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Entrepreneurs under 30

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What’s fuelling entrepreneurship in India 

Kripa Mahalingam

ndian high school students wake up early on weekends to slog over textbooks at IIT coaching classes, right? Well, not all high school students. Over the next two months, 50 teens from schools in Delhi’s NCR region will spend their Sundays at a young entrepreneurs programme organised by The Indus Entrepreneurs (TiE), the largest global network of Indian entrepreneurs. They will learn about marketing, finance, intellectual property and business law; their ‘teachers’ will be established entrepreneurs; and there won’t be any textbooks around. Indian parents are not exactly famous for nurturing the entrepreneurial dreams of their offspring.

Their well-meaning and well-known mantra: study hard and find a good job. But young India seems to be making other plans. For every Mark Zuckerberg, Kevin Systorm or Larry Page in the US, India now has a Naveen Tewari of inMobi, Sachin Bansal of Flipkart and Dhiraj Ram of Mu Sigma. Okay, they are not exactly comparable in size but the new businessmen on the block have quickly become the poster boys for entrepreneurship. Ballsy and brazen, they are confident enough to take on global players. “Even first generation entrepreneurs without a legacy are aiming and dreaming big,” says Sateesh Andra, venture partner at VC firm Draper Fisher Jurveston India (DFJI).

Sanjeev Bikhchandani, CEO, Info Edge“Some of them are going after India but it’s also good to see them reaching for the global market. They are not afraid to create a product and sell it in the US, Europe or South East Asia — it could be anything from mobility to enterprise software.” Within five years of its launch, inMobi has become one of the largest independent ad networks in the world — and it has gotten there by daring to take on Google and Apple in the mobile advertising space and raising $200 million from Softbank Japan to fuel its expansion plans.

In the same five years, Flipkart has become India’s largest e-commerce company (likely revenues of 2,500 crore in FY13), raising almost $150 million in its fourth round of funding at the start of this year. Is this kind of growth too aggressive?

We can debate away but there can be no denying the ingenuity of this new breed of entrepreneurs — they have built formidable businesses in a short span of time and, what’s more, they have been raking up valuations yet to be seen by brick-and-mortar companies that have been around for decades. 

So, what’s driving entrepreneurship in India like never before? First off, there’s now a thriving ecosystem of early stage investors who are scouting for good ideas. “Two years ago, it was very hard to get time with an angel [investor],” says Pranay Gupta, CEO, Centre for Innovation Incubation and Entrepreneurship, IIM Ahmedabad. “But entrepreneurs with a good business model or product can now choose from a line-up of angels. They can decide how much money they want and from where they want it.”   

Sateesh Andra, venture partner, Draper Fisher JurvestonThat was not always the case. “There is far more risk capital available for entrepreneurs today,” agrees Sanjeev Bikhchandani, one of the earliest dotcom entrepreneurs in India and CEO of Info Edge, the company that owns Naukri.com. “They also have success stories and role models to follow. So the ecosystem is better developed than what was available when we started.” Back then, start-ups had to grapple with the lack of capital and infrastructure, and they had a tough time in recruiting talent. Now, though, not only do investors put money in pre-revenue start-ups, they are willing to help strengthen the team and sharpen the business model.

TiE’s established ecosystem, for example, has its network of entrepreneurs mentoring aspirants. “People don’t give enough credit to the kind of mentoring that is available to entrepreneurs now,” says Deep Kalra, CEO, MakeMyTrip. “Mentoring is the most important input that a young entrepreneur can get today because it can save him a lot of effort and time and stop him from going in the wrong direction.” Kalra mentors at least one entrepreneur every week.

He believes established players like MakeMyTrip and Naukri that have been operating for over a decade have added credibility to the start-up business. And their listing was rewarding for both their investors and employees — MakeMyTrip gained 89% and Info Edge 94% on the day they were listed in August 2010 and November 2006, respectively. If MakeMyTrip’s market cap is currently $514 million, Info Edge has soared to about $670 million; and inMobi and Flipkart were being valued closer to $750 million to $1 billion based on their last round of funding.

It’s technology that lifts Indian entrepreneurs to the same playing field as their global peers. “The only difference is that the amount that gets invested in the US is significantly larger,” says DFJI’s Andra. Look at the numbers: VC investors in the US poured $32.6 billion into 3,209 venture deals in 2011. During the same time, in India, VC funds invested $935 million across 180 deals, according to VCCircle.

“The US is a more developed market so there are many opportunities. There is also a lot more entrepreneurial experience since everyone in Silicon Valley has worked in a start-up,” says Kanwal Rekhi, managing director, Inventus Capital, who works with entrepreneurs in Silicon Valley as well as India. “But we have seen some innovative ideas coming from India. Certainly, Indian entrepreneurs are a lot more mature now than they were 10 years ago.” 

Tech: the great enabler

The role of technology in the mushrooming of start-ups cannot be understated. Entrepreneurs across India are leveraging technology to build products and services for both domestic and global markets. “Earlier, companies like Infosys, Wipro or TCS used technology to build solutions to solve problems in other countries,” says Gururaj ‘Desh’ Deshpande, Indian-American venture capitalist who co-chairs Barack Obama’s National Advisory Council on Innovation and Entrepreneurship. “The next wave of companies will use talent and technology to solve problems in India.” He feels that every problem is an opportunity for a new company. “The opportunities in India are huge for people who want to be entrepreneurial,” he adds. 

Fresher gains

Venture cap funds are placing bigger bets on start-ups in the past two years

India is capital scarce, and technology helps a business run more efficiently. It’s already happening — for instance, several start-ups in education and healthcare are using the cloud to deliver products and services without investing in physical infrastructure. In another example, Red Bus saw the big opportunity in the $2.5-billion bus travel market and leveraged technology to set up its online ticketing platform — the company now has over 700 bus operators on board and recently sold over a million tickets, clocking revenues of 300 crore in FY12 to make it one of the most transacted sites in India.

The ability to sell online opened up a limitless opportunity for Druva, the data backup service provider. “Initially, most of our customers were from the US,” says Jaspreet Singh, CEO, Druva Software. “We realised that there was a huge market for our products, when customers in the US were willing to buy from an unknown start-up from a different part of the world. Being able to sell our products online gave us a reach that was beyond our imagination.” Druva hopes to clock revenues of over $50 million by 2014-15, around which time it may take an IPO to the market.

Stumbling on their dream run

However, sometimes, entrepreneurs are so focused on getting their businesses off the ground that they don’t always get the big picture right. “In the first phase, entrepreneurs are very eager to sell their idea,” says DFJI’s Andra. “They wake up only during the second phase to realise that selling profitably is more important than getting customers.” Andra feels that if the entrepreneur doesn’t analyse his business enough, or if he gets too much money early on, he may end up pushing the accelerator too soon. He adds, “If you are not evolved as a company, it could lead to huge problem in execution.”

Kanwal Rekhi, MD, Inventus CapitalNaukri’s Bikhchandani says it is keeping a tight lid on costs that helps in the long run. “We had bootstrapped [self-funded] the company for 10 years before we took venture capital,” he remembers. “We had to earn money to break even so we were very frugal and that helped us keep afloat during the market meltdown after 2000.” 

Trying to keep afloat is exactly what some e-comm firms are doing today.  Start-ups were set up at a frenzied pace as entrepreneurs and investors wanted a bite of the e-commerce pie that is tipped to double to $20 billion by 2015. But here’s the catch. “Only a few million users are consistently buying from online stores,” says Subrata Mitra, partner, Accel Partners, which has funded some of the leading Indian e-commerce start-ups, including Flipkart and Myntra.

“The number is growing, but from a relatively small base, and [the market] can, therefore, sustain only a few such start-ups today.” Deal site Taggle, which was kicked off in June 2010, shut shop last year and Flipkart bought out electronics site LetsBuy. VCs say more e-comm portals will crash and burn before the dust settles. 

Deep Karla, CEO, MakeMyTripThat’s why a team that can adapt quickly is important. A few venture capitalists say they always put the team ahead of the idea. “It’s always better to fund an A-team with a good idea rather than a B-team with a brilliant idea when it comes to investment,” says Deshpande. “Most companies end up doing things a little differently than when they started off, so it’s really important to find the A-team that can navigate through that process.”

Early-stage investing is an art, experts insist. Since there are no numbers, no customers and no spreadsheets to validate everything, it becomes a challenging task. “More often than not, it’s like a roller coaster ride and unless you have been an entrepreneur yourself, it will be difficult to understand the early stage dynamics of a business,” notes Inventus’ Rekhi.

So his firm sets up filters that help it whittle the 800-odd proposals they get every year down to about six in which it invests. Inventus believes every entrepreneur must have some skin in the game so it only funds entrepreneurs who have been bootstrapped, and who have been in business for over a year. “We don’t invest in companies unless we see at least a 10-times return on our investment,” Rekhi says. “So we develop that vision with the entrepreneurs and work with them to realise that goal.” 

Finally, if you think this is probably the best time to become an entrepreneur, you could be just a little wrong — many observers feel that the situation will get even better in the next two or three years. “The ecosystem to develop products is still not here in India,” says Druva’s Singh. “It should develop in the next five years,” he adds. Sure, there’s always room for improvement but we are already in the middle of exciting times for both entrepreneurs and investors. In the following pages, we feature some promising entrepreneurs with interesting ideas. And no, they are not your usual suspects. 

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