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GSP at GSTN what we know till now

Recently GSTN invited application for becoming GSTN Suvidha Provider (GSP) under GSTN for enabling much awaited Goods and Service Tax. GSTN received total 344 applications. CEO GSTN reported in GSP workshop on 25th October that about 98 of these applicants are qualified for further evaluations according to them.

gsp-at-gstn-what-we-know-till-now

The GSP application process, when started created lot of confusion and concern on the eligibility criteria. The eligibility criteria are given here. One common concern was the financial capability criteria’s set by GSTN of:

  1. Paid up / Raised capital of at least Rs. 5 crores and
  2. Average turnover of at least 10 Crores during last 3 financial years.

iSPIRT had proposed that instead of a heavy turnover criterion the GSTN could have used a performance guarantee or a surety bond, both to ascertain the serious players and cover the risk of fly by night operators. This would allow some startups to take the risk and succeed to become GSPs.

The announcement did not clarify what is a GSP or what role will it have in the system.

A large number of interested startups through the GSP was about an application provider of product to file and comply with GST. Hence, the above criteria were considered as a barrier to startups. GSTN although off the record said they will accept application from all and will then evaluate who will be fit to become a GSP. This was however a very subjective approach, where GSTN will use their discretion to allow an enterprise to setup a GSP or not.

These concerns and doubts created confusion in minds of many startups, who have been looking towards the GST as an opportunity to innovate and implement in the space of tax compliance with added value with analytics and business intelligence.

It is subsequent to the workshop that many of these doubts have been cleared.

What finally turns out to be is that the GSPs are the middle layer infrastructure or utility provider or a API gateway to large number of GST filing apps. There may be a mix of GSP/ASP model where an ASP sets up a captive GSP. Even in that case GSP is merely a Gateway.

This blog is to answer some of the questions raised by participants in a Google Hangout conducted by Nikhil Kumar an iSPIRT volunteer. Additionally, it also answers other basic question with the related topic of GSP.

What is GSTN?

GSTN stands for Goods and Service Tax Network. It is a section 8, not for profit private company, with shareholding of Government of India, Government of States and UTs and financial institutions.

As a Special purpose vehicle(SPV), GSTN’s mandate is to establish, develop and manage the required infrastructure, systems, technology, partnerships and eco-system for implementation of GST.

What is a GSP?

GSP stands for GSTN Suvidha Provider. GSTN does not want to facilitate or connect to Goods and Service Tax filing application (called ASPs by GSTN and in this document) directly. This is for reasons of security and scale. Therefore, GSTN has planned a number of GSPs who will act as a middle layer between the ASPs or business and GSTN.

GSPs will facilitate the use of GSTN system to the businesses as well as products and application (developed by ASPs) to file the GST returns, match sales and purchase invoices to settle tax credits. The GSPs will hence help secure GSTN from direct exposure to users on internet as well as distribute the load in a large economy like India.

A GSP will hence act as a gateway that will pass enable the pass through of GSTN APIs (application programming interface) to and from users. There are three types of GSPs envisaged:

  • Plain GSP (Independent GSPs) who will just facilitate the ASPs to use them as Gateways
  • Captive GSPs – (GSP/ASP) used by large businesses for their API consumption/pass through. These may include ASPs wanting to become GSP and use the GSP for their APS having heavy load
  • Open GSPs (GSP/ASP + ASPn) who may use for their ASP and also allow independent ASPs

gsps

Source: GSTN website click here

This is how it is depicted in the above slide shown in GSP workshop. However, during the talk on GSP workshop it was mentioned that it will be mandatory for all GSPs to allow any ASP to use the GSTN APIs. Hence, it remains to be clarified by GSTN, weather the model 2 shown in above diagram means a Captive GSP and weather a captive GSP can deny access to third party ASPs to it’s GSP.

GSTN will sign an agreement with the selected GSPs which will govern the contractual relationship between GSTN and GSPs.

How many GSPs would be allowed?

There is no final decision on how many GSPs will finally exist or be allowed. However, in the first phase, 98 GSP applicants would be allowed to participate in the technical evaluation. How many will pass or how many more will be evaluated has not been declared yet.

Who is an ASP? What is relationship between an ASP and a GSP?

Application Service Providers are – Accounting Software, Invoicing Software, Point of Sale (POS) systems and other innovative applications that can enable businesses comply with GST. ASPs can work with multiple GSPs to enable GST for their customers.

Some ASPs may also have their own captive GSP. Dominant accounting and ERP product companies may have their captive GSP as this further opens up in future.

ASPs will have a contractual relationship with GSPs that they use.

How many ASPs can exist? Does ASP is related to GSTN under a formal relationship?

As per GSTN, they do not want to control the ASPs and leave this for market forces to decide how many ASPs can be there.

ASPs are not a directly related party with GSTN. ASPs will have a contractual relationship with GSPs and GSTN will ensure the GSPs provide a free and fair access to ASPs to the GSTN resources.

Can an ASP apply to become a GSP later?

GSTN , says yes they will evaluate on case to case basis. There is no defined policy. On eligible as per the criteria laid out it in the next phase

What are the commercial terms for a GSP?

As per current information, GSTN will waive the first year charges for the GSPs. However, the GSPs would be allowed to charge the downstream ASPs. GSPs can also provide value added services on top of GSTN APIs and charge for them.

Again there is no define answer. The market will decide many things in future. For startups and small ASP players, it is important number of independent GSPs emerge for a fair and free market to exist.

Can GSP share or use Data for business?

As per announcement at GSTN workshop, the GSPs will not be allowed to share the GST data of businesses filing returns or sell the data to third parties. However, GSP can use this data themselves to create value added service offerings like business analytics and charge the individual businesses to do so. This means the data can be used to create a service offering for the given business only and cannot be cross sold to other parties. GSP will have to strictly adhere to data privacy clauses.

How will GSTN ensure third party ASPs get GSP services early on launch of GST?

NSDL e-Governance Infrastructure Limited (NSDL e-Gov) is the depository (promoted by NSE, now running infrastructure and services for many mission mode projects of Government of India. NSDL is also slated to run the GSTN services.

NSDL will provide the neutral GSP services as an official independent GSP to ASPs. GSTN thus ensures that at least one GSP is ready for third party ASP providers get a GSP to serve the market.

Will GSPs expose the same API set as per GSTN Sandbox?

As per GSTN answers to this questions, the GSPs will be legally bound to expose the GSTN APIs on a complete transparent pass through. However, GSP can provide additional rapper APIs for value add that they will like to build or management of their system.

Will the developer sandbox be available to anyone?

As per GSTN response, Yes.

Will there be any further workshops or hackathons?

GSTN may conduct these in the future. However, none planned as of now.

Where can one find the workshop PPT and other resources of GSTN?

One can use following resources of GSTN to get to more details.

What is iSPIRT pitching for?

At iSPIRT we are continuously involved with GSTN. Role of GST will be a game changer for India’s economy.

Our endeavour is that GSTN is able to offer a thriving platform for number of Product companies existing and new. It is also able to provide an open environment for innovation that can help some startups emerge offering valuable products to the business community.

[this blog is based on Google Hangout conducted on the topic by iPSIRT voluteer Nikhil Kumar, the inputs at GSP workshop conducted by GSTN on 25 Oct 2016 and group discussions with Bharat Goneka, Pramod Verma and Gian Franco Bonini of iSPIRT]

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Volunteer Hero: Rohith Veerajappa #CredoStories

Most of our iSPIRT volunteers have demanding day jobs and yet they jump in to build public goods. They are animated by a cause and a sense of community. Some of them take their commitment to the cause so seriously that they let no task, however unsexy and mundane, get in the way of progress. Their do-what-it-takes approach is what, ultimately, turns ideas and intentions into reality. These unsung volunteers are heroes to all of us!

Take Rohith Veerajappa for instance. He stepped on the night 7th January 2016 to take charge of the 200 PNgrowth attendees boarding buses at Madiwala at 5:30am next morning. What was likely to be a chaotic and messy beginning turned out to be a wow experience. The boarding was smooth and efficient. He made the first touchpoint for attendees to a transformational bootcamp an out-of-norm experience. It was the best start that one could imagine.

rohit-credo-stories-3
Nobody asked Rohith to step in; he took the initiative on his own. Nobody was there to commiserate with him when he worked through the night; yet he was energised and upbeat. Nobody was there to demand a high standard from him; he set the bar himself. This uncommon ownership and determination is what makes him an iSPIRT volunteer hero.

With inputs from Gokul KS

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

 

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iSPIRT & the India Stack pilot – commercialization of techno-creative innovations

iSPIRT invited select companies to leverage the IndiaStack API’s and collaboratively construct a pilot program, as a demonstrable proof of concept.

Broadly, the pilots were established to transfer the invented technologies and expertise to the market. In addition to creating sufficient and supportive infrastructure for technology transfer; to embolden entrepreneurs and businesses create profits based on intellectual property generated from these innovations, our pilot learnings were needed to help effectively address government, regulators and public institutions to seek their support for policy recommendations made by iSPIRT.

More specifically, the belief at iSPIRT was that for successful new technology venture, entrepreneurs and businesses should possess a combination of learning experiences, knowledge, self-confidence and skills to face challenges in various stages of commercialization process.

All participants to the pilot were carefully selected by examining their current business models, abilities to contribute to all aspects of IndiaStack, coexistence in a non-competing frame, investing in own resources (costs, effort, time) and above all for demonstrating their PASSION for technology and BELIEF that they will transform INDIA’s landscape for its people and businesses.

This pilot would not have been possible without the kind support and help of many individuals and organizations. iSPIRT is highly indebted to Khosla Labs for providing AUA, KUA services for free. eMudhra for being our eSign service provider, and for generously waiving fees while working to onboard all the partners in a compressed timeframe for the pilot. All our partners, namely Capital Float, Eko, Axis Bank, and Suvidhaa for enthusiastically supporting us, while setting aside their competitive instincts to collaborate and sharing learnings. And also to each of the iSPIRT volunteers for their guidance and constant supervision as well as for providing necessary information regarding the pilot & also for their support in commission to completion of the pilot in less than 90 days!

iSPIRT believes that by sharing the pilot learnings through the above publication, we will address aspects of entrepreneurship competencies and create the right entrepreneurial environment to produce innovations that are both technologically feasible and commercially viable.

iSPIRT would particularly like to extend its sincere thanks to CATALYST and Dalberg for the study and its dissemination.

Guest Post by Jaishankar AL, Tally Solutions

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Because Sometimes Free is Valuable

Whenever I have helped someone I believe their thanks is sincere and heartfelt. Can’t beat that wonderful feeling, so I do my best to make time and pay-forward.

Amongst the many that pay-forward, I was really intrigued by the iSPIRT community. A group of best-in-class entrepreneurs (and one could say even, celebrity entrepreneurs) coming together to share their knowledge with fellow and new entrepreneurs. With the hope to share some of my knowledge I started my engagement with iSPIRT running design thinking roundtables.

because-sometimes-free-is-valuable

I have had the great fortune of having exceptional mentors teach me what I know about creating solutions that delight customers; design thinking – a mindset and a process to get inspired by customers, focus on trying things quickly and learn as you go to create solutions that will create awesome customer experiences. It was now my time to pay-forward. What started off as a pro-bono effort has brought me to today where I can proudly say that I am amongst the few privileged to be a part of this highly trusted iSPIRT Maven community.

Practitioners like me synthesize and create new-knowledge in a specialized field. This, in my case, is in Innovation & Design Thinking. A large part of such specialized human-knowledge, however, is stored as experience. It is tacit knowledge. The more you teach, the more you learn. Your knowledge gets refined almost everyday. So of course I wanted to share my knowledge fully expecting that I will be learning by teaching.

I was requested to do it pro-bono and sign into their Maven-code of Ethics which fundamentally is to commit for a pay-it-forward model, not expecting any payback in any form from any participating startups.

Do our audience even trust a Practitioner who is providing pro-bono services to be of high-quality, I wondered?  We live in a culture where often quality if assessed with price and I wasn’t sure at first what I should expect. However, after just doing a couple of Round Tables I realized that trust is indeed created when people give selflessly in a pay-it-forward model. And, it is this very high degree of trust that allows entrepreneurs who are a part of the roundtables to provide open feedback to practitioners (aka Mavens) like me to continue learning and refining our craft. This is indeed priceless. Add to the this, the satisfaction of working for the cause of building a Product Nation together with many spirited Entrepreneurs.

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Talking Software Products in Bangalore

Bangalore was the next stop for the iSPIRT product round-table around the theme of “Getting Traction for Software Products”. The goal of this round-table, hosted by Niraj Rout (Hiver/Grexit), Natwar Maheshwari (Around.io) Avinash Raghava and me, was to get peer feedback from a group of startups at a similar stage.

In this format, around ten participants meet and each one gets around twenty minutes to showcase their product and share their challenges. Everyone then gives feedback based on their experience. We met at the Hiver office at HSR Layout.

Hiver HQ (source: website)

We have observed that most Indian product startups are not very comfortable with the self-service model, where the goal is to reduce frictionto product adoption and hence drive traction. With this format we get to talk about topics like automated sign-ups, on-boarding, customer success, content marketing, positioning and quality and nudge the participants towards this model. Most other round-tables talk about how sales can drive growth. Here, we focus on how products drive growth.

We have earlier done this format at Pune, Delhi, Ahmedabad and Mumbai before coming to Bangalore. Being an outsider, it was fascinating to see how the city of Bangalore was rapidly expanding. This magnet for migration has become a mess of concrete blocks, narrow lanes, traffic jams and angry cab drivers. But this is also where the startup ecosystem is thriving. The number of technology startups is astounding and there are many strong companies being built. At the round-table, we had a bunch of really amazing and diverse product companies.

The amount of startup literature available is almost unlimited, and every third person is self-qualified to dispense gyaan. At the round-table, we avoidgyaan by discussing specific problems. Some of the problems we discussed were:

  • Entering new markets (like the United States or Europe)
  • Content marketing (how to get blogs to write for you)
  • Increasing growth (how do we go beyond the early adopters)
  • Launching new products (or pivoting)
  • Moving towards SAAS (from an on-premise model)
  • Competition (getting even with YC funded, slickly branded competitors)

At the end each one of us went back with at least one or two things we could work on.

What really stood out about this group was that this was a bunch of seasoned entrepreneurs. Almost everyone had real products. Their feet were firmly on the ground and were motivated to scale their companies to the next level.

I flew in to Bangalore a couple of days before the round-table to meet ERPNext customers and community members. It was both inspiring and humbling to meet users and developers who were working on a product we built. After all these years, I could see that the product had built a strong reputation and users were expecting a lot from us. Almost every conversation was around open source. Why? How? Are you crazy? I am certain that almost everyone who was uncertain about it before we met, had become an evangelist by the time our meeting was over.

On the evening before the roundtable, Niraj, Avinash, Natwar and I met at the Napoli Bistro at HSR Layout for dinner. Over pizza and soda, we chatted about the state of software products in India. While it was really nice to see product companies being able to survive and begin to prosper in India, there was almost no one taking moonshots, or outrageous risks, like Elon Musk. Most of the conversations we had were on the short term (survival) and medium term (growth).

On my way back to Mumbai, I reflected on what we were doing at ERPNext with open source and building communities. We believe that we are taking big risks, by breaking all the rules of how software products are built in India. In the context of the overall community it is important someone does that. With all the conversations I had over the past three days, I was convinced that we were on to something and we should take even bigger risks.

Whether we fail or succeed, is another matter. We need more moonshots.

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The payment gateway friction in cross-border trade of Software products

The payment gateway problem in exporting online from India

It is not easy for Indian Software product companies to export products online and receive payments in India.  This is true for both the downloadable Software product or Software as a Service (SaaS).

Experts say there is no legal or policy hurdle from RBI. Yet, there is friction. An Indian payment gateway service provider denies foreign currency cross-border transactions from India to a startups or small company.  Only exceptions could be some large companies.

the-payment-gateway-friction-in-cross-border-trade-of-software-products

As part of ‘PolicyHacks’ at iSPIRT, we attempted to attend to the issue of recurring billing in a previous blog here. This blog is another continued effort in this direction. It is based on a discussion with experts from payment solution companies. Embedded below is a video discussion with Krish Subramanian, Cofounder of Chargebee and Kiran Jain of Razorpay.

The options available and adopted by most small Software product companies’ today are:

  1. Use a foreign payment gateway like PayPal, 2 Checkout, Skrill etc. Or
  2. Setup a branch office or a subsidiary in a foreign country
  3. Incorporate in a foreign country and sell globally from there including India

The option #1 above of using international payment providers comes with a heavy transaction cost. The services are not of same order as one can avail being in US or Europe.

So, option #2 and #3 becomes much attractive. This leads to exodus of Indian Software product company’s to USA, Singapore or Europe etc. India stands to lose in the game.

Krish mentions that, “the Indian companies are forced to move abroad to seek the frictionless experience in the payment part, where they allow month on month and do seamless upgrades and downgrades”. He further adds up, “Indian companies being in India do not get the level playing field, even when the strengths of product are very similar to a foreign product. Even using a solution like 2Checkout being in India does not provide seamless upgrade and downgrade. Hence, many companies go and incorporate outside”.

This problem, therefore, is one of the ‘biggest hurdle’ to the ‘stay-in-India’ concept for startups. It is vital that policy makers pay attention and remove friction to this problem for startups to believe in ‘India Story’.

Kiran Jain of Razorpay mentioned that the added attraction for Indian Software product company to move abroad is that, “an Indian company selling on international payment gateway from outside India does not have to comply with service tax”.

This is another level playing field problem. Being in India the Software product sales online is subject to service tax. On other hand being a foreign incorporated company and selling a B2C product the service tax is totally exempted. This is so in current policy framework and is going to stay same in the proposed GST framework.

Although, this is not directly related to the payment gateway problem, it does add-up to the exodus of Startups problem. This issue has been covered in an earlier blog here. It is a policy agenda item on list of taxation issues (of iSPIRT) to be addressed by Government of India and also an item on Stay-in-India checklist.

The cross-border online trade of Software product is directly a Payment Gateway issue. Let us further understand what are the underlying causes, policy issues, possible resolutions and suggestions.

Is there a regulatory hurdle? If not, then what is the cause of problem?

Kiran says, “RBI came up with OPGSP guidelines in 2014”. And, “this policy allows the operation of International payment gateways”, that can facilitate both the foreign currency cross-border transactions and recurring billing. According to Kiran, many Indian banks have capability to provide platform which can accept international cards and multi-currency systems. Few banks support up to 17 different foreign currencies, though the settlement is all done in US dollars.

Why are banks not giving it? Kiran said that in last one year in USA, out of $28.33 trillion online transactions, $16.33 billion were classified as frauds. Indian banking system does not have a capability to incur such losses, “that is the threat to Indian banks”. This threat is the result of ‘returns’ or ‘charge-back’.

In case of delivery of downloadable Software product, at least there is a trail of transaction that can establish that the Software was really downloaded and if unsuccessful the Software can be delivered again. However, in case of services it may be difficult to handle the consumption trail at least in B2C transactions. In B2B transactions, such problems normally do not arise.

Hence, handling the risk of returns and charge-backs is the problem to solved. Solving this will encourage India banking systems to offer free and fair cross-border international payment gateway services.

What is the solution to problem?

Large players by virtue of volume or by offering a risk covering instruments can easily avail the service from banks themselves.

Small and Medium players can use payment aggregators. PayPal and 2Checkout are nothing but aggregators. Thy have infrastructure built in USA. In India they provide services under OPGSP guidelines. Their relationships with issuing banks in USA enables them to provide services in India.

Kiran says, “as on date we have many aggregators in India”. But, “we have not seen any Indian aggregator moving to US and partnering with banks like Wells Fargo or Worldpay”, who could build “an infrastructure trail in US and bring it to India and start providing cross-border payments”.

This will be a powerful option according to Kiran. This option can be used to ease out cross-border multi-currency payment system aggregation. This will give exporters alternative to PayPal and 2Checkout etc.. This will also reduce transaction costs by at least 30%. Now, an Indian merchant pays 4 to 6% plus the currency conversion costs as a compared to the 2.9% + 30 cents per transaction in USA.

The other advantage of Indian aggregator with US infrastructure will be the better understanding of the Indian merchants and the risks involved. Hence, better placed to manage the risks. “Today PayPal looks at every merchant as risky merchant”, says Kiran. The Indian players can have option of either aggregating the merchants on PayPal model. Or offer facility directly to mid and large players.  In later case the entire risk engine is managed by the aggregator. The risk engine will take care of detecting the fraud cards, stolen cards, charge-backs cards as these will not be the capability of a merchant.

In the aggregator model, it is possible to play on volumes by on boarding a large number of small and mid-size merchants. This way an aggregator can easily go to a bank and say my charge-back to sales ratio is just about 1.76%.

Kiran further adds that as an alternative risk mitigation mechanism an Industry body could register small and mid-size Software product companies (merchants) and provide some kind of a certified credit rating. This could help banks and aggregators to assess the risk associated with the individual merchant.

Krish feels, a Govt. body like MSME could build a registration system of merchants with past history, people involved etc. (this could be like extending the Performance and Credit rating scheme of MSME). “This could act as a KYC”, says Krish for the aggregator, payment gateways and banks.

Are there Indian Aggregators offering such services?

As mentioned above, banks offer services in a limited way to large merchants. Aggregators like RazorPay also provide services but again with conditions attached.

Kiran says,“Razorpay provides the services on selective basis. We do not offer the option of card details to be held by merchants”. He further informed that merchant account with many charge-backs are suspended and that cases with one-off charge types may be allowed.

So, there is conditional availability of Indian service providers of cross-border online payment gateways.

Concluding remarks and iSPIRT views

“It is a crying shame if many startups still incorporate outside India just to get a level playing field”, says Krish Subramanian. He also listed following observations:

  • there is an option that is emerging (in terms of aggregators);
  • there are no regulatory hurdles per say;
  • it is more about risk mitigation;
  • the risk mitigation is about creating awareness by closely working with banks;
  • it is also about creating awareness amongst merchants themselves to be able to understand reasons why banks act in certain way and about clarity on pricing, return and refund policy etc.
  • creating overall awareness in eco-system

iSPIRT views on the overall situation on the given problem and present policy status are as follows:

  1. For India to be a Software product nation, Indian resident companies should be able to carry out cross-border trade and receive foreign currency payments onlineseamlessly without opting for incorporating a subsidiary outside India
  2. For a healthy Software product ecosystem, it is vital that Software product companies have access to several options of payment gateway service providers with differing service offerings
  3. RBI alone cannot solve this problem.RBI policy of OPGSP allows the payment gateway players to provide services in India. The inherent risk does not encourage service providers to offer cross-border payment services. RBI may have to become more reformative in encouraging Indian international payment gateway providers.
  4. Government of India needs to intervene and devise an integrative policy that:
  5. promotes an ecosystem of Indian cross-border payment providers
  6. build a mechanism that helps banks and OPGSPs to mitigate their risk without hurting consumer interest
  7. support Software product companies in their cross-border trade by a proactive policy

MeitY can incorporate enabling policy measures in National Software product policy and offer an Indian Software product company registry that has an inbuilt mechanism to ascertain and certify a Software product company’s credibility. Also financial instrument like an Industry corpus fund could provide a common bank guarantee, that can be backup with surety bonds from individual product companies for a defined threshold.

In a digital world order, cross-border trade is going to be highly dependent on easy availability of international payment solutions. Indian merchants able to scale their international trade with ease is vital for India to be retain leadership in Software trade.

 

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Playbooks is one of the key pillars of iSPIRT bouquet.

Playbook in iSPIRT denotes entrepreneurial learning meant for Indian software product startups to become world class and be successful.

Roundtable is a format of learning intended for startups that have reached a happy confused stage. In this format 8-12 non competing startups are brought together to discuss deeply on a topic that holds them from jumping to their next level.A facilitator, who is an in the saddle entrepreneur deep dives on the topic by becoming metaphorically naked and shares his experience and gets a peer discussion going on the topic.Coaching including peer coaching happens through multiple mode – judgement of the discussion (VC mode), sharing experience (Sage on Stage), being a mirror (Guide by the Side). Playbook Roundtable tend to be more of the last category of mirroring.

playbook-ispirtThink of this as group study for 7th class students in an age where there no school & teacher and one has to pass the 10th standard board exam. Some one who has done that leads the group study.

Playbooks have a longitudinal impact so they are tracked via an input metric.  At the end of every roundtable session a Net Promoter Score (NPS) is calculated via survey, the average NPS score of last 85 roundtable that were held is about +80. (iPhone as a product has an NPS of +71).

Roundtable was initially architected by Shankar Maruwada, Ashish Gupta, Vivek Subramanian & Aneesh Reddy. Some learnings from past roundtable are captured here

Key organizing principles behind creating playbook roundtables

  • In the saddle entrepreneurs are the best to teach upcoming ones. Age, company brand plays no role.
  • Quality > Quantity which means traditional format of 1 to 100 classroom style  and metric of footfall attendance should be questioned.
  • Safe environment are absolutely necessary to have deep discussion.
  • Curation is highly important, ie. have non competing participants and bring people together in similar stage of startup growth.
  • A facilitator and organizer checklist.

I have had the privilege to shadow about 40 of 85 roundtables that have happened in last 3 years. If I describe it as saying that gold dust of the tacit knowledge gets shared it won’t be an exaggeration. Chatham rules apply in a roundtable i.e. to protect the safe environment no quote is attributed to a person. However this deck those captures some of the discussed tacit knowledge as directives

A good mental model to decide which roundtables can be used from the market map

2-3-map-by-rajan

Check details at the events section in PN blog

Playbooks is more than roundtable

The initial focus of Roundtable was happy confused product startup founders a later realization was that playbooks will need to extend across the spectrum of entreprenuership lifecycle.

kindergarden   > discovery (1st to 7th std) > happy confused (7th std) > pre-scale (10th std) > pre-growth(pre college)

Playbooks Progression
Playbooks Progression

 

Some of these additional formats emerged

Playbooks sets down one of the most critical foundation layer for India to be product nation.

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How AdPushup Uses Content Marketing To Power Growth #PlaybookRT

Close to about 15 founders gathered on 1st October at the small and cozy office of AdPushup to participate in a Playbook Roundtable on Content Marketing. This was Ankit’s first playbook with iSPIRT and he did a phenomenal job.

AdPushup is a SaaS company that helps web publishers increase their ad revenue by letting them test and optimize their website’s ad layout. Their expertise has been content marketing, and Ankit shared several details of their experience, learning and strategy which have helped AdPushup become a leader in content marketing in the AdTech software space.

Inbound is a Culture

Ankit stressed upon the fact that when starting in inbound practice, founders themselves need to get involved. Inbound is a long term game and requires a lot of patience and perseverance. By getting their hands dirty, founders understand the intricacies involved in inbound and thereby are build the right team and culture.

Buyer Persona

The first step in building your inbound strategy is to put together a buyer persona.  It is basically a description of your ideal customer – someone who will directly benefit from your product or service. Creating content around and for them is what will get you more traffic, engagement and a sustainable growth. You could identify buyer persona by:

  • Interviewing Prospects
  • Feedback from your sales team on the leads they’re interacting with most
  • Looking at your Top 10 customers

A typical buyer persona will consist of the following:

  • Job Role/Title
  • Job Skills
  • Performance KPI
  • Tools used
  • Goals
  • Challenges
  • Personal Demographics (if appropriate)
  • Recent purchase and the decision tree
  • Online communities/websites they use to consume content

A buyer persona will help you identify the kind of content and channels you need to focus on in your inbound strategy.

how-adpushup-uses-content-marketing-to-power-growth-playbookrtContent Creation

There are two types content that founders can focus based on their industry and product:

  • Relevant to business or industry ( informative)
  • Relevant to the Persona (targeted and actionable)

The tone of the content should be educational and non promotional. Create content only keeping in mind – “is this helping someone solve a problem?”. At AdPushup, their target audience is long form bloggers and large web publishers. They write content which either informs them or helps in dealing with a painpoint (e.g. blogging tips, how to get more subscribers, how to get more traffic, user psychology, increasing user engagement, among others).

Each content piece should be:

  • Thorough and meticulously researched
  • Up-to-date
  • Well designed

Content should have:

  • Scannable text – bullet points, sub-headings, short paragraphs, images. Remember bulk of readers do not read but scan the content.
  • Actionable Insights
  • Content Frameworks
  • Citations and sources

Content ideas mostly come from:

  • Keyword research
  • What topics your competitors are writing about
  • Evergreen content (guides, tutorials, how-tos, best-practices)
  • What the industry experts are tweeting, sharing on social media
  • Comments on blogs and from relevant communities
  • Round-up posts

Nail the headline of every post that you publish and you will have won 70% of the battle. If your headline doesn’t inspire confidence, interest, excitement or any sort of emotion then readers wont click on it. Then even though your content might be brilliant and relevant, it will just not get the importance it deserves.

Content Distribution

An important rule of thumb to remember is that whoever is the content creator – allocate 50% of time in creating content and the rest 50% in distributing it.

Some of the channels for content distribution include:

  • Relevant Subreddits
  • Google+
  • FB Groups
  • LinkedIn Groups
  • Pinterest
  • Hacker News
  • Forums
  • Influencer outreach
  • Syndicate/Guest Post
  • Article that will rank on SERP
  • Refurbish for Infographics, SlideShare, etc
  • Competitor URL outreach

When you join communities on social networks, regularly engage with their members. This helps when you have to share your content there and not come across as a spammer.

Reddit is infamous for being ruthless with spammers and self promoters. So the only way you come across as neither is by providing all the value right there in the community post and add a small link in the end which says something like – “to read the full post, here’s the link” (and provide the exact url, not bitly or any short links). Provide the entire outline right there. Anyone reading it should only click on your post when they know exactly what is in the content and they would still want to read it.

Whoever you mention in our post, product or person, make sure to send them or the relevant team members an email telling them about the mention and encourage them to share it on their social media. Most people do actually share if you ask them. Also, it helps if you are relatively well known and the content is really well written.

Look for guest posting opportunities because they are an effective way to make your presence in the industry. And guest post only on sites that are relevant to your audience, have a very high volume of traffic and well respected (e.g. HubSpot, KISSmetrics)

Generating Leads

Once you have created content and distributed, it is imperative you capture details of the readers. You could devise several ways to do that:

  • Opt-in Subscription Forms
  • Banners
  • Email courses via drip campaigns
  • HelloBar
  • Native mentions (with disclosures)
  • eBooks, reports and whitepapers

Make sure your email marketing is sorted out. Put pop-up email capture boxes (and similar lead capture forms/boxes) in your blog to encourage visitors to convert into subscribers. Once you have a decent number of subscribers (300+) and are pushing content out regularly, start rounding them up and email them to your subscribers in the form of a ‘weekly newsletter’.

Here is a screenshot of how AdPushup uses its content to capture user details.

adpushup-blog

Measurement and Analytics

Finally it is important to measure and analyze your inbound activities. As Ankit puts it, “Inbound is a continuous rinse and repeat process”. Few key metrics to track include:

  • The channels that are giving more traffic
  • Channels that are converting better
  • Type of content that gets more organic reach
  • Statements/Emotions in the headline that perform better (e.g. questions, negative statements, suspense, informative etc)
  • Reader Demographics
  • Best time to publish
  • Best channel to distribute for every topic

Once you have a sufficient success in measuring ROI – cut out what is not working and concentrate only on what is getting results. And always keep creating hypotheses and rigorously testing them. You never know what product or customer insight you might stumble across.

Guest Post by Rajat Harlalka, Bellurbis

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India Stack for Smart Cities – Usage and Learnings that can be applied

india-stack-for-smart-cities

Sanjay Jain, Pramod Varma, Ranga Raj

With a lot of momentum being built around Digital India and Smart Cities, we offer a contrarian view of how government agencies and stakeholders should approach this complex problem. While there are many facets towards the journey of Smart Cities – some that are non-technology related – political, bureaucratic, architectural, social, cultural etc.,  and others that are technology driven. We will focus on technology led aspects and approaches to Smart Cities in this blog.

Internet of Cities – Platform for innovation

The impact of Internet and networked societies have led to India Stack – the foundation of Digital India. The learnings of development of these public goods along with others are used as case studies of how smart cities ought to be approached. Tradition within the government, public sector and large entities have been RFP/Tender procurement process. This inherently has some significant limitations:

You cannot tender for Innovation!

You need to conceive and define in great detail what is required in an RFP – Change requests and evolutions prove to be costly mechanisms to incorporate

Restricts solutions to be provided by selected parties and you and other stakeholders live/die by their performance

Constrains participation (Criteria to meet bidding and selection process)

Smart Cities are a journey and not a well-defined destination, so needs to be sustainable. To believe that anyone if capable of anticipating and predicting the needs/technology/standards evolution  over a 50-100 year time frame is impossible. Hence traditional procurement process need to be replaced by a different mindset.

Best principles from India Stack – Design for India Smart Cities Platform

Traditional vertically integrated approaches – pipelines are being replaced now with Platforms (documented in a popular book – Platform Revolution). So thoughts need to shift towards Government as a service or Government as a Platform. The approach adopted by the team in Aadhar were (in no particular order of priority):

Don’t outsource “Thinking” – Build a cross functional team with strong leadership (eg. As Nandan did for Aadhar)

Build internal capacity

The government could not possibly do it all by themselves internally – so the thought process of what was to be done by the government and what was to be done by ecosystem players was outlined

Debate on the ideas of the offering by engaging with thought leaders and stakeholders and subject matter experts that bring in different perspectives

Once the core idea and value proposition(s) are determined – float expression of interest to various parties

Based on feedback repeat the exercise if necessary

Post the outline of the “solution”, strip out the core elements that need to be done by the government and those that can be performed by the ecosystem players

Design core functionality Internally – focus on security, scalability, maximize use of open source and ensuring that the design does not lock oneself to a particular technology or a vendor

Keep it simple and minimalistic – Aadhar focused on a few parameters of storage as compared to other countries attempting to store 50+ parameters that had to be got from multiple sources leading to bureaucratic tangles

Open this core functionality via APIs

Create a strong policy/governance structure and operations management team for the core and how a level playing field can be provided to ecosystem providers

Incentivize ecosystem players (preferably on an outcome based model) to participate in the success of the platform for a win-win model (eg. Ecosystem players invested in technology infrastructure for Aadhar enrolment and were paid post a successful issue of an Aadhar number, which led to ecosystem partners being the marketers of success of Aadhar)

Aadhar did not invest in field infrastructure but just the strong secure scalable back end exposed via APIs and ecosystem partners invested and participated in the fastest growth of a Billion users worldwide!

Smart Cities Platform – Shared Public Goods

Smart Cities are complex, long term initiatives and should not lead to big RFPs, but take an approach similar to what Aadhar and the India Stack took. Design of Smart City platforms need to be capable of sustaining over long period of time as back end systems, front end systems, APIs/Interfaces etc., evolve over time. The figure it for yourself or DIY approach is not economically viable model as well as this will lead to at least a 100+ cities learning and reinventing the wheel and is certainly not an efficient mechanism of using tax money. Governance of municipalities or cities around the county are broadly similar, but have different priorities. A shared economy model of public goods that could be shared/reused and learning and best practices of one applied to another is a healthy approach that the country needs. The EU for example has a governance structure that creates shared public goods that can be leveraged and customized to local environments. Examples of shared economy in transport, accommodation etc have become very popular around the world. Smart Cities should not be funded and built entirely by the government but rather done in a public/private partnership model of a plug and play. An example is private green/alternate energy sources of generation owned by private parties can plug and play into the grid in a win-win model where everyone stands to gain – the utilities body, the private generation entity and the consumers/citizens as a whole. Similar approaches should be adopted by governments with the vertically integrated invest it all/own it all/ operate it all approach should be abandoned in favour of a shared economy model. 

Government as a market maker – spurring innovation (Open APIs, Open Data, Always on RTI)

Some elements of how services are delivered by only trusted parties that belong to the system have to be thrown out of the window. IRTC was available through reservation counters in stations and their website. The experience was not optimum, but when they opened up APIs, numerous ecosystem players offered railway reservations in many forms and that provided choice to consumers. Everyone benefited in the end – Railways, ecosystem players and commuters. Numerous services of governments are offered through only selected offices and a website/portal that often do not work. Government and agencies are not best suited to build and deliver services to customers – ecosystem players are and may the best person win. So governments need to think of themselves as “market maker” – this leads to innovative solutions from startups to well established players including government agencies to provide choice of delivery of these services to public and market forces then take over. Regulation and governance framework to ensure level playing field and not stifle innovation is essential. All of this will lead to greater creation of public goods as the India Stack has demonstrated.

Unique Identity beyond people + Digital Locker + Consent Layer + Payment – Citizen services

Aadhar and India Stack has been leveraged for various schemes such Direct benefit transfer (LPG subsidy, NREGS/PDS..), attendance systems etc. We now explore a few other examples of how India Stack could be leveraged by state agencies for re-thinking how services could be delivered to citizens.

Identity of four sovereign elements that need to be registered are essential

Individuals – Aadhar

Companies/Establishments – PAN/GSTN (Professionals such as directors/doctors/architects/lawyers etc are also distributed in silos but need to be networked and accessible )

Land – Records and Titles – again very distributed and siloed but essential to unlock the value of this asset type as the ability to verify, buy/sell/mortgage/rent could significantly contribute to the GDP of the country. Integrating this with the real estate bill would be a welcome step.

Things (eg. Vehicles) – Agencies such as the Vahan is an attempt to this, but adopts the traditional approach. Ownership/Buy/sell/insurance/permits/taxes/fitness/loan/mortgage/enforcement records when merged provide transparency to transactions.

Voting – Aadhar provides identity which could be used for cleaning up voter registration records for duplication and fraud entries. But with additional layers of entitlement and anonymity, plus digital lockers for documentation proof of residency (ward), remote presence-less digital voting for armed forces and others to exercise their right to vote without physically being present at the ward

Healthcare – Identity + health records + Consent + Insurance (RSBY or private/government players) + Payment/Claims processing/Renewal could make healthcare for all more affordable (lowering costs of transactions) and accessible without the frustration currently associated with it

People Verification – Passports/background checks/Employment/Certification of skills/degrees/Crime/Legal records – police/courts. Today a lot of this data needs to be digitized by distributed in thanas or court jurisdictions. An integrated record system across the country is essential for ensuring people movement and the ability to establish trust or be verified is essential for the employer/issuer/employee. India Stack could significantly contribute to enabling this national grid of information exchange based on consent.

There are numerous other examples in various vertical and horizontal segments that can benefit significantly with the India Stack and many public and private sector players are constantly innovating in this space

Citizens – It is our problem to solve

As we mentioned Smart Cities is a complex difficult journey that can be tackled with a big band approach. Take small problems solve them using these guidelines mentioned above and the use of open data combined with hackathons (bringing in key stakeholders – RWAs, NGOs, Citizens bodies that are deeply interested in the betterment of a city) to allow the ecosystem to innovate solutions to your problems. Seeing is believing and these small initiatives will then recruit more interested parties and a viral effect will take place. As a call to action it means a new thought process and approach by the government to bring in expertise from the outside (as done with Aadhar) and for core committed citizens to rise to the occasion and take up this challenge in a collective manner. It is our city, our government, but by paying taxes and electing a government, we no longer can throw the problem to the other side. The crowd sourced model, the shared economy model, the platform way of thinking are new mindsets that need to creep in to replace the tender raj. 

http://www.indiastack.org/

https://vahan.nic.in/nrservices/

http://www.rsby.gov.in/#

https://data.gov.in/

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Announcing The 2016 India SaaS Survey – A Joint initiative by Signal Hill & iSPIRT

According to a recent report by Google and Accel Partners the SaaS market in India is expected to cross over $50Bn by 2025, driven largely by demand from Western markets, in particular from US-based SMBs. Indian firms are noted as uniquely qualified to serve this opportunity given the available talent, mobile-first mindsets and language skills that enable cost-effective inside sales.

the-2016-india-saas-survey

In realizing this opportunity, however, there remain a number of hurdles to be cleared. To understand these challenges, and gain insight into the SaaS landscape in India, Signal Hill, a reputed independent advisory boutique and the iSPIRT Foundation conduct the annual India SaaS Survey which is open to all SaaS businesses in India.

We are happy to announce the second edition (2016) of this survey. Like last year, the survey aims to create a single reference point for all players in the SaaS ecosystem to understand:

  • Company & product profiles
  • Delivery mechanisms
  • Sales methods & channels
  • Scale & traction
  • Customers & key markets
  • SaaS metrics

From last year’s survey, some key takeaways included:

  • Indian SaaS players are predominantly young companies striving to exceed US$1m in ARR
  • Horizontal applications dominated vertical specific ones
  • Most companies surveyed offered multiple products; in contrast, Indian SaaS leaders recommended a narrower, more focused approach
  • 84% of respondents reported looking overseas for growth, ranking North America as their #1 target geography

To view the full report, click here.

To participate in the 2016 survey, respondents will need to fill in two simple forms Form A, a 100% anonymous survey and Form B, which records company details for us to share the final report. Note that A & B are kept distinct to protect your privacy. Overall, the surveys are 100% multiple choice and will take ~10 minutes to complete, providing the ecosystem with invaluable data & insights.

Apart from the core analysis of the industry and its challenges, participating companies will have their company logo featured in the report and they will also receive a surprise gift from the organizers as a token of appreciation for their support, time and valuable inputs.

It goes without saying that relevant solutions are found only when problems have been clearly identified and understood. Your 10 minute contribution to this effort will be hugely useful in helping the Indian SaaS ecosystem to get there.

We look forward to hearing from you.

 

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Asserting my Maven code-of-ethics and being a Proud Maven at iSPIRT

I am Pallav Nadhani from FusionCharts. Like my fellow entrepreneurs, who dream of making India as a Product Nation and building a great ecosystem together, I found my calling answered with iSPIRT Playbook round-tables. I volunteered to become a Maven so I could share, learn and disseminate the best-practices I had learnt in my entrepreneurial Journey, with other fellow entrepreneurs.

maven-code-of-ethics

Playbook enabled many of us to learn from each other’s successes and mistakes. It was an exciting opportunity to meet incredible and passionate entrepreneurs, and help them in whatever way we can, and also learn from them. I found that there were many like-minded Mavens, who were already helping many start-up founders (attendees), in a completely self-less way by paying-it-forward and not expecting anything in return – and there was a clear blueprint that I could follow. I felt honored to be a part of this iSPIRT Maven-community.

However, during the course of this journey, an unexpected event happened. A couple of attendees, across different playbook sessions, came up to me and asked what we (or iSPIRT) were expecting in return. Baffled by the question at first, I asked them what they meant. Their answer took me by surprise – they mentioned that at a few other similar forums, which they had attended, the equivalent of Mavens had asked for (free) equity along with a senior designation (typically Director or above), in exchange of the knowledge and network connections they were enabling to help such startups. Initially, I thought this could be fair, as different members of the ecosystem may have different operating protocols, but it turned to a point where our actions, which had no such intentions of getting anything in return, were also painted with a similar stroke of doubt. And I realized that this question was not just asked about me, but also some other contributors to iSPIRT.

I was giving completely selflessly, and so were many other Maven’s that I knew, within the iSPIRT community. We never had any intentions of gaining anything, or to further our own self-interest in anyway. However, the attendees assumed, that I as a Maven, would also do such demands in the future. That day, I felt victimized by this system, as my integrity and good intentions were being questioned.

For a few days, I pondered over this conundrum, and I reached out to Sharad and other Fellows in the iSPIRT community. During those conversations I proposed that the best way is either to set a clear protocol of expectations (from Maven’s side) or to not allow attendees to assume. We needed to Sign a Code-of-Ethics and resolve this conflict once and for all. Once we pledge that we will not breach the Maven-Code-of-Ethics, it would not compromise our own integrity in the eyes of the System or other people in the System. So, with the help of the iSPIRT Fellow-Council, we decided to draft the Maven Code-of-Ethics and I have signed it & abide it.

Maven Code of Ethics

As an iSPIRT Maven, I facilitate PlaybookRTs and Bootcamps. This is part of my pay-it-forward commitment to make India a Product Nation. At no point in time, I expect any payback for this from any participating startups in any form including advisory or sweat equity. My selfless contribution is for a cause larger than myself. I hope to set an example so that the entrepreneurs that I touch also embrace the pay-it-forward spirit.

Along with me the other maven who have signed the Code of Ethics are: Avlesh Singh (WebEngage), Aneesh Reddy (Capillary Techonologies), Amit Ranjan (Ex-Slideshare), Amit Somani (Prime Venture Partners), Girish Mathrubootham (Freshdesk), Jay Pullur (Pramati), Paras Chopra (Wingify), Pravin Jhadav(Servify), Rushabh Mehta(ERPnext), Sanjay Shah(Zapty), Samir Palnitkar (Shopsocially), Suresh Sambandam (KiSSFLOW), Shankar Maruwada (EkStep), Shanmugam Nagarajan (24[7] Inc), Sridhar Ranganathan (CrediBase).

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50 Companies. 3 Days of Bootcamp. 1 Year of Mentorship. #PNgrowth2016 is back

We’ve done this for two years. It has been successful. But we still felt that it could be improved. We went back to the drawing board. We thought hard about how we could do this better.

And we’ve come back with something that will be more powerful, and even more demanding from our product entrepreneurs.

#PNgrowth2016 will feature only 50 startups, giving each startup more facetime with the mentors, more scrutiny, and more learning. Reducing the number also means that the quality of the startups attending will also go up, thereby making peer to peer learning  and networking even more valuable.

whatsapp-image-2016-09-13-at-4-57-29-pmSo 50 Companies. 3 Days of Bootcamp. 1 Year of Mentorship.

The Product Bootcamp is back. Smaller, better, more intense. Apply now!

Who is #PNgrowth for, and who is it not for?

PNgrowth2016 is a program to help companies chase ‘Good Scale’ i.e. achieve high growth AND increase in quality. Achieving Good Scale is a critical first step to a company achieving Category Leadership.It will be a year long program comprising of selecting around 50 companies who will go through a three day bootcamp, followed up with monthly mentoring sessions to track progress over the next 12 months.

The idea behind #PNgrowth2016 is to identify companies who can be significantly impacted with Mentoring and put them together in an intense environment to accelerate their learning curve. It is not meant for companies who are:

  1. Well funded, have their business model figured out and have access to business inputs and sufficient mentors.

  2. Companies who are in survival mode, are wondering whether they will survive the next six months or don’t yet have a working product and some initial customers.

How will the format be?

The inputs to the companies will come from structured frameworks provided to them and from intense practice of these frameworks as it applies to their individual cases. During these practice sessions, they will get relevant feedback from their peers, and from experienced Mentors. The feedback will help them improve their thinking and the structure (including metrics) will allow them and their Mentors to judge the progress being made over the next 12 months.

What happens in the three day bootcamp?

  1. You might have heard of a Product Teardown? #PNgrowth2016 starts off with a three day bootcamp for your business model.  It is an intensive ‘business model’ teardown for entrepreneurs, by entrepreneurs.

  2. To begin with, you will be provided with a structure along with frameworks and metrics which you will apply on your own business.

  3. There will be three main sessions (each lasting 4 hours or more) – Market (Demand), Product (Supply) and Product-Market fit.

Across these three sessions, your business model will first be torn down and rebuilt. Along the way, will be questioned on every assumption you have made about your customers, your product, metrics, your business etc (maybe even about yourself)!

You will also get feedback on your efforts from peers – you will be in a cohort of 12 other entrepreneurs. These fellow entrepreneurs will be in your cohort throughout the three days, and for the rest of the year (Think iSPIRT RoundTables)

You will get feedback from Mentors who are practitioners of the science and art of building companies – VCs, experienced entrepreneurs, specialists in Product, Marketing and Sales, Finance. There will be two mentors assigned to each cohort of 12, and there will be around 4 cohorts in all.

There are three formats of learning we’ve planned:

  • VC or ‘Judgment’ – Where your business is judged by those who might want to invest in you and their judgement is a kind of feedback for you to refine your business model.
  • Sage on Stage or ‘Teaching’ – Knowledge from experts whose experiences inspire or instruct you to refine your business model.
  • Guide by the Side or ‘Learn by doing’. You get relevant feedback and insights on your own efforts from peers and mentors that are directly applicable to refining your business model.
  • PNgrowth will be 85% of ‘Guide by side’, 10% of ‘Sage on stage’ and 5% of Judgement model. Your output is proportional to the effort you put in. There is no passive learning.

At the end of the bootcamp, based on all the business model tear down and rebuilding, you will walk out with the top metrics of interest for you, your goals for those metrics over the next three, six and twelve months, and your choices and actions to reach those metrics. The metrics will enable you to progress check in monthly meetings/calls with Mentors and your cohort group.

The preparation for bootcamp will begin with the curation process itself. You will start answering the very simple set of questions that will be repeated throughout #PNGrowth2016 – What is your hypothetical customer Bob’s problem that you are solving (Market-Demand), how are you solving it (Product-Market fit) so that you can have a scalable, sustainable Business Model  which allows you to achieve ‘Good scale’ and positions you on the track to Category Leadership.

And since there are only 50 slots, you should start now!

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Recurring Billing for SaaS. Is it available in India?

Recurring Billing  – demystified for SaaS companies

Abstract

For any SaaS Startup with India market focus, the biggest bottleneck today is recurring billing. It is not available as an open, over the counter service from payment gateways. Most startups have to work around to solve this problem. The workaround may be using an expensive international payment gateway or it may be incorporating a subsidiary in foreign geography. Many startups also move all out of India, if they can afford to do so. In the process India loses some good SaaS companies.

Reading into details, recurring billing is not banned by RBI in India. But, banks and payments gateways do not have the offering available over the counter. Complying with two factor authentication (2FA) and the associated risk of chargebacks are the reasons behind. The payment industry experts say, banks offer it but needs to cover their risk for chargeback scenarios. So, one has to negotiate with banks and therefore large players are able to avail these services.

To bridge the gap startups like Razorpay are building the aggregator payment platform that that can work between the SaaS startups and the Banks to offer recurring billing.

Since, it is not smooth enough, recurring billing is an area, which requires policy maker’s attention. To realize the full potential of a single unified market under GST,  the ‘Digital India’ requires a more open, clearly defined and an enabling policy and procedure on digital payments, at par with developed countries.

This article is based on a deep dive into the problem of recurring billing, with experts from payment solution companies Krish Subramanian, Co-founder, Chargebee (Subscription Billing & Recurring Payments Software) and Kiran Jain of Razorpay (a payment gateway aggregator).

Embedded below is a hangout video with these two experts. You may like to watch the video and/or read the blog piece below (which is built on the conversation in the video).

Some terms used in online payment industry

Recurring billing

It is a subscription driven model of charging or collecting payment from customer. Both the frequency interval of charging and amount charged are fixed to qualify for recurring billing. Software as a Service (SaaS) companies are the biggest users of this service.

Merchant: A person or business who want to sell goods or services.

Acquiring Bank: It is the Merchant’s Bank

Card holder: The buyer who owns and uses a credit/debit/prepaid card etc. to buy goods and services

Issuing Bank: It is the Cardholder’s Bank. An issuing bank issues credit cards to consumers.

SaaS industry and status of recurring billing?

SaaS startups offer products or productized services in a subscription model that runs in a per user/seat at a fixed frequency say per month. In SaaS industry, the recurring billing is often at a low cost transactions e.g. $10 to $50 per user per month.

In developed countries like USA online payment gateways and payment aggregator offer these services. A startup in India can sign for the service from these international payment gateways (like 2Checkout and PayPal) sitting in India. This  can be done with minimum paperwork and absolutely no hassles. But, the cost is almost double the cost of payment gateway services in India. The down sides are payments may not be real time. Also, currency conversion cost twice. Once, when the Indian customer pay in foreign exchange and again when the international payment gateway pays to the Indian merchant.

Problem is the Indian payment gateways do not provide the recurring billing option as seamlessly as foreign payment gateways. Hence, the need to go to foreign gateway, when an Indian SaaS company wants to sell to Indian customers.

Krish of Chargebee adds, “for SaaS companies a non-negotiable aspect to provide frictionless experience to customers is the ability to collect payments on month on month basis”. (please see the video)

Statutory position of recurring billing in India

If one reads through the RBI’s circulars on two factor authentication (2FA), there is no mention of recurring billing. The RBI’s communication vide RBI/2011-12/145 DPSS.PD.CO. No.223/02.14.003 / 2011-2012 August 04, 2011 covering card not present (CNP) transactions which includes online transactions as also the IVR transactions states following two conditions:

Based on the feedback from the stakeholders and keeping in view the interest of card holders the following directions are issued:

(i) It is mandatory to put in place additional factor of authentication for all CNP transactions indicated in para 4 of our directions dated December 31, 2010 with effect from May 01, 2012.

(ii) In case of customer complaint regarding issues, if any, arising out of transactions effected without the additional factor of authentication after the stipulated date, the issuer bank shall reimburse the loss to the customer further without demur.

For an avid policy interpreter this means 2FA is the requirement for every transaction. It is not a straight forward clear position.

Kiran Jain of Razorpay, reads in to the sentence of same communication, where it says, “The matter was discussed in a meeting of banks with the Reserve Bank of India on June 22, 2011 wherein it was emphasized by the Reserve Bank that while it was not advocating any specific solution in this regard,”. Kiran says, “From RBI perspective there is no restriction in India”. According to him recurring billing is allowed under RBI guidelines provided in first transaction 2FA is followed and there is no restriction even by banks. (please see the video)

If recurring billing is allowed why is it not available openly?

Banks have a risk in complying with the mandatory charge back, in case when customer files a complaint. The issuing banks are supposed to refund to customer in case complaint from the customer. Normally the risk is never transferred to the acquiring bank.

Kiran in the conversation talks about the lack of understanding on risk involved, by merchants in India. Banks needs to cover their risk through transaction fee. Merchants in India don’t want to pay high transaction fees, that can cover the risk involved in charge backs.

Banks are not willing to underwrite the risk for small players. This is why there are no readymade recurring solutions available in Indian online payments.

How can this risk problem be solved?

Kiran says, “the alternative is to create a partner in between the banks and the ecosystem of SaaS companies, who is willing to underwrite the risks”.  Razorpay is one such player, who is attempting to solve this problem.

Why can’t a Startup go to Bank directly? What is the way out?

The problem in recurring billing is not only the payment gateway but also the management of the subscriptions. Baking systems are all legacy systems. They are not able to handle the dynamic situations. For example, if a customer lost the card, the new card information should be updated in time. Such gaps are filled by the layer created by third party Payment Gateway solutions.

Also, this further requires some subscription management systems in an online system. Krish calls this “billing intelligence”. This can either be provided by ready made solutions like Chargebee or can also be built in-house.

Startups can solve this puzzle by availing solutions offered by companies like Razorpay and Chargebee. Razorpay reduces the complexities of recurring billing on banking side. Similarly, Companies like Chargebee reduce the complexity of “billing or invoicing intelligence”.

What more can be done on Policy side?

Krish feels, if we engage with banks and banks can build a system that can underwrite risk for small players and also make Bank realize how service providers can help mitigate risk, there can be a chain built to see a successful recurring billing system in India, easily available to SaaS startups.

Kiran’s view is, from policy perspective not much can be done as RBI does not mandate anything specific. It has do’s and don’t type of framework. His view is charge backs are like non-performing assets (NPAs). So, large merchants in India will still get recurring billing solutions from many payment gateway solutions easily and will also have in-house capability to build billing and invoicing platforms.

Looking further (iSPIRT’s Views)

If one researches hard there is possibility to find payment gateways offering recurring billing solutions in India. However, there are lots of questions asked and it is certainly not available as an across the counter service and definitely not to everyone.

Aggregator service like Razorpay have a chance to fill this gap and they will offer valuable service much needed by Startups. A combination of solution like Raozorpay + Chargebee could solve the problem for many startups.

RBI has not banned the recurring billing. On other hand it has also not put the record straight. Going further, there is a need that RBI and Government of India recognize the importance of recurring billing in a digital economy. Once the need is recognized, a layer of reform in policy framework by RBI should be added. Clear regulation that covers all stakeholders as well as encourages banks to offer recurring billing solutions, is needed. A digitally signed online agreement that is backed up by a 2F authentication in first transaction should be enough to cover the paper formalities required for a fixed amount, fixed tenure (frequency of payment) transactions. The buyer of service can revoke the online service agreement online any time. Customer’s risk is therefore limited up to the time he opts out of the service agreement.

RBI will not take actions that promote an Industry. It is Government of India, who should create an enabling policy for SaaS companies. Ministry of Electronics and IT (MEIT) can carve out a scheme that can mitigate risk of Bank, in turn helping SaaS industry. Such things should happen under the National policy on Software product being considered by MEIT.

The bottom line is that the Indian businesses must have access to multiple choices of service providers for availing recurring billing services at a low cost per transaction with a well laid out fraud protection and complaint redressal mechanism.

Both GOI and RBI needs to work together in direction of removing the bottlenecks. India is unveiling a unified digital market with GST coming in. Without seamless digital payments not only we will fall short in our dream of creating a globally competitive SaaS industry but also a fully buoyant ‘Digital India’.

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Payments 4G (aka UPI) The Best is Yet to Come!

Last week was a landmark week for all Indians and by sheer coincidence; the country witnessed the launch of two generational shifts. The one that has everyone excited is Jio, a pure, data-only high-speed mobile network.

The other that perhaps will have equal transformational impact is its peer in the world of digital payments, the Unified Payment Interface (UPI). As soon as I had my first experience with UPI, I realized that its impact has barely been appreciated by most, including me.

Why Payments 4G?

Similar to data networks in telecom, which were built on top of the existing voice/SMS infrastructure, most innovations in Payments are layered on Card platform, a solution conceived in the 70’s. Almost all large-scale payment systems today run on the rails of card-based systems, operated globally by Visa, MasterCard, AmericanExpress and adapted in other regions by companies like UnionPay in China and RuPay in India. While innovators like PayPal, Venmo and Paytm in India have attempted to create close-loop systems, some with more success than others, the interface to the external ecosystem was still mostly card-based.

With UPI, the payment rails have been rethought and built from scratch, a de-novo system that was conceived in the year 2015 and implemented within 12 months. From the ground up the system is built with the idea of SmartPhones and Mobile Internet and like all things in Digital India, ZERO Vendor Lock-in.

A few key capabilities in the UPI architecture are fundamental game changers:

1)   Real-time, inter-bank authorization and settlement from one bank account to another: It sure is fascinating to see a live transaction with someone who receives a notification and can do a balance refresh to see their balance updated instantaneously using ANY application!

2)   SMTP for Payments: Just as you can use any email client (e.g. Outlook, Gmail to access any email account), UPI has decoupled the payment instrument (application) and store of funds (bank account). During the first week of its launch, two of my colleagues showed me a demo of transferring money between each other’s accounts with the same bank and neither of them was using that bank’s mobile application.

3)   Support for all types of payments: It can be anything from one-time, recurring, pull, push, pre-authorized, on-us, off-us, etc. The flexibility in the platform that is exposed to the banking ecosystem as an API is immense.

4)   A concept of Virtual Payment Address (a la email) that enables privacy and security and in effect as much of anonymity with auditability and traceability.

India has largely been a cash economy. For digital payments to takeoff, it is important to be able to bring as many of the real attributes of cash as possible, notably in Real-Time, with 100% value and allowing anonymity between payer and payee. Additionally, digital transactions have the benefit of auditability and traceability, both of which are important in the case of dispute resolution.

For once we have a payment system that is built on a whole new rails and I believe its impact will be nothing short of revolutionary. Coupled with the Smart-Phone and Mobile Internet penetration and an aggressive business model, there are five areas that will be impacted significantly.

1.    P2P – P2P is set for lift-off!

a.   Until now P2P payments in India have been largely done in a batch manner using NEFT or RTGS platforms and even with the launch of IMPS (the underlying foundation of UPI), few had used the slightly clunky interface. With virtual addresses, it becomes easy to send money to someone or send a collect request too. This means Social Payments, Bill Splitting, Gifting and other such use cases will come to the fore.

b.   Additionally two fundamental changes are likely to happen

i.    Informal sector merchants will be happy to accept payments into their bank accounts because they are real-time and zero charge – which can be a great way to get them into the system. Of course once they recognize the value of being in the formal sector, they may have to pay a fee – or alternately a bank may leverage the data for services like loans etc. and keep the payment transactions free.

ii.    Everyone automatically becomes an ATM machine , which in essence can be a catalyst for digital transactions. A large part of the population keeps cash because they may not have access to an ATM, but knowing that an ATM is always around the corner will give people the confidence to keep their money digital. One company has built an app to do just this and could be an exciting one to watch.

2.    Acceptance – from Rates to ROI/Impact will drive decisions

In the enterprise and mid-market sectors, the previous generation of payments innovation, notably SmartPhone-based Mobile POS solutions that have enabled businesses like insurance companies, e-commerce companies, utilities, police departments, and several others to enable digital payments – although on the same rails as the card system. These initial forays have proven the improvement in agent efficiency and productivity, often an increase of up to 10%.

With UPI, the stage is set for SmartPhone/POS to go mainstream and for payments to be integrated into business workflows. Businesses will hence make buying decisions not based on Merchant Discount Rates but more by choice of applications, availability of SDK’s, breadth of payment offerings and by trying to quantify ROI and productivity gains. We expect such sales processes to no longer be driven by banks but done more in partnership with Application or Flexible Payment platform providers.

3. Consumers – Win with rich choice of front-end applications

Until now, consumers could only transact with a card issued by their bank (credit/debit/prepaid) or the mobile banking app of their bank. With the 4-party model of UPI, consumers can use any UPI-certified app to transact via their SmartPhone. This is a breakthrough in that consumers will be spoilt for choice and can pick the best app. While the initial restriction is that a bank must develop such apps, there are some examples of banks allowing third parties to build differentiated experiences. Over time it is clear that there will be an abundant supply of apps and consumers can use any app they like. While this might seem like banks are giving up control but in reality banks that develop a partner-ecosystem can benefit the most by getting visibility into transactions with customers who may not even be banking with them. It’s surely a shift from the banks’ perspective but a big opportunity nonetheless.

4. Convergence – Online & Offline

Historically in Card-based systems, there was a lot of importance given to Card Present vs. Card Not Present . However as we move to a “Phone-present” world, there is fundamentally no difference between a face-to-face transaction and a remote transaction. We are already seeing use-cases like Uber where the service is delivered in a face-to-face manner but the payments are processed in an online manner. We expect more and more of this to happen and business wise the system should start treating all payments the same. I expect to see one simple business model for payments in the near-term.

5. New Metrics – Mining the digital exhaust

Business Metrics will change – from Stores to Flows!

The most fundamental thing that will change with UPI is the business metrics. In the past for banks, CASA (Current Account Savings Account) count and balances were always the primary metrics that were tracked, along with Merchant Discount Rates and transaction fees. However in the UPI-enabled world and the four-party architecture, it is clear that the most important isn’t just to be the store of funds, but to be in the flow of the transaction. As such banks will need to start tracking the use of mobile apps by them or partners, use of such apps by existing customers and customers of competitors as well as the use of competing apps by their customers. With switching costs now becoming close to zero, banks that encourage the creation of an ecosystem and giving the maximum choice to their customers are likely to emerge as winners. Mining the digital exhaust will be key for banks to make the most of UPI.

While exciting, it’s still early days in India. UPI has barely gone live in the past one-week, and already we’re seeing some dramatic impact it is having on the system. The next few months and years promise to be truly exciting for the Indian consumer, retail or corporate, as well as the banking sector which stands to gain a great deal from this innovative approach to payments. Indeed the real-time architecture of UPI will truly make it the envy of many a payment regulator and industry expert around the world.

Watch this space, the best is yet to come – but one thing is for sure – UPI will usher in a disruptive step-function in the growth of digital payments in India. There is no precedent from developed economies – India is blazing a new trail and writing the new chapter in the world of Real-Time Payments!

PS: All images are courtesy iSPIRT

Guest Post by Sanjay Swamy, Entrepreneur & Early-Stage VC! IndiaStack Evangelist. Reblogged from here

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Learnings from iSPIRT Product Roundtable: Building a supercharged team in Silicon Valley

How should Indian entrepreneurs think about hiring and scaling teams in Silicon Valley? What are the thorniest hiring challenges? Who should the first hires be? How can founders scale culture globally?

To focus on this topic, iSPIRT  organized its 2nd Bay Area playbook roundtable– “Building a supercharged team in Silicon Valley”. It was moderated by Jaspreet Singh, Founder and CEO of Druva, a leading platform startup that operates across the Bay Area and Pune. Other participants included the founders of RecruiterBox, StrikeDeck, Supply.AI, 42Gears and ShieldSquare.

This blog shares themes that emerged from a discussion focused on Leadership, Hiring, and Growth.

Playbook with JaspreetHiring for wartime is different than for peacetime  

Borrowing from Ben Horowitz’s “peacetime versus wartime CEOs” concept, the group discussed how startup hiring is more like wartime whereas many well-meaning management principles are derived from peacetime environments, where certain scale and stability are assumed. Key ideas discussed included:

  1. In early stages, you just need 10X type talent i.e. women and men who can scale 10X on any problem thrown at them, and those who are 10X aligned with the founder’s vision
  2. Hire those who understand the “truth you know”, are deeply curious and aligned to your mission.
  3. This often means talking to 3-5 candidates to find the right portfolio of skills that works for you
  4. Using a sporting analogy, hire athletes who can scale as player-coaches, versus people coaches
  5. Stress test in interviews with questions as “if you fail in 90 days, where will you fail”?
  6. Recruiting is exactly like sales and founders should use all channels at their disposal including networks, investors/advisors, and personal meetings with talent in critical areas

Leadership and culture strengthen from hard Socratic questions

All the founders in the roundtable observed that scaling personally is the starting point to becoming a great leader and building strong leadership. Key ideas were discussed around how founders can scale.

  1. How do you know that you’re a good leader? One answer proposed was “when teams consistently come to you for advice” and you can see the advice worked.
  2. Startup founders need to balance “dictate” and “debate” – two default modes most founders fall within. Build leadership teams that counter and balance their default modes.
  3. As startups scale, founders should scale by metaphorically poking holes (asking the right business, product, or people questions) versus having a tendency to own every key decision
  4. If a founder really wants to go deep into a functional area (e.g. Product or Marketing) when they already have VPs, it helps to explain why the Founder wishes to own a function, take permission and build the personal trust to go back if things don’t work as planned.
  5. In the era of Slack and smart collaboration tools, having a large span of control, e.g. 7-10 direct reports should not be a problem for most startup founders as they scale employees to >100

Rapid global scaling needs clear processes and a robust culture

When startups rapidly scale across the US and India simultaneously, it can sometimes lead to parallel sub-cultures. The group discussed some best practices that help founders scale truly global companies:

  1. Approaches such as Objectives and Key Results (OKRs) are really helpful to institute discipline early on in a startup. Other processes can include having a dedicated person (e.g. Chief of Staff) to just own India-US communication.
  2. Teaching employees to self-evaluate themselves towards personal progress goals is more helpful than traditional performance management practices
  3. On prioritization, there’s a temptation for founders to take on simple tasks they know well, e.g. writing messaging copy. It helps to instead focus on difficult tasks (e.g. Quote to Cash or Demand Generation) that are critical to scaling
  4. Within a culture of transparency & trust, it is still crucial for founders to trust but verify, because the bar of product or company quality ultimately starts and ends there
  5. While founders offer feedback to employees, the shit sandwich (nice things + criticism + nice things) is far less helpful than being curious and just asking lots of specific question
  6. Team and culture “pull” is like product momentum, if you don’t see it or feel it, it means you probably don’t have the right team in place yet. Teams need to really bond with each other across borders and it is critical for the US team to visit the India team (more than just India teams coming to US).

Book references

Some book references were invoked during the roundtable. Here’s a list of the books mentioned

Good to Great, Jim Collins

The Art of Management, Peter Drucker

Zero to One, Peter Thiel

Only the Paranoid Survive, Andy Grove

The Hard think about Hard Things, Ben Horowitz