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A successful entrepreneur-turned-VC tells his tale
September 26, 2006
He started his career in the Silicon Valley in the early nineties. He has years of experience in product and general management of software, semiconductor and Internet technology businesses.
His first venture was Euclid, a leading provider of IT management software. He raised $35 million for Euclid and was instrumental in acquiring and managing all the customers and partners, including Wells Fargo, Honeywell and Bell South.
As a charter member of The Indus Entrepreneurs (TiE), he is actively involved in creating a common platform for successful entrepreneurs, venture capitalists, academicians and potential entrepreneurs to interact and help build successful enterprises.
He talks to Contributing Editor Shobha Warrier about being an entrepreneur in Silicon Valley, how he turned into a venture capitalist and prospects for budding entrepreneurs in India.
On starting companies in the Silicon Valley
I became a part of a start-up in the Silicon Valley in 1998. Then a company called Globspan acquired it for $300 million.
I moved from the semi-conductor space to the Internet space and, in 1999, started my own company called Euclid. It was a good time and we raised $5 million in the first round.
There was value in what Euclid offered in the Internet space. All Internet companies like Amazon, Ebay, Google and Yahoo understood the value of security. We had several customers, all large Internet companies had our software and it gave them a dashboard visibility as to how the Internet companies were doing.
We survived by getting the fundamentals right and executing them unlike many other companies. So, we could raise another $20 million in the second round and another $10 million later.
On surviving the dot-com bust
Then came the dot-com bust. We were one of the very few survivors. We survived primarily because of the strong fundamentals. It is not that we were planning and executing the fundamentals. Luckily, we had good customers and good revenue.
But with the dot-com bust, everything slowed down and several venture capital firms stopped funding. It was called the Nuclear Winter. The real revival on the Internet space happened only by 2004-05.
The nineties and today
Compared to what we had in the late nineties, today there are many more opportunities. At that time, it was tech-centric and proven models succeeded, but today there are opportunities in many other areas like new media entertainment, mobile space, gaming, bio-informatics and application of technology in various domains. More information is also available.
Internet has proliferated a lot more. Today, you can get to network with more people. Without wasting time, you can get started quickly. And, that's a big change.
India, a hub for entrepreneurs
I have been visiting India quite regularly these days. In the last five years, I have been here over twenty times. In the last 2-3 years, I noticed that there are a lot of people who want to pursue the entrepreneurial journey in India. I also observed that it is because many Non-Resident Indians are returning to India; not those who lost their jobs but those who had good jobs and green cards.
Probably, they want to come back and live in India. It is a global village now and they can get the best of both worlds by living in India. This is one of the reasons why we see a lot of new entrepreneurs in India now.
Another reason is the incubation activities in the Indian Institute of Technology (IIT), the Indian Institute of Science (IISc), Indian Institutes of Information Technology (IIIT) and the Indian School of Business (ISB).
The third factor is the success of companies like Satyam, Infosys, Tata Consultancy Services and Wipro. Youngsters want to follow people like (Infosys founder) N R Narayana Murthy, (Satyam founder) Ramalinga Raju, and others. They have become role models to a new set of entrepreneurs.
The fourth factor is the availability of venture capital. More and more VCs are interested in India now.
Should Indian entrepreneurs think global?
For companies in India to solve a global problem by developing a technology and selling it to a global customer is rather difficult. A local company can do that better than an Indian company. I am not saying that a company from India cannot succeed but they have to compete with companies from the Silicon Valley, Boston, Texas and Seattle, which is very difficult.
But I would say that Indian companies should have a global outlook but they have to identify which market to pursue.
On why VCs are interested in Indian entrepreneurs now
Venture capitalists look for deal flow, which is here. They also look for a good ecosystem like banks, accounting firms, law firms, etc. which are well in place. A lot of big companies look for acquiring new start-up companies. That is why VCs have found India a hunting ground.
The ecosystem in India is getting into place now. Then, they (the VCs) look for the local market, which is growing very fast. The local markets have become very viable like the mobile, wireless and telecom. You can sell to the local market, acquire critical mass and build a successful business. The IT standards in India have driven these MNCs from the United States and Europe to India. After that, they can look at South East Asia, and then the rest of the world.
Now, exit options are also available. They obviously expect returns and that also is happening.
But we are only at the beginning. It will take a few more years for this to reach really a peak because we have only started building the ecosystem. To celebrate, to say this is here to stay, will take another 3-5 years.
The VC experience
I have been working as an entrepreneur for the last 16 years. I followed my passion and I was with start-ups for half my life. As an entrepreneur, I was very passionate about what I did. Now, I want to work with entrepreneurs who are passionate. That is why I am on the other side of the table. I will be funding start-ups here. I am focussing on the early stage of an idea; when 2-3 people have an idea. I will network with them, put money and work with them.
It is like rolling up your sleeves and doing all the initial great work or dirty work - however you look at it - building the team, building a business strategy, getting customers in India, Asia, Europe, the US, getting the product out to the early customers; being an evangelist.
My work would be to make them ready to get more funding. Since I am doing this in the early stages of an idea, it is no different from being an entrepreneur. So, I will be working with very few companies. I am mainly looking at NRIs returning to Bangalore, Chennai or Hyderbad. I will be more locally focussed.
On the TiE-IBS connection
This is the second year in a row that TiE and ISB have arranged this event (Connect 2006) together. The ISB is a different kind of a business school if you look at the admission criterion. A lot of those who join ISB had already started their careers. So, there's definitely more room to create entrepreneurs.
And, ISB has special focus under Dr.V.Chandrasekhar's leadership in the Wadhwani Centre for Entrepreneurial Development. So, TiE has found a great partner in WCED. We are bringing the academia with the practitioners. It is both art and science, and if you marry them, the result will be very good. It's a unique union that is happening here. I am sure we will do this for many more years.