publication a
Vol 2 / Issue 04 / Jan 08
/Rs 30/-
AJAY SINGH, KIRAN BEDI, SANJNA KAPOOR, PROF. C.K. PRAHALAD
on ENTREPRENEURSHIP
CEO’s guide to IPOs Alternative Investment Market Intrapreneurship in Indian companies
entrepreneur of the month/
Chetan Maini, REVA investor of the month/
Raman Roy, IAN
Opportunities in packaged lunches BPO driver training Corporate governance for listed firms
CASE STUDY TutorVista Family Businesses: growing next gen entrepreneurs Why entrepreneurs need integrity
Vol 2 / Issue 04 / JAN 08
BOARD OF ADVISORS C K Prahalad
University of Michigan
N R Narayanamurthy
Chief Mentor, Infosys
Kanwal Rekhi
Chairman, TiE
Romesh Wadhwani Chairman & President, Wadhwani Foundation Gururaj ‘Desh’ Deshpande
Chairman, Sycamore Networks
Saurabh Srivastava Chairman, Indian Venture Capital Association Kiran Mazumdar Shaw
Chairman & MD, Biocon
R Gopalakrishnan
Executive Director, Tata Sons
Philip Anderson
Professor of Entrepreneurship, INSEAD
Shyam Malhotra Editor-in-Chief Krishna Kumar Group Editor ANALYSTS Arunjana Das Binesh Kutty Shilpi Kumar Sreejiraj Eluvangal Vimarsh Bajpai
/cover story AJAY SINGH, KIRAN BEDI, SANJNA KAPOOR, PROF. C.K. PRAHALAD on ENTREPRENEURSHIP
OPERATIONS Ajay Dhoundiyal Product Manager VIjay Rana Design Anil John Photography SALES & MA Jaideep Mario Gabriel Chandan Sengupta Himanshu Bakshi Raghavendra Naveen Barsainya
MARKETING Associate VP West North North South South-East Asia
PRINT & CIRCULATION SERVICES NC George Associate VP T Srirengan GM, Print Services Sudhir Arora Circulation Services Manager Dipesh Kothari Reader Services Manager Pooja Bharadwaj Assistant Manager, Reader Service Sarita Sridhar Assistant Manager, Reader Service Printed and published by Pradeep Gupta. Owner, CyberMedia (India) Ltd. Printed at International Print-O-Pac Ltd. B-204-206, Okhla Industrial Area, Phase-I, New Delhi-110 020. Published from D-74, Panchsheel Enclave, New Delhi-17. Editor: Krishna Kumar. Distributors in India: Mirchandani & Co, Mumbai. All rights reserved. No part of this publication may be reproduced by any means without prior written permission. BANGALORE 205, 2nd Floor, # 73, Shree Complex, St.Johns Road, Tel: 41238238 CHENNAI 5B, 6th Floor, Gemini Parsn Apts, 599 Mount Road, Tel: 28221712 KOLKATA 307, 3rd Floor, Ballygunj A.C. Market, 46/31/1 Gariahat Road Tel: 65250117 MUMBAI Road No 16, D 7/1 MIDC, Andheri (East) Tel: 28387271 DELHI D-74 Panchsheel Enclave Tel: 41751234 PUNE D/4 Sukhwani Park North Main Road, Koregaon Tel: 64004065 SECUNDERABAD #5,6 1st Floor, Srinath Commercial Complex, SD Road. Tel: 27841970 SINGAPORE 1, North Bridge Road, # 24-09 High Street Center Tel: +65-63369142 CORPORATE OFFICE Cyber House, B-35, Sec 32, Gurgaon, NCR Delhi-122001. Tel: 0124-4031234, Fax: 2380694.
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JANUARY 2008
70
68
72
CEO’s guide to IPOs
52 46
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/contents
34
others/ Time to camp for entrepreneurs ........... 26 Patenting for start-ups, the low-cost way .................................. 38 Corporate Governance for Listed companies ............................ 50 Intrapreneurship ................................. 84
entrepreneur of the month
Chetan Maini, REVA Once you have started swimming, you got to swim harder when it becomes difficult; otherwise you will sink
/INSEAD Case Study - TutorVista Family Business
opportunity/
12
It’s lunch time folks! Providing lunch packets to officegoers makes good business sense. Go ahead and grab a slice of the pie
20 56
blogs/columns Philip Anderson ........ 18 Anurag Batra ........... 62 Rupin Jayal................... 42
Investor of the month/
82
Raman Roy, Indian Angel Network
coming soon
Our job is not to run the company. It will scare away the entrepreneur. However, if things go bad, we analyze as to why the things went bad. Our job is recommendatory and advisory.
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Redefining tribal craft Subhash Arora, an urbanite, redefines Dhokra, a dying tribal craft
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Himmat ka Gap What if the expansion does not work out? What will I do with the new office I am planning to take? What about the people I will hire, the equipment I will purchase?
T
here is this young entrepreneur I know. One day recently, he came by, looking quite worried. Apparently, he was considering expanding his
business and strangely, that was what was worrying him no end! What if the expansion does not work out? What will I do with the new office I am planning to take? What about the people I will hire, the equipment I will purchase?... To quote his exact words “Himmat nahin aa rahi hai” – I am not getting the courage. As we sat chatting, a casual question provided the key to the solution. How much is the himmat ka gap? When we worked out the incremental investments and the incremental risks, you should have seen the change in his demeanor. When he realized that the incremental risk was much smaller than what he perceived as the total risk, he found that it was well within his abilities, and he went on to take the risk and expand his business. That is one more happy ending for us here at DARE. As you step into the new year, here is wishing you many many happy beginnings, and the courage to understand and take the required risks in your road to successful entrepreneurship. Happy New Year.
/Krishna Kumar
JANUARY 2008 7
Feedback DARE.CO.IN
Many congratulations for your efforts. The column by Anurag Batra
courage and commitment to take such
problems (which is acute as now every
a stand.
Tom Dick & Harry owns a car), it saves
– The Entrepreneurial Journey – was
At the age of 14, I began to “feel”
traveling time as it require small space
very impressive. A decade ago, every
like a freedom fighter. But never. At
on roads and it reaches its destination
student desired to be a professional,
the age of 25, I challenged four great
much earlier as traveling time is re-
instead of becoming an entrepreneur.
powers: walked from DelhI to Moscow,
duced – as it require much lesser space
But now there is a drastic change in
then to Paris, then to London, then
to overtake in jam packed traffic on
thoughts of energetic and talented stu-
to Washington to ask a simple ques-
roads which is a daily scene in almost
dents. They now dream and want to be
tion: Why do you destroy humanity
all metro cities.
successful entrepreneurs. There is no
with your atom bombs? It took 3 years.
Also the authorities should give in-
any doubt N R Narayana Murthy, Azim
Great education. Ever since, all my life
centives for small cars in the shape of
Premji, Ratan Tata, Anil and Mukesh
is spent for global education, disarma-
lesser insurance premium and other
Ambani, Capt G R Gopinath are all
ment and peace on earth. I would like
taxes like excise, sales tax, lesser park-
role models for young entrepreneurs.
to meet and discuss with you.
ing fees etc and also much more fa-
I am writing you from Bhadohi, which
Prof. E P Menon
and rugs. They are exported all over the
Hats off to Pradeep Gupta, Shyam
world. At present, our industry is pass-
Malhotra, Krishna Kumar and team for
ing through a very crucial period.
their remarkable work in bringing out
Therefore, I would like to request
DARE, a milestone in Indian entrepre-
you if it is possible for you to send your
neurial world. Thanks to NEN/Wadh-
correspondent to study the problems
wani Foundation.
of this industry, so that we can focus
G.B.Krishnappa coordinator, Entre-
through the platform of Dare. You will
preneurship Development Cell (EDC)
get full cooperation for this task from
Vidyavardhaka College of Engineering,
our association. Thanks in advance if
Gokulam III stage, Mysooru
you kindly publish my feelings.
cilities to such car owners like higher depreciation for its commercial use
is very famous for handmade carpets
What a wonderful monthly you bring
etc. Cars used by government officials must also be small. Mahesh Kapasi.
Congrats for floating a new publication in the domain of entrepreneurship! I believe that your daring attempt will go a long way in promoting the cause of entrepreneurship in our country; I appreciate your earnest ef-
out! It is apt, timely & graceful. I liked
forts in bringing out several factual de-
it immensely. Hearty congrats! Keep it
tails related to many entrepreneurial
Anurag Batra’s article – The Entre-
up. I would suggest you to publish a
startup opportunities, which are rare
preneurial Journey was very inspiring
few project concepts every month for
to source in real-life.
and to the point. It comes from your
the consideration of budding entre-
Sandesh Suneja
heart. I fully agree: “Entrepreneurship is a means and a state of mind, and not an end in itself.” Hearty congratu-
contribute to it if they wish. Suneel Karnik
an entrepreneur? Is it only to create
Our heartiest congratulations and
wealth for yourself and your share-
thanks for such an excellent publication,
holders? I don’t think that one should
which is really quite informative. A lot
be so narrow-minded.
of people are going through the maga-
we live in or are we giving back to the society from which we draw our wealth
zine and showing great interest. Please do keep us regularly updated. R K Gupta, Pathankot
and fame? “. This statement will touch any human heart, which is commit-
Refer to the story – “No parking
ted to social welfare. Being one such
the sign of a new opening” (Decem-
all my life, I write this to you. We need
ber 2007). Small cars solves parking
8
JANUARY 2008
DARE is a great inspiration and would help India get some great entrepreneurs. After failing once a decade
lations. “What is the purpose of being
Are we contributing to the society
K R Senthilvelkumar, Coimbatore
preneurs and others. The readers may
back, I would try again and do it. Mukul R Gupta
SMS “DARE <your comments, questions or suggestions>” to 56677 or Drop us an email: dare@cybermedia.co.in
news
news
DARE.CO.IN
/news Public sector can play VC role Minister of State for Commerce, Jairam Ramesh has stressed the need for new models of government involvement in infrastructure, which, he said, “holds the key” for improving the economic prospects of laggard states. “The public sector can take on the role of a venture capitalist, establish the infrastructure, trigger the economic activity and then exit,” he said at the Foundation Day Lecture function at the National Institute of Rural Development (NIRD). The Minister said that although public-private partnership (PPP) was being seen as a “mantra of sorts,” there was no alternative to the public provision of infrastructure in the poorest and backward states. “To expect that PPP will have any takers in the Northeast, for instance, is the height of folly. There is simply no other option but for the central government to take on the primary responsibility for building this infrastructure,” he said.
India, HK sign revised air services agreement The long-standing deadlock on the issue of bilateral traffic rights between India and Hong Kong has been broken with the two sides having reached an agreement. As per the new agreement, 27 new services for each side will be possible on the Indian-Hong Kong route. While the Indian side can operate these 27 services from any point in India, the Hong Kong carriers can operate 10 services to Delhi, 6 services to Mumbai and 11 services altogether to Bangalore, Chennai and Calcutta. Chennai was added as a new point of call during these talks for the Hong Kong side. An agreement was also reached on the exercise of fifth freedom beyond traffic rights. Out of the 27 services, the carriers of India will be able to operate 14 services to West Coast North America including the cities of Los Angeles, San Francisco and Vancouver.
Entrepreneurs should focus on brand building Union Commerce Minister Kamal Nath has called on the entrepreneurs in the sports goods export industry to focus on brand building, as “this is an area which is an important ingredient in the value of the product.” Nath urged the industry to achieve maximum mileage from the Commonwealth Games in 2010 and work hard for cultivating global standards. He was speaking at the export awards function organized by the Sports Goods Export Promotion Council (SGEPC) on December 18. He hoped that the industry would conduct a SWOT analysis on the potential of this sector and draw a roadmap to evolve growth strategies for the future. “The major strengths of our industry are its people – the dynamic entrepreneurs and the skilled labor force at relatively cheaper costs,” he added. 10
JANUARY 2008
DARE.CO.IN
/news New schemes for food processing sector
Wind power generation on East Coast
Minister of State for Food Processing Industries Subodh Kant Sahai has said that during the 11th Five-Year Plan, the ministry would launch a revamped comprehensive scheme for creating integrated cold chain infrastructure at different levels – farm level primary processing centers-cum-cold chain, collection/aggregation centers and strategic distribution centers. He said the government will extend a grant of Rs 10 crore for cold chain integration in the country along with subsidies to encourage private players to invest in the cold chain infrastructure. Organized retail backed by efficient supply chain has the potential of raising the rate of growth of the food processing sector from 13% to 20% in the next three to five years.
At least 39 sites, which could be suitable for wind power development, have been identified in the East Coast. Wind surveys have been conducted in costal areas including the East Coast under the Wind Resource Assessment programme of the Ministry of New and Renewable Energy. 216 sites in 13 States/Union Territories have been identified as potential sites for setting up of wind power projects including 32 sites in the state of Andhra Pradesh. The government promotes setting up of commercial wind power projects in the country, by providing fiscal incentives such as concessional import duty on certain components of wind electricity generators, excise duty exemption, ten years tax holiday on income generated from wind power projects, benefit of accelerated depreciation and loan from Indian Renewable Energy Development Agency (IREDA).
Govt nod to marketing support scheme The Cabinet Committee on Economic Affairs has given its approval for implementation of marketing support and services scheme comprising components of domestic marketing, international marketing, and publicity during the 11th Five Year Plan. With the assistance under the scheme, handicraft artisans will get enhanced opportunities for access to domestic as well as international high-end markets and other marketing channels.
IDG Ventures invests $2.5 million in iViZ IDG Ventures India, a $150 million early-stage technology venture capital fund, has invested $2.5 million in iViZ, a network security startup in the security and vulnerability management market with an automated and on demand penetration testing product. iViZ, recognized among Asia’s top 5 security startups in the Global Security Challenge held by London Business School in September 2007, is addressing a global market that is currently over $10 billion in size and growing annually at over 18%. It plans to utilize the investment to build its sales team in North America, Europe, Middle East/APAC and India and to significantly enhance its product development initiatives.
Ferretti Yachts comes to India Marine Solutions, a yacht retail company promoting the yachting lifestyle in the country has brought Ferretti Yachts in India. Highly engineered with renowned construction, a Ferretti Yacht is not merely considered another Yacht manufacturer, it is the manufacturer of choice for discerning boat buyers. Manufactured in four purpose-built shipyards in Italy – Forli (Head Office), Cattolica, Marignano and Fano.
Indian Angel Network members invest in Vienova Indian Angel Network has announced a strategic investment into vienova.com. Noida-based Vienova, an online tutoring firm, leverages technology to deliver highly customized live services to customers across the globe. “It is a rare event for the gurus of the IT industry to come together and simultaneously invest and spend time in building a startup. Gurus such as Raman Roy, Saurabh Srivastava and Jerry Rao, are known to have created the IT enabled services space in India, which today employs hundreds of thousands of individuals,” says Parikshit Jain, CEO, Vienova Technology. Global online tutoring is a rapidly growing segment within KPOs. Analysts predict it to grow from less than $200 million today to $2-4 billion within 5-7 years, showing a growth of over 50%.
95 MW energy from urban and industrial waste A total of 52 projects with an aggregate capacity of about 95 MW on energy recovery from urban and industrial wastes have so far been taken up in ten states. There are seven projects with 19.50 MWeq have been completed in five states namely Andhra Pradesh, Gujarat, Punjab, Tamil Nadu and Uttar Pradesh whereas one project with 3 MWeq is under installation in Gujarat. These projects are based on urban waste like municipal solid waste, vegetable market waste, bio-gas at sewage treatment plants and cattle dung. Ten States in the country have projects based on industrial waste with a total capacity of 72.19 MWeq. The Ministry of New and Renewable Energy is promoting energy recovery from wastes through separate programmes. The programmes also provide for capacity buildings, dissemination of information and creation of awareness through training programmes, etc. JANUARY 2008 11
DARE.CO.IN
opportunity/packaged meal
It's lunch time folks!
Providing lunch packets to office-goers makes good business sense. Go ahead and grab a slice of the pie /Vimarsh Bajpai
I
f the way to a man’s heart is through his stomach, then Vinamra Pandiya and Ashwani Rathore have managed to win more hearts than one. The 26-year-old founders of Pune-based Mom’s Kitchen, a packaged meal startup, gave up their successful careers in IT companies last year to take the plunge in the fast-growing packaged meals business. The idea didn’t come as a flash to Pandiya and Rathore but grew out of the disillusionment that came with the poor quality of food both at their professional college and at the firms they
12 JANUARY 2008
worked thereafter. A small sum of Rs 5 lakh was all that the duo could infuse into Mom’s Kitchen. A year later, the Pune-based company has clocked a turnover of Rs 70 lakh, and the entrepreneurs are now eyeing Rs 1 crore by early this year. With Reliance and Tata on their list of clients, Mom’s Kitchen delivers 1,000 tiffins a day from 11 a year ago.
The Market Changing lifestyles and longer working hours have led to the sharp growth of the packed foods and ready-to-eat (RTE) meals business in the country. The ACNielsen Global Online Consumer Survey, conducted with 22,000 Internet users across 41 countries, found that globally, 65% of the world’s online consumers purchase RTE meals, with Asia Pacific topping the list at 72%. The survey also found that 63% of Indians cited ‘convenience’ as their main rea-
DARE.CO.IN
opportunity/packaged meal son for buying RTE meals, signifying the arrival of these new-age products into the modern Indian kitchen. “With our economy growing at a very healthy rate, Indians have less time these days for what were once their regular chores, with cooking proper meals being one of them. Ready-to-Eat meals
will continue to gain a bigger share in the market, in answer to the demand for speed and convenience from consumers,” says ACNielsen. According to Euromonitor International, the RTE meals segment grew 18% in current value terms in 2007 to reach Rs 1 billion. The research firm
W
hat were the initial challenges and how did you tackle them? Ashwani and myself come from middle-class families. Both of us have faced financial difficulties. The idea of setting up a restaurant also crossed our minds but that would have been very expensive, requiring a sum of may be Rs 25-30 lakh. So we decided that starting a tiffin service made more sense because there was a market for quality food service at various companies. We put in all our savings into setting up the company, which we started with Rs 5 lakh. To keep some money flowing into the business, I quit my job at an IT company while Ashwani continued to work. The other difficulty was in marketing. We utilized internal bulletin boards at IT companies. We also used the internet and pamphlets to spread the word. On the service side, initially, it was very tough because we had only two cooks, and then we had to handle calls of the customers and be very professional. It took almost three months for the business to pick up. I knew that every startup has challenges to face for a couple of years. So, we knew the fact that we had to struggle, but that struggle is a sort of education that will take us to the next level and help us grow. What was the delivery mechanism? We started delivering within a six kilometer radius from our center. So, we bought second-hand bikes and put a fiber casing on top of it, just like they do for Pizza Hut. It was a bigger casing
Vinamra Pandiya with Ashwani Rathore Founders, Mom's Kitchen
estimates that the ready meals sector has the potential to touch Rs 1.6 billion by 2011. Major players include ITC Foods, MTR Foods, Kohinoor, Ethnic Kitchens, etc, with the industry being highly organized. But offsite food service providers such as Pandiya and Rathore have
and was designed in a way that it could carry 40 tiffin boxes. We used to pack everything in aluminum foils and the prime motto was that it should be hygienic. The bikes created a lot of brand awareness because of the way they were designed. But at the same time, we focused consistently on the back-end to see that there was no compromise in the quality of food. What are your plans for expansion? Where will further investments come from? We started with 11 tiffins, and we currently deliver 1000 meals a day. We are targeting a revenue of Rs 10 crore by September 2008. We are trying to expand in Pune to cover all the strategic pockets, and then probably in the next few years, we will be opening in cities like Bombay, Chennai, Hyderabad and Bangalore. A couple of investment banks have approached us. We are not looking out for banks. We are looking at private equity investments. This is because the business is going to grow in the next couple of years to a very big level.
What would you advise to those planning to start their own offsite food business? One should not have any preconceived notions about how the industry operates. Don’t depend that much on market research and statistics. You should have that gut feeling. You should be confident within yourself. At least give your idea a pilot run. If you fail to succeed, at least you won’t regret that you did not even take the first step. Food is a simple business. It’s not rocket science, nothing very technical about it. The way you present, the way you do business is again to entertain your customers. You have to delight your customers, go that extra-mile. What is the minimum investment you think is needed to start a business like this? It depends on the place you want to start. If you want to start in Bombay, real estate cost is too much. You could end up spending more than Rs 10 lakh. If you start in a place like Ludhiana, you can start with Rs 3 lakh. Real estate and equipment are major expenses. You also need raw material for 15 days because the business operates on an advance basis. I will advise people to have some working capital because we faced a lot of problems as we pumped all our money, and we had problems with the working capital. We broke even in the ninth month of our operations. JANUARY 2008 13
DARE.CO.IN made the going tough for players in the RTE meals. “Indian consumers prefer freshly cooked food and this poses a threat to the growth of ready meals in the country. A number of food service outlets offer food for various budgets. This will be a hurdle to the growth of ready meals in India,” says Euromonitor. The offsite food business (also sometimes referred to as corporate meals) has largely been in the unorganized sector in the last five years, with some caterers here and there tying up with neighborhood corporate offices to deliver lunch packets to their employees. However, the sector has been in the news in the last one year, thanks to the growing entrepreneurial initiatives in cities such as Ahmedabad, Mumbai, Gurgaon and Pune. According to estimates, the contract food and service industry is pegged at Rs 2,600 crore. Of this, the packaged meal market is estimated to be Rs 500 crore, according to an internal research done by Mr Spoonz, a unit of Radhakrishna Hospitality Services (RKHS). Mr Spoonz offers offsite meal solutions to institutional clients. It serves more than 10,000 meals per day.
The Business The corporate meals business is all about quality and punctuality. “The food has to be hot and should reach office before lunch time,” says Vinamra. This is not all. Any compromise on food quality could cost the business owner dearly because "customers are extremely quality-conscious and want value for money." Another big challenge is to offer variety to keep the customers from getting bored of eating the same food. Most packaged meal providers prepare food at their kitchen sites and get it transported to their client sites in neatly packed condition or in cambro boxes. Cambro boxes keep the temperature same, and thus the food remains fresh and hygienic. Hiring and retaining the right kind of employees, who understand the importance of service quality, is also an uphill task. You would certainly not 14 JANUARY 2008
opportunity/packaged meal want to change the cook every month! The price of food packets is fixed depending upon the menu. For example, Tiffin Express’ meal packets range from Rs 40 to Rs 70, and have been named differently – Royal lunch, Executive, King lunch, Badshah. It also offers Diet lunch to its calorie-conscious customers.
Venture
Entrepreneur(s)
Age
Startup capital
Mom’s Kitchen
Vinamra Pandiya, Ashwani Rathore
Both 26 yrs
5 lakh
King Food Caterers
Sarath Babu
29 yrs
9 lakh
The Bombay Kitchen
Sameer Uttam, Shaan Uttam
26 yrs, 29 yrs
30 lakh
Tiffin Express
Mahesh Gohil
36 yrs
50,000
46 yrs
1 lakh
Chennai Catering Service c Radhavardhan
The Startups The Bombay Kitchen Started by two brothers, Sameer and Shaan Uttamsingh, The Bombay Kitchen began operations in July last year with seed capital of Rs 30 lakh. “Catering is a big market and we wanted to tap into it,” says Sameer, 26, who manages the day-to- day operations. “A part of the decision was also guided by the poor quality of food that was available outside,” he says. 15 months down the line, The Bombay Kitchens has Centurion Bank of Punjab, Pidilite and RPG as its clients. The employee strength has grown from 15 at the start to 25 at present. “An entrepreneur could start the business with an initial capital of Rs 7-8 lakh and a working capital of Rs 4 lakh,” says Sameer. King Food Caterers Brainchild of 29-year-old Sarath Babu, King Food Caterers serves in Ahmedabad. He turned down a lucrative job offer to start his own business. Started with the initial capital of Rs 9 lakh last year, Babu is targeting a turnover of Rs 500 crore in next five years. Babu comes from the economically weaker section of the society. His mother used to cook food as part of the mid-day meals scheme in Tamil Nadu. Now running his own business, Babu sells 8,000
DARE.CO.IN
opportunity/packaged meal Current turnover
Key clients
Target
Synopsis
Number of clients
Operations in
65-70 lakh
Reliance, Tata Chem, I-flex
1 crore by early this year
11 tiffins/day to 1000 tiffins/ day at present
30-40
Pune
4 crore
IIM-A, ISRO, BITS Pilani
500 crore in next 5 years
Delivers 8,000 tiffins a day, employs over 150 people
40 lakh
RPG, Pidilite, Centurion Bank, Times Now
80 lakh annually
40 meals/day
6
Mumbai
1.5 lakh
Reliance, Ranbaxy, ICICI, Rabo Finance
100 meals/day
30-40
Mumbai
2.5 crore
Sashun Chem, Actavis
7,500 meals/day
8
Chennai
6 crore
Gujarat, Goa Rajasthan
meals a day. “The biggest challenge that an entrepreneur faces is that of experience. Customers ask if we have had some experience in the food industry. The other one is that of trained manpower,” says Babu. “One should be passionate about this business to be able to make it a success. Also, I tried it out for two months, and found it interesting,” he says. Babu predicts that in the next five years, it is going to be the hottest industry in the country. Chennai Catering Service In 2000, Radhavardhan, a 46-yearold lady started the catering business in Chennai. Two years later, she expanded the reach to provide corporate meals. With startup capital of only Rs 1 lakh, her company today clocks a turnover of Rs 2.5 crore. By the end of 2008, Radhavardhan is targeting a turnover of Rs 6 crore. “There were many challenges we faced when we started the business. First, trust was a major issue, since the corporations wanted people with experience. It was very challenging to convince them,” says Srinath V, son of Ra-
javardhan. Hiring and training suitable manpower was another challenge.
money into Mom’s Kitchen have approached the founders.
Mom’s Kitchen This start-up venture by Vinamra Pandiya and Ashwani Rathore is ready to clock a turnover of Rs 1 crore by early this year. The duo serves around 30 clients across Pune. Various private equity companies wanting to infuse
Tiffin Express 36-years-old Mahesh Gohil began the venture with only Rs 50,000 two years ago. He now delivers 100 meals a day in and around Mumbai and the clients include Rabo Bank DAR E and Ranbaxy.
SMS “DARE <your comments, questions or suggestions>” to
56677 JANUARY 2008 15
DARE.CO.IN
blogs/INSEAD
Why do entrepreneurs need integrity? Professional investors look for integrity in a venture's management team but that's not the only reason why it's such an important value to cultivate /Philip Anderson
A
bout 18 months ago, I was giving a lecture at the business school of a Chinese university to approximately 200 undergraduate and graduate students. I described what qualities venture capitalists look for in a management team when deciding whether to invest, and why these things matter. I told the students that in my twenty years of working with private equity investors, the one thing they looked for above all others is integrity. Integrity is a deal-breaker, I explained to my audience—if a professional investor is not convinced that a venture’s top management team has a track record of integrity, he or she will not invest, whatever the other merits of the team or the deal. After about 30 minutes of talking, I began taking questions, and the first one was from a young Chinese who appeared to be about 18 or 19. “I do not understand why integrity is considered so important,” he said. “We know many stories of Chinese businessmen who have become very rich even though they break many promises and operate in gray or black areas of the law. In fact, someone who is completely honest probably could never make money in China. Perhaps your theory applies in the West but is not relevant here.” I explained again what venture capitalists are looking for when they assess integrity. I said it was much more than simply being ethical or not stealing. I said that integrity meant above all else not fooling yourself. Professional investors want to know that you have a track record of seeing reality for what it is, not what you wish it would be. This is vital because the signals that an entrepreneurial venture receives are usually ambiguous. You can almost always interpret data from the marketplace in a positive way, “proving” that things are working as you thought they would. A person of integrity is aware of this tendency and struggles to overcome it. S/he realizes that when entre18
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preneurial ventures succeed, they usually do in ways that the management team did not foresee. Consequently, if a venture leader looks at feedback and data through rose-colored glasses, s/he will persist in a course of action that isn’t working and will fail to discover one that does work in a surprising and unanticipated way. That’s why integrity means, above all, viewing things objectively and mastering the human tendency to see what we want to see or expect to see. Integrity also means “no surprises,” I told my Chinese audience. A venture investor does not want to hear about unexpected bad news for the first time at a board meeting. He or she expects the entrepreneurs to pick up the phone and tell them about surprises as soon as they happen. Experienced professionals are very suspicious of entrepreneurs who withhold bad news “just for a little while” in the hope that things will right themselves. Their mantra is “Tell me the bad news as soon as you have detected it, and we’ll work through it together.” Integrity also means not moving one’s targets in order to achieve them. In corporate life, making one’s numbers is of such paramount importance that most executives who are accountable for results hold back a little slack, so that in case of emergency they can still achieve their quantitative goals. In the worst case, they report numbers that are not true; far more commonly, they move orders from one quarter to another; reassign expenses from one category to another; shift assets from one unit to another, and so on, in order to reach a goal. This is particularly deadly for entrepreneurs because the data on which they operate are typically fuzzy and uncertain. For example, it is easy to say one is going to achieve 10% market share by the second quarter and then achieve this objective simply by redefining the market, depending on who the customers turned out to be. But if an entrepreneur does that, he or she will never know whether the venture is ahead of schedule, on track, or behind schedule. It’s like disconnecting all the warning lights on a car’s dashboard—you may fret less but you’ll be the last to know when danger arises. This answer was enough to mollify my audience but they still weren’t satisfied. I could see a lot of heads nodding “yes” when my questioner implied it was naïve to
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blogs/INSEAD think that an entrepreneur in China should (or even could) be a person of integrity. I could tell from the expressions on people’s faces afterward that they thought I had evaded the question that really concerned them: is it realistic for Westerners to insist on integrity as a precondition for backing an entrepreneur? Now in a sense, the person who questioned me that evening in China confounded two different ideas. He believes that plenty of Chinese entrepreneurs have gotten rich despite being dishonest, and I have to take it for granted that he knows more than I do about how common that is. I didn’t say in my lecture that an entrepreneur couldn’t succeed unless s/he had integrity; I said that s/he couldn’t raise money from professional investors unless everyone on the top management team has a strong reputation for integrity. However, the fundamental question still applies: why don’t Western investors simply drop this requirement in China if the evidence suggests that a lot of the people whose ventures make money don’t meet this standard? No doubt integrity is in part culturally defined. For example, there are many cultures in which there is no shame or dishonor in lying to or cheating an outsider, someone who is not of one’s clan, village or perhaps religion. If such people are so uninformed that they do not realize the norms that apply to insiders do not apply to them, then they were foolish to trust and deserve to be disappointed, says this form of ethical reasoning. In such cultures, no one has any obligations to those who do not understand what rules apply under what circumstances. But I think there is a much deeper issue than whether integrity ought to be a perquisite for venture backers. What do you want to stand for; what do you want your legacy to be? Every new venture represents a point of view not only on what activities are profitable but on what kind of organization the founders want to build. Like it or not, if you are an entrepreneur, you create an organizational culture that in large part reflects who you
are. The behaviors that occur in an organization you started mirror the kind of example you set, the kind of people you choose to employ, and the values that people infer from your behavior. If you decide that you must bend to expediency in order to get your enterprise off the ground, realize that this choice will reverberate for a long time. If you cut corners in order to survive, then expect the people in your organization to cut corners in order to get ahead in your organization. If you say one thing and do another, then plan to run an organization where that is commonplace. If you over-promise, then don’t be surprised when the promises that people in your company make to you are what they think you want to hear. Narayana Murthy, whose picture was on the cover of the first issue of DARE, tells me that he has never paid a bribe. That is a proud thing to be able to say, and when he said it to a large audience of INSEAD students, I think it influenced the way they think about business in modern India. What do you want to say to my MBA students ten or twenty years from now about how you built your company and what it stands for? What would make you proud of the organization you have built? It may be possible to build a successful enterprise that has no reputation for integrity, as the Chinese students I met argued so forcefully. A different question is whether such a company can expand outside the boundaries of the culture within which such behavior was profitable. But the ultimate question is not whether people who lack integrity can start companies that survive and grow. It’s whether you have thought through before you start a company what behaviors you want to encourage. Your business will ultimately tell the world who you are and what you believe, and if it doesn’t make you proud to say “I’m one of the founders,” then you’ll have sacrificed one of the greatest rewards that comes with the honorable DAR E title of entrepreneur. INSEAD Alumni Fund Professor of Entrepreneurship, Director, Rudolf and Valeria Maag International Center for Entrepreneurship and Director, 3i Venturelab
SMS “DARE <your comments, questions or suggestions>” to
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case/INSEAD
Tutoring a revolution /Philip Anderson K. Ganesh at TutorVista K. Ganesh closed his e-mail and leaned back in his office chair, permitting himself a small smile of satisfaction. Another parent had written to him, thanking TutorVista for helping her child catch up in school and feel a new sense of accomplishment and optimism. Such testimonials always warmed Ganesh’s heart because the business he had founded in November, 2005 made a positive impact on people’s lives. Not only does TutorVista help students in various countries learn, it also provides enriching, satisfying jobs for some of India’s bright, well-educated talent. In less than two years, TutorVista (www.tutorvista.com) has grown to employ more than 400 instructors who serve more than 10,000 students across a wide range of subjects. As the first online tutoring company focused on serving the US consumer from India, TutorVista had a lot of room to grow by expanding its range of subjects, its geographic footprint, and its links to strategic partners. However, Ganesh believed that the sector was entering a critical period where one or two
firms would establish themselves as the dominant service providers. Could TutorVista grow rapidly enough to be one of the big winners?
K. Ganesh: serial entrepreneur K. Ganesh grew up in India and attended the University of Delhi, where he earned a bachelor’s degree in mechanical engineering. He then attended the Indian Institute of Management in Kolkota, and upon graduating in 1985, married an IIM classmate. He joined HCL, India’s leading computer firm, while his wife Meena joined NIIT, which pioneered high-quality information technology education in India. In 1990, he became CEO of his first venture, which he started with five partners from HCL. Their company, IT&T, specialized in maintaining and integrating computer systems and also sold machines for Digital Equipment (DEC). Started with Rs 97,000 (about 5700 US $ at the time) from the founders, the firm grew until it employed 400 people in 16 locations by 1996. Ganesh became a non-executive director in 1998, and IT&T went public in 2000 before parts were purchased by iGate.
His wife had joined Microsoft in 1995, so Ganesh moved to Bangalore in 1998 to be with her. He became CEO of Wipro British Telecom, a VSAT company that became Bharti British Telecom, bringing it from near-bankruptcy to breakeven in two years. In April, 2000, Ganesh and Meena started a company together, Customer.Asset, one of India’s early BPO companies, which they grew to 2200 seats within two years. This firm was acquired in May, 2002 for $19.3 million by ICICI, which renamed it ICICI OneSource. The couple continued running it for a year and doubled the staff before Ganesh stepped aside to ponder his next entrepreneurial venture. Touring the US and the UK, he heard Western parents criticize the education their children were receiving, and realized that through the Internet, well-trained Indians might help address this pain point. Other entrepreneurs had pioneered online tutoring services, but none had directly targeted the US consumer, who still largely turned to bricks-and-mortar companies such as Sylvan Learning, which charged fees up to $150 per hour. In
"Our ultimate dream is to become part of a household’s monthly budget if the family contains a student who is studying something. We chose $100 to go for the mass market. Sure we could price it higher, but we wanted the pricing to be a no-brainer. We want it to be part of your monthly budget. Americans pay $19.99 a month for broadband without thinking too much about it. We are trying to make tutoring on demand a part of the household monthly budget, like a health club membership." — K. GANESH 20
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case/INSEAD July 2005, Ganesh launched TutorVista with $2.15 million in first-round financing from the Indian operation of Sequoia Capital, a famous Silicon Valley venture capital firm. The service went live in the US in November, 2005 and in the UK in mid-2007
TutorVista’s business model Ganesh pioneered a business model based on flat-rate pricing. For $100 per month, a student was entitled to an unlimited amount of tutoring in any of a wide variety of subjects or to prepare for a specific test, with a money-back guarantee if s/he was not satisfied. He hired Indians who either had master’s degrees in the subjects they taught, or a bachelor’s degree in the subject plus another degree in education. The tutors use a Webex platform, using a shared computer screen, whiteboard, text chat and microphones to link with their students online 24 hours per day. Tutors can work part time or full time, and are paid an average $350 -400 per month for full time work from their homes, an attractive arrangement in cities such as Bangalore where commuting to work could take up to several hours each day. Before receiving certification, they take 60 hours of training from TutorVista, on accents and idioms suited for the US market,
an overview of the US educational curriculum, and US pedagogy: the ways in which American children learn and being the guide on the side, instead of the sage on the stage. Why choose a business model based on flat-rate pricing for unlimited usage? Ganesh explains: "What is the biggest challenge in starting a consumer business? In my opinion the single biggest challenge is whether you can acquire a customer profitably. The only two parameters that matters are what is the cost of acquisition of a customer and what is his or her lifetime value. A lot of times consumer businesses fail to take off despite good quality, good customer retention, etc. because they have a leaking bucket— the cost of customer acquisition exceeds the lifetime value of a typical customer. We asked how to launch a service that matched the customer acquisition cost with the lifetime value of a customer. I want to attract subscribers. I don’t like people who pay $100 for an hour because it cost me $300 to acquire them. I’d rather take a lower amount per month and keep someone for several years. What is the lifetime value of an 8th or 9th grade student? How much can I up-sell him as he goes
Screenshot of the online whiteboard at TutorVista, which is used by the academic coordinator and the student at the same time
through high school, college and onward?" Ganesh feels that customer acquisition costs would be driven down over time in two ways. First, as the user base grows, the company would garner more word-of-mouth-advertising and more publicity in the media. Second, TutorVista would keep improving its online marketing capabilities. The company has bid for keywords using tools such as Google Adsense, and kept studying how various landing pages influenced the behavior of customers who clicked on an ad. Says Ganesh, “Every part of every page is designed to convert people into subscribers. We have hundreds of other landing pages, and we always keep working on Internet marketing.” TutorVista’s pricing model was designed to persuade customers to become habitual subscribers. Ganesh explains: "Our ultimate dream is to become part of a household’s monthly budget if the family contains a student who is studying something. We chose $100 to go for the mass market. Sure we could price it higher, but we wanted the pricing to be a no-brainer. We want it to be part of your monthly budget. Americans pay $19.99 a month for broadband without thinking too much about it. We are trying to make tutoring on demand a part of the household monthly budget, like a health club membership. If you charge per hour, it’s like a dental appointment. You go to the dentist if the pain is large enough and stop when it becomes tolerable. In the US, parents send kids to tutoring when the pain is large and they stop when the child says he has learned enough." Some questioned why TutorVista was priced well below the $40-$100 per hour price that many Westerners paid for tutoring their children. Says Ganesh: "Our customers would be willing to pay more. If I were tutoring personally, I’d charge the highest price for my time, as a consultant does, but we have a different concept. To JANUARY 2008 21
DARE.CO.IN create a business, I want to make it affordable. We chose a mass market model because we have a cost advantage. We think that on the Internet you need a simple no-nonsense statement: unlimited, $100 per month, from India." The pricing model was also designed to derail what Ganesh saw as the biggest threat to personal services businesses such as TutorVista: dis-intermediation. He elaborates: "We spend a lot of time and effort getting a student and matching him with a tutor. Once they like each other, both might realize they have a relationship for at least the rest of the year if not longer, so why not leave TutorVista? Once I have trained and certified a teacher, what keeps me from being disintermediated? When we went to raise money this was one of the biggest questions. Dis-intermediation happens when people get greedy. We keep the price so low it becomes unattractive for the teacher to go direct. The cost of acquiring a customer for us today is $300, and an individual tutor would incur higher acquisition costs. The amount of money they will make from a student won’t cover it. And we charge $100 unlimited for any subject but one tutor can typically only teach one subject."
Which growth path for TutorVista? In December, 2006, TutorVista’s second round of funding garnered a further $3 million from Sequoia, plus $7 million from Lightspeed Venture Partners and $750,000 from Silicon Valley Bank. This capital allowed the firm to raise its branding and marketing expenditures while expanding geographically. As the summer of 2007 neared, K. Ganesh was thinking about what would be the best growth path for the business. Online tutoring was likely to evolve into a market with a few big winners, and he wanted to ensure that TutorVista took advantage of its early entry to build critical mass and emerge as one of the best-known names in the field. Within the present 22 JANUARY 2008
case/INSEAD business model, there was still room to grow revenues by focusing on more ad sales once traffic grew large enough to make the effort worthwhile, and to experiment with different pricing structures. It was more important in the short run however to maximize the customer base and prove to investors that TutorVista could attract and retain customers with high lifetime value at a reasonable acquisition cost. With this in mind, four alternative growth paths seemed most promising: geographic expansion, product expansion, channel growth, and diversification.
Online tutoring was likely to evolve into a market with a few big winners, and he wanted to ensure that TutorVista took advantage of its early entry to build critical mass and emerge as one of the best-known names in the field. Geographic expansion TutorVista had launched a site in the UK in early 2007, and was looking at Canada and Australia as logical markets. All three were English-speaking countries where a significant proportion of primary and secondary students aspired to higher education and might require tutoring to improve their school performance. All three also had well-developed Web infrastructure and a growing percentage of homes using broadband Internet access. Ganesh wondered whether now would be the best time to get into even bigger geographies with more growth potential. In North Asia, for
example, parents commonly invested large sums of money in after-school tutoring to help their children prepare for good high schools and universities. However, outside Singapore, such tutoring usually took place in the native language, such as Japanese, Korean, or Mandarin. Could TutorVista successfully compete against established local players who had a physical presence and taught in the students’ native tongue? One way to penetrate such markets would be through language teaching. In the first half of 2007, TutorVista had launched in Korea an offering of English as a second language. The first student was a 50 year old man who said he felt the world was passing him by because he did not speak English. However, pursuing adults as a primary market would run counter to TutorVista’s business model, since their lifetime value is less than that of a youth.
Product extensions To some extent products and markets were intertwined. Ganesh explains: "We know math and English are the most sought-after tuition subjects in the US and UK. The maximum price keyword we buy is “help with English.” “English” is the #4 searched keyword on the Internet; you can guess what the first three are. We spent our marketing dollars on math and English and the prophecy fulfills itself. We don’t know how much of a market there is for other subjects because we don’t spend our money there." TutorVista might expand its customer base if it embarked on a marketing campaign specific to different subjects, such as languages, science, or social studies. It could also offer more courses geared toward test preparation, speed reading, vocabulary improvement, or other more specific topics. The challenge would be keeping customer acquisition costs down. Ganesh comments: "We can do cooking classes, for example, but the cost of acquiring a student will be so high that we cannot create a profitable business. We
DARE.CO.IN can service someone who comes to us for a cooking class, but we can’t go find them. For example, some of our students want to learn Mandarin, and we can teach that to them profitably, but we haven’t found a profitable way to acquire students who want to learn Mandarin." Another possible way to acquire new customers via new products would be to offer a broad range of archived lessons on the site and charge for accessing them. TutorVista’s tracking systems ensured that the firm knew which topics within a domain were the most popular, e.g. which subjects in mathematics or grammar seemed to prove the most troublesome for high school students. Why not then provide a library of recorded multimedia lessons online and charge separately for access to them? Remarks Ganesh: "It’s an appealing idea to have canned sessions that can be consumed on a self-service model. We haven’t done it yet because our priority has been to make it simple. We don’t want a completely selfservice model, since the personalized tutor who can help you step by step is key to our stickiness. There is a Korean company that has done very well with canned instruction though." A third product extension would be to serve the market for supplemental tutoring funded by US government agencies. However, this would require a fundamentally different business model. Under the “No Child Left Behind” Act of 2002, the US federal government paid for supplemental educational services through state governments. Some states required tutors to have a social security number or undergo background checks. Consequently TutorVista’s policy was to pursue tutoring opportunities funded by students, their parents, or schools, not governmental agencies.
New distribution channels Another way to grow the customer base would be through exploring 24 JANUARY 2008
case/INSEAD new channels of distribution. TutorVista had recently secured a number of strategic partnerships that increased its access to prospective customers. In November 2006, it was named the exclusive online tutoring provider for the Microsoft MSN Encarta online education portal. In February, 2007, TutorVista’s services were made available to members of the U Sphere college admissions marketplace (http:// www.usphere.com/), which matches colleges with students. In April, 2007 Vocabulary.com engaged TutorVista as its exclusive tutoring service provider, giving it access to more than 19,000 schools.
Educating a student is highly emotional and personalized. It’s not like buying a CD or a used massage table. The quality of service delivery is important. One possibility would be to put more attention and resources into corporate channels for marketing tutoring services to the families of employees. Another channel that might be explored was high school guidance counselors, Ganesh notes, “They are normally the first port of call for a struggling student, and one of our first employees in the US was a guidance counselor. Marketing through the national association of guidance counselors is something we’d like to do.”
New business models During 2004 while he was pondering what venture to start next, Ganesh contemplated the idea of creating an exchange that would be for services the equivalent of what eBay is for products. A company named Elance
(http://www.elance.com) had been launched in the late 1990s and had raised tens of millions of dollars from venture capitalists, but Ganesh did not believe the eBay model would work well in online education. He argues: "You can’t do services on a pure exchange platform the way you can do products. Educating a student is highly emotional and personalized. It’s not like buying a CD or a used massage table. The quality of service delivery is important. A parent wants a guarantee that tutors are trained, certified, and that they can get one of equivalent quality if the one they are using drops off. Students want the assurance of a brand and continuity with a tutor." However, it seemed to Ganesh that it might be possible to use a modified online matching platform to increase the size of the market. He explains: "Today, our tutors are employees who commit at least 20 hours per week and need to be available frequently. Can we add people who have different schedules, for example those who only have five hours per week? If you want to teach entrepreneurship and people will pay you $100 per hour, can TutorVista play a role by bringing you together with customers? This could be an extension of our current model, aimed at specialized subjects or highly-accomplished individuals who might not want a job at TutorVista but who want to work a few hours a week. Maybe someone in the world wants to have a discussion with a Ph.D. in nuclear physics or math at a different price point than the mass market wants. We could create a platform, advertise for tutors, give them a small test and register them on the site if they are good. Students will see brief profiles and can choose based on what they want and are willing to pay. The tutors would be paid by the hour while we get a commission. This is the kind of thing Tutor.com does; I’d call it a semi-platform, not a pure platform like Elance."
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case/INSEAD Ganesh’s decision Faced with these alternatives, K.Ganesh and his management team had to choose which growth path held the most promise. His entrepreneurial experience had taught Ganesh the value of focus, and he believed that pursuing one or two opportunities with vigor would produce better results than putting the same amount of effort behind half a dozen growth initiatives. The ultimate test for any growth path was how quickly it would help build the brand and the audience so that TutorVista became the place on the Web that people went to for online educational services. Says K.Ganesh: "Students are an attractive segment because they are at an impressionable age and have a high lifetime value. What is attractive to us is not just an exchange but a portal that becomes a destination site. Our first choice was to launch a simple site with a single service and clear value proposition. That’s the first step—we don’t know what we’ll do the next 12-18 months. Everything is up for grabs."
TutorVista in 2008 In the autumn of 2007, TutorVista added a new product: Spanish language training. What drove the decision was demand from existing customers. Ganesh explains: "People kept asking if we teach Spanish, and it is the next most spoken language in the world after English. A lot of US school districts are encouraging a second language, or even making it mandatory, so the demand in the US is huge. We looked at how to make it affordable for the masses, even if it wasn’t as inexpensive as what we usually do, so we decided to use teachers from Mexico and Argentina, which is unique. We started with five teachers who are all very comfortable in English. So far training them seems to be simple, but as we scale, one challenge is to see whether our methods for training Indian teachers will work in other settings." In November, 2007, TutorVista
K. Ganesh in a panel discussion at the TiE Entrepreneurial Summit 2007, held in Delhi in Dec 2007
acquired Edurite Technologies, a seven year old company that provided content for educational CD-ROMs. Ganesh intends to set up 300 brick-andmortar tutoring centers across India where students can learn standardized material in a standardized manner, using local teachers. He comments: "India is a market where the focus on education and the need for tutoring are high, but we can’t use our global model because the challenges and pressures are different. Internet penetration is low compared to the West, and unlike the US, there is no shortage of teachers. The economics also don’t work the same: $100 a month is a lot of money for an Indian family and the cost of a personal computer is very high related to the average salary, so most students don’t have a computer at home. People outside the top-tier cities feel deprived of access to the education one can get in a big metro. Although India has a lot of teachers, supplementary education is highly fragmented, and depends on the individual brilliance of the teacher. We can sell standardized content from star faculty to schools or in the retail channel as well as providing topquality tutoring through our own centers with computers and Internet connections."
Finally, Tutorvista switched from Webex to its own proprietary platform for delivering online services. Says Ganesh: "Webex worked well for techsavvy people but others find it slightly daunting. It was built for corporate use, not for students at home, and it’s a big download that works best if you have a broadband connection. You force a parent to enable ActiveX controls, get Javascript, and so on just to get help with math. It took us 40 man-years to develop our own much simpler platform, which we could do because we’re in Bangalore. Now our back-end integrates videoconferencing, commerce, session timing, our portal, and our programs." With respect to other forms of expansion or starting up a tutoring exchange, Ganesh says, “We’re keeping an open mind.” He elaborates; “Our current business is working; had we struggled in the past six months to grow, we might have taken a closer look at alternatives. In the short run, we had better opportunities. Now that we have our own platform, we have all the ingredients for a successful exchange if we want to go in that direction in the future. We’re growing substantially, and we’re holding DAR E our options open.” JANUARY 2008 25
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networking/camps
Time to camp for entrepreneurs Informal ‘unconferences’ offer a flexible, low-cost and effective networking and learning platform for young entrepreneurs
/Sreejiraj Eluvangal
I
t’s a lazy December Saturday afternoon and the brown-coloured office of Impetus Technologies in NOIDA wore a deserted look. Inside, one level below the ground, Himanshu Baweja and his two friends waited near the door of one of the many large rooms of the software company. Through the glass doors of the rooms, you could see groups of 20 or 30 youngsters, nearly all with laptops, sitting on plastic chairs with their eyes fixed on projector screens. If you strained your eyes, you could also catch the drop-outs in each room, away from the bright projector screen and seemingly completely caught up in their own hushed conversations. Himanshu and his friends sat through some of the presentations by other start-ups like theirs in the social networking arena. They also gave a presentation on what they were doing. Himanshu is fresh out of college and one of the 30 developers globally to be invited by Google to test out its Open Social platform earlier this year. Having sat 26
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through some presentations, Himanshu is now trying to catch up with some of the people they saw in the projectorlit room. There is excited chatter when they discuss ideas with other fellow start-ups. “I really didn’t know what to expect,” says Himanshu, who passed out of the IIT Kharagpur last year, “the website wasn’t of much use.” Himanshu and his friends are attending their first BarCamp, a kind of user-generated-event where there are no fixed schedules, speakers or invitees. Mostly confined to technology professionals, the camp and its variations, like the Open Coffee Club (OCC) and Mobile Monday (MoMo), provides an opportunity for budding tech-entrepreneurs to keep themselves abreast of the latest changes and make business connections. Since the organizers do not have to bother with inviting speakers and attendees, or thrashing out a schedule, such events are open by nature. Anyone can walk in, sit through and even give their own presentations and talks.
BarCamps, the first such ‘unconference’ event to become popular was inspired by the FOO Camps, itself a spinoff of the dot-com meltdown of 2000. The FOO (Friends of O’Reilly) Camps are organized by technology publisher O’Reilly Media of the US every year. The first FOO Camp of 2003 adopted the rather adventurous strategy of letting the attendees erase and rewrite the schedule of the presentations and talks on a white-board, even as the event was going on. BarCamps, started in 2005 as an open alternative to FOO Camps by one of the attendees, retains many features of the original open format. “Everyone is encouraged to present or talk. For that, you book a slot on the wall in the morning. Schedules are thrashed out on the same morning and are not pre-planned,” explains Arpit Agarwal, one of the converts of Bangalore’s first BarCamp, held in April 2006. Arpit was among the ten or so young professionals who stepped in to save the Bangalore BarCamp from flagging when the
DARE.CO.IN organizers of the first event backed out in mid-2006. “I had attended the first event out of curiousity, it was free and it said there were no rules,” remembers Arpit. The software programmer, working with the Bangalore-based Ittiam Systems at the time, was looking forward to attending even more such events. “Then one day, a few weeks after the first event, there was a message on the BarCamp Yahoo group that there are no plans for a second BarCamp. That led to more people coming forward to organize the second event and soon, a group of around 10 or 12 of us met in a Cafe Coffee Day in Indiranagar,” he says. The Bangalore group has since swollen to around 20 core-enthusiasts, with five BarCamps, the last one in November, under their belt. Having moved to IIT Bombay for a post graduate management course, Agarwal is nowadays busy with the Bombay group. Though Bangalore BarCamp has become the biggest such event in India with attendance ranging from 500600 people, the credit for organizing the first camp goes to around half a dozen people in Delhi. One of them is Amit Ranjan, the India representative for Uzanto Consulting, which specializes in Web software. Sitting at the third Delhi BarCamp at Impetus, Amit explains the funda behind the camps. “A lot of it has to do with the democratizing effect of the Web... the fact that two people could start out in a garage ten years ago and become Google as we know it today.. It’s about the dream, and the need to get feedback from the community. How do you make sure that the products that are put out, whether on the Web or mobile or anywhere else connect with your audience? There cannot be a better way than to get together a bunch of early adopters of such services,” says Amit. Through the three camps held in Delhi so far, starting from February 2006 (six months after it originated in the Silicon Valley), people like Arpit and Amit have invested their time and energy in finding sponsors for food, venue and of course, WiFi for the attendees. “It was a struggle during the 28
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networking/camps early days,” says Arpit, “but now, at least for the established ones like in Bangalore, there are lots of companies willing to pitch in as sponsors.” Yet, the phenomenon has remained true to its original mandate of being open and free and none of the organizers seem to take lightly to any suggestions of taking it commercial and charging the attendees. “I will have nothing to do with a BarCamp that charges the participants,” says Amit, “even when we were organizing this camp, we said no to two sponsors because we felt they did not understand the spirit of the event... It’s not for someone who comes with a fixed agenda that I give this much and I must get this much in return.” BarCamps have grown in popularity nearly all the major cities after they started off in early 2006 and have even spread out to smaller cities like Trivandrum and Coimbatore. “The biggest strength of a BarCamp is that, unlike a normal conference, everybody here is just like you, going through the same problems as you are,” says Kesava Reddy, a software professional from Bangalore who was one of the dozen people who met in the Indiranagar cafe in Bangalore to organize the second Bangalore BarCamp. “In a normal event, there are speakers and there are listeners. There are also fixed schedules. So you end up imbibing a lot of gyan from those chosen to be the speakers and you also do limited networking during the breaks. But BarCamps address the other strong need for a young entrepreneur – the need for peer support. In a BarCamp, a young entrepreneur finds out what his peers think of his business and his product, how they are dealing with the challenges that he is facing now. It goes
beyond the usual gyan and leads to collaborations, partnerships and support networks of peers,” he explains. Indeed, true to its open principles, such events are organized with the help of a editable-webpage or wiki. Attendees are expected to edit and add themselves onto the page. But with attendance reaching 600 and showing no signs of slowing down in growth, how do the camp veterans see such events evolving? Aditya Mishra, entrepreneur in residence (EIR) at Tata Consultancy Services (TCS), whose job is to think up and execute new business opportunities for the company, is one of the most ubiquitous camper and organizer, having attended or organized '8 or 9' such events. “We expect Bangalore and Mumbai to grow to be the biggest in the country,” he looks into his crystal ball. “As we have been trying to do in Bangalore, the camps will form within them collectives, sub-groups around specific topics of interest like mobile software or social networking.” Right now, it’s sacrilege to make frequent mention of words like money (and ‘profit’ is definitely out.) Misra, for example, believes BarCamps will always be a volunteer effort. “It is a given that there is a general need for more open events, both in terms of who can participate and what the participants can do at the event. Interestingly, money has never been a problem for us, due to sponsorship offers. There have even been suggestions to shift the venue to a hotel or a resort, but most of us are not in favour of raising more money than we need or moving to exotic locales,” he says. “Of course, if someone else wants to make a business out of such events by taking advantage of the high sponsor-interest, that may also be possible, but it has to remain free for the participant,” he adds. Finally, Himanshu, disappointed that the Delhi camp was not a two-day event like the Bangalore one, says he will come back the next time even if he has to pay. “But it should always be free.. if it wasn’t, I wouldn’t have felt like checking this one out,” he says. D A R E
KNOWLEDGE 25 years ago, Indiaâ&#x20AC;&#x2122;s first IT magazine, Dataquest, was born. And that started CyberMediaâ&#x20AC;&#x2122;s journey as a specialty media house dedicated to the knowledge industries. Our 15 publications, 12 websites, 100+ events, weekly TV programs, market research and media services are a testament to that. As India moves on its journey to become the knowledge capital of the world, CyberMedia will be at the forefront. Catalyzing the knowledge industries.
DARE.CO.IN
opportunity/training
Someone needs to train those BPO drivers! Training the chauffeurs, a small segment of the entire gamut of opportunities, holds a potential of Rs 780 cr. by the year 2010
/Binesh Kutty
L
ooking at the repeated reports of rash driving and bad behavior of BPO cab chauffeurs, one cannot help but think, “someone needs to train and keep a check on them!” Is there an opportunity lying in doing just that? Who else would be better to ask than the father of Indian BPO industry himself, Raman Roy. When asked, Roy said, “Getting a driver's license today is very easy. However, if we had licensing rules that ensured that the chauffeurs were fully trained, then this would not have been an opportunity. Unfortunately, they are not trained. So is
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opportunity/training
“If someone came out with a certification that says, the chauffer had X kind of a training, which ensured that he followed the rules and did all the right things, would we, as a company, only take these certified chauffeurs? Yes, we would. So would other companies. The 600,000 strong workforce of the BPO industry is set to increase four times in the next four years. Training them all will be a mammoth opportunity. But people have to understand that it has to be customer-focused training on the lines of educating and training in the fields of mortgage, insurance, credit card, fraud management… ”
RAMAN ROY, CMD, QUATRRO BPO SOLUTIONS
it an opportunity? Yes!” Going further, he adds, “If someone came out with a certification that says, the chauffer had X kind of a training, which ensured that he followed the rules and did all the right things, would we, as a company, only take these certified chauffeurs? Yes, we would. So would other companies. But this is not training for the sake of training, so the question is that whether one is able to set out a standard and certification for this training.” As far as drivers' training institutes go, there are a few players already
in this space. Maruti Udyog Limited, who have teamed up with Road Transport Office (RTO) and various other government bodies. Many, including radio cab operators, use their service. V-Link, a fleet management company, recently launched Meru Driver Training Academy in Mumbai. This is again in association with the Road Transport Office. They offer a week's training focusing on safe driving, customer service, basic technical knowledge of the vehicle, brief topography of the city, emergency respons-
es and roles and responsibilities of a driver. However, there are certain hurdles for such institutes to take off. Such training would want the chauffeurs to dedicate themselves for an entire week, six to eight hours per day. Hence, convincing the chauffeurs to undergo this is one big problem that institutes like Meru Drivers Academy is currently facing. There are food coupons distributed free to the chauffeurs coming in for the training, but even those who run the academies know
JANUARY 2008 31
DARE.CO.IN that this is not the actual fix for the problem. Moreover, the fee for each chauffeur could be any sum between four to six thousand rupees. This actually says that voluntary enrollment is far from possible. The BPOs need to opt for and encourage their fleet vendors for such training programs to improve the situation. MAIA Intelligence, caters to the business intelligence needs of many BPOs and provides software solutions for performance management, like fleet management, time entry for corporates and such. “Our solution helps these BPOs track performance, like to see which time slot has the maximum
“It is a very demanding job, where a chauffeur might just end up doing a 24 hours' run. On top of it, they need to meet the timeline; even a five-minute delay will affect their performance rating, and incentives.” ASHUTOSH ATRAY, VP - TRAINING & RESOURCES, V-LINK TAXIS 32
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opportunity/training load, do the schedules need alterations, and such,” says Sanjay Mehta, CEO of MAIA. Mehta adds, “Since BPOs employ the services of several fleet vendors, the performance pressure points could be creating a vendor index and analyzing whether on-time performance is what’s needed, is it the cost, is it the feedback from the employees, and so on.” This would let the BPOs identify the top performing vendors, and the operations head can sign future SLAs (service level agreements) based upon this. Talking about BPO chauffeurs, Ashutosh Atray, Vice-President – Training & Resources, V-Link Taxis says, “It is a very demanding job, where a chauffeur might just end up doing a 24 hours' run. On top of it, they need to meet the timeline; even a five-minute delay will affect their performance rating, and incentives.” This is true to quite an extent. Many BPOs follow either a punitive or incentive way of dealing with performance. In the punitive way, a chauffeur will end up being ‘fined’ for not reporting back in a given timeline, hence affecting the performance sheet of the vendor he is working for. Even if there is an incentive approach, the chauffeur will try his level best to make it back before time. Both these approaches lead to rash driving and overworking to either earn more or to make up for the income lost. What is the fix for this? Roy enlightens, “It is a matter of setting up a process. I have worked with companies where we did not have incentive/punitive measures to get maximum performance. We had GPS-GPRS devices installed, and we knew precisely where the vehicle was. Training the chauffeurs is only a small component.” Technology too can play a pivotal role in improving chauffeur and fleet-related problems. For example, in Quatrro, they have a GPS-GPRS tracking device installed in their fleet. Chauffeurs going off-route, and problems in these lines are taken care of with this system. However, there is another interesting scoop. According to an insider in the industry, the use of biometric devices can minimize some
“Since BPOs employ the services of several fleet vendors, the performance pressure points could be creating a vendor index, and analyze whether on-time performance is what’s needed, is it the cost, is it the feedbacks gotten from the employees, and so on.” SANJAY MEHTA, CEO, MAIA INTELLIGENCE of the problems faced. The device can instantly identify and report whether a chauffeur has been blacklisted previously for any reason. Overworking chauffeurs too somewhat leads to negligent driving, so the device will also be equipped to identify and report if the driver has done a shift of more than eight hours. This is currently being implemented across the branches of a BPO company. Opportunity lies unexploited in someone creating and maintaining a centralized database of chauffeurs in such a way that all the BPOs can pull data from them.
DARE.CO.IN
opportunity/training
RAMAN ROY ON NEAR FUTURE TRENDS IN THE BPO INDUSTRY “In 2008, we are going to see a lot of consolidation and maturity in high end processing. There will be a big issue of the rupee dollar rate, and of attrition. It is going to be a mixed bag of good and bad things. Right now, we in India only participate in 2% of the global market; 98% is still left untapped. Quatrro goes beyond the existing. We are taking this industry to the next level; we are setting up new things. Like, we set up risk management, nobody offered that; and so have we set up things for fraud control, legal, mortgage, and so on. I have 8 areas in production; I have 28 areas that are under evaluation. So, the opportunity is huge.”
DARE/estimates As on 2007 Total number of BPO employees
600,000
Number of employees using cabs (assume 50%)
300,000
Ratio of cabs:employees (1:8)
37,500
Chauffeurs required each cab / 24 hours
4
Adjustment for attrition @ 30%
45,000
Total number of chauffeurs at present
195,000
Projection for 2010 Total number of BPO employees (Growth = 4 times) Number of employees using cabs (assume 50%)
2,400,000 1,200,000
Ratio of cabs:employees (1:8) Chauffeurs required for each cab / 24 hours
150,000 4
Adjustment for attrition @ 30%
180,000
Projected number of chauffeurs in 2010
780,000
Training, Monitoring, and Certification Charges Fee per chauffeur for a one week's training Training refresh cycle in a year Annual market size in 2010
5,000 Rs 2 780 Cr Rs
According to Roy, the BPO industry stands at a strong 600,000 workforce today. This is potentially going to increase three to four times in the next four years. That would be a mind numbing increase of 2,400,000 more people coming into the industry, and they will need training. Will this be an opportunity? “It will be a mammoth opportunity,” says Roy, “But people have to understand that it has to be customer-focused training in the lines of educating and training in the fields of mortgage, insurance, credit card, fraud management etc. All these skills are not readily available, so people have to create these competencies if they were to start training.” We ran some numbers to put an estimate to measure the possible market size of just the BPO chauffeur training space in the year 2010. Turns out, even in a very conservative estimate, the market size will be 780 crores, if not more. Now that is just a small fragment of the huge opportunities DAR E space in the making. JANUARY 2008 33
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34
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/bio
DARE.CO.IN
/bio
CHETAN MAINI
REVA ELECTRIC CAR COMPANY PRIVATE LTD Over 14 years of experience with electric vehicles, during the course of which Chetan has developed over 6 electric, solar and hybrid-electric vehicles in India and US. The man who went ‘green’ long time back, talked to DARE on what drives him. begin with the genesis of REVA. What were the earlier days Letlike,uswhat were the challenges? When I was in college at the University of Michigan I had a chance to work on solar electric cars. We raced across the US in a competition, from Florida to Michigan, and stood first. General Motors then sponsored us later that year to race across Australia and we came third in the world. We used to meet a lot of major OEMs, and to me, as a student, what stuck out was the fact that, if you could cross a continent only on sun energy then the future of this electric vehicle and solar electric vehicle would be great. To me, a lot of inspiration came from such participation that opened my eyes to what the possibilities of such technologies could do in the future. I worked through companies in the US doing work on electric vehicles and in one such company that I was working with started the idea of REVA back in 1994.
entrepreneur of the month It was at a time when this technology still had a lot of issues; oil prices were comparatively very low, pollution was not being viewed as an issue, and electrics was not really being seen as a potential for being even niche or mainstream product. There was a lot of skepticism in the marketplace. As we started such developments this was slowly overcome, because in the mid-1990s everyone was coming out with electric vehicles. The issue that we saw was the fact that electric cars, even though being made by a lot of people, were very expensive, and had issues on technology. We needed to do something different to overcome all this, and one was that we looked at how could one resolve issues of battery management, and so we got several patents in that area. We also looked at getting the cost correct, and in this area we looked at trying to design the product differently, and different manufacturing processes, methodologies of integration of electronics; which I think was fairly unique. Challenges were that we were a small team, trying to build a company that is very innovative, which we had to start from a clean slate and that allowed us to look at lot of innovations and ideas, which I think were very instrumental in getting the product out.
What does it take to design an electric car? Well, today in our R&D, we have around 75 people that are focusing on new model developments. To develop the first generation of electric car, we started in 1994 and we rolled it out in 2001; so the first time it took us some 7 years. That’s because we had to develop a lot of core patents, core technologies, which did not JANUARY 2008 35
DARE.CO.IN exist, to make such vehicles viable and cost-effective. We worked out new processes in manufacturing. I think that the first time took a long time. Today, I would say that if we need to release new models, it would be in two years' time frame because the core technologies have been developed and we have even adapted to them. A lot of the core technologies in many ways are in open architecture, so you can change the software and re-configure the applications further. That is how long it takes and the kind of money we spend to get an electric car out there.
What were the hurdles that you faced in India? The hurdles have been numerous. Initially, there were hurdles in fund raising, like convincing banks to fund such projects. Government policies were another hurdle. For example, before we started the project, we had a subsidy of over a lac of rupees per car, and the excise duty used to be at 8%. Right before launching, the subsidy disappeared and excise duty doubled to 16%, while excise on regular cars came down. So we have had these shocks that continuously come from the government perspective. We actually expected that with environment friendly products being made in India, we would get more support and the support won't go away overnight. Another initial challenge was convincing the marketplace. Being the only player in the space was also very difficult. If you had ten people who were selling electric vehicles, they would all create a market space for a new product. If you are the only one then you are doing a lot more work on convincing, because the person walking in has no clue about how it works. So he is not coming to buy, he just wants to know more about it. To me, in India, more than in the area of technology, there were hurdles in the areas of finances, government, marketing and HR and these continue to be a challenge. When you are in a niche space, getting a team that has the capabilities and the potential for growth is especially challenging.
How has the experience been? In hindsight, I would say, “Oh my God! If this is what I am going to do, I would never get into it.” (Laughs) At different points of time, the challenges were different. Initially the challenges were related to technology. How do you develop technologies that would work? Moving on to finances, how do you convince financial institutions and people to put money in something like this? How do you develop teams and capabilities? It is not as simple as saying, “Hey, I want to make electric cars, can you come and join me?” We had to do electronics, electricals, software, mechanical engineering, automotive, batteries… it is not as simple as in a regular automobile company. You have marketing challenges even today in do you convince customers about the value proposition? I think that there has been a host of challenges right through and there has been several times where there were lows and highs. But we strongly believe in it and I believe that, once you start to swim, you have just 36
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/bio got to swim harder when it gets more difficult; otherwise you are going to sink. We have been swimming harder.
In today’s world of multistoreyed apartments and congested roads, what is the fix for recharging? I can give you our experiences. We have over 250 customers who live in multistoreyed apartments. In Bangalore, since most of buildings are newer, they either have basement parking or they have parking inside the building complex. As a part of the cost of delivering the car, we offer a service where we actually provide a connection from basement to your parking spot plug point, which you would then use to charge. That’s included as part of the entire cost of the car and we do it a couple of days before the car is delivered to you. So in markets like in Bangalore or newer apartments in most of the cities, this is not a problem. I do foresee a little bit of an issue in areas like in Mumbai, where you have much older apartments. In London where we have sold a fair number of cars, there have been issues too. However, it has been resolved because the government has been very proactive and has put electric charging facilities in all the parking lots. So people who park their car can just plug their car immediately and get it charged. I think that over time you will see infrastructure being built up, but right now most of our customers who are buying the car have access to a plug point, drive it all around and come home in the evening and plug it in like their mobile phones and take off the next day.
Being in a segment that does not have a mass consumer base, what are the factors that drive you ahead? I love challenges. When I face a challenge, I seem to get a lot more energy and get the thought process in place that pushes me forward. This business has been about challenges from day to day and that’s what really keeps me going. Some of those may be frustrating at points, but when I sit back, look at the issue, I generally try and change that to an opportunity and refocus my effort.
When the Rs 1 lac car comes, the fate of REVA would be… REVA has always been a global player. Close to 70% of our sales is overseas. We are not dependant only on one market. We have sold more electric vehicles than probably any other manufacturer and in places like London today, we have over 950 cars, which is the largest number of electric cars in any single city in the world. I think that there is going to be healthy competition coming in. As far as the electric vehicle space is concerned, we have managed to be leaders, and with the investments we are making, we hope to retain our leadership. Today, globally we are the most cost-effective electric vehicles available. When you look at where petrol prices are going, environment issues, and city mobility issues, REVA would have a lot to offer in these aspects and such things will always remain an advantage. The car is automatic, it’s easy to
DARE.CO.IN
/bio drive, it’s easy to park and your operating savings are huge. So you have a segment today that’s buying our car as their second car; whose first cars are probably fairly expensive. I think our current consumer is less likely to go to the inexpensive product. They are looking for more features, environmental benefit, convenience...which I think the REVA has to offer. As the EV space grows, we hope to retain our leadership.
The zero principle you espouse – zero defects, zero delay, zero inefficiency, zero pollution, zero wastage, zero compromises. Do you actually manage to do this? No, the zeros are the inspiration to the last part. We really want to get to a level of perfection. What is perfection? It is something that the zero philosophy could really entail, and it is something that came from India. If we are able to do that in every walk of our life and we endeavor to do that, that’s where we want to be. We manufacture products that use renewable energy and so cause zero pollution. We are working on the zero principle as our policy and philosophy. Have we achieved it in every walk of life? No. But it is a path that we are striving on.
REVA is a JV between Maini and AEV; how did it happen? When I was in college, we were four friends who were working on a solar car together. We were always looking at starting a company, doing some work in the electric vehicle
the biggest act of faith. The project at the point was at an extremely nascent stage. I was very young and inexperienced and to have my family say, “We are behind you” meant a lot to me.
You have been the forerunner in going green. Now everyone is talking about it. What's next for you? To give solutions to the guys who are thinking of going green. (Laughs). Because they understand the market and I dont have to sell the concept to them. I am already seeing that happening in a lot of large corporate companies. I am seeing that people are viewing themselves in a bigger picture and I think that’s great, it's going to help businesses like ours
What has been the first big success that you got? What was the first big challenge that you faced? When we started the initial concept, I was working with a very small team; no one had much experience with electric vehicles. My first success was getting the first prototype out, back in 1995. (The first product died in probably a year’s time). As for challenges, I had so many of them. The first was when we tried to get the monies together in the late 1990s when I moved to India and set up the company. To fund it, to make it go forward, was probably my biggest challenge.
MANTRA/ONCE YOU HAVE STARTED SWIMMING, YOU GOT TO SWIM HARDER WHEN IT BECOMES DIFFICULT; OTHERWISE YOU WILL SINK.
space. We were taking guidance from a friend’s father, Dr. Landau, a Ph.D. When we were bouncing off these ideas, he said, “Hey listen, this sounds like a good idea, why don’t you guys come and work for me for summers.” This was in 1990. So I ended up working for a company called Amerigon, which was working on the electric vehicle technology. This over time led to us starting the REVA project there. Amerigon then offloaded its EV business to AEV. The JV happened because initially a lot of work was being done in India and US together. At that time I was heading all the technologies, and was working more in the US than in India. When we finally felt that the product had to come here, in 1999, I moved down and grew the team here and started to take it to production. So there has been an association, but that association has always been with me.
What has been the biggest act of faith that you have received? When I was trying to start this project, we were a small business in India. Having my family say, “We believe in you and if you think that you can make this happen, we will put the money in; we will support you 200%” -to me that was
What or who would you say were your biggest critics? How did you handle them? There were a lot of friends who were my critics. Even though I always considered them very close to me, and they had a lot of respect for what I was doing; they really didn’t believe that there will be a market and that I could make money out of it. They expressed this because they were close. Fortunately, in the last year, several of those people have actually bought the REVA! As for handling criticism, I always looked at what I could get out from that. If someone is being critical, it is because they are seeing a perspective that I don’t see. So if someone has been critical, I expressed my point of view, the advantages, and tried to convince them my perspective and at the same time, heard their perspective and tried to see what I should do differently to change their mindset.
To someone starting afresh, what would be the three most important factors to work on? Have an idea that you absolutely believe in. Surround yourself with people who share that dream and focus on DAR E areas that are actually your weaknesses. JANUARY 2008 37
DARE.CO.IN
law/patents
Patenting for start-ups, the low-cost way Patenting is a costly, but essential process in a globalized market. We explore the cheapest patent strategy for a start-up /Sreejiraj Eluvangal
M
yDuniya Networks is typical of a tech start-up in India. Started off by a group of young technology professionals, the company is based out of Bangalore and develops software for the booming communications industry. Unlike old-time Indian start-ups, MyDuniya faces different realities as it tries to enter the market place. Ten years ago, an Indian start-up company would not have had to worry about global competition, but MyDuniya has been born into a world where competi38
JANUARY 2008
tion and technology have more or less obliterated all national boundaries.
WHY PATENT? “We haven’t decided about patenting, but the long-term benefits are obvious,” says Kesava Reddy, vice president of MyDuniya. “For one, if we are to raise money, investors would value our company more if we have more IP (intellectual property),” he says. “It is a global marketplace,” says Lomesh Dutta, one of the founders of Wirkle, another telecom applications
developer, which filed for a patent on a mobile ‘mark up’ language oneand-a-half years ago with the US patent office. “My competition can come from anywhere...Israel, the US...One has to follow global practices and protect one’s IP in a global market,” he explains. Lomesh’s reason is the primary motivation for companies filing for patents. Under the patent system, a company can claim damages from anyone who seeks to commercially exploit an innovation for which they hold a
DARE.CO.IN
law/patents patent. Once a patent is granted, the patent-holder can give permission (license) to those who wish to exploit the patent commercially in exchange for money or otherwise. However, the prohibitive costs (a few lakhs per patent) have prevented small start-ups from considering the patenting option seriously. We find out how a start-up can beat the costs and make the most of the protection afforded by patents in a global market-place. The system was put in place to make sure that those who invest in expensive research get something in return and others are not allowed to copy and commercially use the products of such research. In concrete terms, patents prevent your competition from reverse-engineering or breaking open your product and making copycat ones, without having to invest into research. Usually, securing a patent takes around four years, but since they are always granted with retrospective effect from the date of the initial application, violators can be forced to pay damages for using patent-pending inventions without permission. However, patents are not very popular in India. “Traditionally, Indian companies are not known for filing a lot of patents,” says Dr. Kalyan C Kankanala, chief knowledge officer and co-founder of the three-year-old Brainleague, a Bangalore-based IP consulting firm. Itself incubated at the IIM Bangalore campus, Kalyan’s company has largely focussed on the IT, communications and lifesciences industries. “The manufacturing sector is yet to see the full value of a patent. The OEMs (original equipment manufacturers) especially don’t think it’s important to have patents. But it is different in the high tech industries. In about 65% of the cases, we can go directly to the business propositions and don’t have to convince them of why they need to file for patents,” he adds. He also points out that the concept of a company that does only research and then licenses out its methods and products to other companies, does not yet exist in India. “People are not used to the concept of just inventing and letting someone
else do the commercialization part,” he says.
NOT REALLY START-UP COSTS Expenses for acquiring a patent in India are relatively low. An individual has to pay regulatory charges of around Rs 10,000 in India, including the annual renewal fees for the first ten years. The charges are four-times if it is a company or any other legal entity. In addition, hiring a consultant like Brainleague to bring in legal and subject experts to scrutinize and fine-tune your appli-
The problem is more acute for high-tech start-ups like those in the IT, biotech industries. With their marketplace spread all over the world, they also have to ensure patent protection in at least the major markets, such as the US, Japan and Western Europe. Securing US patents through a local law firm costs upwards of $ 20,000 (Rs 8 lakh) each. “The initial regulatory charges alone of a patent application in the US are around $ 4,000 to $ 5,000,” says Dutta of Wirkle. “In addition, it takes between 4 to 7 clarifications with the patent office over a three year time-period before the patent is approved. For each of these clarifications, we pay around $ 4,000 to our lawyer in the US,” he points out.
THE WAY AROUND
“If you use the provisions wisely, you can preserve your date of application in all the 128 countries for two-and-a-half years, even though you started with just a 4000-rupee provisional application in India,” NITIN MITTAL SENIOR PATENT PROFESSIONAL VERIST BUSINESS RESEARCH cation costs another Rs 15,000 to Rs 50,000 per application. Though the above charges may not be too high for companies, the fact is that for many Indian start-ups, an India patent alone may not be of much use. “All patents are territorial. An Indian patent only gives you protection in India,” says patent lawyer Kaviraj Singh of Trustman & Co.,Delhi. “If you have a product that is going to be sold in the US and Europe also, you will have to file for patents there,” he explains.
However, there are work-arounds too. The first tool is to use the provisional application route. Under this, an individual or a company can prepare a provisional description of their invention and submit it in the patent office. The charges for filing a provisional application is very low, Rs 1,000 in India and around $ 80 (Rs 3,200) in the US. “The advantage of filing a provisional application is that the inventor can do it alone, without any external legal or any other help,” points out a patent official. “This application has to be substantiated within 12 months with a more detailed filing and we will not start examining the claim till the detailed claim is filed,” he adds. Though filing for a provisional patent and waiting for 12 months will delay the issue of the patent by one year, it gives the start-up enough time to make sure that the invention has commerial possibilities. Many cashstrapped start-ups may prefer to delay patent expenses as long as possible due to financial or strategic reasons. A provisional application also opens up chances of finding investors or funding agents before going ahead with the patent application, on the basis of the invention. Since a provisional application is considered as good as a full-fledged application when determining the priority of the patent apJANUARY 2008 39
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law/patents
plication, a commercially attractive invention can prove to be a strong pull for investors. “I have come across people who have made inventions, but did not have the money to go through with the patent process. I also know of investors and companies who will buy unpatented inventions from such people and go ahead and file for patents in their names,” says Kaviraj Singh. “For a pure inventor or research firm that is not interested in building up a business and wants to go back to the lab immediately, this is a good way to monetize the invention and get funding,” he points out. There are also companies and investors who do not insist on transferring the ownership of the patent to themselves, but are content to engage in a licensing agreement on the prospective patent in return for an upfront payment and royalties. Thus, a start-up can buy an extra 12 months before it needs to pay large amounts of money in the form of consultancy fees and regulatory fees abroad. The second strategy that a start-up needs to follow is to use the provisions of the Patent Cooperation Treaty. The Treaty, created in 1970, allows patent applicants in any of the 128 signatory countries to wait for 30 months before expanding the scope of their patent application outside their home countries. For example, an Indian inventor can still file for a patent in the US two-and-a-half years after he filed for a patent in India and his date of application will be considered the same
“All patents are territorial. An Indian patent only gives you protection in India, if you have a product that is going to be sold in the US and Europe also, you will have to file for patents there.” KAVIRAJ SINGH PATENT LAWYER TRUSTMAN & CO. as that in India. However, like the provisional application, the PCT (Patent Cooperation Treaty) application too has to be invoked within the first 12 months of filing the first application. Thus, assuming that a firm applies for a provisional application in India by paying Rs 1,000, before the end of the year, it has to both file a detailed patent application in place of the provisional one as well as put in a PCT application.
The firm then gets another 18 months before it needs to file applications in other countries like the US. When it files the follow-up applications in other countries within the next 18 months (30 months from the provisional application in India), it gets the same seniority of its date of provisional filing in India in those countries too. All this, of course, comes at a small price of Rs 35,000 to be paid at the time of making the PCT application in India. “If you use the provisions wisely, you can preserve your date of application in all the 128 countries for twoand-a-half years, even though you started with just a 4000-rupee provisional application in India,” points out Nitin Mittal, Senior Patent Professional with Verist Business Research, a Delhibased KPO providing IP management services. Another advantage that start-ups can get by delaying the patent processing is declining the price of consultation and expertise. While Lomesh paid Rs 1.6 lakh per appearance of his US attorney at the patent office, nowadays, Indian companies like Brainleague and Verist carry out the filing process from India for a fraction of the cost. Kalyan of Brainleague estimates the cost of getting a US patent through Indian KPOs to be around $ 2,500 (Rs 1 lakh), a fraction of the $ 20,000 to $ 30,000 that US firms charge. “After I came to India, I realized that there are all these options, I am thinking of switching to an Indian company,” says DAR E Lomesh Dutta.
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JANUARY 2008
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strategy/brands
Creating and nurturing a brand is very like bringing up a surrogate child. It never entirely belongs to you. So who does it belong to? /Rupin Jayal
T
he answer that most w o u l d give is that the company owns the rights to it. And to some extent they would be right. After all Apple owns the iPod brand, as does Tata Motors the Indica brand (and possibly, by the time you read this the iconic Jaguar, Daimler and Land Rover brands too). So yes, the brand is officially “owned” by its parent company. But then what of Stephen King’s famous statement about brands “A product is something that is made in a factory; a brand is something that is bought by a consumer.” So are brands owned by consumers? In today’s marketplaces where people know far more 42 JANUARY 2008
about brands and the companies that own them than ever before, courtesy the Age of Information and the internet, many believe that the ownership of brands has actually moved to those that choose them – their customers. Many examples of this abound – the new Coke debacle showed clearly that the Coca Cola company did not have the right to change the formulation of its iconic beverage. Harley Davidson owners are critical to the company not just as customers but as the inspiration behind the core of the brand. The annual gatherings of the Apple faithful clearly show who actually holds the reins to the Apple brand. Or do they? Creating and nurturing a brand is very like bringing up a surrogate child. You seem to make all the effort, you strive to protect and care for it, invest significant resources – time, money
and talent to make it strong, resilient and distinctive. Yet it never entirely belongs to you. It exists outside the premises of your offices and factories. It thrives in an intangible ecosystem. If the real value of the brand lies in the minds and imaginations of those who choose to buy it, don’t they own it since if it were to “disappear” from their minds it would immediately cease to have any value at all? Actually both answers are true. Parent companies do own their brands but so do the people who choose them. Often when it is said that brand ownership has shifted to consumers the examples used are often those brands with a long heritage, luxury brands, or the few examples of iconic brands. Yet there are many successful brands that do not fall into any of these categories and yet are successful. Who
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strategy/brands truly “owns” these brands? Also when brands begin to lose their sheen either due to inherent problems or due to the category itself coming under threat, who owns them then? The model that seems to fit the environment of brands today seems more like a joint venture. This has very significant implications. Like any successful joint venture this one too has to have certain critical factors to ensure its continued success. Today and going into the future, the most successful brands will be those in the nature of a joint venture between the brand and its customer base. If the customers who own them gain the upper hand it would usually mean that the brand is not doing enough to keep ahead of their customers’ expectation curve. In such a situation the brand would inevitably begin to suffer from consumer ennui. If the reins remain firmly in the hands of the company that owns the brand then, while initially it would be a beacon and perhaps continue to be so for a small niche audience, scaling it up would become difficult. And the risk of alienation in the age of hyperinformed activist consumers would be very great indeed. Successful brands need a sense of ownership by their core audience. So what would make a truly successful joint venture brand partnership? The answer lies in the key factors that drive any successful joint venture. These are mutual interest, mutual respect, a truly symbiotic relationship, continually refreshing the relationship and sharing the success of the partnership. While many brand owners do
espouse the cause of greater consumer involvement, how many view it as a genuine partnership? Each one of the six key factors has important implications, both in terms of strategy and practical ground-level activities.
Mutual interest This is the cornerstone of a successful partnership. While most people would not buy a brand if they did not “need” it in some way, how many companies actually demonstrate the fact that they not only “sell” to their consumers but actually need them in a far more fundamen-
Parent companies do own their brands but so do the people who choose them. tal way. Consumers are the only source of information on brand performance. They act as early warning radars to warn of impending attitudinal change that could cause tectonic shifts in categories. One only has to think of the recent past and many examples come to mind. The way motorcycles have supplanted scooters in India, iPod and downloadable music have supplanted the Walkman, digital imaging has made film-based cameras and camera film obsolete, pagers were o b l i t e ra t e d by the mobile phone, the exam-
ples are endless. In each case, the longstanding leader has been left stranded as the river of consumers began to flow in a different direction. Most are still trying to catch up with their rapidly disappearing customer base. This does not apply to categories with technology shifts alone. In the world of brands too, iconic brands have fallen by the wayside. Does anyone remember Weston TVs, Campa Cola, Forhans (toothpaste), Dalda, Stencil shirts, FUs jeans, Pertech Computers, etc? These were all successful brands at one time but have since disappeared or have a vastly reduced presence. Somewhere down the road the people who bought these brands and even expressed loyalty to them did not feel a sense of mutual interest any more. The companies that owned them did not listen and understand where their consumers were headed and in ignoring mutual interest lost them entirely. The case of motorcycles and scooters is a classic one. Bajaj was the leader and people were happy to pay huge premiums for a Bajaj scooter. When the tectonic shift took place in the twowheeler industry, Bajaj lost out. However, Honda has shown that there is still a healthy interest in scooters. Not only is it the leader in scooters but it has single-handedly rejuvenated what was seen to be a moribund category. Honda even launched its first side-engined scooter – the Eterno, for Indian customers. It listened to the people who did not want a motorcycle, who continued to prefer the practicalities of a scooter. It found mutual interest with an entirely new group of two-wheeler buyers – women. It introduced vehicles that were simple but modern looking. It understood that people wanted designs that were not exotic but didn’t not want the age-old scooter look and feel either. People rewarded this by preferring it to the hitherto leader. Honda did not just bring its range of vehicles and try to “sell” them to people, it understood what mattered to them, invested in it and has received their JANUARY 2008 43
DARE.CO.IN loyalty. Similarly, while Hero Honda has often been criticised for making so-called “ordinary” motorcycles and not making them sufficiently “sporty” (with some exceptions, of course) it has continued to grow and dominate the motorcycle market with its iconic Splendor and Passion range of 100 cc motorcycles. It has also listened to its audience and introduced a range of exciting “sporty” bikes, but in doing so, has not neglected its core customer. Also, with the Passport program, it has sought to recognise the value of its customers and in doing so, has created one of the largest customer relationship programs in the country. It, not surprisingly, continues to grow as other rivals struggle. Mutual interest wins every time.
Mutual respect This is very critical in a marketplace filled with aggressively competing products and the cacophony of a multitude of brand promises. People have many ways of according brands respect. When they recommend a brand they do so because they believe in it and by doing so, often gain nothing for themselves. They are willing to put their own credibility to the test by doing so. They do so by continuing to stay with a brand even though its competitors are busy enticing them with multiple blandishments. They do so by not losing faith when a brand falters occasionally but takes them into confidence and rectifies the problem – the Tylenol case being one of the most celebrated. When the Indica was launched it proved to be bedevilled with all kinds of problems. Yet by maintaining contact with its customers and showing them the respect due to them through sharing information and by passing on the improvements to existing customers rather than just new ones, Tata Motors avoided a potentially disastrous situation. Mutual respect drives loyalty and encourages consumer advocacy.
Symbiotic relationship Many so-called brand custodians fail to recognize that they need their cus44 JANUARY 2008
strategy/brands tomers just as much as their customers need them. The relationship is truly symbiotic. And brands with the highest attitudinal loyalty, those that are actually preferred over their competition (and not just behavioural loyalty, but people actually buying them), are those where consumers feel that they contribute as much to the brand’s life as the brand does to theirs. Harley Davidson, Apple, Swatch, Saturn (cars) exemplify this. This also implies an equal partnership where each values the role and contribution of the other. Suggestions accepted and acknowledged, problems sorted out, little delights given with no commercial motive, are all rewarded with greater consumer participation, involvement and actual
Many brands, and surprisingly service brands, seem to do it rarely. Having once acquired a customer, they seem to forget that he or she exists. preference backed by goodwill. People need responsive, responsible and trustworthy brands just as much as those brands need customers.
Continually refreshing the relationship It does not matter how often a particular brand is bought – the question is how often does it provide a moment of delightful surprise, of understanding, of sharing of triumph with its existing customers? Many brands, and surprisingly service brands, seem to do it rarely. Having once acquired a customer, they seem to forget that he or she exists. So you get a growing number of customers who might be seemingly loyal but are seething to change as they see the brand offering more and more blandishments to attract new customers while mostly ignoring them. Many brands seem to treat their current customers in terms of “min-
ing” lifetime value from them rather than increasing their delight levels. So “cross-selling” supplants engagement and “what’s in it for them” replaces “what can we do together.” In contrast I have a car accessory dealer who always hands over something, a small gift (not a promotion) each time I go to him. The value of the gift might not be much but the thought is and it never fails to bring a smile to my face. He understands the importance of continually refreshing the relationship. My mobile phone provider however does not get it. So as a “special” customer, my SIM card gets replaced with one with a higher capacity but which does not work on my phone and on which I spend endless days trying to get it to work. It starts the “do not disturb” registry but does not provide a simple means to report unwanted calls on its website making it a pain to keep calling to report errant callers. The list is endless. In fact, instead of refreshing the relationship, many brands prefer to take it for granted.
Sharing success This is the one hardest to come by. Yes, companies spend vast amounts of advertising when they reach some numerical milestone. Yet interestingly most often the benefits of so-called “celebrations” are aimed at acquiring new customers. It is seen as what it is – a mechanism to increase sales and to enable another so-called celebration. In the future, sharing success in a real meaningful manner will separate the preferred brands from the “also-rans.” This is a very powerful area of opportunity and one that few use at the current time. To share the “profits” of success with a partner who is critical to your business seems obvious but then why do so many brands ignore it when it comes to their most critical partner of all – their customer? Successful brands enter into a joint venture of mutual interest and reward with their customers. After all it takes two hands for a handshake but just DAR E one to wave goodbye. The author is Director-Strategic Planning at M&C Saatchi
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funding/IPO
CEO’s guide to IPOs An IPO is often seen as a promoters’ ultimate dream. With the stock markets on an upswing, more companies are likely to grab the opportunity. The route to an IPO is paved with tough decisions and a lot of hard work, which needs to be continued even after listing /TEAM DARE
W
hen DLF went public in June last year, offering a Rs 2 share at Rs. 500 – Rs. 550, they raked in a cool 9,187.50 Cr.!, and K.P Singh, the promoter, found a place for himself in the Forbes list of billionaires. Edelweiss Capital’s 692 Cr. IPO was over-subscribed about 111 times in November! And it is not just large companies that are riding the IPO wave. Even small ones are coming out with proportionally smaller issues. Issues as small as 5 Cr. have successfully been made in the stock markets. An IPO (Initial Public Offering) is a mechanism by which a privately held company can raise money by selling its shares to the general public and getting then listed in one or more stock exchanges for further trading. The shares may be from the existing capital base of the company or may be the result of increasing the capital base. Going
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public makes sense for a lot of reasons. Not only does it infuse fresh capital and unlock the value of your company, it also brings a certain status, of being a listed company. With the Sensex on the rise, the markets have witnessed a barrage of IPOs. If you are mulling an IPO of your own, here is a bird’s eye view of the way forward.
Are you eligible? There are eligibility as well as compliance norms you have to meet when going public and getting listed. Once listed, there is a need for continued compliance to ensure that the listing continues. And of course, you need to be able to ensure that the price of the share continues to rise. The Securities and Exchange Board of India (SEBI) lays down several eligibility norms - as a part of the Disclosure and Investor Protection
(DIP) guidelines - for a company to go public. A company has to have net tangible assets of at least 3 Cr. and a net worth of at least 1 Cr. in each of the preceding 3 years, with not more than 50% net tangible assets as monetary assets for doing an IPO. In addition, it should have a track record of steady profits for at least 3 years out of the 5 preceding years. Further, if you have changed the name of your company within a year prior to the issue, then “at least 50% of the revenue for the preceding one full year has to be earned from the activity suggested by the new name”. Finally, the issue size has to be such that the aggregate of the proposed issue and all previous issues made in the same financial year (through offer document + firm allotment + promoters’ contribution through the offer document) should not exceed five times its pre-issue net
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funding/IPO worth as per the audited balance sheet of the last financial year. If you do not meet the above criteria, you can still come out with an IPO provided certain conditions are met. The issue is offered through open bidding (a process known as Book Building), and at least 50% of the shares is allotted to QIBs (Qualified Institutional Buyers). In case the issue is a non-bookbuilt one, then at least 15% has to be subscribed to by scheduled commercial banks and financial institutions. In addition to this, 10% needs to be allotted to QIBs. In both the cases, the post issue has to be at least Rs.10 Cr. or there should be compulsory market-making for a period of two years from the time of listing of the shares. QIBs are institutional investors and can include banks, mutual funds, public financial institutions, FIIs (Foreign Institutional Investors), registered venture funds, insurance companies, provident pension funds, etc.
Should you do it? Eligibility aside, you should really consider whether an IPO is the best option for you. VK Mathews of IBS Software for example, chose the PE route instead of an IPO for funds as he felt that the company was not yet ready to provide the kind of quarter on quarter results required to keep the public happy and thus the share prices growing. For him an IPO is some time in the future, after the company has grown to a certain stage. According to Ranjan Chopra of Team Computers, who has been mulling an IPO, “It’s not just about reaching a particular mass. Size does help
DARE/the players Promoters: A person/s having overall control of the company; the owner(s). Directors: Promoters or persons duly elected by the shareholders to provide strategy and direction to the company and to take crucial decisions. Independent Directors: Directors who are rank outsiders to the company Company Secretary: A (duly qualified) managerial person in a company who ensures that the company complies with relevant legislations and regulations and keeps the board members informed of their legal obligations Employee: A permanent employee of the company, a director, or an employee of a subsidiary company. Employees can be alloted shares as part of ESOPS (Employee Stock Option Plan) prior and subsequent to a public issue. Employees can also be allocated a percentage (10%) of a public issue. SEBI: Securities and Exchange Board of India, a regulatory authority that controls public issues. The issue prospectus is cleared by SEBI. Stock Exchange: An entity registered with SEBI where trading of securities is done. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the primary exchanges in the country. Shares are listed and traded at the stock exchanges subsequent to your entering into a listing agreement with them. Registrar of Companies: (RoC) A central government body that registers and oversees companies. You need the RoC’s clearance for a public issue. Lead Manager: A merchant banker or a financial consultant registered with SEBI. As the name indicates, manages the public issue on your behalf. You are likely to have multiple managers to the issue with one designated Lead manager. Underwriters to the issue: Insurers of the issue. They undertake to buy the securities if it is not subscribed Registrar: Manages the book work. Draws up the list of eligible allottees. Ensures the crediting of shares to the demat accounts of successful allottees and dispatches refunds to others. Subsequently manages share transfer. Bankers to the issue: Bankers who collect the money on your behalf. This money is held in an escrow account. since your shareholders would want to know what kind of market-share you enjoy. The markets too need to be kept in mind. These things, however, shouldn’t be given over-importance. Mostly, it’s about getting to the re-
quired maturity level, having the right kind of ratios and good internal control systems in place”. There is also the question whether raising debt is a better option than going the equity route. There are those
“You don’t go for an IPO right away at an early stage, you go for an IPO at a later stage, probably when the promoters have better control, have better focused approach and eventually the valuation goes up”. — VISHNU VARSHNEY CEO, GUJARAT VENTURE FINANCE JANUARY 2008 47
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funding/IPO
DARE/elements of an IPO Observation letter from SEBI: This is the document that gives the go-ahead for the IPO or asks for corrections to the offer document Offer document: Details the reasons for the IPO, the past and expected performance of the company, background of the promoters, etc. The full offer document can be quite huge. So, there is also an abridged offer document. Red Herring Prospectus: The offer document - prospectus -minus the pricing and total number of shares on offer. Opening and closing announcements: The company needs to take out advertisements announcing the opening and closing dates of the issue in at least one national English daily, one Hindi national daily and in one regional newspaper where it has its registered offices and on its website Trading window closure: Occurs after listing. Period during which insiders (Promoters, Directors, senior employees upto three levels below the directors, all employees in the Accounts department, etc.) cannot trade in the companies shares. Annual / quarterly results: Financial results of the company, approved by the Board of Directors.
attractive with very high chances of immediate appreciation. For example, the Edelweiss Capital issue that got oversubscribed 111 times had a price band of Rs. 725- 825 and closed on listing day at Rs. 1510. This is a strong argument in favor of those who believe that an IPO has to be made at lower than what the market can bear, so that investors get good returns, thereby building investor loyalty and boosting long term prospects. It is here that the role of the lead manager comes into prominence, in advising the promoters on what is realistic. After all, the IPO is riding on the manager’s commitment and ability to mop up the required funds at the offer price. Book building offers some solace to promoters as the price gets determined within the band depending on demand.
Book building or fixed price? who argue that given the right fundamentals, debt is more cost effective than equity, particularly for smaller companies. The cost of raising money in the capital market hovers around 10% of the issue size and dividend expectations are upwards of 15%. Cost of raising and servicing debt is way lower.
Promoters share vs. share price In the words of Gautam Mukherjee, who has been intimately involved “in at least one IPO” one of the toughest decisions that a promoter needs to make is the percentage of equity they want to divest and the price at which to make
the offer. The two are intimately related. Given that you want to raise a given amount of money, if you want to divest a lesser percentage, then the price per share has to be higher. And this, the market may not react favorably to. According to an industry insider, who did not want to be named, in the current scenario, if your IPO is not oversubscribed at least 3 to 4 times, chances are that it would list at a price less than the offer price. So, one of the key objectives of the IPO team is to get at least 10-12 times over subscription. And for this to happen, other things being equal, the offer price has to be
Public issues now prefer the book building route rather than the fixed price route. From the promoters view point, there are some advantages to book building. Under book building, you offer a price band and potential investors bid for shares at any price point within the band. For the promoters, what this means is that if the demand is higher, then shares can be allocated to those who have bid at higher prices. The issue stays open for a minimum of 3 days, during which the bidding process is carried out; each bidder is required to state the number of shares
“It’s not just about reaching a particular mass. Size does help since your shareholders would want to know what kind of market-share you enjoy. The markets too need to be kept in mind. These things, however, shouldn’t be given over-importance. Mostly, it’s about getting to the required maturity level, having the right kind of ratios and good internal control systems in place” — RANJAN CHOPRA, TEAM COMPUTERS 48
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funding/IPO that s/he is willing to bid for and the price (within the price band) for the same. Investors fall in one of the four categories – QIBs, retail investors (those bidding for shares under one lakh rupees), High Networth Individuals (HNIs) and employees. Bidding can be open book or closed book. In Open book bidding, the real-time pattern of the demand and bids is displayed online, as a measure to guide the investor. In closed book bidding, the bidding process is kept under wraps and the investor is required to bid sans any information about what the other bidders are doing.
DARE/IPO basics Draft offer document filed with SEBI by Lead Manager Filing of Offer Document with RoC: Within 21-180 days from the time of receipt of Observation Letter from SEBI, giving clearance. Promoters’ contribution: minimum 20% of post-issue capital Lock-in period: 1 year bar on trading for pre- issue stock. Promoters’ shareholding unto 20% of total share capital is locked in for 3 years . Issue open for 3-10 days Minimum subscription required: 90% of issue size Allotment for retail investors on competitive basis: at least 25% of issue size Allotment for book-built issues: 35:15:50 for Retail investors: Non-institutional investors: QIBs
The road show
Firm allotment: Up to 10% of issue size to employees. Same for existing shareholders
The road show is one of the key market building activities. Basically, it is a series of presentations to potential large investors and to influencers (read financial journalists) about your issue. The lead manager and the PR agency organize these events. Depending on the size of the issue and the sector you are in, road shows will be conducted abroad also. The road show hits the road long before the issue hits the market. In real life, it does not end till the issue closes, with the promoters continually following up with potential large investors (institutions as well as individuals) and trying to convince them to invest in the issue.
No. of days to list: Around 3 weeks after closure of book-built issue
The process An IPO is done through Lead Managers. Lead Managers are merchant bankers, ie, investment banks or financial consultants who help you execute the IPO. Depending on the size of the issue and the market segments you want to tap, you will choose one or more managers to the issue. A merchant banker cannot be the lead manager if both the banker and the company issuing shares have common directors. The draft offer document is the preliminary offer document which contains complete information about your company’s background, management, finances, accounting practices, legal aspects, future plans, etc. It also provides detailed information about the reasons behind the IPO and where
Relisting of delisted securities after a cooling period of 2 years the capital raised will be deployed. It is prepared with the objective of providing a potential investor all information that is required to make an investment decision. SEBI issues you an Observation Letter, wherein it might give you a straight green signal or suggest modifications which you will have to incorporate in your draft offer document and re-file it with SEBI. Once you receive the go-ahead from SEBI, you have a minimum of 21 days and a maximum of 3 months to file your Offer Document with the Registrar of Companies. The minimum amount of subscription required is 90%, failing which you are required to refund the entire amount to the investors. You can also resort to differential pricing, reserving some shares under Firm Allotment to be offered at a price different from what is offered to the general public, as long as the offer is at a price higher than the price at which the net offer to the public is made. Firm allotment to employees and shareholders can be unto 10% of the issue size for each category. Once the basis of allotment is finalized, the final list of eligible allotees is drawn up by the Issue Registrar. Once the IPO is successful, the issue is registered with the stock exchanges, usually NSE (National Stock Exchange, Bombay)
and BSE (Bombay Stock Exchange); a process known as Listing. Listing is executed through a formal agreement made with the stock exchange, known as a Listing agreement.
Delisting You also have the option of delisting from your shares from the stock exchange, which means that trading on your shares in the concerned exchange will be discontinued. Delisting happens for three reasons - voluntary delisting by the company, public shareholding falling below the minimum limit specified in the listing conditions or listing agreement or compulsory delisting by the stock exchange. Voluntary delisting can be done after a minimum of 3 years’ trading period in any stock exchange. It is done through Reverse Book Building wherein the company offers to buyback shares from its shareholders through a bidding conducted by Book Running Lead Managers. Compulsory delisting happens when a company is suspended for a period of six months or more for not complying with the stipulations laid down in the Listing agreement. Stock exchanges allow the relisting of delisted securities only after a cooling peDAR E riod of two years. JANUARY 2008 49
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legal/governance
Corporate Governance for Listed companies Essential compliances to be met pre and post IPO /Manhar Kapoor
C
ompanies going public need to gear themselves up to meet various statutory requirements pre and post IPO. This piece gives a brief overview of the corporate governance part of the requirements. Listed companies are required to publish financial results on a quarterly basis. The accounting and reporting systems need to be strengthened so as to facilitate quick and accurate reporting. Besides this, in the run up to an IPO one of the major challenges a promoter will encounter is to learn to share information and give in to a democratic system of decision making. Many of decision making powers enjoyed by Promoter in his capacity as the Managing Director or the Chairman become subject to scrutiny by the Board. Listing related regulations make it mandatory for companies to share information; broad-base the board of directors to include participation of independent directors; setting up of board sub-committees for reviewing risk, financial information and material events of the company by independent committees. Clause 49 of the Listing Agreement contains the rules on Corporate Governance. It is mandatory for all companies going public to comply with this code. Before the IPO the Board of Directors of the Company will have to be reconstituted (if necessary) such that at least half of total number of direc-
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tors are independent (one-third if the Chairman is non-executive). Simply defined, an independent director is a person who is a rank outsider. Thus, employees, relatives, major shareholders, vendors, customers, auditors etc can not be inducted as independent directors. Independent Directors are extremely scarce. According to Vatsaraj, Convenor of the Independent Directors’ Studies course jointly started by Bombay Chartered Accountants’ Society and S P Jain Institute of Management and Research, there was a requirement of about 30,000 independent directors by December 31, 2005 itself! You will have to start scouting for independent directors well in time It is important to note here that all major decisions of the company are taken by the Board by way of resolutions passed by majority. Annual operating plans, budgets, major business and legal concerns, details of business alliances are placed before the Board for review and approval as required. The company is required to constitute certain committees of the board including the Audit Committee and Remuneration Committee. The audit committee oversees the company’s financial reporting process, reviews the financial results including transactions with related parties, internal control systems, utilization of money raised from public in view of the stated purpose and also assesses risks of the Company. It has (atleast) three members with two-third being
legal/governance
DARE.CO.IN independent. The recommendations of this committee are mandatory and generally binding. Atleast four meetings are held each year. The Remuneration Committee recommends the remuneration payable to Executive Directors including the Managing Director. All members of the committee are non-executive members. The Board members and senior management of the company are bound by a internally mandated Code of Conduct. This Code is posted on the website of the company. A Management Discussion and Analysis report (MDA) is included in the annual report sent to the shareholders annually. Corporate Governance norms make it mandatory for companies to share with investors its view on the industry and business of the company and carry out and publish a SWOT analysis. It must include Managementâ&#x20AC;&#x2122;s view of various matters including industry structure and developments, opportunities and threats, outlook, risks and concerns. Similarly a report on Corporate Governance is also included in the Annual Report. It discloses all elements of remuneration package of individual directors including variable pay and ESOPs. Terms of constitution of various committees and attendance of Directors at the Board and committee meetings. Listed Companies are required to protect price sensitive information and prevent misuse by insiders. Promoters and Senior Managers are prohibited from dealing in shares of the company if they have access to any information, which if known to public, could have an impact on the share prices. The companies need to follow strict rules with respect to proliferation of price sensitive information. The management will do well to consider these issues and have a procedural framework in place well in time. The post-IPO compliance urgencies may not give adequate time for establishment of systems and processes. It is advisable to be ready atleast one quarter in advance and may be have a DAR E dummy run. JANUARY 2008 51
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/interview
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/interview
Prof. C.K. Prahalad The Paul and Ruth McCracken Distinguished University Professor at the Ross School of Business, University of Michigan specializes in corporate strategy. His prominent world-class figure, Prof Prahalad has consulted with the top management of many of the world’s foremost companies. The Ross School of Business has honored him for his contributions with a Life Time Achievement Award.
D
o you think the current wave of interest in entrepreneurship is going to continue for a long time in India, or is it a short cycle?
It is going to continue for a long time in the country. That is the only solution we have to our problems. I think if entrepreneurship is a sense of development, it cannot be a fad. The goal of TiE (The Indus Entrepreneurs) is to make sure that it does not become a fad. We get more and more people involved. If one looks at the composition of people in various sessions (at the TiE Entrepreneurial Summit) in the last three days, it has been from senior ministers to NGOs to entrepreneurs – domestic as well as global, small and large. We are covering the whole spectrum. The idea is to create a process of advocacy and awareness of what entrepreneurship can accomplish within India. You did mention once that Indian efficiencies over ten years would overtake many global businesses… It has the potential. That is different from saying it will overtake. It has the potential to overtake, but it may not. There are multiple reasons why Indian efficiencies might not overtake global businesses. In India, there is a lack of ability to implement; also, there is a lack of ability to think big. Even the ability to train human resources is something that is lacking in India. One of my first theses was, ‘aspirations must be outside the resource space’. Therefore, unless you have the sheer aspiration to be world class, and create best practices, it may not happen. However, we have the potential and we have the wherewithal to do it. Probably mobilizing our resources is going to be the key. How do you make small time people think big? Actually, the amazing thing is that poorest people think big. They want to improve their lives. They want to change conditions for their children. They are not romanticizing the existing state of affairs. To me, the bottleneck, like always is at the top of the bottle. JANUARY 2008 53
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/interview
Indian efďŹ ciencies have the potential to overtake global businesses.
Aspirations should be world class and create best practices.
Poorest people think big while the bottleneck is at the top of the bottle. DAR E
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TiE Delhi Wishes You a
Very Happy and
Joyful New Year
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opportunity/INSEAD
Family businesses: growing the next generation of entrepreneurs /Philip Anderson and Aparna Dogra 56
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H
ow easy is it to become an entrepreneur in India if your family has a strong entrepreneurial heritage? The conventional wisdom is that you have a massive head start. Your family’s reputation, connections, brands, and capital are all at your disposal. If your family’s name is well-known in Indian business circles, you gain immediate acceptance and respect. Your family will provide you with a first-rank education, wise counsel, introductions, and trusted advisors. You have the opportunity to start a business at a much younger age than most because of all these advantages. Or do you? Many children born into famous business families will tell you that there are at least as many disadvantages as advantages if you want to start enterprise. Will your parents give you free rein to choose a business that suits your passion, or will they constrain you to follow in their footsteps? Will they encourage you to start a business that fits today’s India, or are they locked into yesterday’s wisdom and yesterday’s opportunities? Will partners, customers, and employees take you seriously as an independent CEO, or will they assume that you are merely your parents’ agent? Do they believe you actually built the business or do they believe you were handed every advantage and haven’t actually accomplished anything on your own? Family businesses are the bedrock of almost every economy in the world. Even in regions with advanced capital markets and a deep pool of professional managers such as the US or Europe, the vast majority of companies are started, owned and operated by sole proprietors and/or their families. A significant proportion of companies listed on the world’s biggest stock exchanges are controlled by one family or a few families, and in many cases the founder’s family is still active in daily management. However, family businesses can be fragile. Few survive hardly even ten years after the founder dies or turns the enterprise over to relatives. Even fewer survive into a third generation.
Clearly, family businesses enjoy some major advantages when compared to corporations that are publicly owned and professionally managed, or they would not be so prevalent in every country. But just as clearly, managing the transition from one generation to the next is a hazardous enterprise. It isn’t as easy as one might imagine, to succeed by inheriting a thriving company. For centuries in India, the duty of children born into a commercial family has been to carry on their father’s work. Certain regions and jatis are famous for spawning one generation after another of children who build upon what their parents bequeathed them. A popular theme in fiction and non-
Family businesses are the bedrock of almost every economy in the world. Even in regions with advanced capital markets and a deep pool of professional managers such as the US or Europe, the vast majority of companies are started, owned and operated by sole proprietors and/or their families. fiction is the conflict between passion and duty that arises when children have no interest in their family business but, nonetheless, feel compelled to carry on the family tradition. Certainly, carrying on in one’s parents' footsteps is still considered the norm by many in modern India, but many of today’s entrepreneurs who were born into enterprising families are charting their own course. Consider Shamit Bhartia. His grandfather, ML Bhartia, established his family’s business in Calcutta shortly after partition,
focusing on basic manufacturing. Shamit’s father Shyam Bhartia is the co-founder, Chairman and Managing Director of Jubilant Organosys, a leading pharmaceutical company based in Noida, and his mother Shobhana is the vice-chairperson and editorial director of the Hindustan Times. Upon returning from the US in his mid-20’s, Shamit helped start the Monday to Sunday hypermarket chain in Bangalore, which is now a thriving division of Jubilant Organosys. Each generation of this family has pursued a different opportunity in a sector and region that seemed most promising at the time the founder was ready to start a company, instead of seeing his mission as merely perpetuating his inheritance. What are some of the different paths that the entrepreneurial scions of India’s business families are pursuing today? Although there are many avenues taken by entrepreneurs whose parents were themselves entrepreneurs we profile in this article three different paths: diversifying the family business; starting a new company that may someday join the family enterprise; and striking off independently.
Sarvesh Shahra: Diversifying the family business 26 year old Sarvesh Shahra was born at about the time when his father and uncle created Indore-based Ruchi Soya Industries (www.ruchisoya.com), now at the heart of the Ruchi Group conglomerate. Ruchi Soya, whose managing director is Sarvesh’s father Dinesh Shahra, focuses on edible oil, soya foods, and specialty fats and is especially well-known in India for its flagship brand Nutrela. “Nutrela is a heritage brand, a house-hold name in India and the leader in its product categories,” says Shahra. “I have started a new venture which will focus on the health and wellness offering. I plan to take the Nutrela business beyond the original family business by offering different categories of health foods and beverages under this brand.” Sarvesh Shahra has taken charge of a separate company within the Ruchi family and is independently responsiJANUARY 2008 57
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“I WANTED TO UNLOCK THE BRAND VALUE IN THE FAMILY BUSINESS BY OFFERING A LINE OF HEALTH FOOD AND BEVERAGES THAT PROVIDE VALUE-ADDED FOOD IN THE PREMIUM, MID-TO-LOW AND NASCENT CONSUMER CATEGORIES. GROWTH IN THE PACKAGED FOODS BUSINESS IS ABOUT 35-40% PER ANNUM IN INDIA, AND CONSUMERS TODAY ARE ENJOYING AND ARE READY FOR SUCH PRODUCTS." – SARVESH SHAHRA ble for it. “The new venture will focus on the health and wellness offering,” he says. “Until now the family business never took advantage of the health benefits of soya when marketing the Soya line of food products. We plan to make Nutrela the dominant force in the Health and Wellness business and unlock the value within the brand via this brand extension into new upcoming food product categories.” As one of India’s leading agri-business and food companies, Ruchi Soya Industries has identified the country’s Health & Wellness (H&W) opportunity as a major area for growth for its value-added food business. Shahra’s venture plans to open up this market for Ruchi starting with functional health beverages that are rich in calcium and protein. He then plans to add healthy snacks, nutritional supplements, health cereals, and nutraceuticals under the Nutrela brand with new individual product category brands. He explains, “We will use high quality raw and packaging materials for our products, and are setting up an entirely new pan-India sales and distribution network to sell these products in modern retail and A-class outlets. Our overall goal is to provide ‘nutrition you can enjoy.’” Entrepreneurs usually perform best when they bring passion to a business, and Shahra exudes enthusiasm when he explains why he chose to lead this venture. “I studied in Singapore and US and was exposed to health foods at a very early age, so I always knew I wanted to do something in this area,” he says. “I’ve always lead a healthy lifestyle myself. I practice yoga and exer58
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cise regularly and hence I wanted to develop products which reflected my values.” Growing up with the family business has given Shahra a unique opportunity to realize his dream while exploiting
“This is a new division in the family business and will be spun into a brand new company. It’s my own venture and I am completely responsible for all decision making, even though the business has been financed by the family. The family business will continue in the areas of edible oil, soya, shipping, and so on while we take the Nutrela brand into a completely new line of business.” a powerful name. “Nutrela is a health food brand and I felt that justice wasn’t being done to the brand’s core values,” he comments. “I wanted to unlock the brand value in the family business by offering a line of health food and beverages that provide value-added food in the premium, mid-to-low and nascent consumer categories. Growth in
the packaged foods business is about 35-40% per annum in India, and consumers today are enjoying both high income levels and comfortable, healthy lifestyles, so they are ready for such products. I am excited about this venture as it will require a whole new distribution system and various packaging formats for different retail options.” Although the venture is part of the Ruchi Group, Sarvesh Shahra has been given considerable freedom to develop it in a truly entrepreneurial fashion. He elaborates, “This is a new division in the family business and will be spun into a brand new company. It’s my own venture and I am completely responsible for all decision making, even though the business has been financed by the family. The family business will continue in the areas of edible oil, soya, shipping, and so on while we take the Nutrela brand into a completely new line of business.” In Shahra’s view, growing up in an entrepreneurial family has helped him prepared to become a chief executive officer at a relatively young age. After earning a bachelor’s degree in International Marketing, he worked for four years in Ruchi Soya in various departments such as operations and finance. “Via the family business I have a sound understanding of the food business in India,” he says. “We also have an indepth knowledge of the food processing industry, since we are one of the oldest food processing companies in the country. I was given the freedom, support and the resources from the family business to start this venture. I have seen my dad create a successful
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opportunity/INSEAD business and that has been my major motivation to create a successful venture of my own. He has always encouraged me to work hard and is my inspiration.” In the near term, building the business will call on all of Shahra’s entrepreneurial ability. He lists offering highly differentiated products as the biggest issue he faces, since many companies are vying to become a leader in healthy foods. This will require efficient distribution, fine-tuned to cater to all segments of India’s population. Adapting the business to modern retail formats so that it can work with big stores and smaller “mom and pop” operations is another key challenge, along with building efficient logistics and promotional methods that highlight the uniqueness of the firm’s products. Shahra’s objective is to create a major enterprise. He says, “I’d like to grow this business into a successful company offering a big range of health foods and beverages. These are early days and I’d like for this venture to grow into an independent company.”
Bhairavi Jani: Starting a venture related to the family business In starting her own company, Bhairavi Jani is following a family formula for keeping each new generation entrepreneurial. Says the daughter of Tushar Jani, a logistics pioneer in India and co-founder of several companies under the Blue Dart umbrella, “Our family business has very strict rules on who joins it. Everyone in the family has to first start an entrepreneurial venture of their own (within or outside the industry), make a success of it and
can only then join the family business. I had rented out 50 square feet space from my dad for my own office and that was shut down one day by him when I failed to pay the rent. So this was the approach the family took to youngsters starting their own ventures.” Growing up around a logistics business, Bhairavi Jani began developing her own individual approach to the
Our family business has very strict rules on who joins it. Everyone in the family has to first start an entrepreneurial venture of their own (within or outside the industry), make a success of it and can only then join the family business. sector while studying in the US. After earning a bachelor of science degree in business with high honors, she worked as a Senior Analyst at KPMG Consulting in Washington D.C. “I returned to India in 2001, at the age of 21, after working as a supply chain consultant in the US,” she says. “I knew that I wanted to set up a venture which would design the entire supply chain for a company integrating consulting solutions with flawless execution. In our company we design or re-engineer the supply chain of our clients and oversee/monitor its execution. Most of us customers do
not have their own logistics solutions, so we provide these end to end solutions for them. Our clients are from diverse industries like luxury goods, food, agriculture and chemicals.” Jani founded her own company, i3pl, in a fifty square foot office in the premises of her family’s business, the SCA Group of Companies. i3pl is a fourth party logistics company whose role in the value chain is to help clients plan and control all logistical procedures with long term strategic objectives from procurement to production to distribution of good and services. From its initial 50 square foot office, it has grown into a leader in its sector that employs 250 people and serves companies such as Pepsi Foods (Frito Lay), Asian Paints, and Sara Lee. Like Shahra, Jani started an enterprise that is related to her family’s business but stems from her own individual passion. She explains, “Since my family business was in logistics and warehousing, I was pretty familiar with this sector. My heart was set on this venture from the time I was a consultant at KPMG in the supply chain area. I love the challenge of creating efficient supply chain solutions for my clients and making a difference in their bottom lines. When a client recently introduced our company to his board as ‘someone who makes my business happen,’ I knew that best explained my business and was a truly genuine compliment.” Jani’s family deliberately gave her the opportunity to succeed or fail on her own merits, and she welcomed the challenge. “I was always responsible from an early age and love leading from
"I WAS ALWAYS RESPONSIBLE FROM AN EARLY AGE AND LOVE LEADING FROM THE FRONT, MY VENTURE HAS GIVEN ME THE CHANCE TO DO THAT. OTHER THAN PROVIDING ME GUIDANCE AND SUPPORT LIKE ANY PARENTS WOULD, MY FAMILY HAS STAYED AWAY FROM MY VENTURE." - BHAIRAVI JANI JANUARY 2008 59
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the front,” she says. “My venture has given me the chance to do that. Other than providing me guidance and support like any parents would, my family has stayed away from my venture.” Although she was on her own, Jani believes that her family’s heritage was a help as she launched her company. “Since the family business was in similar space, logistics, it gave me a lot of credibility when I started my own venture,” she says. However, she had to overcome by herself the sorts of trials that all entrepreneurs face. “I wanted to shut down in the early days when government officials would harass me, being a young woman in this industry,” she recalls. “The thought of my employees and their families depending on me gave me the courage to go on.” Despite its success, i3pl faces a number of stern tests as India’s logistics sector continues to grow in size and sophistication. “Understanding our clients’ businesses is a challenge because they are all very diverse,” Jani says. “We also have to maintain a lot of confidentiality, since we are strategic partners for our clients and cannot work for companies in similar areas.” Training will be key to the company’s continued expansion, she believes. “We do not have many trained and qualified supply chain professionals in India, so we have now set up a supply chain institute offering a supply chain MBA in India,” she explains. “With this we feel that that we will be able to grow this industry and at the same time have qualified professionals working here.” With i3pl firmly established, Jani’s own role has evolved. She hired a chief
executive officer who is responsible for day-to-day operations while meeting regularly with Jani to discuss key decisions. “I’d like to believe that I am creating leaders by giving up day to day control of my business,” she says. “I now have time to concentrate on new business ventures.” At 28, Jani is a director at the SCA Group of Companies, the firm her greatgrandfather founded in 1896. “Currently, I am the link between the board of the family business and the professionals in the various companies of the family business,” she explains. The SCA
I wanted to shut down in the early days when government officials would harass me, being a young woman in this industry, the thought of my employees and their families depending on me gave me the courage to go on. Group has companies in the businesses of inventory management, supply chain technology, cargo handling and warehousing, having sold Blue Dart’s courier services to DHL in 2004, and eventually, i3pl may join this stable of enterprises. “In ten years, this venture might be part of the family business as we continue to grow and scale it up,” Jani comments. “I will not take it public, because there are a lot of confidentiality issues attached
to working with large corporates and being their strategic partner in the supply chain.”
Abhi Shah: Starting a new family tree 28 year old Abhi Shah, founder and CEO of the ClutchGroup (www.clutchgroup.com), grew up in an entrepreneurial setting but was free of expectations that he would inherit or build the family enterprise. “My dad is a graduate of IIT Mumbai who moved back to India when I was two years old and started a company called Electrotherm, which manufactured large industrial furnaces for metals,” he says. “It was the largest company in this area in India, and after the FIPB regulations in India were relaxed, he sold the company. My mom runs an English and public speaking institute, so I had no empire to inherit.” Shah’s family was determined that he make it on his own to such an extent that he began learning sales at a time when most of his contemporaries were still in school. “My parents wanted me to be independent and learn to fend for myself at a very early age, so after high school they didn’t give me a dime for my undergraduate studies in the US,” he explains. “I sold bibles for 80 hours a week in the sweltering heat of Alabama to save for my tuition fees, and that was my first step into becoming an entrepreneur. I felt that if a 16 year old from a different faith could sell bibles to conservative American households, I could do anything that I set my eyes on. That was when I started to think big.” Shah earned a bachelor’s degree with honors in marketing from Texas
“I FELT THAT THE HUGE INDIAN DIASPORA IN THE US CONTRIBUTED SO MUCH TO THE AMERICAN ECONOMY AND YET HAD A VERY LITTLE IMPACT ON INDO-US RELATIONS, TREATIES AND BUSINESS AGREEMENTS. I HAD ABSOLUTELY NO CONNECTIONS IN THE BUSINESS OR POLITICAL AREAS IN THE US, SO I CONSIDER THIS TO BE A REAL ACHIEVEMENT.” - ABHI SHAH 60
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opportunity/INSEAD A&M University, graduating at the top of his class, and then was a sales star at Compaq Computer and Thomas Nelson, Inc. in the US before joining Accenture as a Senior Consultant. In his private time, he co-founded the US India Business Alliance (USIBA) to promote investment and trade between the US and India and started the Future Leaders Council of the US India Political Action Committee (USINPAC), the largest organization representing Indian American issues in Washington. “That was my second experience in starting something from scratch and growing it to a huge scale,” he comments. “I felt that the huge Indian diaspora in the US contributed so much to the American economy and yet had a very little impact on Indo-US relations, treaties and business agreements. I had absolutely no connections in the business or political areas in the US, so I consider this to be a real achievement.” Shah then earned an MBA from Harvard Business School, intending from the start to launch his own enterprise. “I always knew that I’d be an entrepreneur--after HBS, I did not apply for a job, instead deciding to do an internship with Jerry Rao, one of the youngest CEOs of Citibank in India who went on to start MphasiS,” he says. “I wanted to think big and work in the US-India corridor of business since I studied in the US and my family was in India.” Shah’s internship project was helping Rao sell MphasiS (a leading outsourcing firm) to EDS. Working with the law firm that served MphasiS got Shah interested in the legal services sector. “I knew that the execution of an idea, not just having a great idea, leads to creating a successful growth venture, so I decided to do a study with Harvard Law School for two months once I knew I wanted to enter the legal services space,” he recalls. “At the end of it, I knew this was the sector I wanted to enter and I believed it would scale up pretty soon. The legal services business in the world is $250 billion, and the US and UK account for 95% of the total spend.”
In 2006, Shah returned to India and launched a company to provide worldclass legal services at competitive rates through a network of professionals in the US and India. “India and the US share the legacy of the British legal system and a huge number of English speaking lawyers come from India,” he says. “However, professionals like lawyers are wary of working in your typical BPO Company, so I decided to build a company with paralegals and lawyers based out of the US and India.
I sold bibles for 80 hours a week in the sweltering heat of Alabama to save for my tuition fees, and that was my first step into becoming an entrepreneur. I felt that if a 16 year old from a different faith could sell bibles to conservative American households, I could do anything that I set my eyes on. That was when I started to think big. In the US, we have consultants on our rolls that do not want to work in typical law firms and are happy working 40 hours/week with us. In all, we have 300 qualified professionals in our offices in New York, Washington DC and Bangalore, working for a variety of Fortune 500 companies and over 40 of the 100 biggest American law firms.” Shah is confident that he has found the right sector and the right business model to grow a giant enterprise. “I always wanted to build a world class company on a global scale and I always thought that thinking small is a crime,” he remarks. “I want my company to achieve critical mass and become a billion dollar company in five years. In 18 months, we’ve scaled up very rapidly and I am confident of achiev-
ing our target. I love the challenge of bringing together the best professionals in this industry and working with them. I’ve also been able to seamlessly build and operate this company across two countries and use the advantages of being based in both.” Although he is the child of entrepreneurs, Shah has mostly benefited from the moral backing of his family and their approval of his appetite for risk. “My dad is my biggest cheerleader, but other than that, there is no family involvement in the venture,” he says. In turn, Shah doesn’t expect the ClutchGroup to become a family business that he passes on to his children. “In four years, I would like the company to go public, and after that I would like to go into public service via politics,” he says. “Building a global company will give me the credibility, financial freedom, and network of incredible people to do what my heart is after and pursue my ultimate ambition, getting into public service.” However, Shah expects to give his children active assistance if they want to become entrepreneurs. “Since I’ve been to a business school and have started my company from scratch with no resources from the family, I will be able to provide direct operational guidance to my children if they decide to start their own ventures,” he says. Sarvesh Shahra, Bhairavi Jani, and Abhi Shah are all using a family heritage of entrepreneurship to pursue their own entrepreneurial dreams instead of rising up through the management ranks of a family enterprise. Each has started a company that is distinctively different from what their parents launched, and each benefits in a different way from his or her parental relationships. However, their separate experiences suggest that the descendants of yesterday’s entrepreneurs will have a large part to play in the entrepreneurial revolution that is defining the Indian economy DAR E of tomorrow. Philip Anderson is INSEAD Alumni Fund Professor of Entrepreneurship at INSEAD and director of the 3i Venturelab. He is also director of INSEAD’s Rudolf and Valeria Maag International Center for Entrepreneurship, where Aparna Dogra is head of research projects. JANUARY 2008 61
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blogs/opinion
Entrepreneurial marriages /Anurag Batra
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ith the huge wedding season just coming to an end, one is tempted to think about the prayers and hopes associated with such holy unions. Corporate marriages are as critical to the entrepreneur, who has nurtured his love for an idea and professed it to the world. What is the amount of time an investor would give an entrepreneur’s idea? In other words, by when does the business have to start making money? The ability to dream up an idea - and capability to get it going on ground are often dumbed down and numbed down by the graphs and matrices of ‘angels’ and others. I know of several young men and women who would rather wait to find the investor with the right cultural fit, rather than jump at the first opportunity to let an idea mate the market. But then, there are several others who learn the truths of life the hard way. Short selling an opportunity is only the first among several things they end up losing. What even large entrepreneur-run companies that have been bought into, by even larger companies and investors, fail to realize, is that framing a fresh set of guidelines beyond a point of time is not practically possible. SOP cannot be changed in a day. Culture cannot be changed in a day. When you have bought into a company, please do not forget that you have not bought only the business but also the culture. You have not bought just the returns 62
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and the promise of returns, but also the means employed to get those returns. The services on offer can be toned down or fine-tuned to common objectives, but the way they are served to the market needs to be consistent. We see instances of large-scale disillusionment in the managements and senior workforce of organizations, where they have thrust change upon themselves in their quest to multiply the scale of operations. Yes, change is not entirely bad, and is inevitable, but it has to be managed. Not many corporate alliances foresee management of this change as a core common responsibility – one that could become a sore thumb in an entrepreneurial marriage if left unexplored. Unfortunately, divorces in an entrepreneurial marriage scenario can kill; and in many cases, a divorce is possible only if an alternative suitor is ready. What begs for attention in these corporate alliances is the individual-driven work culture that has been created over a period of time. When you walk into several organizations, you will readily look at a set of systems and processes, and even chaos in some cases, and say, “That smells of XYZ”. Does that mean entrepreneurial ventures are unprofessional? Not at all. You will find an individual’s management style tricking down to become the work culture even in the case of large corporations. And that would be more pronounced when the person driving that culture stays at the top for a long period of time. In the case of entrepreneurs, they have always been there, doing just that. So it is inevitable that they leave their stamp on the work culture. Because of this consistency at the top, the culture of an entrepreneurdriven organization is more or less consistent. But its ability to change is not in question – entrepreneurs being entrepreneurs, are flexible and are used to taking decisions faster. So why would
they not change? They simply need to buy into the idea that change can bring about better practices in the work place. They need to be convinced. The day an investor comes in, it is assumed that the investor will ‘take over’. While that is far from the truth, several investors do come with pre-determined mindsets of having to set the standards. Improving standards with mutual consent is one thing, setting the standards afresh is another. The truth is that entrepreneurs exist because of entrepreneurs within their organizations. This is not a New Year revelation but reality I have believed in, after waking up to this fact for several years now. To look through an entrepreneur’s crystal ball, you need to share that vision. But to truly add to his vision, you need to have your own crystal ball. Which is why an entrepreneur can only marry an investor with entrepreneurial vision. And that marriage is not a happy ending, but a beginning with infinite possibilities. To borrow from Kipling: If you can make one heap of all your winnings And risk it on one turn of pitchand-toss, And lose, and start again at your beginnings And never breathe a word about your loss The legendary poet ended the brilliant poem saying, ‘You’ll be a Man, my son.’ I think the lines apply to entrepreneurs too. If you can dream it and you can do it, you are an entrepreneur. Just make sure that you work with those with a vision that matches – be it your colleagues, associates or the angels that DAR E look over you. Anurag Batra is real life first generation entrepreneur who is Much Below Average (MBA) when he is not busy writing such columns and can be reached at anuragbatrayo@gmail.com. ed: Anurag is the founder of exchange4media.com.
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/ TiE ENTREPRENEURiAL interview
/ SUMMiT 2007, interview
TAJ PALACE, NEW DELHI
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tie/guru/interview sessions
Back to the roots
The Guru sessions at the TiE Summit benefited a fresh bunch of entrepreneurs with the knowledge coming right from experienced minds
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he TiE Summit held in New Delhi between December 11 and 13, 2007, was attended by some of the best-known names in government and the corporate sector, besides a whole new generation of entrepreneurs. One of the highlights of the event was a series of Guru sessions, held in a small noise-free room with successful entrepreneurs sharing their experiences with a bunch of fresh entrepreneurs. The result was a rich list of questionanswers flowing back and forth making the exercise fruitful for each participant. The ‘gurus’ at one such session were Sanjeev Bhikchandani, Co-founder and CEO, Info Edge, which runs naukri. com; Rohit Chand, who Co-founded IIS Infotech, and later
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sold it to Xansa; and Rehan yar Khan, Founder, Flora 2000. The session began on a Shakespearean quote from Chand. “There is a tide in the affairs of men. Which, taken at the flood, leads on to fortune.” “I always sought to apply this to my own life,” he said. This was followed by brief introduction by Chand, Khan and Bhikchandani about their entrepreneurial journeys. Bhikchandani moderated the session and opened the floor for questions. The first question was for Bhikchandani himself. “What were the difficulties you faced in the preliminary phase of naurki.com, in terms of advertising and awareness creation?” asked an inquisitive member of the audience.
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Bhikchandani said he made the most of the first mover advantage. “When we launched naukri, we were the only Indian website across all categories who were targeting Indians in India. All the other players were targeting overseas,” he said. Journalists, at that time, had begun writing about the Internet for Indian readers. And naukri.com was also been written about. So this helped Bhikchandani spread the word about his job website. Khan too said media was the best vehicle to piggyback on. “If you are early in any field, the media writes about you,” he said. One of the gurus mentioned the importance of developing a niche, “as it helps save media spend and you gain popularity.” The veterans said they betted big on
DARE.CO.IN media publicity, which is crucial for startups. Another question was about how to evaluate a business opportunity. Is it all about combination of a business idea and technology? Bhikchandani fielded the question by saying that a “if a business is solving a problem” and it is doing something different, it made sense Rohit Chand to put money there. This Co-founder, Xansa (formerly followed a series of other IIS Infotech) questions relating to diversification strategies, studying trends in overseas market and the criteria for mergers and acquisitions. On the question of studying the trends in the overseas market, Khan, whose company sells flowers in the overseas market, said “we deployed a very robust process, which included numerous visits to the overseas market. Sanjeev Bhikchandani You have to be close to your Co-founder and CEO, Info Edge target group.” He cited an example too “Say you are a manager in Hindustan Lever, and you have to sell a shampoo in the overseas market. So, it is a classic management kind of a problem. You have to connect to your target group,” he said. How much does it cost to set up a website? Khan fielded that too. “The cost of a software is a very small Rehan yar Khan component today. Setting Founder, Flora 2000 up a website is like opening a store on the backstreet. The challenge is how to get the customers there,” he said. Chand, who sold his startup firm, IIS Infotech to Xansa, was asked about the successful mergers and acquisitions. “Who to merge with is a lot to do with synergy,” he said. On the question of a dotcom vs a brick-and-mortar company, Bhikchandani tried to break the myth that starting a dotcom was very cheap. “Today when we say we’ll launch a website, we set aside a large sum of money. It is a lot more capital intensive today than it was some time back,” he said. He said a lot of money goes into advertising and marketing the website. Khan said a lot of “below the line” work is needed DAR E to be done to make a website a hit. JANUARY 2008 67
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tie/ /interview keynote She was the first woman police officer in India to become Inspector General of Prisons, when she was put in charge of Tihar to administering the predominantly male prison, the largest prison in the Asia-Pacific region. Her experience and expertise as a police officer include 26 years of tough yet responsive and interactive policing in different functions throughout India. Having earned the reputation of a police officer with a difference, she has represented India at the United Nations, in USA, European and Asian forums on drug abuse, drug trafficking, prison reform, and women's issues and also is a recipient of various awards and honours.
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hat does entrepreneurship mean for me as a government servant? Entrepreneurship means something that is entrepreneurial – innovative, courageous, bold, new, and breaking new grounds. Regretfully, this is not what is happening in the government sector yet. There may be some of it going on in the ministry of commerce, ministry of industry, ministry of overseas… but the drive I come from, the one that directly impacts you, it is not yet happening. While you may think law enforcement is becoming lucrative economically, it is yet to be. Look at the corruption in India – it is a matter of shame. I do not know how many of us really know where we rank, when it comes to world corruption index, do we? We are just at about thirty points in the index, and that is just in the entire South Asian region. The toppers are Denmark, Finland, Switzerland and the US, that is 70 plus. This should make us think about who is corrupting what? I think, with great respect, that the private sector has a hand in corruption. I do not know who or what areas in private sector. However, the fact is that if somebody is bringing corruption in to the government sector, then it not government that is corrupting the government. It is somebody outside the government. I want to leave this thought with the private sector. As a government entrepreneur, I have a revolutionary idea to regulate. I do not know what role can you play in getting it done, but I am just saying it for ideas’ sake. Because, to find out whether or not an idea can be enforced, one needs to share the idea. How do we make the bureaucrats, police officers, politicians, and the government, walk the streets every day? Why can’t we have a rule by which before they come into the office, they begin in the field? This would mean greater visibility, direct accessibility, great accountability, direct listening and direct observation. This means, seeing, listening and believing. To me, across the board when we have a decent management rule i.e. you begin with walking through the municipal corporations’ garbage. Imagine a police officer walking in the streets themselves and looking at the unauthorized constructions, which means directly meeting the people. Imagine, chief ministers traveling in the Blue Line buses. Imagine if this would happen across the board line range. It is just like CEOs and senior managers taking a walk around their offices. We do not have this system of CEO’s in government being entrepreneurial, which is walking the street, walking the talk… this to me, truly entrepreneurial. One other thing I would like to mention is that how is it possible for us to bring about a technological revolution, social revolution, and information revolution and a political technology revolution, as well. Simply put, our politics is obsolete, and so are our blocks. However, you do not have a say, you do not have the courage to say, and you are not united to say. You are driving information change, but not driving a government change. However, I want to ask you, are you in the position to drive that change? Because doing a green revolution alone is not enough, until you also have bureaucratic and DAR E political revolution. JANUARY 2008 69
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/interview He has been with Spice Jet from its very inception. He was the CEO in SpaceAge Internet Limited and has held various positions in the government. He is currently the Director of Cranes Software
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/interview hat challenges did you face while starting up a low-cost airline in the country?
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I think, firstly, the challenge was in fighting this mindset that first-generation entrepreneurs have no business being in a sector as serious as aviation. All the companies which were there were all well-established sort of businesses and we were told that “you guys just cannot do it." Secondly, we were told that this low-cost model is not going to work in India since fuel is expensive, airports are constrained, it’s only the rich who fly and hence, regular middle-class people can’t even think of flying. We were asked how we were going to change that mindset. Thirdly, how do you implement a model which asks for a lot of reservations on the internet? There are no computers, there are no internet connections, people don’t have credit cards; how will it all work? We, however, felt that people in India were itching for a change. For example, when they moved up from two-wheelers into Maruti cars, they moved up. Everybody wants to try and move up in life, say, from fixed line phones to cell-phones. People want to move from buses to trains and from trains to planes. They aspire to do that and we thought we could tap that aspiration by getting our fares down and that’s what we have seen has happened. People are deserting trains, getting onto planes. The market is growing at around 40% a year right now and there is no reason why more of that will not happen, because even after all this growth, there is only about 2% of our population that is flying today. So clearly, there is a long way to go. Indians are very resourceful. Once you give them a product that they want, they’ll find some way of getting it. They’ll find a way of getting your ticket if they don’t have a credit card, they’ll just borrow one and use it. So, you give people the right product, you make it so that low cost is not equated with cheap and people will use your service.
With increased competition from similar low-cost airlines in the future, won’t there be a need for innovation in the business model? Absolutely! I think with increasing competition, there will be consolidation because we have seen some of that happen already. We have seen Deccan consolidate with Kingfisher, we have seen JetLite which was Sahara consolidated with Jet Airways; so we will see more of that happen. Certainly, the person who has the lowest cost and the best service is going to win. Across the world, LCC (Low Cost Carriers) which have survived are the ones that have managed to keep the lowest unit cost and that is what we are attempting to do. Many of our competitors are low-fares ones but not particularly low cost. So, we are trying to stick to that low-cost model and trying to ensure that low cost is not equated to cheap. It’s like McDonald's, which is sort of low-cost but is not cheap; people are not ashamed to go to McDonald’s. You’d usually find people who travel in a low-cost airline, tear off the slip once they get down. We said, see people have got to be happy flying your airline, they cannot be ashamed of
DARE.CO.IN it. That’s what we attempted to achieve at Spice Jet. So, you need to keep your flights flying on time, make sure that the look and feel of your product is good and that your fares are reasonable.
For a new entrepreneur trying to get into this business, there are lots of regulatory issues. So, has the fact that you have held various government positions in the past helped you? Certainly. You understand the system better; there is no question about it. There is a lot of regulation. As the market is growing, the government is becoming savvier. Regulations are going down but you still need to understand the system. You save a lot of time and a lot of pain if you understand the system, and having been in government for four or five years, that certainly was an advantage.
How do you see the downstream opportunities arising from this sector? There will be several downstream opportunities like training and setting up schools, cross selling opportunities, opportunities in the hotel space, packages combining ticket sale, etc. We have done some of those, and quite a few of them have been extremely successful. Some of them have not been as successful but we think there are plenty of opportunities. In fact, a large part of the revenue in the future is going to come from this ancillary sector, other such downstream businesses and so on.
How do you see the future of the regional airlines coming up? We think they have a very bright future because regional airlines always help the business of mainstream airlines. These regional airlines actually take people from small destinations and take them to larger destinations from where low-cost airlines like SpiceJet fly them. Such small airports need to be connected, small destinations need to be connected. Regional airlines have a very bright future if they keep financial discipline.
How do you see the sector evolving in the future? Well, firstly, I think the market is going to be dominated by low-cost carriers because only about 1.5 or 2% of the population is flying right now. So, clearly many more Indians will fly as they become richer. As the economy does well, as people become richer, more and more people will fly. So, you will see a very large number of people who actually start to fly because there is a huge time-advantage to flying. There is an aspirational quality to travel, so people will fly and we see certainly that the infrastructure will improve with airports like those at Delhi and Mumbai getting privatized. New airports at Bangalore and at Hyderabad have been created and with more and more investment going into infrastructure, certainly airports across the country should improve and, hopefully we will see that happen soon. Being able to fly is such an empowering thing. We DAR E think that it’s that and much more. JANUARY 2008 71
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/interview Sanjna Kapoor is one of Indiaâ&#x20AC;&#x2122;s leading theatre personalities. In her years at Prithvi Theatre, she has initiated a number of activities including childrenâ&#x20AC;&#x2122;s workshops. She is currently working towards an allIndia theatre alliance, based on the practical sharing of resources and ideas
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heatre is not commercially viable in India. In what way can entrepreneurial spirit be injected into theatre?
There are different kinds of theatre in this country. You have folk theatre, traditional theatre, and commercial theatre. So you have a vast amount of theatre that is professional, that is financially viable, that people do. However, if we are talking about urban, so-called contemporary theatre or experimental theatre, it is where we fall into a great problem. I think the basic need for that is definitely opportunities of performance, so you need to create those. As a producer, you need opportunities of performance, you need to have space where you can perform, and our government’s biggest problem is that they are not really looking at creating those spaces. Like, there is no scheme to fund or support Prithvi Theatre, they have no scheme to support an independent theatre space. Our government doesn’t seem to be looking at creating an audience. In Germany or in various countries in the world, it is mandatory for schools to take their children to the theatre. Like they go to the fire station or the Coca-Cola factory or the ice- cream factory, they go to theatre. In Israel, it is mandatory for business houses to buy around 500 theatre tickets a year or 200 theatre tickets a year and they give them to their employees. This way you are building an audience; we have to basically understand that we have to build a theatre community and an audience.
You are passionate about circus. Is there a role for an entrepreneur for reviving it? I am passionate about it, though I haven’t done enough work. There is a good community of circus producers. There are about 32 circus companies that have formed this group. Ironically, circus doesn’t fall within culture; it falls within sports, in Ministry of Sports. You need to have training centers and also an exchange with circuses abroad, like those in France, Canada, Germany, and China. I am sure, there are circus schools, which are of the highest quality where you have incredible engagements and have the world’s leading dance choreographers working with acrobats, creating the most magical piece of theatre. What I dream of is to have traveling circus in India, which goes from one place to another every five years. You would have a huge maidan which has five or ten tents and the performances would last throughout the day. We have circus performers who are treated lowest of the low in our strata of society. After the animals were taken out of circus, which I don’t think is a bad thing,
DARE.CO.IN their lot is even worse today. We need to give them prestige, we need to give them respect, and we need to say that your skills are tremendous. Recently, I went to see a Russian circus, and it was fantastic. Then you have the Bombay Circus taking over, and clearly they have fantastic skills but lack the presentation ability. These things need to be taught, exchanged and promoted.
Do you think it would be commercially viable in the long run? Absolutely. Look at our tradition, look at the circus performance on the streets! Unfortunately, the guys who do it are beggars at the signals and it is amazing what they do. If you are just able to pick them and say let’s give you space and let’s give you value, and allow you to use your art and your skills to get a better livelihood and to engage in society at a certain level.
Tell us something about the All India Theatre Alliance that you are working on. What is the purpose behind it? Initially, the purpose was to explore the various themes and policies that have governed theatre or the theatre has provided in spite of. So it was to initiate to firstly educate ourselves to understand. As we know, we have so many different structures in our policy, we have center stage and then local and within those structures, within those systems what structures are in place and how theatre has survived. There is no way you can have one blanket system of policy making or thinking because its so different and varied. I am ready to meet with and dialogue with theatre practitioners of the country. Its not an academic exercise. There are some components, which need to be academic just in terms of correcting data or generating information. A website will up very soon, hopefully we will avail various languages to access it. It has to be a living entity that the theatre community feeds and needs and Prithvi is dedicated to keeping it alive for three years and hopefully after that as well, but we would like it to take it off on its own. There is a core group of six of us. Some of us continue to actually manage and run it and we have had four meetings so far. We have another one in March, in a place called Ninasam, which is one of the leading theatre institutions in the country. Prithvi Theatre is doing the most amazing work in taking and developing theatre in rural Karnataka. The creator of that space got the Magsaysay award, which he duly deserved. Unfortunately, he is no more, he passed away few years ago, but it is an inspirational place. It is a place I wish all business DAR E entrepreneurs go to. JANUARY 2008 73
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society/crafts
Dhokra was a dying art even where it had originated. It took just one man like Subhash Arora, an urbanite, to redefine it
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f you are a regular visitor to any arts and crafts fair or if you are a connoisseur of traditional arts, chances are that you would have come across grotesque imagery of man and beast cast in metal, like the ones shown on this page. Dhokra, as this tribal craft form from Orissa is called, has its origins amongst the Dhokra Damar tribes that extend from Bihar to West Bengal, Orissa and even parts of Madhya Pradesh. Been practiced for over 4000 years now, it is one of the oldest traditional metal casting techniques in India. However, due to the craftsmen’s inexperience in marketing and their wretched economic condition, Dhokra as an art form has remained static. It is unlikely to find a non-tribal, born and brought up in Delhi to even have heard of Dhokra casting. But such is the story of Subhash Arora, a Dhokra craftsman who has been in the business for almost three decades now. At eighteen, he was just like any other regular teenager, studying commerce
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in Delhi. But now, at the age of fortyeight, he is not only a full-time Dhokra craftsman, but also a National Award winner. “I had a keen interest in craft and used to enroll myself in clay modeling and various other creative programs from the National Bal Bhavan, whenever I had the time,” he says. At the age of twenty, however, Subhash realized that craft was more than just a hobby for him. It was his passion. It was at that moment that Subhash decided to go all the way to pursue his dream. “I was learning about Dhokra casting at that time and just decided to pack my bags, to live amongst the tribal community in the district of Bastar in Chhattisgarh. Having lived in New Delhi all my life, my family and friends thought I wouldn’t last a day there. But
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I did, for four years,” he says with a gleam in his eyes. It took four long years for Subhash to master this technique and create many figures like masks, animals, gods, and other motifs depicting tribal life, in the process. But that is not to say that he did not face any problems. “Living in a forest amongst the tribals, who don’t speak your language was difficult. Also, initially, many were not open to the idea of teaching me, a foreigner, their skill, which had been passed on to them for generations. After a lot of perseverance, I managed to convince one tribal to guide me through the process,” he says. Even so, after learning the process thoroughly, when he returned to Delhi, life was a struggle. For the next couple of years, Subhash was making
The Dhokra Method The craftsmen use the lost wax technique to bring their imagination to life. Coarse clay is first used to shape the product, and then hardened by heating it. Then a mixture is made out of beeswax, mustard oil and dhuna (the resin from the tree Damara Orientalis). This mixture is then drawn into thin strips, and is carved into a design (e.g. snake, leaf) and wrapped around the artifact (i.e. a mask, a statue, and such). The model is then coated with a thin layer of wet clay, causing the wax to make an impression on the clay. The layer is then dried in the sun and more layers of clay are added. A mold is now ready and a clay funnel is added for the molten metal (brass) to flow inside. As the mold is heated, the wax melts away, leaving behind a cavity. The figure is then heated in a furnace. The cavity filled with molten metal is left to cool, after which the clay mold is broken, and the piece taken out for cleaning, polishing and other finishing touches.
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“Living in a forest amongst the tribals, who don’t speak your language was difficult. Also, initially, many were not open to the idea of teaching me, a foreigner, their skill, which had been passed on to them for generations. After a lot of perseverance, I managed to convince one tribal to guide me through the process.” SUBHASH ARORA artifacts, but he wasn’t very successful in selling them. “I used to constantly ponder upon what I was doing wrong and what I could do to make people interested in buying my work. I realized that merely imitating tribal craft was not going to fetch me anything. I realized that things had to change.” “My true inspiration came from when I first saw a piece of Dhokra craft from Orissa. The piece was disfigured, the features were exaggerated and it was all very grotesque. That is when it dawned upon me that
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art was not only about detailing and finishing. It was also about being innovative. Luckily for me, I had it in me,” he says. Subhash started working from a basement in Lajpat Nagar, a business hub in New Delhi, where he would spend many sleepless nights pondering over unique designs for his work. “Since the basement wasn’t equipped for such craft making, I used to make sketches and send them back to Chhattisgarh, and have some of the tribal craftsmen make it
and send it back to me,” he says. It was extremely challenging for him, as the craftsmen could not deliver the piece as he had imagined. Also, it was hard for him to track the pieces and a lot of times his designs were imitated and sold to others. “I did not let all this dishearten me though, as I too, was once just an imitator,” he remarks. His business started picking up in 1990 and in 1993 he was even awarded the National Award by the Ministry of Textiles for his “craftsmanship and contribution to the development of Dhokra craft." Some of his own unique designs, like a very long nosed Ganesh, a long and flat backed horse with several riders and elephants with hunch backs are being imitated by Dhokra craftsmen everywhere. Even as we spoke to him, he was conceptualizing a mask that would have lizards as eyebrows and a snake as the nose. As he puts it “I like to leave my own personal and unique touch in everything I make.” Subhash’s crafts are bought by wholesalers and sold in cities like Delhi, Mumbai and Bangalore and are even exported to European countries. His work can also be found in the National Museum of India, Cottage emporium and in Dilli Haat, with prices ranging anywhere from between Rs 25 to Rs 60,000. Just about two years ago, Subhash moved to Faridabad and now has his own workshop there, where he has hired about twelve workers, including five tribal craftsmen from Chhattisgarh. He claims to make around 20 pieces per day. “They have the hand to create, whereas I have the head to visualize and guide them. Together we make a great team,” he says in reference to the tribal craftsmen. If Dhokra is dying as an art form, how has it affected his business? “There are many people who have an eye for art and appreciate it, so if you are unsuccessful, the onus lies on you. You have to understand your customers and give them something unique. If you have this basic understanding and loads of passion towards your work, nothing can stop you from scalDAR E ing great heights.”
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opportunity/wedding planning
Planning someone's big day The demand for wedding planners is on the rise, and there is a dearth of major players in this industry /Vimarsh Bajpai
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M
arriages are made in heaven but organized on earth. And when it comes to Indian marriages, the arrangements are even more elaborate. Weddings in India represent the most diverse confluence of culture, rooted deeply in regional traditions and customs. As various ceremonies take place before and after the big day, it becomes cumbersome to manage everything from food to decoration while making the guests feel comfortable. Marriages, particularly in north India, are even more elaborate and detail oriented. No wonder then, both sides are left exasperated during the entire ceremony, while doing everything they can to make the event a success. This paves way for a wedding planner to
enter the scene and play the role of a professional event manager. Take the case of Jai Raj Gupta, CEO, Shaadionline. This IIM graduate with a technology background sensed the big opportunity in this space and made foray into the business in the year 2000. “People spend a lot of money on their weddings but they don’t have the time. So we felt that why not provide the service which they deserve,” says Gupta. Thus, Gupta, along with two others, started Shaadionline initially as a portal. Later, they grew it into brick and mortar business.
The Market The Indian wedding market is just getting bigger. It includes everything
from clothes to jewellery to decoration and catering. “The size of the Indian wedding market is estimated at anywhere between Rs 55,000 crore and Rs 60,000 crore. The market is growing at about 15%,” says Pavas Bhatia, Associate Director, KSA Technopak. As income levels for both service and business class touch new highs every year, coupled with major time constraints, the market for wedding planners is set to boom. According to Bhatia, the wedding planning industry would grow at 23-30%. “The size of the wedding planning market could be about 2.5-5% of the wedding market,” says Gupta. “The industry is primarily driven by increasing affluence, and aspiraJANUARY 2008 79
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tions among consumers. Also the desire for unique, elaborate-well-arranged events without hassles coupled with the capability to pay for wedding planners, is driving the market northwards,” Bhatia says. Some estimates put the size of the wedding planning industry at $10 billion. “Say if there are 20,000 weddings on a given day, then only 2,000 weddings are relevant to a wedding planner. Out of these 2,000, only about 10% are planned by wedding planners,” says Gupta.
The Business Despite the fact that wedding is a big family affair, and most people prefer to keep it that way, things are slowly beginning to change. Today’s fast and materialistic life leaves little time for working out the details of an elaborate wedding. This makes the business click. The wedding planning business is like an umbrella of many other businesses such as catering, travel and tour and decoration. Agrees well know wedding designer Viraf Pocha. “Three
major expenses include logistics, catering and decoration,” he says. Getting people flown in to the venue, incurs the largest cost. This is true more in the case of destination weddings, for which Goa, Rajasthan, Malaysia and Thailand are the favourites. The expense rises even further in the case of multi-location weddings. When it comes to decoration, it is the multi-theme weddings that take the cake. Usually they are a mix of ethnic or contemporary or international theme. Each project works in three stages.
“Say if there are 20,000 weddings on a given day, then only 2,000 weddings are relevant to a wedding planner. Out of these 2,000, only about 10% are planned by wedding planners.” — JAI RAJ GUPTA, CEO, SHAADIONLINE 80
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Courtesy: Shaadionline.com
opportunity/wedding planning
These include planning, coordination and implementation. Planning involves a lot of paperwork, jotting down the layout to the minutest detail. In some cases, says Gupta, this may run into 400 pages. The next stage is coordination. This involves discussing the project with the client, and including their feedback and inputs. This is where trust and understanding comes into play. Implementation is the toughest part. It requires being at venue and ensuing that all arrangements are up to the mark. What about celebrity weddings? For them, “weddings are designed to make a statement,” says Pocha. Celebrities also look for sponsors for their weddings, which could be a media organization that bags exclusive rights of the event. “The best part of this industry is that it is not affected by inflation and deflation. No matter what the situation,
everyone has to marry. Neither will the number of weddings change nor will the expenditure change,” say Gupta. But are customers happy about taking the services of wedding planners? This is what Adesh Gupta, MD, Liberty Shoes had to say. He got the wedding of his daugthter organized through shaadionline in July this year. “It was a wonderful experience and the wedding planners made a big difference to the wedding. They rid us of the hassle of working with vendors and, of course, introduced new ideas and made the whole experience pleasant,” he says. The wedding was attended by 3,000 guests.
The Challenges The biggest challenge is to fight the perception that getting the wedding organized through a wedding planner costs the earth, although celebrity weddings cost a lot.
This is also because of the dearth of players in the market. “There are not too many players in the market. I’ll be very happy if I go to a client and he tells me that he knows what wedding planning is and how could I offer services better that the other players,” says Gupta. Creating a good relationship with the client can help you go a long way. Some big corporate families prefer to stay with the same planner throughout because the wedding planner would know everyone in the family. Such wedding planners take the role of a family friend. “Wedding planners in the US and India meet completely different needs,” says Pocha. Like in any other business, getting the right people on board is not easy. As there are no schools to teach the tricks of the trade, most people learn on the job. It may even take a year to become a DAR E good wedding planner. JANUARY 2008 81
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funding/strategy
Raman Roy Indian Angel Network Better known as the father of the Indian BPO industry, Raman Roy has successfully led the BPO initiatives of American Express, GE (now Genpact) and Spectramind (now Wipro BPO), before starting Quatrro in mid-2006. Quatrro focuses on high-end BPO services, with a mix of incubation and acquisition-led strategies. He is also an angel investor who funds and mentors the new wave of Indian startups. We spoke to him about his role as an angel investor. 82
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funding/strategy
W
hat do you look for in a promoter before investing in his venture? Passion! I look for the promoter’s passion. See all investors look at things very differently. Usually, entrepreneurs looking for investments send their presentations saying this is what we plan to do. There are people in the angel networks who go through those presentations and decide what looks good and also mention the parts that need tweaking, and so on. What does a person like me do? I say, “Call in the promoter; I want to meet him in person.” In my view, anyone can make a presentation; it is only a passionate entrepreneur who can pull it off even without a presentation. If you ask Parikshit Jain (promoter of Vienova Technologies, in which Roy has invested recently), he would laugh at the thought of the first meeting he had with me. For me, Parikshit and his management team are most important. Even if he is unable to come up with great ideas, we will guide him. However, if he is not the kind of person who would be able to actualize those, that is a different story. Parikshit says, “We do not give wrong numbers, wrong data on anything.” That is his ethics. That is the kind of person we want to work with. I should not be second-guessing on the reports he sends me to filter out facts. To me, the quality of the management is also very important. See, there are some great people with whom I say I cannot work, because I know they just will not listen to me.
on a particular issue, for which I fix up a meeting with him as soon as possible. What if things go bad, do you get involved operationally? Our job is not to run the company. It will scare away the entrepreneur. However, if things go bad, we analyze as to why they went bad, and help the entrepreneur rectify it. Like in a game of cricket, if a bowler doesn't bowl well, it does not mean that the umpire will take the ball and starts bowling. It is far simple to say, it is a no ball. If his foot overstepped the line, it is my job to say it should not overstep. Our job is recommendatory and advisory. Our job is not to start doing it. It is physically impossible. How do you decide on a timeline in which you would want to exit? How do you measure returns? It happens on its own. It is not rocket science. It is not as though I say some mantra and we get ready for exit. Someone approaches and shows interests in buying off the company, I say, “Okay, let us talk.” Or at times when we are not ready to sell right then, we say maybe in a year we will be ready. The interested party might just participate until we get ready, by buying say 20%-30% of the company’s share. There are times when someone approaches and expresses his interest in the company, but only if the company agrees to follow a certain route. If the entrepreneur does not like the idea, we say that the investee is not interested in this model.
investor of the month Hence, our ability to work, with the management team is also very important. What are the typical mistakes that entrepreneurs commit when seeking investments? Some entrepreneurs behave as though they know it all. If they knew it all, they would not need angel funding. They would have succeeded without it. In addition, some entrepreneurs do not work on building good teams. Individuals cannot do it all on their own. Whether it is Bill Gates, Jack Welch, or NR Narayanamurthy, or Azim Premji, all the people who have been successful have had great teams. Building a great team is a critical component of being successful. What is your level of involvement in an investee company? I put my own money into this venture! As yet, I have not taken a seat in the board of any company that I have invested in. Simply because I do not have the time that is required to participate in managerial decisions. However, we do a lot of internal reviews of all the companies in which I have invested in. I participate in those. Apart from this, entrepreneurs do reach out for help in person or on the phone. One of them would call up and say he needs advise
In Quatrro, we have an acquisition-led model. We like a company, we go and talk to the entrepreneur, and express our interest in acquiring the company. At times they turn down our offer, many times they agree to discuss. Fortunately for us, if it is a company in the BPO industry, people are always willing to talk. As for measuring the returns, it is very simple. If I put in these many lacs of rupees, and these many lacs is what I am getting, in this much time, what is the return? If one invests in stock market, how does he measure returns? It is simple, what is the kind of money you put in, what is the kind of money coming out of it. What are the areas of conflicts with the investor that an entrepreneur should be aware of? Conflicts can happen on anything. It could be on ego, it could be on marketing strategy, and it could be on investment and how you do things… the point is to understand what the goals are. See it is like this, conflicts can happen with anyone sitting anywhere, for any reason. So are there any standard areas in which conflicts happen? Exit could be probably one. However, once you understand the goals, the DAR E conflicts are minimized. JANUARY 2008 83
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issues/intrapreneurship
Where the mind is without fear
Intrapreneurship helps both the employee and the employer unlock their hidden potential and take the innovation route /Vimarsh Bajpai
A
re you planning to quit your job to realize your dream of becoming an entrepreneur? Think again. You may get the “freedom” to hone your entrepreneurial skills within your workplace itself. As Indian companies across sectors devise new strategies to compete in the global marketplace, they are learning the importance of retaining their best brains at any cost. They are tapping, like never before, into the most valu-
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able resource at their disposal – the idea bank of their best employees. Not only this, big businesses are taking to 'decentralization' in a big way, slicing their behemoth operations into small units, each run independently by the new-age manager – the intrapreneur. Management consultant Gifford Pinchot coined the word ‘intrapreneur’ back in 1978. He later dealt at length on the subject in his bestselling book, Intrapreneuring: Why You Don’t
Have to Leave the Corporation to Become an Entrepreneur. Pinchot elaborated on the importance of freedom to think and act within a corporation. He also showed how companies could stay on the leading edge by fostering intrapreneurship at all levels of corporate hierarchy. “Dynamic and competitive business environments of modern organizations are increasingly pressurizing them to become more receptive
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issues/intrapreneurship DARE/who is an intrapreneur? 1. (S)he loves the freedom to think beyond the obvious 2. (S)he adopts unconventional routes to process functioning 3. (S)he speaks his mind 4. (S)he builds or runs the business as his own 5. (S)he is a risk-taker 6. (S)he tries to kill bureaucracy 7. (S)he lacks the fear of failure 8. (S)he is a team player 9. (S)he thrives on innovation 10. (S)he is a self-motivator
to novel ideas, approaches and attitudes,” says Ganesh Natarajan, Deputy Chairman and Managing Director, Zensar Technologies.
The intrapreneurial genome The twin efforts on the idea and responsibility front are bearing fruits. Letting their employees air freely even their wildest thoughts are turning shop floors into fertile grounds for innovation. At the same time, giving intrapreneurs a free hand in running business units equals to quenching their desire of having their own startups. Agrees Natarajan. “The fact that rapid and cost-effective innovations are the only source of gaining and sustaining competitive advantage is ensuring that large organizations move towards encouraging intrapreneurship amongst their employees,” he says. Many of Zensar’s innovative ideas have been born out of its intrapreneurship efforts that have found their way into successful scaling up and commercialization. Zensar’s Solution BluePrint (SBP), a unique framework
that automates the software engineering process, began as an effort of some individuals. SimiTalent Transformation and Intrapreneurship Delarly, “Google has an velopment, the training wing at HCL, has initiated intranet where every employee can post a number of organizationally strategic programs their ideas. Toyota that help employees at every level to get opporgets a million ideas tunities to discover and explore the intrepreneur a year from its rank within them. and its file workers. A manager has to manIGen and Value Creation Portal: Employees are age them from his encouraged to come forward with implementable heart. They don’t care ideas that would add value to the engagements how much you know, that they are working for. until they know how The Eagles Program: Aimed at grooming high permuch you care about them,” says Robert B formance managers, who would be the torchbearTucker, President, ers of intrapreneurship in the organization. The Innovation Re“Employees are the assets at HCL and there is a source. constant quest to promote an intrapreneurial Take the example culture that fosters creativity and innovation, of Vineet Nayar, CEO, encourages proactive and collaborative behavior HCL Technologies. that ultimately increases the level of engagement Nayar began his caof our employees,” says Anand Pillai, Vice President reer with the tech & Global Head- Talent Transformation & Intrapremajor in 1985. Shiv neurship Development, HCL Technologies. Nadar, the then President of HCL Tech took note of Nayar’s “leadership skills and provided him an opportunity to sat- in true intrapreneurial spirit. Many inisfy his entrepreneurial quest within trapreneurs move out of their mentor the organization.” In 1992, Nayar set organizations to start their own busiup HCL Comnet, a 100% subsidiary of nesses after gaining invaluable skills at HCL that dealt in remote infrastruc- running key operations. Free flow of ideas is the essence of ture management and allied services. There are many such examples, both intrapreneurship. Companies play the at the global and national level. It is role of mini-incubators – testing ideas, widely believed that Jack Welch, the doing feasibility studies, and providlegendary chairman of General Elec- ing unequivocal support in converting tric, built the company’s engineering the thought process into new products plastics business as his own company, or services. “It is the process by which
HCL Technologies
“Companies need to ask people to be creative, and praise employees who try things differently, irrespective of the outcome.” — ROBERT B TUCKER PRESIDENT, THE INNOVATION RESOURCE JANUARY 2008 85
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the same, the levels and style of freedom may vary for different verticals. “In the context of the BPO industry, intrapreVision Community: A voluntary participative neurship separates the men from the forum of motivated individuals with capaboys,” says Ranjit bility and commitment to contribute to the Pisharoty, Senior VP (Global Techorganization. nology, Transitions & Strategic ProInnovation Forum: Associates are encouraged grams), Sutherland to think innovatively and are supported by the Global Services. “It management at all levels. is the spirit of ownership, innovation “Many of Zensar’s innovative ideas have and ‘value release’, brought about by the been born out of its intrapreneurship efforts creative engagement that have found their way into successful of individuals and scaling up and commercialization,” says Ganesh teams that drives excellence in serNatarajan, Deputy Chairman and MD, vice delivery, leadZensar Technologies. ing to breakthrough growth,” he says. Intrapreneurship can thrive in public sector compaan individual or a team in an existing nies as well. In fact, many employees organization pursues new ideas and in public sector companies move off opportunities that results in new busi- the conveyor belt to operate indepennesses/revenue streams for the orga- dently. It is just that they have to push nization or significantly improves the a little harder, as Indian bureaucracy is quality or reduces the cost of its prod- a tough nut to crack. Delhi Metro Manucts or services,” says K Kumar, Profes- aging Director E Sreedharan is a case in point. He can be called a publicsor at IIM Bangalore. Despite the impression that intra- sector intrapreneur. Leading from the preneurship works only in IT compa- front, Sreedharan has built Delhi Metnies, which run fast on the innovation ro with his efforts. He has ensured that treadmill, it is not so. Companies from clearances from various government sectors as diverse as BPO, banking, departments come flying. He also profoods, pharma, electronics and auto motes the culture of “autonomous” are upbeat on the benefits on intra- functioning within the organization, preneurship. While the goals remain and delegates responsibilities to op-
Zensar Technologies
DARE/how to foster intrapreneurship? Decentralize: The key to efficient management and quick decision-making lies in allocating responsibilities to team leaders and section heads. Autonomy is the key. Create a culture: It is for the top management to make intrapreneurship an inalienable part of the company’s work culture. Trickle-down effect: It’s a top-down approach. Intrapreneurship practices percolate down the corporate hierarchy. Time to think: Your employees’ mind is a valuable resource. Give them time to think fresh thoughts. Freedom of expression: Lend ears to your employees. Let them express their ideas through various channels, such as forums, idea boards, etc. Reward out-of-the-box ideas: Even applause on the shop floor may be enough to send the message out that great ideas are welcome. Motivate risk-takers: Those who have the courage to implement novel ideas, even if they sometimes go wrong, should be praised for their entrepreneurial pursuit. Do not discriminate: A good idea can come from anyone within the corporate hierarchy. Don’t classify ideas as good or bad based on the persons it come from. Promote innovation: Be it products or services, help employees devise new ways of innovation. Though not all innovations are good, each one is a learning experience. Supply resources: Provide financial, technical and motivational support to those with the entrepreneurial gene. Most of them will value the support they get.
erational heads. More than anything, it is the strong willpower that separates an intrapreneur from an ordinary employee.
Importance of intrapreneurship Encouraging employees to think creative and out-of-the-box can give companies access to a rich idea bank. Agrees Tucker. “The curiosity of the younger lot is a great asset to the
“At the apex level, a CEO can attempt to instill an entrepreneurial mindset and push for continuous generation and pursuit of innovative ideas within the organization.” — K KUMAR, PROFESSOR, IIM-BANGALORE 86
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issues/intrapreneurship organization. Also, research shows you need to have lot of ideas to have a breakthrough idea,” he says. So companies are now lending their ears to what their employees have to say about the business models, products and services. “As organizations grow to larger sizes, it becomes important to shift from single leadership to shared leadership at the top and creation of leadership across the hierarchy. The value creation then starts to happen at every level and at a much faster pace,” says Ajay Soni, Business Leader, Hewitt Associates. But do remember, it is not a oneway street. Intrapreneurship benefits both the employer and the employee. While it gives the employer a chance to get a sneak preview of the employee’s thought process, it gives the latter the confidence to share even his wildest thoughts, which may bear the seeds of a big business idea. “For the employer (read companies and organizations), the winning business ideas of the future are in the minds of the employees, and intrapreneurship is the process through which the organizations can uncover and nurture these ides to the benefit of the organization,” says Kumar. For the employee, intrapreneurship is “the most potent learning process” that challenges their knowledge, creativity and entrepreneurial skill – all of which are vital for their survival in a knowledge economy, he adds. Take, for example, the foundation of the Testing Practice at Zensar, which Natarajan calls “one of the most significant business opportunities, both in terms of the market and the organization.” The Practice, which commenced
with merely ten resources, is today one of the major Practices with over 300 resources. It is a result I-model (Intrapreneurship model): This helps of several debates individuals “take unfettered business decisions” and deliberations of and celebrates “work-place innovation". The "global young individuals operations dashboard" is drilled to the lowest levels and the management at the Vision Commuin the organization, linking the parameters seen by nity, a voluntary parindividuals to their success factors. This has helped ticipative forum of associates, team leaders, managers and the senior motivated individuleadership to march to a common drum beat with als with capability no room for ambiguity or surprises. and commitment to contribute to the or“This has helped individuals come up with small ganization. and large projects for dramatic performance According to improvement and customer experience Hewitt’s Best Employenhancement,” says Pisharoty, Senior Vice ers Research 2007, President, Global Technology, Transitions & some of the compaStrategic Programs, Sutherland Global Services. nies that have very The company was recently awarded the PCMM strong visioning prolevel 5 certification, the first pure-play BPO cesses are seeped in the belief that entrecompany to get this honor in the world. preneurship can exist across all levels within the organization. The process enables the young talent of the organiza- Fostering intrapreneurship tion to create the next 10-year vision for Building an environment that fosters the company. The top leadership then intrapreneurship is an ongoing spends time with the teams to identify process. It has to find place in the the most exciting opportunities. Hewitt culture of the company and has to predicts that innovation and entrepre- be driven from the top management neurship will be one of the biggest dif- level. Intrapreneurship thrives on ferentiators in the marketplace. rewarding risk-taking behavior and Intrapreneurship is also been used motivating out-of-the-box ideas. as an important employee retention When driven from the top, it seeps tool by many companies. Some of through set processes at all levels them have already devised programs to reach those at the bottom of the aimed at giving “more autonomy” to hierarchy. “An overall change in their employees while others are work- mindset and culture is needed, where ing on setting up “think forums” to tap every associate of the firm knows into their employees’ mindshare. that there will be no punishment for
Sutherland Global Services
“Companies are increasingly looking towards their intrapreneurs to take them beyond competition to create new businesses in new markets.” — GANESH NATARAJAN DEPUTY CHAIRMAN & MANAGING DIRECTOR, ZENSAR TECHNOLOGIES JANUARY 2008 87
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“There is a need to have a structured program for workplace innovation with the appropriate, solid rewards and recognition program.” — RANJIT PISHAROTY SR. VP, SUTHERLAND GLOBAL SERVICES experimentation and ample rewards for success,” says Natarajan. Startups stand a good chance of creating the intrapreneurial culture right from the beginning. Entrapreneurs are more likely to value “free flow of ideas” and “autonomous” thought process, and thus make it a part and parcel of their business operations.
At the business level, says Kumar, a technologist or a manager can doggedly pursue a technology/innovationled product idea or a perceived insight about a market opportunity to its logical end in terms of generating a business/revenue stream within the organization. According to Tucker, companies need to ask people to be creative, and praise employees who try things differently, irrespective of the outcome. “I urge SPARK (Systematic Pooling, Analyzing and Remanagers to stroke their chins and ask searching Knowledge): Facilitates organization-wide their teams if there involvement in innovative idea generation leading to is a better way to do new products, solutions and service offerings. The what they are doing, SPARK framework manages various stages from genor a third option that eration through evaluation and culminates in the might be considrealization of a potential ‘Idea’. The “Ideas” received ered. Most managers through SPARK, are then processed through a multinever ask this quesstage validation process that establishes the feasibiltion, or they ask it ity and need of the proposed offering. in a confrontational manner,” he says. Business Analysis and Incubation Cell: Tracks techIs intrapreneurnology updates, changes in governing laws and reguship only an academlations, competitor offerings, as well as academic afic exercise for many filiations that give insights on the expected business Indian companies? and IT scenario changes. Once an Idea is selected, Is it characterized the Incubation Cell develops the offering with supby the ideas pushed porting methodologies, tools, white papers and exdown from the top? pertise. The solution is test marketed, and a small “Yes,” says Kumar. customer base is built before releasing it to the main“There are instances stream market. of new business lines
Patni Computer Systems
“This benefits the organization, and the employee gets recognized for his/her contribution and their ability to make a difference that is realized,” says Kalpana Jaishankar, VP, HR operations and people development, Patni.
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being developed under existing organizations, but my impression is that not many of them are ideas generated at the trenches – a la ‘Post It’,” he says.
According to Pisharoty, the first covenant for fostering intrapreneurship in an organization is a roll-down process for important operational information dissemination. This drives ownership down to all levels. The next important step is training the employees on interpretation of the information, allowing individuals and leaders to take ownership and tweak the knobs. “This leads to creative and innovative ideation and execution where results are seen in real-time,” he says.
Intrapreneurship and innovation The link between intrapreneurship and innovation is inalienable. If the former leads to generation of ideas, the latter gives those ideas a concrete shape. So much is the importance of ideas that Tucker goes to the extent of saying that “a company is a result of its ideas.” Intrapreneurship can be seen as the first step to innovation. “If you see creative ideas as the foundation of innovation, intrapreneurship is the process by which the superstructure is built so that the result is the innovation that is real and visible. In an organizational context, ideas become innovations (in business, processes etc) only through intrapreneurship,” says Kumar. Thus, to create a culture of innovation, a company should first create a culture of intrapreneurship. “Behaviour that gets rewarded gets repeated. So your managers need to reward people who are taking risks, people who are experimenting with ideas, people who are being creative and are attempting to do things better. When you reward such behaviour you are sure to create a culture of innovation,” DAR E says Tucker.
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grow/mentoring
Find yourself a mentor The difference between a successful and a not-so-successful startup might just be the right advice at the right time! That’s why you need a mentor /Arunjana Das
S
iddharth Shastri, an auto-technopreneur, had everything going for him well, until a specific R&D problem became his stumbling block. He approached his brother who’s employed in a German robotics startup; a few sessions with him, a few microcontrollers and Siddharth’s problem was resolved. Siddharth’s brother is not part of the team, but Siddharth likes to pick his brains regularly for any tech-advice. Although Siddharth’s idea is yet at the concept stage, or rather stage 0, with the new-found accelerated progress, he’s sure that stage 1 isn’t far off.
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This is an instance on a very micro scale of what mentoring means to a startup, even to one which is in the process of starting up! Mentoring doesn’t need to be a formal affair, nor does it need to be in a board room with suited corporate types. Mentoring is guidance and a mentor is a guide. A mentor can be a strategic advisor, a sounding board or just a hand-holder. Mentorship is an age-old concept, dating back right to the days of the gurushishya paramapara and the days preceding them! So, why the brouhaha about Mentorship? A spill-out of the new wave
of entrepreneurship has been a gale force of startups – both successful and the not-so-successful ones. There are many things that comprise the void between the two, and going by popular belief, capital would seem to be a huge part of it. Here comes the twist though. Ask any seasoned investor what the bottleneck is and you’ll be surprised by the answer. The bottleneck is not money. Given you’ve set right the other equations you’ll get the capital. After all there is no dearth of investors with an eye for enterprises with money-making potential!
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grow/mentoring However good your idea is or whatever your qualifications might be, experience has no substitute. You need to learn it from somebody who’s been through it, or at least has sufficient experience in your line of business if not in strategy. This is where Mentors come in. A Mentor is also brings along contacts who can answer your question better or give you an invaluable lead. Thus prospects for even acquir-
ing funds and striking up strategic alliances becomes all that smoother. “A mentor should be innovative. Mentors should advise and not impose. They should have experience and should understand the technologies involved as well the business and operations. They should have had experience in dealing with all these things themselves. They should have gone through grind”, says Dr. Ashok
Jhunjhunwala of TeNet Group, an incubator facility in IIT Madras. An alumnus-turned-Professor at IIT Madras, Dr. Jhunjhunwala has mentored over 20 companies till date and is currently working with around 10 more. “For a good mentor, mentorship is a deliberate choice”, says Mahendra Swarup, Chief Mentor of Smile Interactive Group. Swarup has a corporate experience spanning more than 3
Sanjay Anandaram is a founding Partner of JumpStartUp Venture Fund, one of the earliest early stage VC funds set up in 2000. He mentors and occasionally invests in startups and advises VC funds. Mentorship has not yet taken off in India on a big scale. Why is that so?
It’s a function of the state of maturity of the entire entrepreneur eco system. Traditionally in India, entrepreneurs have been hesitant to seek a base, since as a culture we are very hesitant to go out and tell others about our weaknesses. It’s still somewhat like going to a shrink. Such an attitude is evident to a variety of things, including entrepreneurship. At the end of the day, one needs to have a DNA for wanting to share, wanting to bounce of ideas, wanting to have a discussion and a dialog in a very open manner about oneself, FOUDING PARTNER one’s business, colleagues and so on. How many companies do you know that even have a JUMPSTARTUP VENTURE FUND board of advisors? How many entrepreneurs do you know who have a Board of Directors? These are fundamental things. So, I believe it’s all a function of the state of maturity of the entire ecosystem, of how entrepreneurs mature or market conditions mature.
SANJAY ANANDARAM
How can mentorship be made more effective and professional?
You can have some kind of a structured engagement program. It depends upon the engagement model; it depends upon on the company - the kind of the company, the stage and the kind of mentorship that it needs. Many a time, it’s just the CEO who needs to be coached. In some other cases, the mentoring can be in relation to very strategic issues about the business. In some other cases, it’s got to do with tactical and operational matters. You need to see whether it is a very young company or a young entrepreneur. Typically what I’ve found is that mentors/advisors, get in to some kind of a structured arrangement with entrepreneurs. It means that there is a certain number of hours or certain model that is established directly between the mentor and the mentee and that’s the way they work. For example, TiE-Bangalore conducts mentorship programs every month. Mentees or those who want to get mentored send in a brief about their business, about themselves, about the kind of issues that they are coping with and so on. Mentors are assigned to them and they go through the process of being mentored on a monthly basis. Besides that, NASSCOM had recently drawn up a mentorship program in Bangalore, with five or six companies to mentor them and take them to the next stage. There are many people who are doing it both formally as well as informally as well. Increasingly, more and more people are entering entrepreneurship and clearly they need more and more mentors. How far have VCs or PE firms been successful in mentoring their investees?
There is clearly no one size that fits all. Traditionally, the problem in India has been that we don’t have enough early stage investors. So when one is starting off, he doesn’t find too many investors willing to invest at the zero stage; and that is the stage when you need the most mentoring. Once you raise the money from the investors, they generally come on board and you have access to them to figure out what you want to do. So, yes; there is a lot of mentoring going on from VCs and PE firms. For example, there’s Red Bus, with whom I am involved. I was a mentor to them when they had no money. Now that they’ve acquired investment from Seed Fund both Seed Fund and I spend a significant amount of time not just as investors, but also as active mentors. So it depends. JANUARY 2008 91
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grow/mentoring
You don’t always mentor people to grow their ideas. Mentoring is also about helping people reach a conclusion which determines whether it’s worth one’s while to pursue an option which may not get him the desired results or meet expectations. Mentoring is a marathon race. It’s not only a question of just a couple of months. You cannot mentor a person in six months. Mentoring is when you actually shake hands and say that you are going to mentor them through this particular phase of life or business. There has to be a long-term commitment between the two. We have to have a long time commitment towards a common objective. — MAHENDRA SWARUP, CHIEF MENTOR, SMILE INTERACTIVE GROUP (STIG) decades, during which he held various positions of responsibility. He was the Head of Private Treaties initiative of Times of India Group and has held positions like the Managing Director and Chief Executive Officer of Times Internet Limited (Indiatimes.com) and Executive Director of Pepsi India. For the last one and a half years, he has been a mentor to several startups. He recently joined Smile Interactive Group as the Chief Mentor. Swarup emphasizes that his model of Mentorship is different. He believes in equity participation and holds 26% equity in SITG. “Without equity participation in the business, mentorship becomes mostly theoretical. When there’s equity participation, the commitment is from both sides”, says Swarup. He has worked out a model wherein he gets to spend a fixed amount of time, usually half a day, every week with each of the enterprises he is working with, in addition to being available for any specific issues. Currently he is working with five startups. Sanjay Anandaram of JumpStartUp, one of the first VC funds to invest in early stage companies in the technology and technology enabled areas in the country believes that Mentorship is a mix of both the tactical and the strategic; it’s a mix of psychological counseling and management consulting. “.Over and above 92
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experience and expertise, a mentor must be able to earn the trust of the mentee. The mentee must trust the mentor and vise versa. The mentor must have the ability to listen, and to pick up signals, and amplify them well before, say, an event occurs, by observing how a mentee is behaving”. “For example, the mentee might be in a
Mentors should advise and not impose. They should have experience and should understand the technologies involved as well the business and operations. They should have had experience in dealing with all these things themselves. very stressful situation and might not be opening up. It could be a situation where the mentee doesn’t quite know how to react or what to do, and is hesitant or is reticent about the fact. In this kind of a situation, a mentor should be able to draw out the mentee and help him/her think through what needs to happen next”, says Anandaram.
The Organized and the Informal The wave of Mentorship hasn’t reached its crest yet. Apart from a few sporadic initiatives, mentorship hasn’t taken off in a big way, so much so, that all the mentorship that you find is confined to incubators and a few investors. TiE has been organizing Mentoring Clinics where seasoned entrepreneurs are invited to provide mentoring to new entrepreneurs. “Initiatives such as Mentoring clinics are good but not sufficient, since mentoring cannot be done in one or two meetings. They should be used more as meeting points for a prospective mentor and mentee to decide whether one has the commitment towards a long-term mentorship”, says Swarup. The lack of organization adds to the woes of the wannabe mentees even further. The supply-demand gap takes a serious toll, in the sense that one-to-one may happen in spirit but never in reality. Dr. Jhunjhunwala believes that mentorship has be incorporated and organized further so as to reach out to a bigger audience. He, however, believes that formalizing it will kill it. “The entrepreneur should feel that he can walk out easily. Once you bring in a level of formality, that will cease,” DAR E he says.
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funding/AIM
Alternative Investment Market AIM or Alternative Investment Market is a sub-set of the London Stock Exchange: what the London School of Economics called, the worldâ&#x20AC;&#x2122;s leading stock market for young and growing companies. /Arunjana Das
I
n October 2007, Ishaan Real Estate, a real estate investment company incorporated in the Isle of Man, picked up 40% stake in eight real estate projects promoted by the Indian real estate major, K Raheja Corporation. The Rs. 1082 crore required for the deal was raised in AIM (Alternative Investment Market) - a sub-market of LSE (London Stock Exchange) - by Ishaan November last year. AIM was started in 1995 as an alternative market for smaller or earlystage companies worldwide who could neither meet the stringent eligibility criteria nor afford the capital require-
DARE/India-related companies listed in AIM since 2005 Platinum Mining Corporation, Hardy Oil & Gas, Great Eastern Energy, Trinity Capital, Eredene Capital, Eros International, Noida Toll Bridge, India Hospitality, KSK Power Venture, Ishaan Real Estate, HIRCO, DEV Property Development, Naya Bharat Property, Evolvence India, Promethean India, Dhir India Investments, Indian Film Company, Greenko Group, UTV Motion Pictures, DQ Entertainment, West Pioneer Properties, Unitech Corporate Parks. ments for a main-market listing. Over the years, around 2300 companies have listed on AIM, 400 of them being non-UK companies. Around 1000 have delisted for various reasons; some of them having transferred to the main
CAPITAL RAISED ON AIM
Source: London Stock Exchange 94
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market of the LSE. Out of the currently listed 1600, around 300 from outside the UK. The beauty of an AIM listing is that there are no eligibility criteria! No minimum company size, no require-
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“For non-UK companies like ours, AIM has helped raising money in an efficient manner. Besides, we have high quality investors who have invested in Ishaan. We were also attracted by the speed at which tcapital could be raised through the AIM. Liquidity on AIM has, however, not been very encouraging since few investors, as a part of their investment strategy, are not very aggressive with investments in AIM listed companies”. — NEEL RAHEJA, DIRECTOR ISHAAN ment of a track record, no minimum number of shares and no threshold market capitalization to keep up with! That, however, does not mean that anybody could come up and get themselves listed. No. The deterrent is the exhaustive due-diligence process conducted by a Nomad. A Nomad – Nominated Advisor - is a merchant banker or financial consultant and equivalent to a Lead Manager in India. S/he establishes the transparency of your financial and accounting systems and ensures that your company is suitable for a listing in AIM. You are required, at all times, to have a Nomad. The due-diligence that a wannabe AIM company is required to go through followed subsequently by the intensive admission and filing process, screens out possible corporate jaywalkers.
22 India-related companies, some of the more well-known ones being Unitech, Eros International, UTV Motion Pictures and Noida Toll Bridge, have listed themselves in the AIM. Their collective capitalization in the exchange lies somewhere around $ 3.5 bn! Institutional investors such as Fidelity, Goldman Sachs, Gartmore and Bank of New York have been regulars at the AIM. A company looking for an AIMlisting could have much more than money on mind. Companies looking for overseas acquisitions can easily use their shares listed in AIM as currency or those looking for widening their shareholder base and providing exit to existing ones find AIM a faster way towards globalization. You are required to have a Nomad and an approved broker at all times.
DARE/elements of the system 1. Companies: Small to mid-size, early stage to established 2. Nominated Advisers: Finance consultants approved by AIM, handholding companies before, during and after listing. Acts as the regulator and underwriter. 3. AIM Brokers: Approved securities house and member of LSE, usually from the same firm as the Nomad, trading securities post-listing and act as interface between companies and AIM 4. Market Specialists: Lawyers, accountants, PR (Public Relations) officer, IR (Investor Relations) officer 5. Investors: Institutional and non-institutional 6. The Exchange’s AIM team
The LSE website maintains a running register of AIM-authorized Nomads and stock-brokers. A Nomad is authorized by the LSE in playing the role of a hand holder and advisor, over an above conducting the due-diligence process. S/he has three specific duties – conducting due-diligence, managing the flotation process which also includes helping the company in preparing the required documents compliant with AIM rules and the process of listing, and making sure that the company directors are made aware of the obligations and disclosures that an AIM-listing requires. Since, a Nomad is your ticket to a listing, you need to convince him/ her of your suitability for a listing. “Typically, a Nomad gives a green signal to the company only if s/he is convinced that the concerned company will increase the market’s reputation and has a good chance of being able to deliver the promised value to its shareholders”. A stock-broker is a securities house and a member of the LSE. Usually, the Nomad and the broker are the same firm. A broker is primarily concerned with the “aftermarket”; that is, the aftermath of a market-listing. The broker raises funds from its institutional clients and publishes research to drum up and sustain sufficient demand for the shares and making sure that the supply meets demand. An AIM company must have no restrictions on the free transferability of its shares and must be legally established in its country of origin. A company with less than JANUARY 2008 95
DARE.CO.IN 2 years of revenue-earning is required to have a Lock-in period of 1 year, during which the directors are restricted from selling their shares. In addition to a Nomad and a broker, you are also required to employ some market specialists, namely lawyers, accountants, IR (Investor Relations) officer and a PR (Public Relations) office, who take care of various other facets throughout the pre-flotation, admission and post-listing period. Typically, it requires 2-3 years of planning and strategizing if you are to gain maximum leverage from the listing. During this period, you are expected to get independent non-executive directors on board, prepare business plans, make sure adequate management information systems and operational and compliance controls are in place, work out ownership and tax issues, complete mergers or acquisitions and plan out your investor relations strategy. 3 to 6 months before the admission period, you are required to appoint a Nomad and a broker, and work upon a timetable for the admission process. Complete due diligence is conducted during this period. In case the Nomad unearths any problem areas, they need to be reviewed and taken care of. You need to sit down with your Nomad and review pricing issues and PR strategies. The month before the actual admission process is marked
funding/AIM with heightened activity in the form of draft meetings and roadshows. The draft prospectus or the admission document needs to be produced during this period, in addition to the first drafts of other documents that the Nomad deems important for the admission process. The admission document comprises all information about a company, including its background, financial information, accounting practices, legal issues, etc. It needs to be exhaustive enough so as to provide investors with sufficient information to enable them to take their decision to invest in your company wisely. AIM rules also require an admission document to carry a statement from the company that it has enough working capital for atleast a year from the time of admission. The pre-admission process includes registering your prospectus with UKLA (United Kingdom Listing Authority) and submitting an announcement of intention to join AIM to LSE 10 days before the actual admission. A week before the admission, all documents need to be completed and approved and the pricing of the offer and allocation need to be worked out. A company can bypass the admission document route and adopt the Fast-Track route for listing. For this, you need to be listed for atleast 18 months in an AIM Designated Market, comprising the main markets of the
DARE/listing basics, quick and dirty 1. Appoint your advisers. Agree upon the timetable to admission. 2. Produce draft prospectus/admission document and first drafts of other required documents. 3. Conduct initial review of pricing issues, PR presentations, analyst presentations. 4. Due Diligence, PR meetings, Roadshow 5. Register prospectus with the UKLA (United Kingdom Listing Authority). Submit 10-day announcement to Exchange of intention to join AIM 6. After document completion and approval, pricing and allocation of offer to be done. 7. Register prospectus. Sign subscription agreement. 8. Bulk print final prospectus. 96
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Australian Stock Exchange, Deutsche Borse, Euronext, Johannesburg Stock Exchange, NASDAQ, New York Stock Exchange, Stockholmbörsen, Swiss Exchange and Toronto Stock Exchange. UKLA issues a UK Official list which should be referred for any updates on the same. Companies adopting the Fast-Track route are required to make a pre-admission announcement, which includes information as to the company’s business, financial strategy, any significant changes in its financial or trading position and confirmation that the company had adhered to the legal and regulatory requirements of the AIM Designated Market where it was registered. As with the admission document, the pre-admission announcement is also requires to carry a statement from the company directors that the company has sufficient working capital for a year. Admission includes submitting documents to the LSE and paying the required fees, which come to above £ 4000. The average cost of a listing lies above £ 600,000. The admission becomes effective when you are issued a Dealing Notice from the exchange. Once admission is granted, you can start trading your shares subject to the regulations of the LSE and the legal requirements for public offer of securities in the UK.
After Listing While you consider the relative ease with which you are granted admission to AIM, you should also consider the post-listing disclosures and compliance regulations, which are almost as strenuous as a main-market listing. Once you are an AIM company, you are expected to subscribe to international accounting standards over and above satisfying the requirements of your country of origin and the requirements listed by UKLA. The continuing obligations also comprise notifying LSE of any unpublished price-sensitive information, share dealings by directors, any substantial transactions and transactions with related parties and developing a new Admission Document if new shares are to be issued.
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funding/AIM
WE SPOKE TO A LONDON STOCK EXCHANGE SPOKESPERSON WHO WISHED TO REMAIN ANONYMOUS. EXCERPTS FROM THE INTERVIEW: How does AIM help smaller or international companies in raising money? Since its launch in 1995, over 2,100 companies have chosen to list on AIM, creating a unique community of innovative and entrepreneurial companies. AIM’s success is based on a simple regulatory environment which has been specifically designed for the needs of smaller companies. The AIM market supports and encourages innovation and entrepreneurial activity because its regulatory framework and approach is specially designed for smaller, growing companies. Unlike the Main Market, AIM does not have minimum requirements for company size, trading history or the number shares that have to be in public hands before it floats. This system enables a smaller, entrepreneurial company to float on an Exchange. Companies often find AIM to be the most successful way to raise further capital to fund growth, make acquisitions or use as a springboard to a full listing. An AIM quote can also boost a company’s credibility through growth and performance. International companies on London’s Main Market and AIM benefit from the world’s deepest pool of liquidity and largest selection of internationally focussed investors in the world. What are the pros and cons of listing in AIM? Pros: Today nearly 650 international companies from 68 countries are listed in London. The London Stock Exchange is the only major exchange which is growing the numbers of international listings year on year due to capital city’s position as a global financial centre. Companies on London’s Main Market and AIM benefit from the world’s deepest pool of liquidity and largest selection of internationally focused investors in the world. Increasingly, international investors will look to AIM so that they can access leading international growth companies from across the world – and the presence of more Indian firms in London would inevitably raise the profile of India as an investment destination. The fact that AIM is able to fund the next stage of growth for so many international companies and is attracting professional investors in greater numbers is an endorsement of the AIM model and the quality companies on the market. Cons: A total of 2,698 companies have been admitted to AIM and 1,076 have been delisted, which leaves 1,632 companies on AIM as of February 2007 (Table 4) However, delistings occur for a variety of reasons, only some of which can be classified as failures. The biggest single source of delistings, accounting for nearly half the total, is the reverse takeover, through which a company changes its identity but remains on AIM. Other delistings occur as a result of transfers to the Main Market, acquisitions, or redemptions (investment funds redeeming or closing their funds) – none of which can be described as failures. Genuine failures can arise from the liquidation of the company; from restructuring because of financial strains; or from a breach of the AIM rules. In addition, some companies choose to delist without giving a reason. The growth of AIM and the changes in its composition have posed regulatory challenges, but have not undermined the integrity of the regulatory system, a central feature of which is the delegation of responsibility to Nominated Advisers (Nomads) for assessing the suitability of AIM entrants and monitoring their compliance with AIM rules. Over the years, we have seen minimal growth in AIM. Why is that so? AIM is often described as a stock picker’s market, and its performance cannot easily be measured by an index tracking the performance of all AIM shares since 1995. An analysis of after-market returns on new admissions since 2000 suggests that, on average, investors in these companies have outperformed the wider market. The general view among investors is that that the expansion of the market, through the admission of more foreign companies and the newer property and equity investment entities, has been good for AIM, broadening the range of investment opportunities that the market provides. AIM now consists to some extent of several distinct submarkets,but it has been able to serve these different DAR E constituencies without having to alter in any fundamental way the regulatory system that has been in place since the start. 98
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Organizations DARE.CO.IN
covered in this issue, in alphabetic order; first appearance
Accenture .......................................... 61 ACNielsen.......................................... 13 Actavis ............................................... 15 AEV LLC ............................................ 37 American Express ............................. 82 Apple ................................................. 42 Asian Paints ....................................... 59 Australian Stock Exchange ................ 98 Bajaj................................................... 43 Bank of New York............................... 96 Bharti British Telecom ........................ 20 BITS Pilani ......................................... 15 Blue Dart umbrella ............................ 59 Bombay Chartered Accountants’ Society ......................... 50 Bombay Circus ................................. 73 Bombay Stock Exchange .................. 47 Brainleague ....................................... 39 Cafe Coffee Day ............................... 28 Campa Cola....................................... 43 Centurion Bank of Punjab.................. 14 Chennai Catering Service ................. 14 Citibank.............................................. 61 Cleartrip ........................................... 104 ClutchGroup ...................................... 61 Coca Cola company .......................... 43 Compaq Computer ............................ 61 Crossover Advisors.......................... 104 Customer.Asset ................................. 20 Delhi Metro ....................................... 86 Deutsche Borse ................................. 98 DEV Property Development .............. 94 DFJ .................................................. 104 Dhir India Investments ....................... 94 DHL ....................................................... Digital Equipment ............................. 20 Disclosure and Investor Protection ... 46 DLF .................................................... 46 DQ Entertainment.............................. 94 DST ................................................. 104 eBay .................................................. 24 Edelweiss Capital’s ............................ 46 EDS ................................................... 61 Edurite Technologies ......................... 25 Elance................................................ 24 Electrotherm ...................................... 61 Eredene Capital ................................. 94 Eros International .............................. 94 Ethnic Kitchens .................................. 13 Euromonitor International .................. 13 Euronext ............................................ 98 Evolvence India ................................. 94 Fidelity ............................................... 96 Flora 2000 ......................................... 67 Forhans ............................................. 43 100
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Fortune 500 ....................................... 61 Fr. Agnel College of Engineering ..... 105 FUs jeans .......................................... 43 Gartmore ........................................... 96 General Electric ................................. 85 Genpact ............................................. 82 Goldman Sachs ................................. 96 Google ............................................... 26 Great Eastern Energy........................ 94 Greenko Group .................................. 94 Gujrat Venture Finance ..................... 47 Hardy Oil & Gas................................. 94 Harley Davidson ................................ 44 Harvard Business School .................. 61 HCL ................................................... 20 HCL Comnet ...................................... 85 HCL Technologies.............................. 85 Hero Honda ...................................... 44 Hewitt Associates .............................. 87 Hindustan Lever................................. 67 Hindustan Times ................................ 57 HIRCO ............................................... 94 Honda ................................................ 43 i3pl ..................................................... 59 IBS Software ..................................... 47 ICICI .................................................. 15 ICICI OneSource ............................... 20 I-flex ................................................... 15 iGate .................................................. 20 IIM-A .................................................. 15 IIM-Bangalore .................................... 86 IIT Bombay ....................................... 28 IIT Kharagpur..................................... 26 Impetus Technologies ........................ 26 India Hospitality ................................. 94 Indian Angel Network ....................... 11 Indian Film Company......................... 94 Indian Institute of Management, Kolkota ........................ 20 Indian School of Business ............... 104 Indiranagar cafe ................................. 28 Info Edge ........................................... 67 Intel .................................................. 104 Ishaan Real Estate ............................ 94 ISRO .................................................. 15 IT&T ................................................... 20 ITC Foods .......................................... 13 Ittiam Systems ................................... 28 Johannesburg Stock Exchange ......... 98 Jubilant Organosys ............................ 57 K Raheja Corporation ........................ 94 King Food Caterers .......................... 14 Kohinoor ............................................ 13 KPMG Consulting ............................. 59 KSK Power Venture ........................... 94
Lightspeed Venture Partners ............. 22 London School of Economics ............ 94 London Stock Exchange.................... 94 MAIA Intelligence............................... 32 Maruti Udyog Limited ........................ 31 Meru Driver Training Academy .......... 31 Microsoft ............................................ 20 Microsoft MSN Encarta ..................... 24 Ministry of Sports............................... 73 Ministry of Textiles ............................. 77 Mobile Monday ................................. 26 Mom’s Kitchen ................................... 12 Monday to Sunday hypermarket ........ 57 MOP Vaishnav College for Women ....................................... 105 Mphasis ............................................. 61 Mr Spoonz ......................................... 14 MTR Foods ........................................ 13 MyDuniya Networks........................... 38 NASDAQ............................................ 98 National Bal Bhavan .......................... 76 National Entrepreneurship Network ........................................... 104 National Institute of Rural Development ............................ 10 National Stock Exchange .................. 47 Naya Bharat Property ........................ 94 New York Stock Exchange ................. 98 NIIT .................................................... 20 Noida Toll Bridge................................ 94 Nutrela ............................................... 57 O’Reilly Media ................................... 26 Open Coffee Club ............................. 26 Patni Computer Systems ................... 88 Pepsi Foods ....................................... 59 Pertech Computers............................ 43 Pidilite ............................................... 14 Pizza Hut ........................................... 13 Platinum Mining Corporation ............. 94 Prithvi Theatre ................................... 72 Promethean India .............................. 94 Quatrro BPO solutions....................... 30 Rabo Bank ......................................... 15 Radhakrishna Hospitality Services ... 14 Ranbaxy ............................................ 15 Reliance............................................. 15 REVA Electric Car Company Private Ltd ......................................... 35 RPG ................................................... 14 Ruchi Soya Industries ........................ 57 Sashun Chem .................................... 15 Saturn ................................................ 44 SCA Group of Companies ................. 59 Sequoia Capital ................................. 21 Shaan Uttamsingh ............................. 14 Silicon Valley Bank ............................ 22
Somaiya Institute of Management Studies....................... 105 SP Jain Institute of Management and Research .............. 50 Stanford University .......................... 104 Stencil shirts ...................................... 43 Stockholmborsen ............................... 98 Sutherland Global Services ............... 86 Swatch ............................................... 44 Swiss Exchange ................................ 98 Sylvan Learning ................................. 20 Tata Chem ......................................... 15 Tata Consultancy Services ................ 28 Tata Motors ........................................ 42 Team Computers ............................... 47 Texas A&M University ........................ 61 Thammasat University ..................... 104 The Bombay Kitchen ......................... 14 The Innovation Resource Consultancy ....................................... 85 The Securities and Exchange Board of India ................... 46 Thomas Nelson, Inc........................... 61 TiE ................................................... 104 Tiffin Express ..................................... 14 Times Now......................................... 15 Toronto Stock Exchange.................... 98 Toyota ............................................... 85 Trinity Capital ..................................... 94 Trustman & Co. .................................. 39 Tutor.com ........................................... 24 TutorVista........................................... 20 UC Berkeley .................................... 104 Unitech ............................................. 96 Unitech Corporate Parks ................... 94 United Kingdom Listing Authority ...... 98 University of California Davis .......... 105 US India Business Alliance................ 61 US India Political Action Committee ......................................... 61 UTV Motion Pictures.......................... 94 Uzanto Consulting ............................. 28 Verist Business Research.................. 40 Vienova Technologies ........................ 83 Vienova Technology ........................... 11 Vision Community.............................. 87 V-Link Taxis........................................ 31 Vocabulary.com ................................ 24 Wadhwani Centre for Entrepreneurial Development .......... 104 West Pioneer Properties.................... 94 Weston TV ......................................... 43 Wipro BPO......................................... 82 Wirkle................................................. 38 Xansa ................................................ 67 Zensar Technologies.......................... 85
People DARE.CO.IN
covered in this issue, in alphabetic order; first appearance
Abhi Shah .......................................... 61
Narendra Joshi ................................ 105
Aditya Mishra ..................................... 28
Neel Raheja ....................................... 96
Ajay Mishra ...................................... 102
Nitin Mittal .......................................... 40
Ajay Soni ........................................... 87
NR Narayanamurthy .......................... 83
Ambika Soni ..................................... 11
Parikshit Jain ..................................... 11
Amit Ranjan ....................................... 28
Prof. Arya Kumar ............................. 105
Anand Pillai........................................ 85
Prof. Ed Rubesch............................. 104
Arpit Agarwal ..................................... 26
Prof. Radha Iyer ............................... 105
Ashutosh Atray .................................. 32
Prof. Tina Seelig .............................. 105
Ashwani Rathore ............................... 13
Radhavardhan ................................... 14
Azim Premji ....................................... 83
Raman Roy........................................ 30
Bhairavi Jani ...................................... 59
Ranjan Chopra .................................. 47
Bill Gates ........................................... 83
Ranjit Pisharoty ................................. 86
Chetan Maini ..................................... 35
Rehan yar Khan................................. 67
Dinesh Shahra ................................... 57
Robert B Tucker ................................. 85
Dr. Kalyan C Kankanala..................... 39
Rohit Chand....................................... 67
Dr. Landau ......................................... 37
Rosy Fernando ................................ 105
E Sreedharan .................................... 86
Sanjay Mehta..................................... 32
Ganesh Natarajan ............................. 85
Sanjeev Bhikchandani ....................... 67
Gautam Mukherjee ............................ 48
Sanjna Kapoor ................................... 72
Gifford Pinchot ................................... 84
Sara Lee ............................................ 59
Himanshu Baweja.............................. 26
Sarath Babu....................................... 14
Jack Welch......................................... 83
Sarvesh Shahra ................................. 57
Jack Welch......................................... 85
Shamit Bhartia ................................... 57
Jairam Ramesh ................................. 10
Shiv Nadar ......................................... 85
Jerry Rao ........................................... 61
Shobhana .......................................... 57
K Kumar............................................. 86
Shyam Bhartia ................................... 57
K.Ganesh........................................... 20
Srinath V ............................................ 15
K.P. Singh .......................................... 46
Stephen King ..................................... 42
Kalpana Jaishankar ........................... 88
Subhash Arora................................... 76
Kamal Nath ........................................ 10
Subodh Kant Sahai............................ 11
Kaviraj Singh .................................... 39
Tushar Jani ........................................ 59
Kesava Reddy ................................... 28
Vinamra Pandiya .............................. 12
Lomesh Dutta .................................... 38
Vineet Nayar ...................................... 85
Mahesh Gohil .................................... 14
Vishnu Varshney ................................ 47
ML Bhartia ......................................... 57
VK Mathews ...................................... 47
DARE is not an acronym. It represents the daring spirit of the entrepreneur. The red color for the R of DARE represents the fire in the belly of the entrepreneur. You could think of the D representing the face, A representing the chest, R representing the belly and E representing the feet of the human body. Hence the red R. The entrepreneur dares to do things. (S)he dares to do things differently
SMS “DARE <your comments, questions or suggestions>” to
56677 dare@cybermedia.co.in JANUARY 2008 101
DARE.CO.IN
society/hawkers
A fable at the bottom of the pyramid Those who own their business earn more than those who work for others - and this is true even amongst street-side hawkers
/Chhavi Tyagi
A
crowded market; shops of various shapes and sizes, on either side of the street, some right on the street; deafening noise; people haggling over the price of the goods; traffic moving at a slow pace, desperately trying to make its way out; peddlers calling out to the customers. A picture that does not require any introduction - your neighborhood market. Have you ever wondered about the hawkers who line the streets, vending their wares? Maybe you felt sympathy for the meager livelihood that they make. Or maybe you thought that these people make far more than their good’s worth and cheat you in the process. Or maybe you did not bother: after all, what difference does their life or livelihood make to you. Meet Ajay Mishra, a hawker, who conducts his business in the Gurgaon market. In fact, you could give him any 102 JANUARY 2008
name or place him in any market. The story would be the same. He earns his livelihood peddling from his makeshift shop, a shop that is all of a medium sized stool kept on the ground and a thick wooden stick hooked to the wall behind. And what does he sell? Fake Lee belts, which hang on the wooden stick and fake Woodland wallets, spread on the stool, along with some handkerchiefs. He has a disheveled appearance, emphasized by his tousled hair, unwashed face, sleepy eyes and clothes hanging out. He seems a little nervous dealing with the customers. He is a newcomer to this profession, having been on the job for all of four months. Or the reason could also be that he is just a kid. A young boy of 15 years, who makes Rs. 2000 a month, which he says is enough to fulfill the requirements of his family, two siblings and his parents.
All he knows about the business is the price of the goods he has and the extent to which he can let customers bargain. Ajay Mishra is an employee who takes care of another man’s business. Let’s meet Ajay’s employer, another shopkeeper at the same market. He is the owner of three shops - one the small stool that Ajay looks after, the other two are bigger, run by his sons, and have more variety in terms of school bags, slippers, etc. The owner makes seven thousand per month from the stool that Ajay manages and out of this gives 2000 rupees as salary to his employee. Now meet Rashid. And like Ajay, you could also give him any name and place him in any market. Just the size of the shop makes the term ‘hawker’ seems ridiculous to use for him. He also has a makeshift shop, made by wooden sticks nailed to each other
DARE.CO.IN
society/hawkers
and hooked to the wall and a large wooden cart. In scale, Ajay’s stool is no comparison to his shop! Rashid sells fake jackets, which hang on the wooden sticks, along with woolen caps, lowers, vests and briefs spread on the wooden cart, the average item being of less value than on Ajay’s stool. Rashid, though not educated, speaks fairly good Hindi, tinged with some regional intonation. He has been in the business for more than ten years now and has the shrewdness that comes only with years of experience. He is a tall, somewhat burly man, of around 45 years and has had this shop
for the last five years on the same spot. He has a sense of authority while dealing with his customers and can easily gauge which customer would settle for what discount. He, unlike Ajay, keeps to himself the profit of around 10,000 rupees per month, Rashid has an immediate family of a wife and three sons who are in school and a nephew of twenty who helps with the business. These stories get repeated again and again… Another hawker, this one selling vests and briefs from a dingy small cart, earns 100 rupees per day or about three thousand a month. He too has
been working for another man for the past five years. Let’s meet one more, sitting on a low stool in the market, selling wallets. His shop is again a low stool, spread with wallets. He makes about five thousand per month and is the owner of his “shop”. The rules, it seems are the same, whether at the bottom of the pyramid or at the top – those who own their business earn more than those who work for others! Note: This article is based on a sample of five hawkers in one market and does not purport to be a scientific DAR E research.
JANUARY 2008 103
DARE.CO.IN
Who’s Filling the Knowledge Gap? Entrepreneurship education is booming in India, but are our faculty qualified?
C
reativity, resourcefulness, risk management, team-building – desirable skills in those you hire? For yourself? Absolutely. The good news is that courses and workshops to develop these skills are easier to find today, as top institutes around the country rush to build entrepreneurship programs on their campuses. But the rapid rise of entrepreneurship education in India raises questions, including: who’s doing the teaching? It's a new discipline, requiring new teaching methods – is anyone qualified? Over the past three years, the number of entrepreneurship faculty teaching high-growth entrepreneurship has risen from a mere 50 to 75 to over 570, a ten-fold increase, even if one limits the tally to faculty engaged through NEN member institutes. According to surveys of the group, over
85% have never before taught entrepreneurship. This sudden and massive increase represents a revolution in the discipline. Institute directors, principals and the faculty themselves clearly recognize the need for new entrepreneurship educators to build their knowledge before launching into teaching. Fortunately, for faculty-based in India, there are several faculty development courses available, more so than in most areas of the world. The largest program in Asia is the Entrepreneurship Educators Course (EEC), led by NEN in partnership with IIM Bangalore and Stanford University’s Technology Ventures Program. At the current time, there are over 260 faculty members enrolled across the four batches of the EEC. Faculty members who go through this year-long course, and pass strict performance require-
NEN, the National Entrepreneurship Network, is India’s leader in entrepreneurship education, working with over 270 academic institutes to build world class entrepreneurship programs on their campuses, reaching over 300,000 young people. NEN supports new and future entrepreneurs with information, experts and community. www.nenonline.org
ments that include successfully building campus programs, receive Certification from IIM-B, Stanford and NEN. Another key offering in India is the CPET, developed and delivered by the Wadhwani Centre for Entrepreneurial Development at Indian School of Business. CPET also requires development of teaching materials among other requirements to receive Certification from the course. Recently Intel and UC Berkeley signed on with the Department of Science and Technology to run workshops for entrepreneurship faculty,
NEN: upcoming event IIT-Bombay E-Summit When:
February 10, 2008
Where:
IIT Bombay, Powai
Who:
Open to students, professionals and future entrepreneurs
Event focus: Event offers entrepreneurs talks, VC pitch sessions for early stage companies (last date to apply: Jan 13), mentoring sessions, panel discussions, a student e-cells’ meet and the finals of India’s biggest b-plan competition, Eureka, with prize money over 14 lacs. Partners & Sponsors: DST, NEN, Crossover Advisors, Cleartrip, DFJ, TiE More info at www.nenonline.org
Prof. Ed Rubesch, Thammasat University, Bangkok, leading “The Puzzle Exercise” during EEC. 104 JANUARY 2008
DARE.CO.IN and University of California Davis will be running a program in Jaipur early in 2008, targeting both entrepreneurs and faculty. The international flavor of all these faculty development programs is critical. Entrepreneurship education has been active on US campuses for over two decades. “Adapting practices that are working well overseas will jumpstart the development of Indian teaching methods and tools,” explains Prof. Tina Seelig, who teaches in Stanford’s Technology Ventures Program and is one the developers of NEN’s EEC.
Most faculty agree that entrepreneurship can’t be taught using traditional lectures, so faculty development focuses both on core concepts and innovative teaching methods. Conveying the practical and emotional aspects of entrepreneurship requires a hands-on and experiential approach. This can include using games, building mock and real companies, Faculty at NEN’s EEC module on experiential learning. spending time in markets and streets, and using arts-and-crafts to experiNEN Faculty Speak Out ment with rapid prototyping. Radha Iyer, Sr Lecturer, HR and Entrepreneurship “Truly, it’s joy-filled education” KJ Somaiya Institute of Management Studies and Research exclaims Prof. Arya Kumar of BITS PiHow do you teach entrepreneurship? lani, sharing his view of these new apI primarily use experiential learning, despite the fact that we have a course already designed for us proaches. Some faculty members are as per the curriculum. Also, I involve outsiders in the teaching. already adapting the new, participantIn a case study method, you just end up learning theory. But when a VC or alumni entrepreneur centered teaching methods to teach speaks, it’s straight from the heart! They are talking ground reality and that provides us with a reality check. their more traditional subjects. The knowledge gap for faculty will Narendra Joshi, Assistant Professor, Quality management and tool design, and persist for some time as the number entrepreneurship, Fr. Agnel College of Engineering of institutes offering entrepreneurship What is the most effective tool you use for teaching entrepreneurship? programs expands rapidly. Therefore, From the point of grabbing attention, games are the best means of teaching entrepreneurship. The it would seem prudent for anyone best one I have ever done is the ‘Bad idea into good idea’ activity by Prof. Tina Seelig at Stanford. signing up for a course to check the This game is very good because it helps people delve into the worst of possibilities with their busiqualifications of the faculty. ness idea. It’s quite challenging. However, many faculty and instiRosy Fernando, Head of Commerce Dept, MOP Vaishnav College for Women tutes are actively investing in their own education, and the results are already How is teaching entrepreneurship different than teaching other subjects? showing on some campuses around Entrepreneurship has a lot more scope for creativity. the country. Prof. Radha Iyer Somaiya But the biggest difference is that in entrepreneurship, the students can use what they learn to go Institute of Management Studies and ahead and make a business in real life. So teaching this is a lot more real, viz a viz a set pattern as Research was part of the first batch in some other subjects. in NEN’s EEC. “A few years ago entrepreneurship was unheard of,” Prof. NEN Brainteaser: Tweak your Creativity Iyer explains, “but now we have a well Imagine that a friend has brought you a gift. She or he has left the box for you, beautifully received course, with a large group of wrapped, on the floor next to where you are sitting or standing. students excited about it.” Reach down, place your hands on either side of an imaginary box, and lift the box onto your lap. Open the imaginary lid – go ahead, actually open it. Now look inside. What’s inside? Quick Links to Courses: Ok – now replace the lid. This time, your friend has worked very hard to surprise you. Open the box NEN-STVP-IIMB Entrepreneurship again, and inside you find something totally unexpected. What is it? Educators Course: www.nenonline. What’s the purpose? org/eec Every day, we need to come up with new ideas, new solutions. And sometimes ideas just don’t flow. Certificate Programme in EntrepreThe above exercise is a way to stimulate your creativity. neurship Teaching: www.isb.edu Every time you open the box, you have a new idea – and you can open the box as many times as Global Faculty Colloquium: www. you want. Ideas are infinite! intel.com DAR E This exercise was contributed by Dr. Tina Seelig, Professor of Creativity at Stanford University and Faculty at NEN’s EEC. Content provided by NEN JANUARY 2008 105
DARE.CO.IN Enterpreneur of the month – VSS Mani, Just Dial
RECAP
/exit
OCT 2007
Unique idea of the month – The Royal Time Machine A 19 seater luxury bus, fitted out in an early Mughal setting, with drinks and snacks, LCD screens and multi lingual voice-overs can earn an annual revenue of Rs. 1.75 crore.
How to get Private Equity A comprehensive primer for those seeking PE. Insights from entrepreneurs who have done it, how they went about it and leading PE funding agencies. The business of better environment Call it a concern for environment or plain economics, many businesses around the world are striking gold in 'green' pastures
Generic pharma & patents Will the upholding of Section 3(d) of the Patents Act by the Madras High Court be the end of the battle between patent holders and generic manufacturers Farming for caviar Captive sturgeon farms for caviar could earn millions. Russia, Japan and US are doing it. UAE is following suit. Can we replicate it? Radio cabs: a business of Rs. 7,210 cr.
• Case Study Hidesign • Angel investing in India • Apprentice youself to an entrepreneur
Enterpreneur of the month - Shahnaz Husain
NOV 2007
Unique idea of the month - Timond Watches Bitten by the retail bug, Jewelry maker Chain and Chain forays into the competitive luxury watch market with Karan Johar as brand ambassador.
How to get VC funding Too many entrepreneurs are chasing too few VCs even as the funding market hots up. Few things to help you improve your chances of getting funded. Organic Farming: Highly fragmented and lacking mature players with scale, this sector could well offer a few hidden treasures.
Dreaming big for Darjeeling If France can build a multi-billion dollar tourism industry around wine and champagne tours; why can't we build one around Darjeeling tea? Opportunities in telecom infrastructure Release of more telecom spectrum to new players opens up new opportunities in the infrastructure space. 6,000 crore in waste management
• Case Study- Ittiam • Prepare youself to start a company • Women entrepreneurship in India
Enterpreneur of the month - Ajay Bijli, Priya Village Roadshow (PVR)
DEC 2007
Investor of the month - Bala Deshpande
Unique idea of the month - Babajob.com Three entrepreneurs comine social networking with online job search for the benefit of unskilled workers. How to get Angel funding for a startup
Windfall profits in carbon trading Kyoto Protocol turns reduction of pollution into a revenue generator 5,500 cr/year from parking lots
Opportunities in mobile apps New wvwnues open up for content companies and application developerss as bandwidth increases for mobile data.
The business of Spas As healthcare moves beyond treatment to wellness and people get ready to pay more for being pampered, this business is set to boom. • Enchanting India • Manage your team's relationship network • Can you win in China? 106
JANUARY 2008