Indus Khaitan: Lessons Learned from India for Entrepreneurship

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Indus Khaitan on success: In India success is defined not just monetary, and that’s what I see. So if you pick up something and it reaches a certain stage, that’s a success. But that’s also very relative, so I’ll give you an example. I did a start-up in 2007 in Silicon Valley. Within nine months the start-up got acquired. For me the success was not monetary, because I didn’t make a lot of money then; but success was, it reached a milestone. So then what happened was, the start-up which acquired the start-up got acquired, so I had two successive exits in less than 24 months; that was again a milestone. Then I joined Morpheus, which is doing seed investments here. For me success is not like monetary or reaching an end-goal, but it’s a milestone towards a larger goal.

HK: That’s very interesting. Can you tell me why did you bring the idea of start-ups to India from the Silicon Valley?

IK: My trip to India was more of an accidental trip. The company I was working for, they wanted to open up a development centre in Bangalore, and it just so happened that within six months after me being here, the company got acquired. So I had a couple of choices: either go back and work for a larger company in the US or also work for, say, the likes of Facebook or Google in India. But there were two things: one, my wife said, no more start-ups, because she was, like, you cannot do 18 hour workdays and pay no attention to her and whatever.

So she said, rule number one – no start-ups, so take it easy for some time. And then I thought, maybe if I’m in India, why not give it back in terms of my experience or whatever experience I’ve had in Silicon Valley in terms of creating products, relationships, building products. This generally started because the system was very well known to me. I used to attend events and know people.

So I saw that that was missing in India big time, hence I thought, let’s not just take it easy for some time, but also contribute. Then we started an event platform, meeting entrepreneurs, doing sessions and keynote speeches and participating in panel. And just randomly going into meetings and helping people out. Morpheus gave me that platform. So it was more of an accident in terms of why I moved to India, but I would not regret that, because in fact in the last two years, the start-up eco system has progressed beyond what I could imagine two years ago.

HK: What was the lesson you learned from entrepreneurial things in India when you compare between Silicon Valley?

IK: I think in India the eco system is very nascent, as in, I would not say it is non-existent, but it is at the down-level. So Silicon Valley, it’s okay to take risks; it’s okay to fail. In India failure is still not looked upon as a nice thing. Again, society has been very conservative. So if you fail and you write that in your resume that your start-up did not get sold for $50 million, people would just assume you wasted your time. Versus, in Silicon Valley, if you fail, it’s your experience, and if you’re doing another one, people would ask you the question – what were the lessons you learned from that failure? – rather than why you failed, if you like. So that’s missing.

Second thing is that, if you’re a young company, everybody looks down upon you. I was just talking to a lady here and I was telling her that, first you do not have access to market, because big companies have power, money, access to market. Second thing is, people will not work for you, because you’re a start-up. You don’t have a brand, and there’s a very popular saying in India that if you don’t work for a large company, you’ll not get married.

And third is the problem of capital. As you know venture capital industry is very small in India, so if you’re a young start-up, hard to get funding. In Silicon Valley, all these things are given. If you are doing anything which is worth taking a look at, people will put money on that; versus in India, people look at revenues. Have you made money before I can put money on? I think that’s the main difference.

HK: How are you trying to change that difficulty into a kind of Indian Silicon Valley?

IK: Number one is definitely increase awareness towards start-up. So when we talk to potential candidate, we tell him, start-up is not about making money as you would make it in a larger company, but it’s about experience.

Just assume a big company. Versus you work for a start-up, which is, like, five employees. You’d learn more in one year… what you could learn potentially in that other big company in five, ten years. Or maybe you don’t even learn anything. So the opportunity to enhance your resume, or your career is hundredfold. So that’s number one; increasing awareness about why you should work for a start-up as a start-up employee. And the way we do it is, we also write very popular blogs; so myself, my partner, Samir, and we continuously hammer these points. We also do guest articles for, for example, either guest articles for a popular newspaper here. I do guest posts for other large blogs in India and kind of bring that thought out, why it is important.

Second is that we were trying to do investments at a very grassroots level. Now, what is happening is, we are supporting the very young entrepreneurs coming out of college, or people who have an idea or a prototype. They don’t have revenues, they don’t have customers, so in a typical scenario here, no angel investors, or very few angel investors, and no venture capital firm is going to talk to that start-up. We come in, we take that risk. We jump start the eco system and see if we can create a big company.

Primarily too but in general we’re trying to champion the eco system, 15 years ago in the valley, small start-ups got created; people actually ended up gaining experience. If not, they made a lot of money. Basically, we call it as a risk-free. So you work for a start-up or you do a start-up, you have zero risk. You learn and potentially you could make money. You’ve got to promote that often.

HK” Is there a tendency for successful start-ups in India?

IK: I think number one is patience. It takes a long time here.

HK: How long?

IK: I would say if you take a real example like MakeMyTrip, it was started in 2001. It went IPO this year. So it took ten years. But I think that is slightly longer because MakeMyTrip was started when the market was not established. But I think in my mind it is five years minimum; five to seven years. The challenge is that it takes a lot of time to acquire customers and educate them about what new things you’re doing. So I would say five to seven years easy.

I think that’s also very possible very much in businesses in US, except for the likes of Facebook or Twitter or some of these newer media companies which you see. Selling businesses will take five to seven years, and I think that’s what is happening in India. But the good part is that things are at the ground level, so if you are an entrepreneur with a bright idea about facilitating, say, online commerce, and if you could execute it well, you could probably do that within two, three years; you could become a large company doing say $10 to $20 million in revenue, because very few people are doing it there’s less competition, but you have to have the patience to run for three years.

HK: The thing is, how do you live without any kind of financial supports for three years? How do you survive?

IK” Actually Indian entrepreneurs have figured that out. What companies typically do, which sometimes is also detrimental, as in not a good choice… So, for example, you’ve got a start-up and, of course, you borrow some money from your friends, family – you’ll survive. But that could run for 12 months. They take up small projects. They do some consulting to run it for a longer period of time, which gives money. Actually a lot of start-ups I know, the entrepreneurs or the founders do consulting. They would work for, say, three to four days and do some part-time developer role somewhere else. Then that would bring money, but as the money comes in, they would build the product and hopefully the customer gets coming in.

HK: What would be the benefits to start start-ups in India?

IK” The benefit is the eco system does not exist, so you are at the grassroots ground level. The opportunity in India is huge. You take up commerce, you take up mobile, you take education. So very few companies are doing it, because it’s impossible… or not really impossible; it’s tough to do a start-up in India, because you have regulations, you have financing issues, you have employee issues, you have funding issues. The environment to do business is not congenial compared to Silicon Valley. In Silicon Valley you could register a company in 48 hours. In India it could take you 20, 30 days. So since it is not very congenial, it is difficult to start, hence less people are starting, hence less competition. So that’s I think good in terms of some entrepreneurs, because then, if they have the patience and tenacity, they could survive.

Second is, consumers are not exposed to the ideas, the newer ideas. So if you are doing something brand new or copied idea from the US, you have an opportunity to create demand for your product the way you want it. You could price it the way you want it, you could brand it the way you want it, you could promote it the way you want it. There are a lot of greenfield opportunities. Look at InMobi; mobile based advertising, or advertising for the mobile web. Five years ago nobody would have imagined, but in India the opportunity is huge just for them. They’re also looking at the global market. I’ll give another example, say, Flipkart. Flipkart is like Amazon for India. Three years ago the company did not exist, and today it does a revenue of around $10 to $15 million. So it’s greenfield. And when they started three years ago, people said, are you stupid? People are never going to buy books online.

HK: When you fund others, what would be your criteria?

IK: We look at just one thing: we look at the team. The reason being is that, we come in at a very early stage. Two guys out of college, or two guys a couple of years of experience… If they have the ability to execute or develop or trade a business, then we put money in it, because they would come with a business plan which will change in six months, but if the team is good, they can take the changed business plan to a next level. So our main criterion is, how good the team is. Do they have the domain knowledge? Can they write code? Can they work together? How long the founders have known each other. If they don’t know well, they start fighting after six months, and one guy would say, I’m going to business school; I’m going to do my MBA. If they’ve known each other, they would say, no, hang on for another year; let’s work it out. So we look at team the most, because if the team is good, we can change their idea to something else.

HK: How about a single founder? It’s really a kind of cliché to say a single founder is dangerous. Do you agree with that?

IK: I agree with that to a large part, let me just track back. Start-up has also become very competitive in terms of resource consumption in terms of information which is available. And if you’re a young company, you have to do sales on one side, sell the product, and then on the other side you have to build the product. Now, if you’re just one guy, if you have to build it and sell it… so it’s very difficult to divide your time. You could do it sequentially; you could build and then sell. In my opinion – good to have two founders minimum.

And also the start-up journey is very difficult. If you don’t have another shoulder to cry on, who do you bank on? But we have also seen that some of the single founder companies become very successful, and that also is based on the experience of the guy, whether he can hire well. If you are a single founder, you could know the product, but then you could hire good people. So ultimately it becomes part of the founding theme. But to a large part, we look at companies which are more than one founder. If the company has a product developed, certain customers already, then it is okay to have a founder, just one founder; but large part single… And I think it’s true. Many examples – look at Google, look at Yahoo, and of course Jeff Bezos is an exception, because Amazon was a single founder company, but then he got people early on, and he had money, so he hired people quickly and built the team himself. But I think more examples point towards more than one founder rather than a single founder. We like to have two founders, but of course, iPhone had one, because it was Steve Jones. But he had an army of people to build up.

HK: The final question, tell me about your advice to achieve success.

IK: I think general advice is, look for milestones which make you happy. There is no yardstick to measure success. So if something which makes you happy, I think that could be termed as a success; as simple as that. Successful marriage is defined as a happy marriage. Is there a yardstick for a successful marriage? Very simple -yes. If you’re happy, then your marriage is successful. Same thing in life as well; if you achieve something which gives you happiness, I think that’s a successful achievement.

Indus Khaitan is a General Partner at The Morpheus

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