Rise of The Global Entrepreneur - Leveraging The India-US High-Tech Corridor

STVP-2005-010
[Rev. Feb 2, 2006]
Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

It was a bright warm day in Bangalore on January 15th, 2005. The aftermath of the catastrophic Tsunami disaster was still unfolding and people all around the Indian Ocean were grappling with the uncertainty of life. The high-tech industry in India however hadnt missed a beat; the Mumbai stock exchange was still healthy and the average Bangalore resident was contemplating new ways to succeed in Indias burgeoning high-tech economy. Kumar Ramachandran1 knew that his life had changed forever. He had just resigned from his position as Managing Director at Applied Materials, India and was ready to start a company of his own. The future would be full of new challenges he thought. As he sat in his chauffeured car on his two hour, 30 mile commute, he started making a list of people to call. He was glad to be following his heart. After all, life was too short to not pursue your passion. Although Kumar did not know what awaited him on the road ahead, he was determined to leverage his past experience and network of working relationships to launch a new venture of his own. Given his professional background and his knowledge of the new areas of growth in Indias services industry, he firmly believed that the best opportunities for him laid within the realm of engineering services outsourcing. India had pioneered the outsourcing of Information Technology Enabled Services (ITES) and Business Process Outsourcing (BPO) starting in the 1990s. Several Indian companies, such as Infosys, Wipro, and Tata Consultancy Services had become important global players by 2005. In the future, Kumar knew that companies would leverage the Indian workforce not only for software design and back office work but also for product engineering and innovation. His instincts told him that this process would generate incredible opportunities and wealth for those who dared to execute on their dreams. The time was ripe for a company that offered world-class product engineering services at a fraction of the cost to companies anywhere in the world. He chose to call this company Vignani the Sanskrit word for scientist. Kumar had met a number of global entrepreneurs and venture capitalists in the emerging ecosystem that linked India with Silicon Valley and other high tech hot spots around the world. He was eager to learn how into tap this corridor of mentorship, financing and business best practices. Learning
Kumar Ramachandrans biography is provided in Exhibit 1.
This case was prepared by Aparna Bhatnagar and Rishi Manocha, Graduate Students at Stanford University, under the supervision of Thomas J. Kosnik, Consulting Professor, Stanford School of Engineering as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
Success stories outlined in this case were derived from interviews with a number of key individuals from the entrepreneurial and venture capital community. The authors would like to acknowledge their support and thank each of them. They are in no particular order: MJ Aravind, Professor M. Balakrishnan, Sanjeev Bikchanandani, Joydeep Bose, Somshankar Das, Vinod Dham, Sridar Iyengar, Surendra Jain, P.V. Kannan, Dr. Sridhar Mitta, Professor Sangeneni Mohan, B.V. Naidu, Sanjay Nayak, Anu Parthasarathy, Gunjan Sinha, Suvir Sujan and Sunil Verma. Copyright 2005 by the Board of Trustees of the Leland Stanford Junior University and Stanford Technology Ventures Program (STVP). No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission of Stanford Technology Ventures Program.
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from prior successes and failures would be an important first step in launching his own entrepreneurial venture. Kumar understood that launching a global high-tech start-up was a risky proposition. Managing those risks required that he successfully execute four main tasks: raising start-up capital, building a global team, identifying an unmet need in a large potential market, and creating a disruptive product or service. As he continued his commute, he reflected on new developments related to all four of these tasks to the high-tech corridor that had been developed between India and the U.S. in the last few years.
Why Consider India?

In 2005 India and China were widely viewed as two prominent regions of new economic opportunity. The excitement around India stemmed from two related factors. First, India had proven to be a viable off-shoring destination for a variety of software and IT related functions (see Exhibit 2 for a list of attractive destinations for offshore IT services). Second, the growing economic prosperity of India was creating a potentially very large new market for all types of products and services.
Nascent Market Poised to Grow

In 2005, India was home to over one billion people of which approximately 64% were within the working ages of 15 - 64 years old, with a median age of 25. These people would be future consumers of all kinds of goods. Indias GDP was U.S.$692 billion, making it the tenth largest economy in the world (see Exhibit 3 for the largest economies in the world). Its GDP on the PPP basis was U.S.$3.3 trillion, the fourth largest in the world, just behind China. The unemployment rate was 9.2% but approximately 25% of the population still lived below the poverty line (Exhibit 4 provides key information about India and lists the countrys high tech hubs). Given the large population, the rise in employment and the 6% growth rate of the economy, India was considered by many as a large market poised to grow rapidly over the next few years. However, because the majority of the population was poor and rural, only products and distribution networks that were well adapted to those conditions were expected to succeed.2 This process of designing the correct type of low-cost high efficiency products for the emerging world was expected to spawn innovation3, which could in turn impact the availability of such products in developed countries. Based on these arguments, a presence in the nascent Indian market was important not only because of its size but also as a source of strategic competitive advantage. The opportunity presented by the lower segments of the Indian market was explained by Prof. C.K. Prahalad as The Fortune at the Bottom of the Pyramid4. In fact this approach was already being adopted by technology companies such as AMD which had announced in 2005 that it would launch a low-cost (less than U.S.$200) internet-ready computer system by the end of the year, to bring 50% of the worlds population online by 20155. A domestic market with strong buying power in India presented opportunities for innovation and investment that would also possibly alter the type of services and products exported from India in the
Kuldeep P. Jain, Nigel A. S. Manson, and Shirish Sankhe, The right passage to India, McKinsey Quarterly (February 2005). John Seely Brown and John Hagel III, Innovation blowback: Disruptive management practices from Asia, McKinsey Quarterly 1 (2005). C.K. Prahalad, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Upper Saddle River, NJ: Wharton School Publishing, 2004). AMD tries unique marketing for cheap PCs, The Washington Times, April 29, 2005, http://washingtontimes.com/upi-breaking/20050429-065018-3694r.htm, accessed on July 2005.
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future. This had already begun to occur in the automotive sector by early 2005. Increased domestic demand for automobiles had led to cost effective manufacturing plants in India, which not only catered to the domestic market but also exported automobiles to Asian and European countries. The domestic demand for electronics could in the future create a similar trend in high-tech manufacturing where Indian companies thus far had no significant global competence.
Burgeoning IT Services Industry

Indias software and services industry flourished partly through planning and execution and partly due to timing. In the early 1990s, the Department of Electronics (DoE) in India set up the Software Technology Parks of India (STPI) scheme, which was explicitly designed to enable the export of software services from India 6 . The STPI provided reliable telecommunications links, basic computer and office facilities, and tax incentives for the export of software services. These parks were the starting point for Indias IT service firms, which established themselves during the 1990s by achieving global standards in quality while delivering services at lower cost to their clients. The timing was also right because the demand for IT and software services continued to grew dramatically during the decade that followed. Indian companies were well positioned to meet this demand because they had access to a large well-trained workforce and the processes required to utilize it effectively. Every year, nearly two hundred thousand IT engineers graduated from Indias engineering schools and private software institutes and many migrated to Silicon Valley in the late 1990s (see Exhibit 5 for the number of IT admissions and graduates in India in the years 1992 - 2004). After working in the U.S., many of them returned to India following the dot-com crash in early 2000s. The economic boom which followed them to India changed their perceptions of what they could achieve back at home. Many more global companies opened branches in India, including Juniper Networks, Applied Materials, AMD, America Online and Google. Quite often the Indian branches were headed by repatriated Indians who were previously employed with these companies in the U.S. Starting the Indian branch of a global technology company proved to be quite entrepreneurial and empowering for these returning Indians. Meanwhile, Indias IT industry also expanded into ITES and BPO services7. This new category included banking and financial services, technical support, customer service, insurance claims processing and other services. Services were a lucrative sector and many new Indian and U.S. companies were started to fill immediate needs and anticipate new ones. As a result of continued growth, the environment, particularly in Bangalore and Hyderabad, became very entrepreneurial and energetic. The ingredients for success existed: several precedents of successful Indian service start-ups that were billion dollar global companies in 2005, strong ties to Silicon Valley, and a period of high growth and optimism. India attracted entrepreneurs and venture capitalists from Silicon Valley to the countrys high-tech cities, especially in 2004 as the U.S. economy began to recover. Cash smart Silicon Valley start-ups with a software development team in India were quite common. In addition, by 2005 global entrepreneurs and venture capitalists were visiting India in search of some or all of the following: new start-ups, new technologies, and new markets. On the flip side, Indian start-ups were visiting Silicon Valley in search of funding, mentorship and access to markets and resources.
Annalee Saxenian, Bangalore: The Silicon Valley of Asia?, Working Paper, 2000, http://www.sims.berkeley.edu/~anno/papers/bangalore_svasia.html, accessed July 2005.
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BPO stood for Business Process Outsourcing. It was the leveraging of technology vendors to provide and manage a companys critical and/or non-critical enterprise applications. ITES meant IT-enabled services.
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Kumar Ramachandrans Four Challenges as a Global Entrepreneur

Kumar had built the Indian operations of Applied Materials from scratch in Bangalore. The experience of building the India office of a global company meant that he quickly set up a physical office, and found a trustworthy lawyer and accountant to help him incorporate his venture. What he had never done before was form a start-up. He had never written a business plan or raised funds. In Silicon Valley entrepreneurs commonly learned these skills through the guidance of other entrepreneurs and the advice offered by famous Silicon Valley venture capitalists such as Vinod Khosla8 and John Doerr9. Entrepreneurship is about those who dare to dream the dreams and are foolish enough to try and make their dreams come true was Vinod Khoslas message to future entrepreneurs. He portrayed entrepreneurship as a noble pursuit that required countless personal sacrifices, a strong appetite for risk, and courage in dealing with uncertainty. If successful, this pursuit offered amazing rewards: wealth, fame, passion and the opportunity to change the world. But what did Kumar need to do for Vignani to be successful? As was mentioned earlier, he needed: to raise start-up capital, recruit and retain a global team, identify a large potential market, and a create differentiated product or service. These needs were based on four areas of risk that John Doerr told entrepreneurs that they needed to manage to launch and grow a world class new venture: financial risk, people risk, market risk and technology risk.10 How would he get all of this right? Part of the solution was to study and learn from organizations that had leveraged their networks in India and Silicon Valley successfully in the past to win on these four fronts. As he reviewed the stories of entrepreneurs and companies related to each of his tasks, he also had to decide which individuals and organizations he should follow up with to gain support for Vignani in the months ahead.
Start-up Capital
Typically money for an early stage company was raised through angel investors, or seed stage institutional or corporate venture capitalists. In addition to money, these investors were critical to a start-up as mentors. Their experience and reputation often gave a start-up the guidance and credibility required to attract a talented team, future investors and initial customers. Careful evaluation was required when choosing investors because they would own a share of the company and influence critical decisions.
Angel Investors Angel investors were typically private wealth holders who in many cases were also seasoned entrepreneurs. These investors performed due diligence themselves as well as in association with venture capital firms prior to investing a small to moderate amount of money ranging from tens of thousands to a million dollars. In addition to providing critical seed capital, angel investors played a hands-on role in mentoring new companies. They typically sat on the board of the company and offered advice on everything from business strategy to planning the next fund raising round.
Vinod Khosla was a co-founder of Daisy Systems and founding CEO of Sun Microsystems where he pioneered open systems and commercial RISC processors. Most recently, he was a partner at leading Silicon Valley based venture capital firm Kleiner Perkins Caufield & Byers. John Doerr was the founding CEO of Silicon Computers. Most recently, he was a partner at leading Silicon Valley based venture capital firm Kleiner Perkins Caufield & Byers. John had served on the boards of Google, Intuit, Amazon.com, HomeStore.com, Palm, and Sun Microsystems.
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John Doerr, Entrepreneurial Thought Leaders seminar series presentation, May 5, 2000. Stanford University, Stanford, CA.
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Angel money was raised most commonly through personal networking rather than through formal pitches. In India, it was common for friends and family to provide angel funds. One of the most well known ways to find angel investors internationally was through membership or participation in The Indus Entrepreneurs or TiE.
The Indus Entrepreneurs (TiE) TiE was founded in 1992 in the Silicon Valley as a global not-for-profit organization that fostered entrepreneurship. Since its founding, TiE had formed forty-two chapters in nine countries and had played an important role in the founding and growth of thousands of global companies worldwide, such as Exodus Communications, Hotmail, Junglee, Versata and Selectica (see Exhibit 6 for a distribution of TiE chapters around the world). The organization had three main objectives: mentor, network and educate. A large number of TiE members were angel investors for start-ups. The organization helped create an ecosystem for entrepreneurship in India, and at the same time served as a conduit for knowledge transfer between Silicon Valley and India. Entrepreneurial education was one of TiEs most important missions. To mentor aspiring entrepreneurs, TiE offered all its members the ability to sign up for one hour meetings with charter members, many of whom were seasoned entrepreneurs, angel investors or venture capitalists. These meetings gave entrepreneurs access to expert advice on their ideas and business plans at no or low cost. To assist with networking, TiE hosted regular educational events, special interest groups and an annual conference called TiECon where a broad spectrum of thought leaders spoke about entrepreneurship. TiE was active in building an ecosystem for entrepreneurship in India. They had launched the AAA campaign, which stood for Advocacy, Awareness and Assistance. The advocacy initiative sought to work with the Indian government to remove impediments to the development of an entrepreneurial culture. In this context, TiE was working closely with the National Entrepreneurs Network11 to study the factors affecting a paucity of seed capital in India. In the area of awareness, TiE was developing a showcase of successful local entrepreneurs in India to publicize their achievements and inspire the next generation. Finally, TiE was developing programs to assist entrepreneurs. An example was the launch of the Entrepreneurship Nurturing program in TiEs New Delhi chapter. Through this program, a select group of entrepreneurs were given the opportunity to attend weeklong entrepreneurial boot camps where they were coached closely by TiE charter members who helped them validate their ideas, define their market and refine their strategy. Since its early days, TiE had been a breeding ground for angel investors. Serial entrepreneurs and wealthy private investors actively sought aspiring entrepreneurs looking to start new ventures through the TiE network. Angel investing in India-grown companies followed the Israeli model wherein investments were made in U.S. corporations that had wholly owned subsidiaries in India. The reason for this structure was that exits were more likely to occur in U.S. stock markets versus Indian stock markets for a variety of reasons such as valuation. Since angel investors were typically hands-on and had a need to carefully manage risk, they leaned towards companies in which most or part of the senior management team was located in the U.S. even if most of the companys operations were located in India.
Venture Capital Firms The venture capital industry in India was on a roller coaster ride from 1995 to 2005 (see Exhibit 7 for the venture capital investments in India). After Draper International12, the first foreign venture fund launched in India in 1995, numerous institutional and corporate venture capital firms increased focus on the burgeoning Indian IT industry. Some international venture capital firms set up local offices in India, while
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The National Entrepreneurs Network was formed by the Wadhwani Foundation in 2003 to strengthen the network of academic institutions in India performing research, and delivering world-class education.
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Draper International invested in companies in India and in U.S. companies which were doing business in India. The firm was an arm of leading Silicon Valley based venture capital firm Draper Fisher Jurvetson.
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others made flying visits through Bangalore. Venture capital firms invested in numerous companies in India prior to the slowdown of the industry in late 2000 through 2002. By 2005, venture capital had regained momentum, with the majority of investments focused on mid to late stage companies (Exhibit 8 offers a distribution by stage of venture capital investments made in India in the years 2002 and 2003. A similar distribution existed in 2005). With the acquisition of Spectramind by Wipro, Daksh by IBM and Ygyan Consulting by Cognizant Technology, the estimated U.S.$5.1 billion13 ITES and BPO services industry had become a strong area of focus for venture capital firms and angel investors looking to invest in India. A notable example of this phenomenon was the investment by angel investor Ram Shriram14 and top tier venture capital firm Sequoia Capital15 in 24/7 Customer. In addition, high-tech product companies in India had begun to emerge by 2005. Until the late 1990s, primarily multinational corporations like General Electric had leveraged India as a location for product development and R&D. By 2005, this trend had gained substantial momentum and many large and mid-sized technology companies had set up their product development centers in India. However, start-ups that leveraged India for product development were still relatively few compared to the flood of start-ups that leveraged India for software and IT services16. The product trend was just beginning, but many venture capitalists and entrepreneurs saw high-tech product development and innovation as the next big thing on the Indian technology landscape.
Intel Capital Intel Capital was one of the largest global corporate venture capital entities with a worldwide fund of U.S.$700 million in 2005. The firm actively sought out and invested in companies that were strategically aligned with Intel and in a broad sense helped to generate further demand for Intel solutions. Intel Capital invested in four types of companies worldwide. The first type was companies that developed innovative technology. The second was companies that built products around Intels chip sets. That meant companies developing WiMAX, telecom, digital, optical and WiFi technologies. The third type was companies that bridged the divide between the first two types of companies. The final type was companies that created new markets of interest to Intel, such as handheld devices. In 2004, Intel Capital shifted nearly half of its worldwide investments to Asia signaling a strong interest in the continent. Headed by Director of Strategic Investment, Dr. Kumar Shiralagi, Intel Capital India invested in ventures that were aligned with Intel Indias three pronged strategy to create an Indian market for semiconductor chips, push for regulatory changes, and build products for the global and Indian markets. Intel Capital worked closely with other venture capital firms such as JumpStartUp 17 and Westbridge Capital Partners to invest in the telecommunications, broadband and wireless sectors. They were particularly interested in start-ups that helped increase technology usage in rural areas and healthcare. Intel Capital India employed only a handful of people but enjoyed a strong reputation because of its association with the Intel brand. Since its inception, Intel Capital India had funded a number of highly
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NASSCOM, NASSCOM Facts & Figures, NASSCOM Web site, http://www.nasscom.org/artdisplay.asp?cat_id=811#1, accessed July 2005.
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Ram Shriram was a leading angel investor in Silicon Valley having seed funded Google, Friendster and Elance. He had been the vice president of business development at Amazon.com and president of Junglee.
Founded by Donald Valentine in 1972, Sequoia Capital was a leading Silicon Valley based venture capital firm that had funded and nurtured companies such as Apple Computer, Cisco Systems and Google.
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Artiman Ventures, a leading Silicon Valley based venture capital firm with a branch in Bangalore, noted that 95% of its deal flow in 2005 comprised of service companies while 5% of it was product companies.
Founded in 2000 and operating through offices in Silicon Valley and Bangalore, JumpStartUp was an early stage technology venture capital fund that was uniquely focused on investing in both geographies. The firm focused on investments in the software, semiconductor, services and communications sectors.
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successful companies in key strategic areas. Tejas Networks, Sasken Technologies, and FutureSoft (acquired by Flextronics) were examples of successful investments. In addition to providing funds, Intel Capital India helped its portfolio companies leverage Intels best practices and its worldwide stature. Portfolio companies could tap into a network of alliances to create and penetrate the global and Indian markets. Assistance was also provided in hiring experienced management talent and developing core technology. Intel was one of the leading multinational companies doing product development in India. In fact Intels next microprocessor was being developed entirely by its engineers in Bangalore. Intel India also had a strong R&D record in algorithms and software for computer networking. Their patenting system was highly streamlined. All of this served as a source of knowledge about best practices particularly for startups funded by Intel Capital that aimed to do product development in India.
WestBridge Capital Partners WestBridge Capital Partners was a leading Indian venture capital fund primarily focused on Outsourced Services and Information Technology companies. WestBridge was formed when Sumir Chadha and KP Balaraj, two Harvard Business School alumni left their private equity careers in Goldman Sachs to form the partnership in 2000. They raised a U.S.$140 million fund from blue chip financial institutions and private investors. One of the differentiating features of the WestBridge partnership was that it was a cross-border venture firm located in Silicon Valley and Bangalore and focused entirely on businesses which leveraged Indias service capabilities and targeted global markets, with a special emphasis on the U.S. market. Their specific focus distinguished them from international venture firms like Walden International 18 which operated worldwide, and also distinguished them from local Indian venture capital firms which had no or minimal presence in the U.S. For WestBridge, investing in Indian service companies and helping them find markets abroad was a core competence. They believed that having a presence on the ground in India was crucial to identifying the best investment opportunities. It was also important for understanding local nuances, such as what motivates people in India and how the regulatory and financial structure works. These nuances were quite different between Silicon Valley and India. At the same time, having a presence in the U.S. was crucial to understanding the market and helping make customer introductions, since for many of their portfolio companies the U.S was the primary market. WestBridge typically invested U.S.$2 million in early stage companies and up to U.S.$10 million in late stage companies, in addition to providing non-monetary support. The partnership offered guidance on strategic direction, financing options, best practices and assistance in recruiting key senior management talent. They also helped portfolio companies close large customer contracts and structure strategic partnerships with value added alliance partners. WestBridge had focused intensely since 2000 on funding and mentoring many successful crossborder U.S.-India technology companies. Their portfolio companies spanned a wide variety of services including testing/quality assurance software (AppLabs), BPO services like contingency collections (Astra), leading BPO companies (ICICI OneSource), transaction processing (Indecomm), healthcare BPO (Integreo), financial services (Tarang), E-learning services (Brainvisa) and others. Their vision in 2004 was that India would also be offering innovative products to the rest of the world19. According to the founders, the high volume of patents being filed in major Indian R&D centers for companies, such as Texas Instruments, Philips and GE was just the beginning of this trend, which would eventually percolate to start-ups. WestBridge foresaw Bangalore being the epi-center of such innovation in
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With over U.S.$1.5 billion under management, Walden International had established itself as a first tier global venture capital firm. The firms investments were focused on four key industry sectors: communications, electronics/digital consumer, software & IT services, and semiconductors.
Tony Nash, Tech Outsourcing in Asia, AlwaysOn, January 13, 2004, http://www.alwaysonnetwork.com/comments.php?id=P2408_0_4_0_C, accessed on July 2005.
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India20 . In 2004, the partnership funded StandGenomics which provided products and custom high-end software for the biotechnology and pharmaceutical industry to address productivity bottlenecks in drug discovery & development, and diagnostic research. StrandGenomics came out of research projects at the Indian Institute of Science (IISc), the premier PhD granting science institute in India. Going forward, WestBridge forecasted that three major trends would occur. First, the partnership believed that Indias share in global services would continue to grow and there would be a move away from a cost to a quality driven model. Second, there would be an increasing number of companies focused on the domestic sector. The partnership believed that the explosive growth in the Indian telecom industry would be an example of this trend. Third, the partnership predicted a continued change in the mindset of Silicon Valley venture capital and technology firms. While India had in the past been viewed as a low-end testing and QA partner, it would play a critical role in the new product development strategies of global start-ups in the future.
NewPath Ventures Funded by NEA, CMEA Ventures, IFC and Chrys Capital, NewPath Ventures was a hybrid IndiaU.S. venture fund headed by managing directors Vinod Dham21 and Tushar Dave22. The NewPath fund was U.S.$85 million and the firms goal was to invest in companies with an Indian angle. Vinod Dham and Tushar Dave had formed NewPath as a new model of investment for venture capital firms in the U.S. since they firmly believed that investing in India required a hands-on approach that most U.S. investors could not implement. The challenges, in their opinion, stemmed from differences in Indian companies and Indian tax laws23. Specifically, NewPath Ventures LLC was focused on funding cross border start ups that utilized Indias talent for developing chips, systems and embedded software. Their mission was to leverage Indias talent pool to provide leading edge technology solutions to global markets. This mindset was different from most venture capitalists and entrepreneurs who viewed India simply as a source of inexpensive administrative and technical talent. While tapping into low cost talent was attractive (Exhibit 9 shows a comparison of salaries in the year 2003), Vinod and Tushar believed that Indias talent pool could be extended into areas higher up in the technology food chain. This belief was so strong that NewPath did not fund companies with a U.S. office only but instead used a ratio for their companies having about 30% of employees in the U.S. and 70% in India. In addition to looking at India as a technical hub, they viewed India as an important market. Since its founding, NewPath had invested U.S.$10 million each into InSilica Semiconductor, Nevis Networks and Telsima. InSilica was a fabless semiconductor company funded by NewPath and Flextronics. They delivered system-on-chip designs in a variety of application areas such as wireless, networking, and digital. InSilica was a cross-border start-up with headquarters in Santa Clara and R&D centers in Bangalore, San Diego and Slovenia. Nevis Networks was building an enterprise network security solution and was funded by NewPath and Nokia Ventures. Vinod Dham commented on Nevis R&D center in Pune, India: The Pune R&D center is a critical asset for building complex enterprise security solutions and a remarkably effective use of the start-up capital. Telsima was a provider of optical networking hardware but was similar to the other two in that it was headquartered in Santa Clara with R&D centers in Bangalore and Boston.
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R. Raghavendra, From service provider to innovator, Business Standard, August 18, 2004, http://www.business-standard.com/search/storypage_new.php?autono=164451, accessed on July 2005.
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Vinod Dham was well known as the Father of the Pentium Processor for his work at Intel. He had also built a company called Silicon Spice which was acquired by Broadcom.
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Tushar Dave had co-founded and funded a host of successful cross border companies including Arcus, Armedia, V-engines and Platys. T Radhakrishna, We have an Indian angle in all our investments, Sify News, April 22, 2004, http://sify.com/news/thethursdayinterview/fullstory.php?id=13459473, accessed July 2005.
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Vinod and Tushar had played an active role in the companies they funded, all of which were headquartered in the same building as NewPath Ventures in Santa Clara, CA. NewPath continued to attract attention from the U.S. venture capital community and was frequently looked upon as a partner to recommend and perform due diligence on new entrepreneurial ventures in India.24
Global Team
One of the most important factors venture capitalists considered when evaluating a start-up was the composition of the founding team. Both John Doerr and Vinod Khosla put team at the top of their list of reasons to invest in a company. Raising start-up capital was therefore somewhat contingent on assembling a great team. On the other hand, venture capitalists often added to the team, both through board memberships as well as through referrals from their network. In the global context this could be more challenging. Few U.S. venture capitalists had a network of people they had worked with in India and similarly, their ability to judge the quality of a team outside of their geographical area might be limited. Additionally, having a board member in a different country might or might not be useful to a start up depending on its needs. In such context, having work experience in different parts of the world could prove very useful. Also, having been associated with a well known educational institution or company could be an advantage.
Board of Directors Every team needed a coach. The board of directors of a start-up was one set of coaches. Many companies in Silicon Valley had a board of advisors distinct from their board of directors. The board of directors had the responsibility to provide oversight and corporate governance on behalf of investors, whereas the board of advisors provided guidance based on their specialized expertise with respect to the science, technology, and markets that were critical to the start-ups success. In Bangalore, some companies followed a similar model of having two distinct boards in managing and guiding the company.
24/7 Customer Even before P.V. Kannan co-founded 24/7 Customer in April of 2000, he had his first coach picked out. Ram Shriram was a powerful coach to have in Silicon Valley. He was a founding board member of Google and had been an executive at Amazon.com, Junglee, and Netscape. Ram provided angel funding for 24/7 Customer in 2000. He also introduced P.V. to Mike Moritz25. Mike eventually joined the board of directors in 2003, when Sequoia invested U.S.$22 million in 24/7 Customer26. Later on, 24/7 Customer attracted George Shaheen, CEO of Siebel and former CEO of Accenture, to their board as well. How did P.V. Kannan earn the confidence of coaches like Ram Shriram and Mike Moritz? P.V. was born and raised in Chennai, India and trained as a chartered public accountant. He worked at Tata Consultancy Services (TCS)27 in India. The flat hierarchy and quality focus at TCS left its imprint on P.V. In 1991, P.V. migrated to the U.S. and worked as a contractor for Oracle Consulting before starting his own company, Business Evolution, in New Jersey in 1995.
VCs on Indian Trail, Siliconeer, January 2005, http://www.siliconeer.com/past_issues/2005/january2005.html, accessed July 2005.
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Mike Moritz was a partner at Sequoia Capital. He had served on the board of directors of Flextronics, Google, RedEnvelope, Saba Software, Agile Software, Link Exchange, Neomagic, Paypal and Yahoo! 24/7 Customer was Sequoia Capitals first investment in the ITES/BPO industry.
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Tata Consultancy Services (TCS) was an Indian IT consulting, services, and BPO organization. TCS was Asias largest IT services firm in 2004 with revenues of U.S.$2.28 billion in 2004 - 2005.
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P.V. met Ram during a sales call. At that time, Business Evolution (BE)28 was trying to sell software to Amazon.com. Ram was vice president of business development at Amazon.com and was sent to figure out how much of BEs stock Amazon.com could have in return for being their customer. P.V. refused to part with any stock. This display of character made an impression on Ram and they decided to keep in touch. When BE was sold to Kana, Ram called and in early 2000, P.V. moved to Silicon Valley enlisting Rams participation on the board of his next start-up, 24/7 Customer. The relationship with Mike Moritz was built over a two year period. Ram provided the initial introduction in 2000 but the relationship blossomed two years later when P.V. found himself sitting near Mike Moritz on a flight from London to Silicon Valley. By the end of the flight, Mike was convinced of the value proposition of 24/7 Customer and asked if he could invest. P.V. related later on that Mike Moritz knew what questions to ask and how to read people given his years of experience building companies. Mike believed that P.V. was dedicated and that 24/7 Customer would be built for the long haul. In the short term at least, 24/7 Customer had started to be successful. A June 2005 NASSCOM29 rating ranked 24/7 Customer as the 11th largest third party ITES company in India based on revenues. 24/7 Customer was headquartered in Los Gatos, California with customer support centers in Bangalore, Chennai and Hyderabad and offices in the U.K. and Canada. The company employed 4,500 people and provided BPO and customer support services to clients all over the world. In early 2005, 24/7 Customer received significant media attention. In addition to their NASSCOM ranking, the company was featured in award winning New York Times author Thomas Friedmans book, The World is Flat and was one of five winners of the Emerging Star award at TiECon 2005. What role did the board of directors play in making 24/7 Customer a success? The board helped build customer relationships. For any company, access to customers was important, but to a services company, it was crucial. Mike Moritz commented in a press article about 24/7 Customer30 that, You can save time if you approach the right people at the beginning. We help cut the bureaucracy at the customers end. We also try and build a prospective customer list but meeting the right person can be a massive competitive advantage. The board also provided inspiration. All of the board members had traveled to India and addressed the company. Ram Shriram spoke at the companys anniversary celebration, and Mike Moritz met with the entire management team. Their presence reinforced the culture of the company as one that was built-to-last; the board members had previously helped create such companies. For example, Mike Moritz had been a board member at Flextronics, an electronics manufacturing service (EMS) provider. In the early days of EMS, investors had been skeptical about the business model but eventually the industry flourished and Flextronics became a multi-billion dollar company. Mike saw many parallels between the EMS industry and the BPO services industry. In addition, the board also provided advice. Formally, the board of directors met at least 4 times a year but practically, they provided coaching on a weekly basis via emails. During the initial stages, the board members helped build and validate the management team, and also helped attract other investors. Above all, P.V. Kannan felt that his coaches were great because they gave the management space to operate. His advice to entrepreneurs was, You want coaches. They arent the best players. They dont play, but they get the best out of you. Assemble a board with people who are not only smart but they allow you to be the star. He also warned against recruiting a board of directors who didnt feel like coaches, have the courage to say no to people who dont have the right chemistry.
28
Business Evolution (BE) was a CRM software company based in New Jersey. P.V. Kannan founded BE in 1995 and sold it in December 1999 to Kana Communications. The idea for 24/7 Customer originated from discussions with BEs clients (banks and insurance companies) who were interested in off-shoring their business processes and having call centers. NASSCOM stood for National Association of Software and Services Companies. NASSCOM was an Indian chamber of commerce that served as an interface to the Indian software industry.
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Kalpana Shah, 24/7 Customer to double headcount, The Economic Times, January 20, 2004, http://economictimes.indiatimes.com/articleshow/433800.cms, accessed July 2005.
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24/7 Customers coaches had great confidence in their management team. In the same press article by Kalpana Shah, Mike Moritz said of 24/7 Customer, We want to be at least among the top two in our business. The company has so far exceeded our expectations, and as an investor we want to help wherever possible. But the credit for getting new and prestigious business belongs solely to the management.
MetricStream Ramana Mulpury who previously worked as a consultant implementing Oracles leading manufacturing and shop-floor applications founded MetricStream in 2000. Serial entrepreneur Gunjan Sinha provided angel funding and served as chairman of the board. Gunjan had previously co-founded eGain, WhoWhere, and Parsec31 , all of which had leveraged India. In March 2004, Zaplet, a Kleiner Perkins Caufield & Byerss portfolio company merged with MetricStream and Vinod Khosla joined the companys board. Shellye Archambeau, an IBM veteran and CEO of Zaplet, took helm as the CEO of the combined company. The converged company took the name MetricStream and developed software for enterprise-wide quality and compliance management, and corporate governance. The software helped enterprises ensure their products met quality standards like the ISO 9000, and complied with financial, regulatory and corporate standards such as FDA, EH&S and Sarbanes-Oxley regulations. The companys solutions were used in diverse industries such as automotive, food, pharmaceuticals, manufacturing and electronics. By 2005, key customers included Pfizer, Fairchild Semiconductor, Hitachi Computer Products (America), Albany Molecular Research (AMRI), TaylorMade-Adidas Golf, Boston Market, Cannon-ITT Industries and Dolby Laboratories. At the 2005 TiECon, MetricSteam was one of five companies to be honored with the Emerging Star award. According to analysts AMR Research, "MetricStream is well suited for regulated multi-plant environments with complex supply chains, particularly where users are seeking a highly scalable, graphically intuitive product32 MetricStreams board was instrumental in providing visibility, attracting talent, setting high standards and training the leadership of the company globally. First, the visibility of Vinod Khosla and the executive team helped attract a leadership team with global experience. For example, the vice president of engineering, Gagan Arora, was recruited from his role of vice president of engineering at i233 in Bangalore. MetricStream also attracted technical talent from Yahoo! in India. Many on the team had degrees from the Indian Institutes of Technology (IIT)34, which was also Gunjan Sinhas and Vinod Khoslas alma mater. CEO Shellye Archambeau and the leadership team helped create a culture of high standards with the sense of one team empowered globally. MetricStreams close to 110 person team comprised of approximately 30 employees in the U.S. and 80 employees in India. The board understood the power of India as a strategic lever, not just a way to reduce operational costs. A critical element of their vision was empowering a world-class software product innovation team in India. Vinod Khosla traveled often to Bangalore to describe the companys vision. Gunjan Sinha and CEO Shellye Archambeau also traveled there regularly to conduct leadership and management training sessions. Frequent travel for employees was encouraged as well as online collaboration. Most importantly, the bar for performance goals and expectations for product innovation was held just as high amongst the India team as other offices. The companys culture was also reflected in their
31
Parsec operated a global call center in Gurgaon, WhoWhere was an internet services firm based in Delhi and was acquired by Lycos in 1998. eGain was a provider of customer service and call center software and services and had strong operational presence in India. Regulatory Compliance Reshapes the Quality Software Market, AMR Research, January 2005.
32 33
i2 was a leading supply chain optimization company formed by Sanjiv Sidhu and Ken Sharma in 1998 to help organizations deal with the variability that came from the gap in managing supply and demand. Indian Institutes of Technology (IIT) were Indias premier educational institutions for science and technology. There were seven IITs spread across the country, in Kharagpur, Mumbai, Chennai, Kanpur, New Delhi, Guwahati and Roorkee. Undergraduate acceptance rate was only 4% every year.
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compensation package, which strove to pay its employees in India and Silicon Valley on an equivalent standard of living basis. This was possible for MetricStream because unlike a services company, their revenues were not based on the quantity of people hired but solely on the quality of their output.
Management and Technical Talent Leveraging India without understanding its people was like trying to read a book without first learning the alphabet. Hiring and retaining talent anywhere in the world required building relationships based on trust and loyalty. The challenge of doing so across a physical and cultural divide and a twelve hour time difference between the U.S. and India was not to be under-estimated. Clearly, there was a need to find good team members in the U.S. and India who would be able to work together as one cohesive whole. There were a number of companies that helped entrepreneurs through this process or served as role models of successful teams.
Global Executive Talent Anu Parthasarathy35 had seen many companies fail to make such globally diverse teams work. Often, team members in the U.S. felt that their team members in India did not understand customer needs, while team members in India felt that their U.S. counterparts did not really contribute much value and were grossly overpaid. In 2004, Anu started Global Executive Talent (GET) in Menlo Park, CA as a cross-border search firm to help organizations recruit global teams. Having been involved with the Indian technology industry from its inception, Anu had a deep understanding of the Indian market for talent, the complex cultural issues involved in cross border operations, and an excellent rolodex of contacts in the industry. GETs expertise was sorely needed. Senior managers and experienced executives were in short supply in India because the high-tech industry there was relatively young. Attrition rates amongst nonexecutive employees were as high as 15-30% in the IT and BPO sectors in India. Global Executive Talent offered the following helpful tips for employee recruiting and retention in India:
Tap into the skilled but under utilized workforce tied up in public sector jobs, such as in banking, heavy engineering, insurance, textiles, defense, and consumer products Realize the strong influence of family members (other than the spouse) in an employees career decisions. Involving parents or siblings in company activities or providing for them in company insurance plans can build strong employee loyalty Recognize the importance of status and designation as important non-monetary incentives To attract brilliant minds build an exciting and empowering culture Realize that stock options are not as well known or trusted in India as in the U.S. as a method of compensation
Finally, a different kind of leadership style was necessary for making global teams work. According to GET, the global entrepreneurial leader was knowledgeable about many different parts of the world, and had the ability to work with people from diverse cultures. He/she had few pre-conceived biases. In addition, this leader had a low dependence on rules or hierarchy and was open to collaboration. The ability to communicate was paramount, especially under the uncertainty brought about by differing time zones and lack of proximity. Having a global leader in each location of a companys operations and the handshake or ability to effectively collaborate was critical for cross-border teams.
35
Anu started her career in marketing at Wipro from 1983 - 1990. She then started Nexus Search Consultants in Bangalore and was its director from 1990 - 2000. Nexus helped source talent from India among Fortune 1000 organizations. From 2000 - 2004, Anu was head of human resources at E4E.
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E4E (Entrepreneurs for Entrepreneurs) The handshake had been quite good between the co-founders at E4E. Delaware-based E4E was formed as the brainchild of Somshankar Das, Dr. Sridhar Mitta and K.B. Chandrashekhar, all of whom had close working relationships with each other from the past. Having had illustrious careers as a partner at Walden International, CTO of Wipro Infotech36 and co-founder of Exodus Communications37 respectively, Som, Sridhar and K.B. set out on a mission in 2000 to create a global company which would offer many value-added services under the E4E umbrella. Som had met Sridhar many years before his Walden position when Wipro had a joint project with VLSI technology, where Som had worked earlier. K.B. knew Sridhar because they had worked together at Wipro. E4E had raised U.S.$65 million from venture capital firms NEA and Walden International, as well as from private investors such as K.B. Chandrashekhar himself, Lakshmi Mittal38, Kannan Partners and Bill Milton. E4E was headed by Somshankar Das and Murrali Rangarajan in Silicon Valley, and Dr. Sridhar Mitta and Anand Talwai in Bangalore. The companys business model could be likened to that of a technology holding company that built and owned related services businesses. E4E was a large company being built in a modular form. E4E founders and management actively sought out opportunities in the services space, recruited senior management teams to bring them to market and formed new companies that were wholly owned by E4E. E4E provided a common infrastructure (see Exhibit 10 for a diagram of E4Es shared infrastructure model) and guided the development of its companies through mentorship and financial support. In addition, E4E provided a shared U.S. based sales and marketing platform to obtain clients. The modular model enabled E4E to offer their clients what the company called services on tap one or many business process services to any given client in a sales transaction. The E4E modular growth model was unique. It had evolved because of three reasons. First, the E4E founding team was extremely passionate about India and the services industry, and believed that U.S. based venture capital firms were unfamiliar with evaluating and funding companies in the service sector. Given their experience at Wipro, Walden and Exodus, the founding team believed their core competence was in identifying potential demand in new service areas and helping build companies to fulfill such needs. Second, the founding team wanted to build companies and businesses rather than simply fund them, as was the case with most venture capital firms. Somshankar Das, who had helped found Waldens first technology-focused venture capital fund in India called the Walden India Nikko Fund, felt that lack of operating control was a handicap in venture capital. He expressed this thought very eloquently: with 15% ownership in a company, you simply cant control or influence the outcome of the company. Third, E4Es founders wanted to leverage the advantages of scale so the company chose a very modular business model. Scale could be an important factor in services where large clients seek service providers that are big enough to implement their processes. Building a tight group of related companies each with its own management provided economies of scale and also benefited clients, but the main challenge of this approach was teamwork. The constituent E4E companies owned stock only in E4E, which eventually hoped to have an IPO. Som and Sridhar had a friendship based on years of trust. They had each built a network of entrepreneurs in India and the U.S through Wipro, TiE, and Walden. They tapped this network to start their constituent companies. E4E had been successful in building or acquiring companies such as Aztec Software, iSeva, Vincity and iCelerate. As of 2005, its companies employed 5000 employees worldwide and had more than 100 customers.
36
With over 38,000 employees and revenues in the excess of U.S.$ 1.2 billion, Wipro was one of India's biggest IT companies. The company was led by Chairman and Managing Director, Azim Premji, and had 54 dedicated development centers across India, Europe and the U.S., and also had 30 offices worldwide. Exodus Communications was a leading provider of complex Internet hosting for enterprises with mission-critical Internet operations. Customers included web giants eBay, Lycos, MSNBC and Yahoo! Lakshmi Mittal was the chairman of Mittal Steel, the worlds producer of steel. He was named in 2005 by Forbes Magazine as the 3rd richest man in the world with an estimated net worth of U.S.$25 billion.
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Large Potential Market

The Indian market for technology was particularly difficult to gauge because there was still considerable uncertainty about its future growth rates. Although wireless and telecommunications were believed to be the highest growth areas, when and how much rural penetration these technologies would achieve was not easy to estimate. Similarly PC usage and internet penetration in India was far less than China even though the Indian software services industry was based on these tools. They were however not tools that the common man used. It was clear that the standard of living was rising and that more and more people coming out of poverty would mean greater demand for better household and consumable products. This trend could perhaps be used to foretell the boom in the automotives industry. However certain companies managed to read the market need enough ahead of time to have a substantial lead.
Baazee.com (now eBay India) Avnish Bajaj and Suvir Sujan, founders of Baazee.com, noticed the phenomenal growth and IPO of eBay in 1998. Leaving their investment banking positions in New York, the duo returned to their homeland, India in November 1999 with U.S.$20,000 in angel funding to form a company. After extensive thought, Avnish and Suvir concluded that an online auction site would hold enormous potential in India (Exhibit 11 shows a projection of business to consumer (B2C) eCommerce in India). With their initial seed capital, they started Delaware-based Baazee.com Inc. and its subsidiary Baazee.com India Private Limited modeled after the eBay concept. In 2000, the newly formed company aggregated U.S.$21 million in funding over three fund raising rounds from global investors, including Star TV39. The years 2000 - 2004 proved to be important growth years for the company as it scaled revenues to approximately U.S.$3.5 million prior to its acquisition by eBay in the third quarter of 2004 for U.S.$50 million. The companys founders believed in six key success factors for Baazee.com. First, they remained focused on a model that had succeeded in the past by discarding other opportunities, such as an offline strategy. Second, the company believed in nimble execution by erring on the side of execution instead of strategy. Third, even though eBay was used as a model, Baazee.com was customized based on local customer needs. Fourth, equity ownership was used as a way to retain the start-up management team. Fifth, the management team was prepared to meet new market opportunities preparation met opportunity at every stage. Lastly, a strong corporate governance system with best of breed investor relations was cultivated.40 Although most of the challenges faced by the founding team were universal to entrepreneurs, a unique challenge was the development of trust in users of the site. Since online shopping was still a new concept in India at the time of Baazee.coms inception, trust played an important role in getting people to buy and sell on the site. The company realized that prior to its users trusting individual sellers, users had to believe in the safety of online shopping. As such, the company initiated a trust marketing campaign as early as 2001 by offering a secure payment option called PaisaPay Online and a money back guarantee in cases of fraud. As the company grew rapidly, Avnish and Suvir tapped their network of alliances to engage Internet giants Yahoo! and eBay in acquisition talks. Starting at an initial bid of U.S.$5 million from eBay, the company went through a series of negotiations with both companies prior to accepting an acquisition price of U.S.$50 million from eBay in June 2004.
Star TV was a leading satellite television service provider in Asia with more than 300 million viewers across 53 Asian countries and was a wholly-owned subsidiary of News Corporation. Avnish Bajaj, Entrepreneurship in Asian High-Tech Industries seminar series presentation, May 24, 2005. Stanford University, Stanford, CA.
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Naukri.com Launched in 1997, Naukri.com had become Indias leading job portal. A wholly owned entity of InfoEdge Private Limited, Naukri.com was formed based on the experiences of the companys founder and CEO, Sanjeev Bikchanandani. Sanjeev, a brand manager for Horlicks41, noticed strong interest by his coworkers in combing through job advertisements in a leading Indian publication titled Business India. Realizing the need to make the process of searching for a job more efficient, Sanjeev quit his job in October 1990 to start InfoEdge. The initial business model of the company was to produce and sell databases, reports and feasibility studies for job seekers. As the Internet made its emergence in India in the years 1995 and 1996, Sanjeev began to realize the potential of launching an online job site. After a number of false starts, Naukri.com made its debut on the Internet in March 1997. Independent of other job sites which had emerged in the U.S. such as Monster.com and HotJobs.com, Naukri.com developed solutions for employers and job seekers by intense focus on the Indian market. Even though the company became profitable in its second year of existence, it remained in bootstrap mode until 2000 when it received U.S.$1.7 million from ICICI Ventures42. The company used the venture funds it received to broaden its management team and product portfolio. In 2005, with a market share of 49%, the site boasted over 120 million page views and 5 million unique visitors each month. It was ranked Indias 3rd most popular website across all categories. The company had over 15,000 clients and reported revenues of about U.S.$9.3 million, with 90% of that revenue derived from employer related services and the other 10% from job seeker services.
Disruptive Product or Service

Clayton Christensen43, a highly respected professor at Harvard Business School, coined the term disruptive technology to describe a new, possibly lower performance but far less expensive product that addressed the needs of potential customers, who either could not afford or did not need all the capabilities of products designed for the existing market. Disruptive technology starts by gaining a foothold in the low end and less demanding part of the market and then moves up-market through performance improvements and finally displaces an incumbents product. AMDs less than U.S.$200 computer may be an example of a disruptive product. In working towards the fortune at the bottom of the pyramid, the goal of AMD was indeed to invent a less expensive, possibly lower performing technology for the price sensitive market. Startups in Bangalore could partner with educational institutions to develop disruptive offerings. There were examples of promising developments at the Indian Institute of Sciences (IISc) and the Indian Institutes of Technology (IITs).
IISc and IIT Educational Institutions Disruptive product innovation has in the past often originated from research at a university. At Stanford University, disruptive product innovation has happened often because students were taught to think out of the box rather than be constrained by existing solutions to a given problem. The analogue of Stanford in Bangalore was the Indian Institute of Sciences (IISc). In addition to the IISc, the seven IIT institutions spread throughout India were a breeding ground for creative ideas. Cutting edge technology with defensible intellectual property might not guarantee success but it could provide a formidable
41 42
Horlicks was a line of popular malt drinks manufactured by GlaxoSmithKline.
ICICI Ventures was the largest private equity and venture capital management firm in India with funds of U.S.$650 million. The firm invested in IT, pharmaceutical, biotech, media and retail companies.
43
Professor Christensen was the author of the bestselling books The Innovators Dilemma, which received the Global Business Book Award for the best business book published in 1997, and The Innovator's Solution. More information about him can be found on his website at http://www.claytonchristensen.com/.
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competitive advantage. Traditionally entrepreneurship had not been the purview of educational institutions in India but that was beginning to change. The Indian Institute of Sciences (IISc), Bangalore was regarded as one of the best science research institutes in India and had spun off nearly six companies by the end of 2004. Since IISc was a graduateonly institution with a high faculty to student ratio (1:3), the professors started most of the companies from the institution. In 2001, IISc started a faculty entrepreneurship program run by the society for innovation and development (SID). SID had been an industrial affiliates program for IISc since 1991. The new faculty entrepreneurship program provided faculty the opportunity to commercialize intellectual property generated during research. IISc offered its professors the option of a one or two year sabbatical to work on a start-up venture. The institute also created a patent cell by early 2005, which would streamline and simplify the process of filing patents. Another advantage of incubating a company at IISc was access to its research facilities 44 . Companies started or actively mentored by IISc faculty included PicoPeta, Tejas Networks, Strand Genomics, MetaString and Esqube. The Indian Institute of Technology (IIT) Delhi established a technology incubation unit (TBIU) in August 2002 to provide start-ups U.S.$20,000 in seed funding, monthly stipends and limited modular infrastructure with deferred rent for six months. In exchange, TBIU retained a share of equity in the companies they incubated. The IITs also had an intellectual property and patenting process in place. IIT professors had the flexibility to engage in consulting projects for local companies, which were often potential partners, sponsors or customers for TBIU incubated companies. At the IITs, undergraduate students in their senior year were encouraged to commercialize their senior projects at TBIU (or its equivalent) with guidance but not necessarily full-time involvement from their professors. Many IIT professors often had industry connections, which were a rich source of relevant technical problems that had a ready and willing local market. For example one IIT Delhi start-up, Kritikal Solutions applied computer vision and embedded system design to create gadgets for camera based surveillance, traffic monitoring, vehicle authorization and vehicle scanners. These products originated as student projects in response to an existing need in the Indian marketplace. IIT Delhis TBIU had incubated five companies as of December 2004. Other IITs had similar incubation units in place. Most notably IIT Bombay was quite active in entrepreneurship and also held a business plan competition. In general, the IITs had powerful global alumni networks which could in the future serve as a source of angel investment and mentorship.
Tejas Networks Tejas Networks success in the Indian market was a case of preparation meets opportunity. Tejas co-founder Dr. K.N. Sivarajan had worked at IBM in the U.S. and was the co-author of a famous textbook on optical networking. He left his position as associate professor at IISc to start Tejas Networks. His cofounder and CEO Sanjay Nayak had been managing director of Synopsys in India and had co-founded the Indian office of Cadence in his prior experience. The third co-founder Arnob Roy had been a co-founder of Synopsys India and had worked with Sanjay in a number of other organizations. In addition, Tejas angel investor Gururaj Desh Deshpande was co-founder and chairman of Sycamore Networks in the U.S. Tejas Networks was Deshs only investment in India and he devoted a lot of time and other resources to it. His vision and guidance helped Tejas get off the ground. The company raised series B round with Intel Capital and IL&FS Investment Managers Limited45. Series C round of U.S.$15 million was led by U.S. based Battery Ventures with co-investment by Gabriel Venture Partners. Tejas Networks was Batterys first investment in India and signaled the venture capital firms entry into the country.
44
IISc was particularly well known for advanced materials research. This made it an attractive source of innovative ideas for automotive and aerospace applications. IL&FS Investment Managers Limited is the private equity arm of infrastructure leasing and financial services limited (IL&FS), and is one of the prominent private capital providers in India.
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In 2005, Tejas Networks had established a strong foothold in the Indian telecommunications equipment market and was beginning to look globally to increase sales. Since 2000, Tejas had been building and selling optical networking boxes that enabled carriers to support voice and data services. The product also had embedded software to support auto-discovery of network topology and enable network provisioning. Tejas did the software and system design while product manufacturing was outsourced to electronic contract manufacturers. Tejas Networks had a first-mover advantage in providing such equipment at a time when the telecommunications backbone in India was expanding due to growing demand. Tejas products were used in access and edge networks, regional backbones, wireless backhaul and other applications. Their customers in India included the major telecom service providers Dishnet DSL, Asianet, Bharati, VSNL, Shyam Telecom, and Tata Teleservices, and public sector telephone and utilities companies MTNL, BSNL, RailTel, Indian Oil and others. Tejas Networks was unique in being a high-tech product company based entirely out of India (with no offices elsewhere in the world). In India, Tejas technical and market insight had given them a competitive advantage. But catering to the low cost large Indian market could in the future make their product potentially disruptive in the global marketplace. Tejas strategy was to do well in India and then sell their technologically-leading yet cost effective product globally. Globally, Tejas Networks would offer not only a practical product that was of great value but would also provide product life cycle support services. The companys technology and cost effectiveness would serve as its differentiator in the global market where it would compete against Alcatel, Siemens, Lucent, Marconi, Huawei amongst others.
The Vision for Vignani

Having led the rapid growth of Applied Materials in India, Kumar had learnt about the challenges global companies faced in outsourcing their operations. He knew that most global companies had begun to recognize the availability of skilled labor in India but viewed their Indian operations as a labor arbitrage opportunity. Applied Materials, like most semiconductor manufacturing firms who were leveraging Indias talent pool at the time, performed low-end work in India, such as engineering change orders, supplier problem sheets, and redlining. Kumar saw a new vision for outsourcing and for Vignani he wanted to move beyond bodies to brain cells. He firmly believed that if he could cultivate strong domain knowledge at Vignani, he could sell dollars per brain cell instead of dollars per hour and effectively overcome the challenges that existed in outsourcing (see Exhibit 12 for Kumars beliefs about outsourcing challenges). With a strong conviction that the outsourced engineered services industry in India was on the cusp of hyper-growth, Kumar envisioned that Vignani would enable the global capital equipment industry to leverage strong engineering talent at a lower cost from India46. He began defining the target customers for the company. The two industries, which he believed would benefit the most from outsourced engineering services, were the U.S.$35 billion+ semiconductor equipment industry, which comprised of companies such as Applied Materials, KLA-Tencor, Tokyo Electron Ltd., and the U.S.$100 billion+ instrumentation industry, which comprised of companies such as GE Medical, Honeywell International and Medtronic. Kumar however was not alone in recognizing the potential of the engineering services outsourcing industry. Many of the leading Information Technology (IT) outsourcing and Business Process Outsourcing (BPO) companies from India were targeting outsourced R&D and engineering for product development as a new growth area to add to their existing service lines. These companies included Wipro, Tata
46
By 2005, a number of semiconductor companies aside from Applied Materials, such as KLA-Tencor, Tokyo Electron Ltd., and ASML had spent significant amounts of money in engineering services from India. Kumar believed that by 2010, the industry would spend nearly 50% of their R&D labor engineering budget in low cost countries and more than 40% of their sourcing would be from low cost countries.
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Consultancy Services, Satyam47, HCL Technologies, and Patni Computer Systems48, which had revenues in hundreds of millions to billions of U.S. dollars, and established customer relationships in many industry segments. In addition to the large outsourcing companies, there were smaller competitors that were focused exclusively on engineering services outsourcing, in segments other than capital equipment. For example, Neilsoft was an Indian company founded in 1993 that provided engineering services to clients in the software industry, automotive manufacturing, ship building, and construction engineering of large buildings. Vignanis challenge was to use its deep expertise in semiconductor manufacturing to differentiate itself from competitors in that segment, and then to expand selectively to other capital equipment manufacturing segments where it could compete against older, larger companies with proven track records in other types of outsourcing. Through his extensive experience, Kumar knew that companies were capable of selling services and products. As such, he believed that competing head-to-head with giants such as Wipro and Tata Consulting Services would be ineffective. So he envisioned a new model for the company: rather than sell services, Vignani would partner with its customers very tightly and share the risks and rewards associated with outsourcing sustained engineering and value engineering projects. Kumar began to develop a longterm roadmap for the product Vignani would sell to its customers. At the initial stages of a customer relationship, he believed that Vignani would add value through effectively managing sustained engineering projects. As the relationship matured, the company would move higher up in the food chain and begin taking product engineering ownership and became an original device manufacturer (Exhibit 13 details the product roadmap for Vignani). As Kumar refined his vision for Vignani, he realized that the market opportunity for the company was much larger than what he had originally imagined. Through meetings with key leaders in the capital equipment industry such as Tom Rohrs49 and Dr. Gino Addiego50 , he crafted market sizing estimates. He quickly realized that his total addressable market was larger than U.S.$7 billion (see Exhibit 14 for market sizing performed by Kumar). Market research reports by Avendus51 and NASSCOM52 pegged the market at U.S.$7 billion or greater as well.
47
Founded in 1987, Satyam Computer Services Ltd. is one of Indias largest global consulting and IT services companies. The company is listed on the NYSE under the ticker symbol SAY.
48
Patni Computer Systems was a leading global provider of Information Technology services and business solutions. With over 11,000 professional service clients globally, the companys vision is to achieve global IT services leadership in providing value-added high quality IT solutions. Tom Rohrs was a 28 year veteran in the high-tech industry. He served on the board of Magma Design Automation, Inc., etc. He was also Senior Vice President, Global Operations at Applied Materials. Dr. Gino Addiego was the Executive Vice President of Novellus where he oversaw all of the companys manufacturing operations, systems engineering, facilities, information technology and human resources. A 2003 market research report by India-based investment banking firm Avendus estimated the global engineering services segment to be worth U.S.$7 billion.
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NASSCOM Newsline:8-9 (July 2005), NASSCOM, http://www.nasscom.org/newsline/issue45/Research.pdf, accessed July 2005
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Decision Time
Kumar had an overall vision about the services Vignani would offer, and an understanding of his first target market segment. He planned to have an office in Silicon Valley, the headquarters location of four of the top ten Semiconductor Manufacturing Equipment companies (Applied Materials, KLA-Tencore, Novellus Systems, and Lam Research) and a number of their customers. Bangalore would be Vignanis base of operations in India. However, there was much more to be done to get Vignani up and running. As Kumar sat down to begin work on his business plan, his challenge was to answer the following questions:
1) Who were the right investors to ensure a successful entry of Vignani into the relatively nascent industry of outsourced engineering services? Should he approach a venture capital firm or an angel investor at this stage in Vignanis development? What were the tradeoffs involved in the various sources of funding? For example, if Kumar decided to look for angel investors, would it be better to reach out to the TiE network through the Silicon Valley chapter, the Bangalore chapter, or some combination? He had contacts in both TiE chapters. If he chose the venture capital route, should he approach a traditional U.S. based venture capital firm such as Sequoia Capital, a corporate VC with a global reach such as Intel Capital, or a cross-border venture capital firm, which would provide him ties in both U.S. and India such as WestBridge Capital?
2) The right employees were critical to Vignani's success. What should the geographical composition be of his team? Where should senior management talent come from? Whom should Kumar try to attract as coaches to his board of directors and board of advisors? For example, Kumar could choose to hire a geographically dispersed team from the start wherein senior management and sales talent was hired in the U.S., Japan and Europe and most of the technical talent was hired in India. What other possibilities existed and what were the tradeoffs?
3) Was the market for outsourced engineering services for semiconductor manufacturing equipment large enough to attract investors? What was a best-guess estimate of the total addressable market for engineering services for that industry? How should he corroborate his assumptions about the total addressable market for Vignani?
4) How could Vignani differentiate itself from other competitors in the global engineering services market for semiconductor manufacturing equipment, and other types of capital equipment? What would make it compelling for customers to do business with Vignani, instead of other competitors who were likely to enter the segment once Vignani had proven there was a viable potential market?
As he pondered these questions, Kumar kept in mind the sources of success of other companies that had a presence in both India and the U.S. (see Exhibit 15 for a list of companies profiled in this case). He wanted to be able to apply specific lessons from their experience to increase the chances of Vignanis success. Moreover, he wondered which individuals and organizations he should approach as investors and business partners to reduce the risks of Vignani as a global venture, and leverage the strength of the networks that existed in the India-U.S. high tech corridor.
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STVP 2005-010
Exhibit 1
Biography of Kumar Ramachandran
Kumar Ramachandran was the Managing Director of Applied Materials India until Jan 2005. He was instrumental in developing the Global Development Capability (GDC) Program at Applied Materials. In this capacity, he set up the India office in June 2002 and was responsible for its growth to 700 people delivering services in Information Technology, Embedded Systems and Engineering Services. From Dec. 1997 to Nov. 2001, he was the Senior Director of eBusiness for the Services division of Applied Materials. Prior to joining Applied Materials, Mr. Ramachandran was the Director for Process Improvement and IT Strategy at Hitachi Data Systems, where he was responsible for the global Business Process Reengineering program and development of a global IT Strategy. From 1989 to 1994, he held various positions in Electronic Data Systems (EDS) ranging from Management consultant, Project Management and Business Development. Mr. Ramachandran has a Masters Degree in Industrial Engineering from University of South Florida and a Bachelors Degree in Mechanical Engineering from the University of Madras, India.
Exhibit 2
Parameter
Attractive Destinations for Offshore IT Services

India
9,500
Canada
3,780
Ireland
1,920
Israel
900
Philippines
640
South Africa
96
IT Export Industry Size (U.S.$ million) Active Export Focused IT Professionals IT Employee Costs (U.S.$ per year) Number of CMM Level 5 Certified Companies IT Labor Force
195,000
45,000
21,000
15,000
20,000
2,000
5,000 - 12,000
36,000 25,000 - 35,000
25,000
7,000
18,000
60
NA
NA
NA
Low Cost, High Quality Average English Language Skills, Highly Qualified and Abundant Workforce. Robust Project Management Experience Ordinary Infrastructure, Some GeoPolitical Risk
High Cost, High Quality Good Near-Shore, Highly Compatible Cultures with U.K. and U.S.
High Cost, High Quality Good Large Development Centers of Tech Companies like Microsoft and Dell. Significant Offshoring Precedent High Cost
High Cost, High Quality Good More Shrink Wrapped Software Production
Low Cost, Moderate Quality Good Good English Skills and Cultural Compatibility with North America
Moderate Cost, Moderate Quality Good Language Skills
Infrastructure Main Positives
Main Negatives
High Cost of Employees
Regional Unrest
Low Availability of Project Managers
Nascent BPO Industry, Lack of Precedent
Source: Main Destinations for Offshore IT Services (until March 2003), Evalueserve and NASSCOM, http://www.nasscom.org/images/countrycompetitiveness-1.pdf, accessed July 2005
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STVP 2005-010
Exhibit 3 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Largest Economies in the World Country United States Japan Germany United Kingdom France Italy China Spain Canada India Korea, Rep. Mexico Australia Brazil Russian Federation Netherlands Switzerland Belgium Sweden Turkey GDP (U.S.$ billion) 11,668 4,623 2,714 2,141 2,003 1,672 1,649 991 980 692 680 676 631 605 582 577 359 350 346 302 PPP GDP (U.S.$ billion) 11,628 3,774 2,326 1,832 1,744 1,621 7,124 1,046 993 3,363 981 1,015 606 1,483 1,409 521 248 323 265 553 GNI (U.S.$ billion) 12,151 4,750 2,489 2,016 1,859 1,504 1,677 876 906 675 673 703 541 552 487 515 356 323 321 269
Note: GDP = Gross Domestic Product. GNI = Gross National Income. Purchasing power parity (PPP) conversion factors take into account differences in the relative prices of goods and servicesparticularly non-tradablesand therefore provide a better overall measure of the real value of output produced by an economy compared to other economies. PPP GNI is measured in current international dollars which, in principal, have the same purchasing power as a dollar spent on GNI in the U.S. economy.
Source: Quick Reference Tables, World Bank Group, http://www.worldbank.org/data/quickreference/quickref.html, accessed July 2005
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STVP 2005-010
Exhibit 4
High-Tech Hubs and Key Information about India
Consisted of three cities Delhi, Gurgaon and Noida. Companies included Cadence Design Systems, STMicroelectronics and IBM. HCL Infosystems was the biggest IT services vendor
Formerly Calcutta. Fast emerging as a center for technology services. Companies with offices included Tata, Cognizant and ITC InfoTech Marketed along with nearby Mumbai as the Knowledge Corridor. Offices of Parametric Technology, BMC Software, Wipro and Cognizant
Indias main financial and commercial hub. Headquarters to Tata Consultancy Services (TCS), Indias biggest IT services company
Exclusive IT district called Cyberabad on the citys outskirts. Development centers for Microsoft, Oracle, Adaptec and 3Com. Satyam was the largest IT services company based here
Known as Indias Silicon Valley. Home to Oracle, SAP, HP, Sun Microsystems, Motorola, Texas Instruments, Wipro Technologies, Infosys Technology Known as Detroit of India. Base for IT services companies Cognizant Technology Solutions, Covansys and Pentasoft Technologies
Population Delhi Bombay Bangalore Country Data Location: Area Total: Capital: Government Type: Leaders (2005): Population: Median Age: Temperature: Timezone: Climate: Languages: Religions: Business Data GDP: GDP Per Capita: GDP Growth Rate: Currency: Software Technology Parks of India (STPI):
10,927,986 (2005 estimate) 12,691,836 (2005 estimate) 4,931,230 (2005 estimate)
Southern Asia, bordering the Arabian Sea and the Bay of Bengal 3,287,590 km2 (slightly more than one-third the size of the U.S.) New Delhi Federal Republic Dr. Manmohan Singh (Prime Minister), Dr. A.P.J. Abdul Kalam (President) 1,088,264,388 (July 2005 estimate) 24.64 Male, 24.67 Female (2005 estimate) 14.10C / 57.40F in January, 31.00C / 87.80F in July IST (UTC+5.30) Varies from tropical monsoon in south to temperate in north English (national), Hindi (national), Bengali, Telugu, Gujarati, Punjabi, etc. Hindu (81%), Muslim (12%), Christian (2%), Sikh (2%), Jain (1%), etc.
U.S.$3.319 trillion (2004 estimate) U.S.$3,100 (2004 estimate) 6.2% (2004 estimate) 1 Indian rupee (Rs) = 100 paise, approx. U.S.$1 = Rs. 43 (July 2004) 30 Centers throughout India by January 2005. New centers being developed in Gurgaon, Gangtok, Allahabad, Agra, Varanasi, Meerut, Jalandhar, Durgapur, Kharagpur, Shillong, Agartala, and Salem.
Source: CountryWatch, News.com, and The World Factbook. Map adapted from Maps.com, accessed July 2005
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STVP 2005-010
Exhibit 5 Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
IT Admissions and Graduates in India in the Years 1994 - 2004 Total Admissions 87,119 95,160 103,933 138,450 157,556 179,299 233,351 256,686 282,355 310,590 341,649 Total Graduates 53,015 56,032 60,749 59,311 68,824 75,177 82,107 109,376 124,469 141,646 184,347 IT Admissions 58,370 62,806 67,556 89,957 103,067 118,947 125,522 133,053 141,037 149,499 158,469 IT Graduates - Not Available - Not Available - Not Available 42,846 46,112 49,617 53,370 71,066 81,423 93,968 99,162
Source: Degree Level: Engineering Admissions, NASSCOM, http://www.nasscom.org/articleprint.asp?art_id=1260, accessed July 2005
Exhibit 6
TiE Chapters around the World
Source: Chapters, TiE, http://www.tie.org/Home/Chapters/index_html/view_document, accessed July 2005
23
STVP 2005-010
Exhibit 7
Venture Capital Investments in India for the Years 1996 - 2004
1,400 1,200 1,000 800 600 400 200 0 96 97 98 99 '00 '01 '02 '03 '04 20 80 250 500 1,160 937 774 590 900
All numbers are in U.S.$ millions

Source: India Venture Capital Investment Trends, India Venture Capital Association / Asian Venture Capital Journal, http://www.indiavca.org/State%20of%20Venture%20Capital%20-%20October%202004.ppt, accessed July 2005
Exhibit 8
Distribution of Venture Capital Investments by Stages in India for the Years 2002 and 2003
Deal Stage
No. of Companies
Sum Invested ($mil)
Average per Deal
Startup/Seed Early Stage Expansion Later Stage Other/Unknown Total 2002 Total 2003
7 9 44 2 15 77 42
27.98 52.8 345.82 4.56 159.05 590.21 774.01
3.11 5.28 7.36 2.28 10.6 7.03 18.43
Source: Saurabh Srivastava, State of Venture Capital in India presentation, October 20, 2004. India Venture Capital Association, New Delhi, India
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STVP 2005-010
Exhibit 9
Comparison of Salaries in the Year 2003 Country Salary at Market Exchange Rate (U.S.$) Salary in PPP (U.S.$)
IT Professional U.S. U.K. India IT Graduates U.S. U.K. India 45,000 48,000 6,500 45,000 46,560 39,845 75,000 96,000 26,000 75,000 93,120 159,380
Note: PPP = Purchasing Power Parity. The PPP factor, calculated in the table, is a simple scaling factor that can be applied to salaries, calculated at market exchange rates in USD, to determine the purchasing power of those salaries in their domestic markets.
Source: Shalabh Kumar, How Sustainable is the Cost Advantage of OffShore Outsourcing, NASSCOM Report:9 (September 2003), NASSCOM, http://www.nasscom.org/download/Cost_Advantage.pdf, accessed July 2005
Exhibit 10 E4Es Shared Infrastructure Model

Consumer Finance Mortgage Processing Application & Infrastructure Services for Enterprises
Provider and Payor Side Processing
Financial Services
Health Care
High Tech.
Call Center / Transaction Processing Phone and Internet Services Office Space Human Resource Efforts
Delivery Infrastructure Telecommunications Physical Space Human Resources
Source: Somshankar Das, Interview by authors, Santa Clara, CA, June 15, 2005
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STVP 2005-010
Exhibit 11 Expected Growth in B2C eCommerce in India
Source: Expected Growth in B2C eCommerce in India, IDC, http://asia.stanford.edu/events/Spring05/ee402t/slides/052405-Bajaj.pdf, accessed July 2005
Exhibit 12 Current Challenges in Outsourcing
Core
Very few (if any) vendors focus on Value Engineering where they partner with the customer in cost and gain sharing
(No Outsourcing)
Context
Most Low Cost vendors do not have sufficient Domain Knowledge
Most vendors have limited product offerings
Previous Generation Products
New Products
Note: Core is defined as what is required to differentiate a product or service. Context is defined as the critical component(s) required to enable the product or service.
Source: Kumar Ramachandran, Vignani Business Plan, July 2005
26
STVP 2005-010
Exhibit 13 Vignani Product Roadmap

Original Device Manufacturer
Customer sells product under their Label & Vignani manages product design and delivery
Capability
Product Engineering Ownership

For Previous generation products End-to-End responsibility Engineering Product Support Customer Sells & Delivers product Vignani supports to End-of-Life
Cost Reduction Performance Improvement (for previous generation products)
Value Engineering
Key Focus Area -Differentiator -Higher Margins
Sustaining Engineering

Engineering Administration
Obsolescence Management Electro-Mechanical components Design Design Analysis (Thermal, FEA) Field Issues Management Reliability/Compliance Engineering Performance Improvement
Means to an end - Some customers prefer sustaining support - Provides a steady stream of Revenue
Relationship Maturity
Exhibit 14 Estimated Total Available Market for Vignani

Semi Equipment Instrumentation Industry Industry $35,000 42% $20,300 $12,180 30% 10% $100,000 40% $60,000 $36,000 30% 10%
Value Engineering
2004 Industry Revenue (Approx) Average Industry Gross Margins Cost of Goods Sold $M Material cost (@60% of COGS) $M Potential Cost Reduction through Value Engineering Revenue Potential as % of Cost Reduction
A. Total Available Market for Value Engineering $ M Sustaining Engineering

Industry Revenue (2004) $ M R&D Spending by OEMs (based on Income statements) as % of Revenue R&D Labor Spending as % of Rev (50% of total R&D spend) R&D Labor Spending of OEMs in $M Engg Labor Spending of Suppliers to OEMs (4% of Material cost of OEMs) $M
$365
$35,000 13% 6.5% $2,275 $487
$1,080
$70,000 8% 4.0% $2,800 $1,440
B. Total Available Market (50% of R&D Labor $ @ 40% of cost) for Engineering Services $M C. ODM Market Size (10% of OEM Material cost) $M D. Total Market Size (D=A+B+C) $M
$552 $1,218 $2,136
$848 $3,600 $5,528
Note: The Original Device Manufacturer (ODM) Market size is assumed as only 10% of current products since there will be more motivation for customers to outsource the legacy products. Once the ODM model is proven in 5 years, Vignani expected this market segment to grow to more than U.S.$10 billion.
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STVP 2005-010
Exhibit 15
Industry Overview of Organizations Profiled
Start-up Capital
What a Global Entrepreneur Needs
Global Team
Large Potential Market
Disruptive Product or Service
Venture Capital
Networking
Software
Services
Internet
Support Organization
Industry
28

Rise of The Global Entrepreneur - Leveraging The India-US High-Tech Corridor

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STVP-2005-010

[Rev. Feb 2, 2006]

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Kumar Ramachandrans biography is provided in Exhibit 1.

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Why Consider India?

Nascent Market Poised to Grow

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Burgeoning IT Services Industry

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Kumar Ramachandrans Four Challenges as a Global Entrepreneur

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Large Potential Market

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Disruptive Product or Service

Horlicks was a line of popular malt drinks manufactured by GlaxoSmithKline.

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

The Vision for Vignani

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

NASSCOM Newsline:8-9 (July 2005), NASSCOM, http://www.nasscom.org/newsline/issue45/Research.pdf, accessed July 2005

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Biography of Kumar Ramachandran

Attractive Destinations for Offshore IT Services

36,000 25,000 - 35,000

Moderate Cost, Moderate Quality Good Language Skills

Infrastructure Main Positives

High Cost of Employees

Low Availability of Project Managers

Nascent BPO Industry, Lack of Precedent

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

High-Tech Hubs and Key Information about India

10,927,986 (2005 estimate) 12,691,836 (2005 estimate) 4,931,230 (2005 estimate)

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

TiE Chapters around the World

Source: Chapters, TiE, http://www.tie.org/Home/Chapters/index_html/view_document, accessed July 2005

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Venture Capital Investments in India for the Years 1996 - 2004

All numbers are in U.S.$ millions

Sum Invested ($mil)

Average per Deal

27.98 52.8 345.82 4.56 159.05 590.21 774.01

3.11 5.28 7.36 2.28 10.6 7.03 18.43

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Exhibit 10 E4Es Shared Infrastructure Model

Provider and Payor Side Processing

Delivery Infrastructure Telecommunications Physical Space Human Resources

Rise of the Global Entrepreneur: Leveraging the India-U.S. High-Tech Corridor

Exhibit 11 Expected Growth in B2C eCommerce in India

Exhibit 12 Current Challenges in Outsourcing

Most Low Cost vendors do not have sufficient Domain Knowledge

Most vendors have limited product offerings