Technology product startups, angel and venture market comparisons – US and India

There is a lot of activity and interest in technology product companies in India, as there is in the US. I spent some time reviewing numbers from NVCA, VCCircle and pulled some numbers specifically in the areas of Internet, software, technology products and eliminated services companies. Here is a simple table to keep things in perspective. All sources are at the bottom.

USA

India

Total number of technology (Product & services) companies formed annually (average)

24,169

412

# of companies that secured angel funding

15,233 (1)

65

# of companies that secured seed / early stage from VC

1,682

58

# of companies that secured late stage funding from VC

658

31

I am yet to do any “analysis”. Right now the data validation process is what I am going to embark upon.

What is your analysis.

Relevant Links:

1. Crash Dev – eye of the needle

2. UNH center for angel investment research.

3. NAV Fund John Backus

4. Product Startup Landscape in India from Zinnov . (Thanks Pari!)

5. NVCA National aggregate data for US investments (Excel spreadsheet)

Startups and mentors: How to look for a great technology mentor? & A list of top tech mentors in India

I am going to write a 3 part series on mentorship and technology startups. Rather than write about why you need a mentor or how to engage with a mentor (next series) I thought the first step for most entrepreneurs would be to seek out great mentors.

As an additional bonus, I thought I’d list some good mentors in India so there’s a starting point (not comprehensive). Please feel free to add people who deserve to be on this list via comments (you cannot add yourself, someone has to recommend you, preferably 2 people).

We will focus primarily on technology startup mentors, which are < 2 years old. I believe there are 3 types of mentors you need at this stage: TechnologyMarketing & Industry specific ones – that’s it. Everyone else is a nice to have waste of time.

Why?

Early in your startup, you should be focused on solving a problem and building your product, while at the same time, talking to customers and understanding their pain points. So if you are spending time doing anything else, its a waste. Mentors should help you do these things alone.

So, if you are thinking of getting that CEO of a 3-4 year old company which is doing well, as a mentor, he should fit in one of these buckets, else he a) does not have enough time to give you or b) does not have enough practical knowledge to share.

This post is about technology mentors. The next two posts are on marketing and industry mentors.

Technology mentors should help you think about the solution architecture, build & recruit a great engineering team and understand how to solve complex engineering problems.

I define technology mentors as people who are engineering managers, UX designers, architects & hands-on senior technical staff members in their day jobs. No one else qualifies. I would not put ex-engineering manager (now consultants at large, etc.) on this list. The reason is simple:

If you are not practicing, in the trenches, you don’t know the specifics and tend to give “Gyan” at a high level.

ps. US folks, I am trying to introduce some cool Indian lingo into your vocabulary, so please click on that Wikipedia link about gyan. :)

So how do you look for a great technology mentor?

1. Social proof – GitHub, Hacker News, Hackerstreet.in, HackerRank and Stack Overflow are great places to start. Also seek out folks at offline events such as Startup Weekend, Yahoo Hack Day and other such developer events. Dont look for technology mentors at generic industry or startup events. You dont find good technology mentors there.

2. Look at some awesome product companies – Cleartrip, Flipkart, Komli Media, Yahoo, Google (Map Maker), Microsoft Surface, InMobi, Facebook, etc. Get to know who runs their engineering and technology teams. Find out who their good senior, hands-on, architects and engineering managers are.

3. Reach out through your technical network: E.g. I am trying to solve this complex engineering problem, and we have a few areas where we’re stuck and would love some help. Can you please recommend someone who is a <machine learning expert> who is working on this area at <company name>?

Most good technology mentors I know like to work on really hard engineering problems, so the harder & more unique your problem the more likely you are going to attract a great mentor. Its a self selecting list (which is good) so if someone believes the problem you are trying to solve is not in their interest area, you dont want them anyway.

So now, on to a short list (soon to get long thanks to you all).

<EM> This list is biased right now. These are people I know, like and admire. Please feel free to help other entrepreneurs by recommending good people I dont know to this list. </EM>

Some recommended Engineering manager mentors:

1. Sachin Desai (Ericsson)

2. Mekin Maheshwari (Flipkart)

3. Hari Shankaran (Interview Street)

4. Jayanth Vijayaraghavan (Yahoo)

4. Indus Khaitan (Bitzer)

5. Bharat Vijay (ex Yahoo, Amazon)

6. Amod Malviya (Flipkart)

7. Srinivasan Seshadri (ex Kosmix)

Some recommended Architect / CTO mentors:

1. Dorai Thodla (iMorph)

2. Prateek Dayal (Support Bee)

3. Shivkumar Ganesan (Exotel)

4. Avlesh Singh (Webengage)

Some recommended Cloud (AWS, Google App Engine, Azure):

1. Ravi Pratap (MobStac)

2. Perrraju Bendapudi (Microsoft)

Some recommended design mentors:

1. Sunit Singh (Cleartrip)

Is your company dependent on Innovation? Grow the right Culture First! The rest will take care of itself!

There is a reason, Mark Zuckerberg sits right next to the Summer Intern from University of Waterloo (True Story – Daughter of an Indian friend of mine!). No separate office, no glass windows to look out of!

Sergei Brin and Larry Page are worried sick of “Not Enough Innovation” out of Google!

They all focus on building the right culture for their people so that they can out-innovate their best competitors in the world!

Netflix, Google, Facebook all encourage and even require their employees to engage about 25% of their time in some pet technical project of their own. Some of these turned out to be big money makers, many failed!

Their philosophy is that if you have not failed enough number of times, you are not trying hard enough!

It all goes back to the company culture you build from Day 1! I have done it a number of times putting together engineering groups in multiple companies in Silicon Valley and I have done the same thing in India! If anything it works even better in India, if it is any consolation! Employees loved it and so very highly motivated, especially if they came from other companies in India!

Do you view yourself as the Captain of the ship who just makes very high level decisions and leave your first officers and people who report to them alone to do their jobs? Do you trust them from Day 1 to make the right technical decisions, stepping in only to guide them if they are straying too much from your mission?

Many of us come from a technical background and as engineers, our first instinct is to jump in and make the right decisions for our employees. Wrong!

In other words, do you treat that employee who just joined you straight from college as an adult, expect a lot from them, make sure that they have the hardware and software tools and leave them alone to do their jobs?

High expectations does something magical! The same employee comes in on their own on saturdays and sundays to try out something they have been thinking about. It stops being work for them and becomes something they take ownership for!

Do you praise them in meetings for even minor accomplishments but correct things they do wrong in private?

Do you tell them everyday that you are depending upon them to contribute great ideas to the company, give them time to try them out?

Then you have the right culture for innovation!

However, there are other things that go into this culture working correctly! You need to spend a lot of time hiring ONLY the right people! Make no mistake – Silicon Valley, India or Timbuktu, only 5- 10% of any population are really really good and suitable for innnovative companies. Do you look through 100 resumes and filter out that 5 to 10%? The wrong people can make your innovation train go off the rails, right from the beginning!

You are saying – I am this small company in Chennai – I am competing for talent with Infosys, Wipro and others. How do I get that 5 to 10% cream of the crop.

Guess what? I have done that! Spread your search to Tier 2, Tier 3, Tier4 colleges. Go to Bangalore, Delhi and Mumbai to hire. Simple science, really! If you are trying to hire the 5 – 10% of the best in a population, to increase your chances, you go to more populations. I hired two people from Delhi to come, work in Chennai. Did wonders for my employees. They learned how to help, interact with someone from another language, culture.

There is another reason how diversity helps your innovation. Men and Women think about the same problem differently. Punjabis think differently than South Indians. Assamese and Bengalis are different in thinking than Mumbaikars! All these differences are your real assets. Walk into facebook and Google, you will see employees that represent the United Nations. There is a reason to that madness! Innovation comes from thinking differently and people who solve the same problem in many different ways are your real assets, your keys to innovation!

If you encourage them, give them the broad direction, tools and step away to let them do their jobs, fail often but try different things nevertheless. Works in Silicon Valley, New York, Washington. Works even better in India, if you try it without skipping any of the ingredients.

You never realize how much the Indian work culture has borrowed all the wrong things from our British masters before us. Separate dining rooms for different levels of executives, the “Yes. Sir. No Sir” culture. This kind of thinking is more harmful to your goals than you think!

It can be changed. It all starts with a few companies that start doing it. I am sure there are many companies in India that already do it actively today and are seeing the results.

Culture is often pooh-poohed as something touchy-feely stuff and not suitable for a goal oriented, task oriented company. It is everything in a startup, especially one that wants to Innovate!

Fullerton India – Revolutionizing India

At a time when “Cloud” was still a buzz word and “Platform as a Service” as a category didn’t exist, Fullerton India was looking  for the next generation computing technology to help them build business applications faster, cheaper, better.  Fullerton India stumbled across OrangeScape Platform (formerly known as DimensionN). They realized that the conventional approach to build a whole host of of application in the “White Space” area will be heavily time consuming taking anywhere between 30 to 90 days for an application.

And, added to that complexity, these applications change every other week and change management becomes a huge challenge. OrangeScape helped Fulllerton to fill this gap by providing a platform approach not only to build these new applications, workflows as per their business process but also to frequently upgrade them as the business need changes. Listen to Pramod!

Mr. Pramod Krishnamurthy who as EVP – Technology (2005 – 2010) at Fullerton India Credit Corporation Ltd. (FIC) talks about his discovery of OrangeScape and how he adopted our platform which ultimately resulted in their IT team building business apps faster than they would have done in the traditional mode.

Pramod shares more on this success story over a video here and ends with a message to his peers on cloud adoption and working along with emerging companies. Pramod is currently CTO at Birla Sun Life Insurance.

Watch the Video on the Organgescape blog

TechSparks 2012 Unveils the Top 30 Tech Product Startups from India

TechSparks, the flagship event of Yourstory.in, the biggest tech product startup showcase in India, is now in its 3rd edition. The Grand Finale of TechSparks 2012 was held in Bangalore on September 8th, after the 5 roundtables which were conducted in Mumbai, Delhi, Ahmedabad, Chennai and Hyderabad over a period of 4 months. Techsparks 2012 was presented by Intel in association with Amazon Web Services, Qualcomm, Sequoia Capital, CNBC TV 18 Young Turks and VentureBeat.

Registering more than 800 applications to become a TechSpark, the response was overwhelming and the jury comprising of investors, successful entrepreneurs, industry experts and the Yourstory team had a tough time shortlisting the top 30. Applications were received from all over the country and the diversity was immense. From education to healthcare to cleantech, there were companies in every sector with a common motive – leveraging technology to build great businesses.

The Techsparks 2012 Grand Finale had the theme “The Smartest Way to Scale Up” and the entire day was organized around that. Starting with an introduction from Shradha Sharma, founder of Yourstory.in, the high-on-adrenaline event was given a huge pump by RJ Sriram and DJ Dhruva maintaining the tempo. Shradha’s introduction was followed by an in-depth keynote by Shailendra Singh, MD of Sequoia Capital, who outlined some of the most important factors for ‘Building a Business’. The ensuing Panel Discussion was a highly engaging one with audience actively participating in the discussion. The Panel consisted of Narendra Bhandari (Director, Intel Software and Services Group – Developer Relations (Asia-Pacific)); Shailendra Singh (MD, Sequoia Capital); Gautam Gandhi (Head – New Business Development Emerging Markets, Google); Joe Ziegler (AWS Evangelist for Australia and New Zealand); M. Maheshwar Rao, IAS (Commissioner for Industrial Development and Director of Industries and Commerce, Govt. of Karnataka); Dr. Wido Menhardt (Vice President, Head, Philips Innovation Campus) and was moderated by Ravi Gururaj (Vice President, Cloud Platforms Group, Citrix).

Read the complete story at YourStory.in

How Silicon Valley’s Community Gives Back

Editor’s note: “Silicon Valley is a unique, vibrant intermingling of different ideas and cultures resulting in innovation coming from all parts of the world,” says Raju Reddy, executive vice president of global services at Hitachi Consulting. And it was the ideal location for the recent Sevathon 2012, the annual walkathon that brought together more than 60 Bay area profit organizations to raise funds for nonprofit orgs. In this interview, Raju shares insights about the Indian technology community in both the valley and in India and how U.S. technology companies can get involved in “giving back” and helping others.

SandHill.com: My Internet search reveals that you’ve been very involved in helping young entrepreneurs for many years.

Raju Reddy: Professionally, for me, mentoring others is very important. Like other entrepreneurs in Silicon Valley, I’ve been a big beneficiary of people giving back. Many entrepreneurs in Silicon Valley kind of take it for granted, but we’re surrounded by such a wonderful infrastructure of people and organizations to help build a company. I have always really appreciated that and tried to work with other entrepreneurs and help them build companies.

I spent about 10 years in Intel before I started my own company, Sierra Atlantic, in 1993. We were venture funded by NEA, Walden and GE Capital, and I had some great board members and mentors. At the end of 2010 Hitachi bought my company. I also had been mentoring an entrepreneur in Toronto, and that startup was successfully acquired by Intel about the same time as the Sierra Atlantic acquisition. Currently I serve on the board of RedBus and GharPay, both in the consumer Internet space.

Read the complete post at Sandhill.com

Techcircle SaaS Forum 2012 announces top 10 SaaS startups in India

If there is one area within the new-age technology that is red hot right now, it is software-as-a-service or SaaS – both in terms of startup activity and as a tool for entrepreneurs to build a low-cost business from scratch. Techcircle.in has come up with a listing of India’s top 10 emerging SaaS companies who have shown significant market traction, created unique products or services that can disrupt existing markets and most importantly, have a very high potential to make it big in the coming years. The listing has been compiled by a distinguished jury comprising Shailendra Singh, MD, Sequoia Capital; Manik Arora, MD, IDG Ventures and Mukund Mohan, an active angel investor. These 10 companies have also showcased their products during Techcircle Runway at Techcircle SaaS Forum 2012, in Bangalore on Aug 31. Here are brief notes on the 10 startups (note: this not a ranking, the companies are arranged in alphabetical order).

Read the complete post at TechCircle.in

Who are the “early adopter” Venture Capitalists in India

Like you, I assumed that all VC’s are risk takers. I mean as an asset class if you have to provide the highest returns over the long term, I would suspect you have to take big risks to get big returns. The average Indian bank has been giving around 8% annual returns on FD (source), real estate returns about 13%, and gold loan providers will give you close to 15% I am told. So, VC as an investment class should offer higher returns given how ill-liquid they are and how risky they tend to be.

So, how do you really measure if a VC is an early adopter versus a late adopter? (lets keep it simple and only put them into 2 categories).

My thinking is the only way you can do that is to look at their investments (portfolio companies) and find out the categories of companies they invested in. Then find out if any other VC’s invested in another company in that category after the “first” VC did. There are other ways to do that, like ask entrepreneurs who responded the fastest when they were looking for funds, but those dont evaluate who puts their money where their mouth is.

Why is this question useful to answer?

For entrepreneurs who are innovating in a new area, this list of early adopters will help you determine who you should go to first versus who should you expect will fund a possible competitor.

Lets define our methodology and assumptions:

1. We will look at all their websites and make a list of the Indian VC portfolio. Fortunately we have that list of over 50 VC’s in India.

Flaw: Many dont update their website as frequently so there may be a 20% (or higher) error, but I have tried to be comprehensive.

2. We will then categorize their investment into 5 buckets – Media and content, eCommerce, Business to Business, Mobile and other (Education, Healthcare, etc). This is important so we know not only which VC’s are early adopters but we can also try to find that out by sector.

3. Then we will look at the announcement dates of their funded companies from press releases, Unpluggd, YourStory, ET and VCCircle. We will give them 2 points for every investment done in a sector before any other VC did.

Flaw: Most (I suspect over 50%) of companies report their funding 3-6 months after they have raised the money, so this will be a large flaw, but lets do the analysis anyway.

4. Finally look at stage of investment. If a VC puts money in the series A, I would give them two points in the early adopter bucket. If, however they participated in series B or later, they get one point in the late adopter bucket.

First let me give you the results (not in any order other than early adopters vs. late adopters).

Early adopters VC’s.

  • Accel (eCommerce, B2B) – 78 points
  • Indo US Venture Partners (B2B) – 56 points
  • Saif partners (Mobile, eCommerce), but they are late adopters in B2B – 49 points
  • Venture East (B2B) – 45 points
  • Sequoia (Media) – 46 points
  • Seedfund (Scored enough, but dont have a clear winning category) 42 points

In the middle

  • Blume ventures – 40 points
  • Nexus Venture partners – 36 points
  • Helion – 36 points
  • Ojas ventures – 34 points

Later adopter VC’s – all scored less than 30

  • Bessemer Venture Partners
  • DFJ
  • Cannan partners
  • India Innovation fund
  • Inventus Capital
  • Footprint ventures
  • IDG ventures
  • India Internet Fund
  • Lightspeed partners (but have done well in Education)
  • Norwest
  • Sherpalo

What I hope this list will do?

1. Make Indian VC’s think about being innovation catalysts rather than ambulance chasers. I understand you have a responsibility to provide returns, but you also have a responsibility to grow the Indian startup ecosystem. Might I suggest a 5-10% of your portfolio towards risky, “first time this is going to happen” investments?

2. Make Indian company founders announce their funding. Unlike the US, here entrepreneurs are loathe to do so. I can understand the competitive pressures, but not doing any announcement is just lame.

3. Educate Indian entrepreneurs on their target VC list. Depending on the opportunity you are trying to pursue, please target the right VC firm. The only thing you have (and dont have) on your side is time. Use it judiciously.

P.S. I have confidence in the methodology but I would be the first to admit its neither comprehensive nor scientific. If you are an eager MBA / Engineer / analyst and would like to help make this methodology and analysis more robust, I’d love your help. You can take all the credit. In fact, I can convince many publications to give you credit for the work if you desire and if you keep it updated every 3-6 months.

P.P.S. If you are a VC and not in the early adopter list, or you are not happy with the analysis I’d also welcome your associate’s help in making this analysis robust.

The frustration of “lack of progress” with your product

On the outside looking in, its extremely frustrating to hear of product teams shipping product multiple times a day.

I tend to often question: “What in devil’s name am I doing wrong”?

  • Is it that I have not defined the product requirements right?
  • Have we hired the wrong people? Does our team not have enough experience?
  • Is our culture not supportive of mistakes?
  • Are we not focusing on the right things?
  • Do we not have the capability to get stuff done quickly?

Experience with multiple startups has taught me that its ignorant to compare your company with others (who might have stated at the same time) who have more “visible progress” than yours does.

But I hate that experience.

Its hard not to compare and question why is someone else doing so well with a smaller team than you have.

Experience has also taught me that startups for most parts (like kids) have a step function in progress. Its rarely a smooth “up and to the right”.

I hate that experience as well.

Should all that experience not make the next go around a lot smoother?

So the question – “What the value of all that experience”?

There’s only one answer – Its overvalued.

There’s one solution to most of these questions and although it is a cliche and often repeated, the answer is “Hire right” – whether its consultants or contractors or full-time employees, you need to constantly evaluate and hire the right people.

So, how do you hire right? And how do you define “right”?

So lets start with not the job description, but with your culture and values. Hire the right person that fits your culture and can align with your values.

If you culture is defined by moving fast, hire and attract people that can do that.

How do you determine if someone “fits” your culture if all you can do is interview them for 1 hour or so?

Write down questions to situations where you feel your culture will make them act one way versus the other. Ask those questions during the interview.

Depending on the answer to those questions you can determine if they can align.

What I have learned is people rarely change. So its hopeless to expect someone who is not a good cultural fit, to come in and get “religion”.

Original Post can be accessed at BestEngagingCommunities.com

The Product Business is Like the Movie Business

I read the cover story in Forbes on the success of Dropbox, which is set to do about $240 million in sales in 2011, with only 70 employees. As Forbes points out, that is about 3x the revenue per employee of Google, which is no slouch in the revenue per employee department itself. First, congratulations, Dropbox! This is the type of breathtaking number that makes the ordinarily successful companies like, well, Zoho, to wonder “What are we doing wrong?”

In our 15 year history in Zoho Corporation – which is bigger than the Zoho product suite itself – we have shipped over 70 products, of which we would say about 30 have been successful in the sense of being nicely profitable. Yet, even with that group of 30 products, we have seen the 10x effect: a set of two products that have taken approximately the same amount of effort to build, by similarly situated teams, yet one of them does 10x the sales of the other, with both of them being profitable. Of course the 10-bagger is much more profitable but the key point is that both of them could be counted as successful in the sense of being profitable. We have even seen 100x difference for approximately the same effort, but in our case, that is the difference between doing only $100K a year in sales vs $10 million a year, and I would not count that as 100x because the $100K product either grows up or we would eventually discontinue it because it is not profitable.

Dropbox is a logical extension of this phenomenon, where a product does 100x the sales, without taking much more by way of engineering effort than a profitable 1x product. And then the grand daddy of them all – Google search, which in its heyday reached $1 billion in sales, on not much more than the effort of a single engineering team – the headcount gets added later to diversify the company but the original search was a small team. I believe there has only been one Google search so far, so the ordinarily successful (ahem!) shouldn’t feel too bad.

Y Combinator, which has funded over 300 companies so far, is a perfect illustration. All these teams are similarly situated, with similar founder profiles and they all get similar initial funding, and they spend similar initial effort. If we consider only the universe of profitable YC companies, my guess is that so far there is only one 100-bagger i.e Dropbox, in the YC portfolio. Based on Zoho experience, I would estimate YC has about ten 10-baggers, and about fifty one-baggers (i.e just about profitable).

Welcome to the product business, which looks very much like the movie business!

Indian Software Startups Similar to Excitement of Late-90s Silicon Valley

Editor’s note: Sharad Sharma and M.R. Rangaswami are co-hosts of the NASSCOM Product Conclave 2011 (November 8-10, 2011), a must-attend event for software product startups. Now in its eighth year, more than 1,200 delegates from 600+ companies are expected to attend. Sharma and Rangaswami share with SandHill readers their insights on what’s happening in this dynamic market – and why U.S. buyers and software execs should keep the Indian startups on their radar screen.

One of the keynote speakers at the NASSCOM Product Conclave a couple of years back was Guy Kawasaki. In his recently published his book, “Enchantment,” he wrote that our Conclave was one of the most interesting that he had attended in the last few years because of the energy at the conference. And the energy this year is already really high. That’s because, in some respects, the Indian software products industry today is where Silicon Valley was in the 1997-98 time frame.

The Valley then was in a different era of entrepreneurship. There was enormous excitement about where the future of the world was headed and the role that the Valley could play in that. India is somewhat like that in the context of what’s happening now and the role that its software products industry can play in the economic future of India and the rest of the world. It’s a very exciting time.

Original Post at Sandhill.com