Tag Archives: India

The China effect: Numbers dwarf everything else

This weekend over 9.5 Million Chinese students take the National University entrance exam known as the Gaokao. In comparison, 1.5 Million students take the SAT and 1.2 Million take the ACT. 1.2 Million students will take the IIT JEE entrance exam.

Yes, China is that big.

I usually get a lot of questions on startup ecosystems, especially China and India. I used to get more questions about Silicon Valley and India before, but now it is China’s startups that have gotten the attention of Indians.

When  mention that they are way ahead by every measure, I get from Indians a shrug, and the inevitable “Yes, but they are driven by the state and protected by the Government”.

No, is my answer.

China is really that big. Everything they do, they are bigger.

For the 4-5 mobile messaging apps like Hike and others in India, there are 150+ messaging apps, and over 50 of them have more than 2 million users.

If I were a startup entrepreneur in India, I’d be looking more at China for innovation on the mobile and Internet side than the valley.

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So long and thanks for all the fish, but not really

We moved to India 6 years ago from the valley. I started BuzzGain and then wanted to start another company, but ended up at Microsoft instead.

Now we are moving back to the US in July or August. We are heading to Seattle.

I will still come to India every couple of months and the team here will continue to report to me, but I will live in Seattle.

Microsoft Ventures in India has 2 leaders – Ravi Narayan and Rajinish Menon. Ravi focuses on the accelerator and Rajinish on the community and engagement with the ecosystem.

I have thoroughly enjoyed my time in India and have made many friends and a few enemies as well. I have made more than my share of mistakes. So for all those mistakes and the people I have messed up, apologies.

To all the wonderful folks in the various cities that have hosted me and been such a source of support when things were going horribly wrong, thank you very much.

Most of all, thank you very much for being good friends and supporting me with your emails, tweets, blog comments and messages.

Is there any advantage for an enterprise #startup product company to start in India?

Last night I had the chance to be at the event organized by Helion Ventures on Enterprise product startups. The event itself brought about 50 entrepreneurs and investors in the space. I believe the best part of these events is the quality of individuals, which has a direct correlation on the quality of the conversations. This event brought the best folks building enterprise software companies in India.

As a prelude to the conversations, Helion shared results of the survey they had commissioned. This survey had many CIOs (of Indian companies) and about 50 entrepreneurs building companies in the space.

While the results of the survey will not be surprising to those who live and breathe enterprise software, I thought I’d first highlight 3 most important things I took away from the event.

  1. Over 60% of CIO’s in India, were willing to “kick the tires” or talk to startups, engage with startups, conduct POC’s and look at early stage software solutions, but only 13% were willing to buy. Entrepreneurs selling to Indian CIO’s know this very well. CIO’s cited lack of understanding of enterprise support requirements and deficient customer service as the top 2 items for their unwillingness to purchase. (P.S. I rolled my eyes on this one. My 2 cents, they are just amazingly risk averse).
  2. Entrepreneurs, on the other hand, cited the (in) ability to sell (hiring sales people, delivering strong sales value propositions and building great sales teams) as the #1 issue they faced, followed by hiring and building great product management talent in their companies.
  3. Finally both entrepreneurs and investors were more likely (over 60%) to focus on North American markets as their first (and in many cases only) target, followed by Indian markets or global markets. Another part of the survey was size of the target customer. While many were focused on large enterprise, there was a good mix of SMB targets as well.

The more interesting part was the discussions and key questions that followed, each of which could be a blog post in themselves.

  1. Is building an enterprise company out of India, an advantage or disadvantage?
  2. What should investors in enterprise software do to create a better environment for startups?
  3. Is field sales dead?

There were 2 other questions, but these were the most interesting to me.

Participants gathered into teams of 10 people each and they had to discuss the question and help come up with some potential topics and points to consider for research.

We did come up with a framework for the first question – when is building an enterprise company out of India an advantage and when is it not, and when is it a disadvantage.

I’d love more feedback on the framework we came up with to answer the question #1.

Manju Gowda (from i7 networks) and Sachin were part of the team that presented our point of view. The key framework we came up with was a 2X2 matrix with Cost of the product and Value delivered to the customer on the 2 axes.

If you look at the 4 quadrants, only if the Average Selling Price (ASP) was low and the value the customer got was very high – both in terms of time and the economic benefit, was being an enterprise software company from India an advantage. So SaaS companies that offer an order of magnitude better capability and value at a much lower price point (small enough to buy online without a sales person’s help) then being in India helped.

If however the ASP was high and the value from the product was high as well, then unless you have a field sales team that can help sell, you have a distinct disadvantage being in India.

Similarly, if you had a low priced product and the value that the customer got was low as well, it is neither an advantage nor disadvantage to be in India.

Finally if you the ASP is high and the value a customer got was low, then US enterprise software Product Company would do better.

We gave many examples how this model makes sense, but since this was something we came up with in 15 min, I was curious what the rest of you think?

Except if you have a low ASP and unreasonable ROI (Value) for the customer, I don’t think enterprise startups benefit from being founded in India.

Interesting ideas from the #prarambh #IIMUdaipur hackathon

I am in the beautiful city of Udaipur for the weekend to participate in the IIM Udaipur Prarambh hackathon. The IIM itself is only 3 years old and is located within the campus of MLS university in the city.

There were about 70-80 participants from various cities and towns near Rajasthan and a few from outside the state as well. 26 ideas were presented on Friday and of them 6 ideas and teams were formed (ones with the most votes). The city of Udaipur itself was a major draw and it is a delight to be here. The lakes, palaces, food and colors are amazing. The city slows you down with its colors and diversity and that is a great thing.

I was both a mentor and a participant. Here are the final 6 ideas that got the most votes. To see photos from my trip, check out my facebook newsfeed.

1. Anhad: This team was trying to solve the problem of helping students in the the 8th to 12th grade think beyond Engineering and Medicine. In India, thanks to lack of mentors and successful role models, many young students are forced to choose these two fields to study after high school. Ahnad is developing a website which will feature role models from 1000’s of alternative careers and professions. The idea is to expose students to find local role models who they can get inspiration from. E.g. A student in Bangalore wants to become a Radio Jockey, then Anhad will bring a local RJ to the school and have all students who want to be RJ’s attend the session and ask questions, interact and learn from the artist.

2. FindGuru.in Focusing on hobbies, this team wants to help you find a “guru” who can teach you to play the guitar, or tennis in you neighborhood. There are many competing services that do the same, so they want to focus on building a comprehensive profile for each “teacher”. The ideas is that everyone has some innate knowledge or skill, with which they can team someone else, so finding and connecting them is what FindGuru is trying to do.

3. WedWay. This is a pretty cool idea. High end weddings are elaborate affairs in India, with some costing upwards of $250K. Coordinating all the guests pickup, ceremonies, events, sharing photos and the like are currently done by the Wedding planner using WhatsApp. They plan to provide a mobile app to help wedding planners coordinate better. The app will be available to guests as well, to upload each of their photos, checkin to locations, explore local sights, share images from their camera so the entire wedding can be viewed through multiple lenses. There are a lot of other features planned to make sure the right people are picked up at the hotel at the right time, guests can interact and get to know each other, etc.

As an aside I have a perspective on “Use and throw apps” that are a growing category, which I will write more about later.

4. BuzzCaptor. The idea is to capture trends on twitter and facebook to categorize them into streams that are easier to consume. Aimed at PR professionals, the product will help them find influencers and key publications to target by category. E.g. You are Reebok and want to launch a few LeBron James shoe, you can with BuzzCaptor identify the top influential folks who talk about shoes, find out which color and patterns are trending on social media, etc. Another idea that has many competitors existing already.

5. Artin: This is an idea that pivoted from providing art & sculpture as a service to helping high net worth individuals find curated artists who can deliver on commissioned art pieces. Initially their idea was similar to ArtFlute, but since high-end “art as a service” has fairly limited demand they have pivoted to providing a marketplace that helps artists connect with art connoisseurs who want custom art at their home or office every month / quarter / year.

6. HelpmeHelpU. This started as a generic “Find real time answers for your questions” when you need them service to something that’s still evolving. The problem they are trying to solve is when after searching for 20 min and reading Quora, Stack Overflow and other websites you still dont have the answer to your question and need to find an “expert” immediately and get some real time help. They planned to make money by charging a commission to help connect you to the right expert. They were evolving into a book rental marketplace and finally a real time second opinion app.

The eCell at IIM Udaipur won the NEN award for “Entrepreneurship cell of the year” in North India. The event was extremely well organized, they have a encouraging coordinator in Joel Xavier and some very enthusiastic students who were all thrilled to host their first hackathon.

If you get a chance to visit Udaipur either on business or pleasure, dont miss the awesome local food – Pyaajz ki Kachori, Mirchi Bada, Jalebis and other delights. There are several local eateries but we went to the Jayesh Mithai Bhandar, which is a disarming roadside, hole-in-the-wall store which is a local favorite.

Some very interesting #startups at the Wharton India Economic Forum #wief14

I am at Philadelphia this weekend, participating at the Wharton India Economic Forum 2014 with Sanjiv Bikchandani, Alok Kejriwal and Rajesh Sawhney. The forum brings together about 100+ students, local entrepreneurs and investors together for a day long session. It is hosted by the the Indian students who study at the Wharton school of business.

This year they hosted 10 startups (5 in the idea stage and 5 with some traction) to pitch to us for both investment and feedback.

It was great to see some very interesting companies from both India and the US. The 5 idea stage companies had 3 women founders as well and some very compelling ideas.

Here is a summary of the companies.

Idea stage companies. This session featured companies founded by Penn or Wharton students.

  1. AmbitionI: Neha and her cofounder are building a product that uses algorithms to help career counselling for young professionals. Imagine you are working at a large company and always wanted to be an Investment banker. It will connect with your Alumni network and LinkedIn to find out who are the folks that have a similar background as you and have already become investment bankers. Then you can learn how they became an investment banker and figure out how to get some advice to make a career change.
  2. Level Counsel: Aditya and his cofounder are targeting Indian and Chinese XI and XII grade students who need advice on which colleges to apply and which major to pursue. These students will be matched with students who are currently studying at the colleges they want to apply to and connect them so they can get mentorship and advice. They are trying to disrupt the existing career counselling services offered who charge a lot of money to help students make choices on college applications.
  3. Travel Gourmand: If you are travelling to a new location and would like to taste local food but don’t know where to eat or if the restaurants are hygienic or not, this app is for you. They pair you with a local “food guide” who will take you on a 1-3 hour “food tour” and take you to some local hot spots and places to eat. Sayeed Banerjee has a team in Delhi who can help you with food tours in Delhi currently. They plan to expand beyond Delhi soon.
  4. Vhelp: If you are looking for some advice from a lawyer, or a doctor but are not able to get a person at the location you are at, then Kushboo and her team can help. VHelp gets you experts at your fingertips. This is a platform that will help you get advice if you are a rural location but don’t have experts available locally.
  5. WishGuise: This app won the Idea stage competition. Tanvi Chopra’s company helps you rent high street fashion and Ethnic Indian wear. Indian women spend a lot of money on ethnic wear, and they end up not using them too frequently. I think they will have a challenge to prevent perception that they are renting used clothes, but if the top designers are willing to sign up and offer their latest, then I can see how this can scale. It is similar to a company called Rent the runway in the US.

Later stage companies. This session featured many companies from India who applied to the program directly.

  1. Qlicklet: Vivek and his team help monetize Wi-Fi Hot spots at various locations in India using advertising. They are currently running at Delhi airport. If you as a consumer want free Wi-Fi and are willing to watch an ad before you get access to free Wi-Fi for 45 minutes, this app is for you.
  2. Targeting Mantra: Saurab’s company provides analytics and tools to eCommerce companies to help them increase their conversions. They currently have 10 eCommerce companies in India including Yehbi using their product to personalize the website for users and increase customer conversions to purchase.
  3. Sammaan: Ifran’s company provides a mobile van that reaches out to remote villages and rural locations which have no hospitals. This mobile van makes money by charging patients Rs. 25 per visit and also makes money by offering discounted prescription drugs and referrals to diagnostics providers. The cost of each mobile van is about $50K and they are currently operating 1 van in Patna.
  4. ZoomCar: David and his cofounder are building the ZipCar for India. They offer self-driven cars for folks that would like to rent a car for a few hours or a day. They currently offer 6 types of cars currently from Reva’s to Scorpios. Operating currently in Bangalore, this company is currently in the Microsoft Accelerator in Bangalore.
  5. Zostel: This company with 7 founders, some of whom are currently studying in IIM Kolkata offers hostels for backpackers. I met the company before in Kolkata and they are currently operating 2 hostels in Jaipur and Udaipur. They offer a very edgy brand and great value for money at Rs. 400 per bed per night. They are currently seeing 60% utilization at their 2 hostels, and are primarily catering to international travelers. They plan to expand to Goa, Mcleod Gunj and other locations. They won the competition for later stage companies.

I absolutely loved meeting with local entrepreneurs and was part of the VC and entrepreneur panel where we talked about the investment scenario in India and the challenges faced by Indian entrepreneurs worldwide. Wharton accepts about 850 students each year for their MBA program and nearly 50 of them are from India, so they have a lot of knowledge about India and problems faced by Indian entrepreneurs.

The rise of student entrepreneurship in India #tatafirstdot and NEN

Today I had the opportunity to hang out with 1000+ student entrepreneurs from over 60+ cities and all states in India at the NEN #tatafirstdot event in RV College of engineering. The twitter buzz gives you an indication of the event’s energy.

NEN has been promoting student entrepreneurship for over a decade now and this was my 3rd event. They do a terrific job of turning the raw energy and talent of students into some great startups. The first dot event had 500+ students applications. Students from Srinagar (Jammu and Kashmir) to Kanyakumari (Tamil Nadu) participated and this time they had to present fully formed products / prototypes, not just business plans.

To set some context, in 2008, less than 1% of startups in all ventures were founded by students straight out of college. This year, that number is close to 3%. The number of startups has risen 3-fold during this period. We have over 20 Microsoft Innovation Center’s at various colleges in India that focus their effort on supporting great student entrepreneurs as well. These center’s serve to host hackathons, conduct entrepreneurship classes and encourage students and faculty to pursue building companies instead of “getting a job”.

I had a few questions from NDTV (Bala) at the sidelines of the event. One question stood out as something that needs more explanation and commentary.

“Why is it important for us to have more student entrepreneurs as a startup ecosystem”?

There are 3 main reasons why I am so passionate about student entrepreneurs:

1. Their “lack of experience” is a HUGE advantage. Most folks tend to think that experience is a good thing in entrepreneurship. I am a contrarian. I believe that experience (other than the experience being an entrepreneur) holds you back as an entrepreneur. Older and more experienced entrepreneurs are more in number, they are more successful, but they do not create disruptive companies. (p.s. I dont have data to prove this, just anecdotes) They see a problem, they solve the problem and become successful. Student entrepreneurs see something and are willing to question why? They refuse to look at the “current lay of the land” and find ways to operate within the constraints.

2. Their ability to take risk is much greater. When you are young, single and unattached, your ability to take risk is much larger, than when you have a mortgage, kids, hospital bills etc. The worst thing that happens is that you fail and get acquired by a larger company.

3. Time is on their side. Most mid-career executives wanting to start a company are fighting the lack of time on their side. It is NEVER too late to start a company, but if you measure the number of mistakes per unit time you make, then student entrepreneurs clearly have more chances to fail and finally succeed.

I truly believe that students are going to be the largest part of entrepreneurs in India in a few decades. Until then we have Microsoft Innovation centers and NEN to show us how to get them motivated, excited and focused on building their venture.

Shout out to my friend, advisor, guide and awesome student entrepreneurship champion Sri Krishna of NEN. He is the person to connect with in India for all things student startups related.

Are there too few seed/angel investors in India or is too much money chasing too few great companies?

This is a debate that I keep having with entrepreneurs and investors alike. When you talk to entrepreneurs they correctly point out the # of angel and seed deals done in India are very few. If you remove accelerators, the number of angel funded tech companies in India is about 60 (2013) and the number of Venture deals, which are about 50. Add the accelerators, which add another 60 companies and we have about 150 startups getting funded each year.

Given the number of entities that get started is about 1000 (2013), that seems like a small number. Entrepreneurs also point out the very investor friendly terms (drag along, liquidation preferences) that are given by angels in India and the fact that most angel funded companies give between 20 and 30% of their equity at the seed / angel round, which are common among technology startups.

On the other side, Venture and angel investors point out the relatively few exits (fewer than 10 in the technology sector) and the amount of time it takes to grow companies in India (over 10 years). They believe there is enough money for the right opportunities. I can point to 2 examples of companies we are trying to fund which have 3 competing term sheets at the angel investment stage to confirm that it happens, but is rare.

Which brings me to accelerators such as ours. There are about 30+ accelerators in India, but I am going to focus on the top 5. In discussions with other accelerators, the constant theme I get from most folks is the intense focus on the part of entrepreneurs to “get funded”. First the angel round, then the sapling round and then the series A. I know in our own case that is true.

So let me talk about our case in particular, although I have mentioned it before. We dont want to focus on funding. If that’s the biggest need of entrepreneurs then they should go elsewhere.

Unlike other accelerators which are not a corporate program, the key value to Microsoft from our program is startup engagement. We take pride in engaging with the startups and are extremely happy if they are successful, but the financial return from our investment is going to be largely negligible to us. Even if 1 of the 11 startups “makes it big” and we owned 6-10% of the company when it went IPO or got acquired, it would not be a significant dent to Microsoft by any means.

We had a chance to review about 800+ applicants this batch 4 for our accelerator. There were many great entrepreneurs and companies, but we could only support 10 – 15. If we were running a fund, similar to a venture investor, we would only select 2 or maybe 3. That’s consistent with our previous batches.

That we believe is a great disservice to the entrepreneur ecosystem. Many more companies could be small, non angel / VC funded businesses, and still do well. I do not like the term “lifestyle” businesses, but these companies do not warrant the money required by rapid growth, quick to scale companies.

So we do not put a lot of emphasis on our companies getting funded. We do help them get connected with angel investors and venture capitalists, but that’s it. In many cases we have worked behind the scenes to push investors we know to get deals done faster and at better terms, but that’s largely behind the scene. Our emphasis is to open doors and opportunities that help them get in front of other entrepreneurs, potential customers and partners and help them understand the discipline that it takes to be a great entrepreneur.

A few of our previous company entrepreneurs dont like that, and we don’t have a problem with that. Our goal is to help the ecosystem grow and allow more entrepreneurs to experience the journey. If they only wish to focus on funding, they are better off going elsewhere.

So, back to the question: Are is there too little risk capital in technology or too much money chasing too few deals?

Unfortunately the answer is clear only from the perspective that you are coming from. Neither entrepreneurs nor investors will be able to see the challenges the other side faces very easily so it is a question that quite possibly has no clear answer.

The best is to keep at the problem and have different parts of the puzzle try and fit themselves as they progress instead of force fitting more funding into companies or the other way around.

The other part of the question comes from the seed fund that we have as part of Microsoft Ventures. We have not invested in any company, in India, so far, but we have 2 in the pipeline. We get questions on why we dont fund all the companies from the accelerator.

The answer is fairly straightforward but very hard for entrepreneurs to swallow in India.

Microsoft Ventures fund is global. Which means we look at opportunities in the US, Israel, China and other locations. We have some fairly standard criteria for our funding – including, but not limited to the following:

1. We only have the authority to put money in a US or UK entity.

2. We can only use a convertible note instrument.

3. We need to have the company’s product’s well aligned with internal Microsoft teams / products and goals.

The accelerator, however, does not have the strict guidelines associated with these 3 criteria.

Finally since we fund all companies globally, the investment committee looks at all companies across multiple geographies and “looks” for traction, differentiation and other metrics and our companies are just not as strong as those in Israel or the US. They seem to need a lot more time, same amount of money, with potentially smaller exits. While that’s the nature of the maturity of our startups in India, that’s not a bad thing overall. We will get there eventually is my perspective.

Until then we have to fight battles on why we should fund a company from India, when the comparable company in the US is much further along.

The argument for China is simple – a US company just does not do as well in China as a Chinese company.

The arguments for a Israeli company are great as well – most of their companies are Delaware entities, have extremely strong technology (which is aided by government) and they have at least 100% more traction (customers, revenue) than comparable Indian companies.

What do you think? I’d love your perspective on what I am missing.