Archive for the ‘Entrepreneurship’ Category

Shantanu Prakash

Shantanu Prakash, Chairman and Managing Director, Educomp Solutions Limited

Shantanu Prakash has an MBA from the Indian Institute of Management, Ahmedabad 1988 and is a 2012 Advanced Leadership fellow of Harvard University. He founded Educomp Solutions Limited in 1994, a few years after acquiring an MBA degree. His vision has been to transform the teaching-learning process through the use of technology and best practices. The company employs over 14,000 people across 27 offices worldwide. Educomp is the leader in education content, professional development, online learning and the first company to set up high quality schools across the country Under Shantanu’s leadership, many awards and accolades have come Educomp’s way. Educomp was ranked number one in Education & Training in the study, “India’s Best Companies to Work for-2009”. Educomp is a publicly traded company on National Stock Exchange (NSE) in India.
Mr. Prakash is also the founder and Managing Trustee of the Learning Leadership Foundation (LLF), an organization dedicated to bringing best practices in education to under-resourced schools. He is also on the board trustees of over 30 educational institutions including, Modern School Delhi, Sri Sri University and the Great Lakes Institute of Management. He is on the international advisory board of Fundacao Dom Cabral, Brazil. As an investor, Mr. Prakash has made several investments in innovative early stage and mid-stage companies focusing on the internet, education, media, gaming, finance and infrastructure. He is a charter member of TiE (The Indus Entrepreneurs) an organization that connects entrepreneurs. He is a frequent speaker in education and business conferences worldwide.

Reflecting on your decision on plunging into entrepreneurship right after business school, what exactly was your thought process?

Well, actually the decision was pretty easy. I had already made up my mind even before I got into IIMA that I wanted to be an entrepreneur! When I graduated in 1994, India was at this very unique standpoint in its history of economic liberalization. The environment all around me was undergoing major changes. There were large opportunities to be tapped. And that’s when I thought of taking advantage of the opportunity at hand.

I grew up in a middle class family and did not have deep pockets backing me. I was therefore interested in starting something that involved a lot of intellectual capital rather than financial capital. Looking back, I did not compare entrepreneurship with job options in MNCs, banks and consulting firms since I never saw myself in those roles. There was therefore no comparison from that quarter. And that’s when I took the plunge! So far it has been a very interesting and satisfying journey. And given the dynamics in the education space in India, I feel like the more you go into it, the more problems you solve around! Education is always an unfinished agenda in India!

What made you choose the education space?

For me it was a blank slate – I did not have any family business or any professional to define my industry! I could have chosen to do virtually anything under the sun! However, education was an industry in which I had the first hand experience of the challenges involved as well as some ideas on how to address them. I started, like most entrepreneurs do, with a vision but not a large expectation of the financial returns. So there was a little bit of both the opportunities that arose as well as some level of intelligence that led to my decision of entering the education space.
We started our journey – the very first business by setting up computer labs in business schools. That’s when we realized that the opportunity was somewhere else. We observed that the parents had very high expectations of their kids schooling while the schools just did not have the ability to fulfill these expectations and the existence of private tutors was a testimony of that observation. We then took to creating content for school education. Initially, while the content was under development we faced several challenges but after 3-4 years when it was fully ready, it caught the eye of everyone in the industry and that’s when we became an industry wide success. We then diversified into teacher and vocational training and today we are present in pretty much every aspect of the education value chain!

What are the key trends or themes you observe, particularly when it comes to the use of technology in education?

India is a grossly underserved market when it comes to education. Our gross enrollment figures are the lowest in the ASEAN region. The numbers have to move to a more respectable state for it to sustain the growing economy and general economic development. There has to be a lot more primary education along with the training of teachers and the first step has to be to create high quality delivery mechanisms to achieve these. I see technology as the game changer that can allow India to accomplish these objectives. However, in addition to technology, the key is for all the players to come together- the government, the private sector as well as the non-profit sector to work together towards these goals.

What are the new opportunities that the Indian education industry provides today?

There are several opportunities today for entrepreneurs to tap into – including teacher training for the over half a million teachers as well as the whole area of vocational training in which 400,000 skilled people need to be trained to work. Then there are areas such as career counseling, teacher and student interaction as well as tuition (E.g. WizIQ) etc.

What would be your advice for students and alumni here at Kellogg who are thinking of returning back to India?

You have gone and had the best education in the world, now you should come back to utilize it in one of the best markets in the world today – India!


Read Full Post »

India@Kellogg had a conversation with Rashmi Bansal, shortly before the 2012 India Business Conference, to hear her candid thoughts on how students can shape their career after completing their MBA.

Rashmi Bansal is a best-selling author – her 3 books on the subject of entrepreneurship in India – ’Stay Hungry Stay Foolish’, ‘Connect the Dots’ and ‘I Have a Dream’ have sold over half a million copies. ‘I Have a Dream’ was the #1 non-fiction title in India in the year 2011 as per A C Nielsen Bookscan. Her fourth book on the spirit of enterprise in Dharavi slums releases in May 2012. Ms. Bansal is also co-founder and editor of JAM, a youth magazine she set up at the age of 24 and successfully ran for 15 years. In addition, Ms. Bansal is a motivational speaker and mentor to students and young entrepreneurs. She writes the popular blog Youthcurry on issues around entrepreneurship and education. She is an economics graduate of Sophia College, Mumbai and an MBA from IIM Ahmedabad.

For several business school students, the post-MBA career choice is one of the hardest decisions to make. From your personal experience and interactions with others, how would you encourage us to think about it?

Take the decision not just with your head, but your heart. What ‘makes sense in the short term, from a return on investment point of view, may not be the path that unlocks your true potential.

Does the world need another hedge fund manager? Probably not.
Is a BMW really going to make you happy? Only for a while.
Search deep within for where your true passion lies and create a career in that direction – no matter how offbeat it may seem. Your decision will pay off, in the long run.

Being an entrepreneur and building a business seems like an attractive option to several business school students. But is it for everyone? What are some of the realistic questions one should ask before deciding to pursue this path?

Potential entrepreneurs need to ask themselves:
• How badly do I want this, and how long am I willing to hold out?
• Can I see it, feel it and believe it – even if nobody else in the world does?
• Am I okay with the idea of failure?

A business plan is just a piece of paper – it is the conviction and can-do spirit of the entrepreneur that makes it a reality.

In your journey towards becoming a bestselling author, what have been some of your most challenging experiences and how did you navigate through them?

To listen to critics and yet not succumb to them, because you just can’t please all the people all the time. To keep pushing my own boundaries and to learn something new from every person I meet. To stay grounded and humble, no matter how many books sell!

In your opinion, how can we use the business school experience effectively to prepare us for entrepreneurial ventures later in life?

I think if you know you want to be an entrepreneur as you come into the program, you can certainly use the two years to prepare and fine-tune your business plan and even launch your company while still a student. That would give you a head start and also resources, which are otherwise hard to access e.g. mentorship of professors.

If you are not that clear about starting right away, you can still use your business school experience effectively by taking a wider range of courses and developing personal rapport with as many professors and batch mates as possible. Relationships are the assets you carry with you when you
graduate and are especially important for a young entrepreneur, when looking for a break.

In your interactions with several of India’s most successful entrepreneurs, what do you think are their most common attributes responsible for their success?

A deep sense of purpose, passion and perseverance is what makes entrepreneurs successful. There are no short cuts to success.

We are tremendously excited to hear about your next book “Poor Little Rich Slum”! Could you briefly tell us what the book is about and what your motivation for writing it was?

My 4th book ‘Poor Little Rich Slum’ co-authored with Deepak Gandhi is on the spirit of enterprise in Dharavi. The people of Dharavi are a shining example of how human beings can make the best of their circumstances, no matter how difficult they are. Despite lack of infrastructure and even basic amenities, Dharavi has created a vibrant economy powered by hundreds of micro entrepreneurs.

The book took us nine months to research and write and was a very enriching and moving experience. At the end of it I can only say that there is much that we – who have everything and more – can learn from these ‘little Indians’.

Read Full Post »

Kunal Bahl is the co-founder and CEO of Snapdeal.com, India’s largest group-buying platform. Snapdeal was started in June 2008 by Kunal and his close friend, Rohit Bansal. Kunal manages the strategic vision, key business relationships, fundraising and growth plans for Snapdeal. He has a degree in Manufacturing Systems Engineering from the University of Pennsylvania and a business degree from the Wharton School of Business, and attended the Executive Marketing program at the Kellogg School of Management.

Kunal visited the Kellogg campus in mid-November and candidly spoke to us about his experiences, ranging from his desire to start his own business at a young age to future plans for the portal. It has been an exciting year for Snapdeal – in January this year they closed a $12 million investment round, led by Nexus Venture Partners and IndoUS Venture Partners and in July they raised $40 million from Bessemer Venture Partners. While couponing businesses have continued to spring up and be the subject of intense media scrutiny, Snapdeal has been successful in scaling up its business. The team is currently actively recruiting world-class candidates to join their Indian business.

Following his interview with India@Kellogg, Kunal went on to give an engaging and interactive lecture to students at the Kellogg School of Management – speaking openly again about his experience at Snapdeal, future plans for the business and the emerging dynamic and young culture of the company

You started your entrepreneurship journey by starting a detergent company while still being a student. Please tell us a little more about that experience and your learnings.

With respect to developing my professional career, I have long had the belief that I have nothing to lose and a lot to gain – this motivated me to take risks and start a business at a young age. During my final year of college in the US, I started a detergent business. The highly concentrated laundry detergent capsules produced from this business were eventually sold in 4,000 stores in the US, and went on to be featured in QVC (the US’s leading home shopping television platform), New York Times and The Oprah Book club. While considering different marketing strategies for this business, we issued a lot of coupons and allowed people to sample our products and this was my entry into the couponing business.

Despite globally powerful US brand names on your resume you decided to go back to India. Could you tell us a little bit about what led to that decision and your experience to date?

The answer to that question is pretty simple –while working for Microsoft, my H1B visa ran out and I had no other option but to relocate to India. While I was in the US, the Indian retail landscape had changed and we saw an opportunity to introduce couponing to the market. When we started Snapdeal, it was an offline couponing business, not an online one. In February 2010, we had the offline business running and we decided to test out an online portal. We had a website running in 8 days flat.

Building a strong sales force appears to be a challenging, but yet critical aspect of local deal business. Can you share with us your experience in this regard?

We have invested heavily in building the sales force side of the business, and now have more than 200 people, who are working on the ground and speaking with local merchants. Our sales staff typically consists of young sales talent with a lot of energy and perseverance whom we have been able to train very well.

Can you throw some light on what you mean by ‘Mass customization’?

The Indian consumer market is different from that of the typical Western market. Unlike western cities, Indian cities consist of hyper-local markets such that there are several different markets even within a certain city. Within large cities, customers will be unwilling to travel long distances. Hence, it becomes critical to customize the deals with respect to the specific location and preferences of the customer.

Can you talk more about your plans for the business going forward?

We already operate in 50 cities in India and internationally (Snapdeal has started in Sri Lanka, Nepal, Bangladesh, Maldives and Singapore) and as we scale we are expecting to move the company towards a broader retail-buying platform, without being restricted to couponing alone. We will continue to develop this general ecommerce platform for the Indian market and act as a marketing powerhouse for merchants and retailers.

Any advice for students who are considering returning to India?

I think this is a great time to go back to India, given the vast amount of opportunities that exist. In many ways, the Indian consumer market today is similar to that of the market in the US a decade ago and offers immense opportunity to those who are willing to go back and start a venture.

Read Full Post »

Alok Mittal, discusses his views on the current shape as well as the future of entrepreneurship in India.

With a broad range of hands-on experience founding, funding and supporting early-stage technology companies, Alok Mittal joined Canaan India in March 2006.  Alok focuses on investments in digital media and mobile companies, as well as innovators in managed software services and other IT enabled businesses.

Prior to joining the venture industry, Alok co-founded JobsAhead.com, a leading web-based recruitment business, which was acquired by Monster.com, the global leader in online recruitment. He also brings strong Telecom experience to Canaan having worked for Hughes Software Systems prior to that. Alok is also a co-founder of Indian Angel Network, and on the board of TiE (The Indus Entrepreneurs) in Delhi. During the course of his association with Canaan India, he advised Canaan Partners in their investment in Bharat Matrimony, iYogi, Cellcast, UnitedLex, Chakpak and MotorExchange.

Alok earned a BE in computer science and engineering from the Indian Institute of Technology Delhi and a MS in computer science from UC Berkeley.

Great nations are built by visionary entrepreneurs. A child born today in India will graduate from college in 2030. Will he/she have the skills, drive and perseverance to become the entrepreneurial leader that future India needs? Are we supporting today’s entrepreneurs satisfactorily and laying a solid foundation for the next generation?

Entrepreneurial activity in India has a rich history; in some sense we are a nation of entrepreneurs as our infrastructure and resources have necessitated us to figure out clever ways of solving our daily problems. Examples of such innovations extend well beyond the often-quoted “Jugaad”. Almost a century ago, we perfected supply chain management to get home cooked meal to office workers through a six-sigma rated “dabbawala” service. In the 1950’s, we reconfigured old Harley’s to start the phat-phatiya taxi service. In the 1970’s we made quality eye-care affordable through the Aravind Eye Hospital. And in the 2000’s, we sent a mission to the moon at 50% of the costs of other nations. In each decade, we have examined our problems critically and worked within our means to resolve them.

On the technology side, one of our earliest innovations came with the founding of Hindustan Computers Limited (HCL) in 1976, the same time as Apple and 3 years before IBM’s PC launch. In the absence of funding or access to customers, 6 engineers quit their jobs at DCM to start a company selling teledigital calculators and channeled funds from this venture to build microcomputers. Eventually change in government regulations provided a golden opportunity, as HCL was well-poised to gain market share with the exit of foreign companies. India has been innovating since a time when almost all “essential ingredients” of entrepreneurship were absent – capital, institutional support and even well-developed markets and customers. But are things any better today?

Access to funding is the one of the first things that comes to mind when thinking about starting a venture. Without a secure salary, how do today’s entrepreneurs finance the infrastructure and investment for their venture? The past decade has seen the emergence of angel funds such as Mumbai Angels and Indian Angel Network that provide financial assistance and advice to entrepreneurs. In true spirit of angel forums, both have consistently backed even ideas on paper, and helped entrepreneurs turn them into reality. Another recent source of seed funding has come from corporate venture funds such as One97, who provide seed funding in the mobile space. Traditional sources like personal savings, friends and family continue to dominate seed funding in India. Together these present an increasing array of avenues for entrepreneurs to get capital for their idea. Concurrently the cost of tech entrepreneurship has declined – SaaS and cloud computing have made it possible to launch new ideas without investing in server or distribution channels. These developments bode well for entrepreneurs who can today launch their ideas with limited funding, and stretch their funds over a longer period.

Though capital might seem most critical, the importance of a strong, entrepreneurial team cannot be overstated. This is especially true at the early stage, when the idea itself might not be well-developed or lacking proof of concept. The team inter-dynamics, their passion for the idea and overall vision become critical to the startup’s success. In fact many VC’s will provide funding for an OK idea being executed by a brilliant team. In the past there have been two key challenges in recruiting the best people – cultural biases and lack of incentives. Firstly there is a notion that India’s youth prefer stable, low-risk careers and thus only consider large organizations for employement. Failure has a social stigma attached to it and apart from a few enterprising communities, the fear of failing steers most people away from startups. Secondly, it is felt that Indian’s only understand the language of cash – stock options which are used extensively in the West don’t work here. While there is some truth to these, today’s generation is quickly dispelling both notions. Across the country in our top universities, entrepreneurship cells have becoming popular, as students have realized the benefits of pursuing their entrepreneurial pursuits early-on. Moreover with the recent successes of companies such as MakeMyTrip and SKS, employees have become millionaires overnight due to their stock options. Consequently more people are willing to chart their own path, which is reflected in the high caliber teams we see today – ranging from new graduates, to seasoned execs. Sharing such success stories broadly will fuel a virtuous cycle of the best talent wanting to be in startups.

Finding a viable market is the next factor that many entrepreneurs grapple with. After all, creating a good product is only half the battle. As important a consideration is figuring out if there is anyone interested in buying the product, whether they would be willing to pay for it, and how much. On the consumer side, this is closely related to infrastructure development and technology adoption.  Having a strong backbone of infrastructure and pre-existing users generates demand for new services, and provides an avenue to test and refine offerings. PC penetration continues to be low, but is increasing rapidly as cost of desktops and notebooks declines. India has about 80 million Internet users, and with the launch of WiMax/LTE and 3G services this number is sure to increase rapidly. Most importantly, with 500+ million mobile users, the mobile phone provides a high-growth market for startups to innovate in. While entrepreneurs need to acknowledge the high competitive pressure in mobile, the abundance of first-time mobile users presents a rich opportunity. Many mobile users have no preset preferences and therefore are willing to try new products and services to find for those that meet their particular needs. Customer adoption is considerably more challenging on the enterprise side – Indian companies prefer mature products and have generally shied away from testing new, unproven offerings. Moreover international firms through their Indian subsidiaries have dominated the enterprise market till now, making it challenging to experiment and innovate.

So what does the future of Indian entrepreneurship look like? What can we do to ensure that the next Tencent, Google or Baidu to come from India? I feel it comes down to welcoming new ideas, providing better support to our entrepreneurs and a more active government involvement.

In Silicon Valley in California, engineers who have tasted failure get quickly hired by other companies. Why? Because there is a belief that while “Success is a good teacher, failure can teach even better”. This mentality permeates the Valley, and consequently people are unafraid to quit their established jobs to explore a new idea. This is exactly the thinking we need in India, so that entrepreneurs don’t feel they are risking their entire lives by turning down a lucrative job offer. Angel funding in India still has a long way to go to when benchmarked against established powerhouses like the US, where angels provided $8.5 billion to 25,200 ventures in the first 6 months of 2010. Angels not only provide much needed capital, but also valuable guidance to help startups cross the chasm. The Indian investing community needs to realize that investment opportunities in the later stage are directly dependent on our efforts to nurture startups in the seed stage.  Lastly, similar to the Small Business Administration in the US, we need stronger governmental support to provide capital and resources to startups, and to ensure Indian entrepreneurs continue to start, build and grow new businesses.

Read Full Post »

Founder and CEO of Fieldglass, Jai Shekhawat has more than 20 years of experience with software development, information technology and management consulting. Jai is ranked 7th on SI Review’s 2010 “25 Most Powerful People in Staffing.” He is also a two-time Supply & Demand Chain Executive “Pro to Know” and currently serves on the Mayor’s Council of Technology Advisors (MCTA) for the City of Chicago. Jai has been profiled in publications such as Silicon India, Entrepreneur and Chicago Tribune. Under his leadership, Fieldglass received a Stevie Award for “Most Innovative Company in North America” in 2007.

Prior to starting Fieldglass, Jai co-founded Quinnox, an IT and Business Process Outsourcing firm located in Naperville, Ill., with development and sales operations worldwide. Previously, he was a strategy consultant with McKinsey & Co. in Chicago where he served clients in various industries in the areas of corporate strategy, sales effectiveness, marketing and cross-border alliances. As head of operations at Syntel, a software services firm, he helped build the company to nearly 700 consultants as well as create an international sales and service delivery organization to provide application management services to the Global 2000.

Jai holds a master’s in business administration with specializations in finance and strategy from the J.L. Kellogg School of Management at Northwestern University in Evanston, Ill.; and a bachelor’s degree in management science from the Birla Institute of Technology and Science, Pilani, India.

India@Kellogg drilled deeper into the relevance of networks in the life of an entrepreneur during the interview with Mr. Shekhawat. An edited version of the interview follows:


From a management consultant to a very successful entrepreneur.  While most people would be more than satisfied with a career as a management consultant, how did you make the leap into entrepreneurship?  What are the key factors that you considered in making this leap?

I was working for McKinsey and company at a consulting engagement for a financial services firm where I was responsible for redesigning a large portion of the business.  At this time, I wanted to see if I could amount to something valuable without the McKinsey label and the purest way to do so was to create something all by myself.  This decision was not an easy one; however I used a framework which consisted of 4 categories to evaluate the risk of jumping into an entrepreneurial venture:

  • Career Risk: I was giving up my job
  • Financial Risk: Business school debt
  • Social Risk: Coming from India, cultural beliefs would lead people to believe that I had lost my job and had no other alternative
  • Personal Risk: Self doubt

When viewed in this manner, I was confident I could handle the first 3 risks.  It was self doubt that I struggled with the most.  One knows that dark days are inevitable in the world of entrepreneurship.  I wondered if I had the strength to whether such days psychologically.

When considering starting a new venture, how do you find the opportunity that is right for you? How does one objectively identify the risks in deciding whether or not to pursue that business opportunity?

When you are looking for an entrepreneurial opportunity, try to solve a problem that someone will write a check for.  Pick an area that you already know and that will drive insights leading to the germ of a business idea.  Ask people about their problems. Find out which product, if one existed, would they be happy to see.

While knowing the space that one is entering into is important, self knowledge that one is biased is most critical.  You need a way to break your own biases.  It is important to kill the bad ideas early.  The first warning of a bad idea is the moment you get attached to the idea.  Remember that the idea is just one more musing.  Put these ideas through a filter of a business plan and ask yourself which specific problem are you solving?  Another way to test the viability of the idea is convince someone to buy it.  These filters will support pursuing an idea.

How has having a presence in India contributed to the success of Fieldglass?

We have a cost advantage.  From Day 1, we incorporated an offshore strategy into our business model.  This allowed for a speed advantage where we worked out bridging mechanisms.  The fact that this strategy was advantageous for us was proven by the fact that our funding needs were significantly less than our closest competitors, $38M vs. $50M and $90M, respectively.  This is attributed to the offshore strategy.

What are some mistakes that you have found either you or other entrepreneurs make at the initial stages of launching a new venture?

Every entrepreneur makes several mistakes, however 2 that come to mind are:

  • Lack of focus in managing cash flows.  Treat your cash like blood in the blood vessels.  Accounting statements don’t matter as much as cash flows.  If I could do this again, I would find a way to raise less money as there are significant pressures to spend it.
  • Over hiring in anticipation of business. In business, nothing happens as fast as you think it might.  Your quest for readiness comes at a price.  I suggest hiring a ‘human swiss army knife.’  In other words, someone like a strong general manager with a peak skill.  I liken this to a decathlete with one peak event.  The entrepreneur can swap them for different functions within the firm very easily.

How important is the role of networks in your career as an entrepreneur?  Could you give us an example of a situation where you have leveraged your network?

Networks are very important for an entrepreneur.  My Kellogg network was extremely helpful.  A classmate helped set up my first meaningful meeting.  My McKinsey experience was also useful as I would get the courtesy of an opened door.

One vital tip is that your network can be positive or negative depending on how those in your network remember you.  Every interaction that you have with everyone in your network including your classmates and your colleagues must be considered.  These people in your network are putting their necks on the block and vouching for you.  Your network is not static, it has a memory.  Cultivate your network just like a living garden.

How did your network help you in raising capital for your venture?

My network was integral to raising capital.  In the first venture round, the person who invested was a classmate’s contact and my first hire was also a classmate.  We raised $26M via angel funding leveraging our network of friends.  This network effect was positive because we closed one deal 3 days after the fall of major banks.  This may have been primarily due to ‘relationship capital’ which was very strong in our case.  When someone respects you as a professional they are willing to invest in you.

How did you balance the needs of first round investors with later private equity investors? Was there any conflict in balancing those relationships?

We went through 4 rounds of raising capital and had our fair share of significant conflicts.  During the first round when investors put conditions, the entrepreneur must negotiate as much as he can.  As we know, in the next round, the latest money always dictates the existing guys.  This process is rather painful as management of the funding entities becomes a full time job for the entrepreneur.  It takes a lot to bring a capital structure to life and manage investors.  I managed to keep the peace with the 5 venture firms that invested in us for 10 years.  Last month I gave them all returns and sold the firm for $221M representing a 5X return.  The key here is to show your investors the future vision and your commitment to the outcome.

What advice would you give to students interested in entrepreneurship?

For students, there are 2 ways in which they can fulfill their entrepreneurial dreams:

  1. Consider joining a young firm. Believe in the mission of the firm and take on any customer facing role.  This is for those who don’t have a burning idea that they must execute upon graduation.
  2. Start Something: Find your area of expertise and don’t stray too far from your sector.  This will be your comparative advantage.  Ask open ended questions to customers such as what are your big problems? Dig deep and figure out what your customers are looking for.  Keep chasing this idea further and further until you are ready to launch it.

Read Full Post »

Rupam Shrivastava, VP of ePlanetvenutres

Three years ago when I joined ePlanetventures, I was made part of the US and India investment teams.  I am based out of the Valley but travel to India frequently and have been involved in transactions on both sides, and so I hope to comment on the VC-Entrepreneur ecosystem in these two regions.

As with all other VCs, I have been hunting for that ‘Google for mobile’, the ‘first nanotech giant’ and the ‘next clean-tech success.’  It is easier to find candidates for those ‘star performers’ and ‘100X returns’ in the US than in India.  We all have a dichotomy of investment philosophies when it comes to India and the US.  Following are some reasons that are worth mentioning:

The Entrepreneur, the vendor, and the venture

Industry pundits profess the lack of entrepreneurship in India when compared with the US.  In a different lens, I say that being the Indian is being an entrepreneur.  From using car batteries to lighting up vegetable vending carts to negotiating rickshaw ride prices, Indians live and breathe as entrepreneurs.  Necessity is the mother of this Indian entrepreneur who negotiates and innovates throughout the day.  All deals in India are up for negotiation and innovation is an everyday phenomenon.  An Indian entrepreneur is thus street smart.

The US entrepreneur solves a real or perceived business problem or works on the larger canvas towards creating a disruptive technology.  He doesn’t fear failing.  At best, he will get funded and create the next Google, or he may go without a salary for a few months before embarking on something else.  At the very worst, he has unemployment benefits and his peers’ respect for ‘following his heart’ and ‘doing what he wants.’  People may find him/her cool as well.  An American entrepreneur thus needs to focus only on his goals and be business smart.

The Indian entrepreneur has fewer luxuries and safety nets.  Lacking social security and burdened with social obligations, he thinks high but aims pragmatically.  Despite the urge and potential to change the world, he takes comfort in a smaller world of success.  Historically, the societal definition of success has labeled entrepreneurship as a ‘second choice’ or the ‘final resort of the jobless.’  This created a morbid financial and social fear of feeling.  This situation though is rapidly changing.

The BRIC growth bandwagon has millions of passengers, with millions other yearning for their share.  The likes of Sabeer Bhatia have replaced the Tom Cruises of the world on posters and being an entrepreneur is not a taboo anymore.  On the ground level, initiatives like that form the IIMs are worth mentioning.  As a graduating student from IIM, the lure of the high paying banking and consulting jobs deters many budding entrepreneurs.  However, incase you decide to start a venture, which doesn’t succeed in the next two years, you can return to IIM, and apply again for the campus recruitments for your second shot at the high paying jobs.

Business model evolution and revolution

American startups aim to develop paradigm shifting disruptive technologies.  They wish to revolutionize industries and create billion dollar giants.  Funding applications are incomplete without exponential graphs and ‘billion dollar markets.’  ePlanet’s portfolio company D-Wave is an example of a similar path breaking innovation in the supercomputing arena.  This is not to say that all funding applications are sound.  The current vogue Total Addressable Market (TAM) metric provides an easy excuse to throw in billions.  Excel models are a sure part of any pitch and I always make it a point to notice if the startup’s growth projections are more aggressive than what Google or Facebook actually achieved.  Indian entrepreneurs are guilty of optimistic projections as well, but the VC hair-cuts to them are less brutal than applied to their US counterparts.

Indian entrepreneurs have traditionally focused on incremental evolutionary technologies.  That is, producing better, faster, cheaper variety of technologies and businesses.  There have also been recent businesses that replicate already successful models originally developed in the West.  ePlanet’s portfolio company Sree Ramcides, is a fast growing company in the high quality agrochemicals space.  Another one, Seventymm is a replication of incremental innovation through more grounded seldom excites the investors looking to put feathers their caps.

The Indian scenario however is fast changing with a reverse brain drain of US educated talent (the tougher US immigration is further accelerating the move).  These entrepreneurs are spawning interesting Internet models and applying technology to all aspects of commerce and business.  We have seen multiple fast growing companies emerge, especially in Internet enabled businesses.

First round funding venture ecosystem not really

Indian entrepreneurs are mostly bootstrapped.  As opposed to the US where there are more than 250,000 active angel investors, in India you can count them in a handful.  Erasmic, Seed Fund and Mumbai Angels are the few bold ones who are bucking the trend.

Venture funding for later rounds is abundant in India.  The India story still resounds heavily in the rich western investor’s mind (those who obviously survived the recession).  In fact, with an up and running company, you stand a better chance of getting funded if you are in India than in the US.  This unfortunately, has also meant that venture valuations have skyrocketed and have forced investors to conduct deeper diligences and negotiations.

Funding is not the end of the problems for Indian entrepreneurs; it is the beginning of new ones.

Infrastructure: More Innovation versus Plug and Play

For those of you who don’t know, Plug and Play provides basic infrastructure to bootstrapped entrepreneurs in the Silicon Valley.  It is not the only place where can set up shop for your technology startup (after a rigorous selection process of course and seed money definitely helps).  All of us know that garages and dorm rooms are the other major place of path-breaking innovation in the US.

The Indian entrepreneur on the other hand, with the seed money in his pocket, ventures out to negotiate further deals not with potential customers, but with landlords, electricity suppliers, Internet providers and local cafeterias/food courts.  He works hard to find the most cost effective options for his venture.  For the Indian entrepreneur garages do not exist, are hopelessly out of fashion, and dorm rooms are quite ill-equipped to say the least.

There are initiatives with universities, FITT of IIT Delhi, BI of IIT Bombay, ISB, and IIIT are helping incubate startups of these institutions.  These will in time expand to invite outside entrepreneurs as well.  An up and running Indian entrepreneur faces another challenge that his American counterpart seldom does managerial talent to stand with him in thick and thin.

Team recruitment: cash and equity

In India, cash is king (apart from gold that is).  Indian employees expect cash salaries without much regard to the equity component.  Additionally, whether they work at a startup or a conglomerate, the expectation of yearend bonus is common.  The US counterpart is loyal to the startup’s vision and can work for long periods on equity.  This leads to the following dynamics:

As an entrepreneur, it is tough to recruit managerial talent in the US as you want people who share your vision and are ready to work on ti 24/7.  However, once you have found them, they stick for the long run.

In India, it is extremely touch to find people who share your vision.  However, it is quite easy if you are willing to poach them from the successful conglomerate across the road with higher cash salary.

For the investor: brokers and others

Most Indian venture deals still remain brokered.  This is primarily a function of the late-stage focus of the investors.  Most of the investment targets are sourced through boutique investment banks.  They help broker, negotiate and close the transaction.  However, unless you know the broker for long, you run the danger of other VCs upping your offer.

In the US, all sorts of deal sourcing channels are equally important.  Entrepreneurs attend conferences, connect with B-school buddies and also work through investment banks.  Investors looking for the next Google stay close to Silicon Valley or Boston.

Attractive areas: all industries versus high tech

In India, IT/ITES, banking, financial services and healthcare remain the most attractive areas.  We also see a good future in the education, hospitality, infrastructure and power industries while clean tech will evolve in interesting ways.

In the US, the Internet and new media will create new businesses around them.  The applications-boom will create a wave of growth and innovation just as the software boom did in the late 90s.  Other areas would be SaaS, cloud computing, analytics, and virtualization.  Medical devices, biotech, clean tech, and clean energy are other areas to watch.

Conclusions: Fear of the Ocean

For centuries, the Indian civilization never crossed the oceans.  The Eastern philosophy of ‘inward satisfaction’ reigned supreme.  The US on the other hand, was built by daring seafarers venturing into the unknown.  Those seafarers were also the first entrepreneurs, raising capital fro their kings for their risk-fraught adventures.  Today, however, globalization and growth is bridging this historical dichotomy of mindset.

In the current times, like always, the fittest and the visionary will survive, wherever they are.  In the US, the recession will forge the leaders of tomorrow.  In India, the growth will produce them.

Read Full Post »