An Afternoon With Don Norman In Bengaluru

Are you building products for the everyday user? Is it becoming harder and harder to manage complexity while maintaining usability? How do you design a sustainable system for a complex multi-stakeholder environment? How do you teach a user to use your product with good design? How do you reinvent an established business model in light of rapidly evolving markets and technological possibilities? How do you design a product to be truly human-centric?

If any of these questions sound relevant to you, here’s an opportunity to seek answers on 22nd February in Bengaluru! 

About Don Norman

Dr Don Norman is a living legend of the design world having operated in the field for over 40 years. He has been Vice President of Apple in charge of the Advanced Technology Group and an executive at both Hewlett Packard and UNext (a distance education company). Business Week has listed him as one of the world’s 27 most influential designers. Dr Norman brings a unique mix of the social sciences and engineering to bear on everyday products. At the heart of his approach is human and activity-centred design, combining knowledge of cognitive science, engineering, and business with design.

Presently, he is Director of the recently established Design Lab at the University of California, San Diego where he is also professor emeritus of both psychology and cognitive science and a member of the Department of Electrical and Computer Engineering. He is also the co-founder of the Nielsen Norman Group, an executive consulting firm that helps companies produce human-centred products and services.

ProgrammeTalk

Don will share valuable insights about his interactions with Indian people, products and experiences.

Fireside Chat

An informal discussion with Don about his learnings and experiences spanning his long and illustrious career.

How to participate?

We’re inviting engineers, product managers, designers and everyone else who is building for large scale impact.

If you would like to further your understanding of human-centric design and hear straight from the horse’s mouth, please register here by 18th February. (An invite will be sent out to selected participants by 21st February)

iSPIRT Presents Poster Session & Product Discussion With Don Norman

Don Norman, the pioneer of design in the 21st century, is visiting India. Presenting you with an opportunity to engage with the living legend in a closed-door interaction where you can discuss your solution/product and get unbiased feedback on 20th February 2019 in Bengaluru. 

We’re looking for solutions in the social space that are building for the next 500 million in India.

About Don Norman

Don Norman is Director of the recently established Design Lab at the University of California, San Diego where he is also professor emeritus of both psychology and cognitive science and a member of the Department of Electrical and Computer Engineering. He is the co-founder of the Nielsen Norman Group, an executive consulting firm that helps companies produce human-centered products and services. He is an honorary professor of Tongji University’s College of Design and Innovation (Shanghai). He serves as an advisor and board member of numerous companies and organizations. Norman has been Vice President of Apple in charge of the Advanced Technology Group and an executive at both Hewlett Packard and UNext (a distance education company).

Agenda

Poster session  – Show us what you’re working on and how your solution is better in a poster format.

Product Teardown – Engage with Don over your product and discuss what you’re doing well and what can be done better.

If you are interested or know someone who would be interested in growing through this experience, please do register or help them register here by 15th February 2019. Since this is a curated event and there are limited seats we would request you to kindly apply at the earliest. (An invite confirmation will be sent shortly after registration)

For further query, you can write to us at [email protected]

A Platform is in the Eye of the Beholder

The distinction between whether you are building a platform or a product should be made primarily to align your internal stakeholders to a particular strategic direction, as we learned in the recent iSPIRT round table.

[This is a guest post By Ben Merton]

“So are we a platform, or are we a product?” I said last month to my co-founder, Lakshman, as we put the finishing touches to our new website.

We’d been discussing the same question for about a year. The subject now bore all the characteristics of something unpleasant that refuses to flush.

However, the pressure had mounted. We now had to commit something to the menu bar.

“I think we’re a product.”

“But we want to be a platform.”

“Okay, let’s put platform then…But isn’t it a little pretentious to claim you’re a platform when you’re not?”

Eventually, we agreed to a feeble compromise: we were building a platform, made up of products.

Job done.

At least, that is, until #SaaSBoomi in Chennai last month.

Manav Garg, who has considerably more experience than both me and Lakshman at building platforms, put up the following slide:

Product = Solving a specific problem or use case

Platform = Solving multiple problems on a common infrastructure

“Here we go again”, I could hear Lakshman say to himself after I Whatsapped him the image.

“That’s his definition. It doesn’t have to be ours,” he replied tersely, “What does he mean by ‘use case’, anyway?”

“I don’t know.”

I’m in awe of the entrepreneurs who seem to bypass these semantic quandaries.

You know, the ones who say stuff like “Stop thinking so much. Just sell stuff. Make customers happy.”

For me, these are the type of questions I need to chew over for hours in bed at night.

I was therefore excited to be invited to the iSPIRT round table at EGL last week, where the topic of discussion was “Transform B2B SaaS with #PlatformThinking”. The roundtable was facilitated by iSPIRT mavens Avlesh SinghShivku Ganesan & Sampad Swain.

It takes a lot to get 20 tech founders & their leaders to travel after work from all over the city to sit in a room for three hours with no alcohol.  Fortunately, the organisers had promised a lot.  The topic description was:  

“Enable a suite of products, high interoperability, and seamless data flow for customers. This peer-learning playbookRT will help product to platform thinkers develop an effective journey through this transformation” was the topic description.”

The meeting was governed by Chatham House rules, meaning we can’t discuss the name or affiliation of those involved.

However, along with our founder mavens of large, well-known Indian technology businesses, there were 15 or so less illustrious but equally enthusiastic founders (& their +1s), including myself.

The discussions started with an overview of the experiences and lessons that had been learned by some of those who had successfully built a platform.

“We define a use case as a configuration of APIs…” the founder of a cloud communication platform started. This was going to be interesting.

“Why did you define it that way?” I asked.

“Based on observations of our business.”

I began to understand that the term ‘use case’ was being used differently by platform and product companies.  

“A use case of a platform is usually tangential but complementary to the core business. A use case for a product is something that just solves a problem,” someone clarified, guaranteeing me a slightly more restful night.

As the discussions continued, it also became clear that there were a large number of possible markers that distinguish a platform from a product, but there was no agreement on the exact composition.

To resolve the impasse, we listed out the names of well-known technology companies to build a consensus on whether they were a platform or a product.

Suffice to say, we failed to reach any consensus.  The conversation went something like this:

“Stripe?”

“Platform.”

“Product.”

“A suite of products.”

“AirBNB?”

“A marketplace.”

“A marketplace built on a platform.”

Etc etc

Even companies that initially appeared to be dyed-in-the-wool platforms like Segment and Zapier eventually had someone or the other questioning the underlying assumptions.

“Why can’t they be products?” murmured voices of dissent at the back of the room.

This was going nowhere. A few people sought solace from the cashew nuts that had been placed on conference table in front of us.

“Does the customer care whether you’re a product or a platform?” someone said.

Finally, something everyone could agree on. The customer doesn’t care.  Your product or platform just needs to solve a problem for them.

“Then why does any of this matter at all?” became the obvious next question.

“I found it mattered hugely in setting the direction of the company, especially for the engineering and design teams,” the Co-Founder of a large payment gateway said.

“And investors?”

“Yes, of course. And investors. However, I think the biggest impact that our decision to build a platform had on my business was in the design more than anything else,” he explained, “For the engineering team, it was just a question of ‘we need this to integrate with this’. But the UX/UI and the…language… needed to be thought about very carefully because of this decision.”

“So, in effect, the platform/product debate is primarily a proxy for the cultural direction of the company?”

“Exactly.”

Logically, therefore, the only way you can really understand whether a company is a platform or a product is to have an insight into the direction its management wishes to take it.

A company might appear to be a product from the outside but, since it intends to evolve into a platform, it needs to start aligning its internal stakeholders to this evolution much earlier.

“So, a startup like mine should call itself a platform even if we are years away from actually being one?” I asked cautiously after I had enough time to process these insights.

“Yes,” was the resounding, satisfying response that virtually guaranteed me a full night’s sleep.

“And when should the actual transition from product to platform happen?”

“Well, Jason Lemkin says it should happen only when your ARR reaches USD 15m-20m, but that’s just another of those rules that doesn’t apply in India,” the co-founder of a marketing automation software said.

“The important thing is that this transition – when it does happen – is very hard for businesses,” he continued, “There is a lot of risk, but it opens up new revenue streams, helps you scale and build a moat.  We hugely benefited from our decision to become a platform, but it was tough.”

It’s unlikely that we completely resolved the product vs platform debate for all founders. However, I feel that all of us came away from that meeting with a deeper insight into the subject.

Ultimately, whether you’re building a product or a platform will depend on your perspective. Most companies lie somewhere in between.

Where does your company lie on this sliding scale? And if that makes you a platform vs. a product, does it make any difference to the way you think?

We want to thank Techstars India for hosting the first of the roundtables on this critical topic.

Ben Merton

Ben is a Co-Founder of Unifize, a B2B SaaS company that builds a communication platform for manufacturing and engineering teams. He is also a contributor for various publications on business, technology and entrepreneurship, including the Wall Street Journal, the Financial Times and Business Standard. You can follow him on LinkedIn here, and Twitter here.

© Ben Merton 2018

Featured Image: Source: https://filosofiadavidadiaria.blogspot.com/2018/01/o-principio-mistico-da-verdadeira-causa.html

iSPIRT’s Response to Union Interim Budget 2019

Our policy team tracks the interest of Software product industry

INDIA, Bangalore, Feb 1st, 2019 – Proposals for Union budget of 2019 have been announced today by Finance Minister.

Being an interim budget not many announcements were expected. Some of the important announcements that may affect the expansion of the economy, in general, owing to increased income and ease of living in the middle class are as follows:

  1. Within two years tax assessment will be all electronic.
  2. IT return processing just in 24 hours
  3. Rebate on taxes paid for those with an income below 5 lakhs
  4. TDS threshold on interest income by woman on bank/post office deposits raised from Rs. 10,000 to 40,000
  5. Increase in standard deduction from Rs. 40,000 to 50,000
  6. Rollover of Capital gains tax benefit u/s 54 from investment in one house to two houses, for a taxpayer having capital gains up to Rs. 2 crore
  7. Recommendation to GST Council for reducing GST for home buyers
  8. Exemption from levy of tax on notional rent, on unsold inventories, from one year to two years
  9. Many benefits announced for Agriculture and Rural sector

The coining of the phrase “Digital Village” and placing it second on the list of ten-dimension vision statement in budget speech is a welcome step. The statement nudges the next Government to improve access to technology in rural India, a welcome step. We expect “Digital India” and easy and quality access to the internet for every citizen will remain a focus area, irrespective of which government comes to power.

The government has announced a direct cash transfer scheme for farmers. We are happy to see that technologies like the India Stack are being used by policymakers for effective policy-making irrespective of political ideology. Cash transfers promise to be more efficient initiatives that directly benefit our poor without needing them to run from pillar to post trying to prove their identity and eligibility. “Similarly, startups and SMEs remains a focus area in the vision statement. These are very important for a healthy ecosystem built up.

Similarly, focused phrases such as “Healthy India”, “Electric Vehicle” and “Rural Industrialisation using modern digital technologies” are welcome ideas in ten-dimension vision for Indian Software product industry and startup ecosystem.

However, among key issues for Startups and Investments which need to be addressed but have been missed out are Angel tax and Tax parity between listed and unlisted securities. Angel Tax is a very important issue which needs to be addressed conclusively at the earliest. We need to ensure gaps between policy declaration and implementation do not cause entrepreneurs and investors to relocate themselves aboard.

About iSPIRT Foundation

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

For further queries, reach out to Nakul Saxena ([email protected]) or Sudhir Singh ([email protected])

SaaS 3.0 – Data, Platforms, and the AI/ML gold rush

An impending recession, the AI/ML gold rush, Data as the new oil, SaaS Explosion…
The SaaS landscape is changing rapidly and so are the customer expectations!

18 months ago, I came across a message that India is a premier hub for global B2B SaaS, just like Israel is a hub for cybersecurity. At first, I did not think much of it, but after having interacted with many SaaS founders and observing their painful growth journey, I realized the potential in these words. Yet, a series of market shifts are changing the world order of SaaS putting at test India’s position as a premier hub for SaaS.

TL;DR

The SaaS 3.0 market shifts are changing how global customers perceive value from SaaS products:

  • Tools which provide higher levels of automation & augmentation are valued more.
  • Comprehensive solutions in place of single point products is a preference.
  • Interoperability across the gamut of systems is an expected norm.

Startups, you have to build your new orbit to solve for these evolving needs. First, focus on delivering a 5x increase in customer value through an AI-enabled proposition. Next, build your proprietary data pot of gold, which can also serve as a sustainable moat. Lastly, leverage platforms & partnerships to offer a suite of products and solve comprehensive customer scenarios.

Read more on how the convergence of market shifts are impacting SaaS 3.0.

Quick background

While the SaaS industry began over 2 decades ago, many say it is only now entering the teenage years. Similar to the surge of hormones which recently brought my teenage daughter face-to-face with her first pimple. And she is facing a completely new almost losing battle with creams and home remedies. In the same vein, convergence of several market shifts – technology, data, economics, geopolitics – combined with deep SaaS penetration is evolving the industry to a new era. This rare convergence – like the convergence of the nine realms in Thor Dark World – is also rapidly changing how customers perceive the capability of SaaS products.

Convergence #1 – SaaS penetration is exploding!

I learned from Bala at Techstars India that they received a record number of applications for their first accelerator program. 60% of these were building or ideating some form of B2B SaaS offering. It would seem to justify the message above, that SaaS in India has grown legs, building a true viral movement, replicating momentum. Yet in these large numbers, there is also a substantial ratio of repetitive products to innovations. Repetitive in say building yet another CRM, or mindlessly riding a trend wave such as chatbots. Without an increased pace of innovation beyond our existing successes, we cannot continue to be a premier hub.

In 2018 SaaS continued to be the largest contributor to cloud revenue growth at 17.8% (it was down from 20.2% in 2017). Competition is heating up in all categories of SaaS. 10 years ago, an average SME customer was using 2 apps, now it averages at 16 apps. 5 years ago, a SaaS startup had on average 3 competitors, now a SaaS startups averages at 10 customers right out the door. Many popular SaaS categories are  “Red Oceans”. Competing in these areas is typically on the basis of features or price, dimensions which are easy for any competition to catch up on. There is a need for startups to venture deeper into the sea and discover unserved & unmet customer needs in a “Blue Ocean” where they have ample opportunity to fish and build a sustainable moat.

AppZen started with an opportunity to build conversational chatbots for employees, helping them in an enterprise workflows on various aspects like sales & expenses, and several other companies are doing the same. But as they went deeper to understand the customer pains, they were able to identify an unserved need and pivoted, leveraging the same AI technology they had built, to solve for T&E expense auditing. Being a first mover to solve this problem, they are carving out leadership in this underserved space and is one of the fastest growing SaaS startups of 2018.

Convergence #2 – Impending recession in 2019/2020!

On average recessions come every four years and we are currently 9 years from the last recession. The war between the Fed vs the US govt on interest rates, the recent US govt shutdown on a frivolous $B wall, the tariff and trade war between the US and China, are all indicative reasons for an upcoming recession. In such an uncertain economy, customers experience reduced business activity and alter their behavior and preferences:

  • Customers will become crystal clear about satisfying their core needs versus nice-to-haves.
  • They will seek high automation tools to help not only cut costs but also to make strategic decisions for an upside.
  • Many will prefer a suite of tools instead of buying multiple single point products.
  • They will also slow down POC, investment, partnership activities.

In a way, this is mixed news. Companies often pursue low-cost digital products with SaaS being a natural choice. However, combined with the competitive SaaS landscape, businesses become very selective. To be recession-proof startups must:

  1. Collaborate and partner with other vendors to build a shared view of the larger customer scenarios. Innovate to share (anonymized) data/intelligence.
  2. Partner to deliver a comprehensive solution instead of solving for a gap. 
  3. Invest & experiment in building solid AI-enabled automation for improving efficiency and decision making.

E.g. Clearbit’s approach to provide API and allow customers to leverage the value it provides, by integrating with common platforms such as Slack or Gmail which customers frequently use. In this approach they are reducing app switching and embedding the niche usecase into the larger customer workflow environment.

Another e.g. Tact.ai is helping increase sales team efficiency and bring visibility of field data to the leadership team. They are not only solving the core salesforce data entry problem for field sales, but with better data in the system, businesses now get better visibility about sales activities and can take effective strategic decisions.

Convergence #3 – the AI/ML gold rush!

During the dot com & mobile rush in early 2000, I watched many a friend jump ship to build a startup. At that time the web was flush with rich content, but the mobile web was in its early growth and innovative ways to bring web content onto mobile phones were being explored. Automated conversion of HTML to WML was a hot topic. But the ecosystem conditions were not aligned for completely automated WML transformations. Several startups in this space including my friend’s startup shut for such reasons.

More recently in 2016-17 Chatbots were projected to be the next big thing and it too suffered from similar misalignment. Chatbots were the first attempt to bring AI/NLP for customer interaction. However, they lacked the depth of ecosystem conditions to make them successful. 

  1. Bots were treated as a panacea for all kinds of customer interactions and were blindly applied to problems. 70% of the 100,000+ bots on Facebook Messenger fail to fulfill simple user requests. This is partly a result of not focusing on one strong area of focus for user interaction.
  2. Bots were implemented with rule-based dialogues, there was no conversational design built into it. NLP is still in its infancy and most bots lacked data to provide meaningful interactions. They were purely a reflection of the level of detail and thought that went into the creation of the bots.

AI/ML, however, is suffering from the “hype” of an “AI/ML hype”. There is a considerable depth within the AI/ML ecosystem iceberg. Amazon, Google, Microsoft…OpenSource are continuously evolving their AI stack with higher and higher fidelity of tools & algorithms. You no longer need fancy degrees to work the AI tools and automate important customer workflows or scenarios. 

Yet it is easier said than done. Most startups on the AI journey struggle to get sufficient data to build effective ML models. Further, data privacy has increased the complexity of sharing data, which now resides in distant silos. While internal proprietary data is a rich source of patterns, often times it is incomplete. In such cases, entrepreneurs must innovate, partner, source to build complete data as part of their data collection strategy. A strong data collection strategy allows for a sustainable moat. 

AIndra multiplied 7000 stains into 7M data points by splitting into microdata records. DataGen a startup in Israel, is generating fake data to help startups train models. The fake data is close enough to real data that the use is ethical and effective. Startups like Datum are building data marketplaces using blockchain to democratize data access. 

As mentioned many of the AI tools are limited in their constraints. Meanwhile, getting familiar with the capabilities and limitations of the necessary tools will help form a strategy path to solving the larger customer scenarios. 

Tact.ai faced the constraint by the limitations of the Alexa API. However, instead of building their own NLP they focused on working around the constraints, leveraging Alexa’s phrase based recognition to iteratively build value into their product. During this time, they continue to build a corpus of valuable data which will set them up for high growth when the NLP stack reaches higher fidelity.

Solving for the Hierarchy of Customer Needs

The convergence of SaaS penetration, AI/ML, data & privacy, uncertain economy & global policies… the customer expectations are rising up the Maslow’s hierarchy of needs. SaaS 1.0 was all about digital transformation on the cloud. SaaS 2.0 focused on solving problems for the mobile first scenarios. In the SaaS 3.0 era, the customer expectations are moving to the next higher levels. They will:

  • Prefer comprehensive solutions in place of single point products.
  • Expect interoperability across the gamut of systems.
  • Need tools which provide higher levels of automation & augmentation.

For startups who want to fortify their presence in the SaaS 3.0 era :

  1. Begin with a strong AI value proposition in mind, regardless if it is AI-first or AI-second. Articulate the 5x increase in value you can deliver using AI, which wasn’t feasible without AI. 
  2. Build your proprietary data pot of gold. And, where necessary augment with external data through strategic partnerships. A strong data lever will enable a sustainable moat. 
  3. Leverage platforms & partnerships to offer a suite of products for solving a comprehensive customer scenario.

Remember it is a multi-year journey, Start Now!

 

I would like to acknowledge Ashish Sinha (NextBigWhat), Bala Girisabala (Techstars India), Manish Singhal (Pi Ventures), Suresh Sambandam (KiSSFlow), and Sharad Sharma (iSPIRT) who helped with data, insights and critical feedback in crafting this writeup. Sheeba Sheikh (Freelance Designer) worked her wonderful illustrations which brought the content to life. 

Interesting Reads

India’s Health Leapfrog – Towards A Holistic Healthcare Ecosystem

In July 2018, NITI Aayog published a Strategy and Approach document on the National Health Stack. The document underscored the need for Universal Health Coverage (UHC) and laid down the technology framework for implementing the Ayushman Bharat programme which is meant to provide UHC to the bottom 500 million of the country. While the Health Stack provides a technological backbone for delivering affordable healthcare to all Indians, we, at iSPIRT, believe that it has the potential to go beyond that and to completely transform the healthcare ecosystem in the country. We are indeed headed for a health leapfrog in India! Over the last few months, we have worked extensively to understand the current challenges in the industry as well as the role and design of individual components of the Health Stack. In this post, we elaborate on the leapfrog that will be enabled by blending this technology with care delivery.

What is the health leapfrog?

Healthcare delivery in India faces multiple challenges today. The doctor-patient ratio in the country is extremely poor, a problem that is further exacerbated by their skewed distribution. Insurance penetration remains low leading to out-of-pocket expenses of over 80% (something that is being addressed by the Ayushman Bharat program). Additionally, the current view on healthcare amongst citizens as well as policymakers is largely around curative care. Preventive care, which is equally important for the health of individuals, is generally overlooked.  

The leapfrog we envision is that of public, precision healthcare. This means that not only would every citizen have access to affordable healthcare, but the care delivered would be holistic (as opposed to symptomatic) and preventive (and not just curative) in nature. This will require a complete redesign of operations, regulations and incentives – a transformation that, we believe, can be enabled by the Health Stack.

How will this leapfrog be enabled by the Health Stack?

At the first level, the Health Stack will enable a seamless flow of information across all stakeholders in the ecosystem, which will help in enhancing trust and decision-making. For example, access to an individual’s claims history helps in better claims management, a patient’s longitudinal health record aids clinical decision-making while information about disease incidence enables better policymaking. This is the role of some of the fundamental Health Stack components, namely, the health registries, personal health records (PHR) and the analytics framework. Of course, it is essential to maintain strict data security and privacy boundaries, which is already considered in the design of the stack, through features like non-repudiable audit logs and electronic consent.

At the second level, the Health Stack will improve cost efficiency of healthcare. For out-of-pocket expenditures to come down, we have to enable healthcare financing (via insurance or assurance schemes) to become more efficient and in particular, the costs of health claims management to reduce. The main costs around claims management relate to eligibility determination, claims processing and fraud detection. An open source coverage and claims platform, a key component of the Health Stack, is meant to deal with these inefficiencies. This component will not only bring down the cost of processing a claim but along with increased access to information about an individual’s health and claims history (level 1), will also enable the creation of personalised, sachet-sized insurance policies.

At the final level, the Health Stack will leverage information and cost efficiencies to make care delivery more holistic in nature. For this, we need a policy engine that creates care policies that are not only personalized in nature but that also incentivize good healthcare practices amongst consumers and providers. We have coined a new term for such policies – “gamifier” policies – since they will be used to gamify health decision-making amongst different stakeholders.

Gamifier policies, if implemented well, can have a transformative impact on the healthcare landscape of the country. We present our first proposal on the design of gamifier policies, We suggest the use of techniques from microeconomics to manage incentives for care providers, and those from behavioural economics to incentivise consumers. We also give examples of policies created by combining different techniques.

 

What’s next?

The success of the policy engine rests on real-world experiments around policies and in the document we lay down the contours of an experimentation framework for driving these experiments. The role of the regulator will be key in implementing this experimentation framework: in standardizing the policy language, in auditing policies and in ensuring the privacy-preserving exchange of data derived from different policy experiments. Creating the framework is an extensive exercise and requires engagement with economists as well as computer scientists. We invite people with expertise in either of these areas to join us on this journey and help us sharpen our thinking around it.

Do you wish to volunteer?

Please read our volunteer handbook and fill out this Google form if you’re interested in joining us in our effort to develop the design of Health Stack further and to take us closer to the goal of achieving universal and holistic healthcare in India!

Angel Tax Notification: A Step In The Right Direction, But More Needs To Be Done

There have been some notifications which have come out last week, it is heartening to see that the government is trying to solve the matter. However, this is a partial solution to a much larger problem, the CBDT needs to solve for the basic reason behind the cause of Angel Tax (Section 56(2)(viib)) to be able to give a complete long-term solution to Indian Startups.

While the share capital and share premium limit after the proposed issue of share is till 10 crores and helps startups for their initial fundraising, which is usually in the range of Rs 5-10 Cr. Around 80-85% of the money raised on LetsVenture, AngelList and other platforms by startups is within this range, but the government needs to solve for the remaining 15-20% as startups who are raising further rounds of capital, which is the sign of a growing business, are still exposed to this “angel tax”. Instead, the circular should be amended to state that Section 56(2)(viib) will not apply to capital raises up to Rs 10 Cr every financial year provided that the startups submit the PAN of the investors.

The income criteria of INR 50 lakhs and net worth requirement of INR 2 crores is again a move by the government that requires further consideration for the investing community. Therefore, to further encourage investments by Angels or to introduce new Angels to the ecosystem, there is a need to look towards a reduced income criterion of INR 20 Lakhs or a net worth of INR 1 crore, enabling more investors for a healthier funding environment. We also, need to build a mechanism to facilitate investments by corporates and trusts into the startups.

Most importantly, any startup who has received an assessment order under this section should also be able to for the prescribed remedies and submit this during their appeal. They should not be excluded from this circular since its stated scope is both past and future investments. The CBDT should also state that the tax officers should accept these submissions during the appeals process and take it into consideration during their deliberation.

So, to summarise:

  • Section 56(2)(viib) should not apply to any investment below Rs 10 crore received by a startup per year or increase the share premium limit to Rs 25 Crores, from Indian investors provided that the startup has the PAN of the investors
  • Section 56(2)(viib) should not apply to investors who have registered themselves with DIPP as accredited investors, regardless of the quantum of investment
  • The threshold stated should be either a minimum income of Rs 25 lakhs or a net worth of at least Rs 1 crore
  • Any startup who has received an assessment order should be able to seek recourse under this circular during their appeal

Through this circular, the government has reaffirmed its commitment to promoting entrepreneurship and startups in India. With these suggestions, the spectre of the “angel tax” will end up as a footnote in the history of the Indian startup ecosystem.

We look forward to the early resolution of these pending matters. For any suggestions, Do write to us [email protected]

The article is co-authored with Siddarth Pai, Policy Expert – iSPIRT Foundation and Founding Partner – 3one4 Capital.

Disciplining The Not So Angelic, Angel Tax

If you are an entrepreneur, investor, or simply interested in the start-up sector, then you already know that Angel Tax is the buzzword right now.

Based on a law that was introduced in the 2012 budget by Mr Pranab Mukherjee, the rule aimed to target money laundering through high share premium. But unfortunately, the same provision is today attacking startups for their “high” share premiums and treating the difference between book value and DCF (Discounted Cash Flow) projections as income taxable at 30%. (For those interested in a more in-depth study of the provision and associated rulings can check out this article.

Thus, a law to penalize shell corporations and sham transactions are now being used against startups employing tens of people and generating value for the community.  Valuations are usually based on a startup’s future potential for growth and revenue and using book value, a method that’s better suited to asset-heavy manufacturing industries, is like measuring time in light years – it sounds right but is blatantly inappropriate

Hence the problem. This section hasn’t kept pace with the other anti-laundering and anti-abuse measures instituted by law and has become a blanket provision with little opportunity for a Startup to distinguish itself from a fake business. It also specifically discriminates against domestic investments thereby discouraging both investors and startups from accepting investments from Indian residents.

Latest changes, notified just yesterday, provide some way out for certain startups. However, this is a partial solution to a much larger problem, the CBDT needs to solve for the basic reason behind the cause of Angel Tax to be able to give a complete long-term solution to Indian Startups.

While the share capital and share premium limit after the proposed issue of share is till 10 crores and helps startups for their initial fundraising, which is usually in the range of Rs 5-10 Cr. Around 80-85% of the money raised on LetsVenture, AngelList and other platforms by startups is within this range, but the government needs to solve for the remaining 15-20% as startups who are raising further rounds of capital, which is the sign of a growing business, are still exposed to this “angel tax”. Instead, the circular should be amended to state that section 56(2)(viib) will not apply to capital raises up to Rs 10 Cr every financial year provided that the startups submit the PAN of the investors.

The notification also introduces the concept of an “accredited investor” into the startup ecosystem, which is an acknowledgement of the role that domestic investors play. Globally, an accredited investor tag is given to sophisticated investors investing in risky asset classes to denote that they acknowledge the risks associated with such investments and that they have the financial ability to do so. But instead of fulfilling both criteria of income and net worth, they should follow the global model of fulfilling either criteria and lowering the threshold to 25 lakhs of income or a net worth of Rs 1 crore. Their investment into startups should be excluded from the scope of section 56(2)(viiib). As a process mechanism if the CBDT could put in place a simple once a year mechanism for the Investor to submit his returns and giving him a reference number valid for the financial year, this will enable him to invest in more startups in the year without the need to get permissions every time the investor invests his funds.

Most importantly, any startup who has received an assessment order under this section should also be able to for the prescribed remedies and submit this during their appeal. They should not be excluded from this circular since its stated scope is both past and future investments. The CBDT should also state that the tax officers should accept these submissions during the appeals process and take it into consideration during their deliberation.

So, to summarise:

  • The angel tax should not apply to any investment below Rs 10 crore received by a startup per year, from Indian investors provided that the startup has the PAN of the investors
  • The angel tax should not apply to investors who have registered themselves with DIPP as accredited investors, regardless of the quantum of investment
  • The threshold stated should be either a minimum income of Rs 25 lakhs or a net worth of at least Rs 1 crore
  • Any startup who has received an assessment order should be able to seek recourse under this circular during their appeal

Through this circular, DIPP has reaffirmed its commitment to promoting entrepreneurship and startups in India. With these suggestions, the spectre of the “angel tax” will end up as a footnote in the history of the Indian startup ecosystem. We look forward to these pending matters

Start up India, Stand up India.

The post is authored by our policy experts, Nakul Saxena and Siddarth Pai.

Discussion on “The Information Technology [Intermediaries Guidelines (Amendment) Rules] 2018”

Ministry of Electronics and Information Technology (Meity) has put up a new set of draft rules for the IT Act, and is inviting feedback.

The draft rules mostly relates to governing violations on social media.

The Draft is given at:

http://meity.gov.in/content/comments-suggestions-invited-draft-%E2%80%9C-information-technology-intermediary-guidelines

It contains a link to the new rules:

http://meity.gov.in/writereaddata/files/Draft_Intermediary_Amendment_24122018.pdf

This PolicyHacks recording was done on 2nd January 2018 at 5.30 pm covering a discussion on the proposed rules ( amendment ).

iSPIRT Volunteers, Sanjay Jain, Saranya Gopinath, Venkatesh Hariharan (Venky), Tanuj Bhojwani iSPIRT volunteers and Bhusan, a lawyer from IDFC participated in the discussions with Sudhir Singh.

The main aspects of the draft amendment and its impact on the Software product and Start-ups in tech world in India are covered in the discussions. A transcript of the discussion is given below for read. Or you could choose to listen to the recorded audio/video on you tube embedded below.

 

The draft rules mainly cover information published by users on intermediaries also referred to as platforms in this discussion. The three broad aspects that draft rules cover are :

 

  1. Putting higher onus on Intermediaries on objectionable content
  2. High level of compliance and penalties
  3. Enforcing traceability of objectionable content

With above introduction to topic floor was opened for discussions by host Sudhir Singh. Below is the transcript of contribution made by participants ( the transcript may not be complete word by word but follows the semantics of contribution made).

On Question on how the draft rules will impact industry

Sanjay Jain – “Two three element that you have highlighted in there.

First is the definition of the platform player. Intermediaries are broadly defined. They include everybody from  telecom players, ISPs, a Social network and even a site like apartment Adda, Baba-jobs, because all of these will have some kind of user generated content, which is being published and shared with others. While the law drafting may have had one type of intermediary in mind, but it actually applies to all of them and as such that is where some of the issue starts.

Second part is that by moving some of the Onus to the platform, and I actually think they have not fully moved the onus to the platform, which is very dicey situation because, they have moved and not moved at the same time. And because, the onus is primarily still on the Govt. to notify to the intermediary, that there is something objectionable and they have to remove it. But, at the same time they have said that intermediary shall develop technological means for identifying  all of this, as well. Sometimes there is an assumption that technology can do a lot, and in reality while you can have 99.9% accuracy, you still have those 0.1% and that becomes an issue.

Third part, I wanted to say is cost of compliance goes up considerably. They have put a limit 50 Lakh users in India, though we believe 50 lakh may either be little low. They should go little higher and depending upon type of user generated content they should allow for little graded form of compliance.”

Bhusan, from IDFC Institute –  “As a context, these rules have come about are drafted based on earlier rules of 2011 and have some new features like graded approach such as significant intermediary to non-significant intermediary. They have put time lines in terms of response from intermediary and so these rules are being built upon existing set of rules.

There is some short of tightening of the compliance on intermediary e.g. 72 hours of time line for response. If you are a significant intermediary, than you have to be incorporated in India and has to appoint a person who is available 24X7, and you also have to have proactive measure to screen content on your side. Some of this is coming from frustration of getting information from intermediaries.”

On issue of how much these numbers are practical for small players? How to save start-ups?

Sanjay Jain – “Differed assumption is that if you publish any content which is against the law, you are liable. Being an intermediary protects you. If you remember the case of Baje.com, the only protection they got was proving to be an intermediary. Hence, you want to call them (Start-ups) intermediaries but get a better procedural control to stop harassment at hand of low level law enforcement.”

Tanuj came in and quoted the the line after 72 hours, in section 5 it says”as asked for by any government agency or assistance concerning security of the State or cyber security; or investigation or detection or prosecution or prevention of offence(s); protective or cyber security and matters connected with or incidental thereto.”

According to Tarun, this statement is so broad that any junior level officer can say I got information that someone from Hissar in Haryana is harassing a person and give information of all users in Haryana.

Venky – “I agree with Tarun, we have the laws or the rule meant to be more sharply defined and have sharp implementation guidelines. In this case seems to be pretty loosely framed.”

Sudhir Singh – “There is another issue in draft rules on once in a month information to user, and taking their consent. Any hard compliance of rules is normally easier for large players, they may easily invest and handle with technology but small players and start-ups it is difficult situation to comply.”

Sanjay – “From technology experience we learn that if you make something automated, user ignore it. So, what will happen is this will be implemented by sending one email to every user, once in a month, stating if you don’t comply, we will delete your account from platform.

That’s an email that is going to get ignored. So, it is a very ineffective suggestion. Also, there is an implicit assumption that all users are identifiable, which is not the case always. So, just to implement it you will have to identify users. That may not be a valid requirement.”

Bhusan –  “On the point that you need to have more than 5 million users. My question is procedurally how do you even establish that?

Will platform will have to do GPS type of tracking to ensure that and does this not create a privacy risk in itself e.g. I do not know does platforms like Quora know that they have more than 5 million users in India or not. It seems, there is this focus on regulating Big Techs and this 5 Million number really come from that.”

Sanjay – “Basically, anybody can be hosting user generated content. So, lets us say we are on a common platform, and there is a message flowing from me to you. If I violate the law, and let’s say the message is liable of incitement or any other law, then I should be held liable and not the platform.

For that platform needs to be qualified as intermediary, put under safe harbour and intermediary takes on the responsibility of helping the law enforcement. So, we should not take up start-ups out of its ambit. What we have to do is make sure that, the conditions required is that conformance to the standard should not be so terrible that start-up should be excluded.

So, we need to sharpen the requirement they they should be conforming with and make it easy enough for somebody to confirm.”

It is being discussed that Govt. is aiming for higher level of Penalty. What should be our recommendation?

Tanuj – “If you take very young company any short of hit is bad, but if you can put proportion of revenue basis, it will be at least more forward thinking, even if it is not absolutely fair, in some sense more fair of not having that rule or having flat rule. The amendments of changes we should think about of moving the penalty would be not being in favour of arbitrary penalty.”

Tarun added – “Our recommendations should be around sharpening rules, like who can use it who cannot use, what are the accountability measures on them, more than magnitude of these numbers.”

Saranya – “Just to address the Data protection law vis-à-vis intermediary act. The subject matter of Data Protection law is ‘personally identifiable information’, whereas Intermediary act tries to cover ‘all communication in some sense’ and hence, Intermediary act has a longer leash with regard to the person who can take the intermediaries to task.

The criteria of what would be offensive under Intermediary act is very different e.g. encouraging consumption of narcotics. Hence, the criteria that a person can take intermediary to task is extremely wide and needs to be curtailed.”

Bhusan – “There is an inherent subjectivity in these rules and there is need to some short of standard procedures on how these rules are applied by law enforcement agencies across. All that these rules say is  – any request has to come in writing and intermediaries have to comply with.”

Venky –  “From an implementation perspective we need implementation guideline. Section 5 is so wide that anybody can drive a truck through it.”

How the numbers (e.g. 72 hours period to respond and 50 lakh users) should be defined in a manner that is suits Start-ups who are in the early phase.

Sanjay – “Broadly, we need to identify the places and various numbers to apply proportionally depending upon the size of entity and size of violation, in our feed back to the Government.”

Sanjay also brought in attention to the “Appropriate Govt”, needs to be defined well. He said,  “What we want is the Govt. agencies to be defined.”

Bhusan –  “This is very standard way of defining. I have not seen any precise definition on specifying agencies in general regulation and I do not see they will start with IT act on this.

Bhusan mentioned another important issue of end-to-end encryption is a more political point rather than national security issue. (refer section 5 last lines).

Sanjay –  “This is about tracking and tracing may not be about encryption. The fact, that I sent information to some body is about meta data, it’s not about information itself. This may be clarified better, but is not about end-to-end encryption but about meta data.”

Sanjay further added, “perhaps one clause you could add is to say that the ‘intermediary should be able to do this based on the information it has, if it does not have information, there should be not requirement to maintain information’ e.g. if you take business of mailinator, they don’t keep record of mails sent in and out.”

Bhusan, added “it should not lead to intermediaries having a requirement to do KYC on users.”

Is 50 lakh only to target large platform players?

Sanjay, “my read is they may have thought that way. But in reality a regional ISP or even a small newspaper will fall in to that category.”

“Bhusan, I don’t think it is a number generate by some study, but it seems like they just picked it.”

The discussion was rapped with thanks to all players.

Author note and Disclaimer:

  1. PolicyHacks, and publications thereunder, are intended to provide a very basic understanding of legal/policy issues that impact Software Product Industry and the startups in the eco-system. PolicyHacks, therefore, do not necessarily set out views of subject matter experts, and should under no circumstances be substituted for legal advice, which, of course, requires a detailed analysis of the relevant fact situation and applicable laws by experts in the subject matter on case to case basis.
  2. PolicyHacks discussions and recordings are intended at issues concerning the industry practitioners. Hence, views expressed here are not the final formal official statement of either iSPIRT Foundation or any other organisations where the participants in these discussions are involved. Media professionals are advised to please seek organization views through a formal communication to authorised persons.   

Story in Asia Times, on iSPIRT, and Aadhaar

Last week, on Thursday evening, we received an email from Saikat Datta, where he claimed that he had a recording of a conversation, from an iSPIRT meeting, where we discussed various ways to get around the Supreme Court verdict on Aadhaar, along with other allegations.

While this recording was unauthorised, and we were in the midst of internal deliberations (and we have pointed this out to Mr Datta), we have engaged with the reporter to ensure that our view was presented fairly.  We are publishing this email exchange and that audio file in the interest of full disclosure, and transparency.

Thursday 3rd Jan 12:52 PM, separate emails from Saikat Datta to Sanjay Jain & Sharad Sharma 

Thursday 3rd Jan 10:32 PM, response from Sanjay Jain to Saikat Datta

Sunday 6th Jan, 3:47 PM, a second email from Saikat Datta along with Audio recording

Sunday 7th Jan, 12:13 AM, the response from Sanjay to Saikat Datta

In our last email to Saikat, we have mentioned that we have earlier seen activism in the form of reporting, and requested that he report on this issue fairly and that he present our answers in full.  We do hope that he will do so.

In the meantime, we wanted to let the iSPIRT community know that we will continue to deal with issues such as these with transparency.  If we are doing something incorrect/inappropriate, we will welcome any feedback.

The post is authored by Sanjay Jain and Sharad Sharma.

A Fond Sendoff

Today we are giving a fond sendoff to Praveen Hari and Venky Hariharan as they transition out of full-time volunteering and onto new challenges! This is a bittersweet moment: as excited as we are about their future plans, we can’t help but feel a sense of loss. We will most certainly miss their selfless energy in our mission to democratize credit in India.

Democratizing credit is vital for India’s future. This particular breed of the societal problem needs a jugalbandi between public platforms like India Stack and market players like banks, NBFCs, and Fintechs – a kind of jugalbandi that is new to our ecosystem. To bring it about, it needed catalysts like Praveen and Venky.

Praveen has been iSPIRT’s ‘dynamo’ behind flow-based lending. He has done innumerable learning sessions, pulled together countless borrower pools, knocked partnerships together, and was instrumental in the design of “Type-4” loans. He has been the go-to person on all things around flow-based lending for lenders, loan service providers (LSPs), technology providers, sophisticated model builders, and VCs. His can-do spirit is legendary: he has been an inspiring blend of thought-leadership and hustle for all of us volunteers in iSPIRT. Because of this, his name will be forever etched into the history of flow-based lending in India.

Venky anchored our Fintech Leapfrog Council (FTLC) efforts from the very beginning and took on the challenging task of helping incumbent banks embrace non-linear change. Since its launch, FTLC has been instrumental in kicking off a number of market experiments and has helped banks think through their strategies around UPI, BBPS, cash flow based lending, and the technology and data governance changes they need to transition to a new era.

Venky’s soft-spoken approach masks a determination to get difficult things done. His charm is legendary, and he used it to help leaders of FTLC banks practice intentional unlearning. This collective effort has moved the industry forward, helped the banks prepare for a more dynamic future, and set the stage for partnership between banks and new age technology and Fintech players.

As quintessential iSPIRT volunteers, both Praveen and Venky have created enormous ecosystem value, and they did it for the mission. Many market players benefited from their work, and (as is iSPIRT custom) not one paisa flowed to either of them. This selfless volunteering is the iSPIRT way. After subsisting on a small Living Wage as full-time volunteers, it is time for Praveen and Venky to move on.

New Beginnings
Praveen is planning to become an entrepreneur again. After his two month cooling off period, he will launch his new startup. We, for one, are hoping that this startup will be in the flow-based lending space! We are rooting for him to be the Jonathan Rosenberg of flow-based lending: Jonathan was instrumental in bringing SIP Protocol to life as an IETF standard, and in helping to create Skype as a winning implementation of SIP Protocol as its Chief Technology Strategist. We hope Praveen’s path will have a similar trajectory, both in direction and impact! In parallel, he will continue to volunteer part-time for our PSP Connect (formerly M&A Connect) program where he has been active since the beginning. He will no longer be involved in our policy work.

Venky is moving to IDFC Institute to create a new Data Governance Network. We are at the cusp of a new data regime and data economy in India driven by Data Empowerment and Protection Architecture (DEPA), something that is very different from the paths taken by the US, Europe, and China. This Network will bring evidence-based inputs into the policy and practice of data governance; in this new world of data, it is key to secure empowerment and protection of each individual. Alongside this important new responsibility, Venky plans to keep volunteering part-time with iSPIRT on our software patents initiative where he has been active for many years.

When our full-time volunteers roll off to new challenges, they are a gift to the ecosystem. They carry with them an emboldened sense of what India can be, and an energized plan to make new things happen – in turn creating new capacity in the market.

Shifting Gears: Playground Orchestration
iSPIRT has been at work on the societal problem of democratizing credit for the last 4-5 years. We have made considerable progress, yet more needs to be done: Rajni is not yet being served as we would like it.

After some soul-searching, we realized that the next phase of ecosystem building for credit democratization needs a more deliberate orchestration of market and state actors.  Meghana Reddyreddy, a power volunteer, will drive this phase; she will don the mantle of Playground Orchestrator for Democratizing Credit.

Volunteering with iSPIRT
Our central tenet is that societal problems are solved by market players. To come up with truly innovative solutions, these market players need various kinds of public goods – scaleable public platforms, supportive policy and procedural guidelines, transformational market catalysts, and world-class playbooks – to succeed. Our volunteers build these public goods in a selfless fashion. They are often the most talented and driven folks in the ecosystem. Some do this public goods building on weekends. Others, like Praveen and Venky, take a year or two off from their career to do this.  

If you want to be one of these volunteers, read our Volunteer Handbook (https://pn.ispirt.in/presenting-the-ispirt-volunteer-handbook/) and feel free to reach out to us.

By Sharad Sharma, Pramod Varma, Siddharth Shetty for Volunteer Fellow Council and Pankaj Jaju for Donor Council.

My iSPIRT Experience, A Learning Of A Lifetime By Praveen Hari

In 2016, the company I co-founded, Thinkflow, went through a liquidity event. It was a great outcome for all and I was thinking of the next move. It was natural for me to think of starting again. I was wiser, had seed capital and only had to find a problem attractive enough. It looked like I was going down that path and would build another software product company for the global market.

Something interesting was happening in India at that same time. All the global giants were investing in or had invested in companies that were building for India. Venture funds like Softbank, DST Global, Naspers were making bold bets in the Indian consumer space. A lot of digitization was also happening in India. UPI was in the initial release phase (Flipkart had already committed to back PhonePe, when it was just Sameer and Rahul’s idea), the GST bill was tabled in Parliament, a system to track real-time movement of goods was being discussed. It was really a lot of action and if venture investments were any indication, it was the validation of the India story.

In a meeting with Sharad, for the first time, I understood the true potential of the digital stack (now called the IndiaStack) that was taking shape then. While the stack was not fully ready for all the use cases that we covered in the meeting, the vision to solve some of the hardest problems India was facing through technology was fascinating. That vision combined with the kind of commitment the Open API team (it is now called the IndiaStack team) put in is unparalleled in my experience

I left the meeting with a question from Sharad.  “Do you want to do a 2-year MBA that pays you a small stipend?”. I thought about it and said ‘yes’. Amongst all the challenges, unlocking credit for small businesses resonated with me. Having faced the consequences of not having access to timely credit during my Thinkflow days, I could identify with this problem and ended up doing work around data-driven and cash-flow lending. We make a number of decisions in a lifetime but a few handfuls of them are life-changing. And my decision to work with iSPIRT and to focus on Flow-based lending has been a life-changing one.

Over the last 30 months, I worked towards Improving efficiencies in the loan delivery and collections cycle so we could bring a lot more borrowers to the formal system. As an iSPIRTer, I had the privilege of working with CEOs of banks, NBFCs and Small Finance banks to design new loan products. We were working on new ways to use data to underwrite small loans for new-to-credit businesses. I was guiding them on how to use technology to deliver credit at lower costs and worked alongside them to devise new strategies to build new workflows around origination, disbursement, collections, et al.

The iSPIRT stint has been a rewarding one. iSPIRT is all about putting country first and solving country scale problems. Core values such as this and others like setting up fellow volunteers for success were totally unheard of to me in the modern day workplace. iSPIRT is a safe space for any volunteer who is passionate about changing India. The institution has been about investing in the success of its fellows –  I had the benefit of learning from the wisdom of people like Nandan Nilekani, Sharad Sharma, Pramod Varma, Sanjay Jain. My colleagues are A-players and I had the opportunity to learn from and work alongside Meghana Reddyreddy, Nikhil Kumar, Venkatesh Hariharan, Jai Shankar, Tanuj Bhojwani, Siddharth Shetty and Karthik

As I prepare to roll-off my responsibilities at iSPIRT, I want to express my gratitude and a special thanks to Sharad Sharma for giving me this opportunity. He is a great guide and has been a great mentor for me. Thank you for being there for me when I needed you. It has been a great experience working with you and the team and my learnings here are my core strength as I move on to solving for India through my next venture.

India Financial Services – Disrupt or Be Disrupted

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

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

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

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

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

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

The Early Days of AU:

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

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

Partnering with HDFC Bank

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

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

Growing the balance sheet and partnering right

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

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

Consistent performance

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

How we became a bank

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

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

Recognizing the Athletic Gavaskar moment in Indian Financial Services

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

Infrastructure changes lead to New Playgrounds

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

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

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

Dual-immersed entrepreneurs have the biggest advantage

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

New Playgrounds need new Gameplay

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

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

About iSPIRT

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

About AU Small Finance Bank:

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

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

iSPIRT Final Comments on India’s Personal Data Protection Bill

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

Table of Contents

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

Suggestions and Questions

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

Major Comments

1. Include Consent Dashboards

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

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

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

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

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

2. Financial Understanding and Informed Consent for all Indians

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

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

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

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

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

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

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

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

3. Data Fiduciary Trust Scores Similar to App Store Ratings

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

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

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

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

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

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

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

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

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

5. Warn of Potential Credit and Reputation Hazards

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

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

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

6. A Right to View and Edit Inferred Personal Data

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

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

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

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

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

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

7. Sharing and Processing of Health Data

The Bill requires capturing the purpose for data sharing:

Chapter II, point 5:

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

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

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

Chapter IV, point 21:

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

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

Suggestions and Questions

Fund Data Rights Education

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

Limit Impact Assessment Requirement

Section 33 – Data Protection Impact Assessment —

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

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

Passwords should be treated differently than other sensitive personal data.

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

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

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

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

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

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

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

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

Chapter IV – Section 25.4 – Right to correction, etc

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

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

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

Need for an Authority appeal process when data principal rights conflict

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

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

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

Do not outlaw private fraud detection

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

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

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

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

Section 34.1.a. Record – Keeping –

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

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

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

Fillings may be performed digitally

Section 27.4 – Right to be Forgotten

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

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

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

Request for Definition Clarifications

What is “publicly available personal data”?

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

Clarity of “Privacy by Design”

Section 29 – Privacy by Design

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

Define “prevent continuing disclosure”

Section 27.1 – Right to be Forgotten

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

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

Define “standard contractual clauses” for Cross-Border Transfers

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

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

We would like to standard contractual clauses clearly defined.

Define “trade secret”

Section 26.2 C – Right to be Forgotten

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

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

Author Comments

Compiled by iSPIRT Volunteers:

Links

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

Appendix – Sample User Interface Screens

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

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AI/ML is not Sexy

One would think that the new sexy in the startup capital of the world is self-driving cars, AI/ML… I got news for you! AI/ML (esp. Machine Learning) is not listed in Gartner’s hype cycle for 2018.

Source: https://commons.wikimedia.org/wiki/File:Hype-Cycle-General.png

This was corroborated on my recent trip to the valley and the US east coast, where I met several investors, founders, corp dev and other partners of the startup community. It was evident that the AI/ML hype which peaked in 2016 & 2017 is no longer considered a buzzword. It is assumed to be table stakes. What you do with AI/ML is something everyone is willing to listen to. Using AI/ML to solve a high-value B2B SaaS problem is Sexy! (Gartner trends for 2018).

As the hype with AI/ML settles down, B2B startups across the globe are discovering the realities of working the AI/ML shifts for SaaS. Many AI tools & frameworks in the tech stack are still evolving and early pioneers are discovering constraints in the stack and creatively building workarounds as they build their products.

Many entrepreneurs are watching from the sidelines the unfolding of the AI/ML hype, wondering on many valid questions like these (and more):

Q: Do I have to stop what we are building and jump onto the AI bandwagon? No.
Q: Are the AI/ML resources mature & stable to build better value products? No, they are still evolving.
Q: Do I need expensive investments in constrained resources? No, not until you have a high-value problem to solve.

B2B SaaS startups go through 2 key struggles. How to find market-fit and survive? And how to stay relevant and grow. And if you don’t evolve or reinvent as the market factors change, there are high chances for an upstart to come by and disrupt you. The iSPIRT entrepreneur playbooks look to help entrepreneurs get clarity on such queries and more. Our goal is to help our startups navigate such market shifts, stay relevant and grow. Our mini roundtables Playing with AI/ML are focused on WhyAI for SaaS discussions in multiple cities. If you or a startup you know may benefit do register

The MiniRT Agenda

Seeding & creating an active discussion on Why AI/ML? What is the higher order value being created? How to identify the value & opportunities to leverage AI? How to get started with an AI playground (if not already running)? How to think of data needs for AI/ML investments, How to address the impact on Product & Business… Insights from these sessions are meant to help refine our approach & readiness to leverage AI/ML for building higher order value products. And in doing so building a vibrant community focused around navigating this shift.

Upcoming PlaybookRTs on AI/ML

6-Oct (Chennai) 10 am – 1 pm – MiniRoundTable on WhyAI for B2B SaaS – Shrikanth Jagannathan, PipeCandy Inc
18-Oct (Bangalore) 6 pm – 8 pm MiniRoundTable with Dr Viral Shah on AI/ML Tools & discuss your ML/DeepLearning challenges
27-Oct (Delhi/Gurgaon) 2 pm – 6 pmMiniRoundTable on WhyAI for B2B SaaS, Adarsh Natarajan, CEO & Founder – Aindra Systems
TBD (Bangalore)MiniRoundTable on WhyAI for B2B SaaS, (based on registered interest)
TBD (Mumbai)MiniRoundTable on WhyAI for B2B SaaS, (based on registered interest)

The AI+SaaS game has just begun and it is the right time for our hungry entrepreneurs to Aspire for the Gold, on a reasonable level playing field.

Click to Register for the AI/ML Playbooks Track.

Please note: All iSPIRT playbooks are pro-bono, closed room, founder-level, invite-only sessions. The only thing we require is a strong commitment to attend all sessions completely and to come prepared, to be open to learning & unlearning, and to share your context within a trusted environment. All key learnings are public goods & the sessions are governed by the Chatham House Rule.

Image source: https://commons.wikimedia.org/wiki/File:Hype-Cycle-General.png

Interesting Reads

The slow, light touch of AI in Indian Saas