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Indian Regulator SEBI meets Software Product Startups.

How often has this happened? An entire team from Securities and Exchange Board of India (SEBI) with its Chairman Mr. U.K. Sinha meeting with Software Product startups in Bangalore to understand their challenges and also provide useful advice by participating in interactive sessions for more than 5 hours.

On 19th December, Mr. U.K. Sinha, Chairman of SEBI and his management team, heard the stories of 8 Indian software product startups. The idea was to understand both the Capital Markets Challenges (like raising capital from FIIs, listing for IPOs, and other book building challenges) as well new developing landscape of Consumer Market Challenges (like changing landscape of payments, pre-payments, recurring payments, etc.)

Mr. U.K. Sinha, was very forthcoming with his admission that new age companies require a completely new paradigm of evaluation and approvals. The new paradigm is needed not just for listing purposes, but also for market regulation and growth purposes. He assured full commitment from SEBI’s end to the budding entrepreneurs that SEBI is very keen, and will do everything within its capacity to help develop the markets keeping in mind INDIA’s growth needs.

More than 90 minutes of conversation and showcasing of New Software Product Startups from Bangalore took place. Mohandas Pai chaired the sessions on iSPIRT’s side. Not all elements of the sessions can be reproduced here; below are some of the key highlights.

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Home grown Startups share their Stories with SEBI

About 8 Indian Startups which started in INDIA, and which have global operations today, presented their stories not just from a valuation and growth standpoint, but from an emotional and proud-to-be an Indian startup viewpoint. To sum it up, almost every story was about Entrepreneurs who dared to dream something not only for them, but for INDIA, and today want the Indian System (Regulators, Government and Institutions) to reciprocate to their needs. They highlighted their list of issues which include the following:

  • 8 companies from various sectors (InMobi’s Manish Dugar, Ezetap’s Byas, Exotel’s Shiv Ku, HotelLogix’s Aditya, iViz’s Bikash, Paytm’s Pratyush, QuickHeal’s Rajesh and Deck.in‘s Sumanth) all presenting the journey of their startups.
  • A common hardship that resonated from most of them, was the unwarranted need of setting up subsidiaries or parent companies abroad, just to attract the right Investors and raise capital for growth.
  • Exemplary companies like InMobi, which raised initial money from Angel Investors today has a reach of about 1 billion people. Ezetap which raised initial money from AngelPrime, today has global operations, however it has its manufacturing, done entirely from Electronic city in Bangalore. Both urged that it should be made easy for Indian companies to raise money from Global Investors.
  • The existing regulations and guidelines make it very difficult for companies to get the right people (investors and advisors) on their Board.
  • Exotel, Hotelogix, Paytm and iViz, all stressed the need for modifying the SEBI/RBI guidelines on ESCROW, where Indian shareholders should have similar opportunities like Global Investors.
  • QuickHeal’s Rajesh highlighted how Kailash Katkar, a college drop-out had built one the most successful product companies out of INDIA over the past 25 years. Today QuickHeal is thinking of its IPO and needs to decide where to list.
  • Requirement for the Regulator to understand all stake-holders and their motivations, and provide for fast and timely intervention for Exits (IPO listings, etc.).
  • Need for new models to evaluate the new paradigm of Tech/Internet Product startups in INDIA.

At the end of this open session, Shekhar Kirani (iSPIRT Fellow; Accel) highlighted the fact that the Indian software product markets were entering an era of hyper growth. It is a new paradigm where not just startups, but all Institutional bodies within India, need to now collaborate and commit, for supporting each other’s need. In this context, he appreciated the interest shown by SEBI.

Policy Expert Team Interacts with SEBI

Following this open session, the visiting SEBI team met with iSPIRT’s “List in India” Policy Expert Team for an intense three hour closed door conversation about specific issues and their resolution. This iSPIRT Policy Expert Team is led by Sudhir Sethi of IDG and has Rajiv Khaitan (Khaitan & Co.), Sanjay Khan (Khaitan & Co.), R Natarajan (Helion), Rajesh Ghonasgi (Quick Heal CFO), Manish Dugar (InMobi CFO) and Harish HV (Grant Thornton) as its members. While specific details of this meeting are not available, Mohandas Pai told me that the session had been very productive.

Insights from SEBI

Mr. U.K Sinha, Chairman of SEBI, has an unbeatable track-record. In his past life, he was the chairman of UTI, and was instrumental in transforming UTI from a 1.2k crore institution to 12k crore institution. Many insights were shared by Mr. Sinha with all the participating Startup Entrepreneurs. Some of the key ones are:

  • Mr. Sinha and his team gracefully acknowledged that they were not just a Controller or Monitor of Capital issues, but they were equally keen to Develop Markets for businesses to thrive.
  • Further, Mr. Sinha highlighted the introduction of SME-ITP platform to facilitate capital raising by SMEs including start-ups which are in their early stages of growth and to provide for easier exit options for informed investors like angel investors, VCFs and PEs etc.
  • He also indicated that SEBI is exploring putting in place a framework for crowd-funding which will provide a much needed new mode of financing for start-ups and SME sector and increase flow of credit to SMEs and other users in the real economy. In this mode, SMEs and start-ups will be able to raise funds at a lower cost of capital without going through rigorous procedures.
  • It was indicated that SEBI is keen to facilitate capital raising by such companies to help them achieve their full potential.

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New Wind is Blowing

I saw a collaborative approach to problem solving that I haven’t seen before. iSPIRT’s policy approach is refreshing different from the traditional lobbying mindset that one sees in trade bodies. And SEBI is clearly open to listening and learning. It was amazing to see how SEBI as a regulator and iSPIRT as a think tank were both focused on the same national goal. I came away from the meeting with optimism and a spring in my step.

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22nd #PlaybookRT – Solving a customer’s problem in a way your competitor is not doing, is the most memorable thing for your customer or partner.

The Pune Round Table on Lean Sales (26 Oct 2013) could not have had product leaders with personalities as different as Kailash Katkar @QuickHeal and Pallav Nadhani @FusionCharts. In this difference lay the magic. The magic at this Round Table was in full force. Thank you Kailash for hosting us all.

Round Tables are not about story telling. It’s about getting to know specific challenges of the group and correlating that with real experiences of other folks, especially the leaders who have experienced similar problems first hand. However, this Round Table would not be complete without some inspiration from the growth trajectory of Quickheal and Fusioncharts.

Entrepreneurial Discoveries:

Kailash Katkar, QuickHeal:

Kailash started off as a calculator repair engineer, and later was the only one in Pune who could fix broken ledger posting machines. The seeds of Quickheal were sown when they gave away virus prevention software for free. For him, the approach of always being close to the customer’s problem led to one solution (product) after another. Kailash was never a sales guy and when traditional channels refused to carry his ‘Indian’ product, he offered it to computer repair shops and the rest of his distribution story is history.

He realized that even an STD call to Pune was a large enough friction for channel partners to call them at Pune. Meeting with customers and partners helped establish local sales offices, a centralized helpdesk call center, even local feet on the street for support and much more.

Lesson#1: he always pushed his product as a service (we will clean it for you) and demonstrated value, rather than trying to push a box.

Lesson #2: always remained close to the customer, designed service organization around what customers wanted. Today, commands a price edge over security products from MNCs, and now selling in 50 countries.

Lesson #3: solving a customer’s problem in a way your competitor is not doing, is the most memorable thing for your customer or partner

Pallav Nadhani, Fusion Charts:

Pallav’s journey as told was equally mesmerizing. You had to see how starkly different his approach was from that of Kailash. He went for low touch sales, mass marketing, and the direct online route. This worked because his target was an educated customer and they used content marketing to the hilt.

Fusioncharts moved from a developer focus to a corporate IT department focus. This is the typical customer discovery process that any young startup goes through. Theirs is a classic tale of using LinkedIn, online forums, data visualization experts etc to talk about them and promote the brand.

So fierecely were they branding driven that they even changed the name of the product when doing a new major version. The Obama administration and many such examples did not just help them, they used it to their advantage, and relentlessly.

Fusioncharts started giving away source code to build trust, and even contributed to open source. Yet they never played the ‘cheaper product’ game and even commanded price premiums. Of course, to do this you have to position the value of things like source code, support etc and do the ugly duckling design. More importantly, you need to keep experimenting with price to find the sweet spot.

Kailash & PallavLesson #1: Pricing is a competitive weapon. Higher price is not a disadvantage and don’t let sales people tell you that. (Compare with QuickHeal, today sells some versions at a higher price than MNC products).

Lesson #2: Consciously went after higher value customers (corporate IT) who could be relied upon for assured recurring revenue.

Lesson #3: If you price well you can share decent margins and build a good product. Use different prices for different markets if the situation demands, and always try to sell a customer the highest possible version they may need. There’s always scope to reduce the price paid by offering lesser.

Common threads:

Sell to retail or Enterprise:

  • Start selling to retail customers, gain credibility and then move to Enterprise.
  • Enterprise customers would have less churn and provide opportunities to cross-sell other products as well as to other teams in the same enterprise.
  • Many retail customers / channels eventually move to enterprise so you can sow the seeds for larger deals even when you work the retail market.
  • Create several SKUs, the idea being to let the customer find the price level / functionality level that works for them (I’m not paying extra for something I don’t need).
  • Create sales teams for each type of customer (Fusioncharts – for selling to Enterprise, selling to Developer. Similarly at Quickheal, separate teams sell to Enterprise, Retail and Online). This helps the team align to the sales process for that market and talk the language effectively. Quickheal has separate teams for renewals.
  • Created a sales bible (Fusioncharts) which was the rule book for all sales folks. This helped in establishing a credible sales process and limiting discounts to the extent allowed by company policy.

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Branding and PR:

  • Always do your own PR. Keep it so simple that the common person (your mother?) can understand.
  • Your PR should either inspire people or make them angry (agitatated?). It’s no use otherwise.
  • Build relationships with the press, constantly pitch to them and help them with information in general. Ask them what they’re working on and if you can help. They’ll be happy to get any help and will remember when you need them.

 

Sales and Marketing:

  • Use automation tool for customer communication (Infusionsoft / Marketo / Salesforce)
  • Smaller channel partners are preferred (Quickheal) as they have personal relationships and quick on payments. Large partners usually try to dictate terms and tardy on payments. Fusioncharts has used a similar strategy of tying up with smaller channel partners in overseas countries.
  • Maintaining relationships with channel partners is extremely important as they carry a high emotional quotient. Wish them on the festivals which are important in their country. Talk to them, meet them.
  • If necessary, tweak your product or do something special for that market. This generates huge buy-in from the channel partner as they see your commitment.

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Among other things, the specific issues got discussed around:

  • Closure strategies
  • Market awareness
  • New geographies
  • Building / ramping sales team
  • India as a market
  • Funnel management
  • DIY or DIFM
  • Customer Engagement
  • Influencer marketing
  • Building your Service Organisation
  • Leveraging customers
  • Positioning

 

Each of the above is probably a session in itself and the experience sharing was the easiest way to get insights into how these are situations and not problems.

Both Fusioncharts and Quickheal are hugely successful in their own areas, even though each have completely different markets and selling strategies. The amazing part was when :

–       Pallav remarked that he’s learnt a lot from Kailash’s method of being in touch with customers every single day and being out there in front of them.

–       Kailash appreciated the way Fusioncharts has leveraged content marketing and driving a successful marketing team through his vision

The other folks around this round table were Avinash Sethi (Sapience), Ulhas Ambergaonkar (Mauris), Vishwas Mahajan (TiE Pune), Anup Taparia (TouchMagix), Satish Kamat (JBT), Sandeep Todi {me} (Emportant HR) Varoon Rajani (Blazeclan), Dilip Ittyera (Aikon Labs), Sagar Apte (CarIQ), Aditya Bhelande (Yukta), Sagar Bedmutha (Optinno), Girish (Shunya), Arnab Chaurhuri (Xcess), Avinash Raghava (iSPIRT Product Nation), Sarang Lakare (IntouchApp), Ranjeet Nair (Germin8), Pallav (Fusioncharts), Kailash Katkar (Quickheal)

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“Customer Relations is very important” – Kailash Katkar, CEO, QuickHeal Technologies

In this fascinating story, Kailash Katkar recalls the past almost two decades of running a business that at one time faced closure. But riding on quality people, constant innovation and proximity to the customer, Quick Heal has become a leading anti-virus software company that is giving even the international anti-virus companies a run for their money. Read on….

Why did you start this business? Why did you form Quick Heal? What was the intention behind it, and did you go for it alone or do you have partners? 

When I started this company I never thought I will convert this company into Software development. It started as a computer repair shop. I used to do calculator repairing first, and then I was into laser printer machine repairing. And in those days it was a monopoly in Pune. But when I saw that these machines were not going to continue for a long time and computers are going to take over I started, computer maintenance and started taking AMCs. In fact, I had a lot of customers. I was not into computer sales. I was purely into computer maintenance. 

My younger brother(Sanjay Katkar) after his 12th standard wanted to get into electronics for his graduation, but I instead said why don’t you do computers. He was a bit reluctant because it was very new and the fees were high but on my advice he did that and used to come to my shop for practice because I had computers in my shop. Now those days, nobody bought antivirus software. In fact it cost a prohibitive Rs. 14-15,000. Customers assumed it was the responsibility of the contractor to provide it and when computers came for maintenance it was the contractor who had to format the machine, re-install the OS, and reload the data. 

Now my younger brother as part of his curriculum had to do a project so I asked him to write some tools which could automatically remove viruses since formatting the machine and reloading all the data was very time consuming and cumbersome. The Michelangelo virus was infamous in those days and was quite a problem for many computer users. He managed to write one simple utility that could eradicate the virus and it worked very well. So I started distributing the tool to my customers and that was the beginning of the anti-virus business.

So based on customer feedback, I ventured into anti-virus software and believe me I had no knowledge of the software industry. We started work on a full-fledged anti-virus software in 1993 and the first version of Quick Heal was released at the end of 1994 most likely.

Sanjay Katkar(left) and Kailash Katkar(right)

It was quite funny actually when I think back. The software was a DOS version that came in a floppy, and then we designed a small envelope with colorful packaging and started selling it. It was a bit tough for me to sell, but then gradually I started getting success, and I got this success through channel partners, because since I was into computer repairing, I used to know most of the computer repairing people. 

So, what was the competition like in those days, Kailash? 

There were a lot many antivirus software. I mean, there was Norton antivirus; there was McAfee; there was Dr. Solomon. And there were a lot of Indian antivirus also. 

From Pune itself, there were three antivirus software manufacturers. The two prominent ones were Cure and Vaccine. 

In Chennai there was Vx2000 and Star antivirus software. And from Mumbai, there was Red-Armour antivirus software, Red Alert antivirus software. From Delhi, there were three antivirus software. So overall across the country, I think there were about 10-11 software, and this doesn’t include international software. 

So from a customer perspective, was there a leaning towards the imported software or Indian software? 

People were more fascinated by imported products and software was no exception. McAfee and Norton were the preferred choices in the market. 

Correct. you must have had a lot of courage to kind of get into the market at that point. 

Yes. Actually, my computer maintenance work was still on. I continued my computer maintenance until 1998 and this gave me the cash to pump into the anti-virus software development and marketing also. Personally, I used to spend 50% time on computer maintenance and 50% time on software sales. And my younger brother was fully focused on development. 

What was your proposition to the customer? 

Actually, it was quite difficult considering the huge competition, with so many number of antivirus software. But in the late nineties, a virus called Dir 2 came into the market. The virus was extremely dangerous and used to decrypt the hard disk. In fact, users never knew when the machine is infected and after infection how many times the machine was rebooted. Now if you applied an anti-virus software in the traditional way, it was just remove the virus but whatever data was decrypted would be lost and the machine would crash. So every time the machine was formatted about 30-50% of data would evaporate. 

So Quick Heal pioneered a unique approach. We managed to find out how much data was decrypted and encrypt it before cleaning the virus. That way we got the virus out and the data restored. This way Quick Heal was the first antivirus software in the market  which used to do this. Even Norton and McAfee were not doing this. 

What was your communication strategy to inform the market of such developments? 

I was not able to go pan India, but I was able to communicate with most of the customers in Pune. In fact soon after Dir 2 came Natash a dangerous polymorphic virus. Again many of the antivirus software companies took a hit but we were able to find a solution and gradually started converting larger customers like the Times of India who took a corporate decision to adopt our software. 

How did you scale that now? From a development perspective, how did you scale it? 

Now we have a team of around 650 people but we went through some tough times. In 1998 I decided to close down the computer maintenance business because it was very difficult to run two business together. I focused on a distributor strategy but that put a strain on my business because while the distributors sold the product they never paid me on time. In fact it reached a stage when in early 2000 I decided to close down the company. 

In 2001-2, I had about Rs.2 to 3 lakhs in the bank, and then one of my friends advised me that if you really want to scale and grow your business, invest in a proper technical team. Also get a good business team. So finally we decided to do it under a lot of strain because in those days banks never supported software companies.

I somehow inserted a big advertisement in the Times of India, almost a half page ad, saying that I’m looking for country managers and city managers. I was then able to hire good people and together we changed the entire structure of the company.

Why did they come and join you? What was it that they saw in Quick Heal that was the game changer for them?

Quick Heal had become a bit popular in the Pune market and most of these people were from Pune itself. So, they knew about this product. They knew about the quality of the product, but they were quite also that the product was not reaching the masses. So they joined the company to take up the challenge and I am proud to say that more than 10 years later they are still with the company. 

With these new people, we embarked on a strategy to open branches in other cities. Soon I developed a lot of confidence that sitting in Pune I can manage branches in other locations also. We started with Nasik. And after Nasik started running well, in three months’ time I started an office in Bombay and then in Nagpur and then in Indore, and then gradually I went into Gujarat and then I went into North India and South India. Today, we have around 23 offices, apart from Pune, across India. 

So you still believe that a large part of your sales has to be achieved by physical presence?

Yes, yes. Most software companies try to appoint national distributors whenever they scale their product to other countries. And perhaps a few regional distributors.  I don’t believe in that. Because what happens, if you….if you appoint a national or a regional distributor he expects a lot many things to be done by the company. He really does not make efforts. He just waits for customers. If the customer demands the product, then he sells the product. 

When I appoint more than 100 channel partners, then I try to appoint one stockist on top of it, so that I don’t have to deal with each and every channel partner for a transaction like billing and invoicing and payment collection and all these things. I can just deal with all the channel partners just to maintain a relationship and make sure that they are comfortable selling Quick Heal, and if they have any issues or problems, we can go and help them. 

So, this is how I started developing a market all over India, and now we have around 12,000 channel partners across India. We have direct connectivity with each of our channel partners. 

How do you keep this channel partner base updated about the product and about new developments?

By giving continuous training. Every branch has a set of people for a sales team, a set of small – one or two persons – for marketing. Then a team for support, and then the administrative team. And among the support team, there is one person who is a trainer who keeps on training all the channel partners about the product features and product support and other functions. We have a training program conducted every Saturday for a specific set of channel partners. 

And how do you keep updated about the innovations that you need to bring into the products? So, the new antivirus, antidotes, whatever. 

Actually, since the team is spread out across India we always have meetings with the branch managers once in a quarter, and then we keep on getting a lot of feedback from the entire market through these branch managers as to what the customers are looking for.

Okay. Looking at this 15 year journey now, what would you pinpoint as the most important thing that you have done. 

Customer relations are very important for me and understanding the customer is very important for me. So, I have to focus more on that, what exactly customers are looking for and how I can get that service with less effort for me as well as for my team by developing some tools or something like this, you know. 

How do you keep abreast of fast changing technological developments? 

Our senior level team of about 7 to 8 executives constantly are attending conferences and travelling across the globe. For instance, we attend the Red Hat conference and this Hackers conference and most of the antivirus conferences and a lot many security conferences that keep on happening….Not only do they attend, but we also keep on presenting our research papers in these conferences. So every year, around four to five papers are being presented by Quick Heal.