Category Archives: Research

How to get to 1000 startups in India ever year

I will be on a panel with several others at the IAMAI conference next week for the India Digital Summit and the discussion is about how to make 1000 digital startups happen annually in India.

I thought I’d put some thoughts together and get some opinions before I present at the panel.

Currently there are less than half that number of product companies being started each year.

There are various issues across the funnel, but I’ll focus on the #1 issue, which I believe is at the top of the funnel.

Great product entrepreneurs starting great companies.

I wanted to pick a specific example from our accelerator: two of the most amazing hackers and geeks I have worked with – Melchi and Aditya co-founded Cloud Infra after 6 years at Google here in India, building high quality products.

I would fund them just given their background and the quality of hackers they are. Regardless of what they are developing.

Anyplace else (Valley) they would have been funded first and then they would have been asked questions. I worked with them for 4 months.They are amazing.

India needs more of them to increase the number of startups from 500 to 1000.

Unfortunately that’s not happening and is not going to happen.

I may get a lot of brickbats for this statement, but:

I believe the best product entrepreneurs should have built & shipped a world-class product before they start a company.

If you have worked in a services company it does not count. Period.

There are very few software product companies in India – in fact fewer than 20 are really good. Of those 20, many, including Google, are cutting back on hiring and investing in India.

That’s just awful.

Yahoo, Zoho & InMobi in particular have contributed a LOT to the product startup ecosystem in India, given how many good developers they have helped groom.

If you worked at any of these product software companies a few years ago, then you are a candidate for a high quality product startup in India.

Granted, a small number of these folks are actually starting companies, but that can be fixed.

The trouble is there are not too many of them in the first place.

And the bigger issue is that the Google’s and Facebook’s of the world are preferring to hire more folks in the valley.

In fact many of the top IIT graduates who get jobs at Google and Facebook are moving to the valley. 2 years ago they’d be working here in India.

To get 1000+ digital startups each year in India, we have to work on making sure world-class digital software companies hire more of our top people here in India.

I dont think tax breaks will provide them any more incentive to hire here.

I also believe there are enough quality folks here in India they can hire.

I’d love some ideas on what will make them hire more people of high caliber in India and keep them here. I’d love to see them not cut back on hiring in India.

What are your ideas on how we can get these companies to hire great engineering talent in India?

A meetup of Indian accelerators

I had mentioned a few weeks ago that we at Microsoft are putting together a meetup of the top accelerators in India so we can all learn from each other and help each other get better to help the entrepreneur community. Here are more details.

The meetup is going to be held on Feb 1st at the Accelerator and the agenda is driven by the accelerators themselves. It is a closed door event with only invited guests participating and a few members from the VC and entrepreneur community. They are there primarily to help us all learn how we can serve entrepreneurs better.

If you run an accelerator and want to be invited, please drop me an email. There are 40+ people attending from all over India. It will be a day long event with moderated sessions. It is free to anyone that’s running an accelerator or incubator.

Be a force of good.

The 99-0.9-0.1 rule for Indian Startups

Jakob Nielsen is given credit for the 90-9-1 rule of Internet participation.

The “90–9–1” version of this rule states that 1% of people create content, 9% edit or modify that content, and 90% view the content without contributing.

In the last 6 months, I have gotten 21 Indian web and mobile consumer applications data on visitors, engagement and contribution.

In India the numbers are closer to the 99%, 0.9% and 0.1% in terms of lurkers, participants and contributors of any consumer application.

This explains a lot of things, including the 2-speed nature of Indian market adoption.

Its not that we don’t have early adopters, its that most people (99%) are really laggard adopters.

The difference between 1% and 0.1% is dramatic for startups who need the early contributors to get the community going.

To give you an example. Lets take a mobile application which has 3 competitors in India. Each of the 3 products has been in the market for about 6 months and still they total about 140K total downloads.

In the 1% scenario they would total 1.4 Million downloads. This assumes 140M total Internet users for both mobile and web. In reality there are only about 50-80 Million real broadband users.

Is it cultural? I have heard many folks blame (yet again) our Indian culture & education system which values listening to others than voicing our opinions. I don’t quite agree with that though.

I don’t know why exactly we have only 0.1% of people contributing.

This however has dramatic implications for “traction” among startups.

If you are going to show traction and have between 20K to 50K users or downloads, then you should realize that the 99, 0.9 and 0.1 % rule applies again to your users.

Only 0.1% of those who download will actually be contributors (such as check-in to locations if you are Location based service).

So the engagement metrics will be consistent but woefully low compared to what our US counterparts are seeing.

Traction among Indian consumer startups is not really “traction” in other markets.

P.S. I am still trying to see if this is the same for ecommerce startups. I am hesitant to think it will be the same, but among new and smaller (lesser known) ecommerce companies, these numbers are in the range. However, among established companies, the US engagement (or purchase) numbers are probably more valid.

Microsoft Accelerator Research on Starts and Closures in Indian tech startups

We are planning to release research findings every month week as part of our startup support program at the Microsoft Accelerator in India. There are about 50 different topics that we are curious about and are consistently doing research to find out ways to help our accelerator companies perform market research, target early adopters and focus on getting more customer traction.

This series is part of our accelerator database on engagement with startups, investors, mentors & entrepreneurship. Last week we did a report on Smartphone usage in India.

This week our focus is on the rate of companies starting and closing in the technology product space. Over the last few years Microsoft has been tracking new companies as part of its Bizspark program. Besides this we have access to several databases from multiple sources which has allowed us to consolidate all these into a single system to track startup activity. While we currently track over 73 different elements including founders, starts, closures, funding, etc. our focus is on trying to find patterns that can give us more clues to remove the roadblocks that reduce entrepreneurial failure early in the system.

We track over 6200+ entities – which includes services companies with a “product” they are building and also many viable side-projects, where the founder is generating some traction or revenue and 3900+ companies that are solely focused on building products (includes SaaS, eCommerce, traditional software, consumer Internet, etc.) in India.

On average there are about 450+ starts annually over the last 3 years, which has grown dramatically thanks to eCommerce.

While Bangalore has the most number of technology product startups overall, at neary 40%, Delhi/NCR came a close second in 2011, only to return to normalcy in 2012.

In terms of closure, 26% of companies still close within a year of them starting (either the founders giving up and moving on, or the company going dormant).

The biggest issue for closure (given that nearly 80%+ of all companies are bootstrapped) is collecting money from customers who have committed to paying for their usage of the product.

While not being able to raise funds is really #1, that seems to be a generic reason enough and a motherhood-and-apple-pie situation.

Unlike the valley (anecdotal information alone) most failed entrepreneurs dont go on to start another company or join a startup, but instead go to work at a much larger company (over 60%). Most reasons given were because of loans to payoff or pressure from parents (surprisingly not from any others).

Our recommendations are for new entrepreneurs to have a “cushion” of nearly 18 months in funds in their personal capacity before they delve into a new venture as opposed to 6 months.

We also recommend asking new customers for an advance in payment as part of the Proof of Concept instead of payment after the fact to aid in managing cash-flow more effectively.

Microsoft Accelerator Research on Smartphone usage in India

We are planning to release research findings every month as part of our startup support program at the Microsoft Accelerator in India.. There are about 50 different topics that we are curious about and are consistently doing research to find out ways to help our accelerator companies perform market research, target early adopters and focus on getting more customer traction.

This series is part of our accelerator database on engagement with startups, investors, mentors & entrepreneurship.

The first research today that we are sharing is based on survey of mobile phone usage in India. Specifically we wanted to focus on smartphones and the adoption of apps on the smartphones.

There were 3 important questions some of our startups that are building mobile applications had, which we wanted to find answers for.

1. Who are the early adopters of mobile applications on smartphones? By age, gender, type of phone & OS.

2. What types of apps get quicker adoption than others? Games vs. social and Connected vs. standalone apps.

3. What is the usage of mobile web among smartphone users?

There are 3 most surprising answers are:

1. Older people (>35) make up 40+% of smart phone users. Used phones make up 18% overall and nearly 25% of smaller city users.

2. While Blackberry is still strong among older users, Samsung has the most number of touch screen and smartphone users overall, followed by a wide range of local brands.

3. The awareness of apps among both younger and older audiences is miserably low. <27% have EVER downloaded an app in India. Over 33% overall and 44% of older users have no data plan.

What does this mean for app developers in India?

1) Like worldwide stats, games trumps productivity and other apps on the mobile. But if you have a game that requires a data plan you are in trouble. So for game makers, the ability to make money from “ads” that are served via a mobile ad server is limited

2. Given that a lot of users are buying used (second-hand) phones in India, expect to support older models for a significant amount of time.

3. Given very little awareness of “apps” among Indian smartphone users, look for offline mechanisms (kiosks) to pop up to support app distribution.

P.S. Some of the slides have not rendered properly on Slideshare even after 2 attempts, so, here is a pdf version. Smartphone usage in India.