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?
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.
|Security|| Online travel|
|Mobile VAS applications||Social networking|
|Energy efficiency||Plain vanilla IT services|
|Wireless||Core banking software|
|Clean tech||SAP/ Oracle competing enterprise apps|
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.
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.
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”
Change in attitude
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”
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”
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.
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”
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