Startup Bridge India: Breaking Down Borders, Barriers and BS

India has fast emerged as the world’s second largest Internet market. Since 2012, nearly $15 billion has been invested in tech startups with over 300 M&A deals. However, a large percentage of deals (80%, 2014-Q3’16) were sub-$5M deals driven by acquihires and restructuring. Looking west to Israel and the US, it is clear that for a healthy technology product ecosystem, further acceleration in later stage M&A and buyouts is undeniably required. And with this very thesis in mind, iSPIRT, along with TiE Silicon Valley and Stanford University, organized the inaugural Startup Bridge India event on Dec 2, 2016, with the goal of fostering cross-border partnerships with Silicon Valley corporates to drive investments and/or acquisitions of domestic startups.

We are building auto-pilot software for managing cloud operations. The rocket ship is Silicon Valley and Startup Bridge was our gateway to it. Vijay Rayapati, CEO, Minjar

The event was an important chapter in the history of India’s tech landscape for multiple reasons.

slack-for-ios-upload-1-null For one, it was the first step in breaking down borders between Silicon Valley and India. It is no easy feat to gather the top BD and Corp Dev executives from the largest tech Silicon Valley giants all together under a single roof. But with representatives from 65 corporates meeting 28 startups driving 120 connections for partnerships and investment/acquisition discussions, the very fact that the doors were opened, some even knocked down, was a giant leap for the ecosystem.

We were able to have of bunch of meaningful 1-1 conversation with potential strategic partners. Sunil Patro, CEO SignEasy

The second win – a powerful collaborative relationship between TiE Silicon Valley and iSPIRT – was one of breaking down barriers. The coming together of two impactful organizations driven by a similar vision so seamlessly to build a momentous event in ~10 weeks of planning was nothing short of inspirational, an affirmation of the power of the volunteer-driven model that iSPIRT has established itself upon.

The third win, however, was arguably the most powerful – that of breaking down the BS among even the most experienced entrepreneurs in India. iSPIRT has long held a position of being an unbiased stakeholder, with the primary goal of driving positive change in the tech startup ecosystem. Mature entrepreneurs in India, historically big fish in a small pond, have long believed their systems, their pitches, their stories, had been tried, tested and proven. However, playing on the global stage is a whole new ball game and iSPIRT stepped in to break down the BS for entrepreneurs.

I thought I had my deck all figured out. I thought I knew my pitch and had the details at my fingertips. But then I started getting really valuable, thought-out feedback from iSPIRT and I realized I had so much to improve on. I had to focus on pitching to partners, not customers. My narrative was made crisper and my focus was changed from ‘what we’ve done in the past’ to what is coming up next. All of that feedback resulted in a much stronger pitch and more engaged conversations with partners after. Pallav Nadhani, CEO FusionCharts

slack-for-ios-upload-null StartUp Bridge India, with an NPS of 68%, was another valiant step towards putting the Indian startup ecosystem on the global map alongside mammoths like the US and Israel. Team Indus, an Indian startup working to land a rover on Mars, is India’s literal moonshot. Startup India, working to increase cross-border investments and M&A, was India’s figurative moonshot. And after Startup Bridge, it was clear, that this moonshop has a robust arm and is gaining an increasingly powerful momentum.

The story of India’s tech landscape is being written as we speak, and the future is nothing short of exciting…

StarupBridge India is an important step forward for India’s journey as a Product Nation. For the first time, it brought together India’s top global startups at this scale to meet and connect with Silicon Valley’s company to explore potential strategic partnership. This conference will be referred as seminal for years to come as it created a key turning point of software products cross border partnerships. M Thiyagarajan (Rajan), CoFounder & Fellow iSPIRT

25/09/201514/01/2016

India Innovation Session with Jeff Immelt, CEO, GE

Every sector has a long period of evolutionary change that is only occasionally interrupted by a short (5-10 year) period of intense non-linear change. Global corporates like GE are able to position themselves to successfully embrace the evolutionary change. However, to leverage the period of non-linear change, a new kind of partnering model is needed.

Keeping in mind this theme, iSPIRT, India’s software product think tank, spent an hour with Jeff Immelt, CEO of General Electric, and his team, to discuss the implications of such non-linear change to GE and the larger global ecosystem. To drive home the point, six inspiring startups showcased their respective cutting-edge innovations that are helping drive change in their individual sectors. Their stories are captured, in brief, below.

Team Indus

Infrastructure for NextGen Apps

Team Indus, a highly qualified group of ex-ISRO scientists and systems engineers, spoke to GE of two moonshots they are attempting. Literally. The first is landing a privately funded spacecraft on the moon by 2017. As part of this mission, they India’s only entry, and top 3 of 16 global teams, in the Google Lunar XPrize Competition.

The second is a derivative of the first, where they aim to put up a high-altitude long-endurance platform to deliver payload to stratospheric orbits. In laymen’s terms, they are enabling wide-area connectivity for terrestrial applications, essentially disrupting satellites as they’ve been known and used. And at the current pace of progress, they are on track to be the leader in Asia by 2021.

Nimble Wireless

Cold Chain Monitoring

Nimble Wireless’ pioneering IoT solution is built on top of the future of pervasive connectivity that TeamIndus is working towards. Their platform helps enterprises connect, control and manage their business critical assets to enable greater efficiencies and savings. A great use case is in helping leading food/cold chain companies ensure food safety and reduce wastage, especially important in a country that has 33% malnourished children but wastes nearly a third of its dairy products. Here, Nimble deploys real time temperature monitoring and alert management systems to help ensure food safety, eliminate wastages and attain visible RoI for food and logistics companies.

Savari

V2X: Connecting Vehicles to Everything

Moving beyond the world of cold chain to the world of automobiles is Savari’s technology that connects vehicles to everything – each other, smartphones and road infrastructure. There is a battle ensuing between Silicon Valley’s revolutionary approach in favor of self-driving cars and the auto industry’s evolutionary approach in favor of connected cars. Savari’s patented middleware software is enabling the auto industry to realize the gradual, incremental change they believe is the way forward in connecting vehicles. Their technology is pushing forward safety, fuel savings and automation and ensuring auto companies don’t become ‘the Foxconn of Apple’.

Julia Computing

An Open Platform for Brilliant Machines

The consistent theme emerging is that machines are all going to be connected in not too distant a future. All well and good, but there’s a small problem. Today the programming language for machines (iron) is different from that of the cloud (silicon), where software and analytics reside. That means large time and cost investments are needed in translating algorithms between the languages to connect the machines.

Which is where Julia, an open-source language being built out of MIT, fits in. Their solution, a language with a strong mathematical foundation, serves as a common language for machines and the cloud, so the same engineers can write analytics that run on sensors and scale to the cloud. The language has visible use cases across machines (air collision avoidance algorithms, 3D printing) and cloud applications (predictive analytics, pricing algorithms), enabling immense savings in time and complexity. The industrial world until now only had proprietary platforms to choose from but now Julia provides an alternative that is open and neutral, where firms can retain strategic control of their products.

Logistimo

Open-source supply chain

Continuing with the theme of improved efficiency is Logistimo, an open-source supply chain software enabling manufacturers, distributors and after-sales partners to better reach and serve frontier markets. There are unique challenges of implementing such systems in low-resource settings of rural India, where nearly 70% of Indians live. But Logistimo’s nuanced methodologies to manage this low-resource context is what has helped reduce infant mortality, electrify villages, and improve the overall quality of life for citizens of the hinterland.

India Stack

Impact on Service Delivery

Tying this all together was the final session about a pioneering initiative, the first of its kind globally, being spearheaded in India towards a cashless, paperless and presence-less service delivery. The India Stack ties together the Identity Layer (Adhaar), a Paperless Layer (eSign, eKYC), a frictionless Payments Layer, a Transaction Layer (GSTn) and finally a privacy/data-sharing Consent Layer to revolutionize the Indian landscape in not too distant a future.

Lots going on, lots more to come. And this is just the beginning of the excitement for India and the non-linear change that the startup ecosystem is enabling.

05/06/201504/06/2015

2015 India Technology Product M&A Industry Report: M&A and Investment landscape in India

iSPIRT, India’s software products think tank, SignalHill, technology focused M&A advisory boutique firm and Microsoft Ventures, accelerator program for high potential technology startups released the much-awaited 2015 India Technology Product M&A Industry Report. The report highlights key trends in the Indian technology M&A and funding landscape so far as well as predictions for M&A activity in the following year.

To access the report, visit: PMI Report

To watch the Think Next Roundtable: ThinkNext Video

iSPIRT PMI Report

(L-R): Sanat Rao, Partner, iSPiRT M&A Connect; Ravi Narayan, Director of Microsoft Ventures, India; Klaas Oskam, Managing Director, Signal Hill

M&A

According to the report, technology majors as well as large Indian ‘Unicorns’ are predicted to continue acquiring Indian technology product startups to fill technology gaps as well as talent requirements. Since 2011, there have been 190 M&A transactions involving Indian technology product companies, with a total estimated transaction value of $2.27B. That makes the average deal size in India stand at $11.3mn, far lower than that of mature startup ecosystems such as Israel ($113mn) and the US ($57mn). Furthermore, there’s a substantial difference in value between inbound and domestic transactions. Inbound M&A transactions (M&A by global acquirers) average $21.1M versus domestic deals that average $8.4M. Therefore domestic transactions may account for the lion share (72%) of M&A activity by volume (largely driven by the Indian ‘Unicorns’ including Flipkart, Snapdeal, OlaCabs) but a much smaller share (51%) by value.

From a sector perspective, there seems to be a clear trend emerging where the majority of M&A transactions and transaction values of B2B software companies is cross-border in nature, while domestic transactions account for the bulk of transaction value and volume for Internet & Consumer and E-Commerce deals.

INVESTMENTS:

From a funding perspective, VC/PE investments in India have hit an all-time high in 2014. Funding in the E-commerce and Consumer Internet markets have grown 38x from 2010-2014. $4.2B was invested in this space 2014 alone, with the two main companies (Flipkart & Snapdeal) accounting for > 50% of the Indian internet investment dollars. Investments in B2B software are also showing an upward trend.

With a fear of missing out, hedge funds & private equity funds are investing in ‘new’ Series B ($10-25mn) and Series C & D ($20-250m) onwards, fueling a frenzy in valuations. Prior to 2014, it would take startups at least 1-2 years to raise series B and C funds. In the last 12 months, this has dropped by half with companies reaching this mark in less than a year.

OTHER HIGHLIGHTS

The report indicates that a generation of entrepreneurs is coming up in India, looking to build deep-tech companies in the country. Where B2B software companies are aiming at serving the global market, the Internet & E-commerce businesses are focusing on India. These are vision-driven and are focused on creating a market differentiator rather than “selling-out” early. These entrepreneurs are also likely to be angel investors and help other startups succeed, in parallel to running their own firms.

The report also highlights two key challenges that Indian entrepreneurs and startups face: Discovery & Readiness. Most startups are not on the radar of the large global tech companies either for business engagements or investment, which in turn reduces their chances of going through an acquisition. iSPIRT’s M&A Connect Program is solving this problem via targeted connects between US and Indian tech companies with specific technology gaps, and exciting India startups who can fill these gaps.

[Any startups with ongoing M&A discussions, please reach out to [email protected] for advisory support.]

PREDICTIONS

Finally, the report makes some interesting predictions for M&A and investments in India in 2015.

M&A activity will continue to accelerate. Domestic transactions will dominate E-Commerce and Consumer Internet, with large Indian “Unicorns” will aggressively make strategic acquisitions to enhance market dominance and strengthen strategic growth areas such as: mobile, data & analytics and payments etc. Cross-border M&A will dominate B2B / Enterprise Software transactions.

Acqui-Hires will continue to be a critical focus for US and India acquirers. Areas of interest include iOS &Android engineers and Machine Learning/Data Science experts, whose demand is rapidly growing.

Finally, from an investment perspective, E-Commerce and Consumer Internet sectors will continue to be hot into 2015. Internet of Things [IOT] will also receive significant interest from VCs.

Seems like the market is hot and there’s a lot of activity predicted for 2015. Exciting times ahead… Stay tuned!

26/01/201526/01/2015

M&A Roundtable: Indian startups are breaking through

M&A activity in the Indian startup ecosystem has, for a long time, remained fairly nascent. Relatively small exits, averaging $10-15M, are commonplace in India. But things are changing, and with India being the third largest startup ecosystem in the world, Silicon Valley giants are beginning to pay more heed to the entrepreneurs and IP emerging from India.

On January 23, 2015, the iSPIRT M&A Connect Program hosted a Corp. Dev. and M&A Roundtable in Palo Alto. Attendees included corporate development, M&A and senior business unit folks from several key companies including Google, Yahoo, Twitter, Cisco, Intel, Box, LinkedIn, Intuit, etc. the event was coordinated by Sanat Rao (Partner, iSPIRT) and Roxna Irani (Associate, iSPIRT).

Neeraj Arora (VP, Corporate Development – Whatsapp) was the keynote speaker, talking about his experience with the Facebook acquisition, key learnings and challenges he faced while closing the $22B deal with the tech giant. He repeatedly highlighted the importance of trust that the Facebook team built out with the Whatsapp team over the course of multiple years before the acquisition that eventually led to an extremely seamless process. He also emphasized the element of trust that a startup must establish with a potential acquirer, because nothing is more appealing to an acquirer than a startup’s commitment to their specific relationship. (So there’s monogamy in M&A too!)

After an interactive session with Neeraj, we had a candid discussion with the Corporate Development attendees about their experiences acquiring Indian startups. The Yahoo and Twitter corp dev folks shared the key learnings from their recent M&As in India. Here are some takeaways for us in the Indian software product industry and for the next acquirers of Indian startups:

Visible benefits when the target is a US entity. Given legal complexities, the difference in time and effort to close a deal with a US acquirer can vary substantially based on the legal domicile of the company. Recurring piece of advice of new startups is to register as a Delaware C-Corp.
Acquisitions in India take time. Beyond geographic complexities, there are a couple of other reasons responsible. For one, communication can sometimes be ‘lost-in-translation’, so legal agreements with an Indian and a US counsel, with different laws and legal terminology, can often demand more fine-tuning than normal. Other times, key stakeholders may require more engagement and disclosure that demands resources. Whatever the reason, the general idea is to expect, and actively manage, longer cycles.
Acquirer confidence in the core leadership of a startup is crucial. Acquirers often expect a strong management team to hire equally strong employees, so they see high quality leadership as a validation of high quality team and product. This is especially true in the case of Indian startups.
Acquirers are looking for guidance on how to traverse the Indian ecosystem. India is a new market for a lot of overseas acquirers. A recurring request was for a “playbook” that would highlight the process and differences of doing an acquisition in India. This would include items as simple as list of top colleges in India to give acquirers context of pedigree, to employee attitude towards compensation (cash vs. equity breakdown), to examples of standardized termsheet terms and details.

The iSPIRT M&A RoundTable started 2015 with a bang. The year will be a pivotal one for tech startups in India and the iSPIRT M&A Connect Program is excited to accelerate the pace of change. With all the “Virtual Mandates” received from the Silicon Valley companies, we will make carefully targeted introductions to the Business Exchange Associates. And with a higher quality of interactions, we hope to make much a larger impact to corporates and startups alike..

Exciting times ahead… stay tuned!