The Crisis of Credit Visualized

The Aim.. (Dilbert)

Used with Permission. Dilbert ©2009, United Feature Syndicate, Inc.

I want to dream..

"jaage hain der tak
hamen kuch der sone do
thodi si raat aur hai
subah to hone do...
aadhe adhure khwaab jo
pure na ho sake
ek baar phir se neend mein
woh khwaab bone do"

Contact me for a translation, in case you didn't get the meaning.

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Dearth of Product Companies in India - repeat call!?

One of my articles published on the NSRCEL Blog

We were lucky as well as unlucky to have missed the industrial revolution during its birth pangs - we got the stuff once it was already in a shape in the west. If it was the first car that was made or the first record player that played music, the entirety of products came up in some form in the west. This had a dual effect of having some form of product on the one hand (acceleration of technology use in the society) and forgetting to develop newer products in the country. We always had a thought that the product gets developed in the west and then it is migrated in an appropriate form to countries like India. (In fact, if a Indian product really comes up, it is not looked at with the same respect as the one born outside the country!) And now with folks like Friedmann singing about the services industry, the media and the public in general are in a euphoria of being the services capital of the globe, forgetting and unfortunately, ignoring the importance of product development in India. The number of original products developed in India has been very less, in comparison to the other aspects of industry. Well, we need to look at the long term effects of this assumed 'high'!

Whether it be post-independence economic policies, or a rush to get richer quicker by providing services (rather than wait for the full development cycle of a product), there are numerous reasons to look at. But the time has come when indegenous products from India have to be honored, with services being looked as the cream on the milk.

How do you think most developed countries have been able to remain competitive? According to NSF (National Science Foundation, USA), “High-technology industries are driving economic growth around the world”.

Although a lot has started happening in encouraging products as the main motive for development, we have to push the pedal harder. “Even during the recent, slow-growth, ‘post-bubble’ period (2000–03), high-technology industry continued to lead global growth at about four times the rate of all other manufacturing industries.”

Is this article dated by a few years - because it seems, that with people like Mahindra, Tata and Bharat Forge, we do have a product oriented approach!? Well, this article, is not really dated - it is just a reminder for the intense focus that we need to have when we go ahead with products. The definition of product from being a physical entity has been shattered. We need to have the central idea that can materialize into a definite form, and that can by itself sustain the services industry that we are proud of.

To quote a random internet user (login Dharma - no link):

Its hard to build product companies when the markets for these products are elsewhere. Now, with India emerging as a major market for high-tech products/services, its only a matter of time before we have some product-based entrepreneurial success stories coming out of India. I personally know several different entrepreneurs in B’lore working on ambitious product ventures. What is needed now is a combination of (1) govt regulation, (2) infrastructure development, and (3) seed/early-stage support from “mentor” funds/VCs to nurture this budding ecosystem. The service companies have done a great job building up Brand India, and the folks who have made lots of money in the process have an unique opportunity to give back to Indian IT by helping with (3) above.

We do not want to undermine the software services companies - they have contributed brilliantly to the economy - we just should not over-enthusiastic with this and tend to lose a product oriented approach.

Again, quoting Sramana Mitra, in an address to IITians:

In the last decade, IT has sucked all other engineering disciplines dry of their best minds. Even the IIT Civil Engineers and Mechanical Engineers are writing low-level software for Oracle or IBM. If you continue at this rate, none of the other major disciplines will get their rightful share of leadership that is your responsibility to provide.

This may look like a repeat call for a product based economy - but in today's world, it does have its significance.

Any thoughts!?

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'Closer-to-life' Tech

One of my articles published on the NSRCEL Blog

With the buzz about cleantech going around, it seems to be very interesting to find companies investing more and more technologies that are closer to the survival issues of living beings. What started as a revolution in the auto industry with the introduction of diesel and gasoline as the driving fuels for automobiles, has now turned into a simmering source of pollutants that very well threaten the climate around us. It is like all the oil in the oil wells of the globe has been spread out horizontally over the earth through numerous vehicles and has been put on fire.

What exactly does the word clean mean in the term cleantech? Is is clean with respect to the harmful substances spewed by any process or is it the re-cyclability factor of any substance that makes it 'clean'? Apart from the auto industry, there are thousands of other processes which need to employ cleaner technologies and we have seem some improvements due to cleaner methods being used. If you look at the textlie industry, or at the pharma industry, there are numerous holes to be plugged. We are sitting in a room that is fast getting filled up with water and while we are busy plugging the bigger holes, the smaller holes are getting bigger.

When you look at startups and cleantech together, it seems to be a major fad that people are going with. With numerous b-plans that bank upon emerging technologies and industries, based on principles of biology, resource efficiency, and second-generation production concepts in basic industries. To begin with, there is an estimation of the human-caused results of industrialization - examples include: ozone hole, acid rain, desertification, and global warming.
In the 2007 report compiled by Dow Jones VentureSource, numbers show a strengthening trend in clean technology investments worldwide. A record sum of over $3 billion was poured into 221 clean clean technology deals globally in 2007, representing a 43% increase compared to $2.1 billion in 2006.
Looking on the innovations side, people are going to the very limits of their imagination - we have a working model of a battery that sustains itself on 'air'! (Have a look here.) The new design has the potential to improve the performance of portable electronic products and give a major boost to the renewable energy industry. The batteries will enable a constant electrical output from sources such as wind or solar, which stop generating when the weather changes or night falls.
We are moving closer to sustainability - we got to maintain balance - for, like all of us, our planet too is vulnerable beyond an extent! Any thoughts?!

Alternative Startup Financing Schemes - Freeman Murray

I’ve seen a number of posts lately discussing the ‘changing face of venture capital’. Paul Graham talks about the change in dynamics caused by the low capital requirements of technology startups. Fred Wilson discusses the need for a market for privately held common stock. There seems to be a general consensus about the growing role angels play in the startup ecosystem, and sadly there also seems to be a general consensus indicating that angels should basically write off their investments the moment they make them.

This last point rings true for me. Before coming to India I made a number of investments in tech companies. During my chapter... [Read full article]

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Seth Godin on 'The next Google'

   Microsoft, home of the Zune, has just announced that they're going to launch Bing, a rebranding and reformatting of their search engine. So far, they've earmarked $100 million just for the marketing.

Bing, of course, stands for But It's Not Google. The problem, as far as I can tell, is that it is trying to be the next Google. And the challenge for Microsoft is that there already is a next Google. It's called Google.

Google is not seen as broken by many people, and a hundred million dollars trying to persuade us that it is, is money poorly spent. In times of change, the rule is this:

Don't try to be the 'next'. Instead, try to be the other, the changer, the new.

If Microsoft adds a few features and they prove popular, how long precisely will it take Google to mirror or even leapfrog those features?

With $100 million, you could build (or even buy) something remarkable. Something that spread online without benefit of a lot of yelling and shouting. Something that changes the game in a fundamental way. The internet works best when you build a network, not when you buy a brand. In fact, I can't think of one successful online brand that was built with cash.

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Watch the Google Wave

Watch the google wave:

Email, instant messaging, wikis, forums, blogs, mobile, SMS... Google Wave completely obliterates business models and entire verticals of companies left and right.

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Venture Capital in India - Sramana Mitra

     Sramana Mitra's views on Venture Capital in India. Please click here to be taken to Sramana's website.

India is flushed with investment commitments from the giants of technology. Microsoft, Cisco, IBM, SAP, Intel, and AMD have each committed over a billion to further develop their India presence.

So have many of the leading venture capital firms from Silicon Valley. For the longest time, Valley VCs would only invest in their backyard. No more. India, China, Israel are fair game today. This month, Matrix Partners has announced a $150 Million India fund. Sequoia has acquired Westbridge Capital, an India focused fund that has been around for five years. Several other major VCs are playing the space – Kleiner Perkins, NEA, Norwest, Battery, Sierra, Canaan Partners.

Yahoo has started investing in Consumer Internet startups, the first of which was announced recently (Bharatmatrimony.com), playing the corporate venture capital game.

Together, the committed capital chasing India is abundant.

Business Week writes cover stories on how the new billion dollar companies will emerge from India. Some have, already. Infosys, Wipro, TCS. No doubt, the lure of India for VCs is legitimate. These new darlings of Wall Street were built without their money. They want to make sure the next wave is built with.

In today’s India, the commodity in short supply is good entrepreneurs. In VC parlance, fundable deals are few and far between. Why?

Historically, India has been the world’s back-office. Consequently, the skill-set that has developed in India is that of engineering management and coding. The specifications are provided by teams elsewhere. Elsewhere, the market studies get done. Indian managers do not understand global technology markets. They have hardly had opportunity to learn this aspect of business. Entrepreneurs try to position products without knowledge of the product marketing discipline.

The natural instinct for Indian entrepreneurs is to build outsourcing services companies. BPO. Software Development. Chip Design. Those ventures take less capital, and become revenue generating fast. None of the Operating Loss period of a pure play product company is necessary, and hence, venture capital is also unnecessary.

VCs typically do not like this business model. It has low entry barrier. But those who have invested in India in the last five years have also invested in this model and made money off it. It was the only thing that was available. It is, however, becoming less appealing, since those markets are also maturing, and behemoths start to rule.

The next stop for VCs, the most recent wave, has been Consumer Internet and Mobile offerings. India’s growing mass of connected consumer population is the target wallet. Travel, Matrimonials, Jobs, Games, Mobile Payments are all segments getting substantial capital infusion. This trend is likely to continue for the next 18 months. The engineering required in building these sites is marginal, marketing being the big differentiator.

But it will still not consume the available capital. Those who understand the subtleties of these dynamics have started diversifying their portfolios with Retail, Bio Tech, Real Estate. Sequoia’s Royal Orchid Hotels is a case in point. Oak Investment Partners has set up a $200 Million venture fund to focus on the retail boom in India. Veteran retail investor Jerry Gallagher visited India and was astounded by the revenue per square feet in the malls and stores. He came back and convinced his partners to commit capital.

Bio Tech has produced one of the flagship entrepreneurs for India, Kiran Majumdar-Shaw, who is now pulling her weight to drag the entire industry up. India has a better opportunity in this field for the same reason as Retail: domestic producer, domestic consumer. Tests can leverage a gene pool that is perhaps one of the most diverse and universal in the world. If Indian policy-makers can get their act together, then India could even lead a stem cell research effort that is so far faltering in the US. VCs would be delighted to play.

Real Estate, however, is a different animal. For the longest time, the old money in India had only one legitimate investment vehicle. That was buying properties. Indians know a lot more about Real Estate entrepreneurship than any other kind of entrepreneurship. There is a financial eco-system around Real Estate that works, and by and large, venture capital is unnecessary, even unwelcome. Private Equity investors, however, are playing this market.

Conspicuous by its absence in the above discussion is traditional technology venture investing, the game that VCs know best. The reason being, it is almost absent from the technology firmament of India.

Intriguing, but entirely logical. Technology innovation takes intense domain knowledge. Be it in software, hardware, chips or communications, the engineers capable of innovation of this nature are inside the multinationals, harvesting unthinkable salaries, enjoying unbound luxury and lifestyle with servants, chauffeurs, maids, nannies, and cooks coming out of their ears. A $200,000 salary in India effortlessly affords a grand lifestyle that even multi-millionaires in the US cannot dream of.

People become entrepreneurs for two reasons: either they have a chip on their shoulder, and have something to prove to themselves and to the world around them. Or, they want to afford a lifestyle that is substantially above their current means. India is banking on the motivation of the former category alone, to find its technology entrepreneurs.

The onus, I am afraid, comes back to Silicon Valley to come up with technology innovation, which Indian back-offices can then implement and scale.

Venture capitalists will continue to go on their eco-tourism trips to India, then return. In the words of Marcel Proust, The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.

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