Green avenue: Business sense meets clean energy

Visitors these days to St Paul’s school in Hyderabad or Basaveswara College in Bangalore, or any of the growing number of educational institutions across southern India, notice bright rows of solar-powered lamps that have switched off hundreds of energy-guzzling tube lights that the campuses previously employed. Helping them in this transformation to cleaner and greener lighting is Shuchi Energy Ad Promotions, a Hyderabad-based start-up that has shrewdly combined the lure of solar lighting with the business opportunity in ad signages. The company puts up the lights and gets signage rights in return. Hundreds of kilometres away, just outside Pune city, Span Pumps has begun a mission. While big companies are busy bottling mineral water for the urban elite, this company has set out to provide villagers the means to get clean water. It makes deep well pumps and water purification systems. Shuchi and Span are just two examples of hundreds of innovative companies, driven by entrepreneurs who have the pulse of the nation and building businesses that usher in a cleaner environment. They have broken out of the mould of the traditional businessman who thinks of environment protection as something of a Gandhian struggle unfit for commerce and an added expenditure to be delayed as much as possible. They have seen a business opportunity in embracing cleaner technologies and helping companies harmonise their businesses with nature. Happily for India, they are also earning carbon credits, popular business assets representing the amount of carbon emissions that one has helped save. Start-up activity to exploit the potential of carbon credits and clean technology is set to explode in India, says Green Ventures India director Vinay Bharathwaj. Green Ventures India is a subsidiary of New York-based asset management firm Green Ventures International. The latter recently announced a $300 million India-focused fund aimed at renewable energy projects and supporting trading in carbon credits. Founder and CEO of Emergent Ventures India (EVI) Vinod Kala, says he realised in 2004 that there is huge business potential in environment. So, he turned the focus of his company, which used to serve software companies with financial and management incubation services, to carbon credit advisory services. It also helps implement the globally backed clean development mechanism (CDM) programme, ranging from project origination to assistance with project implementation and the monitoring and delivery of certified emission receipts (CERs) and voluntary emission receipts (VERs) in the domestic and international carbon market. It also helps companies achieve carbon neutrality, which represents the net zero emission status. In perhaps a reaffirmation of the commercial credentials of this shift, Infrastructure Development Finance Corporation invested Rs 40 crore in EVI recently. This is a rare feat, as sufficient VC support or angel investing and capital pump-ins for greener ideas, clean technologies and sustainable development concepts in India are still a far cry. Mr Kala says financial investors are increasingly looking at green technology as profit opportunity than only a morally right thing to do, but there are dozens of entrepreneurs who have found the capital expenditure involved in such projects overwhelming and funds too hesitant to invest in them.
Many investors worry not just about the capital intensive nature of the project but also what they see as the fragmentation of the market and the long spans it could take to see return on their investments. ”India is a relatively nascent market for clean technology and the entire carbon credit market,” says managing director of Canaan Partners Alok Mittal. “Though there are a lot of project deployment happening in the space, innovation on technologies by entrepreneurs is still lacking. Plus, countries like Germany are offering heavy subsidies as compared to their Indian counterparts. Therefore, we do not see a lot many VCs investing in projects, but investments are definitely feasible in product and technology companies behind clean energy and carbon credits.” His fund is yet to invest in clean technology deployment projects, but is searching for opportunities, he says. But Mr Mittal’s view on entrepreneurship in this market will increasingly become less true, if stories of innovation sprouting from across the country are any indication. So, some venture capitalists such as Green Ventures have moved ahead with investments in the sector, despite the usual regulatory apathy that a sunrise industry goes through. “There are enough opportunities for entrepreneurs within this space, but its the policy framework for the industry that is not conducive for fostering such start-ups ventures in the country,” says country director of New Ventures India Suneel Parasnis. The firm focuses on clean technology and renewable energy projects. He also complains about the lack of income tax exemption for such projects. New Ventures so far has managed to secure $13 million funding for start-ups in clean technology space. “The market drivers have just started to churn in the country and it would take at least another 3-5 years for more entrepreneurs to enter this space,” Mr Parasnis says. As a sign that clean technology-related ventures is poised to take off in the country, UTI Ventures, in 2007, invested nearly $8 million in Pesco Beam Environmental Solutions, a firm involved in waste-oil recycling and alternate energy systems, while IDFC PE invested Rs 35 crore in Ahmedabad-based Doshion, a water management company. US-based Kleiner Perkins Caufield and Byers, the VC that funded Amazon.com and Google, too, has shown its interest to actively invest in clean-technology companies in India. Among others who have shown interest in investment in this segment in India are big names like Draper Fisher Jurvetson India, Lightspeed Venture Partners, Nexus India Capital Advisors and NEA-IndoUS Venture. Like any asset, carbon credits are also traded globally. And like any asset, they have attracted traders, dealmakers and intermediaries. “We have to look beyond CDM advising to unleash the huge potential of carbon credit services,” says Ernst & Young partner Sudipta Das. This, by itself, is an entrepeneurial opportunity. The Multi Commodity Exchange of India (MCX) was among the first to sense the trading potential of carbon credits in India. Now, about 6,500 tonne of carbon credits are being traded on MCX each day. “It is for sure many carbon credit generators are showing lot of interest to participate on the exchange platform,” says managing director and CEO of MCX Joseph Massey. “The US and the EU have asked both India and China to reduce their baseline emissions, which should get implemented by 2020,” Mr Bharathwaj says. “Once that happens and the government adopts more stringent policies for curbing carbon emissions, clean technology ventures would assume greater importance in the country and as a result there would be more investment interest within the sector.”
(With Ritwik Donde)
http://economictimes.indiatimes.com/articleshow/msid-2980829,prtpage-1.cms

Serial entrepreneurs are always on to the next big idea. What keeps them ticking ?

SERIAL entrepreneurship is looking at companies like the way one would look at a product. Just the way one launches a product, builds attractive features and attributes in the product, invests in creating value, makes it appealing, prices it correctly and manages it through the product life cycle stages, one needs to follow a similar strategy with ventures. So, a serial entrepreneur while being passionate about the business and being deeply committed to the idea, does not lose sight of the fact that this needs to be nurtured and managed to create value. Else, most businesses will eventually become irrelevant or will only be moderate successes. “This scientific and clinical approach to value creation and monetisation is what you will pass on to the next generation,” says K Ganesh, founder of TutorVista, an elearning company. A serial entrepreneur has the pleasure of being able to enjoy the joys and thrills of creating something. This is like an adventurer discovering new land or climbing new peaks. Each venture brings in a new excitement and fresh success, feels a serial entrepreneur. It is like conquering new peaks and moving on to the next adventure. No matter how good the last success has been, it is done and over with. “How are you going to satisfy a curious and adventurous mind with past glories?” A serial entrepreneur is usually more adventurous from an entrepreneur who sticks with his project. Once a serial entrepreneur tastes success in one venture, the urge to try his hand at another one is very strong. “The regular entrepreneur is probably the kind of guy who is happy with his achievements from his project and gets into a comfort zone, thereby reducing his urge to experiment with something new,” says Sushil Wadhwa, founder, Platinum Incentives & Events. The biggest advantage of being a serial entrepreneur is the knowledge that he gains from the various ventures, not to mention the financial benefits that come out it. He is also more ‘hands on’ than a regular entrepreneur. Entrepreneurship is all about passion—you cannot be having two businesses where you are committed to. You can be an investor, board member or a mentor, but where you are going to be spending your total passion, entrepreneurial bandwidth, most of waking-up time as well as dreaming time has to be in just one venture, adds Ganesh. So, if you can get to do that in your current venture, then you need not sell. But, if you dream about something else all day, you should move on, say experts. Whether you sell your current business or maintain it depends on a lot of factors — what is your need for capital, whether the current business will do equally well without you spending time, what is the value you are getting if you were to sell, what do you see the future value of the business likely to be and what are the risks in continuing the current business. Sometimes, you sell because you get a deal that is hard to refuse. At other times, you sell because you don’t see a much better option giving challenges of the business and environment. When Ganesh started off his first venture in 1990 with four friends pooling in Rs 93,000 for a computer maintenance services business, he never thought he would become a serial entrepreneur. He ran it for eight years, but also realised that like product-based businesses have life cycles and one need to plan the business objectives, stages and exits right from the start. So from second venture onwards, he paid close attention to these aspects. Creating something new, being among the first few companies in a new, emerging space, proving to critics that it’s indeed a viable idea and can be profitable too, are all fundamental to the ongoing entrepreneurial drive, says Ganesh: “This drives me to keep starting new ventures.” Manish Sabharwal, founder of TeamLease, a staffing solutions provider, feels the same way. “I’m not sure I can call entrepreneurship a drug, but the addiction effects are pretty similar. I have never met an unhappy successful entrepreneur, but met many unhappy successful employees of other companies. My first venture India Life was much more pre-mediated; I think we were very lucky with TeamLease by being in the right place at the right time. So, we had planned to do another venture, but it also just happened.” Sabharwal also believes doing a second venture is much easier if we consider credibility, brand, network and access to capital. But, the most difficult and important part is getting a good team. “A key element of entrepreneurship is putting a team together and you have to kiss many frogs before your find your princess.” Platinum’s Wadhwa started honing his entrepreneurial skills for running his family business of restaurants, and being a hotel management graduate was of help. But, the family business was not a very exiting venture for him and so he decided to start something on his own, albeit on a smaller scale. After that, it was a ride of ups and downs. “But I was determined to carry on,” he says. His stint in a friend’s company exposed him to the MICE segment. Raman Roy, founder of Quatrro, refuses to differentiate between entrepreneurs and serial entrepreneurs. Though a serial entrepreneur himself, he feels that every entrepreneur is a serial entrepreneur. The biggest mistake is that people define entrepreneurs as those who own their businesses. “Entrepreneurship is all about the risk taking ability and the ability to look into the unknown. Some call it self confidence and some sheer stupidity,” says Mr Roy. To him, Bill Gates is also a serial entrepreneur. “Can you possibly say that he only started Microsoft? The launching and executing of various ideas, products, versions are all like starting new ventures.” Says Sridhar Iyengar of Bessemer Venture Partners, “In essence, all entrepreneurs are serial entrepreneurs. Some start multiple things, which succeed or fail.” Unfortunately, most serial entrepreneurs don’t think that the trend to become a serial entrepreneur is catching on as it takes up a lot of time, and needs a lot of conviction every time you start a new venture. That quality is not very commonly found, they agree. There are many instances where people try to become serial entrepreneurs, but fail, and prefer to go back to a professional career to earn their bread and butter. Entrepreneur mentors like Iyengar think in India where “failure is worse than death” people only want to deal with successful entrepreneurship, somehow belittling those entrepreneurs who tried but failed. He believes that in India we also put a premium on the “he/she stuck with it” entrepreneur, effectively thinking of those who leave for whatever reason as quitters. Every venture need to be started keeping in mind the general space and opportunities, looking at what will be needed to make a success in the field, analysing whether one can gather the critical resources required to succeed in the space and then going for it. Most serial entrepreneurs after their first venture, start off the next only after analysing at least four or five different opportunities before honing on specific one to launch. Once you keep your antennas up and ready to listen, ideas will start cropping up. The opportunities are limitless. What is the key is to quickly filter on the few that you can focus on for detailed evaluation, say experts.Ganesh looks at entrepreneurship like playing poker. You have certain cards in your hand. You can either pack (fold) or remain in play. Entrepreneurship is about deciding whether you have a strong enough hand, that is, high value cards for you to take a call and remain in play. You will never know till end of the round whether your cards were really good enough, whether somebody had even better cards but you take all probabilities into account and take a decision, he says. However, there is a downside to being a serial entrepreneur. As Ganesh puts it, “You lose hair faster, age prematurely, are seen as a crazy maverick by most people who cannot fathom why do these people subject themselves to all this again and again — that too voluntarily.” Sabharwal of TeamLease feels the biggest challenge of doing it the second time is the expectations. The first time you have nothing to lose and everything to gain so have much less baggage. The second time you have conceptions of who you are and what you have done and others have expectations of what you will do. This opening balance can be a gift and a curse, he says. But, everyone need not be a serial entrepreneur. There are people who are good at maintaining and growing businesses to greater heights day after day which can be equally challenging and even tougher. But, the key is the mindset and what makes a person tick. Future serial entrepreneurs need to do their homework first, and then start something new. It’s easy to get carried away by your own success, and other peoples, but it not necessary that each time you will find success. “So have an appetite for failures too, as they are the true stepping stones towards success,” says Wadhwa. So, with the clear road map to value creation, monetisation and exit, one can plan, grow and nurture the business and navigate the company on desired path.
http://10.101.20.24/Repository/ml.asp?Ref=RVRNLzIwMDgvMDcvMDcjQXIwMDYwMA==&Mode=HTML&Locale=english-skin-custom

Life Is A Never-Ending Game

Developing a successful business model for such companies can be a challenge, especially if you’re a rookie entrepreneur. Vishal Gondal, who founded Indiagames and still runs it after selling a majority stake to UTV, tells Mahul Brahma how his business model fashioned itself when he still didn’t know the meaning of the term with :
I was totally into games since my childhood, be it volleyball or online. I still play games all night long. I created my first game at 14, it was a Pacman clone. In 1993, I started FACT (Futura Academy of Computer Technology) at a garage in Chembur, Mumbai. I was just 16 then. There were only three computers and I taught students software programming, multimedia, etc. In 1997, I started ADVER Gaming i.e. games built around advertisements. My first project was for Pepsi. The game was programmed to shoot Coke cans with Pepsi. I used to go to companies and ask for themes for creating games. For Pepsodent, the game was designed to kill germs. I have also designed the scoring system for Femina Miss India, in which his algorithm helped calculate the scores of the contestants. Then came the Kargil war and I thought a game where you can shoot the terrorists who are trying to cross the LoC would be very appropriate. ‘I Love India’ was an instant hit. Then I realised that there’s a lot of demand for India-based games. And so in 1997 Indiagames.com, a website focused on games for India, was launched. It had games like Ravan Vadh and Dusserah. It was still a small venture with only five people until PricewaterhouseCoopers stepped in. One day in 1999 two investment bankers, I had no clue what it meant then, walked in and told me that they can provide me with venture capitalists. I had no clue what they meant, first investment bankers then venture capitalists. They explained that VCs will give me big money to expand my company and they will take stake in it. The best part was I would not have to return the money they’ll put in. Great. Now, when I look back I think had I been aware of all that I would have been able to take the plunge and reach were I stand today. Ignorance can sometimes be a bliss, you see. They asked me my business model and when they realised that was reacting to it as if they were speaking in Greek, they made one for me. PwC said they will only charge me success fees, that is, if they succeed in getting the funds, then only I will pay them. I agreed. They arranged Rs 3.5 crore from VCs and got their due. With the new money, my office expanded and I hired around 40 people. But, I was quite conservative in spending, don’t know why. After the dotcom bust, I wanted to shut online gaming and move over to mobile gaming. But, the other board members were not sure about it and wanted to go with providing services to foreign software companies. So, I had to also act as IT service provider for some time.
But, I had faith in my gaming abilities and as there were not many players in this segment then I managed to get assignments for mobile gaming from Disney, Universal, Sony Pictures and Nokia. And so came games for Lion King, Finding Nemo, Hulk and Wheels of Fortune. I always had the feeling that something more was needed to besides these, I needed a few products. I need to license a character, make a game and distribute it. But, it was very difficult to choose such a character because if it fails we will lose big time. In end 2003, Spiderman 2 was to be released and I decided to go for him. Got in touch with Marvel Comics and managed to get a worldwide licence for Spidey. The game was released in 60 countries and in 6 languages. Later I acquired licences for Bruce Lee, Jurassic Park, Buffy the Vampire slayer and Mask. Mobile game publishing increased our revenues 10-fold. I am happy that I have proved that you can do a product story in India. Now, I have a team of 300 people which include gaming programmers, graphic designers and gaming testers. Everyone in my team love gaming and that’s the common thread that binds us. When we are not creating games, we are playing one. My offices are in Mumbai, Beijing, London and Los Angeles. I also outsource some work to Eastern Europe, US and China. My dream is to give games or e-sports, as I call it, the recognition of a sport. It is never business for me, it’s just gaming. The other global players in mobile gaming are EA, GLU and GAMELOT. Besides, companies like Yahoo and Indiatimes also have mobile gaming facilities. My recent favourites are Resident Evil 4, Gears of War and WiiSports. It keeps on changing. With the growing market of pirated games it is becoming very difficult for gaming companies to maintain margins. So, I have made a pact with major gaming providers including Microsoft where I deliver a gaming package to people via broadband and charge them monthly. The companies are paid according to the usage of their games. So, when there’ll be easy and cheap availability of legal games, people won’t go for pirated products. Recently, UTV has taken over a major stake in Indiagames.com. (the stake held by Tom Online). To budding entrepreneurs, my advice is that you should have a good original idea and the capability to execute it. Have faith in your product. And always give preference to business sense than legal sense.
http://economictimes.indiatimes.com/Opinion/Todays_Features/Starting_Up/Life_is_a_never-ending_game/articleshow/2410358.cms

What's the right time to become your own boss?

Bijaei Jayaraj is happy serving his three-month notice period at MasterCard Worldwide as assistant vice-president and accounts head. Having resigned in January, he doesn’t have another job in hand and interestingly, isn’t looking for one either. After all, he is going to start up on his own. He will soon receive his last monthly pay cheque and then be freed into that uncertain stratosphere called entrepreneurship. Mr Jayaraj had been there before. This is his second attempt at being his own boss. The first one had failed. This time, he has put that lesson to good use, and is better prepared. The rush of blood he feels in his veins must be so familiar to a number of entrepreneurs, who dared to quit the safety of a regular job and plunge into entrepreneurship. While virtually everyone in corporate jobs, and even an increasing number of college students, at least vaguely dream of being entrepreneurs, not many give shape to their thoughts. The desire gets overwritten by the comfort of a salary routine. Only a fraction of such people rises above the resistance, and start planning for their own ventures seriously. For others, it is a mystery how these entrepreneurs dare to risk it all.

“Don’t ever sleep on a dream,” cautions Mr Jayaraj, who thinks his first rash dive into entrepreneurship was still more valuable than passive and idle waiting. He never let his dream wither away. He had this passion for building a business around consumer loyalty programmes and pestered a previous employer to implement his ideas. The company agreed it was a valid proposition, but stopped short of charting the new territory. Disappointed, Mr Jayaraj just quit in haste and tried it on his own. “There was no planning. I thought I would be able to arrange things, but it does not work that way. I was not able to arrange for funds,” he recalls. He realised he had tried to overreach in his enthusiasm. He returned to a job, this time with MasterCard. But in his heart, Mr Jayaraj knew it was just stopgap. He started planning his second attempt at entrepreneurship even as he worked hard at his job. He slowly sewed up the equation: business model, money, people, office space and even a web domain name. His homework complete, he resigned from a job he was performing well at and offered a promising career road map. This, in fact, holds a lesson for entrepreneurs, say experts. Successful entrepreneurs never leave their profession for wrong reasons, says VK Mathews, founder of IBS Group, who quit as general manager of Emirates to start a technology venture for the air transportation industry. “Most executives leave their jobs when they are doing pretty well. Disgruntled professionals should never become entrepreneurs.” For Mr Mathews, the preparation involved extensive research on potential customers who will be his new paymasters. “I first focused on who will pay me,” he says. “Customers have a risk, but they know that they can reap benefits” if they stick with a good businessman, he adds.
Mr Mathews had to empty his pocket for starting the venture. “Plunge is a very risky proposition. My kids were just four and five years then. I had put everything I had in this venture. But, I was determined that it won’t be a half-hearted effort, since I have seen numerous cases where people take leave and try new things just to get back to their old jobs after a while.” Mr Mathews also strongly believes that experience in the corporate world better equips an entrepreneur to manage his/her venture. Freshers may have brilliant ideas but for marketing and arranging funds, it pays to have a corporate exposure. For this reason, potential entrepreneurs must work hard at their current jobs, learn skills that might come handy in business and network intensely. Phani N Raj, founder of a brand merchandising company eYantra, was working with PwC as a consultant in the US. He had to work with lot of start-up companies and the ambition of those entrepreneurs inspired him to ditch the secure and stable job and get into rough waters. “When the decision came to change from security to insecurity plus the family pressure of dissuading from starting a venture, it became very difficult. But, the love of doing something where my contribution can be directly felt and I can make a difference to the business was too strong, so I took the plunge,” says Mr Raj. His planning period was three to five months. He met experts to ask whether the venture would make sense, what kind of challenges he might face, the possibilities of this venture failing and what kind of people and resources he would need to run it efficiently. He studied some players already in the market and made a monthly plan of expenses, first stream of revenues and tried to fix a revenue-to-expense ratio. Sahil Parikh, founder of Synage, worked for ClinicalTools — a software company in healthcare research. For him, leaving was not so hard because he was moving back to Mumbai, his hometown, and he had set up a deal with them about setting up a team and helping them develop software from India. They became his first client. “The biggest mental relief is your family’s support.” He planned his leave over six months in advance to complete the work in the company. He started Synage two months after he moved back to Mumbai. During this period he was busy settling down, looking for people, finding a business name and designing the site. For some like Tufail Khan, co-founder CarWale.com, it was a long dilemma that lasted over a year. But once he decided finally, everything happened very fast. “I resigned from Blue Star within a month of making the decision. It’s more difficult to leave job when one likes it. Internet was of great help in doing all initial research.” He also visited potential clients and discussed the ideas and possible products.
But there is no time frame within which the start-up urge takes expression. For Vivek Pawar, founder-CEO of Sankalp Semiconductor, the course ran as long as 16 years. “I used to always think I would start a company after five years, but it never worked that way as it was too long a time.” He kept on getting new challenges at Texas Instruments and didn’t have time to plan. At some point, he told himself if he did not take the plunge then, he would never be able to. He quit. “Since the vision for my new company was not clear and the entrepreneurship was an idea just based on glamour or wish list, every small or a big issue stopped (me) from taking the plunge. Once the vision was clear, there was absolutely no worry and things fell in place,” says Mr Pawar. KS Kohli, chairman of Frankfinn Aviation Services, never gave up his job as a criminal lawyer with the Supreme Court. It just took a backseat during his ventures. In 1993, he started his first company Frankfinn Medico Infoservices with Rs 40,000, that too borrowed from his friend. It was just a warm-up to his ambition of becoming a big player in the aviation industry. And he finally ventured into air-hostess training in 1997 and the company was renamed Frankfinn Aviation Services. He says: “I love being a lawyer; that’s why I never gave it up. I love being an entrepreneur and that’s why I took the plunge.” There are some entrepreneurs who say it makes sense to have a backup plan in case of failure, but others disagree. “I had assurance from Blue Star in case I ever feel like going back. But, in case of failure, I would have preferred joining a start-up,” says Mr Khan of Carwale. However, Mr Raj worked hard to formulate a backup. “The backup plan was to have some more cushion in the form of money and the worst alternative was to take up a job at a consulting company.” But, Mr Parikh feels that a backup plan puts you in a comfort zone. So, he prefers not to have one. “I decided to go with the single-minded focus and correct course, whenever necessary,” says Mr Parikh. However, the flexibility to change with market realities can be a cushion against entrepreneurship shocks.

http://economictimes.indiatimes.com/Opinion/Todays_Features/Whats_the_right_time_to_become_your_own_boss/articleshow/2924022.cms

Online presence helps build valuations and get VC funding easily

Madhav Oza entered the travel business well before the onslaught of internet, lived through the dotcom transformation of the sector and continues to enjoy a significant market share today. But he has been unable to attract venture capital investment for his company Bluestar, while wannabe travel portals, with nothing more than a website, have successfully drawn such funding. VCs have willingly fallen prey to the technology hype in what is a sound brick-and-mortar business. “They only want to make a fast buck,” Oza says ruefully. “But they fail to do so as only 10-15% make a profitable exit.” Excessive VC attention to some sectors and virtual neglect of other opportunities has led to a wide array of over-invested and under-invested segments in India, industry watchers say. Not that the fancied sectors are pouring money or the less attractive ones are devoid of profit opportunity. But the VCs’ tendency to embrace sectors, where others have succeeded, is creating a distorted scenario in entrepreneurship support across the country, they say. “It’s like a herd behaviour,” Oza complains. Even businesses considered VC friendly are hurt by this over-investment. For instance, fledgling travel businesses fashion themselves more as web portals with a predominant online model, rather than go through the pain of creating physical infrastructure and network. The logic is that the online presence helps build valuations and get VC funding easily. Oza recalls cases, where VCs funded fare discounts on travel sites out of their own pockets, and other cases where the companies folded up after the financial investors made their exit. The major victims of this beaten-track financial culture are the inventors of new products or technologies. Most of them are not business executives and lack entrepreneurship experience. All they have is the technical knowledge of their invention. Ideally, this should offer the maximum profit potential for venture capital houses, since there is value to be built from the ground up. But still, investors shy away from such ventures preferring to invest in the umpteenth search engine or yet another online exchange. VCs fail to invest in early stage start-ups, with high levels of innovation, as they are busy making late-stage investments, says Anil Gupta, a professor at the Indian Institute of Management, Ahmedabad. Even with all the buzz around innovation in many sectors, information technology and services form the VCs’ first priority. Even within services, business around outsourced contracts still get VC money, while new services are ignored, he says.
For instance, there aren’t many VC investors who understand or are interested in the farm sector, but bountiful opportunities lie there. With contract farming, farmer-corporate cooperation and newer market systems evolving, agriculture is increasingly becoming an entrepreneurial activity. Supply of seeds, herbal pesticides and nutrients are going to find robust demand in the coming years. Water purification, food processing products and no-chemical pest-control offer immense innovation possibilities.
Many entrepreneurs feel that the internet’s grip on VCs has not loosened even seven years after the dotcom meltdown. Within this segment, it is the oft-repeated themes like jobs and matrimony that get too much investment. Internet firms that deal with education, training, retail and financial services remain under-invested. Defending VCs, Rishi Navani of fund house Matrix Partners says funds prefer certain sectors considering a combination of market opportunities, management strength and return potential. The business needs to be highly scaleable for early stage funding. A great idea may really not be scaleable. But he also agrees that both VCs and start-ups are victims of herd mentality. Many VCs go by a shopping checklist to satisfy their limited partners or investment committee, taking care to do what other top VCs have also done. This is done to ensure that if something goes wrong, they wouldn’t be singled out for blame. They look for start-ups, which can expand quickly and can attract further investments in terms of next round funding or initial public offering. VCs love scale so that they can exit at the right time. Otherwise, they are not interested. The so-called “India Strategy” also plays a part in the business mix that venture funds go in for. These days, if you are doing business in India, it is mandatory to have certain sectors in your portfolio. The sectors that have caught the stock market’s fancy rank high on priority list, because companies in these businesses can be quickly packaged for an IPO. So, a real estate firm, where a big paper valuation can be built quickly and shares sold at a handsome premium, will attract VC devotion. Let innovation take a walk. On the other hand, a sector like power has no place on a VC’s mind because of its long gestation period, huge capital needs and the low potential for fancy valuations. VCs shrink away from business whose day of reckoning is far away. New Enterprise Associates, India vice-president, Ben Mathias says VCs generally look at sectors that they are comfortable with. “Most VCs with a US background have come from the tech industry and they focus on IT and ITeS. This is not because they don’t believe in the potential in other sectors such as agriculture, but because they don’t understand them sufficiently to evaluate the opportunities,” he says. Some like business mentor Sridar Iyengar feels that there is no area that is overexposed to funding. “We are growing at a good rate. We need investment in all areas. The amount of investment currently being made, which has been growing in the past few years, is still short of what is required and lags behind other countries,” he says. He says VCs would invest in a sector if they see earlier traction or opportunities. “One validation of that earlier opportunity may be one of them backing a project or company in that area. But to say the others are followers, implying that it is blindly done, is false,” he says.
Also, experience has shown that there are different paths to achieve a goal and that different teams will do it differently. “It is only natural that many teams are funded in the same space. In the end, most ideas are not wholly original. They are a better mousetrap. The game is all about execution. May the best team win,” he says. But, things may not remain the same for long and other sectors would attract interest as and when success stories start appearing, experts say. “We may be able to see some changes. Newer services for rural sector may start getting investments and also social enterprises, for which funding is almost zero, may start attracting some angels,” says Mr Gupta. A lot can be done if VCs can become a bit more imaginative and start looking at opportunities in nutraceuticals, herbals, water treatment, low-cost drugs, support for physically-challenged people, one rupee sanitary napkin for women (NIF has the technology from a Madurai-based innovator), a 15,000 wind mill by Mehtar Hussain from Assam being tested successfully in Gujarat for pumping brine solution, says Mr Gupta. There is no dearth of ideas, what is lacking is a robust mentoring, linkage with entrepreneurs and investment window. IIM-A has set up a forum for industrial interactions and an entrepreneurship club. Proposals from innovators as well as VCs are studied to help make the marriage or help both sides to reduce their transaction costs. And things are improving. Radix, a US-based company with an Indian subsidiary, has come up to take on 10 technologies with no upfront cost. It wants to explore their business development globally and then recover its costs from eventual successes. “We need many more Radixes, which provide a whole range of solutions to innovators and inventors and without any upfront costs, but exclusivity agreement for at least 120 days, which they may need to do complete evaluation,” says Mr Gupta. “If only angels and VCs were to invest in one percent of the 5 lakh technology student projects, we would have triggered 5,000 start-ups at very low cost,” he says.
http://economictimes.indiatimes.com/Opinion/Todays_Features/Online_presence_helps_build_valuations_and_get_VC_funding_easily/articleshow/2765240.cms

Entrepreneurs focus on building long-term value

Mohit Dubey, chief executive officer of online vehicle dealer Carwale.com, had two options before him. He could run his ship on a tight budget, entice customers with discounts and make a quick profit. Or, he could invest in infrastructure and improvement in service standards. The second strategy would mean slower ramp-up in the client base and postponement of the date with profit. It was simply a toss up between quick profit and long-term value. First-generation entrepreneurs often look at their first profits as the vindication of their business model and are hence quite eager to reach there as soon as possible. After all, the ultimate goal of any business is profit and why not early? So, it may be baffling to them to see seasoned entrepreneurs and financial investors appearing comfortable with losses in new ventures month after month, worrying about everything else but profit. A lot of venture funding happens in loss-making firms, which don’t seem to have any disadvantage relative to profit-making ones. Does that mean profits are not important in a small firm? The answer lies in the decision taken by Carwale founder Dubey. He figured that short-term profit may be attractive, but long-term value is what he wants to build. So, he chose to build a critical mass for the company before opening the cash box. That meant spending for the future and taking a knock in the near-term. “We took about a year to reach the critical mass, that is take Carwale to a credible level where customers are given a standard level of service. It took us six months to make profits after that,” he says. “We could have taken an easier path earlier by giving discounts, for getting early profits but that would have been a short-term gain and a long-term loss.” Of all the tricks that a rookie entrepreneur will need to make a success out of a new venture, perhaps the most important is to figure out when the company will break even. It can’t be left to chance and the CEO must plan for increasing revenue in a graded manner, investing in infrastructure and processes to support the growth and know how to fund initial losses. The first objective, of course, is to reach a viable cash flow position when the entrepreneur knows that the business can sustain itself. Scaling up then will bring in the benefit of size and profits. Profit timeframes differ from business to business, sector to sector. Unless a business is a one-man show like home-based consultancy, “one should look for scale and size in the business rather than worry about profit when it is started,” says K Ganesh, founder and CEO of TutorVista.com. In fact, profits too early in the life of a new company can be counter-productive, he warns. “Unless the business scales up, the fact that you can make a great profit will not mean much. It is easy to break even or make a profit at small scale, but doing it on a large scale is what building a business is all about,” he observes. For product companies, the span can be longer since development, testing, validation and marketing take up time. Services companies may be able to reach profitability quicker, but they should not rush in and rupture their growth impulses. There are too many small scale industries that never became large companies, because entrepreneurs tasted early profits and stopped taking risks at some point of time.
They may spend their most productive time lobbying for government concessions or complaining about the ills of small scale industries, rather than capturing opportunities and growing out of the bonsai mindset. Early profits may also mean that not enough cash is being pumped back into the business. While everybody likes to do business with or work for a profitable company, few discerning investors will be keen to put their money on a company that drives the balance-sheet before driving the business. Venture capital funds, when evaluating companies for investment, do not look for profit figures but for the soundness of the business model. So, a company playing for the long haul and hoping to win the trust of investors, must focus on the model itself. Profits will follow automatically. “You plan revenue, not profit. You should know where the revenue will come from and when it will overtake break-even and start making profits. There is a need to go to the market to experiment and work on your strategy,” says Pravin Gandhi, president of The Indus Entrepreneurs in Mumbai. An entrepreneur who fails to invest for the future just to show a short-term profit is unlikely to have a sustainable business, say veteran entrepreneurs. Profit or loss is not a choice, only the timing and planning are. In fact, if a company can reach profitability easily, it may not need venture funding. It may also not be scaleable. “VCs never pressurise you for quick profits if you are able to explain when you aim to get profits and the details of how you are working towards it,” Kreeda Games India founder Quentin Staes-Polet says. M Sanjay Kanth, CEO of ESS Solutions, says an entrepreneur must adopt a profit stance in his mind from the first day of his business. “That does not mean that you will not scale up and be tied down with the gains,” but only that you will remain focused on the financial health of your firm. “During the refinance boom in the US, to move beyond offshoring, ESS bought a title and a mortgage company. We started off with just a computer in a small room but this doesn’t mean we will remain that way because we are making profits. That’s business. You need to take risks and expand, and look beyond profits to make more profits in the future.” Successful entrepreneurs often stray from established and easy route to profits. Vishal Gondal, founder and CEO of Indiagames, says he faced resistance from VC investors when he wanted to move to mobile phone gaming business. They wanted him to continue with internet gaming and subsequently move on to information technology services as it was already a profitable sector. But Gondal stuck to his plan and investors eventually relented. “You have to have faith in what you want to do. Then it becomes easy to fight resistance from financiers,” says Mr Gondal. Here is a thumb rule for entrepreneurs. There are two kinds, bad profits and good profits. Bad profits come at the cost of growth, reduce value to the customer and drain future shareholder value. Good profits aid growth, add to customer value and bequeath longevity.
http://economictimes.indiatimes.com/Opinion/Todays_Features/Starting_Up/Entrepreneurs_focus_on_building_long-term_value/articleshow/2639068.cms

Transforming idea into a product

It was a bit of ‘jealousy’ towards a classmate that made Phani N Raj a businessman. School time memory of a student who had personalised clothing and stationery continued to be etched strong in his mind till much later, making him leave his PricewaterhouseCoopers job and start the branding company eYantra. “He was from the US and his cap, pencil box, T-shirt, everything had his name on it. I yearned for such personalised stuff, but there was nothing in India then to meet my demand.” This got him thinking until he arrived at an idea to set up virtual stores where buyers can choose personalised stuff and get them delivered at their doorsteps. Mr Raj is one of the very few with the entrepreneurial spirit who have managed to be lucky enough to convert an idea into business. But most people end up thinking and discussing their bright ideas, but stop short of converting them to prototypes. Experts say there is a set of easy steps that could help any one to nurture a thought and take it forward to see if the kernel of a viable business is contained in it. Look for it The first thing, of course, is to remain alert to the sights and experiences one comes across, because big ideas may be lurking in the most unlikely corners. For Shalabh Sahai, who co-founded the volunteering service MITRA, it all started at the college canteen over tea. He had been trying to understand why there was a communication gap between individuals who wanted to volunteer for social service and the groups that were organising such efforts. “It became our favourite topic of discussion at the canteen,” he says. Thus arose an idea for setting up an online exchange for volunteers. It also helps to jot down an idea to see if it stands the test of time. A great idea may not sound all that great, when considered a day later. An idea is just of a few words long. Only when you sit down and pen it you realise the real picture. It is crucial to go into the details. You need to ask yourself the right questions — what is the compelling need it fulfils, who will benefit from it, is there demand for it and who will fund it? Preparing a business model answering these questions is vital, says Mr Sahai. The answers will tell you whether to pursue the idea or drop it. Read the market An idea from a rookie entrepreneur would be worthless if the product or service doesn’t have the prospect of demand in the market. Industry associations, websites, journals and professional agencies can all help, but an innovator needs to have well-defined ideas on whether a market exists. This is but the first step to gain confidence that an idea can work. If the demand picture is hazy or non-existent, one should have the courage to drop the idea and move on to other things. Sometimes, ideas emerge from necessities. When you have too many projects to handle and too few people and you can’t be at the office 24x7. Emails and phone calls may not be sufficient to handle the complexity of the work. Sahil Parikh, founder and president of Synage, came up with a solution for his office — Deskaway. A software program that helps execute projects online. “The concept was new in India, but I was sure if it is a hit in my office it will be in the market,” says Mr Parikh. Ideas can be ahead of their time Latent demand doesn’t immediately translate into a viable business opportunity and some ideas, attractive as they seem, might simply be ahead of their time. But there are people who have stuck to their business and made it a success in due course of time. An idea who time is yet to come need not necessarily fail, but the entrepreneur must be able to envision the trend of the future that might make it succeed. “I thought of specialising in cyber law and starting cyberlawcollege.com, when even the concept of internet was new,” Bangalore-based consultant Naa Vijayashankar (Naavi) says. “An idea ahead of times is not accepted well,” but perseverance pays. “Now, I have become a specialist in cyber law by default. So, you need to wait for the right time to come and don’t lose faith in your idea. Believe that if not today, five years down the line, it will click,” he says. When criminal lawyer KS Kohli wanted to start a seven-day cabin crew training for airlines, everyone thought he was crazy as all other institutes offered full-year courses. But, he knew that Indian skies were going to be opened up for competition and there would be a surge in the need for flight crew. He stuck to the idea and built a successful operation, branded Frankfinn. Customise to market needs The aim should be to gain a general sense of the type of customer your product or service will serve. Identify your clients well enough so that you can modify your product as per their need. If the business is designed to serve the domestic market, it should have that flavour. “People work differently in different countries. So, it is very important to give Indian touch to your product,” says Mr Parikh. eYantra’s Mr Raj says that he moved over from personalised stuff to corporate brand recall after the internet bust and it worked. MITRA’s Mr Sahai agrees: “We start as novices so we should never be too rigid. We need to learn and adjust our ideas to changes and be open to modifications.” It is also important to hear people out. Because sometimes your business idea may come from the person you least expect it from, just casually, even over beer. M Sanjay Kanth, CEO, founder, ESS Solutions, was originally in the medical transcription business. But, the industry was losing its sheen. He knew the president of a title company based out of Baltimore. That person told Mr Kanth that there was refinance boom in the US which has resulted into a huge backlog in terms of production. Incidentally, his brother M Sujay Kanth, who is now the COO of ESS, happened to be in US to explore business opportunities. They took up this opportunity. This was their first break. “Initially, we had no clue of what was going on and it was very hard to grasp. We took it as a challenge and Sujay got trained in their office for about 40 days after which we started the transition to my India office from 2004,” says Mr Kanth. Sell the idea to investors Money is often the biggest bridge that a first-time entrepreneur has to cross. It is important to sell the concept to potential investors. The startup should also detail a proper plan of how much money needs to be raised and how it would be spent. Projecting cash flow milestones will become easier if the homework to understand the demand had been done. There are also investment bankers who help you get venture capital against a ‘success fee’ i.e they will only charge you if you get funding. But, there is another way in which entrepreneurs get going. They first start a small establishment, may be in a garage with a bit of furniture, and ramp up as the business builds itself. Frankfinn’s Mr Kohli started his business Frankfinn Medico Infoservices by borrowing Rs 40,000 from his friend. But, when the right time came, he used his own fund for starting cabin crew training business. Remember, the customer must eventually “pay” for your business. Everybody else is waiting to get paid. Loss-making as a business virtue perished with the dotcom bust. Start now All the risk you have taken by giving up your cosy job or turning down a big offer has finally paid back. Well, once things are in place just get started. Your idea is now a viable business proposition and has a funding. So, what are you waiting for? “It is very important when starting out is to be mentally prepared for a different journey filled with uncertainty and excitement. This entrepreneurial journey will teach you more about yourself than you would have ever known doing anything else,” says Mr Parikh.
http://economictimes.indiatimes.com/Starting_Up/Transforming_idea_into_a_product/articleshow/2450991.cms

Cyber security market to grow 100 times in 5 years

Not long ago, one of India’s well-known banks received a complaint from a clerk that there may have been an accounting error in the charge of interest rates on overdraft accounts. The bank usually charged an interest rate of 10%, but on a few accounts, the charge was just 5%. The difference ran into several lakhs of rupees. All records were checked and found to be accurate, but still the money was missing. The bank hired a small firm specialising in detection of cyber crimes to check if a fraud had been committed on its network. The firm checked the 259 programs that the bank used and found in the systems nine more that were not in the official list of software. Three of them that accessed the database produced no audit trail. The firm came up with the hypothesis that someone should have briefly reset the interest rates. The extra software could have been installed when the bank was upgrading its systems to newer software. The day of the fraud was identified, the accounts named and the officer staffing a certain desk questioned. It didn’t take much to extract the confession from him. The bank took remedial action without involving the police. A small firm had busted a racket that a big bank could not initially fathom. This case is illustrative of an increasing number of cyber crimes in India and abroad, which have in turn, yielded business opportunities of various hues for small entrepreneur-driven firms. Large companies have a high cost base and depend on nimble start-ups to swoop down on online criminals threatening their business. Cyber security for large and small firms is not merely important, but critical. A leading Supreme Court advocate says the market for cyber security services and products will grow 100 times within five years, due to increased adoption of technology and higher awareness and possibility of cyber crimes. For instance, if there is a major security breach in the banking industry or the stock market, the impact on the country would be devastating. The lack of security could undermine the growth and credibility of India’s outsourcing industry, which has given the country global attention and recognition. “Terrorists and criminals will continue to add their contribution to make the security business prosperous. Be prepared to plan for a long term and you will reap the benefits,” says Naa Vijayashankar, director, Cyber Law College and founder of Naavi.org, a techno legal information security consultancy based in Bangalore. As criminals become more and more tech savvy, a war has broken out between them and law keepers. Nations and companies need an army of specially trained warriors to take the attack to the criminals, Mr Naavi says. Like any other start up in a new field, investments are the key and appealing to a venture capitalist is difficult. Unless the services are institutionalised, investments are hard to come by. Saurabh Srivastav, the president of The Indus Entrepreneurs (TIE), Delhi, says that investing in the area of cyber security is finding global interest. However, he adds: “You won’t succeed unless you have a world-class product or service, as today you are competing in a global market. You can’t offer something that is simply the best in India. Cyber security is not country specific. It isn’t like banking software, where the software for an American system of banking is different from the Indian system. Cyber security is cyber security, the world over.” It is very important for entrepreneurs not to lose sight of individuals since security is important for every information user. If ‘Mobile Security’ is a target, then millions of mobile users are also the target clients. Ultimately, client selection is part of a business strategy and a good mix of mass markets which are stable but of low individual value has to be planned along with high value clientele who would obtain services on retainership. “There is plenty of scope for start up companies in the field of ‘cyber security products’.
There are several small and large software products which are required by the netizens all over the world. There could be professional services rendered on call such as ‘Security Audit’, ‘Implementation of Security Audit suggestions’ as well as ‘Certification of Information Security Status of a company,” says Mr Naavi. Like in all fresh businesses, cyber security start-ups will have their own difficulty in terms of establishing trust in the market. Being a security business ‘Trust’ is more critical in this business than in any other. The gestation period for brand building is therefore high. Additionally, users still look at ‘Security’ as an ‘Avoidable Expenditure’. Evangelising and ‘Concept Selling’ is still required. Renowned cyber lawyer Pavan Duggal calls entrepreneurship in cyber security a highly under-populated sector. “Industries still don’t see it as a necessity and therefore people don’t see it as viable business. This is because, we as Indians have a notion that information has to be shared. The idea that information has to be protected still hasn’t been ingrained.” In fact, security education is in itself a huge business opportunity, he points out. Start-up firms could start something as simple as reselling security software, but there is a large untapped demand for more sophisticated services, Duggal said. “Experts in the area of data security will be desperately needed soon. There is an increasing amount of pressure on companies from the government to ensure compliance with the IT-Act. Within five years there will be a boom. We can expect to see the industry grow to 100 times the current size,” states Mr Duggal. With 21 years of experience in the information security business, cyber detective Rakesh Goyal highlights the mindset needed for the job. He says, “Besides the technical qualifications, an understanding of the business processes of the client they are catering to and an idea of the workings of the criminal mind and criminal intent is needed.” An information technology system has over 600 risk prone areas. Four hundred of these can be plugged, while the remaining 200 need to be monitored, says Mr Goyal, founder and managing director of Sysman Computers. Therefore, he says, there is a lot of business opportunities requiring a lot of people. There is also enough room for a large number of players. According to Goyal, banking, stock broking and e-governance offer ready market for cyber security services already as they have regulatory requirements to meet. The systems in these sectors need to audited by an IT security auditor empanelled by the central government's CERT-In. In the near future, hospitals and telecommunication companies will also have an increasing need for it. Duggal says airlines may start hiring security services firm because planes are often used as a weapon by terrorists. With an array of services and products demanded for the security of an increasing number of vulnerable businesses, the cyber sky is only the limit for online security firms.
(With Jacob Cherian)
http://economictimes.indiatimes.com/Opinion/Todays_Features/Starting_Up/Cyber_security_market_to_grow_100_times_in_5_years/articleshow/2324553.cms