Looking forward to launch your own start-up? Now is the time

With Microsoft, Infosys, Wipro and a host of IT companies setting up shop in Bangalore, it was bound to become India’s IT hub. That helped spawn many IT-related concepts and startups.

Not surprisingly, several venture capital (VC) companies also opted to set up shop there. Gradually, an eco-system developed to nurture such startups. In the recent past, the Microsoft Accelerator (MA) programme has become one such major incubator, and dna watched the graduation ceremony of MA’s second India batch of technology startups.

Our experts panel: (L-R) Nishant Verman, Shekhar Kirani, Mukund Mohan, Raman Roy and Bala Parthasarathy.

But what makes a startup succeed? To discuss this, dna’s RN Bhaskar (with editorial support from Priyanka Golikeri) began a conversation with some of the best brains in the industry. The panel comprised Shekhar Kirani, partner, Accel Partners; Mukund Mohan, CEO, Microsoft Accelerator; Bala Parthasarathy, managing partner, Angel Prime; Raman Roy, chairman and managing director, Quatrro; and Nishant Verman, associate, Canaan Partners.

Given below are edited excerpts:

On the ecosystem
Kirani: The world has given Indian entrepreneurs another opportunity to create world class companies... The new global player is possibly from India, so I’m very hopeful that in the next 10 years, we will see at least several billion dollar companies coming out of India... I see the world opening up to India’s potential.
Verman: We are an early stage venture firm investing in India and the US. We too look at all this as the best time to start a company. Earlier, there was fear.

This is changing. Indians who’ve gone to Cornell, MIT, Stanford, Harvard are actually coming and saying, “Listen, I can actually change the world”. The number of early stage investors from 2006 till today I think has gone from seven to 32. So, if you’re a guy who is smart, who has an idea and is passionate about it, you can actually make money. You don’t have to go to Silicon Valley in the US... With news about RedBus, and Justdial, among others, mergers and acquisitions have begun to emerge in India.

Parthasarathy: I was in Silicon Valley for nearly 20 years and then four startups there. When I moved to India in 2007... the ecosystem was very nascent. And to be honest, the quality of entrepreneurs was not great. What has changed dramatically is the quality of entrepreneurs we get, at least the ones I’m seeing now, has improved... I see a number of people in their 30s, even 40s, who have a family, a mortgage, EMI payments, but quit and actually giving startups a shot.

Roy: When you consider the mindset of the Indian educated adult who was getting out of college only thinking whether he or she will get a job, we had a culture of job seekers. Some significant part of the pyramid is changing from job seekers to job givers. And that is fascinating.

Mohan: The dramatic shift in numbers that we have seen is quite impressive. The number of entities that started up — these may not be companies, they could be, let’s just say, two people and a dog wanting to start a company — has increased tremendously... So what has been the trigger for these things, for the dramatic increase? First, is the phenomenally lower cost... Second is the surge in the small number of companies we track. Five years ago, in the technology space, there were maybe 10 role models. Today, the role models are literally tenfold.

They are younger. They are often women. And they are achieving success even given their humble backgrounds. It is dramatic. Third is the availability of capital, which has dramatically increased. So in India, right now, you can confidently say that there is a good amount of money chasing entrepreneurs... Compared to five years ago, the numbers are impressive.

Finding solutions
Roy: Indian entrepreneurs have no safety nets? So do we have to wait for a social security system? For the safety net? I don’t think so. But people architect solutions. They architect solutions for exit options. There is a lot of work that is happening because that entrepreneur, who has a wife and kid and EMI to be paid, needs to find a solution...

Verman: Indian entrepreneurs are some of the toughest in the world, simply because they have to be.

Parthasarathy: Right. So what the most enterprising do is to follow a trend. They start here, quickly develop a market for their product here. Then they go abroad. They quickly figure out that it is best to sell your innovation abroad. This does not mean that things are not changing here... But honestly, there is no place like Silicon Valley because even by US standards, nobody has been able to replicate that experience.

Mohan: Successful entrepreneurs need to look for challenges; India looks for templates for success. We don’t have enough success-based  templates yet. That is the one we are hoping to be creating now. See, Flipkart’s IPO [initial public offering] would be one template as would some of these big companies making an IPO. eMobile has created another template right now pointing to how fast one can create more than $500 million value. Redbus is the other $100 million template...

Verman: We don’t need to recreate Silicon Valley.  I think we can create something very different. One of my beliefs is how soon can we get people to try and fail. I think given where we’re coming from, failure breeds success much faster than anything else.

Roy: We need to showcase the successes and evangelize the successes.
Mohan: The challenge – I’ll mention only one – the ability for validation at a very early stage – which is what we operate at. One of the key points of failure is just getting people to come back and tell you, this doesn’t make sense or this makes sense.

We’re still not at the point where both companies on the business side and also consumers are ready yet to be able to try as frequently to give them feedback on a consistent basis... For example, a very brilliant mind, a guy called Rajiv Chilaka is the founder of Chhota Bheem. He took 26 rejects from Disney, Nintendo and every other children’s network, before he got to Pogo after seven years.  But if you look at it, Rajiv went to 14 rejects in a matter of less than two years.

Roy: Also the information flow from the earlier adopters. That is what is critical.
Parthasarathy: Just want to add one thing. It is proving to be quite difficult to get enterprises to adopt software and most importantly to pay for it.

Kirani: See we are trying to take a US model and say I’m going to sell a software to a company. But many companies are not yet used to paying for software... But if you go with a value proposition to the companies where you tell them “I will save money, and get you customers”. If you go on the customer giving module, there is a possibility of success.

That’s the reason you see that entire lead module in India is flourishing. You know so many lead based modules have succeeded. Obviously. I’ll get you a customer, give me Rs100. That’s what Redbus does.  They’re bringing a customer to your doorstep.

Roy: I agree with you 1000%; because the licence-based model, which is what people are trying to duplicate as against pay-by-the-drink model when you utilise.

Kirani: You need to consider the culture – the shift money. Don’t try to create money. If somebody is spending money on that, you can shift in your direction. If you can’t shift, you’ll say buy this software, but when the budget comes in, the company does not spend. It will never happen.

Roy: What I am – what we are trying to do – is to look for that sweet spot right now where the person is just married, or both are students, but with advanced degrees, are people who have made some money and they can survive for two years. And the killer combination of entrepreneurial zest is there even in the spouse. Wife is working, making money, husband is taking the risks. So, there is a safety net in a very different way.

Mohan: By the way, all of my three startups were the same.