Author Archive for Alok Mittal

Time to Startup, India!

The recent Startup India event has generated considerable excitement and energy amongst entrepreneurs and the supporting ecosystem. The sound and light around the event has been amazing. As the week rolls over, and the marketing euphoria settles down, the focus must shift to the real impact that this event and announcements around it may make.

First things first – I would not discount the positive impact that can be had just from the focus and status that has been accorded to startups through this initiative. Such focus can help channelize energy from all elements of the ecosystem – from entrepreneurs to investors, and from mentors to academia. That by itself is a credible achievement.

In my view, the singular achievement of the set of specific announcements that have been made will be in making entrepreneurship more inclusive. I had emphasized earlier on the need for the startup narrative to evolve beyond Gurgaon and Bangalore, and beyond the hot-new-Internet-startup that got funded for $100M. The Startup India Action Plan seeks to achieve that.

The proposed Compliance Regime based on Self-Certification, for example, will be highly impactful in startups in “old economy” sectors, even as some of the labor law compliances are more broadly applicable. Similarly, relaxation of norms for public procurement is a great move to reduce the go-to-market hurdle for manufacturing startups, as also a means to expose public buyers to upcoming innovation. The Rs 10,000 crore fund-of-funds, as well as the credit guarantee scheme, are being designed to target a broad mix of sectors such as manufacturing, agriculture, healthcare and education. Launch of Grand Innovation Challenges around the nation’s pressing problems would be helpful in channelizing energy towards these problems.

The theme of inclusion has also been carried through to geographical diversity of startups. Provisioning of Tinker Labs, Startup Centers and Technology Business Incubators, if managed well, can help expand the footprint of startup activity to next tier cities. At the same time, Research Parks in IITs/ IISc will provide the necessary research concentration and support to drive the research innovation agenda – the success of such a model has already been demonstrated in IIT Chennai. Fostering a culture of innovation by reaching out to students through 5 lakh schools will ensure that we create a whole generation of entrepreneurs in next 10-20 years.

Another emphasis which in my mind changes the narrative around startups is in providing Legal Support and Fast-Tracking Patent Examinations. In my view, Indian startups have not emphasized enough on IP creation and protection. Reducing the friction in the process, as well as enabling guidance and facilitation, can help us create and defend high-impact innovations. As we look at solving a million problems, it is important that we provide the right incentives for innovators to leverage the commercial potential of those innovations – the emphasis on Intellectual Property will serve to do that.

I believe that these items around broad-basing entrepreneurship, aligning it with national interest, and putting innovation at the center of startups, are the major achievements of the Startup India Action Plan. Some of the other initiatives like Faster Bankruptcy Settlement and Tax Exemptions are interesting signals, but perhaps not game changers by themselves. Yet others like the Startup Hub, Mobile App for Collaboration amongst ecosystem partners and Startup Fests belong to the set of items that I would rather see the ecosystem solve.

One big miss in the Startup India Action Plan has been the silence around Angel Tax. While incubator investments have been excluded out of this tax, premium over FMV in individual angel investment still seem to continue to be taxable in hands of startups. While the challenges in defining genuine angel investments are well appreciated, we must find a way to undo this regressive move. Or is the finance minister saving this one for the budget!?

This article has also been published here.

Reflections from IIT Session

I was at IIT Delhi today for my duties at FITT (runs the IIT Delhi incubator). Few months back, IIT Delhi decided to support a deferred placement program for students wanting to skip placement in interest of pursuing entrepreneurship. Today’s meeting was a review and approval meeting for four of the cases. Some things that struck me.

  • All the students seeking deferred placement outlined “comfort of parents” as the first reason to seek deferred placement. “Even if my startup doesn’t work, I can tell my father that IIT will still allow me to sit for placements”. Many of the applicants were clear that they are not going to actually seek placement with big companies, even if they failed – as one guy mentioned “I can’t imagine myself sitting in a cubicle working for a large company.” Now some of this might be the most convenient answer (and I suspect that, given how uniformly this reason was given,) but it was amazing to see the conviction of the applicants towards startups, as also the social bias against startups that young entrepreneurs still have to work with.
  • Interestingly, none of the four startups which applied for deferred placement applied for incubation at IIT Delhi incubation center. I have been noticing this for a bit – younger entrepreneurs are moving at a faster pace than mentors/ incubators are used to moving. It is a serious issue for long-standing incubators – will they manage/continue to attract the best deals?
  • Most of the ideas being presented were another one in pack of 50 companies already out there doing the same thing. The founders often didn’t know about competition, nor about previous failed attempts. This was worrying – the level of awareness towards one’s immediate context has to improve. Perhaps something to think about for many of us who are looking forward to supporting young entrepreneurs.

I did ask the question on who their role model is. Though its not a large sample, Rahul Yadav got mentioned. I was only half surprised – guts is glory in today’s times. Am back at the institute for Speranza this weekend – looking forward to meeting more entrepreneurs.

Join the Net Neutrality debate

Medianama has a good analysis and initiative on the Net Neutrality issue. Read up and make yourselves heard here.

This debate has had interesting arguments globally. To the extent, I have been able to follow, there have been a ton of bogus arguments on both sides, thereby confusing the core issues. In my mind, the core issues are around (a) adherence to standard protocols to ensure that applications can rely upon the same; (b) creation of open communication platforms, as a goal in itself, to spur innovation around those networks; (c) clear communication around inclusions, exclusions, and dampeners in any given telecom package – an issue of consumer protection; (d) curbing monopolies that can be promoted by telecom service providers also being in app business and providing unfair advantage to their own apps/services.

Join in on the conversation!

Lufthansa Runway to Success – Call for Entries

Lufthansa and TiE are bringing you the next edition of Runway to Success. Runway to Success is a TV series which will be broadcast on ET Now, and the training camps all over the country would be conducted in association with TiE. Some highlights of the program:

  • The winner of this series would win a seat at Stanford University’s prestigious Design Thinking Boot Camp, along with A Lufthansa Business Class ticket to the US and mentorship at TiE, which alone is sufficient reason to jump into this program.
  • Each episode of this TV series will have two segments: In the first, a success story of a path breaking entrepreneur will be shown to inspire you. The second segment will have three selected entrepreneurs present their business idea to the star entrepreneur. Winners from each episode will be elevated to semi-finals and then grand final where the winner would be declared.
  • Participation is absolutely free!
  • Besides the winning part, there is the absolutely incredible opportunity to connect with the who-is-who of Indian start-ups eco-system, biggies of entrepreneurial world and fellow passionate entrepreneurs which can be a huge boost to your confidence and acumen ship.
  • Last year, 20,000 entrepreneurs from all over India applied for this program, fighting for 27 precious seats.
  • TiE sponsored boot camps would be conducted in major metropolitan cities, where leading entrepreneurs would share their stories and teach how to become an entrepreneur.

You can register for #RunwaytoSuccess Program right here. You can follow the hashtag #RunwaytoSuccess on Twitter for latest updates and stories. More information about this program can be found here.

The Billion Dollar Startup Club

The Wall Street Journal and Dow Jones VentureSource are tracking venture-backed private companies valued at $1 billion or more. See how the club has expanded since the project began in January 2014 and select companies to learn more about each.

Accelerating Time to Market Cap for Internet/Mobile Companies

Must read analysis by Playbigger for Internet/Mobile entrepreneurs. Summary at beginning to report,

Metrics for Early-stage Mobile Apps

Have been talking to many “mobile app” entrepreneurs of late, and one question I get consistently is around how they should think about metrics for mobile apps, to gauge early traction, and with an eye on first round of investors. Here are some thoughts.

In my view, valuable mobile apps fall in two zones – apps which will have tens of millions of users over time, but might not have a short term monetization model; and those which would have fewer users but strong anticipated monetization (think few hundred rupees per active user – a million monthly actives and Rs 100/monthly active gives a $20M annual business.) By and large, I am seeing the first kind of businesses in the Indian market, perhaps because mobile payment and monetization is still nascent. Getting stuck between these two end goals is generally not attractive to venture investors looking for scale.

Here are some metrics that startups and venture investors are using to assess early traction:

  • User growth: Installs and active installs are the first line metrics. Some notion of active users measured at a frequency which depends on usage context of the application – could be daily actives, weekly actives or monthly actives. One thing that seems to have lost emphasis since web days is the virality coefficient – have not seen great examples of viral growth of apps, perhaps because content sharing to app install workflows still seem broken. At a more operational level, tracking the pre-install and uninstall funnel can provide great optimization tips.
  • User engagement: This is perhaps the most important one, and where I have seen most distortion. Active users and/or percentage of users active, IMHO, are not great ways to measure these, because they interfere with user growth metrics – higher growth can lead to larger number of active users without improvement in app experience; lower growth can make the percentage metric look better. In my view, measuring cohorts is the best way of gauging this. First, active user cohorts (i.e. what percentage of users who installed in a particular period are still active). Second, activity level cohorts (i.e. how is the cumulative activity by a cohort of users growing). Active user cohorts provide an insight into leakiness of the bucket. The second one, of rising engagement – for great apps, activity level cohorts are rising charts, not falling over time. The metric of activity at the app level could be sessions per day, average screen views, time spent, or other metrics important for the business (such as messages sent for a messaging application). Note that the DAU/MAU metrics are sometimes used to assess user engagement, but for reasons mentioned above, they are not great metrics for engagement.
  • Key application tasks: A measure of how well and how often are business tasks being accomplished. These depend on the application intent – for example, in a match making app, this might be the funnel into generating a match. Very often these might be “funnels” and not single metrics, and it is a very useful tool to figure out where the flow of actions is constrained (i.e. conversion to next stage of funnel is low), and then fix those to optimize the funnel.

I have not included monetization metrics above because for the first class of applications, that can be solved at the next stage of business evolution. However, providing a directional sense of monetization mechanism and per user potential is important in setting scale expectations from the business. I have also not included a measure of “design excellence” above for lack of an objective measure – it is certainly something that is very important to provide a great user experience, and attain some of the metrics listed above.

Would love to hear from mobile app entrepreneurs on this forum on what they have found effective to gauge the progress of their businesses.

How to effectively use the Rs 10,000 crore allotted for entrepreneurship

I wrote this Op-Ed piece in Economic Times on how the government can effectively use funds allocated to entrepreneurship fund-of-funds.

Key points:

  • Leverage the funds to generate private participation and hence enhance the size of the pool
  • Leverage capacity that exists in corporations, microfinance institutions and the like
  • Emphasize under-served areas that align with national priorities, such as job creation, manufacturing, defense, social sectors etc.
  • Promote geographical and social inclusion to ensure a balanced growth

Comments welcome!

Back to the future

Last few months have been full of uncertainty and choice. It is rare that life provides us with an opportunity to step back and ask ourselves the all important questions of what makes us happy, and what do we really want to do with ourselves. It is even more rare that it simultaneously provides us with the right context to help us answer those questions. Over past few months, I was offered both, due to circumstances ranging from tragic to serendipitous on personal and professional front.

I am glad to share with my friends that my instincts have led me towards attempting to do another startup, instead of continuing with the venture investing business. At Canaan, we have built partnerships with entrepreneurs who we feel very proud to be associated with. We will continue to back and support those relationships, both institutionally and personally. However, I will not be making fresh venture investments. I am now on a lookout for a co-founder and an opportunity, which provide me with an uncompromising mix of fun and challenge over next many years. I look forward to help, support and guidance from my friends in startup, investing and corporate world, as I charter into what is always an unknown territory.

As I discussed these options with few close friends early on, something strange happened. Two of my good friends, entrepreneurs themselves, came back and solicited help on issues they were facing, in a way they never had before. Perhaps my position as a prospective investor in future drew boundaries on what they felt comfortable sharing with me. With those boundaries gone, new conversations opened up. I hope that I will continue to have the opportunity to share perspectives, which being on both sides of the table has allowed me to earn.

42 is a good age to begin. Again.

IIMB EPGP Students want to meet startups

IIMB’s EPGP is an intensive one year full-time residential program designed for mid-career professionals with 7 to 15 years of experience.

During their placement process, some people are interested in pursuing their career with startup companies.

With the intention of connecting these people with startup companies, they are planning to organize a event on 29th Jan. Event details are available here.