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. It's a lot tougher to make a difference - Tom Brokaw
14 Sep, 2008
Vision India 2020
This is the first article of the series Vision 2020 by Sramana Mitra describing which she says, “This is a new series in which I invite readers to take a journey with me into the
future through the minds of multiple entrepreneurs, who by addressing the opportunities I see today, will perhaps shape the future of India. But in this series, we will close our eyes, and exist in this future, and BE each entrepreneur”. Enjoy!
12 years ago, in 2008, it was clear that the labour
arbitrage based IT services industry that had made India a player in the global technology market, was facing a threat. The key issue was supply-demand equilibrium. India’s engineering education system simply could not keep up with the demand for talent.
Engineering schools below the top tier (IIT, IISC and a few others) were struggling due to lack of faculty. Anyone who knew any engineering had multiple multinational companies dangling job offers in front of their nose. Why would they go teach in a small engineering college in a small town? Continued on page 2...
Financial Bootstrapping: Smartly funding your start-up
Bootstrappers are entrepreneurs determined to make a business pay for itself. The freedom from relying on capital invested by VCs is a great motivator, if one knows how to acquire it from the right sources. Their secret weapon, is being nimble and cutting through the bureaucracy to grow faster. Most are entrepreneurs, who have a drive to learn and better themselves in all fields related to their start-up. They use unconventional means to raise funds for their business, without spreading out their arms. A small initial size helps them to focus by realizing that they have little to lose, and they are quick to catch on trends and exploit them. But, how do they do all of this and survive the bloody battles on the tilted corporate battlefield? In this series of articles we delve into some of the nuances of this seemingly esoteric method of raising money. Part 1: What you’ve got and they’ve lost It starts with identifying what a bootstraper doesn’t necessarily have as compared to his huge competition: Distribution, Access to Capital, Brand Equity, Customer Relationships and Great Employees. Each of these facets, one might say, hinges on the amount of capital available to the company to enable its sustenance and growth while maintaining its firm hold over the market. So, if you are a bootstrapper, can you go toe to toe with the big names on their turf? No; the secret lies in waging the war in areas where you are more adept. For example, imagine yourself as a shoe manufacturer trying to sell your new line at retail outlets. You’d be clobbered by the current brands and be out of business while they won’t be losing a moment’s sleep. Successful bootstrappers know that just because they can make a product doesn’t mean they should. Instead, they are well aware of the traits they need to have and the advantage they have over the major market players. Some of these advantages are : A mindset of ‘We’ve got nothing to lose’, being happy with the small fish, direct presidential input , Rapid R&D, being the underdogs, low overhead costs and controlling the time of deliveries. We will elucidate on these points in the next issues, but let us close on an example much closer to home. I am sure there are many who remember id software’s ‘Castle Wolfenstein’. Following the huge success of their game, the 4 developers decided to take on the major players with a unique strategy. They developed another path breaking game called ‘Doom’ and gave it away… for free! Millions of people downloaded the game off their servers and id had captured a huge pool of trusting customers. They launched a bigger version of the game with more levels and gameplay and made it available at a price. It was a huge success! Without having to go through the game retailers, or spend more than 50 cents on marketing they had used an unusual strategy which helped them cut out the middlemen and avoided losing capital as ‘commission’ yet firmly carve a niche in the gaming industry. Next Issue: Part 2: Why big ideas can kill you and what is the bootstrapper’s business model.
Thoughts lead on to purposes; purposes go forth in action; actions form habits; habits decide character; and character fixes our destiny - Tyron Edwards
Vision India 2020: MIT India
Continued from page 1... Against that backdrop, we started a for-profit, private company to train engineers in India. At the time, Susan Hockfield was the President of Massachusetts Institute of Technology (MIT). MIT had also taken a leadership role in the Open Course Ware (OCW) movement, systematically putting every lecture by the institute’s faculty online, freely accessible from anywhere in the world. We convinced Dr. Hockfield to take equity in the company on behalf of MIT, and let us do the project under the MIT India brand, extensively leveraging OCW content. We could, however, only grant certificates, not MIT degrees. When we launched MIT India in 2010, we were handsomely financed by contracts from Intel, Infosys, Cadence, Autodesk, Tata Motors and IBM, and hardly raised any outside financing until much later, when we were ready to scale. In addition, companies like Cadence and Autodesk donated CAD tools which our engineering students could learn with. Our model was simple. We worked directly with major corporations interested in hiring trained engineers. Our customers, thus, were the companies, not the students or parents. To the youth of India, however, we brought a different value proposition. We carefully recruited a set of high potential students with High School Education only, but who were not going onto great colleges or universities. These students, upon acceptance into the MIT India program, were already guaranteed a job at the sponsor company for which we were training them. They participated in a rigorous curriculum focused on the engineering discipline of the sponsor’s choice. For example, Tata Motors, had us train Mechanical Engineers, while Intel had us train chip designers. We had 6 centers in our first year of 500 students each, aligned with one of our sponsors. They were geographically dispersed, and most certainly not in Bangalore, which was already bursting in its seams. IBM’s center was in Kolkata, Tata Motors’ was in Thane, Cadence and Autodesk were in Kanpur, Infosys in Indore, and Intel in Kharagpur. We solved the faculty issue by recruiting a group of talented engineers who were passionate about teaching, and offered them market salary that they would normally get working for MNCs. And our faculty followed MIT syllabus, OCW content, problem sets, exams, etc. As batches of students finished our 2-year intensive program, we renewed our contracts with the sponsors, recruited new sponsors, and opened up new centers all over India. These contracts were extremely lucrative for us, and allowed us to finance great infrastructure, afford and attract faculty, and address the engineering education crisis that India would have otherwise faced, had we tried to work within the government-approved channels. We made a few key strategic choices that made it possible for us to build the $6 Billion a year company that we have today with 1200 MIT India centers, each teaching 2 batches of 500 students. Each year, we train a total of 600,000 engineers. First, we framed the engineering education problem as a problem of the Corporations who need to recruit talent and asked that they pay for a quality solution. They did. Second, we did not allow compensation to be a deterrent for hiring talented faculty. We paid them handsomely, such that they did not feel they were making a career sacrifice by teaching. This enabled those with passion for teaching to choose an academic career. Third, we chose to do this under the MIT brand umbrella, gaining instant credibility among the sponsors, the faculty and the students. With that, we created one of the most powerful engineering workforces in the world.
The author is a well known Silicon Valley entrepreneur who has founded 3 companies, is a strategy consultant for over 70 companies, including SAP and Cadence among others, and the content from her popular strategy blog at www.sramanamitra.com is syndicated by Yahoo! Finance, Indian Daily, etc. She also writes a weekly column for Forbes.
Time is like money, the less we have of it to spare the further we make it go - Josh Billings
Carbon Trading : A bright future
“Clean money for dirty air” - that’s the premise of an emerging trade in carbon credits. In simply words, it signifies the trade of polluting gases which is gaining increasing impetus in India with heightened emphasis being put on reducing greenhouse gas emissions in the environment. So what exactly is carbon credit? The concept of carbon credit, is that of incentivising the industrial units which pollute less, and disincentivising those that pollute more. A central authority, fixes a limit to the amount of a pollutant that can be emitted into the environment. This permit or credit or allowances, gives licenses to emit a fixed amount of pollutant into the environment. Now, if a company say SRF, emits only eight units of greenhouse gases out of the 10 units allotted to it, then SRF will have two units of emission as 'credit outstanding' in its 'pollution' account. On the other hand, if a company say MRF, emits 14 units instead of the 12 units allotted to it, then MRF will have two units of 'debit balance' in its 'pollution' account. In such a case, SRF will be able to transfer its two 'credit balance' to the two 'debit balance' account of MRF. So, both the companies’ pollution account will be matched, and the environment too is able to digest a certain scientifically fixed amount of pollutants. This transfer, from SRF to MRF will be for some monetary consideration, and hence it is referred to as carbon trading. The value of the carbon trading market was around $30 billion in 2006 as per estimates of the International Emissions Trading Association. Almost all industrialized countries, are huge buyers of carbon credit, and all developing countries where industrialization has not reached its peak, are supplier of carbon credit. Japan is the largest buyer of carbon credit, while India and Brazil are amongst the largest suppliers of carbon credit. . With Indian economic growth based mainly on energy from fossil fuels such as coal, there is considerable potential for reducing greenhouse gases, and for CDM projects. Most of the beneficiaries of the carbon trading, are those companies that are investing in windmills, Biodiesel, and Biogas. Actually, by investing in such an alternative, non-polluting source of energy, these companies will earn carbon credit in the form of CER’s (Certified Emissions Reductions), equivalent to the amount of environmental pollution they have prevented. These CER’s could be sold by Indian companies, to companies, say in Japan, at market prevailing rate of CER’s, and thus make profit. The Institute for Global Environmental Strategies, estimates the potential for CDM projects in India to be about 300 million tonnes of CO2 equivalent, which includes 90 million tonnes from renewable energy sources alone. Listed Indian companies are already reaping sizeable profits through CER deals. Carbon trading has brought a huge opportunity for Indian companies. Companies can earn CER’s by adopting energy saving and environment protection methods, and in turn can earn huge incomes by selling them. Its how cleverly these companies make use of this opportunity, that could give them a boost in their businesses.
Who’s the big fish???
You’ll find a series of biz-questions in the next few pages. The answer of each of these questions connects to a central theme, which is a personality. Guess the big connection. Lets see how biz savvy you are! Answers can be found on the last page. 1) In 1997, ______________ was formed and founded by a trio of entertainment players, director and producer Steven Spielberg, music executive David Geffen, and former Disney studio chairman Jeffrey Katzenberg.
The successful person makes a habit of doing what the failing person doesn’t do - Thomas Edison
INR 5 lac for runners-up Envision’07
An interview with Rachit Agarwal and Prabhash Choudhary, Team VIDA, who were runners up in Envision ’07 during Esummit. Envision is a product design and prototyping contest conducted by the Entrepreneurship Cell. TePP has approved an initial funding of Rs. 5 lacs for their product’s testing phase . Excerpts from the interview: TE: First of all, congratulations on the funding. What helped you ideate and come up with your novel bioreactor? VIDA (their team) : Well, as such there were four people involved in this project - Prabash Choudhary, Sumit Jaiswal, Pawan Kumar and myself. Three of us were working in a biotech company for our summer internship, and as a side project were given the task of building a bioreactor. After coming back we realized that the bioreactor had great potential, and when ‘Envision’ came along, we decided to pursue it. After many modifications and with help from our mentor Prof. S. Dey [Dept. Of Biotechnology], we completed the project and submitted it, coming second in the competition. TE: So, how was the feeling when you heard that your TePP proposal had been approved? VIDA: It feels great. We really hadn't thought about the proposal being approved, after such a long time since the competition. But yes, it does feel good. We along with Prof. Dey mentoring us, will get back to the project now. TE: What are the advantages that your product has over other competitors? VIDA: As such there are two widely used plant bioreactors, RITA and Growtek. Both these bioreactors have their own pros and cons, and are expensive. RITA, which is widely used in developed countries, costs around Rs. 3,500 for a single unit, while Growtek, developed by Prof. S Dey here at the Dept. of Biotechnology, costs about Rs. 280 per unit. Our bioreactor, on the other hand, will cost only about Rs. 35 per unit, making it much more affordable considering that research in this area is very expensive. What we did, was to make a product that was not only significantly cheaper but combined both of their functionalities. TE: So filing and acquiring the patent must be your top priority now? VIDA: It most definitely is, especially after the recent developments. I am already in touch with the lawyer. TE: What are your future plans? VIDA: We will first get a prototype ready and check out whether it satisfies the data we have collected. Development of plant bioreactors can be a little complicated, and we need to get test data first. It takes a significant amount of time, since we need to grow plants to test the reactors. We will think about recruiting some 2nd and 3rd years to help us out as well. TE: So, was your ultimate aim while making the product, a profit making business model or a viable alternative for research which is inexpensive? VIDA: The product is definitely aimed at research although it can generate profits as well. Yes, we will target developing countries with this product. This being a good alternative to the expensive reactors used now. TE: And how would you sum up the contribution of Envision and E-Cell? VIDA: It is definitely different. A lot of people have ideas to improve products, which may not qualify as Bplans or technical plans, but are definitely marketable products. Even something like an improvement in mobile phone cover design could figure in that list. What Envision has successfully managed to do, is cater to this segment of people. TE: Well, congratulations again and thanks for sharing your experience with us. For more details about Envision, visit www.ecell.iitkgp.ernet.in/envision
Who’s the big fish???
2) The structure itself was designed by Frank Gehry. Exhibits include Bing Crosby, The Kingsmen, Sir Mix-aLot ,Nirvana and Pearl Jam (Seattle, Washington). Also included are some less famous artists like Queensrÿche and bands far more obscure, such as The Pudz. What are we talking about?
Nobody talks of entrepreneurship as survival, but that's exactly what it is and what nurtures creative thinking - Anita Roddick
The internet landscape in India has been heating up over the last 4-5 years. While a lot of venture capital money has been chasing deals lately, there are very few quality startups in the horizon. Sectors like matrimony, travel and social networking have seen the emergence of a quite a few strong contenders but there are a lot of niches still open to be exploited. City Guides and Blogs Chaos reigns supreme in Indian metros. With exponentially increasing population and unorganized growth in Indian cities, navigation has never been more difficult. Enter players like Justdial, OnYoMo and Burrp. While OnYoMo is still very young, Justdial has already spread to 200+ cities. This is an emerging trend and I suspect this sector has a lot of potential for niche offerings like Burrp. Sales Leads Lets look at the business of generating sales leads. Now in US a lot of niche players like InfoUSA, Hoovers, OneSource, InsideView and D&B operate in this segment. D&B has been in India since 1995 but I could not find any other major player in this field. This segment surely looks ripe to be picked up right away. Education All of us are aware of the poor standards of education ailing the plethora of ill equipped engineering schools in India. The rapid penetration of internet in India today, presents unprecedented opportunities for providing enabling technologies to improve standards of education at a very low cost. Solutions can be as simple as organizing the best information available in a easily navigable structure or they can be as complex as designing of the next Google for educational sector. Indian market is filled with opportunities galore. All that I have mentioned above should be considered as a small sample of the tremendous possibilities. All it takes to succeed is a will to undertake risk and a keen eye to identify opportunities. -Amritayan Nayak
The entrepreneur invites readers articles on any topic related to business and entrepreneurship. Feedbacks on the current issue are also welcome. Our e-mail – firstname.lastname@example.org
Professor Talk : G Surender Reddy
Young minds of IITKGP got a valuable opportunity on 8th September 2008, during a guest lecture organized by Entrepreneurship Cell, to interact with Prof. G Surender Reddy. He has vast experience in teaching management and has himself trained many entrepreneurs in the past. Prof Reddy started off on a spiritual level, comparing the numerous dimensions of God to that of a business model. What followed in the next 90 minutes, was a brainstorming session that dwelt deep into understanding the science of success. Defining management as ‘converting resources into results’, he stressed upon students coming up with his/ her own innovative definitions. In management, synthesis is as important as analysis in delivering results. Following this ideology, he spent ample time in elaborating on both analysis, as well as gathering of resources and putting them together to enhance performance. Providing insights into efficient ways of going about a venture, he spoke about the concept of optimizing profit rather than maximizing it, as also the virtue of 7 R’s required by any successful entrepreneur. Reading, writing, arithmetic (the standard 3 R’s), computer, IPR, clairvoyance, and VIBGYOR (i.e, ability to dream and hope), constitute the 7 R’s. Also, good communication skills are necessary for an entrepreneur to succeed. He defined the ABC of communication as accuracy, brevity and clarity. An entrepreneur cannot operate mired with a common man’s desire for social needs, self esteem, material, and money needs. He points out ‘self actualization level’, as the right platform to start ones venture. On a humorous note he adds, KGP has provided us with two great platforms—the education at IIT and the longest railway platform! An IIT degree is worth Rs. 10 crore in the eyes of a venture capitalist, he says, and adds that we have a most promising entrepreneurial future ahead. Ending on a positive note, he quotes, Who’s the big fish??? “B++” - Be doubly positive, i.e, be an 3) ______ used to sell a setincorrigible optimist. His one- top Digital Video Recorder (DVR), liner success called the UltimateTV, which allowed mantra for bud- users to record up to 35 hours of ding entrepre- television programming from a direct neurs is “be sure, -to-home satellite television probe fair, be there!” vider DirecTV.
The interesting thing is how one guy, through living out his own fantasies, is living out the fantasies of so many other people - Hugh Hefner
Jishnu Bhattacharjee, VP - Nexus India capital in IITKGP
Budding entrepreneurs of IIT Kharagpur got a rare opportunity to interact with a venture capitalist in person at the leadership lecture by Mr. Jishnu Bhattacharjee , vice president ,Nexus India Capital ( ECE, IIT khargpur, 2000) organized by the Entrepreneurship Cell ,IIT Kharagpur on the 5th of September , 2008. “It feels great to be back at the campus . So much has changed over the last eight years”, was how Mr. Jishnu started out. He then went on to explain what exactly Nexus India Capital is looking for in new businesses which they would like to fund. ”We are looking for growing companies in their early stages, driven by innovation in technology or business model”, he said. With over 320 million USD capital under management, Nexus India Capital has already invested in 14 startups, in areas ranging from internet to solar energy. Providing the students a glimpse of the parameters on which a venture capitalist judges the potential of a business, Mr. Jishnu said that it is the market size, technology used ,scalability, core team competency, and the presence or absence of regulatory hurdles, which determine how good your idea really is. A novel concept which he highlighted was the 80/20 rule, in which an entrepreneur identifies 20% of the areas in the business that matter to him the most, and then allocates 80% of his resources towards achieving high performance in those areas. He also pointed out the important role a VC plays in shaping the future of a startup.” From taking governing decisions to auditing to hiring people for your company, a VC’s influence spreads across diverse spheres.” He joked that, in America an entrepreneur’s partnership with a VC, outlasts the average married life of eight years. Emphasizing the need for Kharagpur graduates to take up entrepreneurship with full gusto, he said, “now is the best time to be your own boss.” Whether it be mobiles, internet commerce, clean technology, or organic farming, the opportunities to be exploited are galore. He also welcomed the news that, there have been two startups from the campus in the last two years, and displayed a keen interest in supporting any innovative, technology driven idea that may originate in the campus in the future. Jishnu concluded with a question that left the entire audience with something to ponder on. “I see tonnes of business plans coming up form IIT Bombay, Delhi and Madras. But why not Kharagpur? What is holding us back?” Now, this is a question that we all need to find an answer to.
Entrepreneurship Cell, IIT Kharagpur is a student body which has been started under the vision and guidance of the Sponsored Research and Industrial Consultancy (SRIC) of IIT Kharagpur. In an institution of students with the potential of becoming tomorrow’s leaders in innovation for the country, it is essential to groom these young individuals while they have the time and resources to become capable of handling the pressures, responsibilities and risks associated with entrepreneurship. The basic aim of E-Cell is to provide students with the resources and guidance to be able to be job-makers for the future through effective innovation and sound fundamentals. The primary activities of E-Cell are 1. Organising workshops and lectures periodically for students to create awareness about entrepreneurship. 2. Function as a guide for students with creative ideas which can be transformed into successful companies. 3. Provide mentorship through individuals for students launching their start-ups.
Answers to ‘Who’s the big fish???’ : 1. DreamWorks Animation SKG 2. Experience Music project 3. Microsoft
Connect : Paul Allen has/had major shareholding in all of these companies
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