The Indian Startup Ecosystem with Vishal Gondal, Rehan Yar Khan and Alok Kejriwal

Does Mumbai, or India as a whole, have a startup ecosystem that works? 

As per Startup Ecosystem Index, which ranks the world’s top 20 startup ecosystems; Indian city of Bangalore was listed at 19th position. The report compiled a global ranking of startup ecosystems based on a 50-variable, 8-component index, which includes Startup Output, Funding, Company Performance, Talent, Support Infrastructure, Entrepreneurial Mindset, Trendsetting Tendencies and Ecosystem Differentiation.

It has been seen that a lot of big cities all around the world have tried to replicate the model and success of Silicon Valley - and all have failed miserably. What is the reason behind this failure? What is it that Silicon Valley has that no other place around the world does? 

The answer largely lies in two simple words - an original model.

The Start-up panel at the TiE Entrepreneurial Summit in Mumbai, comprising of Vishal Gondal, Rehan Yar Khan and Alok Kejriwal, tries to identify the problems faced by the average Indian entrepreneur and give an insight into the possible solutions.

by TiE Mumbai
1 year, 6 months ago
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Now that the term start-up has come to be recognized and used, even overused some would say. 

A decade ago nobody wanted to be called a 'startup' company. Now the world has changed drastically. Now we have real investors, real opportunities, customers and people who are willing to spend money.

There hasn't been a better time than today to startup and to go build your dreams.

With a population of over 1.2 billion people, we now have jumped from 50 million smartphones to 500 million, and crossed over a 100 million internet users.

Only 60 companies got funded this year. It shows the opportunity you have for setting up a company to address this massive exploding market in India.

Everything from funding to mentorship is available for those who have the spark. The first  generation of entrepreneurs have cleared the way. The first and second waves of entrepreneurship have created important lessons for the new generation.

What makes an ecosystem?

Investors are looking more for people with passion and courage, rather than people with business plans. They are interested and even excited to fund people who are ready to risk everything for their dream. 

The first generation of entrepreneurs did not have the backing of technology like Amazon Cloud server, Wordpress, blue-host etc., but now we can start our own website practically free of cost. People are ready to help and to join. In such a scenario, funding should not become an excuse for lack of 'guts'.

Excuse for not starting-up is as poor as saying I don't want to have a bath.
Indian Startup Ecosystem

TiE Entrepreneurial Summit 2012 The status of startup ecosystem in India
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As spoken in the panel, on a more realistic note in India, an angel investor is some who has even more courage than the entrepreneur, and invests into someone else's idea.

However, the term 'angel investor' can often be quite misleading. As one of the panelists said, a better term would be 'Shylock investors, referring to the villainous character from Shakespeare's 'Merchant of Venice'.

The are highly important and invaluable to many startup businesses, but one should not forget that they are not charity workers. They are in it for the profits.

Capital has never been friendly and never will be, because you have to give it back

An angle investor is the crudest evaluator of a business plan. He or she is someone who talks to you in the hardest terms. After all, they are going to invest a lot of their own money into you.  

In classical terms, angel investors are those people who, besides putting in money, also invest a lot of time with you.

Angel investors are, or at least supposed to be like a mentor or a guardian. The problem in today's scenario is that most of the so called angel investors don't really understand the business in which they are investing. They do not participate in the business and surprisingly on occasion don't even remember the names of the companies they have invested in. Thus, an individual angel investor might actually work better than a group of investors from a angel network.

The challenge is the disconnect between the capital and the intent of the capital.

However, even though angel groups may not be perfect or might simply be a passing fad, they do make the entire process a lot more structured. They have kick-started a trend and brought the asset -class on the startup scene. What we need is a larger number of such angel investors who would take the time out to really understand and work with their investments.


List of Indian Angel Investors

List of Investors/People to get in touch with for Startups

TiE Entrepreneurial Summit 2012 Startup Panel Angel Investing in India
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What exactly are accelerators? Do we need them? What spaces do they fill in the ecosystem?

The panelists believe that the issue arises not from the absence of incubators, but the quality of those which are present. Most of the incubators in the Indian startup ecosystem are simply those people who were unsuccessful in becoming Venture Capitalists and are now trying to make a steady source of income. The often take a long time to raise the money and in the process, do exactly opposite of what their name suggests. 

The 'accelerators' are are there, but the flavor of acceleration is missing. There's nobody saying, 'here's the cheque, let's do this!'

On the other hand, it may be to early to completely write off the need and importance of incubators and accelerators. As the panelists pointed out, it took Paul Graham, co-founder of the famous the Y Combinator, almost twenty years to finally get to where he is.

We can already see a change in the environment. The first wave of incubators and accelerators is now maturing and the few survivors will figure out the game. It may not have created the perfect conditions in the past, but it gave the startup ecosystem a great kick-start.

India has always been an entrepreneurial country.

There has always been great business potential in the Indian people. What we need to do is un-complicate startups. Instead of discussing term-sheets and studying other's business models, budding entrepreneurs should invest all that time on starting a company and going forward. All the excess information about startups and entrepreneurship is taking the focus off the eventual goal. Instead of looking at models from authorities like 'techcrunch', we should be creating unique and innovative models of our own.


List of Indian Accelerators


TiE Entrepreneurial Summit 2012 Startup Panel Incubators & Accelerators in India
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Success doesn't teach you anything, failure is your only source of wisdom.

It's only when we celebrate failures, we get the strength and courage to overcome them. Failures help people to realize their mistakes, identify and work on their weaknesses, and pinpoint the drawback in their business models so that they can improvise it and success in future attempts.

People should not be afraid of the dark.

Rehan recounted an incident where someone wanted to start a community called 'Startup Funeral', where people can discuss their mistakes and failures. It wasn't a surprise that over 90% of the invitees declined to attend.

There has to be institutionalized failure discovery.
People don't want to talk about their failures until they have succeeded and no MBA would want to do a case study on them. What we need is an organized and systematic congregation of people who share their failures and help each other to avoid making the same mistakes in the future.



Co-Founders

Two brains are better than one, but finding a good co-founder is one of the biggest challenges faced by an y entrepreneur. 

A simple fact is the teams can only happen when one meets people. Most people simply post on random websites and forums or put it up on their Twitter accounts or Facebook pages and then complain that they can not find a suitable partner. You need to get out of your home or office and meet people. It doesn't matter where, it can be in a cafe, events, college fests or IT companies.

The reality is that once you start meeting people in the real world, a percentage will convert, like a sales percentage, and you will find the right person, and not just by sitting at your desk.
Alok believes that finding a good co-founder is a little bit karmic. There's no formula or ticket. The more people you meet, the more are your chances. It's like a marriage, you just have to get lucky. The mindset of a typical startup entrepreneur is that we need a 'techie' co-founder, when in fact there is really no dearth of 'techies'.
You need someone who's like you. You need a DNA xerox! Someone who woke-up from the other side of the mirror and said, 'who are you?'
 Vishal agrees with Alok, finding a partner has an almost spiritual element. 
Till you don't know who you are, you will never find who you are looking for
To facilitate this need of entrepreneurs we need an organized 'co-founder dating', just like matchmaking forums where people can meet with a definite goal in mind. In addition to this, the same can be extended to investors. 
13 tips for finding a startup co-founder you can count on
Co-Founder Dating Websites
TiE Entrepreneurial Summit 2012 Startup Panel Celebrating Failures & Finding a Partner
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All in all, the start-up ecosystem has changed for the better. The number of opportunities is almost countless and the potential in the youth in unimaginable. There was a time when it used to be highly difficult to find investors, but now investors and accelerators are maturing and coming to realize the needs of the entrepreneurs as well as those of the markets.

The startup ecosystem is like an assembly line, where all parts should be looked at. The final stage of the startup ecosystem now calls for our attention, and that is exits. If there aren't enough exits, the entire incubator-angel investor scenario will start dying out. Fortunately, there is movement on this front and focus is shifting to fortifying the interests of the investors too, so that they are more willing to help the startups. 

Capital is always bench-marked with returns. An ideal investor should focus on an IRR of 25% and take out some money at every stage, so that once the original capital is recovered, he can keep reinvesting in the project besides making a profit. Focus is now on exit liquidity instead of interim liquidity. Alternate methods like MNAs, swaps and secondary sales are being applied to safeguard the interests of the investors, but at the same time ensuring that the entrepreneurs are getting sufficiently funded.

People need to realize when it's time to let go of a deal. The typical mindset is to hold on to one good deal, as it is expected to recover the costs of all the failures. This increases the return expectations and discourages exits.

However, the fact is that the success of silicon valley is largely from the fact that a lot of risk capital was circulated to encourage innovation. Even developed ecosystems such as New York and London have more than 70 percent less risk capital available than Silicon Valley for Startups in the early, ”PreProduct Market Fit” Stages of the Startup Lifecycle

You need failed bankers who'll do failed ventures with failed exits and still make a business out of it.
New age investors like Alok, Vishal and Rehan believe that an angel investor needs to consider his or her investment as a part of his own family and thus actively nurture and support it. It shouldn't simply become a part of the investor's portfolio, only to be reviewed when returns are due.
TiE Entrepreneurial Summit 2012 Startup Panel The Final Words
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1. The StartUp Ecosystem
2. Angel Investors
3. Incubators & Accelerators
4. Celebrating Failures & Finding Partners
5. Final Words
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