India Financial Services – Disrupt or Be Disrupted

Matrix India recently hosted two firebrands of the financial services world, Mr Sanjay Agarwal, founder AU Small Finance Bank and Mr Sharad Sharma, founder iSPIRT Foundation, Volunteer at India Stack, for a no holds barred discussion at the Matrix Rooftop in Bangalore. Here is an excerpt from the evening and some of our learnings for fin-tech entrepreneurs.

Part 1 of the two-part series features the untold story of AU Bank, in the words of Sanjay Agarwal himself, as below:

Sanjay Agarwal – on his background and early days before starting AU:

“In my early Chartered Accountancy days, I started out by doing audit work, taxation, and managing clients. I had studied hard and was naïve and enthusiastic at that time hoping, to solve the world’s problems. This pushed me to work harder and I had a desire to do something more.

I believe that we are the choices we make. While evaluating various choices, I eliminated all the options that I didn’t want to pursue e.g. to work for a fee or commission and then I started digging deeper on what really interests me – that was when the concept of AU Financiers was formed.

In 1996, as 26 years old, I began approaching HNIs to raise capital, as back then, there were no VCs. I was fortunate to raise INR 10 cr at a 12% hurdle rate and I had to secure the funding with a personal guarantee. But what is the guarantee of the guarantor? No one questioned this at that time. So, I technically became one of the first P2P lenders, and structured a product that didn’t exist– short term, secured and at a 30% rate of interest. That was the start of the AU journey.”

The Early Days of AU:

“I started off AU as a one-man army. I was everything from the treasurer to the collector. Slowly we built our team and rotated the 10 cr of capital to disburse 100 cr of loans – not a single rupee was lost. There were several challenges at that time for e.g., there was no CIBIL score, financial discipline was lacking, people were still learning how to take a loan and repay it and customer ids didn’t even have a photograph. But somehow, we managed.

The period from 1996 to 2002 taught me everything I needed to learn – how to lend, how to collect, how to manage people, read people’s body language, and most importantly how to manage yourself in different situations. I follow all of that until today, and my team also benefits or suffers from those learnings of mine even today. In those 7 years, we would have dealt with 2000 customers out of which 500 defaulted. That was the ratio of defaulters – 25%. But we managed and there were actually no NPL’s.”

Partnering with HDFC Bank

“In 2002, retail credit was beginning to take off, but our HNIs started pulling their money out, as they wanted a higher return. However, at that time, the most premium bank in the country, HDFC Bank, appointed us as their channel partner. The model we followed was very simple – AU was responsible for sourcing the customer, KYC processing and doing on the ground diligence while loans were booked on HDFC’s balance sheet. HDFC is perceived to be a conservative bank, and it is – however, they gave me Rs 400 cr, on a net worth of only Rs 5 cr! They made an exception in our case due to our strong track record, through execution, sound knowledge of the market, and most importantly our integrity.

By 2008, our net worth had increased to Rs 10 crore through internal accruals. At that time, HDFC told us that we can’t give you any more capital, as we were overleveraged, and that we now needed to bring in equity capital if we wanted to grow.”

Growing the balance sheet and partnering right

“I had two choices at that point, I could continue in Jaipur, keep my ambition under control and live comfortably or figure out what else is possible. I chose the latter and this marked the beginning of my partnership with Motilal Oswal. Its easier to raise equity now, back in the day shareholder agreements used to look like loan agreements with min IRR requirements, etc. As luck would have it, a few months after we raised equity, the Lehman Brothers crisis broke out and most banks stopped funding. We were supported once again by HDFC – they were our saviour and I will cherish my relationship with them always. Once the market settled down, having survived this negative environment, there was no looking back.

Our next major investor was IFC. For the entrepreneurs here, I want to say that you have to be selective about your investors, who will help with not just capital – there should be added value they bring to the table apart from money. IFC was giving me 20% lower valuation, but I knew that I didn’t have any lineage to fall back on. As a first-generation entrepreneur, I had to raise money on the strength of my balance sheet and not basis my family name. I knew that partnering with IFC would shift the perception of AU within the industry, especially for PSU banks. After their investment, we grew from one bank relationship with HDFC to 40 bank partnerships. One thing led to another and Warburg Pincus, ChrysCapital, and Kedaara Capital all came on board after that.”

Consistent performance

“From 2008 onwards, we started diversifying from vehicle lending and got into other forms of secured lending like a loan against property, home loans etc. We never tried unsecured lending and never ventured into microfinance or gold finance. Those were very popular products at that time but focusing on what we were good at resulted in a consistently strong performance. We never had a bad year. In the world of finance, the margin of error is very less. If you have a bad year you can almost never come back. Good companies survive regardless of the market condition, you can never blame the market for your company’s poor performance. In 2015-16, we were a successful NBFC, our RoA was close to 3% with an asset base of close to 8,000 crores, with a RoE of 27-28% and everyone was chasing us – the question at that time before us was, what next?”

How we became a bank

“As an NBFC, it is very hard to manage a book of Rs 50,000 cr with the same efficiency and effectiveness as it’s a people dependent business, there are limits to the kind of products you can do and you can’t keep raising capital. Hence, we became a bank because we wanted to be there for the next 100 years and that perpetual platform can only be created through a bank. That is the biggest platform and it is not available at a price. It’s available through your integrity, business plan and execution. Today, we receive Rs 100 cr of money every single day. This is the same person who was struggling to raise Rs 10 cr in 1996, and is now getting money at the speed of Rs 100 cr every day – it feels amazing but there is a lot of responsibility!”

Part 2 of the two-part series features insights from Sharad Sharma:

Recognizing the Athletic Gavaskar moment in Indian Financial Services

“Indian financial services industry is going through its equivalent of the Athletic Gavaskar project of Indian cricket. The motive behind this project was to instil the importance of being athletic to successfully compete in the modern game. A new team was created with the rule that if you are not athletic, you cannot be a part of the team, regardless of other skills that you bring to the table. Virat Kohli eventually became the captain of this team and the results are for everyone to see. Similar yet contrasting stories played out in hockey and wrestling. In hockey, we lost for 20 years because we refused to adapt to the introduction of astroturf. However, in wrestling, the Akhadas in Haryana embraced the move from mud to mat with rigour, and Indian wrestling is already punching above its weight class and hopefully will do even better over time. The idea of sharing this is that similar to sports, sometimes an industry goes through a radical shift. Take the telecom space, for example, if Graham Bell came alive in 1995, he would recognize the telephone system, 20 years later he wouldn’t recognize it at all. The banking industry is going to go through a hockey/wrestling or communications type disruption and a lot of us are working hard to make it happen.”

Infrastructure changes lead to New Playgrounds

“All the banks and NBFCs put together are not serving the real India today. We have 10 million+ businesses that have GST id’s, out of which 8 million+ are big enough to pay GST on a monthly basis, but only 1.2 million have access to NBFC or bank finance. This is a gap that needs to be addressed and it cannot be solved through incremental innovations.

Entrepreneurs and incumbents should learn from what happened in the TV industry when new infrastructure became available. When India went from state-run TV towers in 34 cities to cable and satellite TV in pretty much every town, there was a massive new market that was unlocked that did not want to watch the same Ramayan or Hum Log TV serials. What transpired was an explosion of entertainment products because of the high demand stemming from the new markets and the TV channel players that reinvented their content is thriving today while others that did not, are barely surviving or have shut down.

So where does this leave the bankers? I think it is the biggest opportunity for the right banker who understands this problem, wants to serve this section of the market and is willing to reinvent the way they do their business and take advantage of the new infrastructure that will be available.”

Dual-immersed entrepreneurs have the biggest advantage

“Entrepreneurs who are immersed in the messiness of both the new infrastructure and the old problem are “dual immersed entrepreneurs”. They are the ones that succeed when a market shift is underway. Today this is not happening. Some of our city-bred entrepreneurs are more comfortable with California rather than Bharat. And some of our sales-oriented entrepreneurs are intimidated by the messiness of the new technology infrastructure.”

New Playgrounds need new Gameplay

“In a world where eKYC exists, and we can transfer money through UPI from a phone, and sign documents digitally – we are ready to deliver financial products on the phone and this is the disruption that is required. Access to credit drives the economy and with this new infrastructure, it is now possible to lend to the real India. However, it’s easy to give money, but the ability to get it back and keeping defaults at a minimum is the real trick. Even there we are moving towards seeing a radical improvement. Debt providers now have powers they never had and defaulters are being brought to book. Customers are now incentivized to build their own credit history to get better and lower interest rates over time. A new Public Credit Registry is coming to enable this at scale. But the biggest innovation is related to the dramatic shortening of the tenor. One can structure a one-year loan into 12 monthly loans or 52 weekly loans. This rewards positive customer behaviour and brings about the behaviour change that is needed.

There is no secret sauce here, it requires gumption – like that shown by Reed Hastings, founder of Netflix. He disrupted the TV and home video industry by first having the wisdom to go from ground to cloud and then again when they started developing original content. In both cases, he had little support from the board or investors. If you can reinvent yourself before it becomes necessary, you’re a winner but this is harder to do for a successful company. The legacy of success provides resisters with the clout to block change. The real beneficiary of Aadhaar based eKYC in the telecom world was not the incumbents but Jio – eKYC allowed Jio to acquire customers at an unprecedented scale and they saved INR 5000 crores on KYC costs as well.”

About iSPIRT

iSPIRT is a non-profit think tank that builds public goods for Indian product startup to thrive and grow. iSPIRT aims to do for Indian startups what DARPA or Stanford did in Silicon Valley. iSPIRT builds four types of public goods – technology building blocks (aka India stack), startup-friendly policies, market access programs like M&A Connect and Playbooks that codify scarce tacit knowledge for product entrepreneurs of India.

About AU Small Finance Bank:

AU Small Finance Bank Limited (AU Bank) started in 1996 as a vehicle financing NBFC, AU Financiers and scaled to touch over a million underbanked and unbanked customers across 11 states of North, West and Central India, prior to becoming a bank in April 2017. During this time, AU attracted equity investments from marquee investors such as IFC, Warburg Pincus, Chrys Capital, Kedaara Capital and recently went public when its IPO was oversubscribed ~54 times. Over the years, AU Bank, led by its founder Sanjay Agarwal, has created significant shareholder value with its equity value growing from ~$120 million in 2012 to current market capitalization of ~$3 billion.

Please Note: The blog was first published and authored by Matrix India Team and you can read the original post here: matrixpartners.in/blog

iSPIRT Final Comments on India’s Personal Data Protection Bill

Below represents iSPIRT’s comments and recommendations on the draft Personal Data Protection Bill.  iSPIRT’s overall data privacy and data empowerment philosophy is covered here.  

Table of Contents

Major Comments
1. Include Consent Dashboards
2. Financial Understanding and Informed Consent for all Indians
3. Data Fiduciary Trust Scores Similar to App Store Ratings
4. Comments & Complaints on Data Fiduciaries are Public, Aggregatable Data
5. Warn of Potential Credit and Reputation Hazards
6. A Right to View and Edit Inferred Personal Data
7. Sharing and Processing of Health Data

Suggestions and Questions

  • Fund Data Rights Education
  • Limit Impact Assessment Requirement
  • Passwords should be treated differently than other Sensitive Personal Data.
  • Does the Bill intend to ban automatic person-tagging in photos and image search of people?
  • Notifications about updates to personal data should be handled by a Consent Dashboard, not every data fiduciary.
  • Need for an Authority appeal process when data principal rights conflict
  • Do not outlaw private fraud detection
  • Limit record keeping use and disclosure to the Authority and the company itself.
  • Fillings may be performed digitally
  • Request for Definition Clarifications
  • Author Comments
  • Links
  • Appendix – Sample User Interface Screens

Major Comments

1. Include Consent Dashboards

We support the idea of a Consent Dashboard as suggested in the Data Protection Committee Report (page 38) and recommend it to be incorporated in the Bill in Section 26 – Right to Data Portability and Section 30 (2) Transparency.  

We envision all of a user’s personal and inferred data that is known by data fiduciaries (i.e. companies) being exposed on a consent dashboard, provided by a third party consent collector or account aggregator (to use the RBI’s parlance). Below is an example user interface:

This mandate would enable users to have one place – their consent collector-provided dashboard – to discover, view and edit all data about them. It would also allow users to see any pending, approved and denied data requests.

Furthermore, in the event of data breaches, especially when a user’s password and identifier (mobile, email, etc) have been compromised, the breach and recommended action steps could be made clear on the consent dashboard.

Given the scope of this suggestion, we recommend an iterative or domain specific approach, wherein financial data is first listed in a dashboard limited to financial data and for its scope to grow with time.

2. Financial Understanding and Informed Consent for all Indians

We applaud the Bill’s Right to Confirmation and Access (Chapter IV, Section 24):

The data fiduciary shall provide the information as required under this section to the data principal in a clear and concise manner that is easily comprehensible to a reasonable person.

That said, we’ve found in practice that it’s difficult to appreciate the implications of digital policies on users until real user interfaces are presented to end users and then tested for their usability and understanding. Hence, we’ve put together a set of sample interfaces (see Appendix) that incorporate many of the proposed bill’s provisions and our recommendations. That said, much more work is needed before we can confidently assert that most Indians understand these interfaces and what they are truly consenting to share.

The concepts behind this bill are complicated and yet important. Most people do not understand concepts such as “revocable data access rights” and other rather jargon-filled phrases often present in the discussion of data privacy rights. Hence, we believe the best practices from interface design must be employed to help all Indians – even those who are illiterate and may only speak one of our many non-dominant languages – understand how to control their data.

For example, multi-language interfaces with audio assistance and help videos could be created to aid understanding and create informed consent.  Toll-free voice hotlines could be available for users to ask questions. Importantly, we recognize that the interfaces of informed consent and privacy control need rigorous study and will need to evolve in the years ahead.

In particular, we recommend user interface research in the following areas:

  • Interfaces for low-education and traditionally marginalized communities
  • Voice-only and augmented interfaces
  • Smart and “candy-bar” phone interfaces
  • Both self-serving and assisted interfaces (such that a user can consensually and legally delegate consent, as tax-payers do to accountants).

After user interface research has been completed and one can confidently assert that certain interface patterns can be understood by most Indian adults, we can imagine that templated designs representing best practices are recommended for the industry, much like the design guidelines for credit card products published by US Consumer Financial Protection Bureau or nutritional labelling.

3. Data Fiduciary Trust Scores Similar to App Store Ratings

We support the government’s effort to improve the trust environment and believe users should have appropriate, easy and fast ways to give informed consent & ensure bad actors can’t do well. Conversely, we believe that the best actors should benefit from a seamless UI and rise to the top.

The courts and data auditors can’t be the only way to highlight good, mediocre and bad players. From experience, we know that there will be a continuum of good to bad experiences provided by data fiduciaries, with only the worst and often most egregious actions being illegal.

People should be able to see the experiences of other users – both good and bad – to make more meaningful and informed choices. For example, a lender that also cross-sells other products to loan recipients and shares their mobile numbers may not be engaging in an illegal activity but users may find it simply annoying.

Hence, we recommend that data fiduciary trust scores are informed with user-created negatives reviews (aka complaints) and positive reviews.

In addition to Data Auditors (as the Bill envisions), user created, public ratings will create additional data points and business incentives for data fiduciaries to remain in full compliance with this law, without a company’s data protection assessment being the sole domain of its paid data auditors.

We would note that crowd sourced rating systems are an ever-evolving tech problem in their own right (and subject to gaming, spam, etc) and hence, trust rating and score maintenance may be best provided by multiple market actors and tech platforms.

4. Comments & Complaints on Data Fiduciaries are Public, Aggregatable Data

…so 3rd party actors and civil society can act on behalf of users.

A privacy framework will not change the power dynamics of our society overnight. Desperate people in need of money will often sign over almost anything, especially abstract rights. Additionally, individual citizens will rarely to be able to see larger patterns in the behaviour of lenders or other data fiduciaries and are ill-equipped to fight for small rewards on behalf of their community.  Hence, we believe that user ratings and complaint data about data fiduciaries must be made available in machine-readable forms to not only to the State but to third-parties, civic society and researchers so that they may identify patterns of good and bad behaviour, acting as additional data rights watchdogs on behalf all of us.

5. Warn of Potential Credit and Reputation Hazards

We are concerned about the rise of digital and mobile loans in other countries in recent years. Kenya – a country with high mobile payment penetration and hence like India one that has become data rich before becoming economically rich – has seen more than 10% of the adult population on credit blacklists in 2017; three percent of all digital loans were reportedly used for gambling. These new loan products were largely made possible by digital money systems and the ability of lenders to create automated risk profiles based on personal data; they clearly have the potential to cause societal harm and must be considered carefully.

Potential remedies to widespread and multiple loans are being proposed (e.g. real-time credit reporting services), but the fact that a user’s reputation and credit score will be affected by an action (such as taking out a loan), most also be known and understood by users. E.g. Users need to know that an offered loan will be reported to other banks and if they don’t pay they will be reported and unable to get other loans.

Furthermore, shared usage-based patterns – such as whether a customer pays their bills on time or buys certain types of products – must be available for review by end users.

6. A Right to View and Edit Inferred Personal Data

The Machine Learning and AI community have made incredible strides in computers’ ability to predict or infer almost anything. For example, in 2017, a babajob.com researcher showed the company could predict whether a job seeker earned more or less than Rs 12000 / month with more than 80% accuracy, using just their photo.  She did this using 3000 job seeker photos, 10 lines of code and Google’s TensorFlow for Poets sample code.  Note the project was never deployed or made publicly available.

As these techniques become ever more commonplace in the years to come, it’s reasonable to assume that public facing camera and sensor systems will be able to accurately infer most of the personal data of their subjects – e.g. their gender, emotional state, health, caste, religion, income – and then connect this data to other personally identifiable data such as a photo of their credit card and purchase history. Doing so will improve training data so that systems become even more accurate. In time, these systems – especially ones with large databases of labelled photos – like the governments’, popular social networks’ or a mall’s point of sale + video surveillance system – truly will be able to precisely identify individuals and their most marketable traits from any video feed.

Europe’s GDPR has enshrined the right for people to view data inferred about them, but in conjunction with the idea of a third party consent dashboard or Account Aggregator (in the RBI’s case), we believe we can do better.

In particular, any entity that collects or infers data about an individual that’s associated with an identifier such as an email address, mobile, credit card, or Aadhaar number should make that data viewable and editable to end users via their consent dashboard.  For example, if a payment gateway provider analyses your purchase history and infers you are diabetic and sells this information as a categorization parameter to medical advertisers, that payment gateway must notify you that it believes you are diabetic and enable you to view and remove this data. Google, for example, lists these inferences as Interests and allows users to edit them:

Using the Consent Dashboard mentioned in Major Comment 1, we believe users should have one place where they can discover, view and correct all personal and inferred data relevant to them.

Finally, more clarity is needed regarding how data gathered or inferred from secondary sources should be regulated and what consent may be required. For example, many mobile apps ask for a user’s consent to read their SMS Inbox and then read their bank confirmation SMSs to create a credit score. From our view, the inferred credit score should be viewable by the end user before it’s shared, given its personal data that deeply affects the user’s ability to gain usage of a service (in this case, often a loan at a given interest rate).

7. Sharing and Processing of Health Data

The Bill requires capturing the purpose for data sharing:

Chapter II, point 5:

“Purpose limitation.— (1) Personal data shall be processed only for purposes that are clear, specific and lawful. (2) Personal data shall be processed only for purposes specified or for any other incidental purpose that the data principal would reasonably expect the personal data to be used for, having regard to the specified purposes, and the context and circumstances in which the personal data was collected.”

In the healthcare domain, collecting the purpose for which the data is being shared might itself be quite revealing. For example, if data is being shared for a potential cancer biopsy or HIV testing, the purpose might be enough to make inferences and private determinations about the patient and say deny insurance coverage. On the other hand, stating high-level, blanket purposes might not be enough for future audits. A regulation must be in place to ensure the confidentiality of the stated purpose.  

The Bill has a provision for processing sensitive personal data for prompt action:

Chapter IV, point 21:

“Processing of certain categories of sensitive personal data for prompt action. — Passwords, financial data, health data, official identifiers, genetic data, and biometric data may be processed where such processing is strictly necessary— (a) to respond to any medical emergency involving a threat to the life or a severe threat to the health of the data principal; (b) to undertake any measure to provide medical treatment or health services to any individual during an epidemic, outbreak of disease or any other threat to public health; or (c) to undertake any measure to ensure safety of, or provide assistance or services to, any individual during any disaster or any breakdown of public order.”

While this is indeed a necessity, we believe that a middle ground could be achieved by providing an option for users to appoint consent nominees, in a similar manner to granting power of attorney. In cases of emergency, consent nominees such as family members could grant consent on behalf of the user. Processing without consent could happen only in cases where a consent nominee is unavailable or has not been appointed. This creates an additional layer of protection against misuse of health data of the user.

Suggestions and Questions

Fund Data Rights Education

We believe a larger, public education program may be necessary to educate the public on their data rights.

Limit Impact Assessment Requirement

Section 33 – Data Protection Impact Assessment —

  • Where the data fiduciary intends to undertake any processing involving new technologies or large scale profiling or use of sensitive personal data such as genetic data or biometric data, or any other processing which carries a risk of significant harm to data principals, such processing shall not be commenced unless the data fiduciary has undertaken a data protection impact assessment in accordance with the provisions of this section. …
  • On receipt of the assessment, if the Authority has reason to believe that the processing is likely to cause harm to the data principals, the Authority may direct the data fiduciary to cease such processing or direct that such processing shall be subject to such conditions as may be issued by the Authority.

We believe that the public must be protected from egregious data profiling but this provision does not strike an appropriate balance with respect to innovation. It mandates that companies and other researchers must ask government permission to innovate around large scale data processing before any work, public deployments or evidence of harm takes place. We believe this provision will be a large hinderance to experimentation and cause significant AI research to simply leave India. A more appropriate balance might be to ask data fiduciaries to privately create such an impact assessment but only submit to the Authority for approval once small scale testing has been completed (with potential harms better understood) and large scale deployments are imminent.

Passwords should be treated differently than other sensitive personal data.

Chapter IV – Section 18. Sensitive Personal Data. Passwords are different than other types of Sensitive Personal Data, given that they are a data security artifact, rather than a piece of data that is pertinent to a person’s being. We believe that data protection should be over-ridden in extraordinary circumstances without forcing companies to provide a backdoor to reveal passwords. We fully acknowledge that it is useful and sometimes necessary to provide backdoors to personal data – e.g. one’s medical history in the event of a medical emergency – but to require such a backdoor for passwords would likely introduce large potential security breaches throughout the entire personal data ecosystem.  

Does the Bill intend to ban automatic person-tagging in photos and image search of people?

Chapter I.3.8 – Biometric Data – The Bill defines Biometric Data to be:

“facial images, fingerprints, iris scans, or any other similar personal data resulting from measurements or technical processing operations carried out on physical, physiological, or behavioural characteristics of a data principal, which allow or confirm the unique identification of that natural person;”

The Bill includes Biometric Data in its definition of Sensitive Personal Data (section 3.35) which may only be processed with explicit consent:

Section 18. Processing of sensitive personal data based on explicit consent. — (1) Sensitive personal data may be processed on the basis of explicit consent

From our reading, we can see a variety of features available today around image search and person tagging being disallowed based on these provisions. E.g. Google’s image search contains many facial images which have been processed to enable identification of natural persons. Facebook’s “friend auto-suggestion” feature on photos employs similar techniques. Does the Bill intend for these features and others like them to be banned in India? It can certainly be argued that non-public people have a right to explicitly consent before they are publicly identified in a photo but we feel the Bill’s authors should clarify this position. Furthermore, does the purpose of unique identification processing matter with respect to its legality?  For example, we can imagine mobile phone-based, machine learning algorithms automatically identifying a user’s friends to make a photo easier to share with those friends; would such an algorithm require explicit consent from those friends before it may suggest them to the user?

Notifications about updates to personal data should be handled by a Consent Dashboard, not every data fiduciary.

Chapter IV – Section 25.4 – Right to correction, etc

Where the data fiduciary corrects, completes, or updates personal data in accordance with sub-section (1), the data fiduciary shall also take reasonable steps to notify all relevant entities or individuals to whom such personal data may have been disclosed regarding the relevant correction, completion or updating, particularly where such action would have an impact on the rights and interests of the data principal or on decisions made regarding them.

We believe the mandate on a data fiduciary to notify all relevant entities of a personal data change is too great a burden and is better performed by a consent dashboard, who maintains which other entities have a valid, up-to-date consent request to a user’s data. Hence, upon a data change, the data fiduciary would update the consent dashboard of the change and then the consent dashboard would then notify all other relevant entities.

It may be useful to keep the user in this loop – so that this sharing is done with their knowledge and approval.

Need for an Authority appeal process when data principal rights conflict

Section 28.5 – General conditions for the exercise of rights in this Chapter. —  

The data fiduciary is not obliged to comply with any request made under this Chapter where such compliance would harm the rights of any other data principal under this Act.

This portion of the law enables a data fiduciary to deny a user’s data change request if it believes doing so would harm another data principal. We believe it should not be up to the sole discretion of the data fiduciary to determine which data principal rights are more important and hence would like to see an appeal process to the Data Protection Authority made available if a request is refused for this reason.

Do not outlaw private fraud detection

Section 43.1 Prevention, detection, investigation and prosecution of contraventions of law

(1) Processing of personal data in the interests of prevention, detection, investigation and prosecution of any offence or any other contravention of law shall not be permitted unless it is authorised by a law made by Parliament and State Legislature and is necessary for, and proportionate to, such interests being achieved.

We worry the above clause would effectively outlaw fraud detection research, development and services by private companies in India. For instance, if a payment processor wishes to implement a fraud detection mechanism, they should be able to do so, without leaving that task to the State.  These innovations have a long track record of protecting users and businesses and reducing transaction costs. We recommend a clarification of this section and/or its restrictions to be applied to the State.

Limit record keeping use and disclosure to the Authority and the company itself.

Section 34.1.a. Record – Keeping –

The data fiduciary shall maintain accurate and up-to-date records of the following

(a) important operations in the data life-cycle including collection, transfers, and erasure of personal data to demonstrate compliance as required under section 11;

We expect sensitive meta-data and identifiers will need to be maintained for the purposes of Record Keeping; we suggest that this Record Keeping information be allowed but its sharing limited only to this use and shared only with the company, its Record Keeping contractors (if any) and the Authority.

Fillings may be performed digitally

Section 27.4 – Right to be Forgotten

The right under sub-section (1) shall be exercised by filing an application in such form and manner as may be prescribed.

The Bill contains many references to filing an application;  we’d suggest a definition that is broad and includes digital filings.

This also applies to sections which include “in writing” – which must include digital communications which can be stored (for instance, email).

Request for Definition Clarifications

What is “publicly available personal data”?

  • Section 17.2.g – We believe greater clarity is needed around the term “publicly available personal data.“ There questionably obtained databases for sale that list the mobile numbers and addresses of millions of Indians – would there thus be included as a publicly available personal data?
  • We’d recommend that DPA defines rules around what is publicly available personal data so that it is taken out of the ambit of the bill.  
  • The same can be said for data where there is no reasonable expectation of privacy (with the exception that systematic data collection on one subject cannot be considered to be such a situation)

Clarity of “Privacy by Design”

Section 29 – Privacy by Design

Privacy by Design is an established set of principles (see here and in GDPR) and we would like to see the Bill reference those patterns explicitly or use a different name if it wishes to employ another definition.

Define “prevent continuing disclosure”

Section 27.1 – Right to be Forgotten

The data principal shall have the right to restrict or prevent continuing disclosure of personal data by a data fiduciary…

We request further clarification on the meaning of  “prevent continuing disclosure” and an example use case of harm.

Define “standard contractual clauses” for Cross-Border Transfers

Section 41.3.5 – Conditions for Cross-Border Transfer of Personal Data

(5) The Authority may only approve standard contractual clauses or intra-group schemes under clause (a) of sub-section (1) where such clauses or schemes effectively protect the rights of data principals under this Act, including in relation with further transfers from the transferees of personal data under this subsection to any other person or entity.

We would like to standard contractual clauses clearly defined.

Define “trade secret”

Section 26.2 C – Right to be Forgotten

compliance with the request in sub-section (1) would reveal a trade secret of any data fiduciary or would not be technically feasible.

We request further clarification on the meaning of  “trade secret” and an example of the same.

Author Comments

Compiled by iSPIRT Volunteers:

Links

Comments and feedback are appreciated. Please mail us at [email protected].

Appendix – Sample User Interface Screens

Link: https://docs.google.com/presentation/d/1Eyszb3Xyy5deaaKf-jjnu0ahbNDxl7HOicImNVjSpFY/edit?usp=sharing

******

Why the SC ruling on ‘Private Players’ use of Aadhaar doesn’t say what you think it does

On behalf of iSPIRT, Sanjay Jain recently published an opinion piece regarding the recent supreme court judgement on the validity of Aadhaar. In there, we stated that section 57 had been struck down, but that should still allow some usage of Aadhaar by the private sector. iSPIRT received feedback that this reading may have been incorrect and that private sector usage would not be allowed, even on a voluntary basis. So, we dug deeper, and analyzed the judgement once again, this time trying to disprove Sanjay’s earlier statement. So, here is an update:

Section 57 of the Aadhaar act has NOT been struck down!

Given the length of the judgement, our first reading – much like everyone else’s was driven by the judge’s statement and confirmed by quickly parsing the lengthy judgement. But in this careful reanalysis, we reread the majority judgement at leisure and drilled down into the language of the operative parts around Section 57. Where ambiguities still remain, we relied on the discussions leading up to the operative conclusions. Further, to recheck our conclusions, we look at some of the other operative clauses not related to Section 57. We tested our inference against everything else that has been said and we looked for inconsistencies in our reasoning.

Having done this, we are confident in our assertion that the judges did not mean to completely blockade the use of Aadhaar by private parties, but merely enforce better guardrails for the protection of user privacy. Let’s begin!

Revisiting Section 57

Here is the original text of section 57 of the Aadhaar Act

Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual for any purpose a purpose backed by law, whether by the State or any body corporate or person, pursuant to any law, for the time being in force, or any contract to this effect:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.

Now, let us simply read through the operating part of the order with reference to Section 57, ie. on page 560. This is a part of paragraph 447 (4) (h). The judges broke this into 3 sections, and mandated changes:

  1. ‘for any purpose’ to be read down to a purpose backed by law.
  2. ‘any contract’ is not permissible.
  3. ‘any body corporate or person’ – this part is struck down.

Applying these changes to the section, we get:

Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual for any purpose a purpose backed by law, whether by the State or any body corporate or person, pursuant to any law, for the time being in force, or any contract to this effect:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.

Cleaning this up, we get:

Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual pursuant to any law, for the time being in force:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.

It is our opinion that this judgement does not completely invalidate the use of Aadhaar by private players, but rather, specifically strikes down the use for “any purpose [..] by any body corporate or person [..] (under force of) any contract”. That is, it requires the use of Aadhaar be purpose-limited, legally-backed (to give user rights & protections over their data) and privacy-protecting.

As an exercise, we took the most conservative interpretation – “all private use is struck down in any form whatsoever” – and reread the entire judgement to look for clues that support this conservative view.

Instead, we found that such an extreme view is inconsistent with multiple other statements made by the judges. As an example, earlier discussions of Section 57 in the order (paragraphs 355 to 367). The conclusion there – paragraph 367 states:

The respondents may be right in their explanation that it is only an enabling provision which entitles Aadhaar number holder to take the help of Aadhaar for the purpose of establishing his/her identity. If such a person voluntary wants to offer Aadhaar card as a proof of his/her identity, there may not be a problem.

Some pointed out that this is simply a discussion and not an operative clause of the judgement. But even in the operative clauses where the linking of Aadhaar numbers with bank accounts and telecom companies is discussed, no reference was made to Section 57 and the use of Aadhaar by private banks and telcos.

The court could have simply struck down the linking specifically because most banks and telcos are private companies. Instead, they applied their mind to the orders which directed the linking as mandatory. This further points to the idea that the court does not rule out the use of Aadhaar by private players, it simply provides stricter specifications on when and how to use it.

What private players should do today

In our previous post, we had advised private companies to relook at their use of Aadhaar, and ensure that they provide choice to all users, so that they can use an appropriate identity, and also build in better exception handling procedures for all kinds of failures (including biometric failures).

Now, in addition to our previous advice, we would like to expand the advice to ask that each company look at how their specific use case draws from the respective acts, rules, regulations and procedural guidelines to ensure that these meet the tests used by this judgement. That is, they contain adequate justification and sufficient protections for the privacy of their users.

For instance, banks have been using Aadhaar eKyc to open a bank account, Aadhaar authentication to allow operation of the bank accounts, and using the Aadhaar number as a payment address to receive DBT benefits. Each of these will have to be looked at how they derive from the RBI Act and the regulations that enable these use cases.

These reviews will benefit from the following paragraphs in the judgement.

The judgement confirmed that the data collected by Aadhaar is minimal and is required to establish one’s identity.

Paragraph 193 (and repeated in other paras):

Demographic information, both mandatory and optional, and photographs does not raise a reasonable expectation of privacy under Article 21 unless under special circumstances such as juveniles in conflict of law or a rape victim’s identity. Today, all global ID cards contain photographs for identification alongwith address, date of birth, gender etc. The demographic information is readily provided by individuals globally for disclosing identity while relating with others and while seeking benefits whether provided by government or by private entities, be it registration for citizenship, elections, passports, marriage or enrolment in educational institutions …

The judgement has a lot to say in terms of what the privacy tests should be, but we would like to highlight two of those paragraphs here.

Paragraph 260:

Before we proceed to analyse the respective submissions, it has also to be kept in mind that all matters pertaining to an individual do not qualify as being an inherent part of right to privacy. Only those matters over which there would be a reasonable expectation of privacy are protected by Article 21…

Paragraph 289:

‘Reasonable Expectation’ involves two aspects. First, the individual or individuals claiming a right to privacy must establish that their claim involves a concern about some harm likely to be inflicted upon them on account of the alleged act. This concern ‘should be real and not imaginary or speculative’. Secondly, ‘the concern should not be flimsy or trivial’. It should be a reasonable concern…

Hence, the privacy risk in these use cases must be evaluated in terms of the data in the use case itself, as well as in relation to biometrics, and the Aadhaar number in the context of the user’s expectations, and real risks. Businesses must evaluate their products, and services – particularly those which use Aadhaar for privacy risks. It is helpful that the UIDAI has provided multiple means of mitigating risks, in the form of Registered Devices, Virtual Ids, Tokenization, QR Codes on eAadhaar, etc. which must be used for this purpose.

What private players should do tomorrow

In the future, the data protection bill will require a data protection impact assessment before deploying large scale systems. It is useful for businesses to bring in privacy and data protection assessments early in their development processes since it will help them better protect their users, and reduce potential liability.

This is a useful model, and we would hope that, in light of the Supreme Court judgement, the Government will introduce a similar privacy impact review, and provide a mechanism to regulate the use of Aadhaar for those use cases, where there are adequate controls to protect the privacy of the users and to prevent privacy harms. Use cases, and an audit/enforcement mechanism matter more than whether the entity is the state, a public sector organization, or a private sector organization.

Note: This is in continuation of Sanjay Jain’s previous op-ed in the Economic Times which is available here and same version on the iSPIRT blog here.

The writer is currently Partner, Bharat Innovation Fund, and Chief Innovation Officer at the Centre for Innovation, Incubation and Entrepreneurship, IIM Ahmedabad. As a volunteer at iSPIRT, he helped define many of the APIs of the India Stack.  He was the Chief Product Manager of UIDAI till 2012

(Disclaimer: This is not legal advice)

Understanding iSPIRT’s Entrepreneur Connect

There is confusion about how iSPIRT engages with entrepreneurs. This post explains to our engagement model so that the expectations are clear. iSPIRT’s mission is to make India into a Product Nation. iSPIRT believes that startups are a critical catalyst in this mission. In-line with the mission, we help entrepreneurs navigate market and mindset shifts so that some of them can become trailblazers and category leaders.

Market Shifts

Some years back global mid-market business applications, delivered as SaaS, had to deal with the ubiquity of mobile. This shift upended the SaaS industry. Now, another such market shift is underway in global SaaS – with AI/ML being one factor in this evolution.

Similar shifts are happening in the India market too. UPI is shaking up the old payments market. JIO’s cheap bandwidth is shifting the digital entertainment landscape. And, India Stack is opening up Bharat (India-2) to digital financial products.

At iSPIRT, we try to help market players navigate these shifts through Bootcamps, Teardowns, Roundtables, and Cohorts (BTRC).

We know that reading market shifts isn’t easy. Like stock market bubbles, market shifts are fully clear only in hindsight. In the middle, there is an open question whether this is a valid market shift or not (similar to whether the stock market is in a bubble or not). There are strong opinions on both sides till the singularity moment happens. The singularity moment is usually someone going bust by failing to see the shift (e.g. Chillr going bust due to UPI) or becoming a trailblazer by leveraging the shift (e.g. PhonePe’s meteoric rise).

Startups are made or unmade on their bets on market shifts. Bill Gates’ epiphany that browser was a big market shift saved Microsoft. Netflix is what it is today on account of its proactive shift from ground to cloud. Closer home, Zoho has constantly reinvented itself.

Founders have a responsibility to catch the shifts. At iSPIRT, we have a strong opinion on some market shifts and work with the founders who embrace these shifts.

Creating Trailblazers through Winning Implementations

We are now tieing our BTRC work to specific market-shifts and mindset-shifts. We will only work with those startups that have a conviction about these market/mindset-shifts (i.e., they are not on the fence), are hungry (and are willing to exploit the shift to get ahead) and can apply what they have learned from iSPIRT Mavens to make better products.

Another change is that we will work with young or old, big or small startups. In the past, we worked with only startups in the “happy-confused” stage.

We are making these changes to improve outcomes. Over the last four years, our BTRC engagements have generated very high NPS (Net Promoter Scores) but many of our startups continue to struggle with their growth ceilings, be it an ARR threshold of $1M, $5M, $10M… or whether it is a scalable yet repeatable product-market fit.

What hasn’t changed is our bias for working with a few startups instead of many. Right from the beginning, iSPIRT’s Playbooks Pillar has been about making a deep impact on a few startups rather than a shallow impact on many. For instance, our first PNGrowth had 186 startups. They had been selected from 600+ that applied. In the end, we concluded that we needed even better curation. So, our PNGrowth#2 had only 50 startups.

The other thing that hasn’t changed is we remain blind to whether the startup is VC funded or bootstrapped. All we are looking for are startups that have the conviction about the market/mindset-shift, the hunger to make a difference and the inner capacity to apply what you learn. We want them to be trailblazers in the ecosystem.

Supported Market/Mindset Shifts

Presently we support 10 market/mindset-shifts. These are:

  1. AI/ML Shift in SaaS – Adapt AI into your SaaS products and business models to create meaningful differentiation and compete on a global level playing field.

  2. Shift to Platform Products – Develop and leverage internal platforms to power a product bouquet. Building enterprise-grade products on a common base at fractional cost allows for a defensible strategy against market shifts or expanding market segments.

  3. Engaging Potential Strategic Partners (PSP) – PSPs are critical for scale and pitching to them is very different from pitching to customers and investors. Additionally, PSPs also offer an opportunity to co-create a growth path to future products & investments.

  4. Flow-based lending – Going after the untapped “largest lending opportunity in the world”.

  5. Bill payments – What credit and corporate cards were to West, bill payments will be to India due to Bharat Bill Pay System (BBPS).

  6. UPI 2.0 – Mass-market payments and new-age collections.

  7. Mutual Fund democratization – Build products and platforms that bring informal savings into the formal sector.

  8. From License Raj to Permissions Artefact for Drones – Platform approach to provisioning airspace from the government.

  9. Microinsurance for Bharat – Build products and platforms that reimagine Agri insurance on the back of India Stack and upcoming Digital Sky drone policy.

  10. Data Empowerment and Protection Architecture (DEPA) – with usage in financial, healthcare and telecom sectors.

This is a fluid list. There will be additions and deletions over time.

Keep in mind that we are trying to replicate for all these market/mindset-shifts what we managed to do for Desk Marketing and Selling (DMS). We focussed on DMS in early 2014 thanks to Mavens like Suresh Sambandam (KissFlow), Girish Mathrubootham (Freshworks), and Krish Subramaniam (Chargebee). Now DMS has gone mainstream and many sources of help are available to the founders.

Seeking Wave#2 Partners

The DMS success has been important for iSPIRT. It has given us the confidence that our BTRC work can meaningfully help startups navigate the market/mindset-shifts. We have also learned that the market/mindset-shift happens in two waves. Wave#1 touches a few early adopters. If one or more of them create winning implementations to become trailblazers, then the rest of the ecosystem jumps in. This is Wave#2. Majority of our startups embrace the market-shift in Wave#2.

iSPIRT’s model is geared to help only Wave#1 players. We falter when it comes to supporting Wave#2 folks. Our volunteer model works best with cutting-edge stuff and small cohorts.

Accelerators and commercial players are better positioned to serve the hundreds of startups embracing the market/mindset-shift in Wave#2. Together, Wave#1 and Wave#2, can produce great outcomes like the thriving AI ecosystem in Toronto.

To ensure that Wave#2 goes well, we have decided to include potential Wave#2 helpers (e.g., Accelerators, VCs, boutique advisory firms and other ecosystem builders) in our Wave#1 work (on a, needless to say, free basis). Some of these BTRC Scale Partners have been identified. If you see yourself as a Wave#2 helper who would like to get involved in our Wave#1 work, please reach out to us.

Best Adopters

As many of you know, iSPIRT isn’t an accelerator (like TLabs), a community (like Headstart), a coworking space (like THub) or a trade body. We are a think-and-do-tank that builds playbooks, societal platforms, policies, and markets. Market players like startups use these public goods to offer best solutions to the market.

If we are missing out on helping you, please let us know by filling out this form. You can also reach out to one of our volunteers here:

Chintan Mehta: AI shift in SaaS, Shift to Platform Products, Engaging PSPs

Praveen Hari: Flow-based lending

Jaishankar AL: Bill payments

Tanuj Bhojwani: Permissions Artefact for Drones

Nikhil Kumar: UPI2.0, MF democratization, Microinsurance for Bharat

Siddharth Shetty: Data Empowerment and Protection Architecture (DEPA)

Meghana Reddyreddy: Wave#2 Partners

We are always looking for high-quality volunteers. In case you’re interested in volunteering, please reach out to one of the existing volunteers or write to us at [email protected]

A Look Back At How Startup India Has Eased The Journey Of Startup And Investors

image1

It’s been two years since the fateful 2016 budget which recognised “Startups” as a separate breed of companies unto themselves, demanding bespoke treatment from the government and authorities. The clarity brought forth helped quell the nerves of both companies and investors, who had to otherwise resort to exotic exercises, supplementary structures, and platoons of professionals to keep their entrepreneurial dreams alive.

As we all await with bated breath for the slew of reforms expected of the Finance Minister, it behoves us to see how far we’ve come and how much further we need to proceed so that a billion dreams may become a reality.

This article is the first part of a two-part series which explores how Startup India has eased the friction in the Startup ecosystem so far, from an investor’s perspective with the second part talking about the next step of reforms which would have a multiplier effect on the ecosystem.

Flywheel of Funding

More often than not, any coverage about fundraising covers the journey of startups and entrepreneurs and the travails of raising their multimillion dollar rounds. But there exists another dimension to this story, that of fund managers raising their own funds. A large section of the investor community was elated that the government recognised this oft-ignored story and created the Rs 10,000 Cr (USD 1.5 billion) Fund of Funds managed by SIDBI which invests into SEBI registered AIFs and Venture Capital Funds.

This approach seeks to galvanise an ecosystem through a flywheel effect, instead of gardening it via direct intervention. The 10,000 Cr corpus can help seed AIFs worth Rs 60,000 Cr in India, which when fully deployed, is estimated to foment 18 lakh jobs and fund thousands of Indian startups. By contributing a maximum of 20% of the corpus of a fund, many fund managers can hasten they fundraise and concentrate more on helping their portfolio companies raise, instead of competing with them.

The Fund of Funds has invested into 88 AIFs so far, thus galvanising more than 5,600 Cr (USD 873 million) worth of investments into 472 Startups.

Bringing back tax breaks, not a back-breaking Tax

The Government’s support of Indian investors found its way into the Income Tax Act, with several measures to incentivise investments into the Indian Startup ecosystem, such as:

  • Insertion of Section 54 EE, which exempts Long-Term Capital Gains up to Rs 50 lakhs provided it has been invested in the units of a SEBI registered AIF
  • Insertion of section 54GB, which exempts Long-Term Capital Gains of up to Rs 50 lakhs provided it been invested into the shares of a Startup which qualifies for section 80IAC
  • Clarifying that the conversion of debentures or preference shares to equity shares will not be considered as a transfer and thus subject to capital gains at the point of conversion (the entire Venture Capital industry is based on convertible debentures and preference shares and this move has settled long-standing disputes regarding the instruments of investments)
  • Issuing a notification that the dreaded angel tax will not apply to shares issued at a premium to domestic investors by those startups who qualify under the DIPP scheme (although the scope of this needs to be extended to rid the spectre of angel tax that haunts various investors and entrepreneurs)
  • Clarifying that the stance of the assessee in categorising the sale of listed securities held for more than 1 year as Capital Gains or Income from Business can’t be questioned by the taxman
  • Changing the definition of a capital asset to include any securities held by a Foreign Portfolio Investor, thus removing the friction arising from asset classification (a similar provision is sorely needed for domestic hedge funds and Category III AIFs)

Capital without Borders

The Startup India scheme over the past few years has rolled out the red carpet to foreign investors while rolling back the red tape. The success of this is evidenced by the percentage of funding foreign capital represents in the Indian startup ecosystem, which is 9 times higher than domestic capital investment.

Some of the initiatives include:

  • Liberalising Foreign Direct Investment into most sectors including financial services, single brand retail, pharma, media and a host of other sectors up to 100% in most areas
  • Abolishment of the Foreign Investment Promotion Board
  • Relaxation of External Commercial Borrowings (ECBs) for Startups for up to USD 3 million
  • Allowing for issue of shares for non-cash consideration to non-residents under the automatic route
  • Marshalling foreign investment into Indian entities primarily for the purpose of investing in other Indian entities has been brought under the automatic route as opposed to the previous government approval route
  • Dismantling the approval mechanism for the transfer of securities by a Foreign Venture Capital fund to an Indian resident
  • Moving most of the filings (FCGPR, FCTRS, etc) to an online window managed by the RBI (ebiz.gov.in)

Well begun is half done

The government’s efforts to improve life for Startups in investors have begun to bear fruit in tangible ways as evidenced by the reduction in the number of companies seeking to have a Delaware entity with Indian operations. The recent leapfrog in the “Ease of Business” rankings also stands testament to this.

The Government must now seek to consolidate all these gains and clarify its stance and the stance of the tax department on long pending issues which have been a bane to all startups. While we have miles to go before we sleep, we must look back and take note of what we’ve achieved before we seek to scale greater heights.

This post has been authored by Siddarth Pai of 3one4 Capital

Creating a company brand — outside a product brand

One of the top two responsibilities of the CEO is to ensure that there is sufficient cash in the bank at all times. That often requires raising money from investors; an unpleasant task for most people! This article discusses a mindset change that is useful for fund raising.

The company by itself is a product that is best sold gradually and continuously to the investors — both public and private.

When we buy any product — say a mobile phone — we do so either because someone told us to or because our research led us to it. Even when we research a product, our view gets influenced by what we have heard about it. In the world of consumer goods, this is the power of the Brand. Raising money also relies a great deal on how the company is “perceived.” This perception is the company’s brand. The first round of money is largely driven by this brand perception. A lot of other aspects of the company (including fund raising in subsequent rounds) are affected by brand, as we will discuss in this article.

A company has two types of brands that coexist — the brand of the company and the brand of its product(s). Frequently the company’s brand gets forgotten or confused with that of the product. Yet, the company brand is omnipresent; created by the team, vision, past success, market opportunity, etc. For e.g. Nandan Nilekani’s next startup will have an immediate brand because of the team — well before the product has even been identified. As mentioned before, the first round is primarily driven by the company brand because there is nothing else.

The importance of company brand to fund raising often diminishes with time because delivered financial and operating metrics become the criterion for evaluating the company. When customers start using its product, the company’s brand gets pushed even further back because the overwhelming brand is that of its product. However this neglect is a wasted opportunity. In most companies there is no explicit recognition of the company’s brand and it has no identified owner. Given the criticality of the company brand for raising money, it’s imperative for the CEO to build that brand. CEOs who are very skilled at raising funds realize that they need to maintain the company brand in addition to the product brand. Consider for e.g. PayTM where Vijay has successfully navigated in and out of many businesses, while keeping the company brand associated with the promise of the future. Another example of the company brand being a driver is Theranos, the Palo Alto based Health Tech Company; of course the Theranos story did not end well because their brand was not backed by execution. However just that brand alone enabled Theranos to raise a fortune.

The Company Brand is not built in a day

Company brand building happens well in advance of fund raising and ideally never stops; the intensity just varies with time and circumstances. There are many ways to build the company brand in the early years of a company’s life.

  • 1–1 engagement with investors to cultivate familiarity: set up periodic meetings with relevant investors to keep them updated, get their views, and build a relationship. These same people will talk about your company in forums and eventually people buy from people.
  • PR — press appearances are noticed by investors (and by prospective employees, and customers). Its often hard to stay in the press for the right reasons so this has to be dealt with conservatively.
  • Presence in forums — establish the position of a thought leader, be seen by peers in the correct context. These same peers will be used as references by future investors. So speak at events like the NASSCOM product forum or TIE.
  • Key influencers in many areas; they can be cultivated as references or engaged as advisors
  • Customer proxies — for e.g. head of HR of INFY if the product is to be sold to HR
  • Product experts — for e.g. an advisor from Apple for a company that banks on usability
  • Go-to-market experts — for e.g. someone from the sales team at Workday, for a SaaS company

A good company brand offers benefits that go beyond fund raising. It drives recruitment and retention (e.g. “best place to work”). It drives sales because customers often buy the company before they buy the product (e.g. the proverbial purchase from IBM). It drives policy/public acceptability (e.g. Google/Infosys wanting to be seen as doing good.)

Company brand building therefore needs to be owned explicitly — often by the CEO — and catered to as one of the critical outbound agenda items. By investing in the company brand from day one, the company’s odds of successful fund raising go up substantially.

Guest Post by Ashish Gupta, Helion Venture Capital

Inadequate liquidity for Indian Startups

Recently was having a conversation with a Private Equity friend and was trying to explain the challenge that has captured my imagination and full attention, ie exits for software product startups in India. He felt that the data about the exit structural deficit that I was trying to point out felt too bearish to be true. My counter argument was that my intent is not to sound bearish but instead be a realist, after all acknowledgement of a problem is first step to solving one.  Post that conversation I thought should put this data out publicly so that through crowdsourcing can at the very least improve my understanding if it is off by wide margins.

2012-2016 VC vs M&A

India VC vs Exits 

India VC vs M&A


India Software Products VC  (in $m)

2012 2013 2014 2015 2016*
$801.00 $1,021.00 $4,883.00 $6,526.00 $2,419.00 $15,650.00
147 123 173 330 223 996

India Software Product M&A  (in $m)

2012 2013 2014 2015 2016*
$205.00 $308.00 $799.00 $1,350.00 $1,339.00 $4,001.00
43 39 59 137 113 391

Source iSPIRT M&A Report https://www.slideshare.net/ProductNation/india-technology-product-ma-industry-monitor-an-ispirt-signalhill-report?ref=http://startupbridgeindia.com/

Israel VC vs Exits 


Israel Software Product VC  (in $m)

2012 2013 2014 2015 2016*
$1,878.00 $2,404.00 $3,422.00 $4,307.00 $4,775.00 $16,786.00
567 667 684 706 659 3283

Israel Software Product M&A (in $m)

2012 2013 2014 2015 2016*
$8,149.00 $3,704.00 $4,493.00 $6,462.00 $6,782.00 $29,590.00
74 81 109 98 86 448

Source IVC Report, http://www.ivc-online.com/Portals/0/RC/Survey/IVC_Q4-16%20Capital%20Raising_Survey-Final.pdf

Above data indicates that Israel was able to generate 1.8X of the money that went in while in India in the same period it was 0.2X. The right comparison is exits from 2012-2016 with VC investments from 2005-2009, iSPIRT report does that comparison but results are even less encouraging.

Exits follow a power law distribution, however in India it seems like a power law’s power law.

Not only is the volume of exit a challenge but also the structure, any ecosystem exits follow a typical power law. For every $1 bn exit, there are ten $100m deal, for every $100m there are hundred $10m deals.

Top 7 deals in India account for ~$2.5b of the $4b in exit. About 250 of 391 deals total a deal volume of $97m which means the size of an acqui hire i.e in long tail is about 0.5m, which is inadequate even for an angel investor (in other ecosystem long tail is >$10 m, hence being referred to as power’s law power law). Lack of many $10-100m deal means there is a missing middle of the long tail.

Source iSPIRT M&A Report https://www.slideshare.net/ProductNation/india-technology-product-ma-industry-monitor-an-ispirt-signalhill-report?ref=http://startupbridgeindia.com/

Anything in the data above that does not feel kosher  ?

 

iSPIRT M&A Connect program takes a multiyear view to design interventions that can address the middle and long tail of the market coordination challenge.

Volunteer Hero: Vivek Raghavan

 iSPIRT volunteers build public goods inspired by open-source Linux and Wikipedia. Our volunteers are selfless, committed and conflict-free. They are animated by a burning cause.
 
One such cause is about creating technology platforms that will help make India a Product Nation. Building a successful country-scale technology platform is hard. And doing this as an open and public platform is even more challenging. It takes talent, sweat, and toil to do this.
 
Vivek-RaghavanVivek Raghavan for instance. He stepped in as a part-time volunteer to help build Aadhaar back in late-2010. Soon he was working as a full-time volunteer. Had he known that he would be volunteering full-time even after so many years, he might not have taken the plunge! In fact, two years ago, he gave up. After all, it’s not easy to work in a government system to make things happen. But, his sense of mission sprinkled with some emotional appeal from other iSPIRT volunteers had him back in action again.
 
We have many full-time volunteers in iSPIRT who take a year or two to give back to the ecosystem. But few have done it for six years! Here is a successful entrepreneur – with two notable exits in the US – waking up every morning to make the world better for all of us. His example inspires other volunteers. He kindles the fire that keeps iSPIRT running.
 
Vivek’s uncommon ownership and determination make him an iSPIRT volunteer hero.
 
Guest post by Pramod Varma & Sanjay Jain
 
“True heroism is remarkably sober, very undramatic. It is not the urge to surpass all others at whatever cost, but the urge to serve others at whatever cost.”  – Arthur Ashe

 

How we built iSPIRT from scratch, with nothing except a lot of spirit. #iSPIRTturns4

I missed the 4th anniversary celebrations of iSPIRT in Bangalore today as my father has been unwell for the last couple of weeks and I have been avoiding travel. I thought it will be good to refresh my memory by reading up some of the old emails and also share the journey of the 9 months of preparation before we officially launched iSPIRT. In the early months we called ourselves as SPIRT — Software Product Industry Roundtable.

iSPIRT officially got launched on 4th Feb 2013 after missing the launch date on 26th January 2013. You should read up the annual letter issued today which talks about the journey, the good progress made and why India has the potential to innovate for the next six billion.

Why I started?

The idea of setting up a product body came about after I ended my ten-year stint with NASSCOM in February 2012, where I was lucky to have worked closely with a number of inspiring individuals in the software product space. While my next career milestone took me back to the corporate world at One97 and I remember Paytm was in the early day: I never knew VSS would make it so BIG one day.

The desire to contribute to the start-up and software product eco-system in the country never left me. This desire in me forced me to reach out to Vishnu Dusad, MD of Nucleus Software. I met him at his office and he encouraged me to stay focussed and he will put all efforts behind convincing and engaging with people like Bharat Goenka of Tally & Sharad Sharmawho chaired the NASSCOM Product Council.

While I was at One97, I had a candid conversation (of leaving One97. I was just 3 months in the system) with Vijay Shekhar Sharma about my passion as I didn’t want to be unfair to a friend who had offered me a job when I needed. I still remember the brief conversation that I had with Vijay where he said “You go ahead and follow your passion, I will support you in whatever you do, be it on the rolls of One97 or outside”. I think that was a big commitment, I know very few people who can do things like that. He said — don’t worry about sustaining yourself, I will take care of that, you go and follow your dream.

I still thank him as he was the first person who freed me and became the angel for the Product mission.

How the key people came together

Vishnu was able to convince Bharat & Sharad that it was time to focus on creating something unique for the Software Product companies in India. We also engaged with Pari Natarajan of Zinnov as he had a good understanding of the ecosystem and also knew some of the gaps that had to be filled. I remember, we did few calls and everything would stop for few weeks as people got busy. I had to again nudge people so that they start contributing back. Many a times, I thought it was difficult to pull something together, but something inside me didn’t allow me to stop.

We always were trying to identify more people, but early on someone had suggested that it is better to start with a small team and then keep adding more people. I remember in one of the calls, how Bharat had motivated me by giving some valuable advice. I remember I had written it down somewhere, but it was more on the lines of when you have a dream and when you discover your mission, it will fill you with enthusiasm and a burning desire to work on it. It was always good to hear Bharat on how much passionate he was for India and for Software Products from India.

Once everyone was aligned, we virtually laid the foundation for SPIRT on 15th August 2012 where Bharat & Sharad met at the Tally office and Vishnu and I joined on the call from Delhi. I came officially on board after that.

How we ideated on the mission and the core beliefs…

After lot of back and forth and around 8–10 calls, we arrived at the Draft 1 of what SPIRT should be focussing on. Once in a while, we would also get an outsider to share their perspective and we got advice on how to create another trade body on software products. I’m glad we did not go ahead with the trade-body concept and created a think tank thanks to Sharad.

Also, since most of the conversations were done on phone, i don’t have any photographs of the team in the early days. Normally, startups always show their photographs from the garages 🙂

Sharing what Pari of Zinnov had put together on. Since beginning, we had lot of confusion on the name, as you can see, SPIRT became SPIRIT 🙂

In one of the initial meetings, it was decided that we will be taking the 3 pillar approach — Policy, Market Catalyst & Playbooks. This was articulated beautifully by Sharad and what SPIRT would be focussing on..

Over the period of time, Bharat, Sharad and Vishnu crystallized the vision and we put together this document, although I remember lot of efforts went behind this.

Launch of ProductNation — the community for Product Founders

Once the core team had decided launch the mission, I was assigned the task to build the community for software products. I remember i had proposed few names to Sharad out of which ProductNation was picked up. The other two names which were close were ProductoNomy.com & ProductsFrom.In

The other list which got dropped was:

TheIndusValley.com & theindusvalley.in are available (this is inspired from The Silicon Valley).

The ProductNation Blog was launched in the first week of September 2012 and I was fortunate that many product folks came and supported this by writing blogs, doing interviews and few meetups.

One of the early versions of the ProductNation newsletters

This is a writeup that I had done at that time

Productnation aims to be a forum for these individuals to contribute their points of view and opinions and energize the software product industry with their passion for enhancing the product eco-system. The citizens of this great “nation” bring experience, diversity, information, knowledge and cut across caste, creed, race and color! In a nutshell, Productnation.in is by the product guys, for the product guys.

The initial name was SPIRT and why we changed to iSPIRT.

Sharad came up with the name of SPIRT which stands for Software Product Industry Roundtable. I guess after few weeks, Sharad came up with this beautiful analogy of why a think-tank positioning is better than the trade body approach. He had all his facts & data ready with him and others also agreed and we were all set.We tried the following domains early

  • spirt.co.in
  • SPIRuT.in (Software Products Industry RoUndTable )

But when we applied for the name at MCA, it got rejected twice and that’s when we thought about adding i for India. Luckily, the third attempt(i was told it is the last attempt) was successful and we got the name registered as Indian Software Product Industry Roundtable Foundation and called it as iSPIRT Foundation. I added the i in the name 🙂

the first version of the iSPIRT website

We again had a tough challenge in getting the domain as someone had registered ispirt.org and few other domains that we wanted. I also wanted to block ispirit.in as many people continued to call us iSPIRT(with the I) in the end.

Joy from WoodApple, a dear friend helped us with the design of the iSPIRT logo…and you can see the wonderful options that he created and I think we picked up the best.

Joy put his heart in designing the logo which is why it came out so well. We didn’t do any iteration, change of colour, style nothing. We just picked one of them.

How the funding happened…

It was clear that iSPIRT will not be a trade body and will not have members. Instead it will be funded by grants and contributions from products firms and individuals. So, we made a list of 30–35 product founders in the month of December 2013 and started to reach out to them.

  • VAS: One97, OnMobile, NetCore
  • SaaS/PaaS: OrangeScape, Zoho (has announced India launch)
  • ERP/CRM: Tally, Ramco, EmployeeWise, Saigun, Impel,
  • Banking — Nucleus, Infrasoft, iCreate
  • Cloud-SI: ABS, Kuliza
  • Digital platforms: Komli, Inmobi
  • Payment platforms: CCavenue, Billdesk, Paytm
  • TECI: MediManage, RedBus

The second list that we had created

  • BI — Manthan, MAIA Intelligence
  • Security/Anti-virus — iViz, EliteCore, K7 Computing, QuickHeal
  • Power — KLG Systel
  • Mass Visibility — Flipkart, Bookmyshow
  • SMB — Gradatim
  • Micro-Banking — EKO,
  • JustDial, Zomato
  • Income Tax — ClearTax, elagaan
  • Retail — Capillary technologies, GoFrugal
Most of my meetings with Sharad would happen at KGA, that was the place where all discussions would be done on the donor funding.

In the first list, I remember we had not even put Freshdesk and today, you can’t do anything in the product eco-system without the Girish’s touch. So happy to see that Girish has built a powerful brand in the last 4 years.

This would be a 20–30 minute led by Sharad on why we are setting up iSPIRT, how it will be different from a trade body model and how they can be part of this movement and support it. To our surprise, most of the founders believed in the story and came forward and donated money to iSPIRT.

Some of the meetings in Bangalore were face to face whereas the meetings in other cities were on phone. The meeting with Naveen of InMobi was pretty good as he gave us lot of insights on what kind of companies/Founders we should be adding in the first 30. The meeting with Shashank of Practo was also insightful as he shared some pain areas of a growing startup and no help he was getting from the eco-system.

The meeting with Pallav happened at Mainland China and Pallav was on full fire, he asked so many tough questions on why we are starting? 🙂

The conversation with Suresh of Orangescape was the easiest as he was one of the early guys who always believed and supported the work been done by us.

I remember collecting 4 lakhs form companies which were in the early stages, but believed so much in the mission, that they did not even question us on the mission or on where the money would be used.

Before the launch, we had 30 founders who had signed up for the mission and came for the first meeting scheduled at Pramati’s office in Bangalore.

The Launch

We had most of the founders who attended the first meeting on 4th Feb, some of them flew from different places to be part of the meeting. You can see some photographs here. It was good to share the mission, what we had planned to do and also how we were planning to execute it.

The Founder Circle at iSPIRT launch on 4th Feb 2013 at Pramati office

Before the launch, Sujit John & Shlipa Phadnis of TOI did a breaking story of the launch by calling it as 30 software product firms break free from Nasscom. This created lot of issue for me & Sharad as both had played an active role in NPC and the EMERGE forum.

The story that I really liked was by Rohin Dharmakumar of Forbes. He did a very balanced story titled “Is iSpirt an Alternative to Nasscom?

Luckily those days, I think @Sumanthr was not active or he did not notice us and hence we never got some mileage 🙂

When we launched iSPIRT, I remember after few weeks we had Manish Bahl of Forrester questioned that iSPIRT will not be able to make an impact as it is driven by volunteers and doesn’t have a proper secretariat, etc. Based on his blog post, i remember there were couple of stories written about iSPIRT as why we might not be able to do what we have set up as a mission.

Surviving and thriving against all odds!

Initially, some of the leaders also thought that iSPIRT will be an experiment for 1 year, if it worked, we will continue, if it failed, the spirit will just evaporate 🙂 I’m glad that we continued the spirit and good to see the movement has taken off. I can see that now we are a large number of volunteers with many initiatives and happy to be one of the volunteers part of this amazing journey, onwards to many more years of thought leadership as #iSPIRTturns4. It has been an awesome journey!

Special thanks to my friend Sairam who did take a look at the blog inspite of his offsite. 

2017 iSPIRT Annual Letter

4th-bday-logo (1)

Problem solvers, responsible builders of companies, communities and ecosystems are the foundation for progress and growth of any nation. What drives all of them is a sense of challenge, ownership of problems, allegiance to autonomy, demonstration of personal accountability and the thrill of finding a solution. This energy is fueling a growing product movement in India. iSPIRT is proud to be part of this movement.

Every movement sees itself as a moral enterprise. Our moral imperative is to help lift India out of poverty over the next 20 years (see 2016 Annual Letter). Technology platforms are powering this ambition. These technology platforms have a significant role to play in driving innovation everywhere. Where India stands apart is that it has carefully thought about digital colonization and has boldly decided that its core technology platforms will be public goods.

Since our public technology platforms are open-access, we expect both Indian and Silicon Valley entrepreneurs to participate in building solutions for India’s hard problems. Thus, Indian entrepreneurs will compete with Silicon Valley entrepreneurs not just in the US market, but in the Indian market as well. This inevitable competition will play out in the context of the maturity of the two ecosystems. Hence, unless we develop the Indian technology ecosystem rapidly, our Indian entrepreneurs will not succeed. iSPIRT brings an intensity to building our technology ecosystem that an entrepreneur displays for building her startup.

Four years on, there has been good progress but there is much more to do. We believe that Silicon Valley does an admirable job of innovating for the first billion. India has the potential to innovate for the next six billion.

PAY-IT-FORWARD PARADOX… The More You Give, The More You Receive

PAY-IT-FORWARD PARADOX… The More You Give, The More You Receive

Ever noticed how the busiest of people are often the ones that find time more easily than others?

It is about making the time versus having the time!

When you make time despite busy schedules and packed days to share your experience and perspectives it helps so many people, definitely more than you could individually imagine. In the process though, you get so much back, more than you could individually imagine. And, I am not just talking about the ego boost you get from your audience, it is the whole process. Deciding what to share allows you to spend time reflecting, perhaps even researching. You learn and remind yourself of what you knew and could have forgotten. The prep certainly helps you articulate and verbalize your thoughts. When you hear your audiences’ perspectives, another learning opportunity. When you get asked a question you couldn’t answer at first, yeah, another learning opportunity. It is the gift that keeps on giving. You very quickly see that making the time to share your thoughts and experiences is a really good way to learn.

At Pensaar, we are crazy biased towards design thinking as a mind set and a process to innovate.

We are practitioners and have used design thinking in our own jobs to innovate and are able to share war stories, trials and tribulations from our experiences. Being less than 6 months old, this August we took on the arduous task of putting together the Design Thinking Summit. The first draft was a vision more than a plan. Here’s what was serendipitous… as we shared our vision, many good people came to support our vision.

NSRCEL-IIM Bangalore, Intuit, iSPIRT and YourStory gave us their support. Many friends and fellow practitioners gave us their time, ideas and mentorship. What was the result? 70+ people went through a 3-day experience of applying design thinking to a real problem and 250+ people spent 1-day in large discussion formats learning about design thinking from each other.

It was truly inspiring and motivating to see so many people pay it forward, we were blessed to have that kind of support. Gave us more passion and energy to realize our vision to spread the awareness and application of design thinking.

Paying-it-forward is wonderful but then you imagine doing that for a bunch of people you have no vested interest in, it is pure humility.

The magnanimity with which they approach knowledge sharing is humbling. There is recognition of the notion that there are millions out there waiting to interact and hear their encouraging and inspirational stories. We asked a few design do-gooders we have had the honour of working with about why they work pro-bono. Here is what they had to say… we are indeed grateful to all the pay-it-forward individuals, makes us want to do more!

“One of the most wonderful experiences in life is to see an idea evolve into a feature or a product and then into business. There are a great many ideas out there that are ready to take this journey. Helping others navigate and experience this journey is what addressing larger audiences is all about” Tridib Roy Chowdhury, GM | Sr Director Products, Adobe

“I do it to pay it forward to peers, practitioners, designers & society at large for better ways to solve problems by design thinking. It is great to be part of something, where it is not driven by the idea of an individual but as a collaborative effort for change.I also get to be part of a platform where I can exchange idea/thoughts/ methodologies and more importantly learn, since there is no single right/wrong way to do design thinking” Harshit Desai, Design Thinker | Digital Transformation Lead | User Experience Strategist, KPMG India

“I see two extremes in the practice of Design Thinking. One pretty serious and offering the best for innovating for better lives. The other is lighter and sometimes belittling the practice. I am a pure play Design thinking practitioner and like to spread the message that for some DT is life changing and for some it betters lives. I have been part of such experiences. It is inspirational! Whether it is pro-bono or not I have been doing this for some years and will continue to do so, to reduce the negativity about design thinking to my best possible ability” Lakshman P Seshadri | Strategy | Innovation & Design, SAP

“Success for individuals or organizations is about what we can do for others as well. I consider it valuable to make the time to share knowledge. Empowering outfits and individuals is just as important. Pensaar’s mission to evangelise and spread design thinking at a nascent stage ties into my belief of sharing is learning” Venkat Kotamaraju | Growth & Strategy Leader, Pensaar

The joy in knowing that that they are changing lives is what makes evangelizing the methodology so important. Also, it triggers a beautiful snowball effect of only inspiring others to do the same.

Guest Post by Deepa Bachu, Pensaar 

iSPIRT is ending the year on a high note

ispirt-is-ending-the-year-on-a-high-note

At the beginning of the year when we wrote down our thoughts in the 2016 Annual Letter about aspects such as break away from copy paste entrepreneurship, innovation bridge with Silicon Valley, progress on open market policies, etc. we thought we will score a few wins in the year. The pace of progress has surprised us. In many areas we have exceeded our best expectations.  

The last few months have been particularly hectic for iSPIRT. Some of the wonderful work of iSPIRTers is captured in the four events that took place in the last five weeks:

#PNgrowth, Nov 25th – 28th: This intense 3-day bootcamp is grooming the future category leaders of our Software Product Industry. This was our second PNgrowth bootcamp this year. Read about it in Avinash’s evocative blogpost: Behind the scenes of $2 billion Indian startup movie #PNgrowth.

Startup Bridge India, Dec 2nd: This was our first roadshow in Silicon Valley and was done with TiE SV and Stanford University. We sought out strategic partners for 28 startups that traveled from India. This was organized by our M&A Connect Program, which is now led by Rajan. Read about the matchmaking event in a descriptive blogpost by Roxna: Startup Bridge India: Breaking Down Borders, Barriers and BS.

InnoFest #IndiaInnovates, Dec 8th: We are slowly and steadily building a community of hardware product innovators to cater to the needs of 100m families in ‘India 2’ (beyond metro). Financial inclusion will soon allow them to improve their lives using Indian products. Prathibha, the anchor volunteer behind InnoFest, captures the mood in her blogpost: InnoFest 2016 – Innovation celebrated in Bangalore, and how…

FinTech Leapfrog Council, Dec 16th: India is set to leapfrog the rest of the world in financial inclusion driven by India Stack. The FTLC program combines global best practices with a home-grown, world-class architecture for financial inclusion, and helps incumbent Indian banks create a “leapfrog roadmap” for their organizations. Venky, the anchor volunteer driving this initiative, describes the thinking behind FTLC in his blogpost: A Leapfrog moment for Indian Banking.

We are ending the year on a high note!

Next year will be a busy one for us given market inflections and the heightened expectations from us. This presents iSPIRT and each of us with a unique opportunity to contribute and make a difference.

With loads of best wishes for 2017 from all of us volunteers at iSPIRT.

What to expect from National Policy on Software Products [Draft]?

Ministry of electronics and information technology (MeitY) has released the draft of National Policy of Software Product (NPSP) for public consultation.

Click here to see the announcement and how to respond to the consultation process.

Click here to see the draft pdf document.

This blog aims to explain where the draft NPSP policy statement stands at present and what to expect further.. The blog also answers many questions arising out in the minds of stakeholders in Software product industry as well as IT industry in general.

This may help Software product industry stake holders in responding to MeitY on this consultation process, which ends on 9th December 2016.

How does NPSP help India?

The first Software policy came up in 1986. It resulted into Software Technology Park (STP) scheme in 1991. Even after 25 years the old Software policy (1.0) of 1986 still prevails, with focus on IT services.

But, past few years have seen serious decline in growth, owing to rapid transformation in technology and Software industry, globally. India’s IT sector is strong enough to face changing technology challenges. India’s national competitive advantage has taken a shift towards innovative stage and ‘product’. Please see another blog on this subject here.

To address globally relevant strategic paradigm shifts, a Software 2.0 policy is needed with ‘product’ as focal to it.

This consultation process will lead this Software 2.0 policy. It will help in India in capitalizing on the existing matured IT industry and build a phase 2 of Industry in form of product based Industry. There are 3 advantages that NPSP announcement brings us.

Firstly, with NPSP announcement, India will give recognition to Software product industry.

Secondly, schemes and programs emergence from NPSP that will catalyze Software product industry eco-system.

Thirdly, Software product industry will have legitimate governance structure in Government of India that help solve problems and provide level playing field.

The draft policy does not have any actionable but only intent statements?

Yes, presently the draft is only a macro policy statement with a vision, mission to be achieved and ten strategic areas to be addressed. Let us understand different aspects of it.

There were two challenges to framing if this draft policy. One most people in Government system link the Industry policies framing directly to a package of fiscal incentives that help in direct market intervention. On the other hand, IT industry having matured, there is less appetite at ministry of finance to easily carve out a fiscal incentive program.

Two, iSPIRT believed that innovation and product based industry needs multi-layered action plan that can help promote the eco-system central to product industry. Adding any fiscal package right in beginning, to the policy statement would have put the efforts in jeopardy.

Hence, most areas that need to be acted upon are summed up in 10 Strategies in the draft. This macro policy announcement helps in getting policy rolled out in two stages.

First, set strategic intents and recognize a product industry.

Second, Action plans (schemes, programs, incentives and institutional setups) can follow on need basis and in phased manner after the policy is finally launched. Policy can be leveraged through multiple threads focused on defined actionable. It could be a) immediate action item list; b) ecosystem building programs; c) segment specific packages and lastly d) incentive schemes.  For example, SaaS based product segment needs an early support in form of a booster package that solves their multiple problems.

This is a right flexible approach adopted by MeitY. This is how it happened in Software 1.0 policy as well.

Let us achieve stage one and then proceed to stage two.

Are there stages envisaged further to announcement?

At iSPIRT, we believe, after the promulgation of NPSP the very first action that is required to be taken by MeitY is a new institutional setup (instead of relying on old or existing vehicles).

Hence, a ‘National Software Product Mission’ (NSPM) should be setup urgently, as nucleus of activity to cater to emerging Software product industry. NSPM can operate under an inter-ministry board, thus drawing legitimacy to understand and solve problems of this emerging industry, across Government departments, at a single point.

NSPM should become a forum for intellectuals and industry practitioners for issues of technology, boosting R&D, international competitive dynamics, steps and actions needed to handle challenges that industry face in a continually evolving dynamic world etc.

Let us welcome the NPSP with open mind and right expectation

Some point in NPSP may not be rightly synching with every segment of Industry. However, one must also note that, the Government’s stake in an industry policy is also multi fold which also including the generation of employment and income.

In view of above, it is in favour of Software product industry to welcome this step 1 of formulating a viable National Policy on Software products. An early approval of NPSP is in the interest of Software product industry of India as well as country to look at a bright future.

A positive welcoming feedback will help MeitY in early approval.

We sincerely hope NPSP will soon be approved and help in building a “Software product nation”.

If you still have any questions you can write to [email protected] or [email protected]

Behind the scenes of $2 billion Indian startup movie #PNgrowth

Last month, for the first time, I witnessed something really special. Even for someone like me, whose very job and calling is to evangelise this nascent software ecosystem of ours, this was something extraordinary.

I’ve been doing this a while, and what happened last month was one of the best feelings I’ve had in this journey.

This is what happened: Some of the leading B2B enterprise startups in the country, including FreshdeskEka SoftwareCapillaryZenotiFusionChartsKiSSFlow, etc all got together under a single roof.

This is what they got together for: To help 52 other, smaller B2B startups in achieving scale, like they have.

It’s no exaggeration to say that the founders of these companies are some of the most important product leaders we have.

In the first session itself, Shekar Kirani pointed out that a platform like this will not be easily available, and the assembled startups needed to leverage the best from the network and from the folks who had arrived with the the express intention of helping them. And the product leaders who also made an important point – that they did not want the new age startups to go through the same grind, or make the same mistakes they had made in their years of scaling.

I was amazed. It is almost never that you see such accomplished professionals come together towards helping and nurturing young startups from their own learnings.

And what was this? What was happening?

This was the 2nd edition of #PNgrowth.

The first one had been in Jan 2016 at the Infosys Campus in Mysore where we had assembled around 186 founders to help companies think about Category Leadership. It went really, really well, but the feedback was that that perhaps keeping it focussed for fewer founders would help the cause better.

Many heated discussions were conducted over breakfast, lunch, dinner, and beer (especially beer) on the program for the 2nd edition and on how we can add value to the content.

These conversations were typically 4-6 hours long, which meant that the entire program/content took us over 200 hours with 12 founders brainstorming for the past 3-4 months.

It really did take us that long.

And those deep discussions based on the 1st edition’s feedback was what the program for November was based on.

And now that #PNgrowth 2016 is over, I decided to take a look back and share some of the learnings in organising this, and on how we pulled this together. 

This year, the program was designed to help companies chase ‘Good Scale’, that is, to achieve high growth without compromising on quality. There were 52 founders with us, from all over India, and a few from outside as well.

Before we get into the details, a larger question must be addressed again, largely because it keeps getting brought up. This time, I’m trying to use a different approach to explain this. Bear with me.

WHY IS iSPIRT DOING THIS ‘MOVIE’ CALLED PNGROWTH?

iSPIRT’s mission is to make India a ProductNation. We have many initiatives like Playbook RoundtablesPNcamp, etc which are focussed around building products and helping companies achieve good scale. Although there are many accelerators in our country, very few offer value to the founders/companies. Keeping this in mind, iSPIRT wanted to do something unique and create a platform which would help companies think about growth in an effective manner. More importantly, we want to make ongoing mentorship accessible to the founders.

_mg_0662The goal was to create 8-10 companies every year which would eventually go on to become $10mn revenue companies in the next 3 years.

WHO ARE THE DIRECTORS OF THE MOVIE? 

These are the co-chairs.

The first edition of PNgrowth had just finished and I was looking for someone to be the architect for the second edition. I met Shankar Maruwada for lunch at Muffets & Tuffets and was having a completely different  conversation. But, as we touched upon the PNgrowth topic, Shankar had lots of suggestions on how we could do this better. I immediately requested him to help in designing the program and helping me organise it better.. He accepted graciously, and was keen to help.

_a5a7389My next request was to get Pallav Nadhani involved again. There is a reason for this. Pallav, in many ways, was the person who forced us to think around Category Leadership. The first meeting took place at Pallav’s place which went on till 2:30 am.

By then, I had had several interactions with Aneesh Reddy, and the early playbook roundtables on Product Management had been done by him. I reached out to him and he was very keen to be part of the program and help us.

With Shankar, Pallav and Aneesh on-board, the pillars of the event were erected.

WHERE DID I FIND THE STAR CAST FOR THE MOVIE?

These, of course, were the facilitators.

Around 4-6 months in advance, we started working on the content for the event. Various topics were discussed. One thing was clear to me: Every founder had immense passion and commitment to add value to a certain topic. The format we had in mind was to make very interactive session. All of us had had enough of the ‘sage on stage’ approach. The founders were to lead sessions and work along with the participating entrepreneurs to help them extract maximum benefit.

Many discussions later, Pallav & Shankar actually started with using the frameworks & mindflips and were later joined by Girish & AneeshManav & Shekhar also used the same in their session. 

_mg_7722It was great to see that all the facilitators did an outstanding job of delivery of the frameworks and ensured that they shared real life stories and lots of data and numbers from their companies. What was more important was that they made sure they spent time with all the attendees and ensured they received personalised attention. They were able to build a personal connect and trust within the startup community by sharing internal information even though they didn’t have to, thereby making the discussion even more credible.

WHO CAME TO WATCH THE MOVIE?

Oh, that. We had huge demand for tickets from the audience, the founders of India’s growing startup community.

_mg_9870HOW DID WE THEN SELECT WHO ACTUALLY GOT TO SEE THE MOVIE?

This time, right from Day 1, we only wanted to get select founders to be part of PNgrowth.

To begin this selection process, we laid out which stage of startups would benefit from PNgrowth. We then went on and created a list of founders and reached out to them. Apart from this, we reached out to folks from within the eco-system and got them to recommend companies to us.

Each company was recommended by atleast 2-3 founders from the PNgrowth curation team. We did zero marketing for PNgrowth except for a video, which we used to communicate to potential participants. We received overwhelming response for the event thus putting me in a fix at several situations where I had to inform founders that they have been rejected for a program/event. It was difficult, but in the interest of the event, it had to be done.

_mg_8362
We finally had 54 founders who confirmed their participation, out of which 52 showed up for the bootcamp. These companies were divided into groups of 6 based on the type of customer/geography they were catering to.

WHERE DID WE HIRE THE SUPPORTING ACTORS?

These were the mentors, and we were able to get around 14 founders as mentors and were simply amazed by their commitment for the two and a half days of the event. Mentors were involved in all facets of the event – from intense board room discussions to the dance floor. Let me go little more deeper on the role that they played. In every session, the founders got access to few frameworks, mindflips which they had to fill and discuss with their peers + mentors. Lot of learnings were shared by mentors and it became very valuable to the founders. Very few of them tweeted from the program as everyone was busy interacting, engaging, absorbing content, but here is one of the tweets which acknowledges the mentors.

_mg_9832WHAT ABOUT THE CREW?

Getting to them, the volunteers.

In my work, I get to interact with many volunteers in many initiatives, but this time the commitment and the passion with which the volunteers worked was unimaginable. Folks would go to sleep at 5am and be ready next day at 8am. They would ensure that mentors/founders have had breakfast, etc and would go an extra mile to take care that founders are focussed on their work and don’t get distracted.

Volunteers also interacted with the founders to understand if the pace/level of the sessions suited them. Lot of planning was done in advance that each and every person who is part of PNgrowth goes back with a WOW experience. I still wonder where they get so much of inspiration from.

_mg_8120I don’t know if i would ever be able to do something like that. Hats off to all the volunteers who put together an awesome experience for the PNgrowth family.

SO, WHAT WAS THE MOVIE ALL ABOUT, THEN?

Day 1

The Founders started with a cricket match between the cohorts itself. 

Sharad Sharma, our guiding light, kick started the event with his words of wisdom for all the founders.

And then it began with Pallav’s session on Who are you? As founders, entrepreneurs have to pitch or sell their ideas constantly, so as to inspire the listener to believe in their dream to either fund the idea, join the team, tie up with the startup, or write about the startup. Is there a method to this? Can this be an acquired skill? 

In this session, founders learnt and practiced a simple framework that enables them to improve their ability to pitch their ideas in the shortest time, to the desired target audience – VCs, journalists, co-founders, customers, business partners, and employees.

The next session was focussed on how to maximise the value of your product. If you as a founder were to increase the perceived value of your offering (Increase average MRR by 1.5X and/or reduce churn to 0.5X),how would your economics change? How would it change your CAC, margins? What would you as a founder then do differently with your product strategy, go to market strategy (positioning, marketing, channel, pricing), team/organization structure, to increase pricing by 1.5X, in the scenarios below as relevant to you. This was followed by an interactive session with the mentors. 

This was end of Day 1 and then we had networking dinner, drinks, some dance and lots of conversations led by Vinod & Ashish.

Day 2

The second day was a more power packed with two sessions. To their credit, the founders were highly engrossed in their sessions, sans their mobile phones and laptops which helped in making these sessions successful.

During the first half, Girish and Aneesh engaged in an extremely fruitful session on product-market how to scale 10X with emphasis on how to establish your sales funnel and building a repeatable sales cycle. This session covered on selling processes from SMBs (by Girish) and enterprises (by Aneesh). They also shed some light on how pricing, positioning and selling varies from one geography to another.

Apart from this, Suresh also gave his insights on selling global products out of India.

_mg_7993The complete session went on till almost tea break after which the candidates came back in for the third and final session by Shekhar and Manav.

This session was meant to give a befitting end to the two rigorous days of activity.

While Manav spoke about how to choose your niche category and expand to other similar industries and geographies, Shekhar’s session was centred around what a VC looks for a in a startup. In the session,

Shekhar did a Q&A round with Nags and Girish on what it takes to build a successful organisation.

He also delved a bit deeper on aspects like how to choose the right market and how to intelligently figure a way out of a market and move into one that is expanding by extracting maximum business value.

Here Raghu also added his thoughts on what it takes to raise venture capital and how one should structure an organisation for a CEO to utilise his time in the most efficient manner.

Though the mentors tried to cover as much ground as possible over the two days, they took questions from audiences on anything they still might have a doubt about.

After this was a complete group photograph since some of the mentors had to leave that night. The energy of the picture speaks for itself. Before calling it a day, the founders were given tasks/homework for them to present on the final day.

Day 3

The third day, we had some inspirational stories from Sanjay Anandaram(Seedfund), Mohit Dubey (CarWale),  Phanindra Sama(RedBus), Raghunandan G(TaxiForSure), Sanjay Deshpande(FortyTwo Labs). We had actually planned for only Sanjay to talk about “entrepreneurial mindset” and then we thought about inviting all of the above folks to share their energy.

Something which we had planned for 20-30 minutes went on for around 90 mins and it was an absolute pleasure to hear some of the learnings/failures from all these founders. Below is the NPS score of 89 for PNgrowth 🙂 

nps-score-pngrowthAfter this, all founders were made to do this exercise on “Getting to 3X Growth in 12 Months”. All mentors with their cohorts spent time with the founders and helped them on what they should be thinking about this. Six Founders got an opportunity to share with the whole group.

Finally Shankar invited all volunteers to share few words on why they volunteered for PNgrowth. With it, a spectacular three days came to end, with some photographs and a lot of hugs, cheers, and greetings.

For me, it was a great feeling to see all of this happen, and at this scale. This probably capped off the year of 2016 for me and iSPIRT as a year in which we were actually able to make the ecosystem function as a cohesive, united entity. Lots of work is ahead of us, but as I write this, I acknowledge a task well begun.

_a5a7717

Many thanks to Sairam for editing & Shruti for filling the blanks.

Innovation Diplomacy & Software as India’s Soft Power

Mr. MJ Akbar, MoS, Ministry of External Affairs, brainstorms with iSPIRT.

Mr. MJ Akbar is the Minister of State (MoS) for External Affairs and a Member of Parliament in the Rajya Sabha. An author of several best-selling books, and a veteran Indian journalist who launched newspapers like The Telegraph, The Asian Age and magazines like The Sunday. Mr. MJ Akbar, met up with iSPIRT, in Bangalore to understand the plethora of Technological Breakthroughs that iSPIRT is facilitating to empower more than a billion Indian citizens, by deploying technology in the service of humanity. Mr. MJ Akbar has also agreed to co-create an era of Innovation Diplomacy, by using Software as India’s Soft Power. He provided some very useful advice by participating in interactive sessions for close to 2.5 hours.

On Saturday, at ITC Gardenia, in Bangalore, Mr. MJ Akbar, along with Mr. Bala, Jt Secy, and his team, consulted and deliberated extensively, on opportunities that can be Game Changers for Innovation Diplomacy. iSPIRT with its team of Volunteers which included Sharad Sharma, Sanjay Anandaram, Sanjay Jain etc, along with several innovative startups, presented various breakthrough solutions that are helping India leapfrog the West.

Below are some of the key highlights of the Learning Session.

mj-akbar

iSPIRT Show-case – INDIA Going from Software Services To Software Products & Platforms.

The session started with a presentation by Sharad Sharma on how India is transforming itself to Software Products and Platforms. He explained how iSPIRT with IndiaStack is helping new-age startups to build platforms which will drive formalization of the Indian economy. This will materially enable Financial Inclusion, Health Inclusion and provide access to more than 200 million households, by digitization and democratization of essential services, and in-turn will create millions of jobs.

Mr. Akbar’s feedback on this session was that we should highlight stories and narratives which resonate with the aspirational identities of people. Like how did India manage to reach MARS? This was an interesting segway, to then have about 8 startups including Team Indus present their stories. Team Indus, is planning to be the 1st private organization in the World, to land a rover on the moon in Dec 2017.

The remaining 7 teams which presented their stories included companies like Pratco, Foradian, Forus, Indian Money, Knolskape, Hashnode, Niramai. Covering Healthcare, Education, Finance, Technology and Medical Devices, these Startups showed how they are helping millions of Indians not only in Tier 1, but in Tier 2 and Tier 3 India, leverage technology, and avail critical services at a fraction of the Global Cost. It affirmed that yes, while America innovated for the 1st One Billion, India can innovate for the next 5 Billion.

The last session, was by Sanjay Anandaram, who made an intense pitch, for using Software as an Instrument of India’s Soft-Power. India needed to leverage its highly credible and respected brand in global IT to use effectively for political-economic leverage. The 3 pillars for this could be (a) “Digital Non-Alignment” ie advocating Net-Neutrality, (b) “Governance for Hire” ie offering the India Stack to countries in Asia and Africa for running of their programmes and (c) Software as an integral part of bilateral and regional trade deals. Software was an area where India can outmaneuver China in Innovation Diplomacy. India has the requisite legitimate & moral authority to make software a key instrument of its foreign policy to achieve its political-economic goals compared to any other nation.

mjakbar-2

Insights and Advice from Mr. MJ Akbar

Mr. Akbar was impressed by the Innovation Diplomacy agenda and commented that India would make an orbital shift in the Arab, West Asian and African region with its Knowledge Capital and Strategic Advocacy of Shared Prosperity. He advised that some of the Startup stories of India should be used to co-create external affairs initiatives of the Govt. of INDIA. He gave several golden nuggets of advice, like Value of Knowledge increases only when it is given away for free. Hence a partnership towards Shared Prosperity in the Knowledge economy is vital. Listed below are 5 important pieces of advice given by Mr. MJ Akbar

  • Empires are not built by Armies, (giving the Genghis khan example), they are built by Technology, Skills and Communication.
  • Why does a country like India, which had such sophisticated science & architecture like Step Wells (Bawadi) even in the 10th century, keep getting defeated?
  • We need to showcase to the World, with good statistics, what we represent in terms of Technology and Communication.
  • We need to highlight to the World that the Frontiers for the Future Lies with INDIA.
    Knowledge Economy should connect emotionally with the Global audience to realize Shared Prosperity.

mj-akbar-3

Conclusion

Mr. MJ Akbar set in motion a few immediate co-creation steps to learn how Innovation Diplomacy can become the bedrock of India’s External Affairs. Being a veteran journalist, he definitely had more powerful narratives to showcase Software as India’s Soft Power. As usual, iSPIRT on its part is fostering and facilitating many such learning sessions to co-create with our Law Makers, and nudge our Policy Makers to help the Software ecosystem. Let us all align our collective vigor to catalyze the effort of building India’s Software Strength to be its Global Soft-Power.

mj-akbar4