Paying it forward

If you grew up in India any time before the turn of the millennium, you must have heard this at least once (more likely, twice a week) when you were growing up. “[Insert name] went to America with only his degree and [suitably small number] dollars in his pocket. All he had with him was his brain and [faith in god/ love for mom/ belief in himself]. Look where he is now. If you [study hard/ eat your vegetables/ stop fighting with your siblings], who knows, he may help get you a job over there.”

In pre-liberalisation days, for most Indians, the US was Xanadu, Utopia and Paradise all rolled into one and it seemed to be every non-resident Indian’s sworn duty to get as many of his brethren across the Atlantic as possible. It helped that in the late 1990s at least, H1-B visas were being tossed like confetti as panicked Americans struggled to stave off the impending Y2K disaster.

That frenzy has tapered off somewhat. Now, there are plenty of opportunities to make it big in India, too, even as — after Y2K proved a non-event — it has become increasingly tougher to move to the US for employment and ultimately, immigration. But for many Indians in Silicon Valley, helping others has become an ingrained habit. Offering practical help, that is. And, rather than getting a young relative from the extended family a mind-numbing job as a code monkey somewhere (anywhere!), they are helping bright sparks in the Valley become even better.

A sub-culture of success

Certainly, Indians in the Valley have enjoyed an uncommon degree of success, even in a region that is noted for its extravagant wins. Over the past two decades, the tech boom has spawned a number of dollar billionaires as well as an entire galaxy of rising stars associated with blockbuster companies. From Kanwal Rekhi, Romesh Wadhwani and Vinod Dham of a generation earlier, to current luminaries such as Ram Shriram of Sherpalo Ventures, one of the first investors in Google, and Padmasree Warrier of Cisco, Indians are clearly at the top of the heap in Silicon Valley. And the entrepreneurial streak in the community seems to be a mile wide.

According to a study by researchers at Duke University, Berkeley and Stanford, titled Then and Now: America’s New Immigrant Entrepreneurs, there’s been a dramatic fall in the number of immigrant-funded start-ups in Silicon Valley, from 52.4% in 1995-2005 to 43.9% since 2005. But the number of companies in the region started by Indians has actually increased over the same period. Between 2006 and 2012, Indians accounted for 32% of immigrant-funded companies in Silicon Valley, up from 25.8% between 1995 and 2005 . That’s more start-ups than those by Chinese, British, Japanese and Canadian immigrants combined. And it’s way higher than the trend in the previous millennium. An earlier, 1999 paper that tracked immigrant entrepreneurs in the Valley between 1980 and 1998 had estimated only 7% of high-tech companies had been started by Indians. 

Mind, it’s not just the Valley. From 26% of all immigrant-led companies in the US in 2005, Indians now account for 33.2%. The community has founded more companies in the US than immigrants from the next top seven countries (including China, Japan, Germany and Canada). The industries of choice: innovation and manufacturing-related services (41%), followed by software (23%). Even in 2005, Indians were ahead in forming innovation and manufacturing-related services companies (which includes computer and peripheral equipment and software, research and testing and computer services) and had a significant presence in forming companies in other sectors such as biosciences, semiconductors, defence and aerospace.

Now, however, they are the largest immigrant group founding companies in each of these areas. And California is calling: 26% of Indian immigrants set up companies in the state, a choice echoed by other immigrant communities as well (except the Germans, who seem to like Ohio best). So, just how are all these successful Valley people spawning a new breed of entrepreneurs?

A binding commitment

Sometime in 1992, a group of Indian businessmen gathered at a restaurant in Santa Clara to honour an Indian government official. The official’s flight was delayed and the group began chatting with each other. Someone suggested meeting more frequently and for the next year-and-a-half, they would meet once a month and swap stories about their careers, successes and strategies. In 1994, The Indus Entrepreneurs (TiE) became an official entity with the mission to foster entrepreneurship in people from the Indian subcontinent. To become a member of this exclusive club, you had to give your most valuable possession — your time — for the benefit of the next generation of entrepreneurs: people invited to become charter members pay $1,500 a year to mentor and guide others. “The world over, people make money and come here. In Silicon Valley, the money stays here, the people stay here and help each other. It’s a self-perpetuating cycle,” says Venkatesh Shukla, president, TiE Silicon Valley.

About a decade ago, though, TiE Silicon Valley seemed in a bit of a funk. Similar organisations had cropped up everywhere, it was becoming far easier to start a business now than it had been when TiE first started and, as Shukla points out, entrepreneurs’ needs had changed. “Now, what a new entrepreneur needs is money, hands-on mentoring and access to customers.” Accordingly, TiE reinvented itself to provide all the three.

In 2010, charter members of TiE Silicon Valley launched an angel investment group to offer early-stage investment and support to new companies. TiE Angels comprises 140 charter members and Shukla recalls opposition to the plan when it was first mooted. Now, he says, 84 TiE charter members have “written at least one cheque”. So far, $7.5 million has been disbursed to about 21 companies in areas such as software, mobility, cleantech and medical devices.

Then, a more organised way of offering mentorship, the accelerator programme TiE Launchpad, was launched in October 2013. Under this programme, up to eight companies will be selected per batch for a five-month session, where they will get a dedicated mentor from TiE’s charter members who will work with them weekly, as well as $50,000 in convertible notes. “The first batch starts in January and the response has been very positive,” says Shukla. “After all, you won’t get that quality of mentors anywhere else in the world. Silicon Valley is where you want to be if you want to conquer the world.” This insight — that money is only a small part of what newbie founders need — is something that’s common to most seasoned Indian entrepreneurs in the Valley. 

Sweat equity

“I was an angel investor for six months and found very little value-add in that route. You meet for an hour a week and end up having the same conversations,” says Sunil Bhargava. So, when the tech veteran set up Tandem Capital, he was clear that his mobile start-up accelerator would be different from the norm. And in each of the three funds launched since 2007, Tandem has been just that.

The first fund was about investing around $1 million in a company for 18 months to two years, and sweating it out with the founders, helping them find the right product-market mix, build business development relationships and then find buyers. “If [seed accelerator] Y Combinator is like the village trying to raise a child with its vast ecosystem of sharp mentors and savvy investors, we are like a family raising a child. We are very involved with our companies; we nurture and support them for a long time,” Bhargava says. In less than three years, Tandem Habit I returned two-and-a-half times the $11 million fund. 

Tandem Habit II was launched in 2011, after the creation of the App Store. Now, there was a scalable way to do business and Bhargava’s focus centred on finding the product-market mix in six months, which the entrepreneur spends at the charming Tandem office, a renovated Victorian cottage in a leafy avenue in Burlingame. Although this was a much-larger fund at $32 million, Tandem invested just $200,000 in each of the 20 companies it supported, the idea being to put in the rest in whichever showed the most promise; there have been no exits so far. Now, Tandem is on its third fund, focused on global digital opportunities, including in India. “I have a soft spot for India and want to put Indian entrepreneurs on the global map,” says Bhargava.

At The Fabric in Palo Alto, Rajan Raghavan and Prabhakar Sundarrajan have a similar strategy — their investment in companies that they back goes beyond cutting a cheque. Between them, the two have launched more than seven companies in the Valley in the past two decades. When they sold their last start-up, Ankeena Networks, to Juniper in 2010 for $100 million, says Sundarrajan, “we wanted to do something different, but still in the networking industry”. They set up The Fabric over a year ago with more than $10 million in funding, with the aim of sequentially co-founding four companies in the computer networking space over a period of two years. The Fabric will work intensively with each company for six to nine months, help it raise venture funding and then move on to the next start-up. 

Where The Fabric and Tandem differ is that at the former, the idea for each new company comes from Raghavan and Sundarrajan. They then find entrepreneurs who can collaborate with them on this idea, inject up to $2-3 million into the firm and share access to The Fabric’s innovation lab in Chennai, which will be a common resource for all the start-ups creating prototypes and offering offshore development facilities. For this, the company takes both founder equity and additional investor equity. “Are we incubators, a seed fund or investors? The answer would be all and none of the above,” laughs Raghavan. “We are co-founders with money.”

The first company out of The Fabric, while still in stealth mode, has already been funded by a major VC, says Raghavan. The second will soon reach out for series A funding and the third is “still a gleam in our eyes”. “Currently, there is a gap between entrepreneurs and the level of maturity VCs expect before they write a series A cheque. With a model like ours, entrepreneurs get guidance from veterans, The Fabric gets to build companies and VC funds — which have become more risk-averse — get more mature companies,” he adds. “It’s a win-win.”  

The India angle

Like Tandem and The Fabric, other Valley entrepreneurs, too, are working closely with India, even as they nurture businesses in their new homes. Take Gunjan Sinha. The 46-year-old serial entrepreneur is now chairman of MetricStream, a Palo Alto-based enterprise governance, risk and compliance solutions provider, a company he set up in 2004. But since the time he came over to the US for a master’s degree at the University of California at Santa Cruz, Sinha has been launching start-ups. His earlier ventures include Viman Software, Parsec Technologies, internet directory services company WhoWhere?, as well as eGain, an online customer service management firm that his former business partner Ashu Roy continues to run.

The common connect: “There’s always a US-India thread in my companies”, whether it is as a full-fledged subsidiary or for running back-end operations. Sinha is convinced, though, that he couldn’t have started half as many companies had he been anywhere else other than the Valley. “If I had ended up in some other part of the US, I couldn’t have done this. This is the R&D capital of the world. Here, you’re never too far from a discussion on technology. You’re never too far from someone working on the next big thing.”

In 2010, Sinha became part of what he considers a very big thing, when he joined the board of the US-India Science and Technology Endowment Fund, a joint effort by the Indian and American governments to promote innovation and technopreneurship through science and technology. The fund offers grants of about $450,000 to bi-national teams that are working on technologies with a positive societal impact, in areas such as affordable biomedical devices and information technologies in water, agriculture and education. “By helping and funding budding scientists and researchers who want to commercialise such technology, we are seeding entrepreneurship in both countries,” says Sinha. 

That’s what Ash Lilani is trying to do as well. As far back as 1998, he was visiting India regularly, drumming up support and enthusiasm for a venture capital ecosystem in the country. A great believer in Indian entrepreneurs, the Kenya-born Lilani, who moved to the US after graduation from Bengaluru University, has been a part of the Silicon Valley Bank (SVB) core team as it built relationships with tech entrepreneurs in India and China, taking a slow and steady approach to try and create a venture capital hub in these countries. “I have always been very bullish about India. We wanted leverage our strong connections in the Valley to develop the entrepreneurial ecosystem in India,” he says. In 2003, he brought over close to 20 VC fund teams to India, introducing them to the country and encouraging them to think of setting up operations here. Many of them did, and several operated out of SVB’s office in Bengaluru, leading it to be nicknamed “Sand Hill East”.

There were other landmark achievements in Lilani’s India career: in 2008, SVB India Finance started providing debt capital to VC-backed companies in the early and growth stages, the first company in India to offer venture lending. And in 2011, when SVB spun off the India investment team, SVB India Capital Partners (SICP), into an independent venture capital firm, Saama Capital, Lilani continued to head it from Santa Clara, where he is based. Since 2006, when SICP came into being, the fund has made over 25 investments in Indian companies across sectors, from Sula Vineyards and Snapdeal, to iYogi, Naaptol and Geodesic. “It is best to think local while investing in Indian companies, but there are some best practices in the Silicon Valley that can be adopted by companies in India and that’s what we are doing with our companies,” he says. 

The bigger picture

Sometimes, giving back involves more than just supporting entrepreneurs. It’s about the larger community and about larger issues. LinkedIn’s senior vice-president for products and user experience, Deep Nishar, for instance, is an angel investor in a whole bunch of companies such as Spool, LawPivot, Shape Security, VigLink, Numerify and Sift, and along with other former Google colleagues, is also one of the founders of AngelPad, a seed-stage start-up incubator in San Francisco. Nishar says he loves to invest in very early stage ideas. “I have an enormous debt of gratitude for the attention and mentorship that I have received over the past 25 years that has guided me throughout my career. So, in a sense, I want to pay it forward.”

But rather than speak about his investments in these start-ups, Nishar, true to his philosophy of maximising learning, not income, focuses on the thriving innovation and entrepreneurial culture in the Valley, which leads to so many new start-ups being launched almost every day. “Go to any coffee shop, be it University Café in Palo Alto or the Starbucks at Sharon Park in Menlo Park, you will find people talking about and exchanging ideas that could change the way we approach life. The atmosphere is extremely vibrant. Silicon Valley has the potential to bring ideas to life and that’s why innovation thrives here,” says Nishar. His fascination with constant learning and the desire to impart knowledge is the driving force behind many of the new features he has introduced at LinkedIn, including offering news and information about business trends, professional advice etc.

MR Rangaswami’s focus, on the other hand, is on the Indian diaspora. One of the earliest angel investors in the Valley who founded the Sand Hill Group in 1997, Rangaswami last year founded the Indiaspora, a non-profit organisation that seeks to further the interests of the Indian-American business community in the US. 

Although their numbers are still not very large (just 1% of the US population), Indian-Americans are among the best educated and most successful communities in the US. “But they aren’t taking their rightful place in society. They have neither the visibility nor the influence they should,” says Rangaswami. Indiaspora, which started with 100 members in September 2012, saw its first prominent event just a few months later, when it hosted a black tie inaugural ball to celebrate US president Barack Obama’s second term. 

At the event, Rangaswami highlighted five items on Indiaspora’s to-do list: get more Indian-Americans onto the political stage, build strategic partnerships with India, keep an eye on India’s reforms process, build a “philanthropic bridge” between the US and India and work towards helping the 300,000 Indian-American below the poverty line in the US. “If the Indian-American business community, especially those from the Valley, are committed towards this goal, we should definitely see success. We have the track record to prove it,” he adds. 

This isn’t the first time Rangaswami has worked for a cause. In 2008, he founded the Corporate Eco Forum, an invitation-only organisation for large companies that have a demonstrated commitment to the environment. The idea behind the forum is to create a neutral zone where business leaders can openly discuss sustainable business innovation ideas and challenges. Members include companies such as 3M, General Motors, Unilever, Chevron Google, Yahoo and Tata Consultancy Services. 

Going by recent events, Indiaspora seems be achieving at least one of its goals. Barack and Michelle couldn’t make it to the inaugural ball in January, but Rangaswami was part of the guest list for the White House Diwali party earlier this month. Some times, giving back is its own reward.