July 06, 2020
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India has just discovered gold dust in the alleys of the Net and it is mighty excited about it. But it may not be thrills all the way.

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MOST of them will fail. Most will see their dreams remain just that dreams. Most will have to one day come to terms with the fact that their ideas weren't good enough, their execution not swift enough, that somewhere along the way they took their eyes off the ball, that their destinies diverged quietly at some point from what they were supposed to be.

No matter. They will still remain the rollicking flag-bearers of a revolution that has already put India at the forefront of an epochal tidal wave transforming global business, economies, nations, life. A tidal wave of individual entrepreneurship and innovation, a tsunami of ideas. The Internet business.

Ask Ashok Jain, 42, who recently quit as ceo of Cadbury Schweppes after 19 years of impeccable corporate climbing, to get into the Net business.

Ask 35-year-old Subroto Bannerjee, who quit a job, stock options and 'lots of money' at Microsoft to e-venture out.

Ask T.S. Rajesh, 28, whose Gray Cell (www.graycell.com), set up in his parents' garage in 1996 with a borrowed computer, is today a world leader in technology that allows people to access the Web through mobile phones.

Ask your 12-year-old daughter. She'll tell you all about it.

Onstage in the Indian Merchant Chambers hall in Mumbai last week, surveying a crowd that would have done a rock concert proud in its zip and zest, Kanwal Rekhi, a US-based millionaire leading The IndUS Entrepreneurs (TiE), a team of investors that wants to invest in and nurture Indian e-start-ups, was forced to exclaim: 'I feel the same energy here that I do in Silicon Valley!'

And why not? As much as 20 per cent of start-ups in Silicon Valley are by Indians, and many of them have reached folk hero status. You haven't heard of Vinod Khosla or Sabeer Bhatia, Rakesh Mathur or Ram Shriram? Welcome back from Mars; how was the weather up there? If there were posters available of these men, they would have replaced Shah Rukh and Sachin on many college hostel walls by now.

If your thinking's still rooted in the Industrial Age, you'd probably say, so what's the big deal? There's never been a dearth of rich nris, right? Well, it's only that on the Net, an entrepreneur, even if based in the metaphorical Jhumritalaiya, has a fighting chance of being a global player, if not the yes, seriously biggest in the world in his category. Or at least sell his firm for millions of dollars, if not billions.

That's what India's brand new dreamers are gunning for. Their dreams may be gossamer, but they're planet-sized. 'I want my site contests2win.com to be the world's largest customised contest portal,' says Alok Kejriwal. Says Ashish Goyal, 25, whose egurucool.com launched last week will provide distance learning for iit, medical and management entrance exams and career counselling: 'We'd like to take egurucool.com to its logical conclusion as the world's largest education and career site. Today, a new age is starting. Another chance to create the Fords and GMs of tomorrow.'

Yes, on the Net, it doesn't matter where you are located physically. Rediff-on-the Net, headquartered in Mumbai, has built up a vast and loyal user-base across the world, as has Indiaworld. Graycell.com is a global Web pioneer sitting in Bangalore. Says Rahul Singh, ceo of Dhun-Carr, and charter member of TiE: 'The beauty about it is that it is totally meritocracy-oriented you don't need contacts, your upbringing and background don't matter, what matters is a good, workable idea. So hop on.'

No wonder then that India is probably the hottest Web destination today after Silicon Valley. No wonder then that as many of these Indian e-ntrepreneurs are coming from high-powered boardrooms and corner offices as from fresh college graduate lists.

Six Bangaloreans, three from planetasia.com, two from Wipro and one from the navy, set up fabmart.com in September. Says K. Vaitheeswaran, vice-president, merchandising, Fabmart: 'We walked out on very lucrative stock options, worth a few crores even to set this up.' Why? 'Because if Fabmart clicks, what we left behind can begin to look like peanuts.' Similar is Neeraj Roy's case, who quit as head, equities group at Prime Securities, to launch hungama.com, an e-promotions website.

But Indian industry was really shaken up in August, when Ashok Soota gave up his high-profile job as ceo, Wipro Infotech, to launch MindTree Technologies. Says his start-up team member Subroto Bagchi, who also chucked a fat paycheque at Lucent Technologies: 'We gave up those jobs because at some point in life we all begin to hear the call of a different drummer. We chose to answer that call.' Then Jain announced his e-plans. And now comes the news that Raj Agnihotri, the man who built the infotech backbone for Asia's largest refinery, Reliance Petroleum, has quit to float his own e-business.

Says Vivek Agrawal, former srf Finance manager who is Goyal's partner in egurucool.com: 'You always crib in big business. You crib about boss, pay, job content, blah, blah, blah. You do only 40 to 50 per cent of what you can do. The Internet gives you an opportunity to do 150 per cent of what you are capable of.' Feels ex-Microsofter Subroto Banerjee: 'No matter what your job, it gets boring after a while. The Net, on the other hand, gives you the power to create; a brief of playing god as it were. Net business is limited only by your ability to dream and think.' Clearly, to these men, the net offers a sort of freedom that no other medium does.

Dewang Mehta of the National Association of Software and Computer Companies (nasscom) estimates that every day, two or three new Indian sites appear on the Net. There are more than 23,000 India-specific sites out there on last count and more than 100,000 domain names registered by Indians. Obviously, competition is white-hot. How many will survive the first flush of enthusiasm? For how many will the sacrifices be worth it? One thing is sure, for those who do make it, the rewards could be stupendous. Says Veeresh Malik, who along with Shailesh Khanolkar set up motoring site cybersteering.com (on the way, selling off his shipping business to concentrate on the Net): 'It was a typical broken-table zero-plan start-up. But today, I am saying no to fantastic sums of money being offered for an 8 per cent stake in the site. The offers have gone up 30 times in 45 days and I am not accepting.'

Till vsnl started giving Net connections on August 15, 1995, your knowledge of the Web would very likely have been limited to Time cover stories. Even after vsnl launched its service, nothing much happened for about two years. And then Sabeer Bhatia sold his free e-mail service Hotmail.com to Microsoft for $400 million. We sat up and took notice. Then came a flurry of deals involving Indians, the most high-profile being junglee.com sold to amazon.com for $280 million. And a couple of more things happened.

About the same time that Silicon Valley investors realised that in the infotech/Web business, Indians were some of the smartest kids on the block shift, Indians living in India suddenly found new role models in a borderless cyberworld, whose power and sweep they were discovering every day. Indeed, many of today's e-ntrepreneurs had life-changing experiences pretty early on the Net. This dragged them into an obsessive life@www. Kejriwal, 29, of contests2win.com, still remembers the day he faced financial mayhem in his family's hosiery manufacturing business: four hi-tech Siemens machines imported at a cost of Rs 50 lakh, had ground to a halt. Siemens India's office was unfamiliar with the equipment. So Kejriwal got on the Net (he had just got a connection in office) and hit the Siemens website. 'In three clicks of the mouse, I had reached the right man. Eight hours later, I got a reply from him that I should replace a particular washer in one of the machines.' The washer cost Kejriwal Rs 8. The machines started running again. 'I thought, man, the Net is god!' he recalls. 'It was like being reborn.'

What these dreamers from Guwahati to Gurgaon also realise was that setting up an e-nterprise doesn't need vast capital. Kejriwal started with an investment of Rs 5,000 of which Rs 3,000 went into registering the domain name and contests2win in which icici Ventures and e-ventures have now taken equity stakes was born, with the simple but powerful idea of allowing people to participate in corporate promotional contests on the Net: no postcards, no mailing, no postage stamps, just 'click here to submit entry'. It turned out this was the first website of its kind in the world!

For that is what drives these e-ntrepreneurs. Start up, get venture capital, grow the business and sell. It's the Silicon Valley model, what Bhatia did, what junglee.com did. And when, last fortnight, Mumbai-based Rajesh Jain sold indiaworld.com to Satyam Infoway for Rs 499 crore ($116 million), in one stroke, he wiped out the difference between Santa Cruz, Mumbai and San Jose, California. 'When I heard the news,' says Ashok Jain, 'I felt Silicon Valley is here.' 'I thought this is the launch of the Internet in India,' says Ashish Goyal, a 25-year iitan, and one of the minds behind egurucool.com.

Valuation'. That's the mantra the Net business lives and dies by, the pot of gold at the end of the vibgyor, the Holy Grail in numerical form. It determines at what price you can sell your shares, either in the form of a public issue or privately to investors. In Web businesses, with no concrete assets, no plant and machinery, no product being manufactured that you can touch and smell, it's a task as tricky as it can get. And to a lot of people it also seems as much based in reality as the tooth fairy.

American stock exchanges today trade in dozens of info-stocks at very high prices with many of these companies running up large losses every quarter, indeed some of them with no apparent chance of making a profit in the foreseeable future. 'Some of these valuation figures may seem high but look at the investments made in biotechnology in the early to mid-'80s and those figures, then huge, don't seem so now,' says Rekhi of TiE. He mentions Mukesh Chatter, a TiE member, who sold his company, Nexabit, for $1 billion to Lucent Technologies before it made a single cent of profit. But, Rahul Singh explains, that is because Nexabit has developed a terrabit router the fastest computer networking gadget on earth a technology which can open up unbelievable markets. A technology that keeps a company like Lucent ahead of rivals for six to eight months can earn it billions of dollars. Similarly, when Satyam pays top dollar for Indiaworld, it gets immense traffic on its site overnight, instead of having to build up over months and years.

So how is valuation decided? How is it that 30 per cent of Calcutta's first private isp, Caltiger, a Rs 1 crore company, but whose equity was valued at an astonishing Rs 100 crore recently, has been snapped by a capital market firms? 'Valuation is based on the traffic, intangibles like promoter's background any successful ventures behind him, any revenue channels in place even potential, if not in place. Recent deals also affect the valuation process. For example, Indiaworld would affect valuations in the future,' says Sanjay Mehta, whose site, he claims, gets 10 million hits a month. His homeindia.com was built on a brilliant idea, that nris may love a service that takes their e-mail addressed to their un-e-mail-enabled relatives in India and post a hard copy to them. Since then, the site has grown to offer several other services. 'We get a lot of feelers from companies with money who want to jumpstart,' says Mehta. 'But I can see ourselves growing on our own and adding value to our business. Later on, if we see someone else can take it much further we could look at it.'

His sentiment is echoed by others. Says Kejriwal: 'Net business is like a relay race. No one runner can run the 400 metres. It's stupid not to pass on the baton. Then the race will not be run.' Entrepreneurs must not get married to their property, he philosophises. 'A Net venture is like a daughter in whom you inculcate refinement and finesse and then marry off to the best groom in the world.'

Manu Agrawal teamed up in April last year with friend Amar Sinha on sawaal.com, 'the most comprehensive search engine on India'. Using indigenously developed web crawlers and almost a year of extensive indexing, sawaal.com offers to search more than one lakh sites for the closest match to the India-specific information desired by its users. Will he sell out if he gets the right price? 'Sure. It would make immense sense for a media firm to acquire sawaal.com.' Create, sell, move on to the next big idea. And keep moving.

Only a few e-ntrepreneurs say they are not willing to sell out. Roy of hungama.com gives an unambiguous 'nope'. So did George Thomas and Dharam Vakharia, who plan to launch mykindasite.com, a portal for children and young adults, on the last day of 1999. 'What is that strata of society which involves everyone from Big Blue ibm to the Coca-Cola red? Children. So we decided to start a portal for kids.'

Thomas and Vakharia are exceptions to the rule; they are neither looking for venture capital, nor do they wish to sell out. The portal is being sponsored by their existing software company, Omega Interactive Technolo-gies. 'Over time, mykindasite.com will cover kids from all over the world with content translated according to the requirements of children in US, Europe and other countries,' says Vakharia. That is, they're trying to build the world's most successful kids' portal.

THE one factor that delayed the flowering of a vibrant Internet industry in India was the absence of venture capital, which has acted as the detonator for the Silicon Valley explosion. But when Silicon Valley woke up and noticed India, its venture capital firms too moved in and set up shop. And boy, are they inundated with proposals!

Vijay Angadi, managing director, icf Ventures, a $20-million India fund, has looked at 700 deals this year, that is, almost three per working day! 'Today, every engineering graduate we meet is asking us how he/she can make money,' says Rahul Singh of TiE. Comments Atul Vijaykar, director, South Asia, and head of Intel Asia's venture arm: 'The upsurge in interest and quality of business deals coming to us is tremendous. Of the 12 countries that Intel invests in globally, India is in the top six and growing real fast.' In the one year that Intel began venture funding in India, it has closed six deals, typically in the range of $5 million.

But what's the hit ratio? 'Typically, in infotech services, of all the deals that come to a venture capitalist, just about 4 per cent get funded but of the Internet deals, a significant 10 per cent, at least, will be funded,' says Angadi. 'Internet start-ups with a strong team and fresh ideas will get funded the pay-off is enormous.'

Kiran Nadkarni, partner, Draper International and co-founder of Jumpstartup, a recently launched $30-million seed-stage venture fund, however, sounds a cautionary note. 'There is no doubt that we venture capitalists are looking at a huge upsurge in business plans, but a high deal flow does not necessarily result in an equal number of deals being done,' he says. 'There is no question that as venture capitalists, we would be more interested in talking to a senior, experienced entrepreneur with thorough domain knowledge. Youngsters do have the brightest ideas but they also need to have a great team that is equally excited and believes in them ultimately we are not here to fund one-person teams.' After all, it's the venture capitalists' money, and they want it back, and if possible, 10- or 20-fold of what they lent. 'Remember that 70-80 per cent start-ups fail. Of a thousand biz plans, we'd fund five. Of these, two will really provide returns that justify the investment,' says Singh.

Even the cautious Nadkarni says that 'what we are seeing currently is only the tip of the iceberg in this Internet boom'. Absurd valuations? No way. 'Valuations work on demand and supply. Internet company valuations in India are influenced by nasdaq trends, which is influenced by the tremendous bull run in the US economy, so the demand is there.' As he speaks, Bangalore Labs, working out of the business centre at the International Technology Park, announces that it has tied up first-stage venture funding worth about $4 million. Last month, this start-up, which is yet to sign on its first client, was appointed the training partner of global software giant Computer Associates for networking services.

What's going on? Leave the pro to answer. 'The Net is knowledge-driven and we have plenty of knowledge in India,' says Harish Mehta, who heads the Mumbai chapter of TiE. 'The Net can be for India what oil was for West Asia.' And next time you hit Bangalore, check out that hoarding from start-up Aztec Technologies: 'For some guys it's beer, for me it is semantic caching.' Or you could call it e-drenalin.

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