Category Archives: India

The future of all education is hyper-personalized

As part of my looking ahead series, I will publish a few blog posts on what I see as the future of certain areas that I am really passionate about. These pieces may also appear in other media, so I will let you know if they are cross-posted.

Across the world, nearly 4.9% of our GDP is spent on education. In countries such as USA and UK, the % is much higher and in countries such as ours, much lower. As we look into the future to get our citizens more educated and informed, we find that the biggest change will be the end of the “one size fits all model”. The future of education will be hyper-personalized, catering to individual students needs and focused on learning outcomes that enable one to do something meaningful with their learning.

At the heart & center of the education, we tend to sometimes forget, is the student.

What would be the ideal learning environment for the student? From Kindergarten to 12th grade, higher education through graduate programs and finally ongoing learning for skills refreshment, what helps the student learn better?

If you ask a student, they’d like to a) be inspired to learn, by having the subject brought to life with examples and experiences, b) learn at their own pace and enjoy the subject and c) learn so they can apply it towards a task they want to perform.

Teaching can be broken into 3 elements – “instruction”, “application” and “review”.

“Instruction” is the explanation of the theory and concept with a few examples. Most of the sciences & math are taught this way already. The social sciences are largely taught this way as well, but the examples are replaced by stories in history, locations in geography and local government examples in civics. For languages the theory is replaced with a large dose of rules. Most are arcane and require rote memorization. Teachers, tend to force students to learn every concept at the same time, regardless of the student’s ability to learn. Inexpensive tablets and applications on those will replace the blackboard based teaching in the next 10 years. Currently instruction is also done in a linear fashion and uses the same tools and techniques for everyone. I know in my own personal case this is meaningless. My son, a 9 year old, prefers if I explain it to him using stories, but my daughter wants to watch videos about history.

“Application” is currently performed by repetition and practice. Instead of applying the learning concepts to a project (in some private schools they are given projects), students are asked to do the same “problems” and answer the same questions multiple times. The expectation is that repetition will ensure you will remember it. The future of application will be based on science kits, drama renditions of historical facts and real-world recreation of circumstances where you would use math. The student is more likely to remember a drama they participated in about the Mughal Empire than the multiple chapters devoted to them in the history textbook. This will also help counter the folks who claim that computing is making students “insular”. The fact that you are doing a project (or a drama) requires teamwork and cooperation.

Finally, “Review” is done by tedious and stress-inducing exams, with emphasis on how well you learned to “learn”, instead of learned to “apply the learning”.  Computing is already replacing the paper-based exams in the higher classes, and they will continue to do so even in the lower grades. Reviews might also get replaced by multiple “demo days” at the end of a semester – with the emphasis on “show me what you learned”.

The future, will feature personalized applications based on experiences with inexpensive tablets and mobile phones replacing the text and images of the 2D text book with voice, video, interaction and text.

While teachers won’t be replaced, the tablet will enhance the teacher’s ability to be a facilitator instead of setting the pace. While some favor setting the pace approach, research has proven that most students are motivated to learn certain subjects faster than others.

The teacher’s role will change to be a curator of great material and a person that understands the unique needs of each student. This obviously means, that not all students in a class will be at the same “level” during the class. Some might surge ahead in Math, others in Literature and still others in Art. Which is a good thing. It will help the students excel in “something”, rather than be ordinary at “everything”.

The future of all student education will be hyper-personalized. From Kindergarten to elementary, middle school to high and from undergraduate programs to post graduate and beyond, each student will focus on having their “own” teacher, their “own” curriculum and their “own” books.

Lastly I want to highlight the differences between hyper-personalized, customized and individualized. They are not the same.

Customized means take a curriculum, tweak it somewhat to the local “needs” of the school and then teach all students the same thing. This is followed by most of the private schools in India. They follow ICSE or IGCSE and “custom” tailor the curriculum for the entire class.

Individualized is what home-schooling is. The focus is on what the tutor (in most cases the parent) feels is best for the child. Individualized programs will work for kids with special-needs in the future, and those with learning disabilities. It requires in many cases, a therapist or instructor who understands how the child learns and only focuses on teaching that material in that particular way. In most cases they use the same curriculum as the mainstream programs, but tend to use the same techniques over and over again.

The toughest choice for an entrepreneur – Slow and committed vs. Fast and apathetic

Another day, another debate. This time it was Ravi Gururaj, Raj Chinai and Rajan Anandan vs. yours truly.

Lets have a twitter debate copying @rajananandan and @ravigururaj as well on your thoughts.

The debate is about the type of investors that entrepreneurs need now. I believe in the last 18 months, the Indian entrepreneur has changed dramatically. They now prefer a slow, but committed investor as opposed to a fast but apathetic investor. If they could have the best of both worlds, they’d like a fast and committed investor, but that’s as rare as a blue moon. Ravi is of the opinion that speed is the need of the hour.

Here’s the background:

Startups that are getting funded by accelerators are largely (there are exceptions) getting a better shot at getting funded that those that are not. Coming out of an accelerator, most startups get a few angel investor to put anywhere between 50L (or $100K) to 2 CR (or about $400K). This is their seed round. In the US, nearly 27% of companies raise the series A after this angel round of funding. That ends up being a $2 Million to $5 Million round. In India for 2013 that is < 5%

In India, because customer acquisition is slow and laborious, the next round after a seed round, is actually a sapling round (or bridge round) during which the entrepreneur raises anywhere from $500K to $1.5 Million. After this round is when most startups raise their series A in India.

So compared to the US startup, Indian startups have given up 7% on average to the accelerator, 25% to seed investors and another 30% to sapling round investors. In the US most startups go from 7% for the accelerator and 20% for seed investors before their series A.

The “sapling round” is very critical. The reason is that VC’s look for market, team, traction, space and competition before they invest in the series A. Most companies (over 90%) in India are clearly not ready after their seed round, with a complete management team, enough traction (aka revenue) and sufficient product differentiation to support a $2 Million round at a valuation of $4-$5 Million.

Say you are an entrepreneur and you want to raise a seed round and are given 2 choices:

1. An investor willing to move quickly and give you 50L in less than 6 weeks, but not commit to helping you fund the next round, either because they assume you will have enough to raise a series A, or because their investment thesis only allows them to put 50L per company and not more.

2. An investor wanting to take 2-3 months to make a decision (to get to know you, or because they are busy, or because of any number of useless reasons) but committing to give you 50L now and earmarking another 1 Cr to 2 Cr for 20% of the companies they invest in for a future sapling round.

Which one would you prefer?

Most entrepreneurs 18 months ago believed that a fast investor was better than a slow one. But I believe that’s changed now.

Why?

The time to raise a round is increasing, not decreasing. Most entrepreneurs are hearing stories of how some Venture investors are taking over 6 months before making a decision since they have enough good quality deals to pursue. They are also seeing their peers raise a bridge round of financing 12 months after their seed funding raise and realizing that a committed investor is better than one that is apathetic to a 50L investment.

I wish there were fast and committed investors, but that is just not possible.

Why?

The time taken to make an investment increases with the amount of capital involved. It is that simple.

For a Venture investor, $250K investments are quick, but $5 Million take more time. Similarly for an angel investor, $100K investments are quick, but $500K take more time, because you better be sure.

The reason for the $500K is that they will put $100K first, then commit to putting another $200K to $400K as needed in 12-18 months. They are committed to seeing you through a series A if they believe in your company.

Angel investors in India are realizing as well, that most (over 90%) of their investments need more money than they put in at the seed stage before they are ready for a series A. Given that 30-50% of their portfolios will fail, close or shut-down, due to any number of reasons, it is important to let the winners “win”. So they need to support their “winners” with more cash.

I’d love your opinion on this topic. Please let us a comment or lets debate on twitter. I am @mukund. Copy @ravigururaj and @rajananandan as well.

A most poignant story of why the world is round and not flat

This story made me cry. Not tears of sorrow, but tears of goodness. There is a lot of that in this world.

I want to tell this story, because I want more people to know about the way the world works and why you have to pay it forward. I have asked all 3 of the folks who are part of this story to see if I could share their real names and organizations. Have not heard back yet.

A few years ago, a young man, about 21-22 years of age, from the not-so-upscale, Tenderloin neighborhood of San Francisco, wanted to do something. Not anything in particular, but something. Inspired by a story he read online about the lack of education resources for the poorest of the poor, in India, he thought about making a trip here to find out how he could help.

His sister (older, married) and family were understandably apprehensive. India is not the most comfortable place for a young person. Still, they supported his trip to India to “find out what’s going on”.

Upon his arrival, the young man met lots of people, hung out at the not-so-desirable parts of Delhi and learned first-hand, about the children of migrant workers, day laborers & the underemployed and their inability to have a basic education. Knowing how poorly staffed government school were, these parents chose to have their kids with them during the day. Most of the kids ended up “helping” the parents at work.

He decided to start a low-cost school to educate them.

Think about that. A low-cost school in Delhi taught and run by a young man from San Francisco.

Fast-forward a couple of years, the school’s running, growing, albeit slowly and our young man matures into a school administrator, and runs his non-profit in India, making few trips to San Francisco during holidays and life moments. During this time, our young man, has grown a staff of 12, trained a few local teachers and helped make a difference in over 200 children’s lives.

One of the teachers, a rather exceptional young woman herself, after a year and a half of being at the school, leaves after she’s married and our protagonist does not end up keeping in touch with her after that.

Last year, his sister’s daughter was diagnosed with Autism.

Autism is a disorder of neural development characterized by impaired social interaction and verbal and non-verbal communication, and by restricted, repetitive or stereotyped.

Autistic kids are expensive to educate in the US. They need a personal trainer, coach and therapist (or one of them) to help grow the child’s confidence.

Our young man’s sister was unable to afford the resources to put her daughter in therapy, but US laws for learning disabilities (I dont know the details, but have been told this) ensure that if your child has a disability and wants help to learn, a good amount of money will be provided to help the child do so.

Unable to afford a therapist, she apparently put an ad on craigslist seeking help. She gets no response for weeks. Our protagonist meets her and the family on one of his trips to San Francisco and posts his anguish on a social networking site.

After 3 days, the young woman he helped, become a teacher in Delhi, calls him (after 3+ years of not being in touch at all) in San Francisco. She offers to meet him for coffee and suggests she could find a way to help. She also just “wanted to catch up” and explain the mysterious lack of communication.

Turns out this young woman, married wrong, went through a divorce and was picking up the pieces. She had a job to keep food on the table, but that was it.

She offered to tutor and be the child’s therapist – for free. She has been doing that for 6 months now.

So there you have it. A young man, from San Francisco, making a difference in Delhi. And a young woman from Delhi, making a difference in San Francisco.

I met the young man at an entrepreneur event a few weeks ago and then upon his insistence, met the woman in San Francisco a few weeks ago as well.

They are both normal, young, 23-25 year old kids. They are though, a lot wiser and more awesome than I will ever be.

The world is round. It is not flat, Mr. Friedman. What goes around, comes around, twice as much and twice as fast.

Among the Indian elite (and I am as much a part of of the elite), the world remains full of opportunities thanks to “globalization”. The rest of the world depends on these two and other such young minds to uplift us.

The world is round, Mr. Friedman. It is round.

The never ending debate about quality vs. quantity among #startups

Yesterday we had a debate at the Microsoft Ventures Accelerator Demo day about whether the ecosystem needed to provide more support for existing startups or get more new entrepreneurs into the fold.

On one hand there was Sharad Sharma of iSpirt who made a very cogent analysis of where engineering education is in India currently (vs. 5 years ago). His point was in 5 years we have increased the # of engineering graduates by 10-fold and that has resulted in many disillusioned parents and students, who have paid lots of money to engineering colleges to get a degree, but find that there are not as many jobs as they thought there would be. This has resulted in social unrest in a couple of states. There is even a state considering a student loan waiver (similar to farm loan waivers in India).

His analogy was: if we get too many early stage entrepreneurs and not enough capital to help them or policy related changes to support them, there will be too many failures and a backlash against entrepreneurship.

His suggestion is to help support our existing entrepreneurs with the intent to make them successful.

Ravi Gururaj and I, on the other side, were of the opinion that we should focus on quantity given the maturity of our ecosystem. India is a largely nascent technology startup community and what works in Israel, China or US does not work here given where we are.

That does not mean we dont support our existing entrepreneurs, but a call to focus only on existing entrepreneurs does not help our cause. The best is we can do both, but if we had to prioritize one, I’d advocate quantity right now over quality. When the ecosystem gets large enough (we will know when it is too large based on lagging indicators, not leading), then the focus on quality alone *might* help.

I am going to outline my case for why this is the better approach based on data that I currently have. I’d love to have you debate this with us. I dont speak for Ravi, so please review the below as my opinion alone.

To set context, there are over 60K (30K product) tech companies that get started in the US annually. The comparable number in Israel is about 400 and India is about 500 (Over a 1000 ideas and entities get started every year in India, but a large number end up not becoming companies).

Of these in the US over 30K (About 3K get VS funding) get some form of funding, about 50% of starts in Israel and 25% starts in India get some money (friends and family, angels, VC’s, etc.)

The bottom line is that we are a very nascent ecosystem. There is largely insufficient data to make meaningful predictions on our successful startups yet.

The second set of data points (read the larger Kauffman foundation report later) are on shutdowns and “failures”.  If you classify success as an exit (which is bizarre, but humor me for a bit) then 97% of startups fail. If you broaden success to those companies that are profitable / operating then 75% of tech startups fail and if you further broaden the definition to those that have not “shutdown” then that means over 61% of startups fail.

Note that these are all US numbers and we dont have significant, meaningful or valuable information for India, but we can largely assume that the failure rates are similar if not worse.

So we are a very nascent startup nation and we have lots of failures.

That would lead many to advocate that you should focus on creating winners. Like there’s a formula for that.

Here’s the thing – there’s NO formula for a startups “success”, except great founders, solving a large problem, which has large market and of course – LUCK.

I dont understand why people dont give a great importance to luck as a significant aspect of any startup’s success. Maybe it is in our psyche to discount the intangible. Anyway, that’s a whole another discussion.

Anyone that claims we can “engineer startups to win” has not realized that it is impossible to pick the winners. Even the best “pickers” average 30% or less “winners”.

So the best you can do is really to get more people to believe in the “religion” and thus turn into more converts.

As a nation we still have many folks who are not entrepreneurs directly who influence our entrepreneurs. We need them to believers as well.

The “get a safe job” instead of a risky startup parent of an engineering grad needs to be converted.

The “I wont let you marry my son /daughter” because you dont really have a “job” father-in-law needs to be converted.

The “I need to maintain our lifestyle so lets buy a imported car instead of your Alto, so dont give up your (ed: dead-end boring) job to start a company” husband needs to be converted. P.S. This is a true story of a women entrepreneur whose husband said these exact words. Sad really.

The argument that they will see many failures and hence will be disillusioned is going to be invalid, since there are few other options.

Let me segue to Sharad’s argument and the comparison to engineering education for a bit.

To those parents who, after asking their kids to get an engineering degree, are now finding them without a job, I ask “What was your option”? Arts? Law? Commerce? Medicine?

While they are all equally good options, none of them are guaranteeing your children a “job” either. And the jobs they deliver are likely going to pay a lot less.

In fact going through an engineering education at a “not-top-tier” college is probably as good for children as going through a top arts college in India.

Why?

Simple. Even the arts are being “scienced”.

Back to our regular programming.

So the 3 main arguments I make for continuing to focus on quantity are:

1. Our ecosystem is too nascent and we have too few data points to focus on quality alone.

Why? Do a lot of experiments, figure out which ones work, rinse, repeat, hope for the best. We cant be Steve Jobs and assume we know a winner when we see one. We are better at being a Jeff Bezos and trying a lot of things, willing to be misunderstood for long periods of time and finally making a few dents.

2. You cannot guarantee quality.

Why? We dont know how to pick winners. We dont know which startups will succeed and which will fail. So, it is best to support all, and the winners will rise to the top.

3. We need more converts to the religion and the failure rate should not be a deterrent.

Why? The options are not many. If you are graduating now and expect to get a “job” at a large tech company, the chances are getting slimmer and the likelihood of you liking your job in a few years are slim.

That’s my argument. Your turn.

Accelerators have supported twice the number of entrepreneurs to the Indian startup ecosystem

I have been researching the data from Thomson Reuters to understand the optics of the accelerator business in India. There are 37 accelerators we track, who give a little seed money and take a percentage of the company in return.

Based 2012 data, accelerators have funded 89 companies with their first check, compared to less than half that done by angels and VC’s in India.

Most accelerator funded companies take 6-8% of the company in exchange for 5-10 L ($10K to $25K) in India. That 6% dilutes to ~4% at series A (assuming 20% for angels and 30% for VC’s).

The first scenario for you, the entrepreneur, is to get funded directly by a VC. The chances of that happening in India are low – 1.4%. The other challenge is that those companies got relatively poor valuations (average about $1.4 Million pre money). Only 19 out of 1300 entities got funded last year to raise their series A through a VC directly. In this case you will possibly dilute 30-40% and still own >60% of the company. I have used 30% dilution in the chart below.

The second scenario is to get angel funding and then in 18 months get VC funding. The chances are better that you might go through this scenario (2X more – 43 companies got angel funded last year), and then venture funding. You will end up owning 56% of your company (by giving about 20% to the angel investors). The valuation challenge persists with angel investors as well, with the average valuation being less than $1 Million.

The third scenario is to get into an accelerator. The chances are twice as much (nearly 9%), but give up 6%, then get angel funding and finally a venture investment. You will end up owning 52% of the company now compared to 56% in the previous scenario. The 4% should get you a better valuation and it does for last year’s data (Average valuation was $2.3), nearly 60% higher.

See the chart below for the data.

Accelerator Metrics

Accelerator Data

The numbers on top of the boxes are the # of companies that got funded last year. The number in the parenthesis is the % of companies of the previous box.

The numbers at the bottom in percentage are the % of your company you will give up to that entity.

The circles at the far right are the % ownership of the company you will have post that path.

I’d love for you to let me know if there are any mistakes in this analysis.

This data will change as accelerators get older and have been around for some time, since most of the VC deal flow is still not through Accelerators or Angels. I suspect as companies from accelerators get more mature and the accelerators get better at running their programs, we will start to see a better benefit for entrepreneurs in India.

Thanks to Anand of Accel, Rahul of Canaan and Abhijeet of Bessemer Venture Partners for reading drafts and reviewing the information. Amaresh & Hanaan at Microsoft brainstormed this model.

All the data above is for Series A valuations and numbers from Thomson Reuters. Overall, there were  143 – 155 companies that reported receiving funding last year in India, and many of them were follow on financing (series B or later).

A/B testing your email messages

I have about 30,000 friends who follow my blog on email, and the open rate is about 8% (which according to Mailchimp is very low) on each blog post. Besides this I have another 9,500 friends and acquaintances that I send an email update to once a month on key blog posts I have written during that month. That has an open rate of 17%. Roughly about 5000 of my friends read a blog post, which gives me a fairly good sample size to do some serious A/B testing on my blog post titles.

My email friends are about 61% from India, and 25% from the US (largely the valley). This was inverse just 5 years ago in terms of %, but the number was about 3200. So a nearly 10 times growth in 5 years. 

Since wordpress does not allow me to segment the email by friends, everyone gets the same blog post and title as soon as it is published. But the email acquaintances is where I have a lot fun.

Here’s what I found last week in 3 sets of 2000+ subscribers.

I had the same body of the message but changed the Subject of the email.

First subject (Sent on a Thursday at 10:30 IST): Where is analytics headed in 2020? An insight gathered from 25 top #startups – 14% open rate

Second subject (Send on a Friday at 10:30 IST): The future of analytics is in offerings based on derived insights – 11% open rate

Third subject (Sent on a Saturdaya at 10:30 IST): How analytics companies are making 92% margins compared to software companies – 21% open rate

I am shocked that the Saturday message had best open rates, since weekends have been consistently low on my open rates.

The message though was one of margin – which I think appeals to Indian entrepreneurs a lot.

What do you think is the reason that the first subject got a better open rate than the second? Is it more specific?

How the risk appetite of entrepreneurs affects their exits in Silicon Valley, India and Africa

I run this fun experiment each time at most events I speak at. I ran is again yesterday at the CII event yesterday in Bangalore. The experiment is to gauge the risk appetite among entrepreneurs. It is not scientific nor is it structured. It has though, given me a sense for the risk appetite among the entrepreneurial class.

I have run this experiment now over 30 times and have had fairly consistent results. If there are over 100 people in the audience, I ask folks three questions and request a show of hands.

Q1. If I gave you a 10% chance of making $2 Million from your startup, how many of you will take that outcome? I get a show of hands at this point.

Q2. If I gave you a 1% chance of making $20 Million from your startup, how many of you will take that outcome? Show of hands again.

Q3. If I gave you a 0.001% of making $1 Billion from your startup, how many of you will take that outcome? Final show of hands.

Over the last 3 months, I have spoken at 2 conferences in the US, 1 in Zurich, 1 in Africa, Singapore and over 5 in India.

The results give me a quick sense for the hypothetical risk appetite for entrepreneurs in that community.

In the US at both the conferences, the distribution was 30%, 10% and 60%. In Zurich it was 60%, 30% and 10%. Africa was very close to the US surprisingly, at 35%, 15% and 50%. It is almost as if Africans have nothing to lose and Americans don’t care for small outcomes, but both end up at the same place.

In all the conferences in India, it has been 70%, 25% and 5% (and that’s being generous in 2 conferences including yesterday, where 2 out of 150 people opted for the 3rd choice).

Rather than draw quick conclusions about the risk appetite, I thought I’d think about it more and understand why Indians are happy with smaller outcomes.

Given that the effort over several years to create a $10 Million outcome at your startup is the same as one that has a $1 Billion outcome, why dont we focus on the large opportunities?

  • Is it fear of failure?
  • Is it that we are “happy” and content with even the small things?
  • Is it that $2 million is such a large change in our lives that the $1 Billion does not seem worth it?
  • Is it that we really don’t aim big? Notice I did not say think big, I said aim big? Nuance, but a big difference
  • Is it lack of exposure to large markets?
  • Is it that we are not hungry enough?
  • Or is it something else?

I don’t quite have an answer. When I mentioned that I dont have an answer to the moderator Mohan Reddy yesterday, he expressed dismay. He was looking for an answer – was it our cultural background, our education system, our values, our government – someone or something had to be blamed.

I dont know the answer, but have a deep desire to find out.

Why?

As we start to invest in the early stage startup ecosystem in India, it is important to calibrate the possible returns and allocate funds associated with the returns. If most entrepreneurs in India are okay with smaller returns, it makes sense for us to allocate fewer fund here than China, Israel or Africa.

From our experience at the accelerator, where, over the last year we have “invested” our time, resources and energy in 23 startups, we know that the risk appetite is much lower among startup founders in India, compared to those in Israel for example.

We have already had 2 small “exits” and 3 closures in India. Israeli companies are still out there, fighting for their series A and beyond, while 1 company had pivoted dramatically in Israel, only to start again.

Is the reason something completely different? Is it that we are realists and don’t think the billion dollar outcome is even possible?

As Henry Ford said:

“If you think you can do a thing or think you can’t do a thing, you’re right.”