The Centre for Innovation, Incubation and Entrepreneurship (CIIE), Beta â€“The Finance Club of IIM Ahmedabad and Leverage â€“ The Private Equity andVenture Capital Club of IIM Ahmedabad bring to you the IIMA Finance Conclave2010 on the 8th â€“ 9th January 2010.The central theme of this yearâ€™s conclave is â€œChallenging the New Normalâ€and it promises to enrich the participants with over the two days throughspeaker sessions, panel discussion and workshops. The conclave will try toevaluate the â€œNew Normalâ€ as it evolves in the wake of the crisis, what arethe forces that will shape it, and what are the strategies for survival.Participation is open to both students and corporate houses. Continue reading ‘IIM Ahmedabad Finance Conclave 2010′
Archive for December, 2009
We have seen lots and lots of startup companies coming up in our country since last few years. Companies ranging from matrimonial websites, job portals to even companies helping people sell their used online stuff. Now and then we keep getting portals which fall into larger categories of a specific list of online portals, some of which could be:-
- Matrimonial website
- Job portals
- Startup directory
- Web design companies
- Management systems like Hospital management system, School management system, College Management system etc
- Social communities and networking
- Online education support systems like preparing for IIT JEE, Medical entrance etc etc
- Â Online T-Shirt selling portals
And the list goes to thousands of categories.
I ask a simple question to all our young entrepreneurs. With these kind of portal based companies ,who are your potential customers and what is your customer segmentation?
We could get following answers based on the business model of the company:-
- If they are directly selling the service to Indian customers then the money comes form the Indian masses
- If they are providing free information to the people through online portals then the money comes from advertising and that too only from those sources who are interested to put adds to a particular segment of visitors which would be mostly Indians
I do not want to discourage the attempts made by thousands of startups coming up from hundreds of universities from all over the country and even from people who are already well settled in a good job. My point is, you are doing so much to generate some money out of your business and that too comes from within your own country. Startups falling in similar categories are competing with each other for a segment of market which isÂ not growing at a sufficient rate toÂ support all of them for a sustainable and scalable business. The day is not far when you try to get an appointment with the IT head of a potential customer to show your product and you are waiting for your turn to come up may be next month. or later . The extreme example of theseÂ are those start-ups claiming to provide business consulting or corporate profiling and having team members having low or almost no experience in these areas.
But, we should definitely appreciate the confidence our youngsters have and the ecosystem in our country which make theme start thinking about having their own business.
So, what is the problem and how to resolve it?
The problem is, that, we get too much exited about ourÂ own ideas and start loving it so much that we are almost confident that this will turn into real business. I am talking aboutÂ mostÂ of those ideas which strike us during the dinner last night and we just jump into making a venture out of it without doing sufficient survey about the market and the competition. And what happens when you jump into business with these kind of ideas?. Well, you start shifting your domain slowly and end up having a business with no goals or road map, but, to just to think about sustainance. In fact, i know about few companies which started with some great ideas and ended up providing web solutions to local market.
So, what we might agree upon till this stage is that:
- We need to start building products and solutions which have a larger market, the market itself should have possibility of getting bigger in future
- With bigger market segments there will be bigger competition (only if you are building an existing solution), but , the kind of competition you will face will be entirely different from the one you find in a limited market
- Building already existing solution in a small market will be a recipe for disaster in most of the cases with few exceptions
- You can beat competition in both markets (limited and global) with a unique product or value proposition, but the returns with a unique product will always be higher if you target global market.
In a nut shell, if you are planning to build a startupÂ from India , where the cost of building software based technologies are low as compared to western countries, you should look into following issues:-
- Do not try to build yet another startup trying to sell something which hundreds of startups are already doing
- Try to leverage the advantage of online business and sell something which can be distributed globally and should be useful not only to Indians but to the other countries as well
- Try to have major stream of your revenue from foreign exchange. Making good amount of money from domestic market is something you will always be doing
Everything said and explained, where do we see this model working?
Why donâ€™t you find it yourself. Search for technology startup companies from India and you will get lot of insight into the discussion we had with this article. I am not denying the fact the common portal based companies have also been successful in past. But, we should also look into the fact that thousands of them are lying there today without doing anything significant and generating revenue through Google ad sense and many more will come up. What we need the most is start having an understanding of building unique technology startups from India which can sell worldwide. After all, this is what large number of foreign companies like Google, Microsoft, Apple, you tube, Symantec etc have done. When do we get to see our own Googles and Microsofts?
As we announced our investment in MotorExchange; I thought to bounce my views on broader B2B plays. In last couple of years, I have noticed two broad growth challenges in Indian internet start ups:
1.) Last mile penetration â€“ This is function of internet penetration in the country and the growth is still incremental. We have seen few services scaled up in India.
2.) Payment Infrastructure â€“ This is a big pain point.
However; I have seen good traction in b2b plays in last 9-12 months. Businesses like FlightRaja, ItzCash have scaled up nicely. Observation is that a large number of services and products like travel tickets, hotel bookings, insurance payments, investment products, and real estate brokerage are delivered through local neighborhood entrepreneurs. Though this ecosystem is fragmented and inefficient (in few cases) it solves the problem of last mile distribution and payment collection. I think that there can be possible opportunities in organizing this unorganized market by providing platform driven services to them. If there is a value proposition, small businesses are willing to spend money and invest in a computer with Internet connection.
There are B2B businesses in areas of logistics, commerce, auction exchanges, assisted commerce, and financial products distribution, which are seeing good traction. These platforms are helping fragmented businesses to increase their efficiency, sales, and customer retention. The challenge here is to reach the fragmented channel and there can be a good offline component to such services.
Any thoughts? or similar businesses?
I would love to meet entrepreneurs who are in similar b2b space and understand their businesses.
I am happy to announce our latest investment in MotorExchange – a B2B auto exchange for Indian market. The B2B auto market in India is over $11Bn and expected to double over next five years. It is a very early stage investment for us, and the key driver in the decision has been the team behind it. Vinay Sanghi, the lead entrepreneur, has been in used vehicle business for over 10 years now. He started with this idea with Automart – like many other 1999 dotcom businesses, it proved to be too early to build that, and Vinay morphed that into what is now Mahindra FirstChoice business. We are privileged to back Vinay in his attempt to build again, what he has envisioned for many years.
Please join me in extending your wishes to Vinay.
In my attempts to engage in angel financing, I have seen the typical concerns that potential angel investors have. Many of these have to do with the investment parameters, and figuring out how investors can get their money back (or returns) – especially given the inherent immaturity of these businesses in being able to outline an exit potential. Investment then gets limited to businesses where investors perceive a high probability of creating a breakout business. Many other diamonds remain in the rough. I have been thinking of ways of addressing this issue so that seed financing is available to a larger base of startups. This should allow for great businesses to “emerge” rather than being “envisioned”.
To start, I am sharing some thoughts on a potential investment structure that should allow this to happen. There are several other elements to making this successful, besides the investment structure, and I will talk about some of those over next few weeks. In the meanwhile, comments and critiques are welcome on this – both from entrepreneurs and angel investors!
During the Global Entrepreneur Week their were several great presentations made, where I was located. I thought they maybe helpful to some on this blog:
1. My video is about building a startup and can be found at http://www.iqbalgandham.com/ and the ppt deck can be found at http://www.slideshare.com/iqbalgandham
2. The rest of the morning session contained pitches from startups and a presentation on sales.
The afternoon session has a great one from Sean (founder of Multimap) and how they managed to stay the course through the dot com downturn, and how to time exits, and finally sell for about $100 million + to the likes of MS
Following that is another good one from Alistair from Huddle. he goes through the steps they took in raising $5million, and how they got early value in the business by giving away small equity bits to get the project built.
Morning session: http://22.214.171.124/Mediasite/Viewer/?peid=c4f16ccb5e304c2ebe893a57fe627610
Afternoon session: http://126.96.36.199/Mediasite/Viewer/?peid=f0ba0d223d0545bfbfa5dfa404711640