Dare To Dream
For others, it is a mystery how these entrepreneurs dare to risk it all. The world belongs to those who dare.
Thursday, October 23, 2008
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)
Sunday, August 31, 2008
Monday, July 28, 2008
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.
Friday, July 4, 2008
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.
Friday, June 13, 2008
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.
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.
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)