IDGVI News: Media Coverage 2011

Product Play

Has the time come for India’s technology product companies to make their mark? Five senior tech professionals talk about how a combination of capital, knowledge, growing local market and government support can create cutting-edge product firms. A snapshot

The Economic Times, Bangalore | 30 August, 2010

FROM LEFT: Professor S Sadagopan, Arnob Roy, Vamshi Reddy, Sudhir Sethi and Sharad Sharma at the ET-Power Of Ideas discussion on India: An Emerging Tech Product Giant

“Tejas actually took some bets and grabbed a few of the inflection points because we were offering new technologies. The Indian market requires its own solutions. That itself creates an opportunity. The market itself is big enough.”
Arnob Roy
Tejas Networks

“While B-Schools study successes, E-Schools study failures, they try to understand how to reduce the failure rate (in start-ups).”
Sharad Sharma
Ex-CEO, Yahoo R&D, India

“An Indian will say I will start a firm that will create disruption. I would say start something simpler and then scale, scale and scale.”
Sudhir Sethi,
IDG Ventures

“We believe that the next 4 to 5 years will be crucial, because these will be the years when products conceived, developed, tested, launched and serviced from India will happen.”
S Sadagopan

A product entrepreneur faces certain challenges

The Indian market forces you to give a product at price and technology points which are attractive and different from international market. Indian product companies use less capital to achieve scale. Our product companies are between $5 million and $7 million in the first five to seven years. The thought process among entrepreneurs and investors is that India can do things at lower capital and that it can do at one-fourth of capital needed in developed markets. That thought process has to change. Also, it is not important that every company has to be successful. In product companies, the situation of whether you are successful or not will be reached very fast. And that is the thing which an entrepreneur has to decide. But when there is competition you don’t have time. In the software industry, the first million came in five years and the second million in, maybe, three years. But a product entrepreneur does not have time and so, he faces a certain challenge in the market. Investors must learn two things as well: don’t make a business plan complex. We always want great ideas to be executed in 30 pages, but a few pages are enough to communicate.

Different model needed

When you look at the readiness and price, what we have seen is that the business model needs to be different for India than from the business model for abroad. Yes, there is price consciousness in India, but it is more about the thought process in building the business models and working them out. It is always about making the business models work. The challenge lies in taking the decision whether you are market ready or not. One of the key learnings from developing a local product is that, we do not look beyond global markets. The differentiation can be added and can be an edge for localisation. I see it as a key thing you can bet on and also the support system we have.

Government support needed

The reason why Indian product firms are struggling to become the next telecom majors such as Huawei’s and ZTE’s, because there is lack of government support. This is despite the fact that telecom alone is a $20-24 billion market in India and growing 20% annually. On the other hand, worldwide markets are growing at 3-4%. There is a need for incentives and mandates to buy the products from Indian companies and support for Indian exports. The missing piece in telecom is that it needs some kind of government stimulus. China created a $100 million product market for Huawei and ZTEs when its telecom revolution took off. We created a great services market, but really no product industry. We have the brightest engineers and a good ecosystem of research and development. What is lacking is the support from the government for that.

We are ready to take off

We actually started incubating companies that were primarily IT companies, but even I saw that that although they started out as IT companies, they got morphed into something larger. One of the best examples is online education firm TutorVista. What they actually built was an internet-based platform that delivered some amount of chat-based content. In that sense, I do believe that many more things will happen. As such, we are ready to take off on this big break, But we must be ready to scale bigger heights. We definitely need to address some issues – whether banking or government-related.

SMB mart’s under penetrated

The opportunity for India is that small and medium businesses and consumer segments are grossly under penetrated, in terms of technology. This penetration is likely to happen over the next five to 10 years. Those who can crack the problem here in India have the opportunity to take their business to other emerging or global markets. The other thing that is critically important is the fast-moving market or technology inflection that start ups can take advantage of. We have to encourage entrepreneurs and proxy entrepreneurs (investors, advisers) to communicate much more cogently that every opportunity is not necessarily an opportunity for start ups unless it meets the inflection test. What we need is advocacy for a market to be created, rather than making bets on individual companies. Where are the think tanks that exist in different industries? In the absence of those think-tanks you can’t create $1 billion companies because they need force accelerators.