India’s New Charmers


On a visit to India, Vivek Wadhwa was amazed he could browse the Net in the middle of the Thar desert and met an entrepreneur who makes ink from vegetable oil

When the world thinks of the Indian technology sector, it imagines a nation of call centre workers and low level computer programmers administering databases and updating websites. Few observers, even in India, realise that the Indian technology sector has rapidly transformed into a giant R&D machine. A host of brand name global multinationals have set up their own R&D operations in India. Intel designed its six core Xeon processor exclusively in India. IBM has over 100,000 employees in India and they are performing significant roles in most of its software development projects. Cisco is developing cutting edge networking in Bangalore. Adobe, Cadence, Oracle, Microsoft and most of the large software companies are developing their mainstream products in India. In a parallel development, many of the original outsourcing names, such as Infosys, TCS and HCL have climbed the value chain and are now providing this type of creative and far more valuable R&D work for global multi-nationals on an outsourced basis. Semiconductor design, aerospace, and medical devices are all segments where large Indian outsourcers provide core R&D work for MNCs, work that was previously considered sacrosanct and never performed by entities outside the corporate veil.

Equally important are the arrival of Indian MNCs who are explicitly tackling global markets, such as Tata with its dirt cheap Nano car that the company is now positioning for a European market entry and Reva, which recently announced it was planning to build an electric car factory in New York state to crash the US market for electric vehicles. Suzlon, a large player in the wind power space, is yet another Indian MNC selling in foreign markets.

What has been missing to date in India, however, is early stage venture activity and the type of grassroots entrepreneurism that is the hallmark of American capitalism and Silicon Valley. In that respect China is way ahead of India with many startups taking advantage of huge government incentives and reeling in talented native Chinese returnees to serve as CEOs and CTOs. Note that Kaifu Lee, formerly Google’s top guy in China, was able to launch a $100 million startup focusing entirely on the mobile sector—and he was flooded with business plans within days of opening his doors in the Middle Kingdom.

On my recent trip to India I started to see new signs of life in tech entrepreneurship. This to me, was a real surprise. So far, all of the innovation has been in the labs of the multinationals who are performing their R&D in India and by their outsourcing providers. But everywhere I looked, I found startups which were really smart and hungry. Some were even doing things better than their Silicon Valley counterparts. Not all of these startups are developing breakthrough technologies but many of them are solving problems that US companies have thus far failed to solve and doing it with fewer resources.

One of the most interesting companies I met is in the mundane business of developing offset printer ink. Except their ink is made from vegetable oil and is entirely biodegradable. The offset printing industry consumes 1 million tons of petroleum products and emits 500,000 tons of volatile organic compounds every year. An IIT-Delhi incubated startup, EnNatura developed ink which emits no volatile compounds and is washable. And the overall cost of their solution will be significantly less than all present compounds when produced in scale. I can see a company like this growing into a billion dollar global business.

Another interesting company was LiveMedia. This is an out-of-home advertising company that has 4,500 screens in 2,200 destinations with a total reach of 50 million people. Of course, you can find exactly these sorts of TV screens in thousands of places across the US. Unfortunately, it’s been very hard to make money selling advertising on these networks.

LiveMedia appears to have cracked that nut using two simple innovations. First, they have created specialised content that is more engaging and interactive than a box droning CNN or the Disney Channel. LiveMedia content includes games, quizzes, horoscopes, a few short animations, and other content that is both cheap to produce and easy to play along with or understand. It’s not boring. Seems simple, but hard to do in practice. Second, LiveMediahas perfected contextual advertising. Screens in a hospital get ads for health insurance plans or health clubs. Screens in an airport get ads for rental cars. And, as the company CEO Rajan Mehta notes, many media companies are key advertisers—which implies that they themselves find LiveMedia a better place to recruit new users than other out-of-home media offerings.

I wasn’t alone in my surprise and excitement. My colleague, writer Sarah Lacy, who is known as ‘Valley Girl’ and is considered one of the leading experts on Silicon Valley startups was totally blown away when she met Harpreet Grover, the founder of a Delhi-based education software firm, His firm is developing software to automate the process of recruiting university students. The solution is so well thought out, elegantly designed and innovative, that Sarah told Harpreet that this was easily the best demo she had seen in two years. Sarah has met thousands of startups over the years including the founders of products like Facebook, Twitter and Google.

But the Indian startup nation faces many challenges. Venture capital investment is lagging, infrastructure is weak and government regulations are burdensome. And Indians still revere multi-nationals and the security that a prestigious job at a Cisco or an IBM can bring.

The good news is that venture capital goes where the innovation is. Once there are enough ground breaking startups, the money will follow. Indeed, the two lead investors in LiveMedia are both US venture capitalists including the respected Valley firm Draper Fisher Jurvetson. Plus, the dynamics of entrepreneurship are the same in India as in America. Company founders usually come from the ranks of experienced business executives and are middle-aged. They get tired of working for others and want to make an impact and build wealth before they get too old. Given that there are now hundreds of thousands of R&D workers in India who are gaining valuable experience and are getting old, it is simply a matter of time before they begin to hatch their entrepreneurial plans. After all, their colleagues who migrated to the US now start nearly one in six of Silicon Valley’s tech firms.

My prediction: Give India another five years and you will see an equal amount of startup activity and vibrancy as you see in America’s top tech centres. Will Indians ever take on Silicon Valley? I don’t know, but I can see India being in second place. That’s pretty amazing considering the relatively short length of time that the Indian start up scene has existed.

Mr. Vivek Wadhwa is a visiting scholar at UC-Berkeley, director of research at the Center for Entrepreneurship and Research Commercialization at Duke University and a senior research associate at Harvard Law School.
From The Economic Times dated 20th Novembert 2009

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