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38% of India’s Unicorns Are Not “Indian”

India currently has 90 unicorns – startup companies that are valued at over $1b – and will likely soon have 100 unicorns, becoming the third such country after the USA and China. Since January 2016 when the “Startup India” program was launched, the startup ecosystem of India including infrastructure for startups, be it incubators, mentorship, funding, corporate initiatives, media coverage, or even patent filing, has improved substantially making life easier for entrepreneurs. 

However, it is still not as smooth a ride for the Indian start-ups as it is for startups in the advanced economies of say, the USA, Singapore, and China. Our “ease of doing business” is yet to be on par with the developed world, especially given the high taxation, onerous compliance requirements, inadequate and cumbersome legal protection of IP, as well as time-consuming and expensive processes to access capital and secure exits. It isn’t a surprise therefore that many companies are shifting their primary legal location to foreign jurisdictions like the USA, and Singapore. 

How do the numbers stand?

As per a study by Venture Intelligence, of the presently known 90 “Indian” unicorns), 56 are based in India, 25 in the USA, 8 in Singapore, and 1 in the Netherlands spanning sectors from e-Commerce to fintech to gaming and more. In other words,  38% of “Indian” unicorns are not quite Indian as they are domiciled outside of India. Moreover, these 34 unicorns have raised approximately $30B ie, this large money could have been but hasn’t been invested into an India domiciled entity. 

Sector Wise break-up of the Unicorns 

Source: Venture Intelligence

Chart: Sector-wise domicile of unicorns as on 31st March 2022.

The reasons for incorporating in the USA are different from incorporating in say,  Singapore. SaaS founders find it easier to reach out to the large market for SaaS “Software as a Service” based offerings in the USA by incorporating there. Companies incorporated in Singapore for high “ease of doing business”, low taxation, quality infrastructure, and quality of life while remaining close to India.  

Out of 12 Indian unicorns in the SaaS category, all except Zoho and Darwinbox are based in the USA. SaaS offerings are expected to be a $1 trillion opportunity and India will lose wealth creation, tax revenues, listing, and related income, by not having these companies domiciled in India. 

Of the three unicorns in a frontier technology area like Artificial Intelligence, namely – Glance, Fractal, and Mindtickle, one is registered in Singapore while the other two are in the USA. Of the 3 unicorns in Gaming, Mobile Premier League and  Dream 11 are based in Singapore and New Jersey respectively while Games 24×7 is registered in India. 

Flipkart, India’s greatest startup success story and the poster boy for Indian e-commerce, which was acquired by Walmart at a valuation of over $20B, was domiciled in Singapore.  That set the trend of e-commerce companies having their HQs in the island country. There are many Singapore shell companies set up by VC funds to become holding companies for Indian subsidiaries. Singapore is today the hottest destination for the registration of Indian e-commerce players.

Even more worrying than this trend of registering the parent company outside India is the migration of startup founders to UAE and Singapore.  Lower taxes, easier access to capital, government support, simple compliance, and better quality of life while being just a short flight away from India make the UAE and Singapore rather attractive to founders. 

Whichever country our startups chose to register or our founders chose to migrate to, the ultimate loser is India with intellectual property ownership and funds being vested in non-Indian jurisdictions. 

Stay in India Mission

In order to retain the economic value added by the start-up ecosystem, it is important that India urgently puts in place policies that ensure that founders and startups ‘Stay-in-India”.  This will require the coming together of various ministries, particularly DPIIT/Min of Commerce, Ministry of Finance, Ministry of Electronics and Information Technology, and regulators like the Reserve Bank of India and Securities and Exchange Board of India to address the Stay-in-India Checklist. 

Stay-in-India is an evolving checklist of issues that need to be solved to contain the exodus of startups from India. These issues fall under four categories: a) Ease of doing business and making it easy to raise funds; b) harmonization of coding of digital economy c) Reducing overall tax anomalies and d) Increased DTA and foreign markets access. 

The issues are comprehensively listed in the Stay-in-India checklist. 

As an example, let’s consider the anomalies in the taxation of dividends. Dividend received from overseas subsidiaries, that has been already taxed, is taxed once again in India as income in the hands of the company. Also, while the rate of tax on such dividends for certain companies is 15% (as against 30%), the same exemption is not provided to limited-liability partnerships and individuals. It amounts to double taxation of income and discourages a model where overseas subsidiaries of Indian startups can pay dividends at lower tax rates to Indian shareholders. Removal of this dividend tax will directly encourage start-ups to remain domiciled in India and receive dividend income from subsidiaries abroad. 

Similarly, there are regulatory frictions e.g. TDS on the sale of software products which reduces the working capital in hands of Software product companies, or the need for filling the Softex form (which was relevant in the early days of IT services exports), and which is now redundant as GSTN Invoices already have the required and sufficient data. All that is required is for different departments of the Govt and regulators to connect digitally and share information. The unfavourable tax regime for IPR protection, such as subjection to minimum alternate tax, IPRs being subject to income tax, and not capital gains even when they are held for more than a year is another big irritant. Technology-heavy startups, therefore, tend to relocate to jurisdictions like Singapore and the USA that have a smoother and lower-cost approach. Founders relocating to overseas jurisdictions are typically seen around the time of M&A. One of the reasons relates to taxation: typically, a portion of the financial proceeds arising from an M&A transaction is held in escrow and released to the founders after some time and/or completion of certain contractual obligations. The escrow payments are treated as income by the Indian tax authorities rather than capital gains as other jurisdictions do – this needs resolution.

India is emerging as a global startup hub, with the support of the Govt, with our startups attracting capital and talent while being at the forefront of innovation, jobs, wealth, and intellectual property creation. Brand India is enhanced globally by the success of Indian startups.  With more support from the Government by way of removal of regulatory friction and by providing incentives – fiscal and regulatory –  the ecosystem required to create, enable and grow Indian startups will dramatically accelerate. 

The Ease of Doing Business must be tackled in mission mode with the Stay-in-India Mission (SIIM) being an integral part of India is to secure its rightful place around the global innovation table. 

The blog post is co-authored by our volunteers Sanjay Anandram and Amit Agrahari. You can reach out to Amit at [email protected]

Disclaimer: The article depends upon various pubic data sources apart from credible data sources that are relevant at the current date and time. Readers may like to read this accordingly. 

Data Sources Courtesy: 1. Venture Intelligence. 2. Invest India

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#StartupIndia Little Action Plan

There was palpable excitement all around on June 16th as the much awaited Startup India policy was to be unveiled. Scores of intrepid, passionate, dedicated, knowledgeable volunteers from multiple groups had worked tirelessly for very many months advocating the need for the administration to recognise startups as legitimate 21st century vehicles for creating jobs and wealth in society. For this to happen, multiple sessions were held to educate, illustrate and showcase what startups had done for other economies and are beginning to do in India.


One of the great accomplishments has been to get the word “startup” accepted within the administration. Acknowledging that an educated highly talented set of individuals could come together to start an entity based on innovation and driven by technology and intellectual property was a major achievement. Because till then, the visual metaphor was of a safari suited micro and small business owner – much maligned in various soaps and movies – obsequiously dealing with multiple government agencies and not averse to bending the law and greasing the machinery!

It is said that the beginning of wisdom starts with definitions. Section A of the Action Plan details the definition of a startup which is quite acceptable. However, what is important is to see how language gets transferred into official government notifications and the law.

However, for a startup to get government tax benefits it has to receive a certification from an Inter-Ministerial Board that will be set up for such purposes! When such a Board will be set up, the composition of the Board, the frequency of their meetings, the discretion powers vested with this Board are all yet to be made known. Why not have An online self-certification mechanism for this with severe penalties for those misusing or misrepresenting their case?

A mobile app will be made available from April 1st of this year for the purposes of registering, filing, tracking, applying for schemes, by startups. Interestingly, though the hope is that it will be within a day, the Action Plan document doesn’t specify how long it will take for a startup company to be registered! And what the pre-requisites are eg does the Inter-Ministerial Board or the DIPP or any other approved 3rd party have to certify the startup?

Self-certification of compliance, via the mobile app, with 9 Labour and 3 Environment laws is a welcome move with a 3 year moratorium on labour inspection. But why not include simple self-certification compliance for all other laws too, eg secretarial and governance matters? And why not for say, 5 years? Especially when the definition of a startup talks of an entity that is less than 5years old?

The Action Plan aims to allow a startup to wind-down its operations in 90days after it appoints a liquidator/insolvency professional and pays off all creditors and sells the assets. This is a very welcome move as anyone who has attempted to shut a company down in India can attest that it is an almost impossible task. The Insolvency and Bankruptcy Bill 2015 (IBB) that’s pending in Parliament will detail the provisions of the fast-track and voluntary closure of a business. Till the IBB is passed and the details known, celebrations will have to wait. The PM even exhorted the audience to use social media to rally support for IBB!

Since April 2015, central and state governments and PSUs have to mandatorily procure 20% from micro, small and medium enterprises (MSMEs). This has been extended now to include startups. But only startups only in the manufacturing sector are eligible! Why not all startups? And in place of “prior experience/criterion” startups have to demonstrate “requisite capability to execute the project as per the requirements”. Whatever that means! With fears of the CAG audit, one can see how this will be implemented in practice.

Startups don’t have to pay Income Tax for 3 years. Well, am not sure if there are any startups that generate taxable income in the first 3years! Why not make startups exempt from all taxes for 5 years?

There is an exemption for investors with capital gains to invest in the government “Fund of Funds” and for investments in manufacturing MSMEs. This is just an extension of an existing provision. But is this exemption applicable to entrepreneurs (not just investors) who say, sell their house and invest in a startup? If not, why not?

Angel investors cannot claim the FMV certification exemption that now, thanks to this policy, includes incubators in addition to venture capital funds.

A clear liberal stock option policy, taxation policy, onerous compliance requirements for startups raising capital – either domestic or overseas – are other areas that will have to wait another day or the budget.

A Rs 10,000crore Fund of Funds, setting up a Rs 500cr annual venture debt scheme, encouraging the setting up of research parks, incubators and a country wide programme to spread the awareness of startups in schools and colleges showcase what the government does best, namely creating large national schemes with a grandiose hopeful vision. Clarity on how these will be implemented and more importantly managed and monitored and what kind of outcomes are planned will however have to await another day!

This Startup Action Policy flatters only to deceive. The reluctance of the state to disengage from the culture of command and control shines through. India jumped 12 places to 130 from 142 in the Ease of Doing Business Index 2015 thanks in large part to the improved power situation and not due to any radical change in procedures and laws!

The good news is that entrepreneurs are unstoppable and have, in spite of the best efforts of India’s crushing bureaucracy, demonstrated their abilities and established India as a global startup hotspot. The steps outlined in the Action Plan will only nudge them along faster. And that can’t be bad. India remains the country with enormous potential!

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of iSPIRT.)

This article was first published on YourStory

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The best way to predict the future is to invent it!

India is interestingly poised today. About half of India’s 1.25billion people are under the age of 25 and by 2020, India will be the world’s youngest country with an average age of 29. According to the World Bank, India’s will overtake China to become the world’s fastest growing big economy by 2017-18. The scale of opportunity – and of course the challenge – in India is unprecedented. Millions of jobs have to be created in the coming years. Wealth has to be created. At an increasing pace and in   an ever changing world.

It is clear to all, including the government, that technology will play an ever more important role in the future. The inevitability of that fact is slowly but surely seeping into the consciousness of all decision makers at all levels. That technology needs to be embraced and leveraged in improving the lives of Indians.

New technologies and platforms are rapidly emerging – e.g., IoT, Mobile/Smart phones, Cloud, Aadhar, Payments – that can and will have profound impact on how we as a country think about the next 5-10years. Our future.

It is clear that continuing to do what we’ve done since 1947 isn’t going to get us far into the future.

“The best way to predict the future is to invent it” and “Change is the only constant” are two popular adages usually bandied about in seminars, corporate-speak, by VC s and successful entrepreneurs! What’s left unsaid are – how do I invent the future? How do I deal with change? And from there on to, what are the possible futures? What are the possible changes? What’s causing them? How will different industries like Financial Services, Retail, Healthcare be likely impacted?

These are the tough questions. Successful entrepreneurs, investors, corporations, academics and governments spend – or, need to spend – a lot of time thinking about such issues.

What are new ways of framing the potential and overcoming these challenges? What is unique about India and what solutions and resources can be shared from around the world? How can India utilize the enormous, young and entrepreneurial energy to craft scalable solutions to impact lives? What are the emerging global megatrends that can be harnessed that will enable India to leapfrog decades of inefficiency and empower people?

We have done this before: From mainframe computing to client-server. From land line to mobile. From paper based to digital identity.

Can we do this again across multiple areas? What will it take?

Answers will be found through debate and discussion by various stakeholders invested in the India of a new India– government, thought leaders, practitioners, entrepreneurs, executives among others. A forum for learning, discussing, debating, sharing of ideas of a future impacted by technology would be very impactful. To catalyse conversations, connections and collaborations that would help provide the answers to the questions.

A journey of a million miles begins with a single step. It is time for that 1st meaningful step to be taken!

LeapFrogTIE LEAPFROG. AUGUST 21ST 2015. ITC GARDENIA BANGALORE. http://www.tieleapfrog.in/

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The Real Reforms: Is Anyone Listening?

The papers are breathlessly reporting the arrival of   “reforms 2.0” while the stock markets are doing what they always do – reacting to rumour,  hyperbole,  fears, uncertainties and doubts. But reforms 2.0 won’t impact the lives of citizens and won’t create jobs, that most crucial of determinants of the economic well- being of a people.

“I’m moving my company to Singapore”, said the CEO of an innovative startup. The company had developed sophisticated imaging and vision products using proprietary technology that would be of great benefit to the defence forces. The company was based in Bangalore where the design and development got done, components were sourced from overseas, manufacturing and assembly got done partly in India and partly overseas. The final product was Indian and competed more than favourably against competition from Israel and some other countries. However, given procurement policies, products from foreign companies were cheaper, received payments far more smoothly whereas the Indian company had to pay duties and taxes on imports (set-offs for these duties too forever to materialize) and had to constantly follow up for several months to get their bills cleared. Of course, that this company didn’t employ “consultants” who could help smoothen the process didn’t help matters. Hence the move to Singapore where the product would get built and shipped to India as a foreign product against a LC (letter of credit) issued by the purchasing entity in India!

Another entrepreneur, similar tale. Upon following up for months to get his payment, he was advised to divide his invoice into two parts in future: one for which payment would be made in US Dollars since it was imported and another for the Indian components of the final product. The US Dollar invoice would get paid via a LC while the Rupee invoice would get paid in due course. The only problem – the US Dollar invoice was only 30% of the overall price! Of course, this entrepreneur too wasn’t willing to inflate invoices and continued to suffer.

In another case, upon filing for the registration of his new company with the Registrar of Companies (RoC), the entrepreneur was informed, after a few weeks of course, that the registration request had been rejected as the name he had selected had “venture fund” in it and therefore required to be approved by the concerned department in Delhi. Not wanting to get into that black hole, the entrepreneur decided to re-file with just “fund” in the company’s name. After some more weeks, another rejection letter ensued. Upon again following up with the RoC, he was told that “fund” didn’t quite explain what the company did! Exasperated and harried as almost 7 weeks had elapsed, he asked the RoC for his suggestion. Finally, after almost 9 weeks, he got the “fund advisors” approved as the suffix.  Another entrepreneur’s application got rejected  since in the opinion of the RoC, the selected name sounded made up! The entrepreneur had to take a dictionary to the RoC to show them the name actually meant something in the English language!

These are but four examples of the kinds of absolutely irrational, meaningless, unfriendly, opaque bureaucratic policies that plague our system. Is it any wonder then that mind numbing corruption takes hold?

There are all kinds of approvals and permits and registrations required to set up a business. The Political and Economic Risk Consultancy based in Hong Kong in a January 2012 report said India’s bureaucracy is the worst in Asia – no surprise to anyone! According to a November 1st 2011  Wall Street Journal article, “India ranks among the world’s worst countries at encouraging entrepreneurs. For ease of starting a business, India is 166th out of 183 countries, just ahead of Angola, according to World Bank figures released recently. Only one country, Timor-Leste, is worse at enforcing contracts.” According to the World Bank “Doing Business” publications,  India ranks an abysmal 132 out of 183 countries in “ease of doing business’ and where, among other notable dismal indicators,  it takes, on average 7 years to close a business and  1,420 days to enforce a contract and where the cost of starting a business is 46.8% of per capita income!

Given this pathetic state of affairs, one can only stand up and salute the intrepid Indian entrepreneur who perseveres with fortitude in spite of the best efforts of bureaucracy, corrupt officials and maddening policies.  India’s small firms add about 3.3 million jobs each year but with over 15million people entering the job market each year, entrepreneurs can and should be playing a critical role in India’s economy.

The two fundamental and critical reforms namely, (a) administrative,  to dramatically simplify, empower and make transparent rules of engagement and (b) legal, to enforce the sanctity of contracts and the rule of  law in a speedy impartial manner are still pending in spite of the recommendations of umpteen committees over past decades. Real reforms in these two areas alone will unleash the energies of entrepreneurs and take India on a different trajectory. Is anyone listening?

Reblogged from YourStory.com

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The redBus Founders on Motorbikes Story! Interested in India Domestic Consumption Start Ups! Seedfund #ThinkInvestor

ThinkInvestor is iSPIRT and ProductNation’s new initiative to serve as a catalyst between Venture Capital firms, Angels, Angel Networks and Entrepreneurs. It is to go beyond brochure ware and dig deeper into the whole life cycle of a typical investment; from introductions, funding, styles of on-going engagement, to exits. And in the process, capture their views on global and local trends, and the entrepreneurial ecosystem in India.

Seedfund is an early-stage venture capital fund, with operations in Bombay, Bangalore and New Delhi. Seedfund was founded in 2006 by Bharati Jacob, Mahesh Murthy and Pravin Gandhi and the team has grown to include Paula Mariwala, Sanjay Anandaram, Sarabjeet Singh, Shailesh Vickram Singh and Tarana Lalwani. All Seedfund team members have been entrepreneurs at some point or the other in their careers. Seedfund investees include AFAQS, CarWale, Chumbaka, EduSports, Fetise, Frontier Markets, Healthizen, Heckyl, Ixsight, Jeevanti Healthcare, Jeeves, Level10 Comics, Lifeblob, myDentist, Nevales Networks, Printo, redBus, RupeeTalk, Sportskeeda, ThinkLabs, Uhuroo and Vaatsalya.

ThinkInvestor-SeedFund

 

 

 

 

 

ProductNation sat down with  Sanjay Anandram, Venture Partner of Seedfund for this interview.

Here’s what we heard :

What is Seedfund? Tell us a little bit about your fund, stage, investments you like? How are you structured? What’s your current fund? How far along are you in your current fund?

The name Seedfund implies only seed funding but really is a seed or early stage fund that likes to get in early and stays on through multiple rounds of funding. We can invest up to $5M in a company. The sector is India Domestic Consumption – anything that the Indian consumer spends money on; financial services, entertainment, travel, hospitality, healthcare, education, etc,. We are structured like a regular VC fund. Our first fund was a small $15M fund but our second and current fund is $55M. The first fund is nearing its end of life and the second fund is about 2 years and 10 months old.

How do you get to know companies and entrepreneurs? What’s the best way for an entrepreneur to get in touch with you?

Sanjay-AnandramWe are less driven by broad trends than by the specific opportunity and the category we find them in. In many cases, we have invested in companies that created a whole new category. For example, when we invested in redBus, there was no category called Bus Ticketing Services but they created one! Our investment in Vaatsalya created a category called Hospital Chains for Tier 2 and Tier 2 towns. Our investment EduSports created a category for Physical Education Services for schools. Sportskeeda is a Sports Online Community site. All these have been started by people completely embedded in that space.

We have a large network and many companies and entrepreneurs we get to know through referrals. We also have a number of companies approaching us directly also. I started in 1999 an online magazine aimed at entrepreneurs. In 2002 I started one of India’s first VC fund called Jumpstartup. Since 2006 I have been associated with Seedfund as a venture partner. All of this means that we have been long enough in this space to build a large network and get to know people. That’s how we get a lot of referrals and many of them come in directly as well, through email for example.

How long does it take for you to do the due diligence process? What is your due diligence process?

At the stage of the companies we are dealing with, there is usually not a lot of due diligence we could do because many of our portfolio companies create their own categories. That said, we place a few phone calls to check out the space a company is in, any competition they may have. Apart from the usual things like checking out the team, sometimes, we may need to clean up existing company structures if they have involved a lot of friends and family investments. Sometimes companies need time to pull things together for us to do due diligence. All of these typically take from about 3 to 5 weeks time.

What kinds of interesting new categories are you seeing in India? Exciting business models, technologies?

There are two ways to look at the categories we see – one could be the mode of delivery – cloud, mobile, SaaS, etc. The other is along verticals that correspond to consumption of the Indian consumer – financial services, education, healthcare, entertainment, travel. The interesting companies we are seeing deliver something faster, better, cheaper to the Indian consumer in these verticals using one of these delivery methods.We are not seeing a lot of fundamental technology advancement plays from India. We are seeing  more innovations in Business Models, throwing together unusual methods of delivery being the innovations.

Although we are focused on the Indian market we have invested in a company like Heckyl that provides financial analytics that includes social media targeted towards brokers and traders. This company has international markets in its scope.

We are very excited about Chumbak, a designer, a brand and a retailer that does India designed Motifs and colors. They have a presence in Japan, have retail stores also in addition to the online one and growing extraordinarily well. Chumbak is creating a brand new category for Indian designed, Indian made products. 

AxisRooms is a one of a kind cloud-based start up in the hospitality industry. It enables an exchange for price and inventory discovery to bring together agents and consumers in the hospitality industry with hotels in real-time. Till now there has never been a single place where all travel agents, consumers and hotels can interact, transact business, and get contracts done.

Sports advertising market is about $800M in size and growing at 25% per year. Sportskeeda is right in the middle of this market to serve consumers with a multi-sport content and community platform. Jeeves is a portal for in-warranty, extended warranty and out-of-warranty appliance repair in India.

What caught your attention about redBus? Any stories or interesting pivots you want to share about that company?

There are a few remarkable things about redBus. They proved that you can build a large company in a very ethical way, focusing only on the Indian market, and building a strong consumer brand without splurging money on marketing and advertising. They also proved that it is possible to create a category by co-opting all the players – the bus operators, consumers, ticketing agents and the Government. It wasn’t easy at all; they had lots of roadblocks but they overcame all those! They made a high-end service possible for the end consumer and at the same time, made it transparent to the bus operators how much money they can make by using redBus, and where their weak points were with consumer feedback. Now a lot of the bus operators’ growth is tied to redBus’ growth and vice-versa, a symbiotic relationship! It was a very unorganized, unprofessional, not transparent business. redBus made it a transparent, democratized one!

Here’s an not often mentioned story about redBus: It was one of those early days when they were selling 30 to 40 tickets a day which was really, really small.  As happens in small start up companies the co-founders were helping man the customer service phone lines one evening. They got a very angry call from a customer whose Bangalore to Mumbai bus was cancelled and he was stranded in the middle of nowhere with his luggage! It was late at night and Phani, and one of his other co-founders got on their motorbikes and met this irate customer where he was. From there they took him and his luggage on their motorbikes to Bangalore airport, bought him a ticket on a late night Air-India flight to Mumbai and saw him off! Although they were not directly responsible since the bus operator was the one that cancelled the bus, they took it upon themselves to make sure that their customer was treated right! The customer reached Mumbai, wrote them a nice letter thanking them for their service and has been a loyal customer since!

Another remarkable thing about redBus is their commission structure for the tickets they sell for large bus operators and smaller ones. It has been the same and they have resisted lowering it for larger operators that bring them more business or increasing it for smaller operators that don’t bring them that much! It is always a standard transparent one for all of the operators. They have done this in spite of intense pressure from larger and smaller operators alike! Over time everyone understood the value of a transparent, consistent commission structure.

The point I am trying to make is that it is possible to conduct business in India this way – ethical, fair, transparent and consistent!

Once you have invested in a company, what’s your engagement model? How do you interact with these companies?

It’s informal and easy-going (but not at all lax). We focus more on helping the portfolio companies build their business rather than manage from spreadsheets. We focus on strategies and tactics for the company; hiring, customers, business model tweaks, what would the next round of financing look like, partnerships they need to create, what kinds of mentors and advisers they need to bring on board, etc,. We see ourselves as partners rather than investors who write a check, and disappear.

There are formal board meetings with the companies on a pre-arranged calendar. Beyond this the informal interactions are all driven by the entrepreneur needing us to help with something. We share interesting anecdotes, articles, meeting minutes, etc,. Apart from these, we do have CEO meetups a few times a year where they share problems, solutions, experiences, lessons learned, especially in the areas of hiring, sales, etc,.

Let’s move to exits! How do you help them prepare for exits? Do you prepare them for exits?

We believe that you build a good company the exits will suggest themselves automatically! CarWale built a good business around a portal for buying and selling new and used automobiles. The German group Axel Springer and the India Today group did an acquisition.  With redBus we were out raising funds when the Naspers group came along and acquired it.

There is no general preparations for exits. Our responsibility as investors is to see the company grow and if they grow well, exits will happen automatically.

What are your thoughts on what’s happening in India? Advice for entrepreneurs and start ups? What’s your advice for people leaving stable jobs for start ups?

There is a lot of activity in India currently. However, we advise entrepreneurs not to get too excited after reading TechCrunch and things happening in Silicon Valley! You need to be excited about opportunities that happen in India! There are enough problems to be solved right here. The customers are here, you can build partnerships here. It is important to be grounded and present in the market for you to build something worthwhile.  It is possible to build big,  interesting companies, businesses right here in India. But for that to happen, you really need to understand the customer problem you are solving and why they would write a check for your business. A lot of youngsters get excited about what’s going on in Silicon Valley. But you should be spurred by customer problems here, not what’s happening in some other market.

You don’t do a start up because you want another job. Not for sex appeal or the glamour! You do it for the passion. You do it because you want to do it! You may need to get used to downsizing your life significantly. You may not have the same compensation and others things that go with a stable corporate job. You may need to deal with social pressures because your friend continues in a corporate job and has bought a brand new house and a Mercedes recently! I have written extensively about these economic and social pressures, why should you be an entrepreneur,  and should you be an entrepreneur. When your passion to go out and do something is greater than the analytical assessment of all these costs, you should do it! You will have to deal with a lot of emotional issues such as self-esteem.

Think of all the possibilities! Don’t let constraints come in the way! It is easy to blame the ecosystem, the lack of money, VCs, Angel Investors, etc,. This question is like asking Is it possible to climb Mt.Everest? Yes. It’s always possible. The key questions are what is required to make it happen? You need to be physically fit, you need to know the lay of the land, you need to have people who have knowledge and experience with doing it before, you need to have the right equipment, a timeline that is suitable and all other resources for such an expedition to succeed. You need to lay all of these in sequence and execute and in 18 months or so you may be on top of Mt.Everest. Constraint based thinking make us give up too soon when you lack one or more of things that are needed. Entrepreneurs use possibility based thinking to address and overcome these limitations one way or another. That’s the difference!

What’s your take on companies getting Mentors? When should they look for one?

Before answering this question it may be better to get some terminology defined correctly since people tend to use words rather interchangeably.

A Consultant is one you bring in to solve a transient, bounded problem. How do I put in an IT system? How do I do Risk Assessment? How do I design a compensation plan?

An Adviser has a longer term strategic and functional objective. What should my IT Strategy or technology be? How should I be doing my marketing?

A Mentor is a like a coach helping them become better. 

In Mahabharata, Krishna tells Arjuna to aim and kill Duryodhana below the waist. That’s a Consultant!

When Krishna give Arjuna advice on how to kill Bheeshma, he’s an Adviser!

Before the battle, Arjuna asks Krishna how he could kill his cousins and grandparents in battle. He’s very conflicted about this. Krishna’s advice then is Mentoring!

It depends upon what the entrepreneur needs. Mentors are needed for high level coaching type of advice. Not for finding customers or helping with this or that. You need to be sure that the problem you have needs a Mentor, not an Adviser and definitely, not a Consultant!