In the late 1990âs, India had become the worldâs leading back-office to many American-based
companies. Since many Indian employees had strong engineering management and software
coding skills, their efforts were very beneficial when working on specifications
provided by product design teams that were stationed in the U.S. and other western
countries. These product design teams went through exhaustive market studies before
establishing product design specifications, which were then sent to the Indian engineers
who converted the specifications into software products. Due to this informal route,
many Indian managers and engineers never experienced the opportunity to understand
the entire product design process and the global technology markets.
Most Indians without any international exposure rarely learn the product development
aspects of business. Instead, many Indian engineers who do not have U.S. work experience
often view software development from an outsourcing perspective rather than from
a product development point of view. Indian engineers have the necessary skills
for product marketing; however, they lack the firsthand experience in marketing
and designing new products.
Approximately 95% of the software and hardware companies in India are medium to
large-sized enterprises that base their businesses around outsourcing, while the
remaining 5% are Indian-American owned high technology product development startups
that are similar to those of Silicon Valley. These high technology product development
startups are generally established by Indians who have been exposed to product development
in their prior American enterprises. These high tech startups tend to expose their
Indian employees to some of the rare product marketing and design skills that most
Indian engineers lack. However, most of these high tech startups are small with
very limited financial resources to recruit and retain most experienced Indian specialists.
Indian professionals are not well acquainted with concepts such as tech startup
or work-for-equity; therefore, most of them do not appreciate a startup job offer
for part salary and part equity.
Indian entrepreneurs who do
not have overseas product design experience try to position products without taking
the product marketing principles into consideration and are inclined towards building
outsourcing service companies and BPOs (business product outsourcing). Such ventures
require less capital and generate fast revenue. None of the net operating loss (NOL)
period of a pure play company is necessary, and hence, obtaining venture capital
is also unnecessary. This model is known for having a low entry barrier and was
probably the only entrepreneurial model available in India.
Venture capitalists and angel investors,
who had invested in such companies in the last five years, were able to make profits;
however, this model has become less appealing since the outsourcing and BPO markets
have almost become mature and saturated.
The most recent trend for venture capitalists and angel investors has been consumer
internet and mobile offerings that target Indiaâs growing mobile consumers. Segments
such as travel, matrimonial services, jobs, games, mobile payments, etc., are getting
substantial capital infusion. Even though this model could possibly be saturated
in the next few years, engineering requirements are marginal in this space, making
marketing a large differentiating factor. To some extent, this example is also introducing
the Indian entrepreneurs to product marketing.
Despite the many changes in the business world that have occurred throughout the
years, many Indian entrepreneurs
have failed to start companies based on technology innovations. Venture capitalists
are very familiar with this trend; however, the lack of significant fundable ideas
has been forcing them to diversify their portfolios with retail, biotechnology,
and real estate. For example, Sequoia Capital, a venture capitalist firm, decided
to invest in Royal Orchid Hotels, a chain of hotels that exclusively accommodates
business travelers. Oak Investment Partners, another
venture capital firm that is known for investing in information technology,
internet media, and healthcare, has decided to invest $200 million in the Indian
retail industry. This large investment was made possible by veteran retail investor
Jerry Gallagher, who visited India, was astounded by the revenue per square feet
in the malls and stores, and convinced his partners to commit capital.
Recently, many Indian-American entrepreneurs from Silicon Valley returned to India
and partnered with many Indian engineers of the high tech industry. The biotechnology
industry has produced one of the flagship entrepreneurs of India. Kiran Majumdar-Shaw,
the Chairman and Managing Director of Biocon, Ltd., Indiaâs first and leading biotechnology
company, focuses on the development of biopharmaceuticals. The extraordinary success
of Mujumdar-Shawâs company has enabled her status to be the second richest woman
in India. She is now using her status, expertise, and skills in trying to improve
the entire industry. All of these entrepreneurs are using concerted efforts in motivating
others to take the path of entrepreneurship. Furthermore, India is flourishing with
investment commitments from many of the corporate giants of technology.
For example, Microsoft, Cisco, IBM, SAP, Intel, and AMD have each committed over
$1billion to further develop their India presence. Many of the leading venture capital
firms from Silicon Valley are also following pursuit. For example, Matrix Partners
has announced a $150 million India fund that will be used to facilitate Indiaâs
rapidly growing internet, mobile, financial, and entertainment sectors. Sequoia
Capital has acquired Westbridge Capital, an India focused fund that has been around
for several years. Yahoo! has also started investing in consumer
internet startups, the first of which was announced recently (Bharatmatrimony.com),
partaking in the corporate venture capital game. Kleiner Perkins, NEA, Norwest,
Battery, Sierra, and Canaan Partners, have also been actively involved in investments
with India.
Many people decide to become entrepreneurs for two main reasons, whether they want
to prove something to themselves and to the world around them or because they desire
a good lifestyle based on their lucrative returns. The first reason is the main
incentive behind recruiting Indiaâs
technology entrepreneurs.