Note: The views & opinions expressed in these essays are strictly my own, and not those of any entity I may be associated with as an employee, consultant, promoter, investor, etc.ARCHIVES
Technology Entrepreneurship in India - Teams
Technology Entrepreneurship in India - Generating Revenue
Technology Entrepreneurship in India - Raising Capital
Equities, ETFs, F&O
Oct 2011: Equity Risk Premium for India
Jun 2011: Investing in Indian equities
Technology Enterprises in India
Nov 2010: Technology investment in India - WATER
Aug 2010: Technology enterprises in India - 3 avatars
Risk Capital for MSMEs
Mar 2010: Risk mitigation for investors in MSMEs
Mar 2010: Why don't (Indian) MSMEs get risk capital?
Feb 2010: Angel investing - Will it work for Indian MSMEs?
Feb 2010: What's so special about innovative MSMEs?
Feb 2010: Where do Indian/NRI (V)HNIs invest?
Feb 2010: Funding options for innovative MSMEs in India
Jan 2010: Innovative MSMEs in India
Technology enterprises in India - 3 avatars
(Last revised 6-Aug-2010, Send comments to email@example.com)
In her book We Are Like That Only, Rama Bijapurkar quotes writer Arundhati Roy: "India lives simultaneously across 400 years". I think this nicely captures the challenge in thinking about technology entrepreneurship in India.
We are a nation of more mobiles than toilets, broadband connectivity as fast & reliable as a babu, BPOs (KPOs, LPOs, CROs, ...) with as many program managers as programmers, venture capitalists who invest in food & textiles and banias who could give MBAs & PhDs a few tips on entrepreneurship.
So, will hi-tech entrepreneurs & startups drive economic growth & wealth creation in India? Consider this assertion by economist John Kay:
Entrepreneurs, investors, government agencies, domestic companies & MNC executives need to think beyond hi-tech (IP-rich) ventures. Innovative business models based on adoption of existing technology and sheer imitation offer much larger opportunities.Think of the landscape of technology enterprises in India as consisting of 3 avatars of companies:
1. Technology innovators
These are the standard issue 'tech' startups, based on cutting edge science & technology. Think Cambridge Display Technology, Genentech, A123, eSolar, Calera, NanoH2O, etc. This is the world of 'scalable' (see Steve Blank's slides for context) startups backed by professional risk capital that target large markets, go IPO and become billion-dollar companies.
In India, these are few & far between, given that:
While there are several ongoing efforts to address this (eg. government funding schemes, technology business incubators, business plan competitions, IPR training, etc.), it is unlikely that we'll see a material impact anytime soon. Moreover, how feasible is it to create a large number of such companies, especially in the current Indian (economic/social) context?
While talking of Indian technology innovations, it is obligatory to mention Tata Nano. And now, Tata Swach. And how GE Healthcare R&D in Bangalore is making innovative products for Indian markets. But I think all of these - across India, in a given year - add up to fewer innovative products than what comes out of Silicon Valley. In a week.
By the way, how many of top 100 publicly traded companies in India fall in this category? None!
2. Technology imitators
These are technology enterprises who appreciate the advantages of imitation over innovation. A simplistic model of such enterprises goes like this: "import -> reverse engineer -> localize -> manufacture -> sell at a fraction of the imported price -> repeat". I'm sure that the post-independence import substitution wave in India helped refine this model. The most recent example I came across involves orthopaedic implants made by Indian manufacturers at one-tenth the price of imported ones.
Of course, this is not limited to hi-tech products. Look at the Indian versions of various e-commerce businesses: Rediff (~ Yahoo), MakeMyTrip (~ Expedia), Flipkart (~ Amazon), etc. They have successfully managed to replicate US business models with minimal expenditure on innovation/R&D.
3. Technology adopters (& adapters)
These are by far the most interesting & high potential technology enterprises. My favorite example is Sarvajal. They sell clean drinking water - but with many twists:
Other examples that come to mind:
Note the difference between imitators & adopters: In the latter case, there is usually a key piece of innovation, just not necessarily in technology. It could be in how the product/service is delivered, branded, financed, serviced, customized, recycled, etc.
It may not always be possible to protect this innovation using intellectual property rights such as patents or copyrights. But the best of such companies will build wide 'moats' (Translation for MBAs: strategic & sustainable competitive advantages). This can be via customer loyalty, massive market share, monopolistic rights, large capex requirements, information economics, savvy branding, etc.
I think being an adopter/adapter in India offers far more opportunities to excel as a technology enterprise, in spite of the gods! Savvy investors are already riding this 'technology adoption curve'. They seek to benefit from technology-adoption that results in productivity gains, access to new (large) market segments, drastic reductions in transaction costs, network ('winner-take-all') effects, etc.
Of course, all 3 avatars of enterprises are key to wealth creation across the Indian society. But for investors, entrepreneurs & especially policy makers to focus solely on hi-tech/high-science startups would drastically limit the economic & social benefits of technology.