#16 - JANUARY 2009 by CyberMedia (I) Ltd

Vol 2 / Issue 04 / Jan 09

/Rs 30

19 MISTAKES ONLINE BUSINESSES MAKE

OPPORTUNITIES IN BIOFUELS SELLING INSURANCE SALVAGE 15 MIN. GUIDE TO COPYRIGHTS THE BUSINESS POTENTIAL OF HOLOGRAMS SLOWDOWN LPO-LEGAL OUTSOURCING AND CONSUMER BUSINESS IS ON THE UPSWING BEHAVIOR

ORGANIC AND NATURAL EXCHANGE COSMETICS AND INGREDIENTS Home water puriﬁers business

entrepreneur of the month/

H.S. Bedi, Tulip Telecom

Doing business in South Africa

innovation of the month/

Solar Planes: An option for the future?

investor of the month/

Which states are favored by entrepreneurs? Deep Kalra, Pravin Gandhi and Manish Sabharwal on managing the slowdown

Foot-operated paper bag machine Sandeep Singhal, Nexus India Weighing the ‘gold’ in ‘Green’ Building a brand at redBus Making the most of your mentors 102 pages including cover

Vol 2 / Issue 04 / JAN 09

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 R Gopalakrishnan

Chairman & MD, Biocon Executive Director, Tata Sons

Philip Anderson

Professor of Entrepreneurship, INSEAD

Shyam Malhotra Editor-in-Chief Krishna Kumar Group Editor ANALYSTS Ambrish Jha Aswathi Muralidharan Binesh Kutty Mohita Nagpal Vimarsh Bajpai

/cover story

OPERATIONS Ajay Dhoundiyal Product Manager VIjay Rana Design Anil John Photography SALES & MA Jaideep Mario Gabriel Imran Ali Dayanath Levaj Jagadeesh Kingshuk Sircar

MARKETING Associate VP West West South South South-East Asia

PRINT & CIRCULATION SERVICES NC George Associate VP T Srirengan GM, Print Services Sudhir Arora Circulation Services Manager Pooja Bharadwaj Assistant Manager, Subscriptions Sarita Shridhar Assistant Manager, Reader Service Printed and published by Pradeep Gupta. Owner, CyberMedia (India) Ltd. Printed at International Print-O-Pack Limited, B-204-206, Okhla Industrial Area, Phase 1, New Delhi-20 Published from D-74, Panchsheel Enclave, New Delhi-17. Editor: Krishna Kumar. Distributors in India: Living Media India Limited, 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: 28387241 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, # 14-03 High Street Center Tel: +65-63369142 CORPORATE OFFICE Cyber House, B-35, Sec 32, Gurgaon, NCR Delhi-122001. Tel: 0124-4031234, Fax: 2380694.

102 pages including cover

DARE.CO.IN 6

JANUARY 2009

This piece looks at some of the most common assumptions that are wrong about doing business online. These are for those who are planning to do business – as in sell or buy goods or services, including advertising -and not for those who just want a presence online

Opportunities in biofuels

With the demand for alternative energy sources increasing, the biofuels business is opening new doors for entrepreneurs

DARE.CO.IN

/contents

opportunities/ Organic and natural cosmetics and ingredients ........................................ 32

global opportunities/

The business potential of holograms ....... 40

Doing business in South Africa

Home water puriﬁers business ................. 50 Solar Planes: An option for the future? ..... 56 entrepreneur of the month

Lt. Col. (Retd.) H.S. Bedi Tulip Telecom Tulip started as a software company in 1992, with four employees and a seed capital of Rs 4 lakh. In FY 2008, the company posted a turnover of Rs 1242.14 crore.

blogs/columns Philip Anderson ........ 20 Rupin Jayal ............. 54 Anurag Batra ........... 81

Legal outsourcing business...................... 78

brand

capital

come

business companies

company

cost country crore customers delhi don’t entrepreneur entrepreneurs experience growth help high idea investment

india like

strategy/ 15 min. guide to copyrights...................... 60 DARE blogs/ Slowdown and consumer behavior ........... 86 States favored by entrepreneurs .............. 86 Where is oil headed for? ........................... 91 investor of the month/ Sandeep Singhal

Nexus India Capital He is the co-founder of Nexus India Capital, a venture capital ﬁrm that mainly invests in companies that are wholly or substantially located in India.

unique idea of the month/ Selling insurance salvage

Deep Kalra, MakeMyTrip.com...................... 30 Pravin Gandhi, Seedfund ............................ 49

INSEAD/

make

management market marketing money need number people products second services start team technology think time used value venture want waste work world years

interviews/

Manish Sabharwal, TeamLease Services ....... 87

indian industry look

The host of the FIFA World Cup 2010, South Africa offers immense opportunities in infrastructure development

innovation/ Foot-operated paper bag machine ........... 92

Paranjoy Guha Thakurta ... 93

based

Building a brand at redBus .......................... 24 Weighing the ‘gold’ in ‘Green’...................... 44

With general insurance companies now outsourcing the sale of salvage, the business is set to boom in the coming years

others /

Exchange ............................................... 10 Feedback ............................................... 14 JANUARY 2009 7

www.dare.co.in

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blogs/edit

One thing to do If there is one thing we must learn to do in the year ahead, then it is to get the basics of our businesses right. We must seek proﬁts rather than just valuation; we must build strengths rather than just leverage on debt; we must be prepared to play for long term gain rather than for instant gratiﬁcation.

f only wishes were horses, the Sensex would have been kissing 40 k rather than playing hide and seek with the 10 k mark. If only

wishes were horses, real estate and infrastructure offerings would have been picked up faster than they could have been thought of. If only wishes were horses, all of us would have been partying wildly instead of staring at gloomy predictions for the future. If only... Looking back, it is obvious what happened. Too many of us wanted too much too fast. And we played too loose to achieve it. It is obvious that we were not happy with accelerated growth rates and wanted even more. And we are paying the price for it. If there is one thing we must learn to do in the year ahead, then it is to get the basics of our businesses right. We must seek proﬁts rather than just valuation; we must build strengths rather than just leverage on debt; we must be prepared to play for long term gain rather than for instant gratiﬁcation. Hopefully the year ahead will not be too hard. Happy new year.

/Krishna Kumar

JANUARY 2009 9

Exchange DARE.CO.IN

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• partners • mentoring • funding • guidance • advice • ideas...

email: dare@cybermedia.co.in OR SMS ‘DARE <your msg>’ to 56677

Published: December 2008

This is the third or fourth time I am writing in to

Piyush, an MBA student, wanted ideas and guidance to

DARE and it has always been a pleasure due to your

start a marketing solutions business for life sciences,

prompt response. I am currently working with a friend

healthcare, and the pharmaceutical industry.

of mine on a fresh idea (target: domestic sector, type: service) but we lack managerial skills to transform

Response: December 2008

it to a business. Therefore, I would like to invite peo-

I am interested in providing marketing

ple with complementary skills (management, civil,

solutions to healthcare and pharmaceutical

electrical and mechanical) through DARE, to join us

industries, and want to contact Piyush. Sujith, Mumbai

so that we can build a strong core team as foundation for this business. Also, we need a mentor to guide us in this transformation.

I run a startup, Evolve ERP solutions, Mumbai.

Parthiban Rajendran

We have developed a web-based ERP software for SMBs. We already have a few live sites and a couple of

I have been reading DARE since it was launched. It’s a commendable effort in bringing out an offbeat

projects under execution.

magazine. What I observed is that you don’t publish I am seeking support of angel funders to put the success stories by small businessmen or ideas for product launch on fast track as well as act as mentors. We already have a core team and robust business plan in place.

small businessmen to evolve into a bigger enterprises. How many Indians can really invest millions in new ideas/enterprises that you publish regularly?

Viren Reshamwala

I am looking for small business opportunities, worth around 4-5 lakhs. I would be highly obliged if

I have launched a website, www.eZeeQuote. com, and offer software estimation and planning

some info/lead is given in this direction. S S Prasad, Hyderabad

services. I need help in promoting and getting business leads.

I want information on medical transcription Badri Narayanan

and want to know how can I get in touch with US clients seeking medical transcriptionists.

I have started a web-based matrimonial service Amet Kumar

in eastern India. It includes not only matchmaking services but more than that. We are interested to add some more services. But we require funds

I would like to understand what is the process in-

to grow this website, and need your suggestion in

volved in obtaining work-from-home assignments

this regard.

from clients based in India or abroad. Mahua Ghatak

JANUARY 2009

Vera

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• partners • mentoring • funding • guidance • advice • ideas...

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This is with reference to an article on e-waste that was published in one of your previous issues. I am

I am a software engineer who has been aspiring to start a business from my college days. Being an ECE graduate, I have many technical ideas of prod-

currently unemployed and would like to know how

ucts, but lack managerial skills to convert them to

can I start an e-waste business or join an e-waste

business. Currently I have partnered with one of my friends, and we are working together to start

company. What are the key sources of this in Delhi? Can you please give some names of companies who

a business. But we both are engineers and do not know how to convert those ideas into business. We have ideas both in products and service

are involved in this business?

businesses. We finalized on some of our ideas. Neeraj Kumar

One of it is home management services. While there are a good number of players for maintain-

Hats off to you guys for bringing out such a

ing industrial buildings, when it comes to ordinary residence, the situation seems to be very different.

great venture, and at the right time! I have an

Be it plumbing or electrical repairing, we hardly

outdoor LCD advertising project and am look-

get any plumbers or electricians to service us. If a recognized, (if possible, certified and authorized

ing for angel investors willing to invest at least Rs 25 lakh. I have LCD vendors ready to supply me with screens. I have assembled a small team to join

by government or similar body) service provider exists for such needs, people would prefer getting serviced from such a company. The very first step we thought for this idea, was

this initiative. I also need a mentor, who has considerable experience in the advertising industry.

a market survey in two big cities and in Coimbatore but as we thought that a market survey could be costly, we thought of employing college stu-

Please help.

dents to get the job done. It has been about two

Alex Puthoor Abraham, Hennur, Bangalore

months, but we could not make any progress due to their timing problems and other distractions.

We are a contract manufacturer for sheet metal and fabrication jobs, interested in parties looking to get their jobs outsourced.

Also, apart from knowing how much people could be ready for such a service, we do not know how to make those numbers to business plans and other managerial stuff necessary to take the second

John

step in business. So we require team members of complementary skills (accounting, human resources, etc) for which I invite interested people

I am interested in mango kernel crushing. Pleases suggest whom I should approach for

to join us. We can discuss about building the management accordingly. Also, we would like to have a mentor to help and guide us to create and launch

the machine?

the business. Hussain

JANUARY 2009

Sunil Kumar V, Coimbatore

a movie about entrepreneurship

showing soon in your city (entry by invitation only)

For more infromation and free movie tickets, log on to www.dare.co.in

Feedback DARE.CO.IN

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Right time for startups entering markets

offers its users to post classifieds, pro-

September 2008 issue. It was very

that are getting consolidated ARTICLE

mote their businesses and conduct

informative.

Time is right for the old value business

e-commerce

I have plans to start a Sr Sec School

to come with a new face. This is the

this portal.

transactions

through

CBSE School in Navi Mumbai. Please Sanjeev

time where the new startups should fo-

do come out with a story on how to establish a school with the following

cus not on new ideas (as investors will be averse to new ideas) but rather focus

Delhi schools mint Rs. 5000 crore by

major aspects:

on new businesses that take advantage

selling nursery prospectus NEWS

of consolidating the dispersed and grief

It is a pity that education concepts have

stricken businesses to raise a cost ad-

changed so drastically that everybody

2. Consultancies which help to devel-

vantage that will steer these businesses

thinks you will only get good educa-

op a blueprint, get funds, ﬁnd real

out of the woes of the bear market. The

tion by getting into a big institute. We

estate developers and supervise till

decisions should be strategic in terms

had done our complete engineering

the infrastructure development is

of longer planning and assured growth

course for less than Rs. 20,000. Now-a-

complete, school is registered and

without the risk of focusing on a single

days, that money isn’t sufﬁcient even

afﬁliated and the school is up and

market space/vertical.

for a KG or a Nursery class for 1 year.

running with all loans paid back.

Sandeep Naidu

The Indian government should bring

development.

3. 4.

out of control / reach.

Advertising

and Marketing

agencies to design suitable ad-

Rajesha Chitrapadi

good time during the slowdown MAG

Placement agencies to help to hire the best teaching talent.

in some norms here before things go How some small businesses are having a

Funding for land,infrastructure

vertisements and issued in print

I couldn’t agree more. We are a small husband and wife content shop. Our

Statement by N. R. Narayana Murthy

media (leading dailies + tabloids

business is up 40% this year with no

on Singur BLOG

+ magazines), electronic media

ceiling in sight. We raised our rates in

Absolutely sir, because of the cheap

(TV+Radio), city hoardings, etc.

an effort to slow down new work, and

political gimmicks of the opposition,

Gestation period

it had no effect.

ﬁnally a big opportunity and need was

Joining major School Associa-

Len Dozois, CopySurgery

quashed from the hands of Bengal. The

tions and other trade bodies like

main people affected will deﬁnitely be

FICCI,CII,etc. 7.

Total Rough Estimate.

How to increase the visibility and

the farmers, who had given up their

reach of your business in a cost-

lands by taking huge loans. Another

effective way BLOG

point, it will be the future of the stu-

Alibaba, IndiaMart, TradeIndia — are

dents which will be affected here....In-

Recession hits SMEs as big cos delay

all the biggies of the B2B industries.

spite of having a degree, we are forced

payment BLOG

They sure do command a huge cus-

to go outside. What does Bengal have

Recession has hit the Indian market.

tomer base, but while looking for

in store for the students? Our future

Nowadays, our payments are delayed

similar sites I bumped across an web-

seems to be bleak!

by 3-6 months. Especially in CoimbatFarah

site that looks quite promising. Joining the online battlefield is the new

Prisoomit.P.Nayak

ore and Tiruppur area in Tamil Nadu, a lot of SMEs are in a wake of crisis. Less

contender Bizedia, which promises

Preschool and Nursery business:

orders and payment blocks are preva-

to be a pioneer in the Indian B2B por-

Franchise or start on your own? ARTICLE

lent. There sales have been reduced to

tal sector in the long run. Apart from

I read the article on starting “Preschool

just 40-60%.

the usual business listing feature, it

and Nursery business” in DARE,

JANUARY 2009

Vinod B

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Business from waste paper ARTICLE

http://cgtmse.in/jsp/HomePage/Eli-

gest me something what to do about

The article is surely informative and

gibilityCriteriaFrame.htm

this problem?

throws light on the need of the hour. There is no doubt that there lies

Also see FAQ at http://cgtmse.in/

Rajinder Soni

jsp/HomePage/faq_ﬁnalFrame.htm. Not your typical e-commerce

potential in waste and it does good for the planet too. Entrepreneurs need to

Chetan Maini,

opportunity ARTICLE

come together for this project

REVA Electric Car ARTICLE

There is potential as we all now know,

I have 1800 watts solar panels with a lot

but what we do not know is the fact

Mayank

of surplus energy getting wasted. Reva

that we are going to be in big trouble if

OS Vinod, CGTMSE ARTICLE

can be very useful to me, but the price

we do not address the waste problem

Read the interview, but I have never

is beyond my reach. I am a farmer near

fast. We need to get together and work

heard of such a thing either through

Mangalore, bad roads here could cause

towards proﬁt along with better living

news bulletins on any media. I think

untimely death of expensive batter-

for all. So we need to share whatever

even most of the banks in India are

ies. Reva is not interested in small ﬁsh

knowledge we have and grow together

not aware of such a credit facility. Now,

like me.

by recycling, reducing, reusing and reGovind Bhat

I would like to know as to, how can I

storing the waste generated. Great article to motivate the entre-

avail a credit facility without collateral? I am an exporter of light engineer-

How to reduce your home

preneurs but where do they get infor-

ing products. Please help.

loan burden? BLOG

mation at one place?

Mathews.T.A.

What to do in a case when you do

www.avirason.com

not have any money to pay in

Sandeep Patel

Dare Reply

prepayments and you are already

Innovative Hiring Strategies ARTICLE

One of the problems that this scheme

in debt with personal and car loans.

This article is good. But I think the strat-

faces is that many bankers themselves

What to do when you are seriously

egies could have been more innovative.

are not aware of this facility or the

getting hurt by these increasing in-

It’s always great to see articles with

fact that their bank is a member of

terest rates. I took 12,30000/- of loan

quotes from senior HR personnel. It

the scheme.

at 7.25% at reducing balance around

helps you to be aware of what is happening in different companies.

The full scheme is available at

three years back in September 2005.

http://cgtmse.in/jsp/HomePage/

At that time, my EMI was 9719/-

But I feel that the strategies men-

CGTSIScheme.htm.

per month and 240 months to pay

tioned about here are old, which eve-

and today my EMI is 12635/-, inter-

ryone is using. It is strange that no one

est rate 13%, and around 450 months

has used the mobile platform for re-

worth of EMIs to pay. Can you sug-

cruitments yet. Sizeable portion of the

You could bring it to the attention of your bank manager. The eligibility criteria is available at

JANUARY 2009 15

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target recruits would have access to a

20 things that improve your chances

mobile phone.

for loan or equity funding ARTICLE

spend percentages, wherein the pro-

NDTV jobs had come up with a

This article clearly highlights the key

motional spends are higher than the

scheme where a person could refer his/

success factors for ﬁnding funding

ATL spends.

her friend and if he/she gets selected,

from bankers or PE Investors.

they stand to beneﬁt. Though the mod-

Though

quite

informative

US leads the world in terms of BTL

Vijay Singh on

el bombed, I feel the future lies in tech-

the macro perspective a little more

Services to keep your IT ARTICLE

nologies and platforms like these!!!

in depth description would have

costs down

been good. A few examples or case

An excellent and very informative ar-

studies would have been highly

ticle that covers most aspects of busi-

appreciated.

ness functions for any SME.

Ralston Coelho Innovative Hiring Strategies ARTICLE Nice coverage on the role of social net-

Gopal Shivapuja

SaaS is deﬁnitely a worthwhile

working sites on hiring process. An-

Global Delivery

choice that one should consider before

other fast-growing hiring strategy is

making any large capital investments,

hiring talented women at home. Due

Looking below the line ARTICLE

as we can see that most solutions are

to family commitments, many profes-

A short recession is of great advantage

already available and there is no need

sional women opt to quit their career,

to below the line marketing services

to re-invent the wheel.

but not their desire for learning and a

for a few basic reasons;

comeback career. Many new schemes

1. Brands move away from typical

like Tata’s second career for women,

brand building strategies and start

Pepsico’s job recruitment advertise-

to focus more on marketing serv-

ments focused on recruiting women

ices which ensure a sales uplift and

only, etc. are all set to explore this new

that is where BTL scores.

arena. Also online portals like gharka-

2. As spends go down, brands look at

mai.com target experienced profession-

focusing spending on target group

al women at home, to outsource project

and hence turn to BTL strategies

work posted by their clients. Gharka-

like direct and one on one experi-

mai.com claims that India has the larg-

ential marketing.

Gopal Shivapuja Global Delivery

IT Equipment: Lease or buy? ARTICLE What if a company needs 100 notebooks for a period of 36 months and is willing to pay Rs 2,000 per month per laptop? Piyush Jain DARE REPLY: 100

notebooks

may

not

the

est pool of professional 'stay-at-home'

3. Retention becomes more critical

women, so are conﬁdent about making

than new customers and hence

problem. The 2,000 rupees may be

the best possible use of this workforce.

focus on customer relationship

the problem as the going rate is

management.

Rs 3,000 upwards.

Aarthi

SMS:

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dare@cybermedia.co.in Website:

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JANUARY 2009

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/contest

Who will be the next manufacturing superpower? England

USA

Japan

China

Steam engine

Petrol engine Electricity

Electronics

Cheap goods Massive scale

? ?

Await the names of

WINNERS | January 06, 2009 | www.dare.co.in |

JANUARY 2009 17

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blogs/INSEAD

Making the most of your mentors T

/Philip Anderson

JANUARY 2009

his month’s INSEAD case profiles the entrepreneurs behind redBus, which has become the largest online ticketer for buses in India. One key to the success of this venture was the ability of the founders to get the most out of the Entrepreneur Accelerator Program offered by the Bangalore chapter of TiE, The Indus Entrepreneurs. It is remarkable that senior veterans of the entrepreneurial scene are willing to give their precious time to the rising generation of startup executives, but that was the impetus behind TiE. The organization came into being because its founders, all successful entrepreneurs of Indian heritage, wanted to give back by providing a helping hand to others who are launching companies. Good mentors are not difficult to find in India. In the technology world, organizations such as TiE and NASSCOM have well-developed mentoring programs. In other sectors, the Confederation of Indian Industries is also focusing more on providing assistance to younger and smaller firms. The alumni associations of most higher education institutions offer similar services, in some cases transcending the boundaries of any one school (e.g. via the pan-IIT alumni association). There is no shortage of business plan competitions in the country, and winners typically receive mentoring as a reward. I have also found as I have gotten to know India’s venture elite that many famous people are extraordinarily generous with their time. Al-

most all the entrepreneurs or venture investors I have met tell me several stories about people they are helping who reached out to them via email or at an event, instead of using the usual referral networks. Of course, such celebrities receive dozens of requests for help during the year, and they are only able respond to a few that touch them in some way. Typically, either the entrepreneur’s personal story and zeal move them, or else they connect emotionally with the market or problem the entrepreneur is addressing. Nonetheless, I ﬁnd that India’s bestknown entrepreneurial ﬁgures are much more likely to help others pro bono than are their counterparts in other countries. Connecting yourself to an able mentor is feasible, though it may require a lot of work and many tries before you succeed. But how can you benefit most from mentoring once you have secured a commitment from capable people who can help you? Having observed many mentoring relationships, I find that people who are new to working with an experienced guide must first overcome a mental block in the form of an inappropriate analogy. Those who have risen through the Indian educational system have learned to revere those who educated them, and they tend to approach mentoring relationships as if they were teacher-student relationships. A mentor is neither an instructor nor a guru, and if you inappropriately treat your mentor like a teacher you admire and respect, both of you will

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blogs/INSEAD derive less from your interactions than you should. A teacher provides you with knowledge, corrects your errors, and occasionally serves as a role model. In a venture setting, it is difficult for advisors to do these things. In an uncertain market, no one knows what is the right thing to do, and often your most important competitive advantage as an entrepreneur is that you can unlearn the accepted wisdom of the past faster than an established firm does. When you are pioneering something new, it is seldom clear in real time what is an error and what is not. Many entrepreneurs have succeeded in the early stages precisely because they persisted in what others regarded as a wrong or foolhardy course of action. And finally, entrepreneurs can use role models with respect to values or how to treat people or how to communicate, but not with respect to the actions they must take. Entrepreneurs succeed because they are unconventional and do things differently from others. They don’t find success by walking a trodden path. The most important reason why entrepreneurs need mentors is that they must recognize and allow for their own tendencies to persist when it’s time to change. Starting a business is a leap of faith. The deck is stacked against you in many ways, because rivals have cash, employees, brands, distribution channels, production facilities, established routines, and a host of other assets that you must build from scratch. To take the plunge anyway, you must ignore a lot of negative signals from your environment. Furthermore, as you move forward you will encounter many people who give you discouraging feedback, and will need to overcome many failures while you learn who are your customers and what they will pay for.

As a result, entrepreneurs typically over-compensate by becoming extremely focused on whatever works. Their persistence is a virtue, but it can become difﬁcult for them to walk away from a course of action that once worked but no longer does. Overcoming failure is not as difﬁcult as knowing when to abandon a successful formula. Entrepreneurs get their initial foothold by learning to shut out negative information and ignore what appears to be pessimistic feedback. As a result, they are prone to ignore signals that say it’s time to change course.

“

The most important reason why entrepreneurs need mentors is that they must recognize and allow for their own tendencies to persist when it’s time to change. Starting a business is a leap of faith.

”

A mentor is above all someone who provides you with an authentic and trustworthy reality check. He or she is someone who helps you see the world for what it is, not what you wish it to be. Mentors are there to provide perspective, not solutions. A wise counselor is good at asking thought-provoking questions, not giving you the right answers. He or she helps you identify more options than you would have alone, instead of telling you which option to pursue. The testing question you should always ask after you work with a mentor is whether you now feel you have a more thorough and objective eval-

uation of your situation than you did before. Can you understand in a new way what you are doing and why? The next most important reason why entrepreneurs need mentors is to make useful social connections. Mentors can provide useful advice, but the value of counsel is limited when you are trying to do something that is novel, that differs from what others have done. In such situations, no one knows what is the right thing to do. As a result, you need to recombine insights from several people who have dissimilar points of view. The best advice is that which you stitch together yourself, recombining ideas from various people into a wholly new insight that none of them possessed. Consequently, you need to interact with people whom you don’t already know and who do not think the way you do. Your mentors can introduce you to a wide variety of people who are strangers, but will give you some of their time because the mentor asked on your behalf. This is why you should look for mentors who have great social networks. It’s better to work with a mentor who can help you make useful connections than one whose forte is providing helpful advice. Once you ﬁnd a good mentor, your part of the bargain is to execute vigorously on the insights you achieve, as the redBus case exempliﬁes. People will invest time in you if they see you moving forward, keeping your commitments, and respecting the value of the inputs they give you. Then, also expect you to recognize that you have acquired an obligation. If you succeed with the assistance of mentors, the only way to repay them is to aid others as effectively as you were helped. That multiplies the impact of the time and care they gave you, honoring the investment they made in your success. DAR E INSEAD Alumni Fund Professor of Entrepreneurship, Director, Rudolf and Valeria Maag International Center for Entrepreneurship and Director, 3i Venturelab JANUARY 2009 21

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/unique idea of the month

Selling insurance salvage With general insurance companies now outsourcing the sale of salvage, the business is set to boom in the coming years

/Vimarsh Bajpai

JARGON Salvage: A recovery of all or part of the value of an insured item on which a claim has been paid. The insurer will normally dispose of the item and apply the proceeds to reduce the cost of the claim. Surveyor and Adjuster: A person who investigates and assesses claims on behalf of insurers. Claims: Injury or loss to the insured arising so as to cause liability to the insurer under the policy it has issued.

hen fire gutted a paint manufacturing factory in Ghaziabad in October 2007, all that remained of the facility was 200 metric tonnes of iron and steel scrap fit to be sold at a dirt cheap rate. The insurer of the factory – IFFCO-TOKIO General Insurance – decided to put the scrap on sale. As normal practice, the company-appointed surveyor would double up as a salvage manager to rope in suitable buyers for the scrap and sell the commodity at whatever price he would get within a short span. However, this time around, the insurer decided to approach SalvageSettlers, a salvage management firm to do the job. It took 20 days for SalvageSettlers to sell the scrap at a price 28 percent higher than the reserve price (Rs. 26 lakh) put by the insurer, making the latter richer by Rs. 7.25 lakh. The

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deal, although small in size, proved to be a stepping stone for Anshul Gupta, founder of the salvage management ﬁrm, in a business that is yet to have a market worth its size. Gupta’s share in the deal: Around 2.5 percent of the selling price. Having worked closely with several general insurance companies as a surveyor himself, Gupta always wondered as to why he could not broker a lucrative deal between the insurance company selling salvage (whatever remains of the goods after damage) and the buyers. One reason was the lack of time because in his role as a surveyor; he had to inspect the site of the accident, assess the extent of the damage, coordinate with the cops, and report back to the insurer on the amount of reasonable claim. This left him with little time and energy to look

around for suitable buyers for salvage. Although selling the salvage is not the job of a surveyor, yet general insurance ﬁrms have long relied on them to do it. Sometimes, the surveyor gets nothing in return on the sale of salvage. Realizing that he could make a business out of brokering the salepurchase of salvage, Gupta started his company in October last year. One year down the line, he has brokered 31 deals, having helped insurers save approximately Rs. 2 crore.

The business Salvage management as a dedicated stream of business is a fairly new concept in India, although the business has been around for a long time in developed countries. US-based Salvage Sale has been doing brisk business, though there are many other smaller players in the country. The business emanates from the need of general insurance companies to minimize their losses in case of damage of the goods insured by them. It could be industrial goods, household material, or motor vehicles. After settling the claim by the insured, these companies sell off whatever remains of the damaged material to recover some cost.

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/unique idea of the month The business involves roping in buyers of a particular commodity and getting them to make competitive bids. “The surveyor can sell but cannot generate competition. Unless the competition is generated and you are not able to use the market dynamics, you can never expect a good price for salvage,” says Gupta. For salvage management ﬁrms, it involves preparing a good database of customers and bringing them together to make bids for the commodity to be sold. In the US, salvage management companies post advertisements in various newspapers to generate buyer interest. Putting the inventory online for prospective buyers to see and bid is an easy way to get customers as well. The commodity is not tampered with by the salvage management ﬁrms; instead, it is sold in whatever state it is. So there is no headache of making it look attractive for the buyer. The transportation cost is borne by the buyer. The market is still in a nascent stage. With very few players dotting the country, there is plenty of scope for new entrants to make a mark. Gupta wants to see competition in the sector: “New players will increase the market. As the market size increases, we will only gain. It is the marketing of con-

cept that is important. We want more people to enter this business.”

Challenges One of the biggest challenges is to keep the stream of assignments ﬂowing, as many insurance companies are still not very open to the idea of outsourcing a large chunk of their salvage sale. They prefer to rely on their surveyors to do this. It is also important to have a performance record ready to ﬂash at a prospective customer. Reaching out to the right customers in the shortest possible time and making them interested in buying the salvage is also crucial. An even bigger challenge is to get them under one roof to make bids and broker the deal. As Internet penetration in the country is still low, the facility of online auction is yet to take off. However, in developed countries, most deals fructify online.

Setting up your own shop More than money, it is the experience of dealing with insurance companies that matters more, particularly the claims department. The nitty-gritty of the business lies in understanding the mindset of the seller (insurer) and the customer. Gupta’s experience as a

FAQ What does a salvage management firm do? It brokers a deal between the general insurance company (that sells salvage) and the end customer (buyer). How is it different from the work of a surveyor and loss adjuster? A surveyor and loss adjuster’s job involves inspecting and investigating the mishap, assessing the extent of damage, and accordingly reporting it back to the claims department. He also undertakes the selling of the salvage once the claim has been settled. However, a salvage management firm is only involved in selling of the salvage by seeking competitive bids for the commodity, and in turn brokering a lucrative deal for the insurer. Does the salvage management firm own the salvage at any stage of the deal? No. It just plays the role of a broker. What constitutes salvage? It could either be industrial goods, household products, and motor vehicles that have been damaged or recovered after been reported lost. How much brokerage do salvage management firms get? It can vary depending upon the size of the deal, but on an average it is 2 to 2.5 percent of the selling price of the commodity.

More people in this business will help popularize the concept. — Anshul Gupta SalvageSettlers surveyor came in handy. His networking with the insurance companies also gave him access to the decision makers. He had had several meetings with the national claims managers of these companies to rope in good business. One can start out of a small ofﬁce (it could also be a home ofﬁce) because although one is in the business of selling goods, there is no need to store the inventory. But a good company website can spread the word fast. Listing the inventory on the website is the fastest and easiest way to reach out to customers. The cost of setting up the website could vary. Taking the right people on board is also important. Those who have had a good stint in marketing and sales can help grow your business. It is, therefore, the salaries that account for a major expenditure. Other inputs require creating a good database of customers and updating it regularly. One will also need tele-callers who can reach out to target customers and create interest among buyers. Other costs involve traveling to the site of damage to get the clear picture of what is to the sold. Good negotiation skills can help broker excellent deals, which means more money DAR E in the coffers. JANUARY 2009 23

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case/INSEAD

Building a brand at redBus From just an idea three years ago, redBus today has established a strong brand and is growing rapidly with 120 employees, operations in 15 states, and revenues approaching $7 million annually /Philip Anderson

n October 2005, Panindra “Phani” Sama (called “Phani”) simply wanted to go home for Diwali. Like thousands of young engineers who had moved to Bangalore to pursue job opportunities, he wanted to be with his family for the holiday, so he tried to book a bus ticket. The agent told him he had no seats available for Phani’s destination, but suggested trying another agent. That struck Phani as a strange idea. “If you try to book a ﬂight or a rail ticket, an agent will tell you whether a given train or airplane is full, and if is it not, he can sell you a seat,” he says. “I wondered why you couldn’t seem to do that with buses.” Few would have predicted that a semiconductor designer would tackle such a problem, but Phani Sama had long wanted to be an entrepreneur, and in Bangalore’s hothouse environment for startups, highly-trained engineers have started many different kinds of companies. Born in Andhra Pradesh, Phani was schooled in Hyderabad before he earned an electrical engineering degree from the Birla Institute of Technology and Science (BITS) in Pilani, Rajasthan. “I had been an electrical engineering wannabe throughout my childhood, so I trained to design microchips,” he relates. He initially joined ST Microsystems, but in order to return to southern India, he shifted to Texas Instruments and relocated to Bangalore, where he became one of the youngest team leads at the ﬁrm. “I had an entrepreneurial drive in my mind to start a company, and do something on my own," Phani recalls. Consequently, he began attending all the events of Bangalore’s chapter of TiE, The Indus Entrepreneurs. “That gave me insights into how companies

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are built and what was required, going beyond the engineering part of product development that I had learned already,” he comments. “I learned that ideas are born from needs, and that a small thing can start a big idea. I got confidence that a small need can be the foundation of a big idea. All the talks I attended at TiE and the orientation of the organization influenced me. Every fortnight they had a networking meeting, and company founders would tell us how they started, which gave me confidence.” Inspired by the lessons he learned through TiE, Phani began to investigate how bus ticketing in India worked. “You need curiosity to question everything, and that’s how you find a problem worth solving,” he says. The 25 year old engineer went to three or four agents, asking how the system functioned and why one agent might have a bus seat available when anoth-

er did not. “I learned that across the whole of Bangalore, there are thousands of agents, but each represents just a few small operators,” Phani recounts, “Nobody aggregated all the tickets to a particular destination. As a result, you really curse yourself if you want to go home but you can’t get a seat. You are never convinced that you have exhausted your options, because somewhere there might be an agent who can sell you a ticket even if dozens of others tell you they have nothing left. Consumers were spending so much time looking for seats and being unhappy that I thought, ‘Why not put in software to integrate things so that any agent knows if there is a seat from a bus leaving Bangalore?’” Further talks with bus operators persuaded Phani that a third party was needed to change the system. “Each bus operator is so small that he can’t build his own IT system, so I thought

case/INSEAD

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If you try to book a ﬂight or a rail ticket, an agent will tell you whether a given train or airplane is full, and if is it not, he can sell you a seat. I wondered why you couldn’t seem to do that with buses

JANUARY 2009 25

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Photo: istock.com

case/INSEAD

it would be a good idea to build a system for them,” he remarks “I was not from a software background, so I took the idea to two of my batchmates from BITS Pilani.” Phani ’s two friends, Sudhakar Pasupunuri, a senior software engineer at IBM, and Charan Padmaraju, who was working with Honeywell, liked the idea and agreed to form a company together, Pilani Soft Labs Pvt. Ltd, to develop the idea into an enterprise . “They focused on software and operations, while I concentrated on getting the bus operators together,” Phani says. “However, we just called ourselves co-founders, without giving much thought to formal roles.” For ten months starting in October, 2005, the three continued working for their respective employers while building their entrepreneurial venture in their spare time. 26

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The founders traveled throughout Bangalore and beyond, to destinations such as Hyderabad, Chennai, Pune and Mumbai, meeting dozens of bus operators. The responses were mixed, some encouraging and some dismissive.

Phani and his partners moved forward before settling upon a business model. Phani recollects, “Initially, I assumed a lot of things. I knew the industry was too fragmented for anyone to develop an IT system or trust another person’s technology, so I figured a solution would help the operator, the agent, and the customer. I believed that operators would benefit because they were turning away customers they would have some chance of satisfying if they used our system. Most agents represented only two or three small operators, so I thought they would see the benefit of having more inventory.” The founders traveled throughout Bangalore and beyond, to destinations such as Hyderabad, Chennai, Pune and Mumbai, meeting dozens of bus operators. The responses were mixed, some encouraging and some dismissive. Phani soon realized that most op-

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case/INSEAD erators were small businessmen who were anything but technology-savvy; agents were even smaller and less technology-intensive. Getting operators to update their inventory online so that customers could see in real time how many seats were left would be an impossible task. Selling software to operators or agents seemed like an uphill battle. What should be the business model? Fortunately, help was at hand. Phani was aware that for some time, the Bangalore chapter of TiE had operated an Entrepreneur Acceleration Program (EAP) for selected entrepreneurs. Explains Sanjay Anandaram, a veteran venture capitalist who co-chaired the EAP at the time, “We send a call out to entrepreneurs who are part of our database or belong to other groups such as Proto or NASSCOM, inviting them to submit plans. We review them, create a shortlist, then ask these founders to present their ideas to a group of TiE members who typically have venture investing experience. A few are selected to be mentored. The company graduates when it raises somewhere between $100,000 and $250,000 from venture funds or private individuals.” Says Phani, “We participated because here were charter members of TiE who would be willing to mentor us if they liked our plan. We had 15 minutes to pitch the idea. Afterward, I gave my card to everyone, but no one gave me a card until Kiranbir Nag, Vice President for SVB India Advisors, came out of the room. He said ‘This is my card and your presentation was good,’ and he invited us to follow up. We had three meetings with him before he and Ashok Yerneni agreed to work with us. Sanjay Anandaram also became a mentor. During our whole presentation he had played devil’s advocate, challenging us to prove our concept works, so I became very upset initially, but he closely mentored us every day and became a key advisor.” The TiE mentors adopted the venture in July 2006, a month before the launch of the redBus service. They made an immediate impact, according to Phani. “We didn’t even have

an Excel spreadsheet at the time; everything was just conceptual,” he says. “Kiranbir made us create one to make explicit our assumptions about the number of operators, number of travelers, amount of commission we might charge, and so on, and that was a big step forward. Our mentors made a commitment to meet with us every week, and that meant a lot. These were the heads of companies in this country, and since they agreed to meet us for an hour every week, I did everything they

Getting operators to update their inventory online so that customers could see in real time how many seats were left would be an impossible task. Selling software to operators or agents seemed like an uphill battle wanted. If they wanted an Excel sheet, for example, I would make sure I had it at any cost when I showed up at the next meeting.” Why were the innovators behind redBus selected for the Entrepreneur Accelerator Program? Says Anandaram, “I was involved after they were selected, but the two things that stood out for me were the passion of the team and the potential to scale. They were attacking a fragmented space. To me, this seemed similar to how online travel agents were working, but I felt that people were not focusing on this area, even though it was a much bigger market than most in travel.” Although the entrepreneurs’ background was not from the industry, Anandaram also liked their understanding of the mar-

ket. “A lot of TiE members don’t travel by bus,” he says, “but these people did, and they were really grounded in the experience. They understood the problem thoroughly from the standpoint of the customer.” In addition, Anandaram admired the ability of the founders to attract high-quality talent. He saw their track record in getting good people to come on board as an excellent sign that they would be able to grow. As they were building up the idea, Phani Sudhakar and Charan persuaded Abey Zacharia to join them as head of business development while Mayank Bidawata signed up to helm marketing. Both were MBA’s, Zacharia from the University of Madras and Bidawata from the Asian Institute of Management. “The head of marketing had worked in direct marketing at Lintas, and before that had handled retail banking products at ICICI,” Anandaram recalls. “Here was a talented young guy with several years of experience who gave up a good job in Mumbai, relocated to Bangalore, and took a salary cut to become part of this new thing. The head of alliances, Aaditya Swaroop an MBA from IIM Kozikode, had worked in corporate strategy at Airtel in Delhi, and had also taken a salary cut and moved in order to join redBus. The company was able to attract such people because everyone understood how the industry had functioned so inefﬁciently, and they realized the promise was so clear.” The venture’s new mentors gave them the conﬁdence to plunge ahead and work out a business model as they went. Says Phani, “I knew there was a need and thought there was a solution, but I wasn’t sure how to make money out of it.” He continues, “At the time we were selected by TiE, there still were a lot of mixed opinions about what our identity should be. Some people thought we should operate a GDS (Global Distribution System) for bus operators, offering a transaction platform and making money by charging for each online transaction. Others said that if we did that, it would take a long time to recoup our investment JANUARY 2009 27

DARE.CO.IN ing value where that would be easiest. They told us just to go do that, gain recognition, and stand on our own as a business. Then we could move on to other things and worry about automating our operations. The TiE members really helped us take one option and pursue it relentlessly with more conﬁdence.” Because the bus operators were not computerized, redBus could not simply tap into their existing systems in order to put seats online. To get around this problem, Phani and his partners

adopted an old practice that had long pre-dated computers: block booking. They asked bus operators to reserve some of their inventory until an hour before departure time, just as off-line travel agencies reserve a fraction of a hotel’s rooms in advance. That allowed redBus to offer seats from multiple operators without knowing in real time how full any given bus would be. It also insulated the bus operators from worrying about scaling up IT systems and servers to handle holiday peaks in online traffic. However, this decision created a classic problem: which came first, the chicken or the egg? Phani and his partners were among the first to ask private operators to allocate seats to them in advance. Once redBus was established as a volume seller of tickets, more operators would be willing to set aside inventory for them. But unless operators could be persuaded to do that, how could the venture build volume? The only way to overcome this hurdle was through sheer effort and determination. redBus launched its service August 18, 2006 with just one operator on board. Recalls Phani, “I told the operator that we were a group of well-educated entrepreneurs who were experimenting in order to improve the ticketing experience for cus-

Photo: istock.com

because the operators weren’t yet technologically savvy enough for a GDS.” TiE’s veteran advisors spurred the young engineers to resolve the problem by acting instead of relying too much on hypothetical analyses. Phani recounts, “Our mentors were of the opinion that we could start off if we could just solve the ﬁrst obvious problem we saw, which was on the consumer side. We could launch a Web site and mimic the whole back end, even if it wasn’t automated at all. The ﬁrst step was to get traction by add-

case/INSEAD

JANUARY 2009

Because the bus operators were not computerized, redBus could not simply tap into their existing systems in order to put seats online. To get around this problem, Phani and his partners adopted an old practice that had long pre-dated computers: block booking

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case/INSEAD tomers. I said I knew it would work, and asked if he would help us. He said that he would give me one week to show progress or forget it. I knew that during that one week we couldn’t sell tickets on the Internet, since that was too short a time period for a new medium. So I went to bus boarding points in Bangalore, told everyone our story, gave people my card, and said ‘Call me and I’ll get you a seat.’ That’s how we did marketing for the first two months: going to bus stops, giving out cards, and telling people one at a time who we were. Most of the customers pitied us; they figured that a founder was telling them this story, so why not give it a try? A lot of people in the IT sector were able to relate to us.” Customer by customer, operator by operator, the redBus team built a business. “It was really tough,” Phani recounts. “An operator would call me and say ‘Come over to our office,’ and I would sit there literally until night waiting for them. When I did that, they said, ‘OK, I’ll give you a chance.’ Finally, one journalist was impressed and wrote a story about us, a good article profiling the launch of a new service. That gave us our first visibility.” From the operator’s point of view, redBus was simply another distribution channel. Says Phani, “We are another agent for them. They pay us a commission, just as they pay other agents. We didn’t add any mark-up because the reason why we started the venture was to help customers find tickets, not to raise prices for them.” However, the launch of redBus was temporarily delayed until the founders secured an online payment gateway. Historically, bus ticketing had been a cash business, and redBus had to reconcile payments daily with operators who were used to being paid in cash on the spot by their agents. Although operators saw redBus as just an online ticketing agency, the partners viewed the heart of their business as providing a superior customer experience by any means: online, through a call center, via home delivery, or through distribution partners such as Sify. redBus not only offered

standard fares from multiple bus operators but also allowed customers to choose their seat and book return tickets, services that traditional agents did not offer. Says Anandaram, “There was consumer demand for a quality customer experience for bus travel, which had been an unsophisticated and messy experience. We thought that if we could drive a consumer brand that promised a good experience, operators would eventually clamor to become part of the system and would give us access to their inventory.” Through word of mouth, public relations and search engine market-

Although operators saw redBus as just an online ticketing agency, the partners viewed the heart of their business as providing a superior customer experience by any means: online, through a call center, via home delivery, or through distribution partners such as Sify ing, redBus began to build greater awareness and established presences in Hyderabad and Chennai. Growth enhanced the value proposition redBus offered to operators and to other agents. Says Phani, “Consolidated information about departures and fares didn’t exist anywhere. Nobody knew how many buses went from X to Y, with what timing, and what was the price of a seat. We were the ﬁrst information tool anybody could use for that, including operators.” Although ticket agents saw redBus as a rival, they occasionally used it to book their own tickets in return for 30% of the commission redBus received from the operator. Phani explains, “When an agent

has someone in his office, he doesn’t want to let go, so he uses us as a last resort to sell a ticket.” Furthermore, most offline agents could only offer return tickets to their customer by booking them through redBus. As redBus began growing by leaps and bounds, it attracted professional investment. Phani relates, “Once TiE selected us, many investors came to know about us because online travel was the talk of the town. Several big investors approached us, so we asked our mentors for advice. They told us their opinion was that we should go with an early stage fund that would spend time with us, so we selected Seedfund.” This well-known venture capital firm invested $500,000 in redBus and partner Bharati Jacob took a seat on the board. By August 2007, redBus had opened new offices in Mumbai, Pune and Delhi, but Phani was concerned about the future direction of the firm. Many small operators were beginning to sell bus tickets online, and major travel portals such as Yatra were also expanding into the space. A significant venture-backed competitor emerged with a different business model. Says Phani, “Ticketvala.com was started by the former CTO of Worldspan, a wellknown name in travel. They raised three times as much venture funding as we have and they had more experience. Their model was to give software to operators, integrate them into an online platform, then launch a front end and make money. They saw themselves as software vendors and platform operators first and as a brand second, while we had done things in another way.” From the start, Phani and his partners had debated whether to think of themselves as a software company, an online platform, or a brand. Their mentors had urged them to move forward in the swiftest way possible by solving a problem, which had driven them toward brand-building and ticket sales. Now, Phani wondered, was it time to re-visit that decision and reorient the company to enable the next Case Study - Contd. on pg 82 phase of growth? JANUARY 2009 29

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slowdown/opinion also going back to our suppliers and trying to get better rates. We are doing everything possible.

Do you think the time is good to acquire companies at low valuations? Are you looking at acquisition? The company that one acquires should be right. One has to understand that acquisition is not something that you do and that is it. The easiest thing in an acquisition is to make up your mind; the toughest thing is to consummate the acquisition. One has to realize that a lot of bandwidth would get used up in the process. One has to look if that bandwidth would be better used in aligning yourself to company goals. We have been on the lookout for a while; that hasn’t changed. The cost of money is higher. But it has to be a spectacular company. The good news is that things might get cheaper, but the bad news is that even our cost of capital is higher. So the last thing that I’m going to do is go out and raise money again

The Mumbai terror attacks have hit the travel industry badly. How do you see the recovery happening? That blip was short. Flights to and from Mumbai plummeted 41 percent in two days, but then limped back to normalcy within ﬁve days. Business does go on, with Mumbai being a business destination. I think what has been hit the most is inbound travel holidays.

Deep Kalra

Founder & CEO, MakeMyTrip.com ow is your company dealing with the slowdown?

We are looking to see where cost takeouts can be done without too much pain. These are on facilities, so we are renegotiating a lot of our contracts including bandwidth, at times including rental. Travel and entertainment is a no-brainer. We are cutting

What should entrepreneurs do during the slowdown?

back drastically on that. Travel only when you have to, downgrade travel starting from me. This is a good time to tighten. When you are in a high-growth business, sometimes these things take a backseat. There are always some transaction losses that happen. We are going back to credit card companies and trying to get better rates. We are

These are tough times, and getting funding for an idea for pre-revenue businesses will be hard. Try to make sure that your revenues are aligned to costs as much as possible. But spending a lot of money on branding is not a great idea. Funding will be difﬁcult to get. The cost of money will be DAR E much higher.

This interview was done on the sidelines of TiE summit 2008, Bengaluru 30

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sector/cosmetics

Photo: istock.com

Organic and natural cosmetics and ingredients The share of organic and natural cosmetics in the $270 billion global cosmetic market is growing at a fast pace

/Ambrish Jha

n the last issue we had discussed how petroleum and cosmetics are related. Just to remind our readers, basic ingredients in many cosmetic products have their origin in petroleum. Distinct fragrances used in lotions, shampoos, and other cosmetic products are because of certain aromatic hydrocarbons that are also derived from petroleum. Dermatologists and beauty experts have always pitched against the use of petroleum based materials in cosmetic products. In recent times organic and natural cosmetics have not only surfaced in the market, but are also fast increasing their share in the overall global cosmetic market, which is worth over $270 billion. This article is an attempt

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to peep into the world of organic and natural alternatives to petroleum in the beauty care products, and explore possible business opportunities in the segment.

What are natural cosmetics? Ordinary commercial cosmetic products, which include even those that are manufactured by well-reputed brands, often contain toxic and chemicallypotent substances capable of causing long term adverse impacts on human skin. Some people, in fact, exhibit immediate health problems upon use of such products. However, more and more people around the world are growing aware of the dangers of using chemical cosmetics. This has led to a

steady rise in the demand for certiďŹ ed organic skin care and cosmetics. But what are natural and organic cosmetics and who certiďŹ es certain products to be organic or natural? Most users of natural and organic cosmetics are not aware of what the terms natural and organic refer to in the context of cosmetics. To a common person, natural cosmetics would be those that are not made using any chemical ingredients and processes. This deďŹ nition may look simple, but in the world of cosmetics it is far from being clear. Natural and organic cosmetics are mostly used synonymously. There are, in fact, differences between the two. Natural cosmetics replace the carcinogenic products

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sector/cosmetics derived from the petroleum base. Ingredients in natural resources are obtained from plants and natural sources. In fact, products are labeled quite often as natural in many countries, including the US, even if only 70 percent of the ingredients used in them are from plants and natural sources. The products that are thus sold can have some chemicals as their ingredients—chemicals that are supposedly not harmful to our skin. “White mineral oil is a safe, effective, time-proven ingredient preferred by many formulators,” says David S. Morrison (as quoted in various journals), an expert in the field of personal care. According to the US National Organics Program (NOP), a natural substance is derived from a plant, mineral or animal source, without having undergone a synthetic process. Others emphasize on 100 percent organic ingredients to be classified as organic. “Organic products go one step ahead (of natural cosmetics), says Veena Seetharama Annadanaa, Chief Consultant, Organic Agribusiness Consulting. She says, “Organic products are those which use plants and herbs grown organically.” Toronto-based Organic Make Up Company, which believes in 100 percent organic ingredients, defines natural ingredients as those that have not undergone any synthetic process and that are derived from plants, animals or minerals. The company includes those ingredients as natural that are refined through physical as well as biological processing. Ingredients obtained through simple technologies in use in a conventional kitchen are also considered natural by the company. The common person has taken natural and organic products as one, and the greatest advocates of the use of natural ingredients in cosmetic products have also not raised much hue and cry about this. They seem satisfied that natural ingredients are slowly replacing carcinogenic ones. They also know making organic cosmetic products is possible only with the greater acceptance of organic ways of farming.

Guidelines and certiﬁcations In the US, which is the largest market for natural cosmetics, the organic cosmetic industry is ﬂooded with new companies that claim to have organically manufactured products. In India, there have been some companies that claim to be selling natural and organic products. But they are mostly natural, and not strictly organic, for the products often on sale do contain some chemicals. Guidelines for certifying natural and organic products are far from being clear. A number of certifying agencies prescribing different standards for natural and organic cosmetic products exist in Europe. These included Soil Association (UK), Ecocert/Cosme-

“

Exact data is not available in India about the size of the organic and natural cosmetic products. But it is less than 5 percent (of the total cosmetic market of India). — Veena Seetharama Annadanaa Chief Consultant, Organic Agribusiness Consulting

bio (France), BDiH (Germany), ICEA (Italy), and Bioforum (Belgium). They have now agreed (in November 2008) to develop common standards for natural and organic cosmetics. Certifying of products (as natural or organic) will start from April 2009. These agencies can, however, still be able to develop separate standards as long as the baselines are met. The move is analogous to what has occurred in the organic food industry where the EU has minimum standards for organic agriculture and food products. Another Europe-based initiative called NaTrue has been set up in as-

sociation with German Cosmetic, Toiletry, Perfumery and Detergent Association (IKW) and US global standard like OASIS, NSF and NPA. Hopefully, these new common guidelines will ensure the products that are put up for sale by cosmetic companies do live up to their claims for being truly organic. Consensus as of now is that the products using more than 70 percent ingredients from plants or other natural sources are described as natural products.

Harmful chemicals and alternatives Modern research at the Herb Research Foundation has found that human skin absorbs up to 60 percent of the chemicals in products that it comes into contact with directly into the bloodstream. This is why the present day hormone therapy treatments and smoking cessation medications are often prescribed as patches that one applies directly to the skin. Going by the same logic, harmful chemicals used in cosmetics would be entering our bloodstream causing long term adverse impacts. Petrolatum, more commonly called Vaseline, and mineral oils, which are used in most of the cosmetics products and even in baby oil and lotions, form an oily ﬁlm over skin to lock in moisture. While doing so, these also trap in toxins and wastes and hinder normal skin respirations. Researchers at the Brunel University in England are looking closely at a family of preservatives called parabens, which are added to the cosmetic products to help them maintain their freshness and lengthen their shelf life. They are found in approximately 75-90 percent of cosmetic products like make-up, lotion, deodorants and shampoos. The research at the Brunel University has linked parabens to the possibility that male babies will have lower sperm counts. Parabens, which are derived from petroleum, can kill bacteria and fungi that could potentially enter a cosmetic product on the shelf of a shop or showroom. A conclusive answer is yet to come correctly gauging the extent of damages parabens can cause to human skin, JANUARY 2009 33

DARE.CO.IN but when they can kill bacterial cells, it is just left to our imaginations about the kind of damage they would be inflicting on human skin once applied. Among women, they have been linked to breast tumors and endocrine disruptor (by mimicking estrogen when introduced into the body). Propylene glycol, another common ingredient in cosmetic products, is also obtained from petrochemicals. This is added to numerous skin care creams and lotions as an emulsifying agent to make the skin look smooth. However, it speeds up the aging of the skin and can also cause irritation and contact dermatitis. Artificial fragrances, mostly obtained from petroleum byproducts, can cause numerous health problems including headaches, lung problems, skin irritation and dizziness. Of late, there have been attempts to find alternatives. Multinational companies have started focusing on organic cosmetics as these are considered not only safe for health reasons, but are also looked at as something environment friendly. Many people prepare organic cosmetics at home too. Some of the natural ingredients used in organic cosmetics are yoghurt, honey, oatmeal, chamomile, tea oil, etc. Natural extracts like hemp oil, tea oil, coconut oil, cocoa butter, carrot seed oil and aloe vera can be combined and mixed to form an effective lotion for the skin, which not only protects it from harmful sun rays but often softens and moisturizes the skin. Beauty recipes from China and India using traditional herbs have earned a special significance the world over. Ayurvedic recipes from India for skin and hair treatment also serve as cosmetics. Mud, mineral products, milk, milk cream, and eggs are used in various natural cosmetics. Spices and condiments like turmeric and saffron figure quite often in the list of ingredients for natural cosmetics. Lemon is another effective ingredient in natural cosmetics. Fruits can make up excellent face packs, and cucumbers, peaches and apricots can be especially mentioned in this regard. The oils obtained from 34

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sector/cosmetics almond and coconut act as very good massage oils for skin and hair, controlling wrinkle and crease formation on the surface of the skin. Natural perfumes can be obtained from essential oils of rare herbs. The best part about organic cosmetics is that unlike chemical based cosmetics, these do not interfere with the body’s absorption of vitamin D. Moreover, these help an individual to have a healthy skin, lustrous hair and glowing complexion in a completely natural way. Naturally-made cosmetics also help in skin tissues and cell repair. No wonder, more and more people are realizing the worth of organic cosmetics.

White mineral oil is a safe, effective, timeproven ingredient preferred by many formulators. — David S. Morrison personal care expert, (as quoted in various journals) Trend and market size According to a consumer survey conducted by Datamonitor in February 2006, 51 percent of consumers agreed with the statement that “natural ingredient based skincare and personal hygiene products are healthier and better” and 60 percent agreed that they “associate natural products with wellness/well-being more than unnatural equivalents.” The analysis showed then that natural personal care was a rapidly growing market, and had predicted a growth rate of 12 percent overall over the next ﬁve years. Natural personal care market, which includes skin care and hair care products, was more than $6.5 billion in 2007, with the US sales alone touching more than $4.5 billion, while European sales touched around $1.5 billion. Within Europe, Germany

is the leading market with total sales of around $825 million in 2007, corresponding to around 6 percent of the total German cosmetics market sales of $1.8 billion. Market share in Germany is expected to reach 10 percent by 2010. This seems quite possible particularly knowing current annual growth rates in the organic segment of the cosmetics market is around 20 percent. Global market for natural and organic cosmetics is expected to be around $8 billion by 2009. UK-based Tesco has started to sell organic cosmetics in supermarkets. It launched its BNatural range, a selection of 50 products, early this year. All products in the range are priced under £10. None of these products contain parabens or sodium lauryl sulphate, but only three are certified as organic by the Soil Association. “The range is not entirely natural, but it does feature natural ingredients,” explains Marian Morley, technical development manager for Tesco, as reported in UK-based newspapers. She says all fragrances within the products are 100 percent natural, which is a rare find in products retailed at this price point. She says, “Not every ingredient is organic because it is not possible to get organic ingredients for everything that’s needed—but it’s hoped that new organic sources will open up, because of customer and retailer demand. The range will be continually evolving and improving.” Popularity of natural cosmetics have reached beyond the US and Europe. They are creating quite a stir in Asia also, especially in Japan, Korea, Malaysia, Hong Kong, Singapore and Taiwan. In countries gaining economic weight such as India, sales volumes of natural and organic cosmetic products have increased significantly along with the other cosmetics. There have been several reasons for the rise in the sales of cosmetics in India. Income levels have increased significantly in India over the years, and this has allowed the evergrowing middle class to afford more personal care products. At the same

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sector/cosmetics time, high income consumers have started to look for premium products, which essentially mean natural and organic cosmetics.

Situation in India Most of the cosmetics market in India is captured by players who sell products having high amount of chemicals in them. One third of all cosmetic and hair care products contain carcinogenic ingredients that have proven to be extremely harmful to the human skin. Penetration levels of international brands are still quite low at only 20 percent. Remaining 80 percent of the consumers use low-cost cosmetic products. According to an ASSOCHAM study, India’s per capita consumption for cosmetics and toiletries for well-known branded products stands at $0.68 as against $40 in Hong Kong, $9 of Philippines, $10 in Malaysia and Taiwan, $12 of Japan and $1.5 of China. (Hong Kong has the highest per capita consumption for cosmetics and toiletries products because it is the launching pad for such products for most of Asian countries. According to Technopak consultants, Indian beauty and wellness products is about $5.7 billion. Veena Seetharama Annadanaa, Chief Consultant, Organic Agribusiness Consulting, says, “Exact data is not available in India about the size of the organic and natural cosmetic products.” She says, “But it is less than 5 percent (of the total cosmetic market of India).” This is quite expected as natural cosmetics are costlier than normally used cosmetic products. Users of the natural cosmetics would be from the segment which prefers top brands like Unilever, Procter & Gamble, Emami, Godrej, Loreal or Dabur. Veena says, “Alternatives in use (for petroleum by products and other carcinogenic ingredients) in natural and organic cosmetics are almost 200 percent costlier.” This effectively means smaller players are out of race to produce natural and organic cosmetics. Smaller players are, in fact, not even aware of what are the sources of the raw materials for the

cosmetic products they are producing. One such player, when contacted, showed complete ignorance of the fact that parafﬁn oil, mineral oil and other aromatics he was using to produce cosmetic products have actually come from petroleum. To expect him or many like him to even think of alternatives to harmful chemical ingredients would be lunatic on our part. In the Indian context we can safely conclude that ayurvedic cosmetic products are the only organic prod-

Not every ingredient is organic because it is not possible to get organic ingredients for everything that's needed—but it's hoped that new organic sources will open up, because of customer and retailer demand. The range will be continually evolving and improving. — Marian Morley Technical Development Manager for Tesco, as reported in UKbased newspapers ucts available in the market, even though there are a lot more natural cosmetic products, indigenous as well as imported ones. It is estimated that the total size of the Indian ayurvedic market, which includes the cosmetics, is Rs 8,000 crore and it is growing substantially between 10-15 percent. Major ayurveda cosmetic suppliers include Himalaya Drug Company, Vicco Laboratories, Emami Group and and Ozone Group. Some of the products, like No Marks manufactured by Ozone,

have managed to create a niche market for itself. However, Ozone’s chairman SC Sehgal was reported asking for more government support. He says, “There is an urgent need for more investment in modern research and improving marketing.”

Future Cosmetic manufacturers are gearing up to the demands of the people to have alternatives to the chemicals used in cosmetics. Consciousness for environment and health friendly products today is on a different level from the fast moving trends seen in previous decades. Today it is seen as something that enriches people’s lives. A survey by Datamonitor among consumers from the US and Europe revealed consumers are now quite conscious of the link between beauty and health; they view the two holistically. The solution lies with the people. After all, whether one continues using cosmetics that contain petroleum-based ingredients or not is a personal choice. What is important is to know that a person has a choice when it comes to buying organic or synthetic cosmetic products. There is an extensive range of natural cosmetics on offer already. Bottom line is that natural cosmetics have got a definite future. Veena says, “Growth of organic cosmetics in India would be slow but steady.” According to market research firm Nielson Company (2007 survey), 84% of Indians feel the pressure to look better than the generation before them, and 30% conceded they are spending more and more on beauty products and treatments. This spells business opportunities for the already established players in the cosmetic industry, and also for the new entrants. What is needed perhaps is a careful assessment of the market and continuous research on finding newer alternatives to the usual chemical ingredients. Global market for organic cosmetics is, after all, still growing at 9 DAR E percent annually. JANUARY 2009 35

DARE.CO.IN rom the armed forces to selling software to telecom services; how come?

Well, it has been interesting and adventurous. Of course, there were lots of ups and downs too. The fact is that the army has been a great place and I have had some of my best times serving there. I would say that the army makes one a much better person. However, there is a stage when you realize that it is not just the organization where you can grow enough, or perhaps the army does not even need you. At that stage, one needs to take a decision as to what should be done next. With me, this happened after serving for 22 years. This is when I realized that there were not enough vacancies for people to grow. So the ﬁrst step towards entrepreneurship happened with my decision to quit the army. Even the decision to become an entrepreneur did not come that suddenly. Before I quit the army, I had to decide on whether I should take up a job or start a business of my own. For me, the army was a great place to be in a job role. But if I had to do something great with my life, I knew entrepreneurship was the better choice. [Tulip Telecom] was originally started by one of my cousins and my brother-in-law in 1992. I joined them in 1994. Thereafter, we started out selling software products, got into hardware, then networking, followed by telecom, wireless, and now Virtual Private Networking (VPN).

/bio You have ridden on bank funding quite a bit. Can you share your experience with us? Initially most startups do rely on bank funding. When you start up, normally your idea is not mature enough for an angel to invest in you — they prefer to see some success in business ﬁrst. As a startup, you would typically put in Rs 100 from your pocket and expect the bank to give you a loan of Rs 200. With this Rs 300, you get started, and once the business tastes success, the investors come into picture. At this stage, the question is, “How much of equity do I want to let go?” As a tendency, startups typically go for as much fund as possible, not really bothering about the equity they are letting go in return. I believe one should restrict the amount of equity that one gives away. The focus should be more on getting maximum debt. So that whatever money you need, you have 50 percent more than that available for you to play around. I would say, try and have maximum of that from bank funding so that you conserve the equity. Rather than throwing your equity away on day one, save it for the time when the business grows, as this is when you will need your equity more than ever. But then, if your business is just starting, giving equity does add some credibility. It is all about getting the balance right. I believe that if you are sure about your business, go only for funding that you actually need, while trying to get maximum of debt, and retaining your equity till as late as possible.

Did you always want to be an entrepreneur?

Any advice for aspiring entrepreneurs while approaching a bank for business loans?

The thought of entrepreneurship came to me around 1986. I was posted as an instructor in the computer wing at Military

Banks go by the documents that you present. It is very important that you have the right people helping you with the business

entrepreneur of the month College of Telecom and Engineering (MCTE) then. I used to interact with a lot of businesses for arrangement of student training programs. This is when I started to have a genuine interest in entrepreneurship. However, I was also considering the fact that if one leaves the army after a span of 20 years then he becomes a pensioner. I knew that leaving after having put around 15 years in the army, without any security to go forward, would not have been the best decision. Hence, I waited till I completed 20 years of service. Around 1989, I decided to move on the next level in my life, and in 1990 I put that thought into action.

How do you know an opportunity when you see one? The only way to spot an opportunity is by constantly innovating. Whenever you are doing a business that is going steady, you should constantly experiment in multiple lines of businesses. You see opportunities as you grow, and as you see an opportunity you keep experimenting. Some of these may take off, while some may fail. I believe that just being steady does not move you forward; life is all about innovating and trying new areas of business. It has been in my very nature to keep doing something new in my life. 36

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plan, presentation for the bank and also other documentation. There is nothing wrong in getting professional help in doing all this. It is crucial to get good advice and have the right representation when you approach the bank. Normally, approaching the bank for a business loan is taken very casually and people do not approach them in a professional manner. You should know that the bank goes by proper documentations.

What were the different personal stages that you had in Tulip’s growth? At first, I was one of the directors in the company. In 1997, I bought out the company and since then I have been CEO. It has only been some time since I gave up that position and appointed Sudhir Narang from Cisco as CEO. I have always introspected myself as CEO as well as the owner of the company. There is a difference in both these roles. As a professional CEO, you are not putting money where your mouth is. As an owner-CEO you are doing just the opposite and know that if you are right, you win — you gain the money; if you are wrong, you lose — you lose the money. I believe that if a person has confidence in his own business, he can balance these two roles just fine.

/bio

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Lt. Col. (Retd.) H.S. Bedi, VSM TULIP TELECOM

Hardeep Singh Bedi served in the Indian Army for 22 years before he set out to start his own company. Tulip started as a software company in 1992, with four employees and a seed capital of Rs. 4 lakh. It rose to become one of the biggest network connectivity players in the industry. The company has a turnover of Rs. 1242.14 crore (USD 310.73 million) for FY 2008 and an employee strength of over 2,100. JANUARY 2009 37

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/bio SUCCESS MANTRAS/ NEW IDEAS OR DOING THINGS DIFFERENTLY WILL HELP YOU DO WELL. CONSTANTLY INNOVATE AND LOOK AT NEW LINES OF BUSINESS. KEEP YOUR MIND OPEN FOR NEW IDEAS. LISTEN TO PEOPLE AROUND YOU. YOU WILL BE ABLE TO PICK IDEAS FROM THE VAGUEST OF PLACES. CONVERT THOSE IDEAS INTO ACTIONABLE ITEMS. YOU NEED TO BE IN A NICHE.

What personal challenges did you face in these stages? I have a very great family who are really supportive. My wife, Maninder Bedi, is also working. Hence, half the day goes in our respective jobs, which leaves us with half the day to spend together. Our children joined the business immediately after their studies. My son, Deepinder Bedi (Director, International Business and Marketing) has been in the company since last five to six years. My daughter, Sukhmani Bedi (Director, North America)has been around for three years now. The children have had their share of work experience outside Tulip and are now pretty much handson with the business. Hence, at a personal level there were no big challenges, thanks to the support from my family. The one real challenge was at the time when I bought out the company. There were cash flow problems. In the initial phase, changes happened fast, and we did go through a rough time. The fact is that businesses never go upwards in a linear fashion; there are ups and downs in a manner of a curve. As long as one understands this, he is prepared to manage the downturns. How does one prepare for downturns in business? You need to have multiple product lines for this purpose. Because, if you are dependent on only one line of business and that goes down, you are in trouble. If you keep experimenting and innovating in newer areas, it will definitely sustain you through rough patches.

At what stage did you stop being hands-on in operational roles? I have never actually taken my hands off it. I have always remained personally involved. But yes, at a stage when I feel conﬁdent that the person heading that role is able to move at my speed to deliver as per my requirement, I do reduce my attention in that direction. My degree of involvement may change based on the person's performance. The ideal scenario to ﬁnd the right person to handle the operational role is promoting people who have been proving themselves in that line. This, of course, is the easy way. The problem comes when you hire new senior people, because these people may not necessarily perform the way you expect them to. So, one has to be very clear as to what the expected deliverables are. If they do not deliver as per requirement, opportunities should be given to other people in the organization who are worthy of that role.

ple to advice me, right people to handle my ﬁnances for me, and so on. They helped me take the business to the next level.

Where did you get your early support from? My family has always been there. Besides them, initially the four employees who were with the company were a major part of the business and their support helped me a lot. It has been 16 years now, and there are around 15 people who have been with us for 10 to 12 years now.

What was your ﬁrst big success? Around 1999, Tulip had just got into the wireless business as we saw tremendous potential in that area. We were looking for a big order and we got one from a bank. In 1999, we were able to connect a bank across multiple states wirelessly. This became our ﬁrst and one of our biggest successes.

One failure that you learned from? The biggest failure was that I was not able to get a good bank right in the beginning, due to the lack of understanding of the banking system. I was stuck with that bank for almost ﬁve years, which did not really support growing my business. That was probably the worst time that I went through. For the aspiring entrepreneur who go for bank loans, the right thing to do is to change banks as soon as possible. He should also get the right people to advice him on generating ﬁnances at the right time. Do not sit on one single bank for a long time. One needs to understand that business is a race between two horses. One is the running horse (revenue), and the other one is the eating horse (expenses). The horse moving faster dictates where the business is heading. One needs to make sure that the running horse stays ahead.

Your biggest faith came from? The faith shown by my large customers — both were banks. I convinced them of my new line of business i.e. to provide connectivity to banks across the country. Their acceptance and understanding of our business model meant a lot. After having done that for one bank, a second bank started following the same line. As a result, our business really took off and that was the turning point.

What was your ﬁrst big challenge?

When and how did you know you were ready to go public?

The biggest challenge was to have adequate working capital to meet business requirements. This was especially so around the time frame of 1995-99. To tide through this, I got the right peo-

I think it was around mid-2005. We had done this project in Malappuram district for the government of Kerala, after which we thought that we had a very good idea in motion. We wanted

JANUARY 2009

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/bio to do similar things in other places. We did a similar network in Mumbai and some other locations. We were sure that this could be a really good business. Then I started going around to generate funds for it. I went and met all the large funds. Every fund said that while they liked the business, they did not understand it. Hence, none of them invested in my venture. Finally, when I did get approval from a couple of funds, I realized that it was taking too long. Hence, I decided to go for an IPO.

How will the current financial slowdown affect your business? Any countermeasures? As things stand, it appears that the companies are likely to cut down on their Capital Expenditure (CAPEX) and some deduction of Operating Expenses (OPEX). As a part of our overall business strategy, we are reducing the network integration part of our business, which is what companies need CAPEX for. As far as OPEX is concerned, with the whole lot of fiber that we are doing, we have suddenly increased the addressable market by almost 550 percent. The financial slowdown may reduce the spending of some customers. For not get effected by this, we have realigned our business in such a way that: one, in case of the CAPEX slowdown, we plan to reduce sales in the trading and equipment business; and two, in order to make sure that the slowdown does not effect our core business i.e. the bandwidth business, we have restructured our business to increase our overall business by 550 percent. Therefore, we do not see a slowdown, but an increase in the business instead.

“

What is the next big thing in the area of data connectivity? In the ﬁeld of data connectivity we expect to see more players coming in and a tremendous growth thereby. This growth will come from greater coverage of network. So far, network has been restricted to the top eight to ten cities. As it starts moving to the interiors of the country, more and more parts will keep getting covered. The point is that the government needs infrastructure to deliver services. This infrastructure can be in the form of road, water or data connectivity. Data connectivity is a fundamental infrastructure for delivering services today. Going forward, as companies like ours expand, the ability of organizations to deliver better services in other parts of the country will improve.

You intend to reach out to every village in the country. What are the milestones set?

Banks go by the documents that you present. It is very important that you have the right people helping you with the business plan, presentation for the bank and other documentation.

BFSI, defense, government, and telecommunication, how is your experience of working with various industries?

All these industries are good. Our experience of working with the private sector has been very good, but with the government sector, it has not been the best. There is a lack of respect for the money of vendors in government organizations. Businesses like ours works on very tight budgets. We like to implement projects very quickly, and we need to get our money out quickly, as we are paying ﬁnance costs. It is our investors’ money that we are putting on the table while implementing projects with the government. In the bandwidth business, we are very happy with government organizations and we continue to work with them. The problem area is hardware and network integration where the payments get held up. This delay adversely affects the proﬁtability of these projects, and as a result affects the margin of returns that we can give to our investors. This is not desirable by for business.

”

As a prudent businessman, it is not that we first make the expenses and then look for customers. We first get the business and then make the expenses. Having said that, we are now looking for orders. There are some states for which we have got orders. As the orders keep coming, we will start rolling out the network to cover every village. Therefore, we do not set any milestone. The milestone is basically to pick up the orders. Our aim is to reach every village within two years, but that depends on us to be able to pick up the orders. The point is that we are willing to make the investments to reach out, but now it is for the government and business organizations to see whether they need services there. If it becomes profitable, then we will go there.

How much personal time do you get? How do you spend it? Honestly speaking, I only get my Sundays off. What do I do on that one day? I spend the day in bed [laughs]. I lie there all day watching television and movies. My wife has no choice, because she has to share the bed with me [laughs]. The children bear with me as long as they can. To be honest further, these days my lifestyle has changed quite a bit. I believe that there are different stages in a man’s life. I believe that this is the stage for me to create an organization. I want this organization to be something that a person would dream of to make in such a short time. The fact is that I have actually felt an increased sense of success in this organization since January 2006. My aim is that in the next ten years, I would like to make this company really big. Now is the time DAR E for me to do all this. JANUARY 2009 39

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manufacturing/holograms security proof for brands. Holograms, thus, assure consumers about the quality of the brand. The government of India is one of their biggest users in the country. Voter ID cards, driving licenses, and passports carry security holograms; and with car theft on the rise, holographic security number plates are likely to be used for new vehicles. The Indian hologram market is growing at 20 percent per annum and has more than 40 players. According to Manoj Kochar, MD, Holoflex, “The hologram has become the first point of the sale verification feature. People are looking for a hologram on documents, bank notes, and products. But that alone is not sufficient. It is impor-

The business potential of holograms With industries and government waking up to piracy and counterfeits, the business of holograms has a promising future /Mohita Nagpal

iracy regularly eats into the proﬁts and reputation of big businesses. So much so that goods worth $600 billion are counterfeited every year. International alcohol brands lose approximately $300 million a year due to piracy. In 2006, India lost $1,250 million to software piracy. This has made several businesses sit up and take steps to protect their interests. The use of holograms is one such measure. 40

JANUARY 2009

Although the use of holograms in developed countries started in 1947, it started to gain popularity in India in the early 1990s. Brand identiﬁcation and security were the main reasons behind their use. Each hologram is unique and one cannot recreate the same even with the same manpower and machinery. A hologram cannot be replicated, scanned, photocopied, or printed. That makes it an excellent

Earlier, the biggest challenge of this business was educating the brand owners about what a hologram could do for their brand. I actually had to spell out a hologram to a customer. Now, the challenge is to meet the cost expectation of the customer because now he has options.

— Manoj Kochar Holoﬂex

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manufacturing/holograms tant to educate the customer about the special features that one ought to look for in a hologram.” There are three types of holograms — security, packaging, & promotional. Security: Security holograms have a market size of Rs. 150 crore. It is a technology-driven segment that needs constant innovation. Around 35 players in India are manufacturing this type of hologram. It is a low-volume high-margin business. Very high volume orders of security holograms become non-viable as the cost of manpower security is very high. Packaging: This category has a Rs. 250 crore market, and is a highvolume, low-margin business. Here, the price competition is greater as the customer buys the hologram not for its security feature, but just to ensure the presence of a hologram. Hence, the customer looks for the cheapest option. Promotional: Promotional holograms are a popular phenomenon abroad, but the trend does not seem to be catching on in India. There are hardly any makers of such holograms, and its market is less than Rs 1 crore. In the past, promotional holograms have come in the form of tazzos in potato chips packets, but it has never shown any growth. The reason being that Indian companies have still not identiﬁed it as a promotional vehicle.

DARE/overview Industry

Holograms

Types

Security, promotional, packaging

Number of Players

Market Size

Over Rs 400 Crore

World market

US$ 2.4 billion

Growth Rate

20%

Proﬁt margins

5-25%

Initial capital

Rs 1-3 crore

Growth Indicators

Brand security consciousness, rising counterfeiting.

Challenges

Constant upgrade in technology, sourcing of equipment, educating customer about brand security, security of premises, meeting cost expectations

Major Players

Holostik, Holoﬂex, Alpha Lasertek, Everest Holovisions, Flex

Manufacturing holograms There are two ways to go about manufacturing holograms. The most important process of holography is mastering, that is, creating the “master copy.” From the master copy, one can replicate holograms. Creating masters is an expensive as well as a highly technical process and only a few in India are equipped with a mastering lab. An entrepreneur can acquire all the latest technology and mastering machinery with an investment to the tune of a few crores of rupees. Alternatively, one can outsource the master and invest about Rs 50 lakh in other machineries to emboss holograms. And after a few years of experience and a little more cash in his kitty, one can start creating one’s own masters.

The moment I see a threat, I upgrade my technology immediately. It is a big race where you are running and the counterfeiters are running along with you. You have to be one step ahead of them.

— U.K. Gupta Holostik India

Holography starts with preparing the artwork. It includes the name of the company, logo, and other brand information. Then a master is created by recording a laser image on the glass using optical technology. According to U.K. Gupta, CMD, Holostik India, “Mastering requires a very calm environment as even a slight change in the temperature of the room can change the outcome of the image. Also, one cannot create the same master again in case it is damaged.” After preparing the master, the next step is electroforming. In this process one has to replicate this image from glass to a nickel plate. From that, again, various copies are created. In holography language, the ﬁrst copy is called the “grand mother.” One cannot replicate numerous holograms from the ﬁrst copy as it will damage it. A second copy is made that is called the “mother” and then various “daughters” are produced from it. The daughter is used in the embossing machine to produce holograms. The entire process requires a number of machines, including a master origination machine, silvering machine, mechanical recombination machine, electroforming tanks, embossing maJANUARY 2009 41

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manufacturing/holograms Challenges

New Technologies in Holography Holographic data storage: Holographic storage is an optical technology that allows 1 million bits of data to be written and read out in single flash of light. InPhase, a US-based company, recently launched its first commercial holographic drive. This is capable of storing 300 GB of data, the rough equivalent of 60 DVDs. Holographic conferencing: Hologram conferencing tries to make people appear as a hologram (virtual person) in real time, anywhere in the world. Holography in solar energy: Holograms can be designed and produced for solar energy installations. Using special holographic optical elements, the path of sunlight can be modified, especially concentrated, reflected, diverted, or dispersed. Medical holography: Holographic lenses can check the blood sugar level of a person. Holographic 3D images of eyes, testing of human teeth, and chest motion during respiration were carried out quite early. chine, coating lamination, die-cutting, and numbering machine.

Why can’t a hologram be duplicated? A hologram cannot be duplicated unless one has access to the original master. Of course, a counterfeiter can always order similar holograms from a manufacturer by paying a bit extra. But the stakes are too high for any manufacturer to take the risk. As Kapil Bajaj, MD, Bajaj Holographics says, “In case the manufacturer is caught, his machinery can be frozen. No manufacturer will take the risk, as the cost of his machine is too high as compared to the size of the order. It is suicidal, almost as if you are smoking in a storage where all ammunitions are kept.” Moreover, the manufacturer can also be sued under the Copyright Act for creating similar artwork. To prevent illegal duplication of a hologram, the Hologram Manufacturers’ Association of India (HoMAI) has a security hologram roster. According to C.S, Geena, Sectretary, HoMAI, “Each hologram producer registers the holograms it produces on behalf of its customers. Each member before making a new hologram searches it with the roster to prevent accidental copying of an image. Once we are sure that the new image is purely authentic, a certiﬁcate is issued to the hologram producer.” 42

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According to Gupta, “Anyone can start a holographic company. The challenge, however, is to keep upgrading the technology.” He states that he spends at least Rs. 5 crore annually in just technology upgrades. “Even if you locate the technology abroad, it is not as if they will give it to you. They will research the background of your company and will make sure that you don’t misuse it,” he adds. “The Indian market is growing in terms of volume, but not in terms of value. The players don’t understand the market. They think that by reducing prices they can get more sales. At the end of the day they don’t have enough money to do R&D. It is not a print and packaging business wherein you just buy the machine and expect money. You have to constantly upgrade technology,” says Rohit Mistry, Founder, Holographic Security Marking Systems, who has had exposure to the holographic industry in European markets as well. As not many companies are yet aware of the beneﬁts of a hologram, the market has still not grown to the size it can.

The future

If a person can keep upgrading technology, this business promises a lot of potential. The government of India requires very high security markings. Counterfeiting is also growing very fast and brand owners would also want to ensure that the credibility of their brands is not damaged.

— G.S. Dhillon Alpha Lasertek

The future of this business depends a lot on the acceptability of holograms. With an alarming rate of counterfeiting, brand owners are becoming increasingly security conscious. Holograms on currency notes: A few manufacturers have been consistently trying to convince the government to start using holograms on currency notes, something that currently more than 100 countries are doing. According to a study on Canadian currency notes, after the introduction of holograms the counterfeiting rate dropped to 60 ppm (parts per million) in 2008. Technology integration: According to Kochar, “If one is thinking of entering this business, then one must carefully assess the industry and try to ﬁnd out a gap that one can ﬁll. Holograms as a standalone would not be the solution. Merging various technologies is DAR E clearly the way.”

a movie about entrepreneurship

showing soon in your city (entry by invitation only)

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Weighing the ‘gold’ in ‘Green’

/Irawati Gowariker

an companies that are into sustainable development sustain the testing times of a slow economy? A close glimpse at ‘green investing’ i.e. investing in environmentally responsible companies can provide a more accurate answer. Heads of industry bodies, banks, venture capital ﬁnancing companies and investment advisors are all commenting on green investing which has lately been gaining prominence in India. They share one view on green investing -that it is no longer a choice between “Save your money” or “Save the trees”. The green

JANUARY 2009

space may well become a ‘greener pasture’ for entrepreneurs. But before we weigh the ‘gold’ in green, let’s begin with an overview of the broad green landscape. Green investing pans across players in renewable energy sectors including wind, solar, hydro power, bio-fuels, biomass, rural energy technologies, waste management, new energy technologies (chemical fuel cells, hydrogen energy, ocean energy, etc.), consumer durables such as energy efﬁcient home appliances, green construction and industrial products (like water treatment,

Photo: istock.com

/INSEAD air pollution control equipment). The green market size and opportunities are promising, says a recent Merrill Lynch and Capgemini report, which attributes its robust growth to the world community’s increased attentiveness to environmental concerns, such as global warming and climate change. Emerging markets attract less than 1% of the US$ 3.7 trillion managed by the criteria of responsible investing. There is more encouraging news for environment-friendly entrepreneurs. Green entrepreneurs can now pitch for investments through the Green Investor’s Network. Launched by New Ventures India, this is a joint initiative of the CII- Sohrabji Godrej Green Business Centre in Hyderabad and the World Resources institute in Washington DC. According to Sr. Director and Head-CII-Sohrabji Godrej Green Business Centre, S. Raghupathy, the Green Investor Network is “an initiative to create a community of investors, focused on investing in clean technology and clean energy sector. We facilitate investments in unlisted small and medium enterprises in the clean technology and clean energy sector. At the moment we have 8 members in our network with commitments from many more venture capitalists and banks”. The New Ventures India program has successfully facilitated investments in eight green companies to the tune of US$ 18.6 billion (Rs. 73 crores) in the form of equity and debt. From an investor’s standpoint, Raghupathy is convinced that “green makes good business sense as clean technology and clean energy sector in India is growing very fast. Under the New Ventures India program we have been working with more than 200 enterprises in the green sector since 2006. We have screened and identiﬁed the most innovative and promising 21 companies since the past two years. The major investments were made by venture capital funds, a clear sign of the shifting focus of investors from information technology, telecom, realty etc to Green.” Viewing the road ahead, Raghupathy sees a large opportunity for green entrepreneurs as this strong

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/INSEAD

The whole idea of going green has caught on with more and more Indian corporates. No wonder, many companies have put environment management systems in place and are trying proactively to be green.

Wind Turbine

— Hemant Rustagi CEO of WiseInvest

Hydro Power

Photo: istock.com

investor network has the potential of attracting huge investments in the near future. One of those large investors that Raghupathy refers to is Manoj Gupta of Nexus India Capital. A leading venture capital ﬁnancing company, Nexus has invested in a solar powered portable LED lights company, Dlight, and an organic farming company. Gupta draws a parallel between the telecom and energy industries as he explains, “In India, we see a similar revolution as telecom (enabled by mobile phones) in the energy space, enabled by renewable energy sources. Energy is a huge problem in India. We consume only one-fourth of world’s average per capita power consumption. Greenhouse gas emissions coming from power generation is harmful for everybody and for sustainable development of any society

Solar Energy JANUARY 2009 45

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Organic Farming

ITC Green Building 46

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Photo: istock.com

Bio Fuel

/INSEAD it is important we adopt green technologies.” Having actively invested in clean energy companies at a very early stage, Gupta continues to bet big on clean energy and doesn’t mince words when he says, “CleanTech is one of the sectors where companies should use this recession time to build long term value and not worry about short term losses and gains. India’s energy problem is a fundamental problem, which cleantech alternatives can address if they are made “cheaptech”. India can be a launching pad for “cheaptech” solutions in a CleanTech global scenario. Entrepreneurs will fail in India if they play by CleanTech hype in the western world. If currently CleanTech is version “1.0” in western world, we should look at in India version “0.1” opportunities (technologies addressing fundamental problems) or version “2.0” opportunities (leapfrog technologies like happened in telecom using mobile) because problems in India are different than western world”. Gupta has started a CleanTech Special Interest Group in Mumbai with The Indus Entrepreneurs (TiE). These data points further substantiate the future potential of the green market. According to Clean Edge, the US-based green technology consultant, the four clean-energy technologies of bio-fuels, wind power, solar energy and fuel cells were worth US$ 40 billion in 2005. They estimate the industry to grow to US$ 167 billion by 2015. In India currently, 11,000 MW of power is being produced from renewable sources. During the 11th Five Year Plan, the Plan panel is targeting 15,000 MW of capacity addition. According to estimates, renewable sources contribute only 7.7% of the country’s total power generation, as against the world average of 13%. This leaves scope for massive growth of the solar and wind energy sectors (a renewable energy SEZ is also in the ofﬁng). India is the fourth largest ethanol producer globally after Brazil, the US and China, with its average annual ethanol output touching 1,500 million litres. For a 5% ethanol blend in petrol nationally, the ethanol required is 550-640 mil-

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/INSEAD lion litres annually. The sugar industry wants the government to also approve ethanol blending with diesel and if that happens, the demand for ethanol will quadruple. Hemant Rustagi, CEO of WiseInvest Advisors, an investment advisory firm based in Mumbai analyses this as, “The whole idea of going green has caught on with more and more Indian corporates. No wonder, many companies have put environment management systems in place and are trying proactively to be green. Besides, tough environmental regulations, growing preference among consumers for eco friendly companies and inherent cost benefits are some of the other reasons that have prompted many companies to strive for a balance in economic, environmental and social impact on their businesses”. Confidence in sustainable companies as a sector was reiterated when a fund house launched a mutual fund for sustainable development. ABN Amro Sustainable Development mutual fund philosophy is that of investing in socially responsible companies. Top holdings of this fund are by blue-chip companies including Reliance Industries, Bharti Airtel, ICICI Bank, L& T, Hero Honda, Tata Power, SAIL and others. K C Reddy, Chief Investment Officer, ABN AMRO Asset Management, India explains the construction of this fund to retain the fund’s philosophy, “We not only looked for attractive investment opportunities in sectors like alternative clean energy, organic farming, environmental purification and water conservation, we are also looking at companies in existing sectors which can generate growth without hurting the environment or efficiently utilising resources. Therefore, opportunities exist in both large and small companies. We also like companies that either are investing in other companies that promote social responsible growth or work with organisations that limit damage to the environment”. About its performance, Reddy says, “At its peak in January 08, the fund has returned around 60% with its growth option NAV per unit at Rs. 16.02. As ex-

CleanTech is one of the sectors where companies should use this recession time to build long term value and not worry about short term losses and gains. India’s energy problem is a fundamental problem, which cleantech alternatives can address if they are made “cheaptech”.

— Manoj Gupta Nexus India Capital pected, the equity market correction in 2008 has hurt performance”. Commenting on the performance of this one-of-its-kind mutual fund in the Indian market, Rustagi says, “The performance of this ABN Amro mutual fund is in line with that of diversiﬁed funds. The launch of this fund is a positive development and more such launches will compel companies to improve their environmental, social and governance (ESG) standards”. For retail and institutional investors looking to invest in green stocks, the search has now been made less cumbersome with the launch of the S&P ESG India index earlier this year. Initiated and sponsored by the International Finance Corporation and developed by a consortium of Standard & Poor’s, CRISIL and KLD, this pio-

neering investable index includes 50 NSE-listed companies whose business strategies and performance demonstrate high commitment to ESG standards. Unlike previous indices of this kind that measure ESG parameters on a committee and internal consensus basis, the quantitative scoring system of S&P ESG India index lends complete transparency to responsible investing. Drilling the discussion down to specific sectors and green listed companies, these experts were equally forthcoming with their thoughts. Nexus’ Gupta elaborates, “Companies I am bullish about are Suzlon, Praj, Moser Baer, Shriram EPC and Thermax. Suzlon is a leader in wind and will remain so for quite some time. Praj is doing some very interesting research in next generation bio-fuels which can be very promising going forward. Moser Baer’s thin film capacity will soon come online enabling reduction in solar prices. India needs good engineering talent in renewable, and Thermax and Shriram EPC are leaders in renewable engineering”. Himanshu Varia, senior analyst, Asit C Mehta advises investments in Suzlon and JP Hydro and adds, “There are many other companies that are involved in other areas like solar energy equipments, equipments for bio-fuel plants, etc. Some of the companies have taken up these initiatives as part of their diversification measures”. As far as alternative energy and organic farming are concerned, investment advisor Rustagi’s thoughts are, “As the government is pushing the plans to make renewable energy generation mandatory for power producers, all companies will go into renewable energy. This will boost investments in the sector benefiting investors over time. And incentives announced by the government for solar and wind energy companies would promote and attract foreign investment to the sector. Some of the companies like RIL, Suzlon, Essar Power and Tata BP Solar have been investing more in renewable energy. Organic farming can be a promising sector since the demand for organic products has been on the rise year after year”. Another green sector Rustagi JANUARY 2009 47

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E-waste recycling

Waste Management 48

JANUARY 2009

Photo: istock.com

Tidal Energy

/INSEAD points out is that of bio-fuels. “Bio-fuel is likely to gain importance in the light of increasing energy demand. Bio-fuel companies can be a good bet for serious long term investors” Rustagi adds and summarises, “Efforts by these companies in improving environmental sustainability are likely to improve their overall efficiency and contribute significantly to their bottom lines. This in turn would benefit investors holding stocks of these companies in the long run”. Having facilitated investments in unlisted small and medium enterprises in the clean technology and clean energy sector, Raghupathy’s firm belief is that, “These players will be listed entities of tomorrow providing tremendous value to the stakeholders and environment. The current trend may facilitate platforms like the Alternate Investment Market (AIM) on the Indian soil in near future to cater not only for equity investors but also for carbon trading”. Echoing these positive sentiments even through a recession, venture capitalist Gupta avers, “In a recession, the best companies will be those focused on energy efficiency because of better capital efficiency than on energy generation side. Given the capital constraints, energy efficient solutions with low payback period will be very interesting, especially for high energy intensive industries. Through the economic downturn, the best companies will be those aligned with government policies and government spending,” Gupta illustrates this further, “For example, companies aligned with APDRP (Accelerated Power Development and Reform Program) scheme where government is spending billions of dollars on grid upgradation will do very well even in a recession”. While Indian investors and companies alike are getting better tuned to the advantages of triple bottom line (People, Planet, Profit) investing, entrepreneurs that are thinking green DAR E could make others see green. Irawati Gowariker, a communications specialist and a media professional, has previously steered Corporate Social Responsibility for HSBC’s software development arm.

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slowdown/opinion

to learn to deal with it. A lot depends upon when the markets return to normal. If the markets don’t come back for another 10 years, then I don’t have any strategy, and nor will anyone else. May be some valuation change may happen. You can perhaps incentivize the entrepreneur more depending on performance. So you pay him/her more if they are performing despite the environment. That kind of tweaking may happen. If an investor has money, he should go and invest, but at the same time, not make a stupid investment.

Some of the sectors where the outlook is bright despite slowdown? One sector that stands out is healthcare because it doesn’t get affected by slowdown. Second is the Internet. When it is the physical costs that people want to save, it will divert them more to doing things online. So the Internet and mobile are also good sectors to look at. Also because the 3G spectrum is being rolled out, it would provide opportunities for value-added services.

What advice do you have for entrepreneurs who are ready with their business plans?

Pravin Gandhi Partner, Seedfund

o you think entrepreneurship will suffer during the slowdown?

Two things will happen. Firstly, the availability of capital will reduce. At this point now many funds will get raised. New capital will not come. Secondly, as the markets have collapsed, everybody’s view of exit pricing will also reduce. Hence, valuations will suffer. Because of that one suspect, I hope that it does not happen, entrepreneurship itself will suffer. After the 2001 bubble burst, it took four to ﬁve years for things to return to normal. Depending on what the recovery time for this mishap is, it will either take this much longer or it will return in a hurry. Angels will be careful with their money

because their wealth has depleted. So all this will have an impact. On the slowdown, I have a feeling that next year is deﬁnitely gone. My hope is 2011 is when you will begin to see the rebounding of the Indian economy. With America and other countries throwing so much money into this, it will take two years for it to trickle down to the consumers. If that happens, we are back in business.

Has there been a change in your investment strategy? We are still a long-term investor because we invest in the early stages. Our view is that what would have taken four years may now take ﬁve years. One has

If you have a good idea and you believe that it should be funded, then you should go look for funding. In the worst case somebody will say no. But why wait if you believe in your idea? However, people should learn to listen. If, suppose, five VCs say that it can’t be funded, don’t blame the VCs; instead, go and review the idea. If you have a retail venture plan, clearly this is not the right time to start one. So look for something on cost savings. See if you can come up with a solution to the real problem. For those who started last year, I would say do not try to expand right now, but try to stay on course. Conserve your cash and try to break even. All that goes down comes up. You should be smart enough to believe that you will ride out the storm. If you are good at what you do, somebody will find you out and give you business. I would not invest lot of money today in going out DAR E and finding customers.

This interview was done on the sidelines of TiE summit 2008, Bengaluru JANUARY 2009 49

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opportunity/manufacturing

Home water puriﬁers business As the penetration level of puriﬁers is minuscule, there is space for new players to enter /Ambrish Jha

ooking for water purifiers? Forget the ones who come knocking on door persuading you to buy one explaining how important water purifiers are for one’s own safety. Just click on Yellow Pages directory and you will come across hundreds of names providing the same in different Indian cities. Add to this the big names like Eureka Forbes, Kent, Phillips, Ion Exchange, the new entrant Whirlpool and you will find the list quite exhaustive. The underlying message is clear – business of water purification machines is lucrative, growing and is here to stay. The exact size of the market is difficult to estimate with any accuracy,

JANUARY 2009

considering different claims made by different players. What emerges as consensus is that the market is definitely worth over Rs 1,000 crore. While Whirlpool estimates it to be Rs 1,400 crore (in April 2008 when it entered water purification market) industry, Eureka Forbes put figures at Rs 1,000 crore, Mumbai-based Ion Exchange at Rs 800 crore, and consultancy firm Frost and Sullivan describes it as Rs 1,400 crore business.

Major players 1. Eureka Forbes 2. Kent 3. Ion Exchange 4. Usha Breta 5. Phillips 6. Luminous

Types and uses There are several kinds of puriﬁers in the market. Most popular types are RO (reverse osmosis), and UV (ultraviolet)

7. Whirlpool 8. Hindustan Lever

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opportunity/manufacturing based. Besides these, there are simple candle filter purifiers, softener plants, and distill water plants (used for commercial purposes alone). UV based water purifier systems used to be sold more than RO purifier systems till recently, but things have begun to change. According to Frost and Sullivan, roughly 41 percent of all purifiers sold in India are now RO based. This is quite high considering the world average of only 11 percent. Not all purifiers should be sold everywhere, but the bias towards RO purifiers seem so imminent. RO purifiers should be used at only those places where total dissolved solid (TSD) count in water is more than 100 ppm (parts per million). Below this, UV purifiers are recommended, but RO purifiers seem to be a clear favorite among people. “I have not sold any UV (Ultra Violet) based purifier in the last 3-4 months. I would say the sale of late has been almost 50-50 between UV and RO purifiers,” says Amit Thakur, MD, Swastik Enterprises, a Delhibased company selling its own brand of water purifiers. RO purifiers are preferable for ground water usage, or where water is hard or salty. Amit says, “In water supplied by Delhi Jal Board, TDS count is between 90-150 ppm. RO is still advised in Delhi because corporation water often contains excess fluoride, calcium, magnesium, and even nitrate, ammonia and pesticides.” RO leaves only 10 percent ppm of TDS after purification. However, TDS count below 50 ppm is good for human health. RO may, therefore, actually deprive water of beneficial minerals also. Perhaps this explains why Kent has come up with a new solution. It has attached a TDS mixture with membrane, a vital component in purification of water in RO purifiers. TDS mixture allows some water to go straight to storage tank and mix with the purified water. This helps in maintaining the optimum TDS count, saving water from being deprived of necessary minerals.

diseases has increased, and along with it has increased the income of Indians. People have now more income to dispense with than ever before. Penetration level of purifiers is still abysmally low in the country, with the highest penetration level recorded in Delhi, where the figures stand at 25 percent. Contrast this to the figure of 0.42 percent in Bihar, and less than 5 percent for Gujarat, Tamil Nadu, Punjab and Karnataka, and one can find the logic behind the fast paced growth seen in the purifying business.

If you have knowledge of the field, and you have the will power to put in hard work, you can start on a small scale with merely Rs1 lakh as capital. — Amit Thakur Swastik Enterprises Driving force Disagreements may exist as far as estimates of the real size of the market is concerned, but there is no denial that the market is growing, and that too at impressive rate. There is no unanimity even in assessing the growth rate though. Claims range from 12 to 20 percent. “Everyone gets business – branded companies, companies in the unorganized sector, and even those going door to door independently,”says Amit. So, what drives the market for water purifiers? Is it the fear of getting infected by water borne diseases, or is it the low penetration level of the purifiers at the moment which is driving the sector at a phenomenal rate? It seems to be a bit of both. Origin of around 25 percent of all diseases in India is attributed to water. Awareness to protect against water borne

Market and major players There are players in both organized and unorganized sectors, with the contribution of the unorganized sector in overall business being 45 percent, says Frost and Sullivan in its report. Eureka Forbes, Kent, Usha Breta, and Ion exchange are the major organized players. Whirlpool has started in April this year (2008). Besides these, there are the cheaper Chinese products as well. Amit says, “Sale of Chinese products is minuscule. I do not know about market statistics, but my experience says organized and unorganized players sell almost the same number (of purifiers).” Eureka Forbes is the leader, followed by Kent and Ion Exchange, says Amit, who is in the process of establishing a name for his own company’s branded products. Whirlpool officials do authenticate what Amit says. According to one of his officials, penetration level of purifiers in India as a whole still stands at less than 1 percent, with penetration in Tier I city being close to 35 percent, and in Tier II cities at only 11 percent. He says, “There is huge scope right now at different price points.” No wonder Whirlpool products are priced between Rs 14,450 and Rs 22,950, a bit higher than even the products of other established players. Organized players usually sell their branded UV purifiers between Rs 7,500 and Rs 10,000, while unorganized players sell the same for anything between Rs 5,000 and Rs 7,500, and the Chinese UV purifiers are priced between Rs 3,500 and Rs 4,500. JANUARY 2009 51

DARE.CO.IN As far as RO purifiers are concerned, the Chinese ones are at the lowest rung again, selling at anything between Rs 5,500 and Rs 7,500. Unbranded good quality RO products are sold between Rs 9,000 and Rs 12,000, while branded RO purifiers range between Rs 12,000 and Rs 18,000. Candle purifiers, which are in demand only at those places where there is no electricity and water supply, sell between Rs 3,000 and Rs 4,500.

Key to business “If you have knowledge of the ﬁeld, and you have the will power to put in hard work, you can start on a small scale with merely Rs1 lakh as capital,” says Amit. “Everyone gets business.” He says the difference in quality between purifiers provided by big brands and unbranded ones are not much, as almost all players procure components used in the machines from common suppliers. Prices depend on what quality of products are actually used in products. Thus there can be 3-stage automatic UV filters competing with 3-stage and 5-stage manual purifiers. Success of a product in the market, in fact, depends on two essential factors- advertising and after sales service. Purifying being a relatively new business, advertisement is a must. Companies like Eureka Forbes, Kent, Ion Exchange, and Phillips have huge budget for advertisements. Unbranded products lack on this front, but they try to outsmart the big players through after sales service. “Many big companies have failed to sustain because of poor after sales service,” Amit says, citing the examples of Videocon and Phillips (which has made a re-entry into the market). “Even Phillips and Luminous are struggling because of this. The same is the case with Parker Power puriﬁers.” Despite so many complaints visible on various community websites against the after sales services provided by the market leader Eureka Forbes, Amit, who has worked with the company in the past, says the company is more or less prompt in 52

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opportunity/manufacturing providing after sales services, even in remote areas. “This is why they are so successful in the market. But same cannot be said about other branded products,” he says. Usually, every new machine installed ensures five visits by engineers in a year. Servicing comes free in the first year, but anything from Rs 200 to Rs 500 is charged for every servicing after this. This forms a substantial source of revenues for unorganized players, as their engineers are called for help when the big guns fail to provide the same. One obvious disadvantage associated particularly with RO purifiers, however, is the huge wastage of wa-

Penetration level of purifiers is still abysmally low in the country, with the highest penetration level recorded in Delhi, where the figures stand at 25 percent. ter. Ratio of wastage to pure water using RO systems is 60:40, indicating 60 liter of water goes waste for every 40 liter purified. “We suggest people not to let water go waste. This water can be used for gardening, for cleaning clothes and utensils, or vehicles. Normally people do not adhere to our suggestions,” Amit says accepting wastage can lead to problems in long term.

Certifications Companies involved in water purifying business make tall claims about their qualities, showing all kinds of certificates issued by agencies located at different places on the globe. Indian agencies involved in issuing such certificates include Indian Medical Asso-

ciation, Spectra Labs, and Shriram Institute for Industrial Research. Eureka Forbes, the market leader in purifying business, is reported to have more than 104 certificates. Eyebrows may be raised over the very validity of these certificates, but these are flaunted by companies widely to support the sale of their products. Unorganized players which try to migrate to next level ape the bigger established players in procuring certificates, and the trend seems never ending. What has added chaos is the absence of any regulation or specific standards for water purifiers within India. Bureau of Indian Standard (BIS) has failed to evolve guidelines to keep pace with the changing technology and pollution profile. It has standards only for UV and candle filters. These standards are also obsolete considering they were evolved between 1970s and 1990s. Whole emphasis of BIS guideline is to free water from bacteria. They are not applicable for water contaminated with chemicals and suspended matter. There is an urgent need to adopt a dynamic standard for water purifiers, similar to those evolved by NSF International, an NGO based in the US.

Conclusion Water purifying business is growing at over 12 percent (in India), RO segment is growing at a brisk rate of 25-30 percent. Sale of RO systems (and probably UV systems also), which provide better business margins to companies, will particularly remain bullish, thanks to lack of access to safe drinking water and wide prevalence of water borne diseases. At present, globally more than one billion people lack access to safe drinking water and 2.4 billion people lack access to proper sanitation, nearly all of them in the developing countries, including India. Nearly a third of the world’s population worldwide live in water-stressed areas. This ﬁgure is expected to rise to two-third of the population by 2025. It will hardly come as a surprise to see many more big names turning to DAR E this sector with greater vigor.

TiE Delhi Internet Special Interest Group (SIG)

Surviving and Winning in a Downturn 30th January, 2009 The current economic crisis is one of the worst since the 1930’s and it is here to stay. Most economists predict that the economy will decline at least until the middle of 2009 and some think it could be even longer than that. By any measure, the current economic downturn is likely to be steep, long, and turbulent. But every crisis brings with itself its own set of opportunities and a new set of survival rules. The Internet Special Interest Group in its next session would focus on how entrepreneurs can make the most of the meltdown. Key learning points:• Understanding the analysts’ perspective on how to build business in turbulent times • A closer look at the internet companies which survived the dotcom bust and analyzing the learnings • Investor perspective by reliving the life graph of successful portfolio companies of select VC's For registration contact Nitin Agarwal at 9818477719 or nitin@tienewdelhi.org

TiE Delhi Education & Training Special Interest Group (SIG)

Deconstructing Market Size – Unveiling Opportunities 16th January, 2009 Trillion Dollar Market - Billion People - Handful of Successes? •

Education & Training is one of the most promising and lucrative sector for entrepreneurs in India today. So why do we have such few success stories in this booming sector?

•

What is the most critical issue faced by the entrepreneurs – Is it effective execution, strategic direction or funds for growth?

•

Many entrepreneurs today are lured by a fast growing sector and ‘seemingly’ large numbers but do they having a clearly deﬁned plan to target the opportunity? The upcoming E&T SIG session would highlight leading/unique examples in E&T sector

that have been able to understand and leverage speciﬁc market opportunities and would help participants understand how to convert market opportunities into successful ventures For registration contact Manish Joshi at 9971766455 or manish@tienewdelhi.org

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/blog

Brands spell hope

/Rupin Jayal Should brands merely be a reﬂection of reality? Or should they be beacons for the future? Should they disrupt mechanical and habituated ways of being? Take the place of human icons in a world empty of them and thus become virtual leaders? Or should brands become objects of love and intimacy for people?

here is no clear-cut answer and the most appropriate one may lie somewhere in the midst of all these choices (and possibly more). But in the coming days — and even when we emerge from the current downturn — the world of brands, branding, and communication are poised to change irrevocably and forever. Without excessive crystal-ballgazing, people are going to speak for their favorite brands far more than ever before and be equally vocal about the ones they dislike. “brand communication” will increasingly be a debate where so-called brand custodians and owners will form part of the conversation. The power will have shifted, and these custodians will need to live up to what their brands’ users and loyalists believe about them, rather than telling these same users and loyalists what they “should” know, believe, and feel about these brands.

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So will brands increasingly become repositories for the beliefs and convictions of those who choose them and thus play a relatively passive role in the future? To play an active rather than just a participatory role, the relationship between brands and their users will have to be far more symbiotic. Brands will no longer be able to “tell” (and sometimes dictate) people what they “should” perceive about them as in the past. However, brands, to be truly enduring and successful, will not be able to abdicate a proselytizing role entirely either. Both extremes will only result in short-lived success. Almost in sync with the rise of brands has been the fall of inspirational leadership in the world. The paradox was that, as world leaders gained ever greater power to influence people’s lives, they lost the stature of being able to exercise it meaningfully. Petty people created petty conflicts on an unimaginable scale. Brands stepped in to fill the vacuum and spoke for the aspirations of the so-called “masses.” Brands increasingly began to stand for the fundamental values that iconic leaders of the past had stood for, and at the same time represented a “stairway to [a] heaven” of aspirations. For example, Toyota fundamentally represents reliability, Body Shop ethical values, Snapple and Ben & Jerrys the value of authenticity, Tata honorable business, and Apple has freedom. However, in the main, the bulk of brands stood for varying degrees of aspiration. It was a world where aspiration ruled as a primary motivator. This all-pervasive motivating power drove people to strive beyond the sustainable, and oftentimes beyond the believable. Castles were built of thin air and people paid notional money for notional dreams. Unfortunately, the bill for all this unbridled aspiration has now arrived, and our credit is overdrawn. So what should brands really stand for? The answer partly lies in the pre-

vailing climate and culture of the people in which the brand operates. However, if there is one overarching aspect that brands will need to stand for, much more powerfully than ever before, it will have to be hope. Brands will need to integrate genuinely “noble cause” dimensions within their value system. This would have to be in sync with core brand values, and need to transcend aspiration and acquisition. Through representing a fundamental commitment to a better world, brands will become harbingers of hope. Brands that are able to seamlessly and most powerfully merge “noble causes” and core brand values together will be the brands of the future. Hence, a music brand could ensure that it focuses on music as a dissolver of differences. It could encourage its artists to create music that brings opposing cultures closer to each other and create an entirely new genre of music that seeks to heal. People who doubt the power of music to impact lives only have to examine the power of black spiritual music during the dark days of segregation in the US, the way it brought antiwar demonstrators together during the 1970s, or the influence of musicians in Africa during the time of apartheid. All these show us that music can actually work towards healing the increasing fissures that divide our world. Similarly, an electrical appliance brand could, for example, set aside some of its R&D capability in creating products that run on renewable sources of energy. The most obvious of these could be solar-powered appliances. But going beyond — how about creating a range of “buddy appliances”? Every time you buy an oven, for example, the brand would contribute towards providing a cooking appliance that replaces fossil fuels in an underprivileged home. Every time you buy a washing machine you could help provide a simple water filtration unit for a village family. Every rupee

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/blog you spend could subsidize health and nutritional products for people who cannot afford them. The upper levels of the income pyramid would thus enable those living below to start moving up. By integrating this and thereby standing for more than just the narrow category they operate in, brands could transform lives far more than governmental intervention through taxes and levies, which are unevenly distributed and with scant respect for effectiveness. Helping ensure effective distribution and the creation of appropriate networks could create plenty of employment and entrepreneurial opportunities for people, and it could be another way to ensure greater inclusiveness and thus a larger market. The growth in the size of the market would contribute to growing volumes, which could actually translate into cheaper products for the people buying them — enlightened self-interest for all. Automobile companies could participate and use their expertise in creating mass transportation systems. As these would, over time, reduce the pressure on road infrastructure and take the hassle of everyday commuting out of people’s lives; people could return to buying automobiles mainly for the pleasure of driving them, and thus, over time, rescue a sector that seems to be heading towards terminal decline. None of these would generate immediate returns. But people today are growing wary of “quick” results — having seen how precipitous the decline can be from such “wonder” bubbles. A key factor of our lives in the future will hinge on sustainability. It will be critical to creating an atmosphere of hope. Sustainability doesn’t just mean ecological or ﬁnancial sustainability (de-leveraging and living within one’s means), but also social sustainability (reducing growing income disparities, for example), technological sustainability (innovation that reduces rather than increases complexity and pressure), and lifestyle sustainability (reducing the impact of cyclical economic rollercoasters on the fundamental way of living one’s life).

Brands could encourage sustainability and thus build a climate of hope for the future, rather than contribute to cyclical feeding frenzies followed by scuttling for cover when times inevitably turn bad. As politicians continue to be engaged with holding on to ever more evanescent power, brands that want to play a more fundamental role in people’s lives will need to fill the visionary vacuum. So, for example, in the future, rather than a public outcry causing food and beverage brands to introduce “good/better for you products,” the true leadership brands of the future would seek to understand the real, larger impact of their products on the lives of the people who use them rather than just narrow product benefits, and pre-empt manmade epidemics like obesity. Automobile brands seeking to create true leadership will not only sell to people with a proven record of safe and reasonable driving, but will also contribute towards minimizing that which makes driving a chore, and thus recreate the pleasure of driving. Other brands will seek to understand the impact they make through areas such as technology, conspicuous consumption, etc. to prevent problems such as information overload, peer pressure, and isolation. Brands will view their role in people’s lives more holistically, and more of them will seek to play a more fundamental role in people’s lives rather than just dealing with consumer response, product benefits, functions and features, and more. The brands that will represent hope will be brands that occupy the pride of place in people’s hearts because they

actually seek to make a difference to people’s lives, and not in the narrow sense of category and attributes. To truly represent hope, brands will need to move out of the “consumer”, “market,” and “category” thinking. Brands and brand thinking will need to undergo a fundamental evolution to be true leaders of hope and thus be the leaders of Brand 2.0:

From Consumers Ô To People Market place Ô Lifespace Category Ô Mindspace Such a fundamental paradigm shift will impact everything we now know and believe about brands and branding. Most brands have to catch up with the depth of people’s awareness, knowledge, and the resulting convictions. Those that do will evolve from being objects of aspiration to becoming beacons of hope. Those that do not will lose the battle for “heartspace” and will ultimately be eroded by corDAR E rosive indifference. The author is Director-Strategic Planning at M&C Saatchi. JANUARY 2009 55

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opportunity/aviation

Solar Planes: An option for the future? If a team of Switzerland-based aeronauts has its way, solar planes could be the next big revolution in the aviation sector. Can Indian companies beneﬁt too? /Aswathi Muralidharan

little over a century ago, when the Wright Brothers’ maiden flight resulted in a short, bumpy ride, it was hard to even think that “heavier-than-air” aircrafts would one day change the way we travel. In fact, at that time a lot of people were even able to demonstrate that it was impossible to fly that way. But innovation and advanced technology not only proved them wrong, but also made air travel affordable. Today, however, the focus of research has shifted. The increasing demand for aviation fuel and growing concerns over environmental damage are driving researchers to find greener alternatives. It is predicted that aircraft emissions, which currently contribute about 3% to global carbon emissions, will be one of the major contributors to global warming by 2050. Also, according to a report by the UN’s Intergovernmental Panel on Climate Change (IPCC), fuel consumption by civil aviation is expected to reach 300 million tonnes in 2015 and 450 million tonnes in 2050. Given this background, imagine a flight powered by solar energy, and therefore consuming no fuel and producing no pollution. Impossible? Well, you are wrong! Though the concept of solar planes is still in experimental stages, progress is clearly visible. It has traveled a long

JANUARY 2009

way since the days of the unmanned Sunrise I, the world’s first solar-powered flight in 1974, and Gossamer Penguin, which was capable of carrying a human in 1980. Now, it is the turn of Solar Impulse, which are attempting to demonstrate the feasibility of a daynight-day cycle (36-hour) flight. All this brings us to another burning question: though still a distant dream, can solar energy actually power a commercial flight in the future?

Solar Impulse: Showing the way forward? Solar planes have caught the fancy of many, with at least 10 prototypes in development right now for various purposes — right from collecting scientific samples to providing telecommunications relay platforms. So what is unique about Solar Impulse? Solar Impulse is a project led by Bertrand Piccard, a psychiatrist and aeronaut who made the first non-stop round-the-world tour in a balloon, and André Borschberg, an engineer and graduate in management science, trained as a fighter pilot. The team works in Lausanne in Switzerland. Their project, if successful, could possibly be the next stage in aviation technology. Borschberg, CEO of Solar Impulse, explains, “It is the first airplane that will have no fuel on board. By having no fuel on board and flying on solar energy, it will create zero pollution and not emit

any greenhouse gases. It is planned to fly them day and night on solar energy, so it doesn’t have to go down to refuel. It can fly until the pilot is too tired!” Achieving this, however, is easier said than done because staying airborne for 36 hours or completing a day-night-day flight without conventional air fuel requires an unprecedented level of technology. Especially so because the energy collected by 1 sq. m of photovoltaic cells can supply only 28 watts of power – the equivalent of an electric light bulb! Therefore, a complete makeover of a conventional airplane model was needed, with drastic reduction in its energy consumption. According to the project’s website, “Only a machine of disproportionate dimensions (61 m wingspan) and very light weight (1500 kg) will be able to fly sufficiently slowly (45 km/h) to operate off the available energy!” There were two issues that had to be addressed — constructing an aircraft the size of an Airbus and weight of a mid-sized car (a challenge in itself ); and the controllability of such a flight. The single-pilot plane is said to be microlight and based on innovative techniques of aerodynamics, structure, construction methods, and propulsion. To make the plane lightweight, very thin layers of carbon of 0.5 mm thickness and 20 mm length is being used.

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Photo: SolarImpulse.com

opportunity/aviation

Is the Solar Impulse technology an improvement on the solar planes made earlier?

Q&A

It is a combination of many things. The plane flies around the world with the power of a big scooter or a small motorcycle. We achieved this by first making the airplane very large so it has many bio-dynamic characteristics and qualities; second is it is very light — it is the size of an airbus, but is as light as a mid-sized car. Again, by making it light, we reduced energy consumption. These factors make it possible to fly with little energy.

Photo: Solar Impulse/Stéphane Gros

What are the materials used in the manufacturing of the plane?

Andre Borschberg CEO, Solar Impulse

What is unique about Solar Impulse?

It is the first airplane which will have no fuel on board. By flying on solar energy, it will create zero pollution and not emit any greenhouse gases. It is planned to fly them day and night on solar energy, so it doesn’t have to go down to refuel. It can fly until the pilot is too tired!

We have developed material solutions and production techniques with our partners that allow us to produce very thin layers of carbon — of 0.5 mm thickness over length of up to 20 mm. The other thing was to have a very efﬁcient propulsion chain, so we got the appropriate electric motors. The entire propulsion chain, from solar cells to electronic switch controls, all optimize the use of energy. What is the efﬁciency of the solar cells used?

The efﬁciency is between 22 and 23%. It is not the highest possible efﬁciency, but it is the best in the context, because we were able to make them very light and thin.

We need a very light airplane system to fly during the night. The difficult part about flying at night is that, as the sun is not available, we have to have enough energy stored in the battery. What were the technical challenges you faced while developing this plane?

One challenge we have is the controllability of the plane. There is no plane of this size, weight, and dimensions that has been flown so far. So we had a lot to figure out about how a pilot will have to fly such an aircraft and keep a safe flight. Therefore, we had to develop our own solutions – simulators on which we could develop different solutions, compare them, and potentially also change the design of the airplane to be sure that we could control its every move. As the plane flies at very low speeds, the efficiency of the flight controls is also very low, making it even more difficult. That was one big challenge, but using technology, using modeling, sophisticated calculations, and expertise of our partners, we aim to get flight simulators close to reality and, therefore, be able to predict what will happen when we do our first flight next year. Will the plane fly at different altitudes during the day and night?

Actually, the battery technology is developing well but is still not good enough. JANUARY 2009 57

DARE.CO.IN During the day we will have to climb to around 10,000 m, and with the energy stored at that altitude, we can ﬂy down at the beginning of the night for about three hours, and when we are at low altitude, at about 3,000 m, we can use the batteries. We will be ﬂying for the rest of the night with the batteries, until the sun next morning is strong enough. What is the speed of the plane?

At sea level it is about 25 knots (~46 km/ hr); the maximum is about 40 knots (~74 km/hr). It is very slow, the reason being that we need to have very low energy consumption. To reduce energy consumption, the first step is to reduce speed. When it goes higher, it will fly at a higher speed. When we fly around the world, it will be at about 70 to 80 km/hr. The Solar Impulse is a one-seater. Can the capacity be increased?

42 years to develop the required technology so that everybody can ﬂy without carbon emissions. What are the technological limitations that can be worked upon? There are different potential routes to go on. We do not take any fuel on board, which is one solution. Another solution could be to produce fuel out of renewable energy, which could be embarked on the airplane using, for example, underground solar energ. People are already working on this.

lantic in 1927 for the first time, it was also one man on board. The aircraft was full of fuel, and people were saying it is a wonderful way to cross the Atlantic, but if we want to cross the Atlantic then we must become pilots! It took 20 to 25 years and more for humankind to fly an airplane with 100 people on board. So to fly with many people on board using renewable energy will also need many years of development. The technology may be different from what we are using now. The purpose of our project is to show the path, take the first step. To make it possible even once will open doors to new technological developments. The objective of the International Air Travel Association (IATA) is that by 2050 all aircrafts that are flying will not produce any kind of carbon emissions. That means zero carbon emissions in 42 years. So right now if we are able to fly with one person on board, then that means we have

What is the total cost of the project?

The total cost of the project is $80 million, of which we have 70 percent currently. It is mostly ﬁnanced by private institutions/corporations. We would be very interested in partners coming from Asia, from India, for example, especially if Indian companies are attracted by this kind of project and would like to be part of this exploration.

Photo: SolarImpulse/EPFL 2007

Certainly, with new technologies. You know, when Charles Lindbergh crossed the At-

opportunity/aviation

Other major issues were the choice of solar cells and batteries. Though solar cells today have reached a conversion efficiency of up to 40.8%, Solar Impulse uses ones that have an efficiency of 22 to 23%. Borschberg explains, “They are the optimum solution in terms of efficiency and weight. We were able to make them very light and thin, and we need a very light airplane system to fly during the night.” A supplementary difficulty was that the energy gathered during the day would not only be required to propel the 58

JANUARY 2009

aircraft during the day, but also be used to recharge the batteries to ensure flying by night and under bad weather conditions.

Where do we ﬁt in? Aircraft manufacturers across the world are trying hard to ﬁnd greener solutions to tackle the mounting problem of aircraft emissions. There are four reasons for entrepreneurs to keep an eye on this project. One, while some are researching gas-to-liquid (GTL) technologies — in 2008, an Airbus A380 completed the

first ever flight by a commercial aircraft using GTL in the first stage of a test flight programme — others like Virgin Atlantic and Boeing are trying to develop aviation fuel made from pond and sea weed. Given the situation, Solar Impulse, if successful, could be another step closer to the technology of the future. The second reason is the opportunity in the manufacturing of spare parts and technology. India is on its way to becoming a big manufacturing hub for global majors in the automotive and aviation sector. There is also the opportunity of making solar cells for such planes. Three, as Borschberg says, the IATA aims to make all aircrafts carbon emission-free by 2050.. “So,” he adds, “right now if we are able to fly with one person on board, then that means we have 42 years to develop the required technology so that everybody can fly without carbon emissions.” And, finally, this project is especially important as renewable sources of energy, especially solar energy, and battery technology are touted to be the DAR E next big thing.

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strategy/legal

15 min. guide to copyrights /Aswathi Muralidharan Conventions that protect Indian work in foreign countries • Berne Convention for the Protection of Literary and Artistic Works • Universal Copyright Convention • Convention for the Protection of Producers of Phonograms against Unauthorized Duplication of Their Phonograms • Multilateral Convention for the Avoidance of Double Taxation of Copyright Royalties • Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement

hat is a copyright?

A copyright is an exclusive right given to the author of an original work for a specified number of years. There are three classes of work for which a copyright can be applied — original literary, dramatic, musical, and artistic works, including software programs; cinematograph films; and sound recordings. The owner of the copyright has the exclusive right to, or to authorize others to, reproduce the work, issue copies of the work to the public, perform the work in public, communicate the work to the public, make cinematographic film or sound recording in respect of the work, make translations of the work, and make adaptations of the work. According to Rodney D Ryder of Preconcept, “Copyright is the only right that accrues upon creation, that is, for example, if you write a story or create a computer software, you are entitled to protection from the minute you create the work.” A copyright is valid not only for the particular country that you are in, but all over the world, due to the Berne Convention, an international 60

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agreement governing copyright that requires its member countries (members of the Berne Union) to recognize the copyright granted by other signatory countries in the same way it recognizes its own.

Who can copyright? As stated earlier, copyright is granted to the author of an original work in the classes mentioned earlier. This brings us to the question: who is an author? In the case of a literary or dramatic work, it is the person who creates the work; in the case of a musical work, it is the composer; in the case of a cin-

ematographic ﬁlm and sound recording, it is the producer; in the case of a photograph, it is the photographer; and in the case of computer-generated work, the person who causes the work to be created is the author.

What is the duration of a copyright? A copyright on literary, dramatic, musical, or artistic work is valid for the lifetime of the author plus 60 years after his or her death. For all other types of work, including anonymous work, the copyright is valid for 60 years from the year it was published or produced. After the copyright expires, the material enters the public domain and can be used freely by anyone.

Is registration necessary? One does not need to register to be en-

Works covered under the Copyright Act a) Original, literary, dramatic, musical, and artistic works: • Literary: Any form of written work, tables, compilations, computer programs, etc • Dramatic: Work that can be enacted • Musical: Combination of melody and harmony • Artistic work: Visual art (painting, sculpture, drawing, etc.) b) Cinematograph ﬁlms: A visual recording, which is a combination of various arts and music (for example, soundtrack, acting, dancing, etc.) c) Sound recording: Recording of sound regardless of the medium or method in which such recording is made

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strategy/legal titled to a copyright. Registration is a legal formality for making a record of a copyright. However, it adds proof to one’s ownership and helps in case of copyright infringement. It is important to note that registration does not give one any additional rights over those received when the work was ﬁrst created. The process of registration takes about six to nine months.

What cannot be copyrighted? The term “original” has a narrower meaning when it comes to the copyright law. It is important to note that the copyright law does not seek to protect ideas, but only unique expressions. For example, if you are creating an action adventure gaming software, you cannot copyright the idea of action adventure gaming software, but your versions of it, for example, The Legend of Zelda Series or Tomb Raider Series. The reason behind this is, if ideas are protected, it would lead to blocking them from further development. There can be no copyright in subject matter, themes, plots, historical or legendary facts, titles by themselves, or names, short word combinations, slogans, short phrases, etc.

When is a copyright infringed? What is the redressal? A copyright is said to be infringed under two conditions. One, when a person who does not have a copyright license does something that only the owner of the copyright has the exclusive right to, such as making copies, selling, etc. Two, when a person permits the use of a place for the communication of a copyrighted work to the public without permission and for proﬁt. According to Ryder, “A copyright infringement is both a civil as well as a

Creative Commons Licenses Creative Commons Licenses are several copyright licenses released by Creative Commons (CC), a US non-profit corporation. A Creative Commons license is based on the copyright law, so is applicable to works protected under the copyright law. It provides a middle path between the two extremes of “All Rights Reserved” and the “Public Domain,” and gives information about how the material can be used by others — such as the right to copy your work, make adaptations of your work, and to distribute your work. The Creative Commons licenses are based on four elements: Attribution (people can copy, distribute, display, perform, and remix copyrighted work, as long as they give credit as requested; all CC licenses contain this property); Non-commercial (people can use the work for non-commercial purpose); No Derivatives (the work cannot be altered or modified); and Share Alike (people can create derivative works on a copyrighted material provided it is published under the same license as the original work). criminal offense. If it is an economic loss, you can claim damages in the civil court of law. You can also file a police complaint; an officer above the rank of a sub-inspector can take cognizance without a magistrate’s warrant. Copyright infringement is a nonbailable offense.”

What is fair use under the Copyright Act? The doctrine of fair use allows copyrighted material to be used under certain circumstances without invoking infringement. A copyrighted work can be used without the permission of the copyright holder to facilitate education and research, to disseminate knowledge and information for the promotion of the economy and society, for criticism or review, for reporting current events, in connection with judicial proceedings, for performance by an amateur club or society if the performance is given to a non-paying audience, and the making of sound recordings of literary, dramatic, or musical works under certain conditions. The doctrine of fair use is incorporated in Section 52 of the Indian Copyrights Act, 1957, which explains what is not legally an infringement.

Copyright Term Extension Act of the US (Sonny Bono Act) In 1998, the Copyright Term Extension Act (CTEA) extended copyright terms in the US by 20 years. Before this Act came into being, a copyright would have lasted for the author’s lifetime plus 50 years, or 75 years in case of corporate authorship. This Act extended the duration to the life of the author plus 70 years, or in case of corporate authorship to 120 years after creation or 95 years after publication, whichever is earlier. Though this Act affected copyright terms for copyrighted works published before January 1, 1978, it did not revive copyrights that had already expired.

How is copyright different from trademarks and patents? There are three types of protection available for intellectual property — copyright, patent, and trademark. While patents protect inventions and improvements to existing inventions and trademarks protect brand names and designs, a copyright protection is for literary, artistic, and musical work.

How does one license a copyrighted property? A copyright can be either licensed or assigned. While assigning a license, the author of the work can fully or partially sell the copyright either for the whole term of the copyright or any part of it, subject to certain limitations. In this model, the author or the creator, after assigning the copyright, will generally not have any control over how the third party uses those rights. For example, a musician may assign rights of his creation to a record company in exchange of royalties and other considerations. On the other hand, the record company may invest in promoting the video and gain out of it commercially. A license is an agreement where the copyright owner maintains his ownership, but allows the licensee to exercise some or all of the rights without fear of a copyright infringement. Hence, the author or the creator will continue to exercise control over how the third party uses the copyright owner’s rights. For example, a software license agreement is generally a copyright liDAR E cense agreement. JANUARY 2009 61

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/cover story

mistakes online businesses make

19 This piece looks at some of the most common assumptions that are wrong about doing business online. These are for those who are planning to do business – as in sell or buy goods or services, including advertising -and not for those who just want a presence online

/Krishna Kumar

JANUARY 2009

e are in what is probably the third wave of Internet businesses. The ﬁrst wave that had eyeballs and sticky eyeballs as measures of valuation ended in the dot com bust of the end nineties. The second wave came after that and was more muted with e-commerce and online transactions being the focus. The third wave and current wave is focused around social networking and other “web 2.0” technologies. One of the perks of my job is that I get to see quite a lot of business plans in all their detail. And these days I am getting to see quite a lot of them that focus on doing business via the net. Unfortunately, not many it seems understand the medium that is the Internet. Many of the mistakes that were made in the very ﬁrst wave are still being repeated. Many of the assumptions that were proved to be wrong then are still forming the basis of one too many business plans. This piece looks at some of the most common assumptions that are wrong about doing business online. These are for those who are planning to do business – as in sell or buy goods or services, including advertising -and not for those who just want a presence

online. By design, I have jumbled up the items in no particular order, so that you read all of them and do not ignore some saying that they are not relevant to you, because they are.

Online will reduce costs

This is the number one reason running businesses give for taking up an aggressive online strategy. I have heard it from retailers, I have heard it from consultants, I have heard it from publishing houses. And this is the big mistake that will upset their otherwise well laid business plans right from day one. What actually happens is like this. Moving online will reduce your future costs in your current way of reaching your audience. But it will not cost any less on the new medium to reach newer audiences. For example, it will reduce your costs in new retail stores or in new ﬁeld data collection staff or in paper for new copies. But, mark my words, you will end up spending equal if not more on the new media – the Internet. If you are converting existing customers from say your retail shop or your print pages to the net, even then, the cost of setting up and run-

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/cover story ning a similar or better experience for your customers will turn out to be similar if not more. If you don’t believe me, read on.

Setting up a website is cheap

This one ﬂows from the online is cheap syndrome. I have seen business plans that talk of multi-crore revenues that allocate all of ﬁve thousand rupees a month for a web server! Stop for a minute to do the calculations. How many customers does that multi-crore income convert to? Can the $9.50 shared hosting from bluehost take that load? Would you want such a shared server to hold your sensitive business and customer information? Let us look at some real data. As of early last year, Facebook photo, one of the applications in Facebook (and not the main Facebook, mind you) had 160 terabytes of storage with 5 terabytes of photos being added each week. At about Rs. 3000 for a half terabyte hard disk, that is 30k to 50 k in just new hard disks every week depending on the level of RAID you have deployed!

Moving online will reduce your future costs in your current way of reaching your audience. But it will not cost any less on the new medium to reach newer audiences

At the same time, Facebook was hosted on 10,000 web servers, 1,800 database servers and 105 memcached servers. Any guess what their monthly datacentre bills are like? Any guesses on what the salary bill for the administrators for the system would be? Or how many software developers are required to create and maintain the entire application? What about the security experts required to keep your applications hacker proof? Then there are those who state that using opensource software makes it cost next to nothing. Now, I have to be careful, given that dare.co.in runs on opensource software and has been comparatively cheap to build. Opensource can be cheap if you know what you are getting into. It can be cheap in the license part, but not in the customization part. I have sat through evaluations where software houses have quoted (and got) in the crores to build websites based on Opensource software.

Tech and web savvy startups are equally bad when budgeting for Internet resources. Most of them assume that the founders will do all the coding and server administration required, for ever after, and do not or at best under budget for these items. As the business grows, you will need to put more developers on the job and the founders will have to move on to more strategic things than the coding of a sub menu.

It will run for ever without further investments

A website is not like a house that requires only an infrequent paint job. It is more like a star hotel that requires regular and significant maintenance and makeovers. A website is in constant evolution. As technology and surfer tastes evolve, web properties have to evolve to keep pace. And that takes time, money and effort, all of which are often not budgeted for. Why has it to evolve? Consider social networking. Out of nowhere, social networking has become the central hub of most web activity. Almost all web sites have had to adapt to this and build social networking features. Operating systems evolve over time. New patches come out and after applying a patch, you will find that some features of your web site are not working and you need to rejig them. New security threats are discovered almost every day and your web applications have to be patched or perhaps re-architected to overcome them. Services you use may change. For example, your payment gateways may change their security requirements. Business dynamics change. Business processes change. Your website needs to be changed to accommodate all these. And finally, in about 3 years, your hardware will need replacement and upgrading. A quick rule of thumb would be that you would spend as much in maintenance and changes on your website in 3 years as you would spend initially in setting it up. Milage of course varies with makeup. If you have done your initial architecture, scoping and setup well, then this will be on the lower side. JANUARY 2009 63

DARE.CO.IN If you went conservative in the beginning, then be prepared to spend on the higher side as you go along.

Technology is everything

Then there are those who believe that all that you need to succeed is the latest technology. This is much like having fabulous packaging and an expensive ad campaign even when your product is, to put it mildly, terrible. There was lot of talk (and scrambling) about the need to make web sites web 2.0 enabled, or social networking enabled. Great. You do all these, but what use has the user got with all these if they are not relevant to their experience and use of your site? One of the best examples of e-commerce in India, irctc.co.in, does not need social networking to get about 200 thousand unique visitors every day. Your bank would have to do some real hard soul searching before having forums as part of their on line transaction portal. Remember that technology or features is not what you are selling. It is at best an enabler of the experience that the user gets at your site. If the user gets there and sees that all that you have are gimmicks, it is unlikely that she will come back again. Look for the value proposition for the user, not for enhancing the biodata of your tech team.

Trafﬁc just happens

Sure. And the Sun rises in the west! Consider some numbers. There are a hundred million plus domains registered under just .com, .net, .org, .biz and .info. And you just added one more. Technorati has indexed some 133 million blog records since 2002. There are 900 thousand blog posts made every twenty four hours. And you set up yet another blog and expect people to just flood in! Most business plans, particularly startups make no provision for traffic generation activities. Like you need to drive footfalls to your brick and mortar business, you need to drive traffic to 64

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/cover story your web properties. And the methods at your disposal are roughly the same, namely advertising and making your shop / site popular by various means. And advertising is not the only thing you need to do. You need to do search engine optimization, and you need to ensure that dead URLs are removed and you need to cultivate links from other websites... the list goes on.

Search engines will ﬁnd you easily

This derives from point 5. You set up a site and search engines are waiting to send the whole world to your door step. Unfortunately, reality is completely different. Major search engines require you to authenticate your site by creating an account with them and putting up a code fragment that they provide at your site. Till that is done, most of them will not server your pages to searchers. You need to also regularly maintain one or more (more as your site gets bigger or more complex) site maps that they download (at their own frequencies) to update their index pool. After submission and veriﬁcation, you need to constantly check back to see whether there are problems with your sites listing and indexing. You are also able to deﬁne some parameters that search engines use to index your content. As your site develops, you need to change some of them. It is quite possible that there will develop problems with your listing at the search engines that will seriously limit

How to submit and authenticate your site to search engines You need to create an account with the search engine and then submit your site and its sitemaps to them. For Google submit at Google webmaster tools at google.com/ webmasters. For Yahoo, go to siteexplorer. search.yahoo.com and for live, proceed to webmaster.live.com. By the way, how many search engines are there that people use? Did you know there are literally hundreds of them? A list can be found at searchenginecolossus.com/.

trafﬁc to your site or even stop them completely. And once you get into trouble with a search engine, it is often a frustrating and time consuming experience getting it sorted out. And I have not even touched upon search engine optimization.

You don’t need people to run an online business

During the dotcom boom of the nineties, I had come across those who believed that the icon of those days, ebay, operated from a basement with almost no employees and that all that ebay required was a few servers. And this was at a time when ebay actually had a few thousand employees and operated out of ofﬁces and warehouses across continents. Things have not changed much since those days. Recently I came across another business plan that al-

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/cover story

The easiest way to check measurability is by putting two analytics solutions on your site. You will almost immediately see that the two do not agree on most things. most did away with people! It called for software to gather content from other websites and post it up. And then it expected visitors to add value to that content. Another software would deliver ads on those pages. If only business was as simple! By the way, do you realize what is the biggest problem with this business model? It is not just the absence of people. The content that you scrape from other sites – search engines would mark the other site as source and you as a copy. So, not only they will not send any trafﬁc your way, but also, if you are seen to be regularly doing this, they could black list your site! And of course, there are copyright issues to using content that others own. Almost every online business plan I have seen seriously underestimates the number of people required!

Website visits can be measured exactly

One of the biggest advantages of the Internet is that everything is measurable – or atleast that is the theory. In practice, this too turns out to be different. The easiest way to check this out is

to put two analytics solutions to work on your site. You will almost immediately see that the two do not agree on most things. The difference could be anywhere from 10-20% on most matrices. For sites with large traffic volumes, that may be within manageable (or ignorable) limits. But for sites with smaller traffic levels, the variation could be significant, particularly if you are going to use the information for strategic decision making. Let us say you are looking at the key words driving search traffic to your site. What if the top keywords currently driving traffic to your site are not the ones with the most relevance for you? You would then want to do some search engine optimization to increase the search traffic for the ‘relevant’ keywords. Now, if analytics tools cannot even agree on the relative strengths of keywords for your site, what are you supposed to do?

Alexa is right

This is worse. Let us say you want to ﬁnd out how your competitor is doing. Obviously (keeping

industrial espionage out) you do not have access to their analytics reports. So what do you do? You head over to a public website rating service like Alexa (or compete or quantcast with hundreds of such sites out there). These sites have two big problems that skew all their data completely out of context. Number one, they are all heavily focused on a US based audience. Their sampling of non-US originating traffic is infinitesimal. So, unless you are competing for visits from the US audience, they would give you completely skewed reports. Second, some, like Alexa specifically depend on people who have downloaded and installed their tool bars or have created accounts with them. And there is no information on what demographics of people have done so. So, for all you know, the information and ranking of your site selling software as a service to large corporates in South Asia could well be based on the surfing habits of stay at home moms in the US! I have come across instances where traffic ranks at such sites fluctuate wildly, in the thousands one day and down in the dumps of double digit lakhs the JANUARY 2009 65

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Trafﬁc ranks at such sites ﬂuctuate wildly, in the thousands one day and down in the dumps of double digit lakhs the next next. So, use such websites sparingly, knowing fully well that they could be completely, completely off track.

Beautiful pictures make people read your emailers

10.

Talking of beautiful websites brings me to beautiful emails about beautiful websites. One of the standard ways of promoting a website or article is to send out emails. Unfortunately, most such emailers are cut and paste jobs of the print creativejust put the print advertisement into an email and send it out. Now, most email clients are conﬁgured not to show pictures in emails unless the recipient speciﬁcally asks for it by clicking on a button.

So, effectively, when you send out picture ads as emailers, you are depending on the subject line piquing the attention of the reader and making her want to see your ad.

People read emails

11.

An even bigger problem is that your emailer may never reach your intended audience in the first place. Let us assume that over time, you have collected an impressive number of subscribers to your mailing list. Now, you face three significant problems in communicating with them. One, a significant portion of your email list is invalid. As people move jobs or move from one free email serv-

Most email clients are conﬁgured not to show pictures in emails unless the recipient speciﬁcally asks for it by clicking on a button 66

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ice to another, they rarely update the information at the various websites they visit – at best some of them will re-subscribe from the new email address. Good list manager software will remove email addresses after a given number of bounces to give you a more realistic picture of your database size. Empirical evidence seems to suggest that as much as 20% of your email database could get invalidated like this every six months. But then you need to be using such list managers and should have enabled bounce management! Second, an email has to go through multiple spam ﬁlters before it reaches the inbox of the intended recipient. Most mass mailings, particularly those with only graphics in them or those with suggestive titles in them will never reach the intended audience. Finally, the reader has to open the message and read it. People typically do not read a large number of emails they receive, due to a variety of reasons including lack of interest or time. To sum it up, you should consider yourself very lucky if you consistently get around 5 -10% open rate for your emailers and if you hit 20% or more, you should be in email marketing heaven!

Google is the only way to advertise online

12.

Ok. So you have got some budgets for getting visitors to your site and you decide to put all that into Google’s Adwords program. Why? Because everyone else is doing it? Wrong. Most of the bigger web properties have their own sales teams and would at best be running Adwords ads as a backup, to ﬁnish off surplus inventory. So, it is likely that the target audience you are looking for – particularly if they are not the adventurous types - may not be even seeing your ads if they are run only on one network. Even if you are looking for ad networks, - services that place your ads on multiple websites, there are a number of other ad networks out there that you need to explore, if only to ﬁnd out if any of them would offer you a better deal.

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online are airline tickets, travel agents and travel accommodation. How much was it that you were planning to sell online?

Top sellers online Airline tickets Train tickets Travel accommodation Music (ringtone) downloads

Most of the bigger web properties have their own sales teams and would at best be running Adwords ads as a backup, to ﬁnish off surplus inventory And chances are that you may even get better targeting, better click-throughs or even better conversion rates.

Adsense will make me rich

13.

This is the other side of the “Google is the only ad network” argument. There are any number of content creators, publishers and aggregators who believe that all they have to do is subscribe to Google’s Adsense advertising program and their site will be full of ads and they will be laughing all the way to the bank. They are partly true. Their site will be almost full of ads (There are some limits to the number of Adsense ads you can serve per page). But it is highly unlikely that your banker will have to deploy extra manpower to keep track of your account. To put it bluntly, it is highly unlikely that you will even break even with just Adsense. Adsense is designed for Google to make money, and for small time websites to get some pocket money. It is not for businesses that will depend on online advertising for signiﬁcant revenues. At best Adsense can be used by small websites that cannot afford their own sales teams or to ﬁll in unused inventory and generate a supplemental

income, something that will not even make a signiﬁcant difference to your P&L. You will need your own sales team to bring in advertising revenues if that is your business model.

People will buy stuff online

14.

There is a lot of retail happening online and you should easily get a small percentage of that pie. Right? Lets get our facts right first. According to internetworldstats. com, just 3.7% of India’s billion population had Internet access in 2007. And a Survey by Visa in November 2008 across six countries in Asia Pacific placed India fifth in per capita spends online. And what do they buy online? According to the same Visa survey, “In India, purchasing digital downloads was the most popular form of consumer e-commerce. Seventy-six percent of respondents from India, the highest among Asia Pacific, have bought a form of digital entertainment over the Internet in the last 12 months. Music downloads (63 percent) emerged as the most popular digital entertainment purchase”. What else do they buy? Going back to the Visa survey, the top three on the list of transactions

Collecting payments online is easy

15.

Payment gateways make life easy for the online seller. Or that atleast is theory. Practice like with everything else is slightly different. First you need to tieup a payment gateway. And if you are a startup or a small business, then your problems start there. Banks that provide payment gateway services demand a hefty deposit or a large enough transaction commitment that straight away rules out the option for smaller business. And options like Paypal are not really popular this side of the ocean. By the way, have you taken online fraud into consideration? Or the cost of providing for security against online fraud?

Visitors will create all the content I need

16.

There are quite a few websites that thrive on content that visitors create. Digg for instance is solely about links that users provide and comments that others provide. So does Stumbleupon and Technorati. Facebook, Flickr, youtube and Orkut depend completely on user generated content. All of them have fabulous valuations. Digg for instance had a valuation of over 300 million dollars, before it fell to around 200 millions due to the tough economic conditions. The problem is in the business model. Almost all of them are struggling to develop viable business models. The only viable business model seems to be that some one else buys them out for their user base or user stickiness. Digg in particular has JANUARY 2009 67

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The problem with websites that thrive on user generated content is in the business model. The only viable business model seems to be that some one else buys them out for their user base or user stickiness

had buyers (Google) walk away during the late stages of negotiations, and Kevin Rose now says that they have the best ever 12 month roadmap now! Another fact to keep in mind is that for every user generated content site that makes it big, there are a few thousand others that bite the dust. Even as Youtube did a 1.65 billion dollar sale to Google, hundreds of video hosting sites bit the dust, unable to get enough users. For every Stumbleupon that succeeded, the number of those who stumbled along the way are simply too large. Users will create content, but only a handful of sites have managed to get momentum from that.

Search engines (read Google, as the others do not reveal anything about their ranking methodology) rank pages according to authority. A page that puts out a given piece of content (article, news, etc.) first is taken as the original and all others are taken to be copies. The original gets highest authority and copies

get lower authority. And if a website is seen to be consistently “copying”, then search engines have been known not to crawl them as frequently and also not to list them prominently in search results. So, think thrice about business models that relay on content from other websites.

I can pull all the content I need from other web sites

17.

This is the other side of the user generated content coin. This can be as screenscraping, or as subscribed webservices. My concern here is not just with copyrights or fair use. Pulling content from other websites is the surest way of ensuring that you loose search engine trafﬁc. Why? 68

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If a website is seen to be consistently “copying”, then search engines have been known not to crawl them as frequently

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/cover story A recent outage that we got away easily from I was getting ready to call it a day, when I got an SMS saying that our servers were down. A quick call to Binesh and we were up checking what was wrong. Unable to reach the server, we decide to reboot it. This server is hosted at Serverbeach and they provide a tool for automatic reboot. Over to the login page, only to find that that is also not accessible. Even the “mail Serverbeach” page is inaccessible. We have another server at Serverbeach and a quick check confirms that that too is down. By now panic sets in. Having a server down is one thing. Having all your servers down is alarming. having your datacentre down is disaster. A datacentre has multiple levels of redundancy and if it goes down completely , it has to be some thing serious. We hunt down the helpline number to find out what has happened when luck seems to be with us and we get an alert that the main web server is up again. Check it and yes, indeed the website is up as if nothing has happened. Meanwhile the other server is also up, but the application had shut down, requiring a restart. Easier if we can login to our account at the datacentre. While the home page for the datacentre is now up, we cant login. Tried to chat with the site operator (they have liveperson implemented) and here is what I got : jenriquez: there is a known issue in our Virginia datacenter and our engineers are looking into this How long will it take? Dont know. we will post a message at the serverbeach blog. It is midnight here, should I wait? we will restart the server. But the server is up; the application has to be restarted.... <No response.> ? <No response> I give up. Waited for an hour, intermittently trying to login to the account or find the post at the forum. Finally went into chat mode again and got a URL for the forum posts. Turns out that the url was wrong! Asked again and this time got the correct URL. It is 1:32 in the morning by now and my last thought for the days is that whoever thought that managing a website is a 9 to 5 job does not know what they are talking about! (this content is from the DARE blogs)

Managing a web site is a 9 to 5 job

18.

A website is not like your regular storefront that you shut down after business hours. It is more like an airport hotel that has visitors checking in and checking out round the clock and has maintenance work going on all all hours. Remember that visitors to your site can come at all hours and from all corners of the world. So, you cannot afford your servers to be down at any time. Typically, you set up alert mechanisms that send you an sms when your servers are not reachable or when the applications running on them are slow or not responding. And this SMS can come at any time of the day. They do not respect any 9 to 5 schedules or weekends or holidays. I personally have lost count of the number of times I or others in my team have been woken up at night with an SMS saying that one or more of our servers are down or not responding as they should.

You can scale your business constantly

19.

Most web based business plans that I have seen rely on constant and steep scaling of visitor numbers, page views, transactions, what ever. Most of the time, this does not happen. Visitors to websites increase in steps and not in a steep growth line. Why? Because it takes time for people to get familiar with you site, because it takes time for you to get your search engine indexing right, because it takes time for people to start adding your pages to social book marks. And ﬁnally because online browsing and buying habits have a seasonality to them, and you cannot always be the ﬂavor of the day, even if you are dealing with alltime favorites like BollyDAR E wood or porn. JANUARY 2009 69

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funding/strategy

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funding/strategy Sandeep is the co-founder of Nexus India Capital, a venture capital ﬁrm that mainly invests in companies that are wholly or substantially located in India. Nexus typically invests early in the life of the company. However, it limits its investments to 6-8 in a year. In the last two years, Nexus India has invested in 15 companies. Prior to Nexus, Sandeep was co-founder and CEO of Medusind Solutions, a healthcare outsourcing company. He is also the co-founder and Managing Director of eVentures, a venture capital ﬁrm focused on early stage investments in India since 1999. Sandeep has an MBA from The Wharton School with a dual Major in Finance and Marketing, and a BS in Electrical Engineering from Stanford University.

iven the current global slowdown, are you reworking on your investment strategy? When we are looking at investments, we are looking at a 5-7 year horizon. These blips in between don’t matter that much.

more people today who are saying ‘listen you won’t see Infosys grow at the same rate that it was earlier’ and so on. It is a good time to potentially look at entrepreneurial options for growth. There is no sense of despondency or gloom. But there is cautious optimism. There are people who are willing to step out and take risks. A lot of people in the last decade have seen the growth in the Indian market, have seen their salaries grow tremendously and accordingly their savings. They are now open to entrepreneurial activity. As an investor, are you open to considering business plans right now or there is a freeze? Absolutely. We are open to new investments. We have just raised the second fund ($120 million) and we are investing from that. We are looking at plans regularly. No change in our day-to-day activity. As long as you have a great business idea, there is no dearth of funds. Investors are probably going to be looking more at differentiation. So, if you do the next “me too” thing, you may find it hard to get funding than you did before. But if you have a differentiated product, a clear strategy for the market and the market is large enough, there is funding out there. Great companies get built during the time of recession. The reason is that when everybody sits back and says ‘I am not doing it’, there are some people who go out there and take risks. People who venture out face less competition for customers and employees. It is very important for an

investor of the month Our investments are across four sectors. We invest in consumer-focused companies in the domestic market, technology companies that are both domestic and global, business services and clean technology. Although there is a slowdown in different pockets in each of these sectors but we continue to see growth. There is no change in our strategy. It all depends on the quality of the entrepreneur and what space they are targeting (if the space is large enough) and if they have some differentiated services or products. So, there is no real change in our investment approach. We believe that consumers will continue to spend but the economic growth will slow down, and the type of growth that we were seeing at the company level may have to be moderated. Something that may have taken three years to build out, may now take four. But a strong entrepreneurial team would continue to build out great companies.

entrepreneur to have a clear understanding of the market and how they expect to create a compelling value proposition and a differentiated service in that market. Make sure that your market is large enough. How has been the performance of your investee companies in the last two years? Most of our companies have been posting revenue growth of 60-80% and in some cases 100%. Many of our companies have hit profitability and are doing quite well. Some companies that we have invested in are in the early stage of their development but had achieved milestones in terms of either building a certain technology or product, or getting a certain set of customers. For them, it may not be a revenue growth per se but are commendable achievements. We are seeing that for companies that are focused on India, given the slowdown, the growth may not be 100% but we may look at 50-60% growth.

Despite the slowdown, are you still getting business plans for consideration? That’s the good news. The entrepreneurial activity has not dipped. In fact, we believe it has picked up. There are

How are your portfolio companies dealing with the current slowdown? People are cautious in their spending, and the same holds true for our portfolio firms too. You want to make sure that JANUARY 2009 71

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funding/strategy

you have enough cash in the bank to last yourself for 1218 months to go through this cycle. Our companies continue to spend for growth. So they are spending money on R&D, product development and marketing but they are doing that in a thoughtful manner. We are asking them to be cautious but make sure that they don’t go overboard. But there is no hard-and-fast rule that says one can’t do an acquisition or cannot hire expensive people. A lot of that is a shade of gray and one has to take it up on a case-by-case basis. When a business plan arrives at your table, what is it that you look for before deciding to invest? The first thing we look at is whether it is the right focus area for us. If a company has a US management team or a European management team and are focused on the US and Europe markets, those plans do not fall in our bucket. Our focus is on companies that are being built in India or that are being built for India. The second thing that we look at is the space that they are targeting. We would not, for instance, invest in the infrastructure sector. It is not a VC type investment. There are certain segments that are not capital efficient and would not make sense for us. Once we are convinced that there is a potential to build a large scalable company in a certain space, we set up a meeting with the founding team and have them present their plan to us. There onwards, it is all about people. Then that becomes more important in making the decision. We focus on the passion of the team, and their ability to succeed. They should have the clear understanding of what the market requirements are and how they expect to target them. How do you allay fears of entrepreneurs that once investors come on board, they call the shots? We at Nexus have been in the shoe of an entrepreneur ourselves. All of us built companies from scratch, as the CEOs of our companies, and have had board members and investors on our companies. We are aware of this issue that may exist in the mind of an entrepreneur. The second thing is that we are investing behind people and if you come in and try and second guess the person in terms of their own business, then you are not really backing the person. If you are backing the person, then you have to

give him the room to build his business in his way. Having been entrepreneurs ourselves, we understand that entrepreneurs have their own challenges – what may appear an easy thing from outside, may not be as easy as there are others constraints that the entrepreneur is working with. It is important to understand that we are there as facilitators and not as monitors or operators. So, we have to facilitate their ability to grow. In all our shareholder agreements, we have information rights. We will have board seats in most cases. Whatever information a board member should get, we expect that. We would like to see those things that are important for an entrepreneur or the management team to run the business. We expect our investee firms to provide us information that they think is valuable for them to run their businesses and which we think can help us help them better. What is the ticket size of the investments that you make? We will invest anywhere from $1 million to $8-10 million in the first tranche. Over the lifecycle of the company, we could invest up to $20 million, depending where the company is in its growth path. If it is a very early-stage company, they may need only about $1-2 million. If there is a company that may have $2-3 million in revenue and is looking to go global or is planning an acquisition, the amount of money that we give will be higher. What kind of exits do you look at and within what time-frame? We invest for a 5-7-year horizon. The exits would either be domestic listing or some sort of a strategic transaction, some sort of an acquisition either by an Indian or a global company. We may see some exits in global markets but that would be fewer. There is no preferred exit for us. We look at IPO as another financing activity within a company, in which case rather than taking money from private investors you are taking money from public investors. We want to build our companies to the point where they could potentially list. History has shown that if you have an option to list, you would get a better valuation in a strategic transaction. We see many times that a company would file a red herring prospectus as a signal to the market that ‘if you want to acquire us, do that now DAR E before we go public.’

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/going global

Doing business in South Africa The host of the FIFA World Cup 2010, South Africa offers immense opportunities in infrastructure development

/Mohita Nagpal

Earlier in 2006 it also formed a joint venture with Community Investment Holdings, South Africa, to market and sell Ranbaxy’s range of anti-retroviral (ARV) products there. In fact, Ranbaxy is just one of the many examples of Indian companies that capitalized on the business opportunities prevailing in South African markets. The Tata group has been present in South Africa since 1997. Tata has identiﬁed SA as a major growth area in its plans and therefore increased the con-

tribution of non-Indian businesses from 25 to 35% in 2006. Tata Steel constructed a R 650 million high-carbon ferrochrome plant in Richards Bay on the KwaZulu-Natal coast. Tata Motors formed a venture with the local Imperial Group for selling cars and light commercial vehicles in 2004. It sold around 11,000 units in 2005, double the number expected. Moreover, Tata’s hospitality wing, the Taj chain of hotels, is poised to capitalize on the growing number of tourists in South Africa.

Photo: www.southafrica.info

Photo: www.istock.com

hen Ranbaxy Laboratories signed a US$ 70 million deal to acquire Be-Tabs last year, it became the ﬁfth largest pharmaceutical company in South Africa. It had already established a presence in the country in 1996, but this ensured that it developed deeper roots, used the brand equity of Be-Tabs to its beneﬁt, and got local manufacturing rights as well. It expects to boost its earnings by more than double through this deal.

JANUARY 2009

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/going global Jindal Steel, and Kirloskar. Public sector enterprises include NSIC, CII, GOI Tourist Ofﬁce, State Bank of India, and Bank of Baroda. According to Jardine Omar, Economic Councilor, South African High Commission who was present at India Food Exhibition 2008, “There are probably close to 200 Indian companies that have either a direct presence or have appointed agents or distributors in South Africa. So the economic relation is pretty buoyant at the moment.” The major sectors of exports to South Africa include motor vehicles, rice, metals, cotton, fabrics, leather, pharmaceuticals, and machinery. Whereas South African exports to India include gold, silver, chemicals, coal, iron and steel, fertilizers, transport equipment, and paper.

DARE/country facts Area:

1,219,912 sq. km Population:

47,587,543 GNI per capita (US$):

5,760.00 Income category:

Upper middle income Why South Africa? Africa is one of the world’s few unexploited markets, and South Africa being the gateway to Africa makes for

DARE/opportunity areas n

ICT

Infrastructure

Manufacturing

Power

Transport

Textile

Tourism

Gems and Jewelery

Pharmaceuticals

Photo: www.southafrica.info

Then there is Lakshmi Mittal’s LNM Group that took over former state-owned steel maker Iscor in 2004, renaming the company Mittal Steel SA. Godrej Consumer Products acquired the South African hair color business of Rapidol, UK as well as its subsidiary Rapidol International in July 2006. The two companies had a combined turnover of ZAR 52 million (approximately. Rs 33 crore) the previous year. Besides, IT has emerged as an important sector for Indian companies in South Africa. Companies like Tata Consultancy, Aptech, Satyam Computers, Zensar, and Ramco are well established in SA. Other Indian names in South Africa include the UB Group of India (beer manufacturer, hotels), Mahindras, Ashok Leyland, Cipla,

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/going global What makes South Africa an attractive destination for Indian businesses?

South Africa is currently considered one of the global centers of economic growth along with economies of countries like Brazil, India, Russia, and China. And the reason for that is, firstly, the South African government is focusing on infrastructure development, and with that comes a whole range of socio-economic benefits for a country and its people. The reason we are focusing on this is because South Africa is hosting a mega sporting event in the year 2010 that is, the FIFA World Cup. I don’t need to dwell deeper about what benefits a large sporting spectacle brings to a nation. We all have seen the success China enjoyed when it just hosted the 2008 Olympics. The beautiful infrastructure that came up, the jobs and other economic benefits that China received from hosting the event are just some of the examples. Similarly, a lot of infrastructure in the form of stadiums and public transport is being developed in South Africa. Hotels, restaurants, shopping malls are being created for the influx of tourists in 2010. These infrastructure projects are stimulating entrepreneurs who want to take advantage of these opportunities. Secondly, like India, South Africa has also been on a high growth in the last 14 years. A period of unprecedented growth has been experienced by the South African government. To sustain this, public sector infrastructure must also be upgraded; airports, railways, road networks —— they all need to be upgraded. Almost €40 billion is to be dropped into the economy to upgrade infrastructure. That requires public sector investment, so again there is an opportunity. What are the key sectors that are attractive for Indian investors?

Areas of opportunity for Indian companies particularly are engineering, construction, and machinery. One can also look at joint ventures with South African companies to take advantage of sheer volumes of opportunities. Automotive is a key sector for Indian companies. The reason why South Africa is particularly attractive is because it is the gateway to Africa, and this market is estimated to have 150 million consumers. So companies like Tata and Mahindra have come and set up bases in South Africa to take Jardine Omar advantage of opportunities emerging in the Southern African region as a whole. South Economic Counsellor, South African High Commission Africa is traditionally a mining-based economy because it is endowed with natural resources like coal, gold, iron ore, manganese, and platinum. Therefore, Indian companies come to South Africa to acquire access to these natural resources. The IT sector is big, with the government department spending to improve their infrastructure and corporate governance. There is a huge opportunity for Indian IT companies to come and explore opportunities in South Africa. Pharmaceuticals is a natural sector for India, and some leading Indian companies like Ranbaxy, Dr Reddy, and Cipla have already established themselves here. How does the South African High Commission help Indian entrepreneurs do business in South Africa?

First, we assist with informational services, information on doing business, business opportunities, and investment incentives in South Africa. Second, we work on behalf of the potential investor, facilitating access to the highest level in government to fast track and to make the investment decision-making process simpler. We also facilitate visits to South Africa. For example, if a company comes to us and they are interested in traveling to South Africa to explore further opportunities, we facilitate a program for potential investors with our network of contacts at state as well a national levels in South Africa. We also bring South Africans to India to interact with business people in India. We also organize conferences and business exhibitions to provide a platform of opportunities for Indian entrepreneurs. How stringent are the labor laws in South Africa?

Labor is very well organized. Unions are part and parcel of the history of development of South Africa. They also work very closely with the South African government to ensure that the objectives of the people of South Africa are achieved. So the labor movement is not destructive, it is constructive. It also wants to see economic growth and employment opportunities for South Africans. It is a good relationship between labor, business, and government. Hiring and firing of people is not as difficult as it is in India. But within the ambit of labor regulations, you cannot just fire a person for any frivolous reason. There is a due process that must be respected and followed. How good is the level of infrastructure and R&D?

If you are traveling to South Africa, I won’t forgive you for thinking that you are actually in a country in Europe. The current infrastructure is fairly sophisticated and advanced. All it needs is an upgradation to sustain the current level of economic growth. As far as R&D is concerned, quite a substantial expenditure goes towards it. We have R&D and technical institutions that have programs to stimulate and promote innovation. There is the Council for Certiﬁcation Research program to promote innovation and new product development, new technology for manufacturing, IT sector, and services sector. How easy or difﬁcult is it to start a business in SA?

It is fairly easy to do business. In fact, if you look at the IMD Business School’s competitiveness ranking and the ease of doing business, South Africa is probably ranked amongst the top 30. Certainly, it is higher than India. The process of closing the business is not much stringent either. 76

JANUARY 2009

DARE.CO.IN

/going global a perfect choice to set up a business. South Africa is just 3% of Africa’s surface area and holds about 4.5% of its population. Moreover, it accounts for 40% of Africa’s industrial output, 25% of gross domestic product, generates more than half of all electricity, and is responsible for 45% of all mineral production. It also has rich reserves of natural resources like platinum, chrome, gold, and alumino sulphates. It also manufactures more than 80% of all motor vehicles made in Africa and 57% of all steel manufactured on the continent. The transport service is also fairly developed in South Africa, with 30,600 km of single track. It has the biggest rail network in Africa, serviced by 92% of all electric locomotives there. There are 535,000 km of built-up roads. Johannesburg International Airport, which handles 18 million passengers a year, is the biggest airport on the continent. All of South Africa’s major cities have conference venues like Durban’s International Convention Center, Johannesburg’s Sandton Convention Center, and Cape Town’s Convention Center, the best among a total of 1,700. The country also promotes innovation in a big way with a lot of organizations supporting it. The Technology and Human Resources for Industry Program (THRIP) is a partnership program that seeks companies to match government funding for innovative research and development in South Africa. Then there are organizations like Support Program for Industrial Innovation (SPII) and The National Technology Transfer Center (NTTC) that have been initiated by the Department of Trade and Industry for the same purpose. The 2004 GDP of South Africa was ZAR 3096 billion, an increase of 3.7%, growing to 4.8% in the second quarter of 2005. The government hopes to achieve growth between 6.5 and 7.5% by 2014. Mining, ﬁnancial services, and manufacturing are the biggest contributors to economic growth. The FIFA World Cup 2010 hopes to cash in on

INDO-SOUTH AFRICA TRADE

All ﬁgures in US$ MILLION Source: Department of Commerce, Government of India

DARE/doing business 2009 Ease of….

2009 Rank

2008 Rank

Change in Rank

Doing Business

Starting a Business

+10

Dealing with Construction Permits

-1

Employing Workers

102

-6

Registering Property

-9

Getting Credit

Protecting Investors

Paying Taxes

+42

Trading Across Borders

147

137

-10

Enforcing Contracts

Closing a Business

-2

Source: World Bank Doing Business 2009 Report

tourism in a big way. Already, around 9.1 million foreign travelers visited South Africa in 2007.

Doing Business 2009 According to the recent Doing Business 2009 Report by the World Bank, South Africa has gained three ranks to 32 in 2008 on the parameter ‘ease of doing business’. It has gained on the parameter of starting a business, jumping from 57 to 47. It also jumped 34 ranks on paying taxes, from 67 to

23. The report says that it now takes six procedures and 22 days to start a business in South Africa. However, it fell on a number of parameters as well. For example, ranking of trading across border went from 137 to 147. The reason for that, Jardine Omar believes, is, “South Africa is part of the Southern African community. It is the most advanced economy of all these countries, while other economies are still protected and not as libDAR E eral as South Africa.” JANUARY 2009 77

DARE.CO.IN

sector/lpo

LPO-Legal outsourcing business is on the upswing

The legal process outsourcing (LPO) business is witnessing a surge, thanks to the rise in the number of legal cases in developed countries hit by recession

/Ambrish Jha

ecession might have come as a blow globally, but for the LPO industry it’s an opportunity never seen before. Bankruptcies and litigations have increased manifold, and so has become bailout packages from governments leading to signiﬁcant rise in regulations. All these have fueled the need for legal works, and the direct beneﬁciaries are the LPOs. The LPO business, however, is not just about employing lawyers. It does involve technology and marketing in the base countries, namely, the US, the UK, Japan, etc. With an advantage in technology and knowledge of how the outsourcing industry works, BPOs and ITOs have turned out to be the worthy forerunners to the LPOs as far as technology is concerned. Some BPOs have actually taken to it on seeing the huge gains waiting to be tapped. Some of the big names of the LPO industry include Pangea3, Clutch Group, Integreon, CPA Global, and Mindcrest. 78

JANUARY 2009

Top 10 LPOs 2008 Rank

Company

2007 Rank

Company

Clutch Group

Pangea3

CPA Global

Integreon

QuisLex

Law-Scribe

Mindcrest

QuisLex

Law Wave

SDD Global

Atlas Legal

Cobra Legal Solutions

Ius Juris

Bodhi Global

Lexadigm

iDiligence

NeoWorth LPO

SOURCE: The Black Book of Outsourcing (http://www.theblackbookofoutsourcing.com/vendors-lpo-2008.htm)

LPOs have emerged as a perfect solution to the in-house legal departments of large multinational corporations and law ﬁrms looking to cut on their legal costs. They employ highly qualiﬁed, skilled, and motivated legal

professionals in India to accomplish low-end, standard, and less sensitive legal tasks outsourced to them. The beneﬁts are mutual. While the US- or UK-based legal ﬁrms and multinational corporations manage to reduce

DARE.CO.IN

sector/lpo their legal expenditure by almost 50 to 80 percent, Indian lawyers employed with the LPOs earn much more than they would if they practice in Indian courts on their own. What has helped the cause is that legal systems of both the US and India have their origin in the UK legal system. Most of the LPOs do employ or work in association with British and American lawyers. They are the ones who provide additional training, most often in legal writing style, to the lawyers employed by the LPOs. For senior lawyers from the US, this association has come as a huge relief from the grueling task schedule, ensuring better remuneration at the same time. Most of the legal outsourcing takes place from the US and the UK, though other European countries and Japan have also stated doing the same. India has managed to emerge as the biggest destination of legal outsourcing, but countries like the Philippines and South Africa are also trying to take a pie out of the business, thanks to their comfort with the English language and the similarity of their legal systems with American and British ones. The market size of the LPO business is anyone’s guess. Estimates vary from $40 million to $150 million. However, there seems a perfect consensus about one aspect — bullishness of the industry. By 2010 it is expected to reach anything between $640 million and $1.5 billion. Some enthusiasts say that by 2015 the size of the industry could be as big as $15 billion.

areas — litigation, compliance, bankruptcy, and foreclosure. For instance, bankruptcy of Lehman Brothers alone has led to litigation worth $1 billion. Indian LPO companies have managed to impress outsourcing companies by embracing professional management skills and providing services matching American standards. Sanjay Kamlani, Co-CEO, Pangea3, says, “Legal talents in India have learned to implement Six Sigma tools and other methods to ensure consistent quality delivered in the most efﬁcient manner.”

Reasons for increase in business

Corporate clients seem to be in the process of adopting backend legal outsourcing into their business models, as Kunoor Chopra of Law Scribe says, “What I found very interesting is that corporate clients are not introducing us to their panel counsel because they want the law ﬁrms to seriously build offshoring into their business model.” Outsourcing of lowend legal tasks is reducing the costs of LPOs by as much as 50 to 90 percent. Shah says the top 200 associates charge more than $300 an hour, whereas partners

Recession and the desire on the part of legal ﬁrms and multinational corporations, particularly based in the US, to cut costs has turned legal outsourcing into an industry. It was encouraged by resolutions passed by some of the state bar councils in the US supporting such outsourcing. Abhi Shah, co-founder and CEO of Clutch Group — the company named as the number one among LPOs in the 2008 version of The Black Book of Outsourcing – says recession has opened new vistas for LPOs in four different

The market size of LPOs in 2006 was $146 million and by 2010, the industry would be worth $640 million.

— Abhi Shah Co-founder and CEO of Clutch Group

and senior lawyers charge close to $1,000 an hour in the US. LPOs, on contrary, charge anything from $32 to $100 an hour. Outsourcing to India provides higher savings as one moves up the value chain in the type of work outsourced, Chopra reveals. For secretarial type transcription or data entry work, savings are around 30 percent, she says, but as you move into litigation, corporate, and intellectual property support work like document and contract review, drafting, patent searches, illustrations, and applications, the savings increase from 50 to 70 percent. Tremendous saving opportunities for legal ﬁrms showcase how LPOs can cash on these. For Pangea3 the last three months have been the largest revenue generators ever and the last six months have seen a 100 percent growth in business as compared to the same period last year, Kamlani reveals. Abhi Shah’s Clutch Group expects a year-on-year increase of 100 percent in business this year compared to last year.

The size of the LPO sector Various estimates have been made about the size of the LPO sector by experts. While Shah says the market size in 2006 was $146 million, Poorvi Chothani of LawQuest puts the ﬁgure relatively low at $40 million, and Kamlani estimates it at $750 million. Shah estimates that, by 2010, the industry would be worth $640 million, and Kamlani puts the ﬁgure at $1.5 billion. Despite all optimism, the fact is that LPO business is in its infancy, unlike the BPO and ITO sectors. In comparison with the BPO and ITO industries, the revenues generated by LPO at present are much lower. According to Chopra, “In the fourth quarter of 2007, there were in excess of 45 BPO contracts with contract value in excess of $25 million. To date, to my knowledge, there hasn’t been a single LPO deal of this value.” Signs of maturity are visible in the LPO industry, as Chopra says, “The deals are moving from project to full-time employee team based, and JANUARY 2009 79

DARE.CO.IN with this the size of the deals are also increasing.” Market research ﬁrm Forrester Research, which Kamlani refers to, has predicted that about 35,000 lawyer jobs will shift offshore by 2010, and this will increase to about 79,000 by 2015. “If you take the low end of the LPO bill rate,”he says, “say $30 per hour and assume an average LPO lawyer bills 1,800 hours per year, then 35,000 LPO lawyers would generate approximately $1.75 billion [by 2010].”

Business prospects “We are looking forward to more than double our workforce [from the present strength of 300] by 2010,” says Shah, whose Clutch Group is set for all kinds of organic and inorganic growth. Kamlani also believes his company can clock a growth rate of over 100 percent by 2010. The LPO business has, however, its own share of problems. It’s not difficult to set up an LPO, thanks to lack of regulatory requirements that need to be fulfilled for an Indian willing to start one, as pointed out by Chothani. In addition, the infrastructure needed is particularly advanced in India. LPOs, thus, proves to be Low capital-intensive industry. One of the leading LPOs, Mindcrest, for instance, started with only five lawyers in 2002, and now it employs over 450 legal professionals and engineers. It is, therefore, no surprise that LPOs have mushroomed within a short span of time. When Chopra started Law Scribe in 2004, there were only five players in the market. Contrast this to the present situation, with over 100 to 150 LPOs already registered, as Shah reveals. This has led to a situation where there are many small, poorly financed LPOs trying to cement their place in the market. “There are about 15 to 20 serious players in the field with a stable infrastructure,” says Chopra. LPOs also depend on effective marketing and sales teams in the country where their customers are based, and a strong and effective delivery team in India. Chothani says, “It is extremely difficult, almost impossible, to build 80

JANUARY 2009

sector/lpo a viable business without both these arms of the business.” Without a guaranteed client flow from the US or the UK, and the support of a large BPO or ITO organization, or a US corporation or law firm, coupled with good financial backing, it would be impossibly difficult for an LPO to establish itself in the market. Kamlani suggests innovation and focus on specialized skills as the keys to success of the LPOs. He says, “Always invest in knowledge, and supplement it with sound global management skills.”

Legal talents in India have learned to implement Six Sigma tools and other methods to ensure consistent quality delivered in the most efﬁcient manner. — Sanjay Kamlani Co-CEO, Pangea3 Countries of origin Business generated by LPOs originate mostly in the US and the UK, which contributes almost 95% of the $250 billion industry. The US comprises 77 percent; the UK’s contribution is 18 percent; and the rest of the world makes up for the remaining 5 percent, according to Shah. He says, “It is, thus, obvious from where business will come.” Outsourcing from rest of Europe and Japan has shown signiﬁcant in-

crease, as Kamlani points out. Some ﬁrms are reportedly working overtime to get more share of legal outsourced works from Japan.

Indian legal firms & LPOs Indian law firms have generally refrained from the LPO business even though they have an advantage as far as the talent pool is concerned, as pointed out by Abhi Shah. A few are still in the business, but many others closed down. They faltered mainly because of their limited exposure to technology. Some experts like Kamlani point out those legal firms earn as much as $200 on an hourly basis. He says, “The LPO price structure of $20 to $75 will cannibalize their [Indian legal firms’] legal practice business.” There seems another reason why legal firms in India have not embraced the LPO business. They view the LPO industry as the first step towards ultimate liberalization of the Indian legal industry as Chopra points out. Their apprehension can be understood in the context of the Chief Justice of India’s remark some time back, albeit in an informal function, that the Indian legal system will ultimately open to foreign players.

The future The legal outsourcing industry seems to be going through a process similar to what was seen in the early days of BPO development. Consolidation will take place in the ﬁeld, and weaker players will be pruned out. Deals would get bigger gradually, and the present trend of project-based deals could give way to full-time employeebased deals, something already accomplished in the BPO sector. The industry is immune to the political environs in the US as well, as the state bar councils in the country have welcomed outsourcing. Some of the experts like Kamlani do see LPOs being players in special economic zones of India. The writing on the wall is clear — whatever be the difﬁculties, entrepreneurs will continue trying their DAR E hand at LPOs.

DARE.CO.IN

blogs/opinion

Is entrepreneur a strategic or a tactical opportunist T /Anurag Batra

here is an old saying "If people

entrepreneurs is that they say he or

(let me change it to entrepre-

she lacks strategic vision and intent

neurs) knew what they had to

and is too tactical. Sometimes when

be successful, most people wouldn't".

they criticize the entrepreneur they

This saying is so apt for entrepreneur-

are associated with too much, I think

ship. As I have said in my previous

of them as fools because I believe "Any

columns, entrepreneurship is an act

fool can criticize, condemn and com-

of faith, it's a loop of faith. Entrepre-

plain—and most fools do."

neurial success is all about going from

This over-emphasis on strategy over

failure to failure without loss of enthu-

execution is sometimes misplaced. Af-

siasm." Most entrepreneurs encounter

ter all, strategy is a plan for future and

success after many failures. Entrepre-

entrepreneurs have already factored

neurs believe being defeated is often a

that in their mind. To them execu-

temporary condition. Giving up is what

tion is strategy in action. Sometimes I

makes it permanent. The entrepreneur

feel the analysis focuses too much on

believes that only those who dare to fail

knowledge and not on its application.

greatly can ever achieve greatly. Entre-

What is knowledge without applica-

preneurs also believe that "Not failure

tion? I believe knowledge is a process

but low aim is criminal." The reason I

of piling up facts, wisdom lies in their

write about how entrepreneurs create

simpliﬁcation and implementation.

enterprises and shareholder wealth is

Strategic guys (I wonder how strategic

because it is often debated, dissected

they are devoid of executions) pontiﬁ-

and commented on. Business media

cate and fail to appreciate that even for

does it, consultants do it and so do

the transformation of an industry or a

strategic advisors. They sometimes be-

company, the steps have to be small

lieve that the reason the entrepreneur

and commonsensical. Strategy is com-

succeeded was because he or she was

monsense in action. Strategy is also

at the right place at the right time and

envisioning the future and making it

things happened. They don't tend to

your present.

see that the entrepreneur made things

Anurag Batra is real life, ﬁrst generation entrepreneur who is Much Below Average (MBA) from the prestigious Management Development Institute, MDI. When he is not busy writing such columns, he can be reached at anuragbatrayo@gmail.com.

happen, he or she executed well and took risks, did things that other people thought were unwise or too tactical. What I ﬁnd most irritating about these discussions and analysis about

DAR E

Anurag is the co founder and editor-in-chief of exchange4media group which includes exchange4media.com. JANUARY 2009 81

DARE.CO.IN Case Study - Contd. from pg 29 The entrepreneurs behind redBus and their investors decided to continue building redBus as a brand whose core competence was providing a superior customer experience. Says Phani, “We understood the vision of Ticketvala.com, but we felt it would take them a while to get results that way. Sanjay and Bharti told us not to focus on making software to operators the lynchpin of our early strategy and said that we had to demonstrate business value to motivate all concerned. They never ruled out giving software to operators, but emphasized that we needed results to go forward and motivate our team.” “Our model gave us money coming in every day, which built our ﬁnancial strength,” Phani continues. “We also added value directly to bus operators by selling tickets, which helped us build trust and strong relationships. Today, operators and our employees are so enthusiastic and encouraged because they can see our growth. We have also been able to gain the trust of our customers by satisfying them, which gives us an opportunity in the

From the start, Phani and his partners had debated whether to think of themselves as a software company, an online platform, or a brand. Their mentors had urged them to move forward in the swiftest way possible by solving a problem, which had driven them toward brand-building and ticket sales 82

JANUARY 2009

case/INSEAD

DARE.CO.IN

case/INSEAD

By the end of 2008, redBus had established a strong brand and was growing rapidly with 120 employees, operations in 15 states, and revenues approaching $7

Photo: istock.com

million annually future to cross-sell other products.” Seedfund showed its confidence in the enterprise by injecting an additional $700,000 in capital. In contrast to the venture’s early days when Phani had to persuade operators one by one to provide inventory, today operators typically contact redBus themselves and ask to join the system because it has become India’s largest online bus ticketing agency. Says Phani, “Today we have the largest network with bus operators, so more sign up all the time. Once you have a product, you have everything to push.” Phani believes that redBus enjoys a first-mover advantage because operators who were once willing to reserve seats for an unknown startup now are used to dealing with an established online brand. Adds Anandaram, “Ticketvala started out wanting to be a software provider that would charge a transaction fee for every ticket sold through their platform. They soon realized that it’s a very tough problem because many operators are not yet ready to understand how to use it and what are the benefits. They and others had to spend money offering tickets for free or for one rupee, so the platform has not yet paid off to the extent they had anticipated. Today, operators are more concerned about selling tickets than about having an efficient back end, though I think

that will change two or three years down the road.” By the end of 2008, redBus had established a strong brand and was growing rapidly with 120 employees, operations in 15 states, and revenues approaching $7 million annually. Says Anandaram, “I think there are three important lessons to learn from this case. First, there is no point having a grand strategy in a brand new market opportunity: your strategy is the one that gets executed every day in real time in the field, based on multiple inputs that keep coming at you from various directions. In a market that is so disorganized, nobody knows what will lead you where; you have to move forward. Second, it’s important to have cost-consciousness built into a startup from day one, as redBus did. Third, you need the right communications and internal information systems to scale up as a company grows. This is a cash-intensive business where you need to have a finger on operations minute by minute. You also have to ensure that the guy you hire in a small branch office understands operations, what bus operators need, and what it takes to adhere to the value of providing a great customer experience. That’s why Phani constantly travels around and communicates to employees and partners DAR E why redBus exists.” JANUARY 2009 83

/http://www.dare.co.in/blogs.htm from the

DARE.CO.IN

Liquor industry says cheers to recession!

Which states are favored by entrepreneurs in India?

Posted by: Mohita Nagpal in slowdown, recession, liquor industry, India food exhibition on Dec 21, 2008

Posted by: Binesh Kutty in TiE, Survey, study, KPMG, india, entrepreneurship, entrepreneurs on Dec 18, 2008

very cloud has a silver lining. Seems, the sun is shining on the Indian liquor industry despite the recession. These hard times are proving to be boom time for the industry, which has managed to post a growth rate of 18% against the normal rate of 10%-12%. Possibly, booze is coming as a respite for many to bear the slowdown. Vijay Mallya, Chairman, UB group has even gone record to call this industry recession proof. Even at the recent India Food Exhibition in New Delhi, the wine exhibition area drew the maximum crowd. Exhibitors had a “high” time managing the visitors. To conclude with what an exhibitor had to say, “Good times mean celebration. Bad times mean depression. The most important thing is that liquor comes as a solution in both times.”

study called ‘Entrepreneurial India’ done jointly by TiE and KPMG, gives an insight of what destinations in India are preferred for doing business. The survey was done across 15 states and 1000 entrepreneurs.

Slowdown and consumer behavior Posted by: Vimarsh Bajpai in Wal-Mart, slowdown, recession diet, recession, IIP, consumer goods, consumer on Dec 18, 2008 close of friend of mine who is a regular at the upscale restaurants in New Delhi is now on a recession diet. Ever since the news of slowdown started making it in bold letters on the front pages of the morning newspapers, she has been concerned. This is not so much about losing her job but more so that it would deprive her of the mouthwatering cuisines at posh restaurants. It was a pleasant surprise that she is now taking the austerity route and discovering cheaper alternatives to try out new delicacies. Is the slowdown changing consumer behavior across the globe? The answer seems to be in the affirmative, given that the sentiments are at an all time low and consumers across the globe are tightening their belts to deal with an uncertain future. According to the UK’s most senior food retailers, Andy Bond, the CEO of Asda, a subsidiary of Wal-Mart, the recession will create a new breed of UK consumer focused on thrift and a return to “traditional values” that will survive for half a century. The October IIP figures reflect a dip of 2.3% in consumer goods’ production, as against the growth of 13.7% in the corresponding period last year. Although too early to make lon-term projections, the figures do reflect the anxious consumer behavior in view of the slowdown. The dip in sale of automobiles is a case in point. The difficulty in availability of credit has made things worse. Car sales slipped by around 20% last month while two-wheelers saw sales dipping by nearly 15%. So if you now think of making your household budget and abiding by it in letter and spirit, remember that you are not the only one who is on a recession diet.

JANUARY 2009

Gujrat topped the result with 23% of respondents favoring the state as the most suitable for entrepreneurship. This was followed by Maharashtra and Haryana with 13% and 8% of votes, respectively. Tamil Nadu, Andhra Pradesh, and Delhi tied garnering 5% of votes. [Visit www.dare.co.in/blogs.htm to download a PDF of the complete study report.]

Even graduates and post graduates are begging for alms Posted by: Binesh Kutty in Survey, statistics, poverty, NGO, india, entrepreneurs, development, country, beggars on Dec 23, 2008 ere is some food for thought for all those planning on setting up your own NGO. The Department of Social Work, Delhi University conducted a survey for Government of NCT (National Capital Territory) of Delhi on the issue of 'beggary'. Some of the findings are simply baffling. Average number of beggars in Delhi: 58,570 Out of the surveyed beggars: • 22 beggars earn between Rs. 200 to Rs. 500 per day. To put this in better perspective, let us assume their average earning as Rs 350 per day – they are collecting Rs. 10,000 per month • 6 beggars hold a bachelor's degree • 4 beggars hold post-graduation certification Now while the Government does conduct raids under Bombay Prevention of Begging Act (1959), it's not doing any good — judging by the hoards of beggars we see out there on the streets everywhere. According to Subbulakshmi Jagadeesan, the Minister of State for

/http://www.dare.co.in/blogs.htm from the Social Justice and Empowerment, some simple steps could help. Such as rolling out mobile courts under the act, shelter homes, NGO support, training and rehabilitation of beggars, public awareness campaigns to get people to desist from giving alms, etc. I am sure, we have entrepreneurs, who have even better ideas to abolish poverty in much more effective way. Just that, even a strong heart shrinks at the thought that it will take decades together to get rid of this social-evil.

DARE.CO.IN Interestingly, requests for opening 360 more channels are pending with the Information and Broadcast ministry.

Will housing for the middle-income sector witness a boom? Posted by: Aswathi Muralidharan in recession, real estate, financial slowdown, financial crisis on Dec 20, 2008 ast week, DLF announced its plans to invest nearly Rs. 15,000 crores over a period of 3 years to develop residential projects in the Rs 15-40 lakh range. It was reported that DLF Home Developers Vice President A Harikesh said mid-income homes will witness a significant growth in the coming quarters. According to newspaper reports, the company, witnessing a tremendous response for its mid-income housing, had sold over 7,000 flats so far this year, despite slowdown in the housing demand. The retail estate giant plans to construct about 40,000 housing units in the mid-income category, sizes of which would be between 1,000 sq ft and 1,800 sq ft. This move coincides with Public Sector Bank’s decision to cut home-loan interest rates to 9.25% for Rs5-20 lakh and 8.5% for loans of up to Rs. 5 lakh. Does this mean that the mid income housing sector will be the savior of the real estate sector?

Television channels may get swallowed L Posted by: Ambrish Jha in UTVi, Rupert Murdoch, Outlook, NDTV, INX network, Enam Securities, Chirag Negandhi, Businessworld on Dec 22, 2008 lowdown in the world economy is spreading its impact on almost all sectors. It might have directly affected the housing and financial sectors, but its affect is wide reaching. Reports have started filtering suggesting some of the news channels may actually fail to survive the harsh times. According to a report published in the BusinessWorld (December 22, 2008), channels which are under severe stress include the INX network, UTV’s news venture (UTVi) and NDTV. The magazine has written on information provided by merchant bankers and analysts that INX network has huge distressed assets. NDTV may not be in imminent danger of being swallowed, but its profitability is under stress. According to Chirag Negandhi, analyst with Enam Securities, NDTV currently operates on a rapidly growing fixed cost base, imparting significant volatility to EBITDA margins. This is compounded by increased competition in the news and Hindi space leading to lower profitability. NDTV declared Q1FY09 standalone revenues of Rs 697mn (up 14% YoY), EBITDA loss of Rs 135mn (vs EBITDA profit of Rs 13mn in Q1FY08) and adjusted net loss of Rs 220mn (vs. loss Rs 22mn in Q1FY08) due to higher operating expenses. Consequently, Chirag has reduced for Enam NDTV’s revenue estimates, and revised FY09E EBITDA downwards to Rs124mn. Reports, as quoted by BusinessWorld, suggest print media is better equipped to face the heat, though some bigger names (the report has named Outlook) may come up for sale. General entertainment channel, the report says, is going to suffer huge losses - annual loss may be as big as Rs300 crore. Movie channels are expected to sail through this period without much problems, mainly because their variable cost is less than their fixed costs. Perhaps, some consolidation is urgently needed in the media sector. Quality of programs have been the most severe casualty in the process of mushrooming of television channels. May be Rupert Murdoch of India will emerge during this hour of distress. Or, who knows Rupert Murdoch himself surfaces in India too buying stakes in different companies directly or indirectly.

Want to know what Indians searched for the most in 2008? Posted by: Binesh Kutty in Zeitgeist, Trends, Patterns, Online search, ideas, Google on Dec 15, 2008 ave you seen the Google 2008 Year End Zeitgeist? You should! Zeitgeist, the word, is a German term meaning “spirit of the time.” It refers to the moral and intellectual trends of a given era. At Google, the aggregation of the billions of search queries that people type into the Google search box gives us a glimpse into the zeitgeist. I actually came across this release some time back, and wanted to share it with our readers. Just so, as it may directly or indirectly give you some insight for understanding what has been going on in the minds of people – the same people who might just be a client or a potential customer. Here I am pulling out couple of lists – ﬁrst is the one that you can use, the second can, well, amuse as well. Top holiday destinations 1. Goa 2. Kerala 3. Kashmir 4. Dubai 5. Singapore 6. Australia 7. London 8. Shimla 9. Switzerland 10. Manali Top ‘how to’ searches 1. how to reduce weight 2. how to kiss 3. how to earn money 4. how to get pregnant 5. how to learn english 6. how to gain weight 7. how to play guitar 8. how to create a website 9. how to impress a girl 10. how to tie a tie.

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Indian Industrial production index shrinks for ﬁrst time in 14 years: what does it mean? Posted by: Krishna Kumar in slowdown, manufacturing, leather, index of industrial production, exports, cotton, consumer goods on Dec 14, 2008

ll TV channels and all Newspapers are carrying the news that Indian industrial production has turned negative. What exactly is happening? Should we be worried? Fact: The first or quick estimate of the index of industrial production for the month of October 2008 is 0.4% less than that the same time last year, (October 2007). Does this mean we are in a recession? No. A recession means a negative GDP growth and here we are talking of just manufacturing. remember that the GDP also includes significant services and agricultural components. Is the decline significant? A 0.4% decline need not be significant in the overall context. But once you drill down, you will see that some segments are more impacted than others. Also, the fact that this is the first decline in 14 -15 years is enough to set alarm bells ringing. Everyone will be watching the next announcement on 12 January2009 with extreme interest. Quick analysis Exported oriented and consume oriented goods are the ones showing a decline in their indices. If you want to understand this conclusion, read on. What is the Index of Industrial production? The index of industrial production has a base of 100 for 1993-94 and is calculated by the Central Statistical Organisation of the Ministry of Statistics and Programme Implementation. The detailed announcement is available here. The October 2008 index of 261.5 compares to 274.7 in September 2008 and to 262.6 in October 2007. So, there is a reduction both from the previous month and from the same time last year. But there is more to it.

The different estimates First, these are quick estimates and will be revised twice and it will be some time before the final figures are with us. For an indicator, consider this: The first estimates for October came in December along with the first revision for September figures and final estimates for July. So, it will be about five months before we have the final figures. The elements of the index The number that is discussed above is the general index, which is made up of three sectoral indices- mining, manufacturing and electricity, each with different weightages. The industrial production index is is also divided into seventeen industry groups and by use-based groups into basic goods, capital goods, intermediate goods, consumer durables and consumer non-durables. 86

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/http://www.dare.co.in/blogs.htm from the What has slowed down? To understand what exactly has slowed down, we need to drill down into the components of the index.

The sectors Mining grew from 169.6 in October last year to 174.4 = +2.83% Manufacturing declined from 280.2 to 276.9 = -1.18% Electricity grew from221.4 to 231.2= +4.43% Use based Basic goods grew from 227.2 to 233.3 = +2.68% Capital goods grew from 350.8 to 361.7 = +3.1% Intermediate goods declined from 2560.5 to 250.9 = -3.69% Consumer durables declined from 431.9 to 419.0 = -2.99% Consumer non-durables declined from 245.8 to 240.8 = -2.03% We are beginning to see the contours of what exactly is happening. The index for Manufacturing has declines. The index capital goods and base goods are growing while those for intermediate goods and consumer goods are declining. Let us now look at the industry groups to understand more. Industry groups Of the seventeen industry groups, only seven showed positive growth. Lets first see the major ones that posted a decline. The largest decline was in leather and leather and fur products which fell 18.07% from 167.1 in last October to 136.9 The next big decline was in wood and wooden products, furniture and fixtures which declined 14.37% The third biggest loss was in cotton textile which declined by 9.55% Number four in the declining list was transport equipment and parts which declined 6.11% At number five was basic chemicals and chemical products other than petroleum and petroleum products which declined5.53 %. Six seven and eight respectively were "wool silk and man made fiber products " (-4.79%), "textile products including wearing apparel" (-4.61%) and "Jute and other vegetable fibre Textiles (except cotton)" (-3.34%) The last two in the declines list were non-metallic mineral products (-3.28%) and food products (-2.88%) The seven which posted growth included Other manufacturing industries = +11.02 % Beverages, Tobacco and Related Products = +7.54% Paper & Paper Products and Printing, Publishing & Allied Industries = +5.41% Rubber, Plastic, Petroleum and Coal Products = +5.14% Basic Metal and Alloy Industries = +4.01% Metal Products and Parts, except Machinery and Equipment = +1.24% Machinery and Equipment other than Transport equipment = +0.33% What does this mean ? First take a look at the export statistics here. Barring the top two items (petroleum and jewelery) almost all others in the top ten are in the industry segments that have seen a decline in the index. Leather goods also enjoy large export markets. Now let us get back and trace the items that have seen a decline in their respective indices. Manufacturing / intermediate goods - consumer goods (durables + nondurables) / most items in the top of the exports list In hindsight, perhaps we did not need the index o findustrial production to tell us that consumer buying and export markets are affected. DAR E

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slowdown/opinion

here is a lot of chaos in the labor market. What’s your take on this?

Chaos is only 6 percent of the labour market. The organized sector in India accounts for only 6 percent, so 94 percent of India is not seeing any of this. Some of this chaos is overdue. It is a cleansing process. I don’t think it will last very long. We are already close to the bottom. I think in 18 months India will become a much more attractive investment destination.

Do you think companies are overreacting to the slowdown? Absolutely. They are not sure so they are being extra-cautious. Anorexia makes you thinner, it doesn’t make you healthier. Some of them are overreacting and they will soon realize it.

How is TeamLease dealing with the slowdown? We have had some performance-related adjustments. The slowdown has impacted us, but it is also an opportunity to build a great company. For years, good and bad have been treated equally. Now people are realizing the importance of a true service.

What is your view on the effect of the slowdown on entrepreneurship?

Manish Sabharwal

Co-founder and Chairman, TeamLease Services

This current slowdown is a great opportunity to make entrepreneurial moves that you could never make before. The kind of opportunities you see in a low tide you don’t see them otherwise. This is the time to be making prototypes, to be ﬁnding team members, to be making calls to customers. This is a unique opportunity. In the past ﬁve years the game was loaded in favor of bigger companies, bigger people, and those with big money. In this downturn everybody is equal. What matDAR E ters is guts.

This interview was done on the sidelines of TiE summit 2008, Bengaluru JANUARY 2009 87

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DARE

is proud to be a winner of L-RAMP Awards 2008

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other winners A. Manoharan T. Muthu Ayyapan S. Alphonse Naman Sanghvi K. Mohan Dr. Malavika Vinod Kumar K. Uma Vaatsalya Healthcare IFMR Trust Ela Bhatt

The Lamelson Recognition and Mentoring Program (L-RAMP) is a joint initiative of the Indian Institute of Technology Madras and Rural Innovations Network and supported by the Lamelson Foundation, USA

Ajay Dhoundiyal, Ambrish Jha, Anil John, Arunjana Das, Aswathi Muralidharan, Binesh Kutty, Chhavi Tyagi, Dayanath Levaj, Imran Ali, Jagadeesh Jayakumar, Jaideep Marlur, Krishna Kumar, Mario Gabriel, Mohita Nagpal, Shilpi Kumar, Sreejiraj Eluvangal, Sudhir Arora, Sujith Sujan, Vijay Rana, Vimarsh Bajpai

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Believe it or not - This font can reduce printing costs up to 20% Binesh Kutty in slowdown, recession, ofﬁce, IT, innovation, idea, how-to, entrepreneurs, cost-cutting on Dec 23, 2008 his is simply ingenious! Just check out the visual below. It is a magniﬁed view of EcoFont (developed by SPRANQ creative communications of The Netherlands).

I searched it on the shelves but could not find one. So I asked a salesperson who was standing idle just staring at the customers. Much to my surprise he wasn't even aware that there was a Biography section inside the bookstore. When I asked him about the 'biography of V S Naipaul', he only registered the name. He promptly sifted through the books and came out with one of Naipaul's novel that had his name in bold on the cover. It was surprising that despite working in the bookstore he wasn't aware that there was a computerized database that he could look into. It seemed me that he had been deployed on the shop floor without a proper briefing. I am sure many other customers must have felt equally disappointed.

After inflation and recession, here comes ecoflation Posted by: Aswathi Muralidharan in Untagged on Dec 11, 2008 For those still wondering, the holes in the font are the area on which printing ink wont be used. Amusing, but effective. Is it readable? I checked it – it looks just fine, like any other font. During the slowdown, every penny counts. It is amazing how this rather simple innovation can contribute in cost cutting. All you have to do is set this font as default on all workstations in your company... Additionally, you can also implement some of the ideas mentioned in one of my previous blog entries — How to save paper at work?

Is your staff well informed? Posted by: Vimarsh Bajpai in V S Naipaul, The New York Times, services, products, customer care, customer, books on Dec 21, 2008 aving a staff that itself is not well aware of the products and services that you offer can turn away customers. The best thing about the slowdown is that you can stroll leisurely inside a mall doing window shopping with little money in your pocket to support the temptation to buy anything. There is a voice inside you that keeps telling you "These are tough times. So save some money." This way you can avoid the guilt that comes soon after you have ﬂashed your credit card to purchase something beyond your means. Facing similar plight, I was strolling inside a large shopping mall in New Delhi yesterday only to land in a seemingly well-stocked and well-known bookstore. While the friend accompanying me parted ways soon after we entered, I decided to just roam around to check out the new releases. As a thick hardbound at my bedside is already waiting to be read so there was no question of buying a new one. However, I got reminded of V S Naipaul's "authorized" biography written by Patrick French. The World is What it is has been included by The New York Times in its list of The 10 Best Books of 2008. I quickly changed my mind and decided to buy a copy.

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t takes no rocket science to understand that there has been a remarkable rise in the prices of vital commodities in the recent years. Between 2006 to 2008 itself, the average price of oil, has risen by 110%, wheat by 136%, and rice by 217%. Though the prices might have slightly declined due to the current ﬁnancial crisis, but in the longer run, it might burn a hole in your pocket. According to a new report, “Rattling Supply Chains,” by World Resources Institute and A.T. Kearney, environmental trends and their consequences might have a greater effect on businesses in the coming years. The report indicates that mounting pressure on natural resources will lead to higher costs along corporate supply chains. This pressure will affect many industries, especially those dependent on natural resources to produce consumer goods, who would have to internalize increased costs that is currently beared by the governments and the society. The FMCG industry could itself see earnings fall by 13-31% by 2013 and 19-47% in 2018, if they do not implement sustainable strategies throughout their supply chains. The report recommends the following actions to address the concerns: • Understand the environmental impacts/trends and your dependencies, and then seek substitutes if possible • Prioritize environmental issues and opportunities depending on their potential impact on costs, revenues, and reputation • Chart a new course, and make sustainability principles a part of an action plan • Take an inventory of current initiatives.

US electronic retail store in trouble! Posted by: Mohita Nagpal in Walmart, US, retail, recession, Circuit City, Best Buy on Dec 21, 2008

fter ﬁnancial institutions and the auto companies, it seems retail is next in line to face the heat of the economic crunch in the US. Circuit City, the second biggest electronic retail store sought for bankruptcy

/http://www.dare.co.in/blogs.htm from the protection. And this news comes just a fortnight before the beginning of the peak shopping season in the US. Trouble began when Circuit City started losing its market share to the other electronic biggie, "Best Buy". Then, Walmart's increasing popularity in the electronic segment also posed a threat. However, the real problem started with the troubled economy. Circuit City lost about 87% of its stock value. Now, it is planning to liquidate 155 stores of its total 700 stores in the US. However, experts believe that the worst is yet to come for the US retail sector.

Where is oil headed for? Posted by: Ambrish Jha in Russia, OPEC, Oman, Oil prices, Deutsche Bank, Azerbaijan on Dec 19, 2008 il prices have tumbled below $40, more than 70 percent low from its peak of $147 a barrel reached in July this year. OPEC is trying its best to check the fall in prices. It announced its second cut this week. Cut of 2.2 million barrels a day is to be implemented from January 2009. But the measure evoked adverse response from the market. Instead of rising, oil prices fell further. This comes on the heel of of a similar cut of 1.5 million barrels per day announced by the OPEC in September this year. The move had boomeranged on the apex oil cartel, and the latest cut is expected to go the same way.

Reason for the decline is obvious - recessionary trend in the West, particularly in the US, which is the largest consumer of oil in the world (consumes more than 25% alone). Other major consumers like Japan, Europe and Chian are also reeling under slowdown. So where is the oil headed for? Predictions for near future do not look bright for the oil producers. Forecasters are now predicting the ﬁrst decline in world energy use since 1983. Deutsche Bank has said in it s recent report that it expects the US oil prices to average $47.50 a barrel in 2009, with the risk of prices falling toward $30 a barrel on a temporary basis. OPEC seems to have committed a mistake by announcing new cuts when earlier cut announcements had not borne any fruit. OPEC's announcements have seldom any signiﬁcant impact in the market. OPEC members have largely remained noncommittal to the cuts they announce in their meetings. Such announcements, at the best, have marginal affects,and that too only when the market is bullish. Such cuts or announcements are not going to boost oil prices in the immediate run. What these will do rather is to adversely affect the prospects of rebound in prices even in the long term. Sentiments being bearish, and recessing going to remain a fact for the next year or even more, no such cuts can pull the prices up. Each such cut, therefore, will dampen the oil prospects in the commodity market more and more, and will drive the prices down further. This was evident after the announcement of the recent cut. Prices came down from almost $45 a barrel to less than $40 a barrel.

DARE.CO.IN Oil producers blamed speculators for driving oil prices higher when the oil market was bullish. Nevertheless, they enjoyed the phenomenon and created huge cash reserves. All pleas from major consumers to increase the supply was turned down by the OPEC. The same speculators have turned bearish now and oil producers cannot do anything about it, almost the same way when they could not do anything when oil prices were going through the roof. OPEC need firm support from non-OPEC oil exporters like Oman, Russia, Azerbaijan, but it has got nothing more than assurances. Oil producers should realize oil market is cyclical in nature. Prices go high, come down, and again go up. They must wait for their turn when oil prices would go up. And, the way exploration and production works are coming to a halt now, there is no reason why they would not be laughing again post recession. With work on new oil fields put on hold because of financial crunch, I have a hunch oil prices would go beyond $200 a barrel within a year or two after the recession, though it is anybody's guess when recession will actually be over. Best bet for OPEC, therefore, is to help in tiding over recession at the earliest. They can show their intent by not announcing similar cuts and definitely by not implementing such cuts even if they are announced.

Creative Capitalism Posted by: Vimarsh Bajpai in TIME, entrepreneurship, creative capitalism, capitalism, C K Prahalad, Bill Gates on Dec 19, 2008 K Prahalad, Paul and Ruth McCracken Distinguished University Professor of Strategy at the University of Michigan Ross School of Business, made an impressive speech on democratizing entrepreneurship at the TiE Summit in Bangalore this week. He insisted that taking entrepreneurship to the grassroots level would result in meaningful implementation of the thought of inclusive growth. "Everybody in the world should have to opportunity to be a micro consumer, micro producer, micro innovator, micro investor and micro entrepreneur," the professor pointed out.

Will British Airways manage to takeover Qantas? Posted by: Ambrish Jha in Willie Walsh, Qantas, Oneworld Alliance, Malaysian Airlines, Iberia, British Airways, BA, Alan Joyce, Air Fance-KLM on Dec 18, 2008 ritish Airways, with a ﬂeet strength of 256, is already one of the largest airline companies in the world. The airline is riding on the current slowdown to acquire some more assets. It has been eying Australian carrier Qantas for a long time. In fact, parleys between the CEOs of the two companies had been going for a long time now. But talks seem to come to a halt on Thursday (18th December, 2008). DAR E

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INNOVATION

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Foot-operated paper bag machine The easy-to-install Bagmaster can make up to a 1,000 bags per hour and requires little technical skills to operate /Mohita Nagpal

“I

t’s an accidental innovation” says KJ Thomas, the man behind the paper bag making machine — Bagmaster. This humble innovator believes that it is the simplicity of the machine that makes it easy to operate. Thomas started his paper bag company, Universal Eco Bags, in 1986, selling paper bags and notebooks. But two years back, things took a new turn. Thomas developed a paper bag making machine through which bags could be manufactured in a cheaper and costeffective way. The earlier method was tedious and time-consuming. He used to use a box-like mold to create creasing on paper, which was then manually folded to make bags. Apart from being a slow process, producing bags of different sizes was also not possible. Thomas tried another machine, the HD punching machine, which could do the work faster but still the problem of manufacturing different sizes of bags persisted.

The Bagmaster Faced with the multiple problems, he decided to make a machine of his own. Thomas’ innovation runs on motor. The machine has a wooden platform with an iron ring in between as a partition. The paper is put in from one side, to be passed under six iron wheels that create the creasing. The creased paper is collected from the other side. It has a foot-operated accelerator through which the speed of the iron wheels can be controlled. The harder you press the accelerator, the faster the wheels will move. Thomas claims that one can make up to 1,000 bags per hour with the machine. But, of course, one has to have a full team of workers cutting and folding the bags to achieve that ﬁgure. The problem of different sizes is solved with the inclusion of six wheels that are spread on a distance that can crease 42 inches of paper at a time. 92

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Overview Product: Bagmaster Purpose: Producing paper carry bags Advantages: Easy to use, easy installation, nominal price The machine has seen a good transformation from its prototype that didn’t function the way it does now. As Thomas says, “The ﬁrst testing of the machine was a failure. When I passed the paper under the iron wheels, I got two pieces from the other side. Then I made some alterations and tried again, but with no success. The same thing happened three-four times, before it started working successfully.” He now runs a factory in Kerala. Thomas has the capacity to manufacture one machine a day, which he sells at a 20% proﬁt margin. Strength: The easy-to-operate and easy-to-install features of the machine are its biggest draw. There are no technical skills required to operate it. Moreover, it is priced nominally at Rs 40,000, weighing just 85 kg, a great deal less than the HD punching machine that costs Rs 1.5 lakh. The machine can produce bags of different sizes. “I can guarantee that no other machine can crease 42 inches of paper at a time, except for my Bagmaster,” Thomas says. Weakness: The machine does not churn out the whole bag; instead it performs the creasing part speedily. But all other functions that follow have to be done manually. The folding and

Why paper bags? • 100% recyclable and reusable • Easier to carry than plastic bags • 100% biodegradable i.e. eco-friendly

K.J. Thomas cutting of the paper, punching holes, putting a thread, all these functions take up a lot of time. Opportunity: Thomas wants to market his product as a tool to create self-employment opportunities. He believes that old age groups, housewives and the physically challenged can use this machine to earn some money. “A woman can at least make 300 bags a day through this machine. And she will get at least 20% profit margin on every paper bag she sells. It makes for a good part-time business”, he says. Thomas is looking forward to exporting paper bags in the Western markets as he believes the demand for such bags is high. He is also planning to introduce a ‘buyback policy’, under which he will buy finished paper bags from the people he is selling the machine to. “I will sell this machine to people and they would be happy if I will purchase the finished bags back from them. Then, I will export all the finished paper bags,” he adds. Threat: As of now there is no competition. But, if a machine is innovated wherein the process of folding is also mechanized, then it could be difficult DAR E for the Bagmaster to survive.

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/blogs

The writing on the wall

/Paranjoy Guha Thakurta

he year 2008 has been one hell of a roller-coaster ride. Hopes soared, only to be dashed. Expectations rose sky-high before people realized they were biting the dust. What is worse is that the new year promises to offer little respite from the worldwide recession that has resulted in the rate of growth of the Indian economy slowing down considerably. The months ahead are certain to prove difficult and more and more people have become circumspect. The more philosophical among us had anticipated the slowdown – after all, parties don’t last forever. At the end of the celebrations, someone has to sweep the floor, clean the kitchen, wipe the toilet, remove the broken pieces of glass and clear the garbage. Here are some of the important resolutions for 2009. Remember your grandmother who asked you to live within your means. Don’t get overly enthused by financial bubbles that burst in your face. Neither let greed nor fear dominate your emotions when it comes to matters monetary. And, never forget to stash away a little bit for that gloomy day, that period of adversity. As the old saying goes, hope for the best but be prepared for the worst. The first week of January 2008 saw stock market indices rising to record heights. The 30-share sensitive index of the stock exchange of Mumbai had peaked at a level of 21,000 and none could have guessed then that the year would end with the sensex struggling to remain above the 10,000 mark. If

one had invested, say, Rs 1,000 in equity shares in the beginning of the year, the value of such an investment would have collapsed by 60 per cent in eleven months. In early-2008, foreign institutional investors were gloating about India’s famous ‘growth story’ after having pumped in an estimated $ 18 billion into the country’s share markets during calendar 2007. In the course of the next twelve months, the same portfolio investors had run away with more than 80 per cent of their money – net outflows had exceeded $ 14 billion by the end of November. One direct consequence of FIIs withdrawing their funds was a sharp depreciation in the value of the Indian currency vis-à-vis the American greenback. Between March 2007 and March 2008, the rupee had appreciated against the dollar by over 15 per cent. Between March and November, the rupee had lost a quarter of its value: the exchange rate of one US dollar crashed from around Rs 39 to roughly Rs 50 in eight months. Consequently, job losses have mounted, especially in labourintensive, export-oriented industries such as textiles and garments, gems and jewellery, leather, handicrafts, sports goods and processed foods. One estimate places the number of jobs lost in garments and textiles manufacturing companies alone during 2008-09 at 1.2 million. Behind each retrenched worker is a family with a bleak future. Exporters lost out on both counts. When the rupee became strong, their products turned uncompetitive in international markets. Now that the Indian currency has weakened considerably, exporters are unable to reap benefits from the situation since markets in the developed West have shrunk. Consumers in North America, West Europe and Japan are postponing purchases of many of the products that are exported from India. Not surprisingly, for the first time in a decade and a half, non-oil exports from India declined by as much as 20 per cent in the month of October. Few could have imagined that crude oil prices would plummet from $ 147 a barrel in early-July to less than one-

third the amount at $ 45 a barrel by December. Yes, prices of petrol and diesel are down. As inflationary pressures at home eased – the rise in the official wholesale price index that had stood at a high of 13 per cent in August (the highest in thirteen years) fell below 8 per cent -- politicians belonging to the incumbent regime heaved a huge collective sigh of relief. But their enthusiasm at having tackled the monster of inflation may be a bit misplaced. Although the rate of inflation has declined, this does not imply that the prices of articles of mass consumption have fallen. What this signifies is that the speed at which prices had been rising has decelerated. Inflation would remain the single most important issue before the electorate. During 2009, the rate of growth of the Indian economy is almost certainly going to decline to somewhere between an optimistic 7 per cent and a pessimistic 4 per cent. The writing on the wall is clear. The index of industrial production fell in October for the first time in 15 years. To add to economic woes were the terrible terrorist attacks in the country’s commercial, financial and trading capital Mumbai that started on November 26. What followed was an outburst of belligerent nationalism. Still, not everything on the horizon appears hopeless. There are silver linings in the dark clouds of recession that are hovering. Yes, India is still better off than most countries. The country’s economy is not contracting. The outcome of the November-December assembly elections sent out a clear message: the ordinary voter, poor and illiterate she may be, cannot be easily fooled. The voter is not swayed by emotive issues related to terrorism, religion and caste. The voter is far more intelligent that he or she is made out to be. They differentiate between the more-corrupt and the less-corrupt, the corrupt-and-efficient and the corruptand-inefficient. They know politics is not a zero sum game in the world’s largest democracy. They can indeed distinguish between the greater and DAR E the lesser evil. The author is an educator, an economic analyst and a journalist with over 30 years of experience in various media—print, radio, television, Internet and documentary cinema. JANUARY 2009 93

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opportunity/energy

Opportunities in biofuels

With the demand for alternative energy sources increasing, the biofuels business is opening new doors for entrepreneurs /Aswathi Muralidharan

n December 15, anxious eyes across the globe were ﬁxed on Barack Obama as he nominated the next US Secretary of Energy. Their anxiousness was not without base, because Obama’s decision would have been an important one, given the backdrop of growing concern over energy security and global warming. Obama ﬁnally nominated Steven Chu, a Nobel Laureate, to the key post. Of late, these issues have been drawing a lot of attention from governments, experts, entrepreneurs, and researches alike. As a result, the alternative energy segment is witnessing a lot of activity, with the list of options expanding rapidly, from solar energy and wind power to biofuels and more. Many countries are now focusing on biofuels to counter pollution, address global warming, and reduce their dependence on fossil fuels. In the US itself, experts predict that the year 2009 will witness a lot of interest and investments for efforts to develop next-generation biofuels and expand renewable energy sources. Is there an opportunity for Indian entrepreneurs to enter this sector? The business potential of biofuels in India is huge, and can be expected to grow at a faster pace in the years to come. According to Dr Alok Adholeya, Director, Biotechnology & Management of Bioresources, TERI, “Currently almost 70% of India’s crude oil requirement is imported, which is expected to increase to 90% by 2030.” This, coupled with the price volatility of oil, which has been

JANUARY 2009

ﬂuctuating from the current $40 a barrel to $147 a barrel in the recent past, may lead to biofuels playing an important role in reducing our dependence on imports in future. The National Biofuels Policy mandates 20% of all diesel and petrol demand to be met by using plant-based rather than fossil-based diesel by 2017. At present India’s biofuel production is not even enough to cater to 5% of the demand. Says Deepak Desai of Business Brains Consultants, “Currently, the government has mandated 5% ethanol-doping in nine states, which has not been met due to supply shortage.”

The Bioethanol Industry Ethanol has been produced in India for ages. Molasses, a by-product in sugar manufacturing, is the major feedstock used as raw material. Possibilities are also being explored to use other feedstocks such as sweet sorghum, sugar beet, and maize. In 2006, India was the fourth largest producer of ethanol, after the US, Brazil, and China. Though India has been producing bio-ethanol in signiﬁcant quantities, it is being used for the manufacture of beverage and industrial alcohol because of higher returns. This has been a major roadblock in producing fuel-grade ethanol. However, keeping in mind the government mandate

and the demand it will create, there is an opportunity for entrepreneurs in entering this sector. The cost of production of ethanol from molasses hovers around Rs 17 per liter. According to a report by the United Nations Conference on Trade and Development (UNCTAD), the yield of sugarcane in India varies from an average of 77 tons/ha in tropical states to about 52 tons/ha in subtropical ones. About 40 kg of molasses is produced

Biofuels technologies are far more complex, and hence focus on viable and innovative technology becomes imperative for any entrepreneur. The key will lie in the structuring of the business model to integrate the supply chain — right from feedstock to contracts for end-products. – Shashank Inamdar MD & CEO, Praj Industries

DARE.CO.IN

opportunity/energy Projected Demand for Petrol and Diesel, and Biofuel Requirements Year

Petrol Ethanol blending demand requirement (Mt) (in metric tons)

Diesel Biodiesel blending demand requirement (Mt) (in metric tons)

@5%

@10%

@20%

@5%

@10%

@20%

2006-07

10.07

0.5

1.01

2.01

52.32

2.62

5.23

10.46

2011-12

12.85

0.64

1.29

2.57

66.91

3.35

6.69

13.38

2016-17

16.4

0.82

1.64

3.28

83.58

4.18

8.36

16.72

SOURCE: Planning Commission, Report of the Committee on Development of BioFuel, 16 April 2003; Demand based on estimated growth rates of 7.3% and 5.6% for petrol and diesel, respectively, in the 10th plan (2001-02 to 2006-07), 5.0 and 5.0% in the 11th plan (2006-07 to 2011-12) and 5.0 and 4.5% in the 12th plan (2011-12 to 2016-17).

per ton of cane, from which about 10 liters of ethanol can be obtained. If the sugarcane is directly and fully used in ethanol manufacture, the yield is 70 liters per ton. “For a small-scale industry producing 10,000 liters through the molasses route, investment would be around Rs 3 to 4 crore; for a 30,000 liter plant, it would be around Rs 15 crore,” says Desai. Other possibilities that are emerging include the use of residual biomass for producing ethanol — for example, straws and weeds. However, the technology is still in developmental stages.

purposes, where a lot of stationary engines are used for producing energy.” Therefore, there might also be an opportunity in producing biodiesel in small scale for local energy needs. “For a small biodiesel plant, producing 500 liters, the investment could be as little as Rs 50 lakh,” says Desai. The cost of production per liter is somewhere around Rs 24 to 30, depending on the plantation density and logistics.

The Biodiesel Industry While the Indian ethanol industry is mature, the biodiesel industry is still in its infancy. Biodiesel can be produced from both oilseed crops, such as sunﬂower and soybeans, and animal fat. However, Jatropha is the preferred feedstock for production of biodiesel in India. This is because it is non-edible and has a smaller gestation period of two to three years, compared to other plants. “Biodiesel is not available in large quantities because the plantation and the feedstock production has only recently been undertaken. The largest of plantations have happened only in the last two to three years. So you can expect sizable yields by 2010-11,” says Dr Adholeya. Besides the transportation industry, an advantage with biodiesel is that it can be used in stationary engines directly. According to Dr Adholeya, “Biodiesel can cater to decentralized energy needs of our villages, where the power grid is not available. It can also prove to be very useful for agricultural

Besides Jatropha, many other seeds, such as sal, neem, and rubber, which are also non-edible, can be used to produce biodiesel. “There is a large potential in our forest activities, where long-time gestation period would be okay. Those are the areas where we can get more sustainable yields from,” says Dr Adholeya.

Biofuels from Algae Algae as a source of biodiesel looks promising. Experts believe that the use of oilseeds is a temporary phase that will be good for over a decade or two. After this, land availability will become a serious concern. “Then you can get into the production of secondand third-generation biofuels, which includes algae. We at TERI also believe that algae will have a very strong future,” says Dr Adholeya. There are several reasons behind this. Firstly, one of the nutrients for algal production is carbon dioxide. Therefore, producing biofuel from algae will help reduce carbon emission. Secondly, India has a very long coast line, which can be beneﬁcial is growing marine algae on a large scale. Some countries like Holland, US and Australia, have already started pilot projects.

Technology: A Major Entry Barrier

We should focus on producing ingenious strains of algae that are multipleuse strains, rather than the hardware portion of the technology, which is already being developed elsewhere. — Dr Alok Adholeya Director, Biotechnology & Management of Bioresources, TERI

Technology is one barrier that an entrepreneur is likely to face while entering this segment. “Although seemingly very simple, the biofuels technology area is far more complex, and hence focus on viable and innovative technology becomes imperative for any entrepreneur. The key lies in structuring the business model to integrate the supply chain — right from feedstock to securing contract for end-products and adoption of futuristic technologies,” says Shashank Inamdar, Managing Director & CEO, Praj Industries. Another entry barrier is proof of performance. According to Inamdar, most biofuel plants have many variables in their performance and need to be customized. Hence, it is essential that the entrepreneur has vast experience, data bank and references. D A R E JANUARY 2009 97

Organizations DARE.CO.IN

covered in this issue, in alphabetic order; ďŹ rst appearance

ABN Amro ................................................................. 47

Hindustan Lever ........................................................ 50

Airtel ......................................................................... 27

Hologram Manufacturers f Association of India ........ 42

Alexa ......................................................................... 65

Holographic Security Marking Systems .................... 42

APDRP ..................................................................... 48

Honeywell ................................................................. 26

Apple ........................................................................ 54

IBM ........................................................................... 26

Aptech ...................................................................... 75

ICEA ......................................................................... 33

Ashok Leyland .......................................................... 75

ICICI ......................................................................... 27

Asian Institute of Management ................................. 27

ICICI Bank ................................................................ 47

ASSOCHAM ............................................................. 35

IFFCO-TOKIO ........................................................... 22

Bajaj Holographics .................................................... 42

IIM Kozikode ............................................................. 27

Bank of Baroda ......................................................... 75

IMD Business School ............................................... 76

BDiH ......................................................................... 33

Imperial Group .......................................................... 74

Be-Tabs .................................................................... 74

International Air Travel Association ........................... 58

Ben & Jerrys ............................................................. 54

International Finance Corporation ............................ 47

Bharti Airtel ............................................................... 47

internetworldstats ...................................................... 67

Bioforum ................................................................... 33

Ion Exchange ............................................................ 50

Birla Institute of Technology and Science ................. 24

irctc.co.in ................................................................... 64

bluehost .................................................................... 63

Iscor .......................................................................... 75

Body Shop ................................................................ 54

Jardine Omar ............................................................ 75

Brunel University in England .................................... 33

Jindal Steel ............................................................... 75

Business Brains Consultants .................................... 96

JP Hydro ................................................................... 47

Charles Lindbergh .................................................... 58

Kent .......................................................................... 50

CII ............................................................................. 44

Kirloskar .................................................................... 75

Cipla ......................................................................... 75

KLD ........................................................................... 47

Cisco ......................................................................... 36

L& T .......................................................................... 47

Confederation of Indian Industries ............................ 20

Lehman Brothers ...................................................... 79

Creative Commons ................................................... 61

LNM Group ............................................................... 75

CRISIL ...................................................................... 47

Loreal ........................................................................ 35

Dabur ........................................................................ 35

Luminous .................................................................. 50

Datamonitor .............................................................. 34

Mahindras ................................................................. 75

Department of Trade and Industry ............................ 77

MakeMyTrip.com ....................................................... 30

Digg .......................................................................... 67

Mittal Steel SA .......................................................... 75

Dlight ........................................................................ 45

Moser Baer ............................................................... 47

ebay .......................................................................... 64

NASSCOM ............................................................... 20

Ecocert/Cosmebio .................................................... 33

NaTrue ...................................................................... 33

Emami ...................................................................... 35

New Ventures India ................................................... 44

Eureka Forbes .......................................................... 50

Nexus India Capital .................................................. 45

Everest Holovisions .................................................. 41

Nielson Company .................................................... 35

Facebook .................................................................. 63

NSE .......................................................................... 47

Flex ........................................................................... 41

NSIC ......................................................................... 75

Flickr ......................................................................... 67

Organic Agribusiness Consulting ............................. 33

Forrester Research ................................................... 80

Organic Make Up Company ..................................... 33

Frost and Sullivan ..................................................... 51

Orkut ......................................................................... 67

German Cosmetic, Toiletry, Perfumery

Ozone Group ............................................................ 35

and Detergent Association ....................................... 33

Paypal ....................................................................... 67

Godrej ....................................................................... 35

Phillips ...................................................................... 50

GOI ........................................................................... 75

Pilani Soft Labs.......................................................... 26

Google ...................................................................... 64

Praj Industries ........................................................... 47

Gossamer Penguin ................................................... 56

Preconcept ............................................................... 60

Green Investor fs Network. ....................................... 44

Procter & Gamble ..................................................... 35

Herb Research Foundation ...................................... 33

Proto ......................................................................... 27

Hero Honda .............................................................. 47

Ramco ...................................................................... 75

Himalaya Drug Company .......................................... 35

Rapidol ..................................................................... 75

JANUARY 2009

redBus ...................................................................... 20 Reliance Industries ................................................... 47 S&P ESG India ......................................................... 47 SAIL .......................................................................... 47 SalvageSettlers ........................................................ 22 Satyam ..................................................................... 75 searchenginecolossus .............................................. 64 Seedfund .................................................................. 49 Shriram EPC ............................................................. 47 Sify ............................................................................ 29 Snapple .................................................................... 54 Sohrabji Godrej Green Business Centre .................. 44 Soil Association ........................................................ 33 South African high Commission ............................... 75 ST Microsystems ...................................................... 24 State Bank of India ................................................... 75 State Bar Councils .................................................... 79 Stumbleupon ............................................................ 67 Sunrise I ................................................................... 56 Suzlon ....................................................................... 47 SVB India Advisors ................................................... 27 Swastik Enterprises .................................................. 51 Tata ........................................................................... 54 Tata Consultancy ...................................................... 75 Tata group ................................................................. 74 Tata Motors ............................................................... 74 Tata Power ................................................................ 47 Tata Steel .................................................................. 74 TeamLease Services ................................................ 87 Technopak ................................................................ 35 Technorati ................................................................ 64 TERI ......................................................................... 97 Tesco ........................................................................ 34 Texas Instruments .................................................... 24 The Indus Entrepreneurs .......................................... 24 The National Technology Transfer Centre ................. 77 The Technology and Human Resources for Industry Program (THRIP) ................................... 77 Thermax ................................................................... 47 Ticketvala.com .......................................................... 29 Toyota ....................................................................... 54 Tulip Telecom Services ............................................. 37 UB Group of India ..................................................... 75 UNCTAD ................................................................... 96 Unilever ..................................................................... 35 Universal Eco Bags .................................................. 92 University of Madras ................................................. 27 Usha Breta ................................................................ 50 Vicco Laboratories .................................................... 35 Visa .......................................................................... 67 Whirlpool ................................................................... 50 WiseInvest Advisors ................................................. 45 Worldspan ................................................................ 29 youtube ..................................................................... 67 Zensar ...................................................................... 75

People DARE.CO.IN

covered in this issue, in alphabetic order; ﬁrst appearance

Aaditya Swaroop .............................. 27

Kiranbir Nag ...................................... 27

Abey Zacharia .................................. 27

KJ Thomas ........................................ 92

Abhi Shah ......................................... 79

Kunoor Chopra ................................. 79

Amit Thakur ...................................... 51

Maninder Bedi .................................. 38

Anshul Gupta .................................... 22

Manoj Gupta ..................................... 45

Ashok Yerneni ................................... 27

Mayank Bidawata ............................. 27

Asit C Mehta ..................................... 47

Panindra Phani Sama ...................... 24

Barack Obama .................................. 96

Poorvi Chothan ................................. 79

Bertrand Piccard ............................... 56

Pravin Gandhi ................................... 49

Bharati Jacob .................................... 29

Rodney D. Ryder .............................. 60

Charan Padmaraju ............................ 26

Rohit Mistry ...................................... 42

Charles Lindbergh ............................ 58

S C Sehgal ....................................... 35

David S. Morrison ............................. 33

S. Raghupathy, ................................. 44

Deep Kalra ........................................ 30

Sandeep Singhal .............................. 70

Deepak Desai ................................... 96

Sanjay Anandaram ........................... 27

Deepinder Bedi ................................. 38

Sanjay Kamlani ................................. 79

Hemant Rustagi ................................ 47

Shashank Inamdar ........................... 96

Himanshu Varia ................................ 47

Steven Chu ....................................... 96

HS Bedi, Lt. Col. ................................ 37

Sudhakar Pasupunuri ....................... 26

Jardine Omar .................................... 75

Sudhir Narang .................................. 36

K C Reddy ........................................ 47

Sukhmani Bedi ................................. 38

Kapil Bajaj ......................................... 42

Veena Seetharama Annadanaa ....... 33

Kevin Rose ....................................... 68

Wright Brothers ................................. 56

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

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