STARTUP...www.startups.in/going-global
A clutch of
sub-unicorn Indian startups with hi-tech products has found niche global
markets, from San Francisco to Lima to Ho Chi Minh City. But keeping investors
happy and taking on global competitors are the big challenges
As far as offbeat business destinations go, Lithuania
is as distant as it gets for entrepreneurs running startups in India. But for
Arvind Lakshmikumar, CEO and founder of Tonbo Imaging, the capital of the
Baltic nation, Vilnius, is the key to the firm’s fortunes. The Bengaluru-based
developer of imaging and sensing systems is banking on the cache of laser
experts in the first state of the erstwhile USSR to declare independence.
Lakshmikumar’s hunt for some very specific skillsets around laser technology
led him to the talent pool at Vilnius.
Tonbo shot to fame in October 2016, when it bagged a
$100 million deal to manufacture and supply night vision sights for guns
intended for the Peruvian Army. The company has since broadened its focus to use
its technology to target global businesses in industries as diverse as imaging
and automobiles. It is now among a clutch of Indian startups building their
businesses for global markets, unlike a vast majority of startups in the
country focused on the domestic market. Tonbo, for example, gets over 80% of
its business from outside India, and the number is climbing. A couple of
kilometres from Tonbo’s office in Koramangala, a residential suburb in
Bengaluru that has over the past decade become a hub of startups, Nishith
Rastogi and his team are building a business aiming to automate the process of
moving people and parcels. Founded around three years ago, Locus started with a
handful of Indian clients. But it has its eyes firmly set on the prize —
overseas business. “Supply chain is a global problem. But we need to provide
local solutions to show value to customers,” says Rastogi.
Locus is a product of fear. One day in 2014, Rastogi
developed an “irrational fear” about his sister’s safety when she took an Uber.
He and friend Geet Garg built RideSafe, an application that detects route
deviation real time. To their surprise, some food tech companies adopted the
product to track their fleet. The opportunity to work with these companies gave
the duo an insight into the inefficiencies in logistics supply chain. The seed
for the idea that became Locus 101 was thus planted.
With a 10-member data-science team, Locus wants to
expand its focus from India to Southeast Asia. The company has six cities —
Manila, Jakarta, Bangkok, Kuala Lumpur, Singapore and Ho Chi Minh City — on its
radar. These cities are around an hour’s flight from each other, making it
easier for a small sales team to cover. Moreover, these cities have twice the
active (those who pay for stuff online, not just surf ) internet population of
India. “We don’t want to tell people where their delivery truck is, we want to
show them where it should be,” Rastogi adds.
Several entrepreneurs and investors ET
Magazine spoke to have sensed a perceptible shift in the market. The
past decade has been about India’s startup story — highlighted by the emergence
of a dozen unicorns (venturefunded startups valued over $1 billion). But this
phase also saw several companies burning out. Forced to compete by funnelling
millions of dollars into deep discounts, dozens of startups had to close down
their business. Singed by these flameouts, investors have turned off the fund
tap and are focusing their attention on another rising trend. “From India, for
the world — this is the new motto of several startups. The mantra is simple;
provide the best solution for customers and compete based on value, not price
arbitrage. This will form the next wave of growth,” says Sanjay Swamy, managing
partner at Prime Venture Partners.
Whether it was technology platforms or enterprise
software-as-a-service solutions, Indian startups have grown from being copycats
to service providers to now being innovators and thought leaders. There are now
companies that were started in India but are expanding globally — such as
recruitment solutions provider HackerEarth — and those that started with US
customers and is now expanding to other countries including India — such as
marketing solutions provider Synup.
Mentoring and investment are crucial for startups looking
to target overseas markets. And this help can sometimes come from unexpected
sources, like in the case of SigTuple, which is focused on artificial
intelligencebased medical technology.
Flipkart founders Sachin and Binny Bansal helped
SigTuple. The company’s technology, says CEO Rohit Kumar Pandey, can improve
the productivity of diagnosticians four- or five-fold. That should be a good
reason for clinical labs around the world to rush in to buy its offerings. But
only if things were that simple for startups.
Pandey is the first to admit that ventures like his
will have to take a long and winding road to success while prospecting for
clients overseas. “Startups don’t just have a perception issue when they try to
sell in global markets, they also have to meet tough regulations and convince
reluctant investors along the way,” he adds. In the case of Sig-Tuple, for
example, its products have to conform to CE certification, used as a quality
barometer in the European Union and Japan. Only then can they get even a
toehold in these markets.
Lakshmikumar of Tonbo says startups will have to
struggle to go overseas, because many of these markets require onground
contacts and industry knowledge. “Having worked with the US Department of
Defense and having a depth of contacts there, along with contracts for units
such as the Israeli Special Forces, helped us get a foot in the door,”
he says. Despite that, Tonbo took time to get off the
ground. Started a year after Flipkart, Tonbo reportedly has an estimated
revenue of around ₹100 crore; for
comparison, Flipkart reported a revenue of around ₹20,000 crore. “People forget
that these are long-gestation businesses that are capital intensive and require
patience to reach a size of any consequence,” he adds.
It is a bold leap for entrepreneurs, investors and
clients alike. So was it for Squad, a company focused on artificial
intelligence (AI)-powered solutions.
Six months after this three-year-old enterprise
software firm started selling in India, it set an audacious goal of aiming for
the highly competitive US market. “Everyone we spoke with, advised us against
it, as conventional wisdom demanded a mature product and a team with an
established network in the US,” recounts Apurv Agrawal, CEO and cofounder of
the firm. “We had early traction (in India) but the product was still at a beta
stage.” The founders realised that tapping the large US market was critical for
the firm’s survival.
Entrepreneurs give various reasons for steering away
from the Indian market. “Selling in the Indian B2B market is quite challenging
as most organisations have built their infrastructure on legacy systems and are
now finding it challenging to adopt new-age technology,” says Agrawal. “It will
take a while for startups to sell B2B software because currently it usually
means long sales cycles (as much as 12 months or even more) and companies
require continuous on-site support for maintenance and training.” This kind of
capital spend deters most B2B startups from selling in India.
To crack the US market, Agrawal and his team started
making cold calls via emails to potential customers in late 2013 and early
2014. They managed to convert some prospects into annual contracts, providing
some certainty of survival. “Eventually, we had enough clients to be able to
travel to San Francisco. And a little over a year later, we opened an office in
San Francisco and now have more than a few large brands working with us.”
Such success stories notwithstanding, industry
watchers caution these firms will have to keep a watch on the behemoths they
expect to unseat.
“The main hurdle these Indian firms face is
explaining their USP (unique selling proposition) to clients,” says Anindya
Ghose, professor, New York University’s Stern School of Business. “Take Grey
Orange, for example. The space it is competing in (advanced robotics systems
for automation at warehouses, distribution and fulfilment centres) is getting
crowded.” Look at Grey Orange’s competitors — Kiva Systems, which was acquired
by Amazon Robotics; Boston Dynamics, which was acquired by Google; Fetch
Robotics and Swisslog. And these are just the larger competitors.
Why would a US ecommerce company entertain
Singapore-headquartered Grey Orange as opposed to, say, Amazon Robotics? “The
answer lies in how innovative Grey Orange’s products are,” says Ghose. It is,
after all, the first Indian robotics and artificial intelligence company to get
international funding — $38 million from Tiger Global and Blume Ventures. Grey
Orange is registered in Singapore but all operations are handled from Gurgaon.
Enter the Dragon
To add to the challenge, the crowded robotics space
is also seeing a new entrant: Chinese companies. European and Japanese firms
have historically dominated the industrial robotics space, while commercial
robotics has been the stronghold of startups from the US. China-based
warehousing robot companies have been actively expanding their overseas
operations. Beijing’s push to spread 5G and AI is also a trigger for the growth
of these Chinese firms. China is expected to become the world’s largest single
market of industrial robots, with shipments of 1,34,000 units in 2018.
Competing in the money-draining global market can be
a nerve-racking experience for startups. In mid-2016, Ashwin Ramesh discovered
that his company, Synup, a provider of local marketing intelligence, had barely
three months of cash left. “We came within three months of running out of money
as we chased business overseas,” he admits.
After splurging their angel funding, this discovery
served as a timely reminder for him to become organised. Ramesh began his
entrepreneurial stint in Class IX, when he stumbled on a data entry job online.
His ambition leveraged on the experience of the past decade to first build a
small consultancy (grunt work took a lot of his time, but a fancy title never
hurt, he then thought), before trawling the net for work. Synup’s business
model then focused on improving the quality of local listings and helping
companies and brands manage and measure their listings, reputation and local
search analytics.
This meant Ramesh and his team had to convince
businesses with online listings to use Synup’s tools to make sure simple things
such as shop numbers were updated, along with details such as wheelchair access
and WiFi availability. He then graduated from working with small businesses
(some 28 million of these dot the US alone) to signing up with larger brands
overseas. And it was not as if the biggies did not need help. A Google search
listing, for example, showed that a Costa Coffee outlet had a phone number that
was not functional, and there was no indication of a working wireless internet
access either.
Ramesh is now trying to prepare Synup’s software to
ride the next wave — of voice search — powered by the likes of Amazon’s Alexa
and Google Home.
Another company trying to stay one step ahead of the
behemoths is Alphaics. Its founders and computer chip industry veterans
Nagendra Nagaraja, Vinod Dham and Prashant Trivedi want to use their
intellectual property (IP) repository to do so. The two-year-old firm is
focused on designing chips for the emerging world of artificial intelligence.
Semiconductors don’t have the computing capability to
keep pace with the massive processing demands of AI, says Nagaraja. Everyone
from traditional chipmakers such as Intel, Qualcomm and Nvidia to Google,
Facebook, Microsoft and IBM are trying to muscle into this space. Google’s TPU
chip, for example, is already used across the company’s data centres and is
central to everything happening under the hood — from voice searches on Android
phones to results on the search engine. According to one estimate, more
efficient TPU chips saved Google the cost of setting up 15 data centres.
Alphaic wants to play ball with these behemoths. It
has devised what it calls an RAP chip and is commercialising it for use in
segments as diverse as self-driving cars, robotics, cloud computing and
unmanned vehicles. “We can build products for the global market, thanks to our
intellectual property portfolio, which has kept us ahead of many larger
competitors,” says Nagaraja.
However, strong technical skills alone aren’t likely
to drive a business to global stardom. Prabhakaran TP and Manu Madhusudhanan,
founders of Cooey Technologies, have been on the hunt for their next round of
funding for their health tech firm. “We have 300,000 users of our solution
across the world. But even then, it is a challenge to convince investors about
the viability of building a global tech business from India,” says Prabhakaran.
While the duo did raise a small amount of angel
funding, most of their financing has been from their own pockets. And this fund
flow is bound to run out soon. Cooey, a mobile platform that uses internet of
things and partnerships with medical device makers to try to capture health
vitals at hospitals and clinics, needs capital to fund its expansion. It wants
to sign up with more customers in the US, but is also considering other
markets, including Asia and Europe. “We hope to close a round of funding this
year,” Prabhakaran adds.
For many fledgeling ventures like this, a funding
boost will help them in their global leap.
Rahul Sachitanand
ETM22APR18
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