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Greenhorn entrepreneurs

Stifled by a lack of growth and frozen hikes, many youngsters have turned entrepreneurs. While talent and real estate are going cheap, funding is scarce and gun-shy investors are taking longer to firm up their plans. Will these greenhorn entrepreneurs survive?

Rahul Sachitanand | Print Edition: May 17, 2009

In December 2008, serial entrepreneur and coveted angel investor Kanwal Rekhi, Founder, Excelan and The Indus Entrepreneurs (TiE), and (more recently) Inventus Capital, held a mentoring session in Bangalore. The event, organised by TiE as part of its Entrepreneurship Summit in India’s IT capital, was expected to draw 30 attendees. Instead, it was a “standing room only” where this ‘guru talk’ session was held, with over 150 wide-eyed founders turning up.

A few kilometres away, Sudhir Sethi, India Managing Director, IDG Ventures, which focusses on early-stage start-ups, was wading through a raft of business plans in his Commissariat Road office in Bangalore’s central business district. IDG Ventures received some 700 plans last year, says Sethi, and if that frenetic pace keeps up, the firm expects to get at least 1,000 proposals this year.

What’s hot, What’s not
Areas wannabe entrepreneurs should be eyeing and those they should be avoiding.
Hot Cold
Security Online travel
Mobile VAS applicationsSocial networking
 Energy efficiencyPlain vanilla IT services
 WirelessCore banking software
 Clean techSAP/ Oracle competing enterprise apps 
Several other seed, angel and venture capital investors, too, say that the number of enquiries and deal flow are on the rise. “Our deal flow has increased 50 per cent over the last six months,” says Subrata Mitra, Partner, Accel India, which acquired Erasmic Venture Fund earlier this year. TiE’s Bangalore chapter, which had 838 members as of March 31, 2008, today has over 1,200 members.

TiE’s Entrepreneurship Summit, which was expected to be packed to the rafters with some 1,500 attendees, actually attracted over 1,700. Based on this sort of response, Samir Kumar, Managing Director, Inventus Capital India, expects to invest in at least four or five companies this year. “The main driver for the increased interest is lower opportunity costs, since talent is cheaper and rentals more affordable,” he says.

Small beginnings
In Jayanagar 4th T Block in southern Bangalore, Hari Prakash Shanbhog, Co-founder, Ipomo, a company that provides mobile learning solutions, is in the process of setting up shop. When this writer met Shanbhog, only a couple of tables had been rigged with notebooks and telephone lines.

“We’ve learnt to do everything on our own,” he laughed. “We’ve negotiated directly with landlords and got a 25-30 per cent decrease in rentals.” A year ago, Shanbhog quit a senior position with Wipro to bootstrap his venture, which got backing from a clutch of investors, including former Wipro President Ramesh Emani. Down the street from Ipomo’s office, Srikanth Chunduri and his classmate from school, Aditya Bhamidipaty, went through an exhaustive list of entrepreneurial options, ranging from biofuels to vegetable retailing before setting on their current business plan: An online group marketing venture called GoVasool.


GoVasool
What is it: Online group marketing venture
Founders: Srikanth Chunduri (R) & Aditya Bhamidipaty (L)
Last jobs: Chunduri—Mitchell Madison Strategic Consulting; and Bhamidipaty—iGATE Global
“We went through an exhaustive list of entrepreneurial options, ranging from biofuels to vegetable retailing”
In August last year, a trio of young executives in Delhi decided to hang up their corporate suits to start a community-based venture in alternative tourism called 78mm Adventures. It all started in 2005, when Jeet Sachdeva, a hospitality management graduate, Jagrit Gupta, an IT engineer, and Vivek Pratap Singh Rathore, a computer science graduate, joined the MBA course at Nirma Institute of Management. “We shared a passion for weekend escapades,” recalls 26-year-old Sachdeva, who worked as a feasibility consultant for Howarth HTL. The biggest stumbling block they encountered along the way wasn’t funding or generating demand for their service, but parental pressure. Once they succeeded in veering around that problem, the trio began conducting a variety of offbeat trips, from beachfront jams and jungle night camps to desert safaris and cloud trekking. 78mm Adventures offers enthusiasts real and virtual platforms to share information about places to visit in India. “Our focus is to discover newer places and build online communities around them. We have a database of over 100 itineraries. So far, we have organised over 12 events (read trips),” says Sachdeva.

Change in attitude

 

Ipomo
What is it: A mobile learning solutions firm
Founders: Hari Prakash Shanbhog (back) & Vidhyadhara S. Talya (front)
Last jobs: Both worked with Wipro
“We’ve negotiated directly with landlords and got a 25-30 per cent decrease in rentals”
Scattered fishponds of entrepreneurship can always be found in any market (in any environment), but rarely do a slew of factors conspire to come together as they have in today’s changed market conditions to result in a discernible start-up wave. One, a slowdown allows entrepreneurs to buy office space cheap and acquire talent that would have been out of bounds in the good times. In Bangalore or Mumbai, realty analysts estimate prime rental space is available 15-25 per cent cheaper than during the peak period 18-24 months ago.

 

Kreeo
What is it: A collective intelligence platform
Founder: Sumeet Anand
Last job: Cranes Software
“We launched the beta version of our product in January and hope to launch a final cut in the next few months”
Then, several large companies such as Google, which announced plans to shut its radio and SMS service, are moving out of several markets, clearing the way for young start-ups to blossom. Specifically, for Indian start-ups, the growth of the domestic market has been a boon. Simultaneously, investors say that entrepreneurs today are more globally aware than their predecessors a decade ago. “The world is more connected today and, therefore, entrepreneurs have more access to data, unlike their predecessors, who had to take educated guesses at best,” says Mohit Goyal, a member of the Indian Angel Network.

There are other factors, too, that are catalysing this interest in entrepreneurship. For example, the slowdown has meant that several people have lost their jobs, or at least face reduced salaries and frozen promotions and increments. Faced with this stalling growth, many executives are turning entrepreneurs. “We see a lot of interest in entrepreneurship in the 25-30 age-group, a phase during which there is little to lose,” says Inventus’ Kumar.


 78mm Adventures
What is it: An alternative tourism venture
Founders: Jeet Sachdeva (C), Jagrit Gupta (R), Vivek Pratap Singh Rathore (L)
Last jobs: Gupta—TVS Motors; Sachdeva—Howarth HTL; and Rathore—Gujarat Gas Company
“Our focus is to discover newer places and build an online community around them”
Some VCs are promoting hybrid models that have founders running day-to-day operations with a senior pro, who assumes charge as Chief Executive or Chairman, managing the big picture. Mahesh Murthy, Managing Partner, Seedfund, a firm that funds companies at the most risky “seed”stage, says there is an increased interest in entrepreneurship as youngsters realise that the blue-chip investment banking jobs are now harder to come by and they don’t want to settle for smaller companies. However, the number of companies providing the more risky seed stage funding has reduced from six or seven a couple of years ago to just a couple today, points out Murthy. “We have also noticed that although we receive fewer junk business plans, the number of viable ideas continues to hold steady. Besides the rush of Internet-based ventures, we notice increased interest in social entrepreneurship, the rural market, education and healthcare,” he adds.

Cost compulsion
To keep costs in check, start-ups have adopted varying strategies. For example, Sumeet Anand, Founder, Kreeo.com, a provider of software that collects and categorises various types of data, hired a group of eight freshers and trained them on the job to build the company’s application.

His office, on Sarjapur Road, just down the street from Wipro’s sprawling HQ, is bare, with his ‘cubicle’ being a corner of a large room that serves as the company’s base. “We launched the beta version of our product in January this year and hope to launch a final cut in the next few months,” says Anand, who has got backing from serial technology entrepreneur Sashi Reddy.

Despite the enthusiasm of most entrepreneurs, investors, especially angel and seed investors, remain wary about current market conditions. “The amount of money they have in hand to invest has come down and even VCs are investing smaller amounts and taking longer to finalise their investments,” says Mitra of Accel. According to estimates from Venture Intelligence, an investment tracking agency, VC firms made just 18 deals in the fourth quarter of calendar year 2008 as compared to 35 in the same quarter a year ago. Consequently, the amount of money they invested, too, fell sharply from $241 million to $91 million.

“The fair-weather entrepreneur will disappear,” says Kumar of Inventus Capital. The few who do make it big will look back at that part of curve that corresponds with the current slowdown as one of their most fruitful learning phases, ever.

Additional reporting by Manu Kaushik

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