Vol 2 / Issue 11 / Aug 08
The Business of Body Art
investor of the month/ 15 services to keep your IT costs down O S Vinod, CGTMSE After college: Job or entrepreneurship? innovation/ Rapid prototyping Varsha, the rain gun Opportunities from an ageing world Create your own jewelry Mini hydel, major bucks columns/ Sensitive brands Online movie rental business Political stability anyone? Exchange: Seeking mentors, partners, investors An entrepreneurâ€™s best friend: Failure
Vol 2 / Issue 11 / AUG 08
BOARD OF ADVISORS C K Prahalad
University of Michigan
N R Narayanamurthy
Chief Mentor, Infosys
Romesh Wadhwani Chairman & President, Wadhwani Foundation Gururaj ‘Desh’ Deshpande
Chairman, Sycamore Networks
Saurabh Srivastava Chairman, Indian Venture Capital Association Kiran Mazumdar Shaw R Gopalakrishnan
Chairman & MD, Biocon Executive Director, Tata Sons
Professor of Entrepreneurship, INSEAD
Shyam Malhotra Editor-in-Chief Krishna Kumar Group Editor ANALYSTS Arunjana Das Binesh Kutty Mohita Nagpal Shilpi Kumar Sreejiraj Eluvangal Vimarsh Bajpai
The Business of Body Art
OPERATIONS Ajay Dhoundiyal Product Manager VIjay Rana Design Anil John Photography SALES & MA Jaideep Mario Gabriel Imran Ali Chandan Sengupta Dayanath Levaj Jagadeesh Nivedita Dwarkanath Naveen Barsainya
MARKETING Associate VP West West North South South South South-East Asia
PRINT & CIRCULATION SERVICES NC George Associate VP T Srirengan GM, Print Services Sudhir Arora Circulation Services Manager Pooja Bharadwaj Assistant Manager, Reader Service Sarita Shridhar Assistant Manager, Reader Service Printed and published by Pradeep Gupta. Owner, CyberMedia (India) Ltd. Printed at International Print-O-Pack Limited, B-204-206, Okhla Industrial Area, Phase 1, New Delhi-20 and Rajhans Enterprises, 134, 4th Main, Industrial Town, Rajajinagar, Bangalore-10. Published from D-74, Panchsheel Enclave, New Delhi-17. Editor: Krishna Kumar. Distributors in India: Mirchandani & Co, Mumbai. All rights reserved. No part of this publication may be reproduced by any means without prior written permission. BANGALORE 205, 2nd Floor, # 73, Shree Complex, St.Johns Road, Tel: 41238238 CHENNAI 5B, 6th Floor, Gemini Parsn Apts, 599 Mount Road, Tel: 28221712 KOLKATA 307, 3rd Floor, Ballygunj A.C. Market, 46/31/1 Gariahat Road Tel: 65250117 MUMBAI Road No 16, D 7/1 MIDC, Andheri (East) Tel: 28387241 DELHI D-74 Panchsheel Enclave Tel: 41751234 PUNE D/4 Sukhwani Park North Main Road, Koregaon Tel: 64004065 SECUNDERABAD #5,6 1st Floor, Srinath Commercial Complex, SD Road. Tel: 27841970 SINGAPORE 1, North Bridge Road, # 14-03 High Street Center Tel: +65-63369142 CORPORATE OFFICE Cyber House, B-35, Sec 32, Gurgaon, NCR Delhi-122001. Tel: 0124-4031234, Fax: 2380694. Cover Photo Courtesy: Ash Kumar, ashkumar.com
100 pages including cover
Services to keep your IT costs down
Software as a Service (SaaS) or cloud computing is an emerging model where someone else installs and manages software, and you use as much as you want, only for as long as you want, and pay on a per-use basis. This is fast emerging as a better alternative to installing and maintaining your own applications
opportunity/ Opportunities from an ageing world ......... 32 A tale of kathis and samose ..................... 42 Online movie rental business ................... 68 strategy/
investor of the month/
O S Vinod Credit Guarantee Fund Trust for Micro and Small Enterprises
The CGTMSE provides backend guarantees to banks for loans up to Rs 50 lakh, so that small entrepreneurs and startups do not need to provide collateral guarantees.
After college: Job or entrepreneurship ...... 28
Rupin Jayal ............. 24 Paranjoy Guha Thakurta ... 66 Anurag Batra ........... 84
This capital-intensive sector is lucrative in the long run. But long breakeven time and getting a number of clearances could put your patience to test
Building enduring brands ........................ 90 contest/ Manufacturing story responses ............ 64
TiE-Canaan Entrepreneurial Challenge ...... 80 Proto.in .................................................. 86 INDIAN ONLINE AD SALES 900
business cabs chauffeurs come companies
company cost crore customer customers delhi entrepreneurs ďŹ‚eet house india industry
just like make manufacturing market print
publishing radio resort says search
second services share start time trafďŹ c tree used value want world year years
opportunity/ 60 The online advertising food chain Online advertising is growing by leaps and bounds, but are there opportunities for smaller players?
number passion people
Mini Hydel, Major Bucks
Rapid prototyping..................................... 72
good goods hand
100 0 2007
innovation/ Varsha, the rain gun
Innovated by a simple farmer, the unique sprinkler head conserves water by up to 50%
others / Exchange ............................................... 10 Feedback ............................................... 17
innovation / Make your own jewelry ......................... 94
NEN / 5 VCs talk about their marriages ............ 76 Is the highest price always the best? ........ 78 AUGUST 2008 5
Scale up or get better? If you are conservative by nature, then no amount of cajoling is going to make you scale fast. If you are the aggressive kinds, no amount of holding back is going to stop your quest for scale
was sitting with an old friend who had just turned entrepreneur, when the discussion turned to an important question. How fast should the startup grow?
Should he build his business slowly, waiting for scale, or should he push for scale right from the beginning? Should he work to get his product offering exactly right ﬁrst? Or, should he build scale with what he has got, particularly considering that cash ﬂows are ok and that he might even be posting a proﬁt this year? It was not that his product was not good or right. It was just that it could get more robust and have a bit more features. Maybe a little bit of tweaking to get it more foolproof… If you ask me, there are no straight answers to that question. It depends more on your outlook and deposition than on the business environment. If you are conservative by nature, then no amount of cajoling is going to make you scale fast. Glory can wait, but not perfection. On the other hand, if you are the aggressive kinds, then no amount of holding back is going to stop your quest for scale and the greater glory. You would rather do the minor tweaks later, after you have achieved the glory of size and scale. And for those who are in the middle third, we are living in an age that is in a hurry – in a hurry to explore new things, in a hurry to conquer the unknown, in a hurry for the movie being released next week and its music, in a hurry to get our hands on the latest cell phone, in a hurry for better valuation, in a hurry for the next round of funding to close, in a hurry to do that IPO… When you are part of a generation that’s in a hurry, perfection may well have to play second ﬁddle.
AUGUST 2008 7
ENTREPRENEURS IN MICRO & SMALL ENTERPRISE SECTOR
A great business idea A sound business plan A prudent business model
That's all the collateral you need to get collateral-free credit from your bank Under our Credit Guarantee Scheme, all credit facilities extended by banks upto Rs.50 lakhs, for setting up of new enterprises, expansion, diversification, modernisation, technology upgradation, working capital requirements etc., which are not backed by collateral security, are guaranteed by us. All you need is feasible business plan. Contact the nearest branch of any of our Member Lending Institutions* (MLI) for further assistance.
Yo u Ta k e t h e C r e d i t , We G u a r a n t e e i t !
*MEMBER LENDING INSTITUTIONS OF CGTMSE: ● Allahabad Bank ● Andhra Bank ● Andhra Pragathi Grameena Bank ● Axis Bank Ltd. ● Bank of Baroda ● Bank of India ● Bank of Maharashtra ● Baroda Uttar Pradesh Gramin Bank ● Canara Bank ● Central Bank of India ● Chaitanya Godavari Grameena Bank ● Chikmagalur-Kodagu Gramin Bank ● Corporation Bank ● Dena Bank ● Durg Rajnandgaon Gramin Bank ● Gurgaon Gramin Bank ● Haryana Gramin Bank ● HDFC Bank Ltd. ● ICICI Bank Ltd. ● IDBI Bank Limited ● Indian Bank ● Indian Overseas Bank ● IndusInd Bank Ltd. ● ING Vysya Bank Ltd. ● Karnataka Bank Ltd. ● Karnataka Vikas Grameena Bank ● Kashi Gomti Samyut Gramin Bank ● Kotak Mahindra Bank Ltd. ● MGB Gramin Bank ● Nainital-Almora Kshetriya Gramin Bank ● National Small Industries Corporation Ltd.● North Eastern Development Finance Corporation Ltd. ● Oriental Bank of Commerce ● Pragathi Gramin Bank ● Prathama Bank ● Punjab & Sind Bank ● Punjab Gramin Bank ● Punjab National Bank ●Purvanchal Gramin Bank ● Rajasthan Gramin Bank ● Saptagiri Grameena Bank ● Small Industries Development Bank of India ● South Malabar Gramin Bank ● State Bank of Bikaner & Jaipur ● State Bank of Hyderabad ● State Bank of India ● State Bank of Indore ● State Bank of Mysore ● State Bank of Patiala ● State Bank of Saurashtra ● State Bank of Travancore ● Syndicate Bank ● Tamilnad Mercantile Bank Ltd. ● The Bank of Rajasthan Ltd. ● The Federal Bank Ltd. ● The Jammu & Kashmir Bank Ltd. ● The Nainital Bank Ltd. ● The South Indian Bank Ltd. ● UCO Bank ● Union Bank of India ● United Bank of India ● Vijaya Bank ●YES Bank Limited
A DEVELOPMENT INITIATIVE OF MINISTRY OF MSME, GOVERNMENT OF INDIA & SIDBI
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Published: July 2008 Hiren Patel had sought mentoring from someone who has experience in IT & Retail business development. Urvashi Ved was looking for mentoring and funding for her venture.
Response: July 2008 Please have Hiren Patel and Urvashi Ved contact me. Gloscon - is a leading open source Web 2.0 development ﬁrm developing nearly 40 Web 2.0 products like citiplots.com, jaldibol.com Roshan Shah
I had seen the ﬁrst issue of DARE at a book stall, and since then I have bought all the issues of DARE. Thanks a lot for providing such a good magazine due to which I am about to start
r article on Thank you very much for you g – the number New-Age Publishing. It is amazin ght in this ﬁeld of new avenues that can be sou ething we have alone. I forgot to mention som along to people initiated and hope you will pass ed. who might write in and be interest people as We are trying to tie up with P)”. What that “Associate Service Providers (AS the ﬁeld can tie means is that people who are in ge of services up with us and offer the same ran igner can now as we do. For example, a cover des design services offer editorial, printing and cover outsourcing by doing cover design himself and customer is the other two to us. As far as the remains the concerned, however, the person sole provider of all the services. mission on Additionally, we also offer a com . We have tried the fees we charge to the referrer site at http:// to explain this brieﬂy on our web tml www.cinnamonteal.in/careers.h ch for that Once again, thank you very mu tion it provides, article. In addition to the informa reneurs like us it also helps bootstrapping entrep get some marketing mileage. Leonard Fernandes CinnamonTeal on-demand Print & Publishing
my company with a partner from Symbiosis. I referred this to my bhaiya who is an orthosurgeon in Apollo hospital. But I need some guidance as this is initial stage and I want to contact some entrepreneur to motivate for a food business in Chennai. Kanhaiya Kumar Jha
industry I am interested in setting up an oil in my for extraction of mango kernel more useful home town Tamilnadu. It will be rmation who for me if you provide me info set up this will give technology and who can industry on turnkey basis. Rangarajan
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I need to thank my ofﬁce boy for being absent and forcing me to go to a nearby shop for a snack. There at an adjacent newspaper shop, I found DARE, daring me to look at it. Since then I am avid reader of DARE for the last 3 months and ﬁnd the articles very stimulating and useful. My heartfelt thanks to Cyber Media for bringing out a magazine exclusively for the entrepreneurs sparing a thought or two for start-ups and straining to provide valuable guidance for them.. I am an entrepreneur for the last 6 years into recruitment consultancy with ofﬁces in Bangalore and Chennai. To introduce myself, I am the last of the 8 children in a typical middle class family which is always averse to risk. At age 12 (25 years back), I suggested my dad to start our own ice cream shop in one of the few shops which we rented as we had a cluster of 7 schools in the vicinity and the bus stop was right in front of our shops. Instead, with typical abandon, he brushed aside my suggestion as kiddish (as I spoke about ice-creams) but later rented it to Arun Ice Creams and they made a whopping Rs 4000 daily sale with a 35% margin (which was BIG TIME money those days and reasonable amount of money even today). The monthly rent we got was less than his one day proﬁt and it has just doubled after 25 long years. That was my ﬁrst assessment of a business opportunity. A decade or so later, after my Engineering and MBA into my job, I tied-up with my one of my own client as a prospective partner who promised to invest in an STD and Xerox shop (which was a moneyspinner those days and difﬁcult to set-up considering that the STD lines were not granted easily) who later ditched me after we had made an advance to a shop. I told my father that he needed to get into something more in tune with the changing times (he was selling ﬁrewood and charcoal) and thus had to do it ourselves even though he had backed out. He simply refused to take risk and took back the advance and, sure enough, same place a similar shop came up and made roaring business. Even now, I ﬁnd many of my ideas of yesteryears taking shape today right in front of my eyes and I remain a mute spectator not having the wherewithal to fund for my ideas. As an aspiring and ambitious person, I have dared to be different after a decade of corporate experience and am on my own now but am limited by resources and unable to put to work my contemporary ideas to better use. I feel I have what it takes to succeed in ever changing and tough situations of today where the inﬂation is high and the recruitment scenario is stiﬂed. I can discuss all these and more with investment partners who would see value and substance in my thoughts. I do hope DARE will provide me with an opportunity and introduce some of the angel investors in the form of an HNI or understanding VCs who do not brush aside my small (ﬁnancial) requirements V. Ramanathan Chief Consultant BRAINS ‘N’ SKILLS Placement Consultants
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In December 2007, the title of DARE caught my attention in one of the book exhibitions. Since then, DARE has been my
sole EFFECTIVE mentor. As a ﬁrst generation entrepreneur
potential entrepreneurs, who are
and founder PrincipalSoft Technologies, I always found it
looking for mentorship with their
difﬁcult to get deﬁnitive guidelines to the business critical
startups. I teach entrepreneurship
areas like software marketing in international market,
at IIM-B and Princeton. I also have
product pricing, managing technical teams, product
my own company appropriately
scoping and budgeting…all at the same time. However the
called startups where we hand-
articles and case studies in DARE provide much needed
hold entrepreneurs in all aspects,
direction for the growth of entrepreneurial abilities. I
be it in drawing up a biz plan,
sincerely thank DARE for being an ACTIVE mentor and
or developing a biz strategy or
guide that contributes to the growth of PrincipalSoft.
I could not hold myself back from writing this email at the
Through this column of your
end of reading the Feedback section of June 2008 DARE and
magazine I would like to tell all
asking for HELP. I have been able to develop 2 web based
those entrepreneurs out there that
software products to cater to the Human Resource needs
they can contact me and we would
of organization. A. myHRCare software helps in process
be more than willing to hand-hold
streamlining including recruitment, proﬁle management,
and mentor entrepreneurs.
leaves, appraisals, time management and payroll. B. eXam
I started this company startups
product provides a framework to deﬁne and conduct
so that we could build a large
mass internet based exams with objective, descriptive and
fraternity of entrepreneurs who
picture based questionnaire. For over last 6 months, I have
will play a major role in our
been struggling in deﬁning product branding, pricing and
country’s economic development.
distribution. Very few marketing organizations have shown
My interest is in helping build
capabilities in “software” product marketing and sales.
With the help of D.A.R.E., would it be possible to identify
ideas. You can also check out my
any organizations who would like to be a marketing partner
blog on entrepreneurship called
with PrincipalSoft for current and future products?
Vivek S. Pande Managing Director PrincipalSoft Technologies
I keep reading in your magazine,
Nandini Vaidyanathan forstartups.blogspot.com
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I am Dr. Ananth Ramasamy, a vet doctor turned as entrepreneur in BPO/ IT(ERP) industry. Thanks to DARE for providing consistent and unparalleled business mentorship to entrepreneurs like us. Now, we are a group of vets planning to start a portal in niche area of veterinary services. The idea is in its embryonic stage. I would be grateful, if DARE could provide detailed information as an experts article on ‘portal
my publishing Thanks for E Exchange. letter in DAR a ed by Elokh I was contact e are ugh it and w Infotech thro f talk itial stages o still in the in again in Thanks once t. ar st to ss for the proce this regard. Sattish. L tions SunSpark Solu
business / search engines’. I would like to have some basic details: 1. General information on recent trends and technologies in portal business. 2. Is India having a potential market for vet services? 3. Proven business models and marketing strategies 4. Sources of revenue through portal business. We are looking for guidance in this aspect. Ananth R iElvira Infomatrix
Published: July 2008 Arvind Tolye, DCR Limited, made an offer of getting a master franchisee of his apparel brand. Response: July 2008 Sameer Anand, Deepak Kumar Gupta, and Rajeev sent in enquires, which were forwarded to Tolye. Feedback received:
It was nice reading the writeup on Medsphere, we would be interested to know more about the organization and the product, to explore how we can work together in the teleradiology space. It would be great if you can intr oduce us to the right person. Partha Dey Managing Consultant - Healthcare Practice, IBM India
We are very happy to receive enquiries. We are very much thankful for your efforts and support. We are sending all details to every enquiry, and will discuss in details. We are also looking for Rs 3 Crore Private or angel ﬁnance, can you give us names and contact details of ﬁnancers, or consultants who can assist us... Arvind Tolye DCR Limited
Radio Cabs: Challenges en route
release (dated November 18, 2007)
Thank you for the article ‘New-age
(July 2008) is informative. Its utility
on behalf of Cyber Media. The release
Publishing’ in the July 2008 issue. I am
would have been more if their [cab serv-
was about a forthcoming issue of
now looking forward to a more detailed
ices] telephone numbers and rate chart
Dare which had the same subject as its
analysis of Children’s Book Publishing
would have been added. Also to solve
city trafﬁc and parking problems auto
I wrote to Sanjiv Kataria (Strategic
should carry three persons on sharing
Communications, CyberMedia) for
basis –ﬁxed routes and ﬁxed charges
help and he directed me to the Editor.
in between two important destinations
He told me that you would help me with
like Connaught Place to Hauz Khas etc.
the pdf ﬁle of the relevant issue. I found
Similarly taxis must carry ﬁve persons.
this as a great opportunity to have a
word with you, and so thought to write to you directly.
I am an Assistant News Editor with The Economic Times. During my search related to a story, I was just surf-
Congratulations! You have done a great job by reaching out to the ﬁrst generation entrepreneurs and helping people like us. Thanks for that. I am a dentist by profession and want to venture out into taking up a franchisee for probably a juice car or a bakery. Please
I would really be grateful if you could help me out in my endeavor. Bhuwan Bhaskar The Economic Times
ing net to ﬁnd some information about waste management and the business
DARE: We have mailed you the relevant
opportunities in the ﬁeld. During my
links on our website, and the PDF. Wish
endeavor, I came across with a press
you all the best for your story.
guide me. Dr. Shilpa Rao (Via 56677)
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Email us at firstname.lastname@example.org AUGUST 2008 17
Mini Hydel, Major Bucks This capital-intensive business is lucrative in the long run. But a protracted breakeven time and a number of clearances could put your patience to test
hen Spentex, a Rs 1,200 crore textile major set up Himalayan Crest Power Limited, a special purpose vehicle in the year 2000 announcing its entry into the hydropower sector, it was seen by many as the usual attempt to diversify. But for Mukund Choudhary, the promoterdirector of the company, it was a sense of personal effort “to contribute towards reducing global warming.” Since its start, Himalayan Crest’s three small hydro projects of 3 MW each—Manal, Chandni and Timbi—all located in the Sirmour district of Himachal Pradesh, have been well on track. While the Manal project was commissioned in the year 2005, the Chandni project will go on steam soon, even as the work on the third one is on in full swing. It has been 15 years since Himachal Pradesh opened up its hydropower sector for entrepreneurs, inviting them
DARE/quick facts • Hydropower is a renewable, non-polluting source of energy • Small hydropower systems capture the energy in ﬂowing water and convert it to usable energy • Small hydropower systems have capacities of up to 25 MW • The country’s ﬁrst hydro project was commissioned in Darjeeling in 1887 • Setting up a 3 MW plant costs approximately Rs 15-20 crore • The cost is broadly divided under four heads—land, machinery, construction and labor • Finance for projects is available from government bodies such as IREDA and PFC. Banks also offer term loans for setting up a project • The generation cost of hydropower is not only inﬂation free, but also reduces with time 18
opportunity/mini hydel to set up small hydro projects of up to 5 MW each across the state. Himurja, the state government’s energy development agency, has since awarded 259 projects to private ﬁrms with the target to generate around 900 MW of electricity. But so far, only 15 projects are up and running, generating a mere 50 MW of hydropower. Many projects are believed to have got entangled in several clearances that are needed for starting work on the sites. These include those at the gram panchayat level and at the various government departments. Given the dismal situation of private projects of other companies in the state, it was indeed a pat on the back for Himalayan Crest when soon after the commissioning of its Manal project in July 2005, an appreciation letter from Himurja landed in the hands of Anil Kumar Verma, the director of the company. The letter dubbed
Setting Up a Small Hydro Project Step 1: Project identiﬁcation: Depending upon the availability of a suitable site, a project is identiﬁed either by the government or the entrepreneur. Step 2: Project allotment: The government puts a group of projects up for bidding, which sees participation from interested parties. Based on the lowest quotation, the government allots projects Step 3: Pre-feasibility report: Once the project has been allotted, the entrepreneur is expected to carry out a study of the site and submit a pre-feasibility report to the government. If the project is not found to be viable, the government returns the earnest money it received at the time of the allotment. Step 4: Detailed project report: If both parties are satisﬁed about the viability of the project, the entrepreneur works on a detailed project report that closely looks at aspects related to ﬁnance, technology, man power, etc. Step 5: Techno-economic clearance: The detailed project reports are submitted to the government based on which and other aspects, the entrepreneur will have to get a technoeconomic clearance from a committee of experts set up by the government. Step 6: Environmental and other clearances: Only after the techno-economic clearance has been granted by the government, can the private ﬁrm approach various departments for clearances. These include the departments such as forest, wildlife, pollution control board, ﬁsheries, PWD, revenue, etc. Local panchayats are also approached for relevant clearances. Step 7: Financial closure: This involves arranging project ﬁnance, paying the relevant levies and taxes, and ﬁnalizing contracts for civil and mechanical work. Step 8: Commencement of construction: With everything now in place, the work on the project is started. Note 1: This is only a broad outline of the steps involved in setting up of a small hydro power project. The actual steps are detailed and may vary from state to state. More information is available on websites or ofﬁces of every state government’s energy development agencies, which also work as nodal agencies for such projects. Note 2: Some state governments expect that all the activities after the grant of techno-economic clearance should be completed within a period of 30 months. * With inputs from AK Verma, Director, Himalayan Crest Power Ltd
AUGUST 2008 19
DARE.CO.IN the Manal project as a “milestone” in the state’s quest to harness hydel power through private participation. It also expressed Himurja’s interest in bringing out the “success story” of the project, to be used as “guidelines” for the upcoming projects. “We have received several quality certiﬁcations for our hydel projects. These include ISO 9001, ISO 14001 (environment management system) and ISO 180001 (operational health safety assessment system),” says Verma. Albeit at a small level, Spentex is among several corporate biggies that are playing a major role in the hydropower sector, sensing huge potential. Jaiprakash Hydro Power, part of the infrastructure major Jaypee Group, is among the early entrants in the sector. Its 300 MW Baspa-II project in Himachal Pradesh was fully commissioned in June 2003 at a cost of Rs 162,472 crore. The company has also bagged other projects in Uttarakhand, Himachal Pradesh, Arunachal Pradesh and Meghalaya. Jaiprakash Hydro Power is the country’s largest private sector player in the hydel generation. Another player, Bhilwara Energy, the power sector ﬂagship of the LNJ Bhilwara Group, commissioned its ﬁrst project of 15 MW in Madhya Pradesh in 1997. In January this year, the company bagged two projects of 710 MW
DARE/hydropwer The back-bone of sustainable energy. This is because it is: • A renewable source of energy • Supports the development of other renewable energies • Fosters energy security and price stability • Contributes to fresh water storage • Improves electricity grid stability and reliability • Helps ﬁght climate change • Can reduce pollution • Makes a signiﬁcant contribution to development • Means clean and affordable power • Key tool for sustainable development SOURCE: International Hydro Power Association 20
opportunity/mini hydel AK Verma Director, Himalayan Crest Power
What makes Himalayan Crest’s projects unique? Being the World Bank projects, all the procurement has been done based on the bank’s guidelines. World Bank mission teams visited our projects twice. Our Manal project today is being recognized as a model project for pelton wheel. We have obtained various certiﬁcations such as ISO 9001, ISO 14001 (Environment Management System), ISO 180001 (Operational Health Safety Assessment System). We will now get SA: Safety Assessment, in a period of six months. To obtain this certiﬁcation from international agencies cannot be an eyewash. Today, 100% employees at my project site (except one person) are from Himachal. There is a stipulation from HP government when the project is awarded that you must have 70% locals employed with the project. What options for ﬁnancing are available for entrepreneurs? Earlier it was IREDA. It had a World Bank line of credit. If you avail that loan then you save on excise duty because there is a deemed export beneﬁt from multilateral agency. So your project cost is reduced to a very great extent. Now PFC is also ﬁnancing (no limit), REC, IREDA, HUDCO, and all other banks are ﬁnancing. There are banks and ﬁnancing institutions that have the mandate to ﬁnance. Whether the project is viable or not is a question raised by each bank and they want to see. But if a techno-economic clearance has been given by a statutory authority, there should be no reason why they should not give ﬁnancing. But they can do their own proposal to see whether the project is viable or not. in Arunachal Pradesh. This has given an impetus to the company’s plans to generate 2,850 MW of hydropower by 2015. The other major private sector players in the business are Tata Power and Reliance Power. The Videocon group has also announced plans to set up a 1000 MW hydropower plant in Uttarakhand. The company is expected to put in Rs 60 billion in the project.
Hydropower and Small Hydro Systems Hydropower is a renewable source of energy that is non-polluting. As water falls from a high point to a low point, it has a certain amount of potential energy. With the help of a turbine, this potential energy is converted into mechanical energy, which in turn is converted into hydropower with the help of a generator. According to the National Policy on Hydropower Development, “our country is endowed with enormous economically exploitable and viable hydro potential assessed to be about 84,000 MW at 60% load factor (148,700 MW installed capacity).” The deﬁnition of small hydro varies slightly from country to country. In In-
dia small hydro refers to projects with up to 25 MW capacity. According to the International Small Hydro Association (ISHA), “In Canada ‘small’ can refer to upper limit capacities between 20 and 25 MW, in the US ‘small’ can mean 30 MW, however, a value of up to 10 MW total capacity is becoming generally accepted.” No matter how you deﬁne it, “one thing remains the same, small hydropower is one of the most environmentally benign forms of energy generation available to us today,” adds ISHA. Power projects above 25 MW are dubbed as large hydro projects. The hydropower sector is quite lucrative for entrepreneurs, given the potential that still remains untapped. “As grids cannot be drawn to remote places in the country, for entrepreneurs, there is a huge opportunity in small, micro and mini hydro sector. The pico hydro sector is also lucrative,” says SS Murthy, Professor, IIT Delhi.
Setting up a Plant Most state governments have announced policies speciﬁcally related to hydropower. The ﬁrst step is the
DARE.CO.IN identiﬁcation of a project or a group of projects. This is mostly done by the government. However, private ﬁrms are free to identify potential projects and recommend it to the government. The government puts these projects for bidding and invites sealed tenders relating to the cost of a project. Once the allotment process is over, the allottees carry out pre-feasibility studies on the site and submit a report to the government. If the project is not found to be viable, the government returns the earnest money it received at the time of the allotment. If the project is found to be feasible, the government asks entrepreneurs to work on a detailed project report (DPR). This takes into account aspects such as ﬁnance, technology, manpower etc. This report is then submitted to the government for techno-economic clearance (TEC). Once the TEC is received, the company moves to various departments such as forest, wild life, ﬁsheries, PWD, etc to get other clearances. Only after these clearances are obtained that ﬁnancial closure takes place, after which, the work on respective projects begins.
Costs and Transmission of Power The cost of the projects depends on various factors such as location of the site, etc. It is broadly divided under four heads—land, machinery, construction cost and labor cost. For Himalayan Crest Power, the cost of each project came to around Rs 5 crore per MW. This means a 3 MW project cost the company approximately Rs 15 crore. However, Verma believes that today the cost of the project could vary somewhere between Rs 6 crore and Rs 7 crore per MW. For its projects, Himalayan Crest took loans from Indian Renewable Energy Development Authority (IREDA) through the World Bank. “Being a World Bank project, all the procurement has been done based on bank’s guidelines,” says Verma, who has had considerable experience in the past, being part of the 1,500 MW Nathpa-Jhakri power project, to which World Bank sanctioned Rs 437 million. 22
opportunity/mini hydel S S Murthy Professor, Dept. of Electrical Engineering, IIT Delhi
How have pico hydro projects helped villagers in Karnataka? About three years ago, there were ﬁve places where pico-hydel systems were set up. We, from IIT Delhi, provided technology. Some local entrepreneurs and NGOs were involved. This was in districts that are part of the Western Ghats. This has brought a new change in their lives. The villagers had never seen electricity before. Even Border Roads Organization has asked us that they can give some land for implementation of pico hydro projects. Can the input cost of setting up a hydro power project be brought down? Initial cost can be brought down if we have proper manufacturing, also standardization and economy of scale. We can make it at least Rs 1 lac per KW. After all, government gives subsidies for various things. They are giving free power. Why not give same subsidy here. Then villages themselves can handle it. They can generate their own power and use it. That way for a village, even 10-20 KW would be sufﬁcient for basic need. Only it requires proper planning to implement it. Is hydropower business model proﬁtable? We have been promoting that there should be a good business model. We have told this to the REC. You have two options—draw a grid to remote places or have them have their own power plants. The second one is better. The new concept is to produce electricity nearer to the load center. Then you don’t have to draw long lines etc. The present scenario on drawing of electriﬁcation to rural places is uneconomical. They are not able to energize those lines. They hardly give power for three to four hours a day. Just drawing the line to the village is not an issue, giving power is the issue. Therefore, it is a question of making a proﬁtable business model. Experts in ﬁnance, management, etc should sit together with people from technology background and then it is possible to draw a good business model. The government has to become pro-active. You can also claim carbon credits. All of them are eco-friendly. They are reducing pollution. If China is utilizing it and India is not using this facility, then it is unfortunate. Several agencies today ﬁnance hydropower projects. These include Power Finance Corporation, Rural Electriﬁcation Corporation, Indian Renewable Energy Development Agency, etc. Most banks also offer term loans for such projects. “Whether the project is viable or not is a question raised by each bank and they want to see. But if a techno-economic clearance has been acquired, there should be no reason banks should hesitate from ﬁnancing such projects,” adds Verma. Financing for such long-term projects is either project ﬁnancing or balance sheet ﬁnancing. Most banks would prefer balance sheet ﬁnancing, which means they would want to ensure that your company’s ﬁscal health is sound and can bear the burden of repaying the loan on time. The government provides incen-
tives in the form of tax holiday, exemption from water royalty for a certain period. But still, the breakeven periods are long. For small projects, usually the state government asks companies to draw a transmission line from their project site to the nearest sub-station. “For our Manal project, the sub-station is 5 km away. It is a 33 KV line. For the Chandni project, it is about 10 km long. They are mostly between the range of 5-15 km. The line has to be constructed and maintained by us. Distribution is not our part,” adds Verma. Various state governments have different tariffs, which are decided by the regulatory commissions. “For a smaller project up to 5 MW in Himachal Pradesh, they have kept the tariff at Rs 2.50, ﬁxed for a 40 years period,” DAR E says Verma.
Sensitive brands Your brand has much to gain by turning into a pincushion for some of your consumers’ troubles ing very active in showing that they are sensitive to the concerns and aspirations of those who choose them and those they seek to attract. This can range from an automobile brand providing discount coupons for fuel, to a media house seeking to address the issue of quality political leadership. Both address areas of deep concern for people, albeit at two different ends of the scale, and in doing so seek to create bonds that are deeper than those forged through transactions and glitzy advertising alone.
kyrocketing inﬂation and a plunging Sensex, increasing interest rates and decreasing political stability—all this in just a few months. Unbridled optimism to growing pessimism in about ninety days. That is the speed with which things can change in the closely linked global economies of today. But what does it mean for the ordinary person? What can brands do during such uncertain times for the “man on the street”? The ﬁrst answer that comes to mind is the obvious one—be beacons of continuity, stability and what brands were originally meant to be—a bulwark of trust. But that seems to bestow a relatively passive role to brands. In today’s highly competitive world, brands must be seen as active, energetic, continually evolving and creating excitement. This is even more true for a country like ours with a young population and “young” as a relatively free and liberalised market. So then what is the role that brands can play? Actually, the most effective role combines the essence of both the apparently opposing positions mentioned above. They need to represent core values that safeguard the interests of those who buy them, while be24
In today’s highly competitive
world, brands must be seen as active, energetic, continually evolving and creating
excitement. This is even more true for a country like ours with a young population and
“young” as a relatively free and liberalised market.
And it is not just about discounts and promotions or “offers”. While these can be construed as addressing a key concern, of rising prices (!), they usually are inducements to encourage people to pre-pone purchases or to buy one brand instead of another and imply an almost purely transactional relationship. This is perfectly understandable given the pressures of a highly competitive marketplace and with people increasingly seeking better deals aggressively. However, such promotions tend to merely bribe rath-
er than actually befriend the people they are seeking to attract. Many companies also have programs that seek to make a meaningful contribution to the society. This “noble cause” based corporate social responsibility is very important, because it allows a larger group of people the beneﬁts of a growing economy. However, this is not the area that is being addressed in this article either. A sensitive brand still seeks to encourage people to choose it. The brand is not a social cause. The fuel for the brand’s salience continues to be interactions and transactions with people. However, it is the content of these transactions that illustrate the imagination, dynamism and sensitivity of a brand. The word “sensitivity” means that the brand has a ﬁnger on the pulse of the “people”, rather than treating them merely as “consumers”. It recognises that people still have aspirations. It also recognises that people do not cut back just for the sake of it. People in a booming economy, the future promise of which has been widely written about in the most glowing terms, want to continue to enjoy its fruits. So a slowdown is like a hangover after a really great party. And most people do not stop partying just because they tend to suffer from hangovers thereafter. How can brands demonstrate sensitivity during this period of hangover after the great low interest, inﬂation and high Sensex party of just a few months ago? What if a brand took on the risk it expects its customers to take? For example in real estate, supposing a brand guaranteed a basic value to the property come what may? A chorus of protest would probably arise quite understandably, because how can anyone predict how much the real estate
/blog market will ﬂuctuate? But those kinds of calculations are made every time any real estate brand decides to start a project. So why not use that expertise on behalf of its customers? How about a retail brand that is willing to manage a household’s monthly grocery portfolio in such a way so as to minimise the impact of inﬂation. Just like managing a ﬁnancial portfolio it juggles between an “acceptable” basket of brands in various key categories to maximise the buying power of the household’s rupee. Recently a bank brought out a ﬁnancial product that enabled investors to gain during this roller coaster period for the Sensex. So whether the Sensex climbed or crashed (within limits) investors would actually gain. The only catch was that only people with fairly sizable ﬁnancial resources could invest. But could such an instrument be made available to people with more modest ﬁnancial resources—people who would probably beneﬁt in real terms even more? How about a medical insurance brand that celebrates “wellness anniversaries”—a free check up at a reputed hospital if the insured individual has a year of good health? This would signal that the brand wished to protect and nurture the good health of its customers and would encourage people to get regular checkups done. Also it would probably graduate from being a “problem solver” brand to a healthful brand—quite an evolution for brands that are usually purchased for defensive, rather than afﬁrmative, reasons. The essence is to engage people with your brand, but to do so by showing an understanding of their circumstances and the environment around them and thus make a connection that goes beyond just a transaction. This is an extension of “enlightened self-interest” for individuals—“enlightened promotion” for brands. There have been a few excellent examples of this, but brands largely tend to use promotions to “sell” rather than engage. Perhaps one of the most effective examples of this was when Pepsi converted a standard under the crown cap
promotion into “Mera number kab ayega”. It was 2000-01 and India’s “economic miracle” was really beginning to gather momentum. Opportunities were rapidly emerging across a diversity of new industries. Youth aspirations were burgeoning. However, for many, while the destination of their aspiration was clear, the pathway to it was shrouded in uncertainty. Was their education adequate, how could they meet the right people and ﬁnd the right breaks, how could they differentiate between career pathways and dead-ends? And the most powerfully engaging question truly was “When will my turn come?” So what could
How about a medical insurance brand that
celebrates “wellness anniversaries”— a free check up
at a reputed hospital if the
insured individual has a year of good health?
have been just another fun and evanescent under the crown promotion, forged a far deeper and more engaging connect with its core audience. The brand was sensitive to its audience’s deeper, more compelling concerns and vividly demonstrated the fact that it understood and thereby strengthened its position as an icon brand for India’s youth. Today with the environment becoming even more uncertain, and yet aspirations continuing to grow with every success story, with people juggling between apprehension and ambition, brands have a potentially crucial role to play. Here are some suggestions on how you could begin to make your brand more sensitive and reap the ensuing beneﬁts: 1. Understand the role the category that your brand operates in, plays in the lives of people for whom it is
relevant, both in practical terms as well as in deeper emotional terms as well (ref “What you “sell” may not be what they “buy”” DARE December 2007). 2. List the key relevant concerns that your brand’s audience might be facing today—try and go deeper than just (e.g.) “Rising prices”. 3. Generate a list of enlightened promotion ideas that could address these concerns that go beyond transactional “bribery” such as discounts and freebies. Just because they are being buffeted by rising prices does not mean that they want to be made to feel “cheap”. Just because they are being buffeted by rising prices does not mean that they have stopped appreciating value over just price. 4. Try and create a property rather than just a promotion. This can only happen if you seek to connect with the people you want to appeal to at a deeper level. At a level that says that this is a brand that really understands my needs and concerns and isn’t just trying to make a sale. 5. Invest in the communication package with the same intensity and resources as you would for so-called “brand communication.” Give it the respect it deserves, because if done effectively it will probably say more about your brand and engage more deeply with the people you want to connect with, than most brand communication is ever able to do. Most importantly, it will make tangible the core value of your brand, enabling people to actually experience it rather than just be passive observers of it. Sensitive brands that undertake enlightened promotions will occupy a far more meaningful place in people’s lives rather than just in their shopping baskets. And when the good times return they will be the brands that people will have convictions about, that they will prefer and ultimately consider worth DAR E paying more for. The Author is Director-Strategic Planning at M&C Saatchi. AUGUST 2008 25
After college: Job or entrepreneurship What is the best course of action for a wannabe entrepreneur fresh out of college—start immediately or work for 2 years? /Sreejiraj Eluvangal
hen Satya Vyas completed his BTech in metallurgy and materials engineering from IIT Roorkee two months ago, his parents were very happy. As is usual with bright students at India’s premier technological institute, he had landed a lucrative job offer from a multinational company. “The company is the number one in the world, as far as offshore engineering services are concerned. My parents were very happy. The basic package it-
self was $100,000 per year [around Rs 3.5 lakh per month] I could have saved 20 or 30 lakhs in two years,” says the 23-year-old who was planning to do an MBA after two years. Instead, Satya turned back to his student days. “Even as a student, I had found it difﬁcult to get good food delivered home. I had also, a year ago, visited different cities to ﬁnd out if there was a possibility to start a fooddelivery business for homes and ofﬁces.” So, with just a hundredth of the money that was offered to him by the engineering services ﬁrm, the lad from Jaipur is all geared up to start operations at ‘Dietz Foods’, a home-delivery service for the health-conscious. “What is the worst that can happen?” asks Satya, who comes from a predominantly non-business family, except for his father who used to run a ﬂour-mill business. “I was anyway planning to work for two years and then do an MBA. Then I felt it was a better decision to start right now and learn along the way. On my own, I would learn more than if I were working at any corporation. This way, I am learning marketing, HR, etc. And ﬁnally, you cannot wait for the best idea and the best time. You will make mistakes, but you keep learning and not repeating those mistakes.” Satya is not an exception. Fed by stories of entrepreneurs making it big, many university students dream of starting on their own as soon as they can get their degrees. With many having designs in sectors like Internet and software products, which frequently require very little initial investment, starting out on one’s own has never been easier. But is that the right way to go, or should one spend a year or two
in a company and gain that ‘operational expertise’?
Hesitate, and all is lost “I don’t think there is any such thing as a right or wrong age for starting out,” says Rajeev Karwal, founder and CEO of the Milagrow Business & Knowledge Solutions, a provider of management services to small and medium enterprises. Karwal, famous for setting up or turning around the fortunes of many consumer brands such as LG in India, believes that a young entrepreneur can learn much more on his own than as an employee at another ﬁrm. “India today is completely different from what it was when I started out,” says Karwal, who started his career a quarter century ago. “It was not as open and happening as it is now. The ecosystem was limited, the public sector banks were laid back, and the VC cul-
Director, Dietz Foods
On my own, I would learn more than if I were working at any corporation. Like this, I am learning marketing, HR etc... You will make mistakes, but you keep learning and not repeating those mistakes.
strategy/startups ture did not exist. Today, these things are there. If someone has the will, they should step in. If the idea gains traction, there will be money behind it and the skills that one talks about can all be brought in later. In fact, the greatest companies in the world, whether it is Apple or Microsoft, were all started by people who did not work anywhere else,” he points out. Karwal, who has been an entrepreneur only for the last one and a half years of his 25 year career, also agrees with Satya’s belief that a career in an established company is not going to be very helpful to an aspiring entrepreneur. “I have interacted with people who run big corporations and I have also interacted with many young entrepreneurs. Many who run big companies are not anywhere as sharp as some of the small entrepreneurs that I have worked with,” he says. Satya also points out that sometimes not having worked in an established company may be a beneﬁt, as it allows you to “rethink the core processes” of an organization—to steal a line from an IBM ad. “Many people told me that since I am by training a metallurgical engineer, I should work in a restaurant for some time before starting on my own. But I want to develop my own best processes—how the supply chain will work, where I will source my raw materials, what values my company stand for, etc. In an established company, these processes may have been set 20 or 30 years ago and you will be involved in a very small part of the overall process,” he says, adding that for him, time is of great importance. Anthony Hsiao, a German who cofounded the Pune-based online travel utility entrip.com after graduating from the Imperial College, London six months ago, has his own take on the risk of starting off immediately after college. “People said that it was quite risky, and that one has to have a few years of work experience inside a company before trying to set up his/her own company,” he says. “My response to that is, we’re 23-24 years old and spoilt by our lifestyle in rich and relatively per-
fect Europe, what do we have to lose if we try out our luck in an area that interests us a lot? Whether you’re out of college or out of Symantec, it’s all the same. We’ve just hired two guys, one from college and another one from a large company. The graduate has had relevant exposure, which is evident. The other one who’s worked for a company hasn’t really had much relevant exposure,” he points out.
ANTHONY HSIAO Co-founder, entrip.com
Or learn at someone else’s expense? Yet Satya and Rajeev are exceptions. Most entrepreneurs feel that it is always a good idea to test the waters before taking the plunge. “To me, entrepreneurship comes as a natural evolution of one’s corporate career,” says KK Venkatraman who cofounded 3DSoC, a 3D modeling company, spun out of Indian Institute of Science nearly two years ago. Venkat, who is also the CEO of the company, got into 3DSoC after a 12 year stint with Wipro, after becoming aware of the need for and opportunity of starting purely product-based IT companies in India. “The inspiration for starting the company came from my career with Wipro, which was into services,” he says. Venkat believes that no amount of academic experience and learning can prepare you for the real world. "Let us look at the example of mobile applications. Everyone knows there is an opportunity. Everyone is aware of the big numbers. An IIT may prepare you to make a great application. But how will you get market acceptance, the customers? In academic environments, you don’t meet customers. “You can, of course, try to learn on your own. But it will be a discovery process and will take a long time. So, in this way, it will take you longer to reach your ultimate goal—a successful product or service—if you don’t get the experience of an existing company. If you spend two or three years in a customer-facing role at an existing company, you are actually cutting short the cycle to your ultimate success. The need today is to differentiate and unless you have worked in an
If you have had the exposure, then be conﬁdent. If not, join a startups to get the experience to get the relevant experience. existing place, you can’t differentiate,” he points out. Entrepreneurship evangelist and executive director of National Entrepreneurship Network (NEN), Laura Parkin too agrees that often the biggest opportunities are spotted by those working in existing companies, rather than students. “It’s rare that young people have enough exposure of any market to really understand the opportunities,” she says, “Without that exposure, the types of businesses young people often start are relatively low-value, like food catering, t-shirts, cake baking,
KK VENKATRAMAN CEO, 3DSoC
Entrepreneurship is a natural evolution of one's corporate career. AUGUST 2008 29
DARE.CO.IN SIDDARTH JONATHEN Co-founder, Infoaxe.com
strategy/startups months due to visa and funding issues after his master’s at Stanford points out that such a stint can have unexpected and pleasant consequences. “It allows you to meet other smart people whom you might potentially want to attract later to your company. It also gives you technical experience if it’s in the same ﬁeld,” points out the co-founder of online search company Infoaxe.com.
The importance of preparation
Working at a start up allows you to make contacts, get technical experience and just sheer operational experience. For this, a well chosen startup is the best. etc, though this is certainly not always the case,” she points out. Rahul Aggarwal, who co-founded i2k2 Systems, a Web hosting company, in the ruins of the dot-com bubble, agrees, but adds that besides being able to spot opportunities, a job may also empower you with the generic skills required for an entrepreneur. Aggarwal, however, confesses that he was unusually lucky to have had the opportunity to entirely manage an outsourcing business set up by his uncle. Aggarwal believes that his ﬁrst stint at Crompton Greaves after his engineering education and subsequent management of his uncle’s ﬁrm were invaluable in providing him with insights that have helped him make i2k2 a success. “Fifty to seventy percent of the work in running any company is generic,” he says, “It’s about people, systems, administration. What is speciﬁc is only the trade, which you need to learn. But the factors like accounting, ﬁnance, systems, people, documentation remain the same. Even on my ﬁrst job in Crompton Greaves, I learnt how to manage people as I was soon promoted to head a location,” he remembers. Siddarth Jonathen, who ended up working with a US startup for ﬁve 30
Finally, the answer to the question of whether one should choose a job or start on one’s own depends on two questions—how niche the enterprise is and how well the wannabe entrepreneur has prepared him or herself during education. Anthony of entrip.com sums it up: “If you have had the exposure, then be conﬁdent,” he says, “If not, and you are not conﬁdent enough to just try or risk it anyways, then getting the right kind of exposure is a good idea.” Siddhartha Govindraj, who worked in Singapore for around two years before starting a project management software-maker Silverstripe Software, believes that students who plan on starting on their own will do well and do prepare themselves in advance. “Students can usually handle the technical work, but what about legal, administration, marketing and so on?” he asks. “Since this is the ﬁrst time the student will be facing these issues, there are likely to be large gaps. You need to know the areas where you need help and bring in advisors or mentors or partners who can cover those deﬁciencies. Many colleges have incubation cells that can be helpful in bringing in these advisors,” he points out. “College students have no industry experience, so many times the idea does not work in real life. You also have to prepare yourself for quickly adapting to market realities,” he adds.
And exceptions! Among all the talk of ‘experience’, Laura of NEN also reminds us of the exception to the rule that perhaps explains the Googles and Microsofts of
the world. For some unique problems thrown up by new technology, she points out there is little to be learnt from being part of the existing setup. “When one looks at the Yahoos or Facebooks of our time, one sees a pattern: new technology, no established players, and while the young entrepreneurs were solving a problem they were facing themselves, that also just happened to be a problem lots of others were facing. So in this case, their limited exposure to the market turned out not to be a limiting factor,” she says, adding: “Those young entrepreneurs who managed to solve a big problem—one that plagued millions—are those whose innovations became valuable.” The last word, perhaps, should go to the newly-minted entrepreneurs like Satya and Anthony. “The best case is that we’ll be heading a great proﬁtable company in a few years’ time. The worst case is we will have had an awesome time and learned a lot, because we had to try to run a company, rather than just ‘doing a job’ of a cogwheel inside one ignoramus apparatus and we’ll have broadened our horizons so much more than most of our peers,” Anthony says, capturing Satya’s spirit as well. “I personally believe, regardless of whether you’re a grad or an industry expert, what is the make-or-break is your attitude,” he adds. “Are you a hard worker, constant learner, don’t give up or let some bureaucrat or security guard stop you? Can you think on your feet instead of being told what to do? Can you impress people and convince them to work with you, to make them part of your cause? Then you’re probably the right kind of person to found a startup, and it doesn’t matter what experience you’ve had or what subject you studied. Legal work, admin, HR, etc, are all doable, or learnable, or outsourcable. These should not be a blocker. If they are, then chances are that you either need a partner for whom these things are not a blocker, or you have to re-assess whether creating a startup is what you DAR E want to do!”
Opportunities from an ageing world With the world ageing faster than ever, the demand for specialized products and services for the elderly is set to grow. The number of persons aged 60 years and above is expected to nearly triple from 673 million in 2005 to 2 billion by 2050 /Vimarsh Bajpai
apan today is an ageing nation. Nearly one in ďŹ ve Japanese is 65 years or older. The situation is projected to worsen in the next 30 years when one in three Japanese would be over 65 years of age. While Japanese women are producing fewer children, its elderly population is living longer. This is fast changing the social and economic dynamics of the country that not long ago was the nerve center of technological advancement. Not only the government, but the Japanese business community is also coming to terms with the reality that their products and services have to be remodeled to suit the needs of their
Population trend - % above 60 years
opportunity/ageing graying population. Toymakers and gadget companies, for instance, are now focusing on the elderly, who could become their largest consumers in the not-so-distant future. An organizer of the Tokyo Toy Show was recently quoted as saying that Japanese toy companies were increasingly focusing more on toys for adults due to health worries and also lonelier people, as there are more single households in Japan. With its potential customers in mind, Sega, a Japanese toymaker, has launched a ‘listening’ plant to help elderly people deal with their loneliness. ‘Pekoppa’, as it is called, has an inbuilt chip that reacts to the rhythms of speech. The plant bends (nods) when a human voice reaches it. Call it the concern for the elderly or plain economics; many a businesses in Japan and other developed countries are designing such products for the old, frail and lonely. One such organization is the US-based Center for Aging Services Technologies (CAST), which is an international coalition of over 400 technology companies, ageing services organizations, universities and government representatives. The CAST is focused on expediting the development, evaluation and adoption of emerging technologies that can improve the ageing experience. The coalition is stressing heavily on “the need to apply American innovation to wellness technologies that enable prevention, early detection, increased compliance and new modes of remote care giving and family support.” Not all CAST appeals are falling on deaf ears. Some ﬁrms, such as the USbased Health Hero Network, a unit of Bosch group, have taken the lead. It is an innovator of solutions for remote health monitoring and management. Its popular solution is the Health Buddy system. It acts as the interface between patients at home and care-providers, facilitating patient education and monitoring of chronic conditions. The system includes monitoring technologies, clinical information databases, Internet-enabled decision support tools, health management programs and content development tools.
10 Global ‘Ageing’ Estimates • The world population will increase likely by 2.5 billion over the next 43 years, passing from the current 6.7 billion to 9.2 billion in 2050. • As a result of declining fertility and increasing longevity, the populations of a growing number of countries are ageing rapidly. • Globally, the number of persons aged 60 years or over is expected to nearly triple, increasing from 673 million in 2005 to 2 billion by 2050. • In the more developed regions, 20% of the population is already aged 60 years or over and that proportion is projected to reach 33% in 2050. • In developing countries as a whole, just 8% of the population is today aged 60 years or over but by 2050, 20% of their population is expected to be in that age range. • Whereas the number of persons aged 80 or over (the oldest-old) is projected to increase nearly ﬁve-fold, from 88 million in 2005 to 402 million in 2050. • About half of the oldest-old live in developing countries but that share is expected to reach 71% in 2050. • During 2005-2050, eight countries are expected to account for half of the world’s projected population increase. This includes India, Pakistan, China, Bangladesh and the US. • Europe has the oldest population, with a median age of nearly 39 years that is expected to reach 47 years in 2050. • Global life expectancy at birth, which is estimated to have risen from 58 years in 19701975 to 67 years in 2005-2010, is expected to reach 75 years in 2045-2050. SOURCE: United Nations World Population Prospects: The 2006 Revision
The Graying World Not just the Japanese, the rest of the world is also ageing faster like never before. Technological advancements in the ﬁeld of medical science have blessed people with longevity, more so in the developed world than in the poor nations of Africa and Asia. The increase in life expectancy at birth, coupled with declining fertility leads to the increase in the number of older people across the world even as the number of younger people walking the globe falls. This is already a reality in many developed countries. According to the United Nations’ World Population Prospects: The 2006 Revision, in the more developed regions, 20% of the population is already aged 60 years or over and that proportion is projected to reach 33% in 2050. In developed countries as a whole, the number of older persons (persons aged 60 or over) has already surpassed the number of children (persons under 15 years of age), it adds. However, developing countries, at this point, can breathe a sigh of relief but the happiness may not last longer because many of them may soon be-
gin to witness “a period of rapid population ageing.” In developing countries as a whole, just 8% of the population is today aged 60 years or over but by 2050, 20% of their population is expected to be in that age range, the report states. Globally, the number of persons aged 60 years and above is expected to nearly triple, increasing from 673 million in 2005 to 2 billion by 2050, according to the UN population estimates.
Economic Impacts of Ageing Several countries including those in Europe are seriously considering the impacts of their ageing population on the economy. Most countries are likely to witness increased pressure on public spending on pensions and healthcare. A slew of reforms will have to be initiated in developed countries to make up for the decline in young population. In the US, federal spending on the elderly population has already surpassed that on people below 18 years of age. The biggest impact of ageing is on a country’s labor force, as the number of working hands deplete. According to the UN’s World Economic and Social AUGUST 2008 33
DARE.CO.IN A Window of Opportunity A host of opportunities exist across sectors for entrepreneurs in Japan, several European countries, and Australia that are facing the rise in the number of people 60 years or older. Products for the elderly • Comfortable clothes and accessories • Furniture made of light wood or cane • Gadgets, toys, robots and electronic goods • Medical equipment and devices • Health and ﬁtness products • Books and literature on old age and religion • Dentures, spectacles, hearing aids, etc • Walkers, wheelchairs, walking sticks, etc • Low-cost houses • Neighborhood markets • Home security equipment • Health monitoring solutions • Low-ﬂoor and well-lit buses Services for the elderly • Old homes/retirement homes • Hospitals and nursing homes • NGOs • Beauty salons and skin treatments such as Botox • Fitness and yoga centers • Mental health services • Life insurance and banking services • Health insurance • Medical tourism • Religious and spiritual tourism • Massage parlors • Affordable public transport • Home billing facilities • Door-to-door banking and insurance services • Nursing staff, security guards, maids and chauffer placement services Survey 2007, a reduction in the number of workers may have negative implications for output growth and for securing the well-being of the population at large. It adds that lower output growth 34
opportunity/ageing implies that addressing the needs of a larger dependent older population will become a heavier task. In a paper on the impact of the ageing population on the global economy, Jeremy J Siegel, Professor of Finance at The Wharton School, says the ratio of workers to retirees will see a steep decline in the US and other developed countries. He adds that without enough workers to produce goods and buy retirees’ assets, retirees will not be able to fund their retirement. Siegel, however, suggests a solution. “The solutions are to either raise the retirement age or encourage globalization and allow the youthful workers of developing countries to buy retirees’ assets. The latter choice will lead to a massive transfer of capital ownership to the developing world and a healthy global economy,” he adds. The capacity to save may diminish with age, which could have an impact on the generation of savings in the economy as a greater number of persons grow older, says Social Survey 2007. “This may have implications for the level of global savings and availability of investment ﬁnance, particularly owing to the weight of the countries with ageing populations in the world economy,” it says. In France, for instance, household saving rates have remained relatively constant despite higher old-age dependency ratios. In contrast with Germany, in Australia the old-age dependency ratio did not change much, but household saving rates fell precipitously during 19892007, suggests the report.
A Window of Global Opportunities While there are several doomsday predictions about the fast ageing global population, there is still a glimmer of hope that can be seen. But for that, the economic activity will have to reorient itself with new consumers in mind— those 60 years and above. A quick visit at www.seniorshops.com will clear the hint further. The company caters exclusively to senior citizens offering products and gifts. It also sells products for the hearing impaired and visually challenged. There must be many
more stores offering a one-stop shop for the elderly but the trend seems to be an exception rather than the rule. In any society, as ageing patterns change, they have a bearing on consumption. According to the UN’s Social Survey 2007, based on current consumption trends exhibited by persons aged 65 years or over in developed countries, it is possible to anticipate, among other things, that the demand for health, long-term care, housing and energy expenditures will likely increase. It says older people tend to spend a higher share of their incomes on housing and social services compared with younger population cohorts. The growth of ageing population is sure to push the demand for speciﬁc products and services in several countries. As an entrepreneur, one can explore a host of manufacturing opportunities besides the lucrative services sector. The best way to help our elderly would be to provide them with suitable products and services, and that too at an arm’s length. Take the UK, for instance. A parliamentary committee expressed concern over the disappearance of the local shops. It said that given the restricted mobility of some older people, a matter of greatest importance to them is the possible disappearance of local retail pharmacies, to be replaced by pharmacies in supermarkets. The demand for various products, such as hearing aids, spectacles, dentures, wheelchairs, etc, will also grow signiﬁcantly. Similarly, skin care business is already seeing boom time in the developed world. The market for drugs to control and treat diseases of aging and for appearance-related products and services is expected to reach $71 billion a year by 2009, according to US-based BCC Research, as quoted by the New York Times in a news report last year. Manufacturing and exporting goods for elderly to developed countries could also be a great opportunity. But given the cut-throat competition, the products have to be of high quality DAR E and competitively priced.
The Business of Body Art With todayâ€™s youth increasingly getting body art done for style and self expression, the time is just right for interested entrepreneurs to set up body art studios and organize this industry
Photo courtesy: Ash Kumar, Ashkumar.com
ctor Angelina Jolie has over a dozen of them and soccer star David Beckham has a total of 15, including his wife Victoria’s name in Hindi. But think our Indian celebrities are out of the picture? Sanjay Dutt has a huge lion embossed on his arm. Esha Deol carries the Gayatri Mantra on her back and the latest one to be a part of the tattoo mania is none other than Saif Ali Khan, with his lady love Kareena’s name inked right across his arm. Not lagging behind is the trend of body piercing. So if Christina Aguilera can boast of 11 piercings on her body, our very own Momaith Khan (of the Dekh Le fame) beats her incomparably with a whopping 18 piercings, including her eyebrows and her navel. Lara Dutta and Antara Mali ﬂaunt their navel rings, while Emraan Hashmi is never seen without that stud on his eyebrow. Are only celebrities indulging in this emerging trend? Well, with 19% of India’s population falling in the 15-24 years age bracket, i.e. the segment of customers that dominates this business, and with the ever so increasing inﬂuence of celebrities on them, the craze is rapidly rubbing off on to the general public as well. India’s youth is using body art not only to make a fashion statement but also as a means of self-expression. With several body art studios for tattoos, body piercings, temporary tattoos and even henna opening up in the country, this business is hotter than ever before. And thanks to the raging demand, and dearth of trained talent, there is scope for many such chains to be set up across the country.
Tattoos and Body Piercing
Piercing Studio in Mumbai, “It’s a revival of an old art by Western culture. When this trend went abroad, better products and methods were introduced. Ink, for example, was black, made out of charcoal and mixed with water. The Westerners started using fruit and vegetable extracts, mixed it with glycerin and produced colored dyes.” Similarly, body piercings have also been part of our history. Our grandmothers have had them, our mothers have them, and even now, children are taken to jewelry stores at a very young age, to get their ears and nose pierced. But while Indians largely restricted themselves to ears and nose piercing, the Westerners brought in the trend of piercing other body parts like the navel, eyebrows, chin, tongue, nipples and even the genitals (Ouch!). Taking from these trends, the Indian tattoo and piercing industry, although still highly unorganized, is ﬂourishing. “When customers see a proper studio, following the correct hygiene and safety protocols, they feel safe and don’t even mind paying a premium price. Yet, there aren’t many such parlors, perhaps because there aren’t any proper training schools in India for this art,” says Arun. Karan Arora, owner of Ron Tattoos, a body art studio based in Delhi, adds, “I am also a dealer in tattoo and piercing equipment, and I easily manage to sell around seven machines in a month. Everyday, we get a new artist, who wants to train under us, which shows that there is a lot of interest being generated for the business. However, it is still a nascent industry and only time will tell who is eventually going to survive in the market.”
Now and Then Culturally, body art is not a new phenomenon to us. Most of us have seen our grandparents with an Om or Trishul tattooed on their hand. Women of that generation were also often seen with three black dots tattooed on their chin. Tattoos have also been common amongst certain tribes in India, where they were symbols of group loyalties and held a social importance. Says Arun Alva of Al’s Tattoo Parlor and Body
Know Your Art There aren’t any fancy degrees needed to start this business. People in this industry have come from a number of diverse backgrounds. A basic knowledge of art and a steady hand is all you need and you are good to go! Take Karan Arora for example. A trip to Bangkok is where it all began. “I got inspired by the tattoo culture over there and decided to buy a
Photo courtesy: Arun Alva, Al's Tattoo Parlor & Body Piercing Studio
DID YOU KNOW? The oldest tattoo was found on a 5000 year old frozen body of a Bronze Age hunter named Ozti. In order to seduce Mark Anthony, Cleopatra used henna to color her hair, lips and nails, and also as a perfume. Benjamin Drucker with 745 piercings is known to AUGUST 2008 37 have the most number of body piercings.
Al’s Tattoo Parlor and Body Piercing Studio
When customers see a What the Tatooists say proper studio, following the correct hygiene and safety protocols, they feel safe and don’t even mind paying a premium price.
KARAN ARORA Ron Tattoos
Getting tattoo and piercing equipment, including the machine, needles and inks is extremely easy, especially if you have relatives living abroad. But in the end, art talks! So it is essential for you to be a good artist. 38
opportunity/fashion tattoo machine and inks for practicing,” says Karan. He then ordered a couple of CDs from abroad and constantly researched on the net, to learn more about the art. “My family and friends trusted me and were sporting enough to let me try tattooing on them for free and soon enough I realized that I wanted to take it up professionally.” Karan has been in this business for two years now and does everything from body piercing, permanent and temporary tattoos, nail art and body painting. When we asked him what it takes to be in this business, he replies, “Getting tattoo and piercing equipment, including the machine, needles and inks is extremely easy, especially if you have relatives living abroad. But in the end, art talks! So it is essential for you to be a good artist.” For Michael Cowasji, owner of Mike’s Body Art Studio in Delhi and Goa, tattooing only started at the age of 33. “Since I was a kid, I was curious about tattoos and would always be intrigued by people who had them. But it was only around the age of 33, when I was done with my mechanical engineering, information technology and garment engineering, and I still wasn’t getting job satisfaction, that I decided to adhere to this inner call I kept having about taking up tattooing,” says Mike. Being in this business for over ten years now, Mike feels that art graduates and hobbyists pick up tattooing faster. “That ways, they only need to be taught the technical aspects of tattooing,” he points out. Although Al’s Tattoo Parlor and Body Piercing Studio, was started by Arun’s brother, Al, about seven years ago, Arun only decided to take up the business fulltime around three years ago. The studio was Al’s brainchild and he even went to Amsterdam to learn the art thoroughly. Arun learnt tattooing from his brother, and other main artists appointed from Singapore and Holland who worked in his studio. “Only after about a 1000 practice tattoos are you actually ready to work with real customers. You only get one chance and there is no room for mistakes,” says Arun. So, where or on whom can you
practice on? “If you are conﬁdent and use the best of products and hygienic methods, many people will be ready to be your guinea pigs. Just remember to have a main artist sit right next to you for guidance” says Arun. So, who is ﬁt for such a business, according to Arun? “There isn’t a right or wrong way to do art. You simply can’t deﬁne it. Every person brings their own unique touch while doing art. Therefore, I only just see how well an artist is able to demonstrate each and every intricate detail.” Certiﬁcation Not Mandatory Ok, so you are a good artist and are interested in this business, what next? Will you have to go abroad to get certiﬁed? Well, as of now, you do not have a choice but to go out of the country. Holland, Australia, Singapore and Thailand are some of the most popular places. According to Mike, “ As the demand is increasing, customers are enquiring about your credentials, which is why I had decided to take a break and do a course from the American Tattooing Institute in Arizona.” However, if you are passionate and dedicated enough, it is not a requirement. “Anil Gupta, a renowned tattoo artist based in the US, got trained locally in India. Now, he is so popular that people have to book as much as six months in advance to get a tattoo done from him,” claims Arun. Also, if money doesn’t permit it, you always have the option of getting trained under a tattoo and piercing artist in India, who has been certiﬁed from abroad. Even in terms of getting your business registered, tattoo and piercing artists don’t fall into a speciﬁc category. “You need to register it as a men/ women beauty salon,” says Karan. “Nowadays you can see many amateur artists setting up this business at homes, with no guarantee of hygiene and yet nobody asks any questions. It is only after a percentage of customers start to get infected, will standards be set,” he continues. Ensuring Safety Standards Maintaining hygiene standards
opportunity/fashion Equipment and Supplies TATTOOS Autoclaves Cleaning and sterilization chemicals Cosmetic and temporary tattoos Creams (Anesthetic, Aftercare, Healing) Disposable gloves Flash, patterns and designs Machine grips Medical supplies Stencils, Needles, pigments and inks Tattoo guns, machines and parts Thermal image copiers Tips and tubes Ultrasonic machine PIERCING Body jewelry Corks, Forceps, Pliers, and Tapers Ear piercing gun and Piercing needles Disposable gloves and Gauze pads Marking ﬂuid and toothpicks HENNA Applicator cones Gloves, cotton balls and swabs Eucalyptus oil Glitter henna Henna pens, powder, and stencils Mordant liquid Straight pin Wooden mixing stick something that needs gearing up in this industry. In order to be reliable in this business, as Karan puts it, “you need to be a doctor without a degree.” You need to know everything from sterilizing your equipment to dealing with skin problems, in case of an infection. Having a doctor on board or a medical consultant you can easily reach out to is recommended. Autoclaves and ultrasonic machines should be used. Needles and gloves should be disposed and machine parts sterilized after every use. Inks should be lead free and preferably pure organic pigments. In case of body piercing, ensure that you only use surgical steel metal for piercing and jewelry. A fresh pack of needles should be opened right in front of the customer, so that the customer feels safe about the whole procedure. Similarly, ink
should also be emptied into a separate container and the remaining ink should be discarded off later. Many tattoo and piercing studios also require the customer to be of 18 years of age. Those who are under 18 are required to be accompanied by a guardian.
colors, as well as the time it takes to be executed. Many artists charge around Rs 1500 for a square inch and Rs 500 for every additional inch, for a tattoo in black. For colored inks, the average cost is Rs 2000 for a square inch and an additional Rs 600 for add-ons. But prices can even sore up to a lac, depending on the size and detailing. The average cost of a body piercing, including a ring or a stud is between Rs 1000 to Rs 1500.
For the Young and Restless Anyone between the ages of 18 to 35 are frequent visitors of body art studios. Although when it comes to body art, age is no bar. Arun reminisces the time when Exploring Possible Offshoots the 60-year-old actor Mumtaz came Apart from setting up tattoo and body to his studio for a tattoo. “She always piercing studios, there are many spinwanted to get one, but never got around offs in this segment that can be looked at. According to Karan, “Body paintto doing it, until now,” says Arun. And the only thing that is stopping ing and airbrush tattooing for bikes, teenagers below 18 to get one is the fact cars etc is upcoming and there aren’t that they aren’t allowed. Even that how- many people in the industry doing it.” ever, doesn’t stop them at times. “If the The trend of cosmetic tattooing is also customer is adamant, we have to make catching up. This includes permanent exceptions, so that they don’t resort to eye makeup, lip liners, lip coloring, blush, eyebrow drawing and coloring unsafe methods to get one,” says Arun. You can expect around ﬁve custom- and scar rectiﬁcation. Says Mike, “Many ers a day for tattooing and around 10 clients with burnt or disﬁgured skin are for body piercing. For tattooing, the now being recommended by dermapopular demand is for tribal designs, tologists to our studio for re-coloring of Chinese symbols, religious themes, patches on the lips, eyes etc.” Setting up body art training instibutterﬂies, angels, names of loved ones and lots of custom designs with shad- tutes is another possibility, as there is ows and 3D art. Temporary tattoos are a lot of demand, especially amongst also extremely popular. “For every cus- youngsters. As of now, trained arttomer we get for permanent tattoos, we ists need to be hired from abroad a get around 5 for temporary,” says Many clients with burnt or Karan. These are disﬁgured skin are now being extremely popurecommended by dermatologists lar, as they are painless, you to our studio for re-coloring of can match them patches on the lips, eyes etc. with your outﬁts It feels great to revive people’s and you can get a new one every conﬁdence in their appearance. few days! When it comes to body pi e rc i n g s, na vel and eyebrow piercings are the most sought after. The price of a tattoo is based on various factors MICHAEL COWASJI such as size, intriMike’s Body Art Studio cacy, placement, AUGUST 2008 39
lot of times, since there is a dearth in the country. Dealing in tattoo and piercing equipment could also be explored. Most of this equipment right now needs to be imported. Some tattooists like Mike are even manufacturing their own equipment. “Thanks to my mechanical engineering degree, I can make my own tattoo machines and guns,” he says. Currently, China, Korea, Germany, Thailand and the United States are some of the countries where such equipment is being procured from. “Even the inks and sterilizing chemicals need to be obtained from the United States, as it is the only country where they are certiﬁed from the Food and Drug Administration (FDA),” says Karan. Tattoo removal equipment is quite in demand, as many youngsters just blindly follow trends, and later want it removed, either out of boredom or the social stigma attached with it. Many existing studios therefore are thinking of investing in such equipment.
HENNA Be it in the Middle East, Africa or South Asia, Henna is being applied for centuries now as an adornment. In India, the usual trend is ﬂowery and paisley designs applied on the palms, arms
and legs during occasions like Diwali, Eid, Karwa Chauth and especially during weddings. But trends are changing now, thanks to the inﬂuence from Hollywood celebrities like Madonna, Gwen Stefani and Demi Moore who popularized it as stylish temporary body art. Youngsters are now getting henna designs on their backs, arms, ankles and even around their navels! The current scenario of the henna industry in India is again extremely unorganized. During festival season, you can usually see people rushing to their local mehendi walas (henna artists) to get it done and for weddings various local beauty parlors are contacted. Is there opportunity in carving a niche in this segment? Well, we compared a street henna artist to existing players running exclusive henna companies, to ﬁnd out! Opposite Ends of a Spectrum There in the midst of a busy M-block market in Greater Kailash, Delhi is his working area. He sits on the steps, gazing at passersby, eagerly waiting for someone who might want to get henna done. Right next to him, lays a stool with neatly placed henna cones, oils, a design album and a set of visiting cards. Right above him is a board that says “Raju Mehandi Wala.”
Henna is increasingly being promoted worldwide and customers are now looking for branded products. My products are extremely popular and reliable as they give color and fragrance guarantee and are good in quality with no chemicals. The packaging is also extremely professional with its date of manufacturing, sell-by date and barcode. 40
Raju, 28, has been in this business for about ten years now. He claims to get around 15 customers in a month, which earns him any where between Rs 1500 to Rs 3000. To survive, he also sells bangles. “This business thrives depending on the season. During festival and wedding season, we get plenty of customers,” says Raju. His bridal packages, depending on the intricacy of the work, are in the price range of Rs 1100, Rs 2100 and the most expensive package costs Rs 5100. “I hire a couple of henna artists during that season, to help me out and with whom I divide the proﬁts,” he continues. But then on ordinary days, even working 12 hours a day every week, hardly fetches him any customers. Now let us shift to Bhramadevi Sharma, owner of Bhrama’s Mehendi, a company based in Mumbai that deals in the Henna applying business. Bhramadevi has been in this business for the past 48 years, and her daughter Deepa Sharma has also been a helping hand for the past 20 years. “Although you can get mehendi walas in every nook and corner, people prefer going to someone with an established name. Having a website has especially helped in attracting clients, since these days many people get on the Internet to plan for special occasions,” says Deepa.
Henna Artist, ashkumar.com
opportunity/fashion The cost of their services could be anywhere between Rs 5,000 to Rs 15,000. They also have arrangements for henna application outside of Mumbai, provided the customer is willing to pay the travel fare. The henna packages for such customers ranges from Rs 15,000 to Rs 35,000. “We have traveled all over India and even to Singapore, Dubai, London, Italy, Panama and the US to apply henna,” claims Deepa. They are in fact even planning to open a branch in London! Who do they cater to? Besides brides, Bhrama’s Mehendi has catered to many eminent personalities. Their client base includes the Bachchans, Shah Rukh Khan, Rekha, the Ambanis and the Mittals amongst many others. But Bhramadevi is not the only henna artist with a success story to tell. UK-based Ash Kumar, not only has an elaborate list of international and Indian celebrities as his clients, from Madonna and Julia Roberts to Shilpa Shetty and Rani Mukherjee, he has also found a place in the Guinness Book of World Records. That’s right! He is the world’s fastest henna artist, known to complete one armband in 18 seconds ﬂat! Ash Kumar has been in the business of henna for seven years and runs a company called Ash Kumar.com. Com-
Raju, a road side artist, gets around 15 customers in a month, which earns him any where between Rs 1500 to Rs 3000. To survive, he also sells bangles.
menting on the global henna industry, Ash says, “We are heading towards a professional standard now, as opposed to the home-based industry that it previously was. The public is now recognizing industry professionals and lots of artists worldwide, especially in Japan, Australia, Africa, India and Pakistan are getting inspired by our company to start their own ventures.” The bridal henna packages that the company offers include a standard (£235), a bronze (£250) and gold (£300). Quiet expensive, isn’t it? But as Ash puts it, “For the quality offered, they know it’s worth it!” Ash gets anywhere around 100 to 300 requests for henna per month, but time only permits him to fulﬁll around twelve. Senior artists in his company, who have been personally trained by Ash, do henna on 3 to 7 customers in a month. Raju, Bhramadevi and Ash Kumar are all henna artists. Raju struggles to get customers to make ends meet every month. And then there are the likes of Bhramadevi and Ash who are in the same business, but running highly successful companies. Picture the difference? Branching Out Your Business Henna products is an area that is also quite in demand. Ash has his own
line of signature products that can be ordered from his Website, including ready to use henna, sparkling glitter gels, Bollywood henna kits, temporary tattoo transfer designs and the Ash Kumar design portfolio. “Henna is increasingly being promoted worldwide and customers are now looking for branded products. My products are extremely popular and reliable as they give color and fragrance guarantee and are good in quality. The packaging is also extremely professional with its date of manufacturing, sell-by date and barcode,” claims Ash. Another popular demand is of henna training institutes. Ash, who also runs the AK Beauty Academy, offers the Just Henna (£300 for beginners) and Henna Refresher (£150) courses to anyone who is interested in this art. “The classes are so popular that they are fully booked eight months in advance,” says Ash. Some of the trainees in the masters’ level of this program are also personally recruited by Ash to become an AK agency artist. Soon, Ash is also planning to open one such academy in India. “Lots of emails have been pouring in from Indian henna artists. They have the money to buy my products, but they need to be shown how to use them,” he says. Challenges In The Way When we asked Ash about the potential challenges in this business, he replied, “One of the biggest challenges that I had to face was to break through the conception that has been around for hundreds of years—that it is only done by aunties at home using a pot and toothpick! Reforming this amateurish perspective to make the beauty industry realize that this is indeed a profession with a lot of money to made in it, has been extremely tough.” Well, Ash through his achievements, like a record in the Guinness Book and a permanent display in London’s Royal Victoria and Albert Museum, has deﬁnitely brought about a change in perspective. The real question is, are you ready to bring about another such reform? D A R E AUGUST 2008 41
A tale of kathis and samose Around 95% of the Indian fast-food industry is based on foreign food items, is there an opportunity in going Indian?
ow many times have you held yourself back from going for a quick bite from the road-side stall? In today’s fast-paced world, for many, skipping meals is the rule rather than the exception. But when it comes to getting a quick snack while waiting for the bus or train, there are not many options for the health-conscious. “The Indian food palate has lots of snacks—samosas, pakora, vada-pav, paratha, rolls, etc, but if we go to a branded fast food outlet, how many of these would you ﬁnd?” asks Akbar Khwaja, one of the earliest entrepreneurs to enter the Indian branded restaurant market. Akbar, with some
help from Swedish-Iranian restaurateur Vahid Berinjian, pioneered the chain food joint model in India, establishing US Pizza in Bangalore in 1995. Thirteen years, 60 outlets and 25 cities later, Akbar is planning another attack at the branded restaurant business in India, this time from a more ‘Indian’ angle. “The international fast-food chains in India are expanding at the rate of around 40 outlets per year. But in a country as large as India, how much visibility can you have at that rate?” he asks. While international brands like McDonald’s and Pizza Hut aim at India’s
suave, westernized middle-class out to dine, Akbar and a few others like him are aiming another market—the average Indian trying to ﬁt 36 hours of life into 24. “Indian companies are underfunded, the economy is under-funded. Yet, the design of outlets being put up by the top brands is such that they cost around Rs 3-7 crore each to put up.” Akbar therefore plans to set up 1,000 outlets, at a cost of around Rs 5 lakh each, starting with 50 in the next six months. The strategy is to go micro, with just the stall and the food—no chairs, no jokers and certainly no ACs. “The ‘Satvik’ brand will serve Indian fast-food items at all locations where
we can ﬁnd enough space to put up a small stall - malls, outside theatres, even bus stops,” he says. Akbar’s is certainly a brave move, but not a novel one. Being based in the commuter capital of India, Mumbai, Dheeraj Gupta saw the opportunity early, in 2001. “We ﬁgured out that we have to cater to a particular need, which was to emerge as a very good snacking option. Ours is ﬁnger food for the person in a hurry. No plates, no cutlery, fast and on the move,” says the entrepreneur who has so far stuck to Mumbai and Gujarat. Dheeraj’s Jumbo King is the pioneer in trying to cater to the hunger of the average person on the street and in a hurry. However, unlike Akbar, who plans to open 50 stalls in 6 months and 1000 over the next ﬁve years, Dheeraj’s has been relatively slow going. Despite starting off in 2001, Jumbo King is still only 45 outlets strong. However, like Ak-
bar, Dheeraj Gupta is planning a mega expansion over the next one year. “Putting up stores is easy,” says Dheeraj, who works on a franchisee model, unlike what Akbar plans for his ‘Satvik’ Indian fast food brand. “What is important is to build the brand and make it relevant to the customer and make money. The challenge is to give a
Indian companies are under-funded, the economy is underfunded.. Yet, the design of outlets being put up by the top brands is such that they cost around 3-7 crore each to put up.
— Akbar Khwaja MD, United Restaurants
uniform product across all your stores, 365 days a year,” he says. In short, against just 45 outlets in last seven years, Jumbo King will open another 250 stores, across the country, in the next 12 months. Dheeraj points out that investing in stalls or ﬁnding franchisees is not the challenge in this business. “The biggest challenge is in getting your supply chain in place, in this case, having a cold chain.” Indeed, every player with designs on the market, from Bangalore’s Kaati Zone to Delhi’s Nirula’s to Dheeraj and Akbar, has a centralized production model. While Dheeraj plans to supply markets as distant as Delhi and Bangalore from his central kitchen in Mumbai, Bangalore-based Indian snack specialist Kaati Zone will use their kitchen in Bangalore to supply to other cities as they expand later this year. “Without a central kitchen, at least in the early days, it is difﬁcult to enAUGUST 2008 43
DARE.CO.IN sure consistency, and consistency is very important,” says the 56-year-old investor-turned-entrepreneur Kiran Nadkarni. Kiran’s Kaati Zone, deriving its name from kaathi or roll, has the distinction of being the only one of the four or ﬁve players in this space to get funding. Starting off in late 2004, Kiran’s is also a younger enterprise compared to others like Jumbo Pav or Goli Vadapav, started in 2003. Besides consistency, another factor prompting fast food makers to ship rather than cook is the economies of scale. “Over time, our Delhi kitchen has turned into a 40,000 square feet factory supplying UP, Haryana, Punjab and Rajasthan also,” says Sudipta Sengupta, head of sales and marketing for the Delhi-based restaurant chain Nirula’s. Though not strictly a fast-food brand, the restaurant group has come out with 16 fuel station or ‘Express’ fast-food counters for malls, airports and food courts. “These places have little or no seating and the investment too is in the range of only Rs 8 to 10 lakhs,” Sengupta points out. All of Nirula’s ready-to-eat items, including its heat-and-eat meal-boxes are made in the central kitchen and shipped out to outstation outlets once a fortnight. The method, however, has its downside. “Inside Mumbai, we still have a 5-degree chain and for other places, we have put in a -18 degree chain. As a result, the vada pav that I sell for Rs 7 in Mumbai has to be sold for Rs 12 in Gujarat,” says Dheeraj. While challenges abound, most of the players are on the cusp of expansion. While Nirula’s Express will start making an appearance in Western India this year, Kaati Zone and Jumbo Pav too will branch out of their respective zones and cities. Meanwhile, the ‘Indianness’ is both an advantage as well as a disadvantage. The obvious advantage is that unlike a burger or a sandwich, which may tastes alien to many Indian taste buds, the samosas,vadas and the kaathis require no introduction for many Indians. “We have a home ground advantage, especially with the 35 plus. If it’s a ﬁve year old, he does not care,” says Dheeraj. 44
Once you have one success story, many others will jump in. We will have 10 large Indian brands, very beautifully distinguished.. parathas, biriyani, chaats... and these will become global brands.
— Dheeraj Gupta Founder, Jumbo King Foods
However, the same Indianness also imposes strict cost restrictions upon the players. “We have a large base of customers who feel that the price is too high,” says Kiran, with a smile. Kiran’s kaathi rolls are priced at around Rs 30. “Since, it’s Indian, we don’t have to tweak the product’s taste to sell it. But when you sell something that is similar to what is available on the street, price comparisons are inevitable. We can never compete on prices,” he points out. Akbar however believes the price competition will keep the offerings ‘grounded’. “You can have elite prices and premium products if you are selling something outside the cultural context, like American burgers in India and Indian samosa in the US. But premium prices can also prevent you from becoming a mass brand,” he points out. Another big uncertainty is the lack of a proven business model. Dheeraj and Kiran take inspiration from American brands such as McDonald’s, which built their business around one or two ‘core’ products. “If you try to offer everything, the supply chain becomes complicated. I know a person in Mumbai who built an entire building, just by selling lassi. It’s like a doctor. A generalist who has done only MBBS gets only so much money. An eye-specialist will get 20 times more and a retina specialist may get 10 times more than an eye-specialist. If you are a generalist and offer everything, the moment a focused guy comes in, he takes the market away,” he points out.
Kiran too got inspired by the success of brands such as Pizza Hut and McDonald’s, naming his venture Kaati Zone, though it also offers vada pavs, parathas and beverages. Akbar however has the opposite opinion. He believes that too tight a focus on individual items and cities has prevented the Indian style fast-food industry from growing so far. “The biggest Indian style fast-food company is still in the range of Rs 3 to 4 crores a year. The reason is that they are too focused on a particular menu item or geography,” he says. Prashanth Prakash, partner with Bangalore-based Erasmic Venture Fund, which invested in Kiran’s venture, agrees with Akbar on the need for variety. Prashant however also sees the limitations. “When we came into Kaati Zone, it was mainly concentrated in tech parks. But we needed more visibility for the brand, so we opened a few high-street outlets. Similarly, the product range was broadened. If you are too niche, you are not in the right business. You would like to give the customer variety, but ﬁnally, it is a trade-off between that and your ability to scale. If you have too broad a range, you can’t scale.” Another open question is the business model. While Jumbo Pav has been built on a franchisee model, where the brand-owner gets a part of the total sales revenue; Akbar believes fast-food stalls are too small to be franchised. What does not seem to be under much debate is the potential of the segment. “The entire fast-food industry in India is worth Rs 1500 crore,” says Akbar, “Out of that, only around 50 or 100 crores is Indian fast food. We have only scratched the surface.” “It will be like what happened in IT,” says Dheeraj. “You need someone to take the lead, like Infosys. Once you have one success story, many others will jump in. We will have ten large Indian brands, very clearly distinguished in parathas, biriyani, chaat and these will become global brands. Someone just has to take the lead and inspire DAR E the others.”
Services to keep your IT costs down
Software as a Service (SaaS) or cloud computing is an emerging model where someone else installs and manages software, and you use as much as you want, only for as long as you want, and pay on a per-use basis. This is fast emerging as a better alternative to installing and maintaining your own applications /Krishna Kumar
his piece looks at software on demand or software as a service (SaaS) option for startups and medium enterprises looking to reduce their upfront technology investments as well as technology management headaches. Technology investments form a signiﬁcant part of the expenditure of any organization, big or small. If you listen to the pundits, without technology investments, you are dead. And if you listen to those who have tread the path, then the headaches associated with even a simple setup can leave you with a similar feeling. This is why many startups and medium businesses either avoid technology investments or spend too much of their time, money and energy on the subject. Web technologies and bandwidth availability have now matured sufﬁciently for us to look at hosted, managed applications as a way out of being caught between the devil and the deep sea.
How does it work? They go by different names—managed software services, software as a service (SaaS), cloud computing or the older, application service provider (ASP). But the basic business model is the same. With SaaS, you do not buy, install or run the application at your end, all that is taken care of by the vendor at 46
Hosted Vs Managed Hosted typically means implemented on a remotely located server on the Internet, usually just for you. You would be responsible for managing the software, upgrading it, etc. Managed is also hosted, but you are not responsible for administration, updates, etc. Usually, with managed services, the same implementation is shared by different customers. This piece covers managed services. his data center. As there is no installation, there is no need to buy expensive hardware either. You pay on a per-use basis (times number of users, messages, documents, etc.), usually every month, in advance. Depending on the service, there may be a setup and conﬁguration fee. For some services, customization is also possible, that at times could end up being higher than the annual fee. In most cases, it is as simple as going to their website and signing up. You pay with a credit card, conﬁgure the service yourselves and you are ready to go. And in most cases, you get a free trial period, which I would strongly advise you to use to get a feel of what can be done and more importantly, what cannot be done.
What is the advantage? SaaS takes away your upfront investments, which in most cases can be fairly heavy, and converts that into smaller monthly payouts that would be easier to organize and manage. As your business scales up, (or God forbid, down), you can change your usage slab and payouts, mostly instantaneously. There is no lead time to buy and install new systems nor are there associated capital costs. Finally, you are free to concentrate on your business and not on how to get particular software or hardware working; and to that extent, you need to maintain only a leaner team (less lots of IT people).
Budgeting Are you amongst those who are sick of budgeting with spreadsheets? Where increasing complexity leads only to increased frustration? Where you lose track of versions with everyone ﬁnally carrying a different set of numbers? Adaptive Planning probably has an answer for you. The software extends the paradigm of spreadsheets, but brings in SBU level ﬂexibility to add speciﬁc budget heads as required. It also does modeling and sales planning and workﬂow (Enterprise Edition) amongst other things.
There are three versions—express (free), corporate and enterprise. Pricing models are comparatively more complex depending on the number and types of users, support levels, training needs and so on. So, you are best advised to contact them or their partners. www.adaptiveplanning.com
Collaborations, meetings and conferences In these days of soaring travel (and other) costs, web-based conferences go a long way in bringing your budget back to shape. What if you could take a potential client through a discussion on your engineering drawings without actually ﬂying out and physically displaying the drawings in front of him? What if you could do a quick sales conference without having to get the full sales team into the same room? What if you want to play around with an idea with your team that is in different cities? In today’s world of managed services, all of these are possible, and at a
cost that is only a fraction of a DelhiChennai return ticket! Webex (webex.com) brings to the table web meetings, desktop sharing and audio conferences (and a few other services) on a pay-as-you-use model. So, if you have a sales presentation to make to a client in another city, you could share the presentation over the net with the client. Alternatively, you could have an interactive employee conference without anyone having to travel. Pricing depends on a number of permutations and combinations and typically you enter your details on the website and then someone contacts you. MindMeister (www.mindmeister. com) is an online mind-mapping tool. Mind mapping? A mind map is a visual representation of ideas, tasks or thought processes. A mind map helps you express (and change) graphically, the logical sequencing and relationships between events and ideas and anything else. Mindmeister offers three plans—a basic plan with six mind maps is free and comes with advertising, a premium plan at US$ 49.9
(Rs 2,145) per year and a team plan that includes a team administration interface, pre-populated friends lists and custom sub-domain. The team plan starts at US$ 235 (Rs 10,105) per year for ﬁve users. www.webex.com www.mindmeister.com
Customer Relationship Management (CRM)/Sales Management So you got a small sales team out there and you need to ensure that they are making the requisite number of calls. You need a handle on the status of each caller and ﬁnally, when one of them leaves, you need the replacement to be able to step in quickly and seamlessly and start from where the other person left. In short, you need a sales management application. The most famous and perhaps the most successful of all managed applications, available at www.salesforce. com falls in this genre. You can extend Salesforce in two ways. You can get a Salesforce partner to customize the application to suit your speciﬁc needs. AUGUST 2008 47
Be aware that customization comes at a hefty prize. Appexchange (www. salesforce.com/appexchange) offers additional applications that you can buy (some are free) and install onto your part of Salesforce to increase or improve functionality. Another SaaS application in the same genre is SageCRM sagecrmsolutions.com). www.salesforce.com www.sagecrmsolutions.com
Document Management If your business revolves around documents and it is important for you to manage and track document creation and use, then you are in the market for document management services. Knowledge Tree (www.knowledgetree.com/live) has a basic offering of 1GB storage and three users that is free and has a premium option of US$ 15 (Rs 645) per month per user and offers 10 GB storage per user. www.knowledgetree.com/live
Email Management All businesses have catch-all email ad48
dresses—ones like dare@cybermedia. co.in or email@example.com. And you need to allow many employees to access and reply to these mail addresses. Employees also need to know what mails have been answered and what the previous mails from a given sender have been. Sproutit’s Mailroom service (sproutit.com) attempts to do exactly that. The Sproutit Mailroom, which calls itself a “simple email helpdesk”, is very much ‘work in progress’ with many rough edges. It sometimes gets tracking information wrong, and does not have facilities to print or to backup locally. But at a base price of US$ 9 (Rs 390) per month for three users and 500 messages (free for 100 messages and an ad inserted into every mail out) that is worth living with. We use sproutit. com’s Mailroom to handle mails firstname.lastname@example.org. www.sproutit.com
Market Research Surveys One of the major elements of cost (and time) in a market research project is the survey. Reaching across to all the respondents takes both time and
money. And that is where online surveys come in. You set up the survey online and invite respondents to come to the page and ﬁll it up. You can set it up as an open survey that anyone can answer or a closed one that, only those who get an invite from you can ﬁll in. Survey Monkey (www.surveymonkey.com) is an online service that lets you conﬁgure and run online surveys. SurveyMonkey offers three plans, a basic free one and a monthly plan at US$ 19.95 (Rs 858) and an annual plan at US$ 200 (Rs 8,600) per year. The key difference between the plans is the number of responses you can get per month and the number of questions for a survey. Survey Monkey offers multiple (15) question types and questionnaire templates. The paid versions also offer the ability to download your responses to a spreadsheet (or database). Zoomerang (www.zoomerang.com) Basic is free and is limited to 30 questions and 100 responses per survey and the responses are available only for 10 days. Otherwise you have professional, education and non-proﬁt plans. Professional comes at US$ 599 (Rs 25,760) per year (US$ 799/Rs 34,360 with mo-
bile, including 100 mobile credits). Zoomerang also does cross-tabs, ﬁltering and customizable charts. www.surveymonkey.com www.zoomerang.com
Spiceworks is free, supported by ads. If you do not want the ads, then there is a monthly fee of US$ 20 (Rs 860). As for me, I am happy with the ads! www.spiceworks.com
Network Monitoring If your organization runs on a smallish to medium network, then someone has the added headache of ensuring that everything is up and running; that everyone’s mail is synchronizing and everything from printer toner to bandwidth is available. Good network monitoring tools are few and far in between and are costly; way too costly for a medium or even many large businesses to implement them on priority. Time to welcome Spiceworks (www. spiceworks.com). Spiceworks is many things—network monitoring tool, help ticketing system, IT asset management, and more, rolled into one. You download and install a small piece of software onto a PC and then run it from your browser to get started. The Spiceworks website states that it works well with up to 250 devices, and slows down with more. And the good thing is that it does Windows, Linux and Mac!
Newsletters and Email List Management If you are in the habit of keeping in frequent touch with your audience— customers, potential customers, well wishers—then you must be doing a lot of emailing. Do you know how many of the indented recipients have opened the message? Or how many have clicked on which link? Or even how many email ids are no longer working? Newsletter managers help you do all this. They let you manage your address lists, manage bounces and provide you with open, and click statistics. Constant Contact (www.constantcontact.com/email-marketing) charges monthly, based on the size of your contact list. You can send as many mails as you want to these contacts. Plans start at US$ 15 (Rs 645) a month for 500 contacts. Aweber communications (www.
aweber.com) gets you started at US$ 19 for a 500 database and includes signup forms on your website, auto responders and analytics of recipient responses. www.constantcontact.com/ email-marketing www.aweber.com
Project Management Project management is a particularly critical need for startups and other organizations that have to manage feature lists and schedules and fast approaching milestones. But they often have to resort to spreadsheets instead of good project management software, simply because of affordability. Dream Team from DreamFactory (www.dreamfactory.com/solutions/ dreamteam) comes in two versions— Pro and Enterprise. Pricing is not that straightforward. There is a monthly subscription fee and separate fees for storage, data transfer in, data transfer out, and different types of requests. It also requires the DreamFactory player to be installed. Liquid Planner (www.liquidplanner.com) allows three project memAUGUST 2008 49
strategy/IT Google Analytics tracks pages at the page level. If you want to go even ﬁner, like, where in a page users are concentrating, then you need something more. And that is where ClickDensity (www.clickdensity.com) comes in. ClickDensity does clickmaps, heat maps and hover maps. All of these help you track where on a page users are clicking. With ClickDensity, you have plans ranging from a starter pack of US$ 5 (Rs 215 per month) all the way to a premium pack at US$ 400 (Rs 17,200 per month). The key difference between the different plans is the number of clicks stored to create the maps and the number of sites tracked.
bers and 2 GB storage for free. Users above three require payment of US$ 35 (Rs 1,505) per month or US$ 300 (Rs 12,900 per year). Paid accounts get 50 GB of storage. Basecamp (www.basecamphq. com) comes in three versions, Basic (US $24/Rs 1,032 per month), Plus and Max. There is also a free option with one project and no ﬁle sharing. Basecamp offers to-do lists, ﬁle sharing, group message boards, milestone lists and time tracking. www.dreamfactory.com / solutions/dreamteam www.liquidplanner.com www.basecamphq.com
Shared To-do Lists If you are working in teams, then keeping track of shared or delegated to-do lists is a pain. And if the team is spread out, then it becomes an even greater pain. To-do lists that are shareable are a good way to avoid this pain. Remember The Milk (www.rememberthemilk.com) is a service where you can not only maintain to-do lists, but also share them and have them ﬁnished by others. The location of your task can be noted on Google maps from within the application itself. You can have tasks sent in as email by anyone who knows your Milk Account email id or have them added to your calendar. 50
The basic plan is free, while the pro account costs US$ 25 (Rs 1,075) per year. www.rememberthemilk.com
Web Analytics Google Analytics (www.google.com/ analytics) is free and many websites (including dare.co.in) use it. Google Analytics is easy to set up and you can be up and active in minutes literally. The service gives you an overview of the visitors to your site and you can drill down to get more details, including where the visitors came from, what lead them there, what browser they were using, what screen resolution and so on. IT also gives you a map with drill down, which shows you where your visitors are coming from.
Web Server Monitoring If you have one or more servers or sites up on the net and you are managing them on your own, it is important that you be alerted when any of them go down or otherwise become inaccessible from any corner of the world. Server monitoring services do exactly this at speciﬁed intervals from locations across the world and alert you over SMS, email and other services when problems arise. Pingdom (www.pingdom.com) offers a number of reports including uptime and response time along with monitoring. Pingdom offers nine different checks including HTTP, TCP, Ping, DNS, UDP, SMTP, POP3 and IMAP checks and you can set up dif-
ERP on SaaS Model – The New Revolution S oftware as a Service (SaaS), a model of delivering software applications to customers over the Internet, has today reached an inﬂection point and is poised for a powerful take-off. By 2010, Gartner predicts around 30 percent of new license purchases (in APAC excluding Japan) will be in form of SaaS, or delivered through the SaaS model. In a recent survey of 1,017 technology decision – makers, Forrester found that worldwide adoption of SaaS in large enterprises is now at 16%, up 33% from the previous year’s 12%. Coming into the picture is the enterprise resource planning (ERP) on a SaaS model. It is becoming the next big thing in enterprise software and offers enterprises of all sizes a viable, scalable and ﬂexible model that will take them to the next level in terms of technology.
Why ERP on SaaS Model? Pay for what you use: SaaS model offers just the “right” functionality because 80% of people don’t need 80% of the functionality in software. Secondly, with SaaS, there is less of a culture of big discounts based on big upfront payments as there is in perpetual licensing, so it also is less of an incentive to buy more than you need, which then turns into shelf ware. Thirdly, the SaaS provider knows how much you are using on a real-time basis. Although the charging is immediate, there is no exposure to lengthy and often painful on-premise audits, which are the main mechanisms onpremise vendors rely on to check compliance. Faster Implementations: One of the primary reasons for quicker implementation is because organizations do not have to concern themselves with installing underlining infrastructure and all SaaS implementations are purely platform- independent. Conﬁguration of application data occurs often via a browser. Simpliﬁed application integration: Built on open standards and Web services standards, inter-SaaS application integration is considerably easier than the integration of propriety applications. While on-premise to on-demand integration is still a challenge, the overall integration burden Traditional ERP Model High Capital Expenditure Direct & Indirect Investment Ballooning Costs Long Implementation Rigid Limited Access Upgrades at Extra Cost Limited Licensing Internal IT infrastructure Traditional business model Relatively less ROI
OnDemand ERP Model No Capital Expenditure No Investment Low Cost Subscription Model Implementation In Weeks Scalable Anytime, Anywhere Access Free Updates Flexible Licensing Minimal IT Infrastructure Advanced internet focused approach Relatively greater ROI
is considerably reduced through SaaS. Reduced infrastructure investments: Acquiring software has traditionally produced the requirement to acquire new infrastructure (hardware, middleware, networks and so forth) to enable it. Through a SaaS model, much of this investment is unnecessary and can be eliminated. Reduced operational management requirements: SaaS can be a boon to resource-constrained companies that do not have the resources, such as database administrators, to implement an on-premise application. Lower upgrade costs: The SaaS model reduces the cost of upgrading from one version of the software to another considerably compared with on-premise costs. Since the model is a multi-tenant architecture, the cost of all software, infrastructure and expertise is shared by a large number of customers. Lower switching costs : The SaaS gives the customer the freedom to easily make the switch from one solution provider to another. This freedom to easily walk away from a provider, works as a motivator to introduce better features and ensures optimum performance. Many customers would have invested a considerable amount of money in implementation, integration, customization, testing, training, maintenance and upgrades (sometimes ﬁve to seven times the amount of money spent on licenses). Despite of the problems in the set-up, the on-premise ERP will exist as a necessary evil and the difﬁculty arises when the customer wants to evaluate any new vendor. Improved Security: Skilled resources, network redundancies, stand-by power, up-to-date security and intrusion detection are mandatory infrastructure required to provide an enterprise class service and are integrated in the SaaS model. Increased Accessibility and Productivity: Web based applications gives the freedom to access the information from any part of the globe at the click of a button.
Why Ramco OnDemand ERP Ramco OnDemand ERP is the ﬁrst full-ﬂedged ERP catering to the needs of growing business. A world-class software, delivered as a service, it helps to streamline and integrate the business processes. As easy to use as e-mail, it requires minimal training and can be accessed from anywhere. For an affordable subscription, Ramco takes care of all the infrastructure, maintenance and support needs. Ramco OnDemand ERP is conﬁgured to meet the business requirements and typically takes less than a week to deploy. As the business grows, the solution can be scaled up to accommodate multiple locations, currencies and business units. It integrates multiple functions and systems into one solution which gives total visibility and control of operations. In the process, it helps to focus on growing business.
strategy/IT managed package.Pricing is on slabs of number of employees and you have to contact them to get started. Adrenalin (www.myadrenalin.com) from Polaris also offers a hosted variant of their HR package. www.empxtrack.com www.myadrenalin.com
ferent checks to alert different people. You can be alerted, both, when a service comes down and when it comes back up. You can also set up the check interval to vary from one minute to sixty minutes. They also have a check location in Mumbai. Pingdom offers two plans, Basic and Business at US$ 9.95 (Rs 428) and US$ 39.95 (Rs 1,718) per month respectively. We use Pingdom to monitor all servers and services that we run and I must confess to an occasional false positive that has made us wake up and get connected in the deep night. Host Tracker (www.host-tracker. com) offers many more plans, has more monitoring points and is cheaper, but offers only basic HTTP tests. www.pingdom.com www.host-tracker.com
Inventory Management If you have inventory to track (like inﬁeld service parts, multi-restaurant consumables or IT infrastructure), particularly at multiple locations, then 52
SeeControl (www.seecontrol.com) is worth looking at. The See Control Website, unlike other SaaS vendors, does not have any price or plan lists or a place where you can sign up. You need to contact them through a form on the website and they will get back to you. www.seecontrol.com
Human Resources Management HR is an area that gets divided into further niches, with each having its set of players. Thus, you have services that do online tests for proﬁling and those that do e-learning. Then there are payroll services and of course, the recruitment portals. Our primary focus here is on basic HR—employee information (HRIS), appraisals and payroll being available in one place. Empxtrack (www.empxtrack.com) from Saigun offers HRMS, applicant tracking, employee self service (leave tracking, HR help desk, employee handbook, personal data update), employee portal and appraisals as a
ERP, the big daddy of enterprise applications, is also available as a managed solution from many vendors. Here the offerings typically tend to be industryor process-speciﬁc. Ramco (www.ramcoerp.com), for example, offers process-centric solutions (vendor management, customer management, storage and distribution, accounting, planning and stock management) and have particular focus on selected verticals like auto components, chemicals, discrete manufacturing, distilleries, electronics, engineering, etc. (See a full list at their site.) Delantt Consulting (www.delantt. com) offers hosted SAP BASIS, including sandbox hosting (evaluation stage), development hosting and production hosting. Pricing is dependent on type of hosting and number of user ids. SAP offers its own hosted solution, Business ByDesign at www.sap.com/ solutions/sme/businessbydesign www.ramcoerp.com www.delantt.com www.sap.com/solutions/sme/ businessbydesign
Managed Email You have three types of email services out there. Simple mail without any frills, and mail with bells and whistles like shared calendars, public folders, mobile sync, etc. Simple mail (SMTP and POP3) comes fairly cheap. Hosted mail with bells and whistles—the type offered by Microsoft’s Exchange server or Zimbra is costly in comparison. But you will be left to manage the server. Managed email with the bells and whistles (where someone manages your Zimbra or Exchange accounts) is even more costly. Way more costly.
strategy/IT Before You Choose Before you choose a provider, there are some points to keep in mind that will ensure a better experience as you go along.
Do The Trial Almost all SaaS vendors will give you a free trial, usually of thirty days or of a limited number of users. In fact, many, like sproutit and 01.com offer a mandatory free trial period of 30 days, during which you can delete your account without being charged. It is a good idea to use the trial to check out how the service works, and to ﬁnd out what is missing. If a service provider does not have an upfront free trail offer, ask. You will most likely get one.
Choose The Right Plan You signup for one of the many available slabs and the vendor will have an over usage charge, which is normally somewhere in the small print. Typically, charges for using extra will be many times the standard rate. So, when you go for a hosted server, you may signup for a server with 1000 GB per month of data transfer. Any usage above 1000 GB in a month will have an extra charge per GB, and this varies from service provider to service provider. Let’s take the example of Sproutit, which provides a shared mailroom service and charges US$ 0.05 for every message sent or received above plan limit. So, if you sign up for a personal plan with them (US$ 9 for 500 messages in and out) and just happen to do 900 messages instead, you would end up paying US$ 29 as against the US$ 19 that you would have paid with the next higher plan that covers 1000 messages. So, with all SaaS signups, it is important that you choose the right plan and monitor your usage as you go along and adjust plans if required.
Service Level Agreements (SLA) An SLA sets out what level of service availability is being promised and what make good you will get in case the stated service level is not met.
Yawn! Who wants to read boring legalese? However, you will be surprised. Let me give you one recent example. I was negotiating with a leading regional data center for managing emails. Somewhere buried in the middle of the proposal was the SLA and in it were a few gems. How about “Intermittent downtime for a period of less than ten minutes will not be counted towards any downtime periods” or “There will be no more than twelve hours of scheduled downtime in a calendar month.” Give me a break. Scheduled downtime of up to 12 hours a month for an email service? And if the mail is down for nine minutes after every two minutes, that will be ﬁne? Wait. That is not all. “All burnouts are excluded and shall be charged on actual.” Excuse me! You burn your equipment for whatever reason and then want to charge the customers for it? Obviously, this service provider has some serious rework pending on their SLA. Meanwhile, do not be surprised after the fact with what an SLA contains. Give it a look once over before you sign on. At least the known devil is better than the unknown angel!
Look Out For “Other charges” Many SaaS services run on a sign-onand-start model. But many like email services have set up fees. But you also come across some fees that are let’s say, unexpected. Take the case of LuitDox, a document management offering. You need to pay them in advance, either for six months or for a year. That may be okay. But every time you make a payment, there is a processing fee of $35! Salesforce.com will have their partners do some customization of the site to meet your exact requirements. But most customization quotes I have come across have been equal if not more than the annual charge for a small organization. (Such customization charges are of course open to negotiation.)
Integration Issues One of the problems with opting for multiple SaaS providers is the lack of
integration across vendors. Your users will have to login to each of the services separately, using separate passwords and possibly user names. And you would have to create, delete and otherwise administer users at each service separately. It would have been nice if all services could accept logins using something like OpenID (www.openid.net) or an LDAP-based directory service like the Windows Active Directory Services (ADS). Until that happens, we are left with having to manage a different user name and password at each vendor.
When You Leave When you leave a service that you were using (and paying for), ensure that you have conﬁrmation from them that your account has indeed been terminated and that you will no longer be charged. Else, you may have the unpleasant experience of your credit card being charged even when you are no longer using the service.
Can You Convert Your Vendor into a SaaS Model? F i n a l l y, i f y o u c a n n o t f i n d a hosted model, can you make your selected vendor offer a pay-as-youuse model? We were negotiating for the implementation of a new HR system. And the ﬁnal question we had of the shortlisted vendor was whether he would implement it at a data center of his choice and manage it for us, against monthly payments instead of an upfront payment plus annual maintenance charges. The ﬁrst reaction was one of incredulity. But a month of cajoling with an assurance of a three year contract and a year’s payment as advance cheques helped them to agree to the deal. For us, a huge onetime payment got converted into more comfortable monthly payouts, and we did not have to bother about having to manage the backend. The funny part is that today, they sell a hosted model based around what we cajoled them into doing just for us, and I am not getting anything DAR E for the idea! AUGUST 2008 53
the Rain Gun Innovated by a simple farmer, the unique sprinkler head conserves water by up to 50% /Arunjana Das
ndian agriculture is always at the mercy of the rain gods. It happens very often that when one part of the country reels under a chronic drought, the other is ﬂooded to the brim. The ultimate loser in both cases is the poor farmer. In an effort to bring succor to the farming community, one man in a remote corner of Belgaum district of Karnataka has innovated a sprinkler head called Varsha, the rain gun. Anna Saheb originally named his innovation Chandraprabhu rain gun, a cost-effective offshoot of the rain gun technology that brings down water consumption by up to 50%. It also reduces irrigation time by 40-50% and power requirement by a corresponding amount. Varsha has received wide-ranging recognition during several agri-exhibitions, and has been well received by farmers. It also happens to be part of the ﬁrst portfolio funded by the Aavishkar India Micro Venture Capital Fund (AIMVCF).
Varsha was an invention mothered by the necessity of adequate irrigation in Anna Saheb’s sugarcane ﬁelds. A former betel nut and tobacco farmer, he found the existing sprinkler irrigation system wasteful and inadequate for his sugarcane crop. Pop went the weasel, and out came a new sprinkler head, one that had an assortment of nozzles of different sizes to discharge water at different speeds and at different ranges. This was Varsha, the rain gun, which turned out to be a tremendous improvement on the existing sprinkler system. Anna Saheb used it in his ﬁelds and slowly the word spread, with more and more farmers approaching him for optimizing their irrigation systems.
What is Varsha? Varsha, the rain gun, is a sprinkler head that provides water to ﬁelds much in the form of artiﬁcial rain. The rain gun technology is a form of micro-irrigation that aims at reducing wastage of water
Speciﬁcs Per head cost: Rs
3,500 Per acre installation cost: Rs 15,000 (inclusive of installation of three-inch PVC main pipeline and riser pipe) Rate of irrigation: One acre in about oneand-a-half-hour time. As it has a three-inch pipe and a wide nozzle, even composts such as biogas slurry can be applied to the crop through it. The water is applied with force and pests like aphids, white ﬂies etc. can be washed down. It does not even need additional pipelines because of its large coverage. Varsha rain gun throws water (up to 500 liters per minute) covering a radius of 90 feet like artiﬁcial rain. during irrigation. Traditional forms of irrigation lead to a loss of water ranging from 40-60% through evaporation, seepage or general wastage. Micro-irrigation technologies, such as the rain gun, seek to bring down losses borne on account of these factors. The cur-
Beneﬁts of Varsha • Water consumption reduced by up to 50% • Irrigation time reduced by 50% • Power consumption reduced • Less labor intensive • Crop yield increased by 10% • Micro-application of fertilizers, thereby reducing consumption • Pests washed away rent edition of Varsha, a subset of rain gun technology, is a further improvement on existing technologies, both in terms of costs and efﬁciency. The rain gun has several nozzles of varying sizes to discharge water and a locking system for part circle irrigation. Although it had been specially reﬁned by Anna Saheb to suit the requirements of his sugarcane crop, it can be used for irrigating other crops also. Advantages of using it ranges from saving water to getting rid of pests to preserving, and even increasing, soil fertility. The nozzles dispense water at volumetric ﬂow rates of up to 500 liters a minute, to distances up to 90 feet. In one-and-ahalf hours, it can irrigate land up to an acre. It also helps in getting rid of pests and in nitrogen-ﬁxation of soil. Thus, it’s no wonder that empirical evidence shows increased yields of up to 10% in two to three years from using Varsha. Varsha won huge acceptance amongst the local farmers. The Honey Bee Network, in 2000, awarded it with the Third Best Grassroots Innovation Award.
Reaching markets The bottlenecks in the path to commercialization of this product were lack of awareness and sophistication. Anna Saheb was not keen on commercializing his innovation when he was discovered by the Rural Innovations Network (RIN). RIN is an NGO that identiﬁes, supports and propagates rural innovations. Paul Basil, the CEO of RIN in a write-up about Varsha said, “At the Rural Innovations Network, we saw the potential of Varsha, as it could not only play a key role
Parthasarathy Mukundam Servals Automation
How did your association with Varsha begin? We came to know about the rain gun through Rural Innovations Network, an NGO that incubates rural innovations. Rain gun was initially innovated by Anna Sahib, who was not keen on commercializing the product. RIN wanted us to make this under license from him. Of course, we made a lot of technical improvements in the product. Last year, Indian Institute of Technology, Chennai did a lot of technical improvement under the RuTAG Programme.
What is the reach of the product? Initially, as a part of our social concern, we conducted extensive demonstrations and road shows to many farming groups in Tamil Nadu to explain the water saving potential of the product. We have also pioneered the concept of dust abatement through the rain gun. We did free trials at Neyveli Lignite Corporation and Chennai Port Trusts for this. Now, other port trusts have also started using it. NABARD have also promoted the concept of self-help groups buying them and hiring to marginal farmers. What is the product’s price? Varsha, the rain gun is priced affordably, considering the problem of the farming community. The unit costs around Rs 4,000. How are people receiving it? It is now widely used by port trusts. Their repeat orders are an indication of their acceptance of the product. On the irrigation side, a gradual acceptance of this product is being seen. Are you looking at proﬁtability? Servals Automation, being a socially-conscious organization, has priced the product to enable more farmers to beneﬁt from it. So, the margins are low and the rural marketing expenses are high. SAPL are happy about this situation as their product is making the desired social impact. in the irrigation sector with the water savings it offered, but also make a crucial difference to the cane economy. We received ﬁrsthand conﬁrmation of the potential when we exhibited the rain gun at leading exhibitions such as Kisan 2001, Agri Index 2001, and Krishi India 2002 in Bangalore, Coimbatore, Trichy and other places.” After careful review of the product, RIN offered to incubate the product for mass production and marketing. For technology transfer, Servals Automation entered into a contract with Anna Saheb, wherein he agreed to provide them the license to mass pro-
duce and market the product. RIN also scouted for venture investment for the same, pulling in investment from AIMVCF for a period of ﬁve years, wherein they seek to manufacture and market at least 3,500 rain guns. The product was ﬁrst test-marketed in Tamil Nadu, which saw good response coming in. Subsequent to acquiring the license for production, Servals made some technological improvement in the product in collaboration with IIT Chennai. With their constant efforts, Varsha is gradually changing the landscape of water conDAR E servation in irrigation. AUGUST 2008 55
O S Vinod
Credit Guarantee Fund Trust for Micro and Small Enterprises
Typically, when you think investor, you think of a VC or a PE fund. We do not consider a bank to be an investor into the business, even though banks provide the working capital into all businesses and project funding into most. This month we speak to OS Vinod, CEO of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). CGTMSE provides backend guarantees to banks for loans up to Rs 50 lakh, so that small entrepreneurs and startups do not need to provide collateral guarantees.
funding/strategy Can you give us a brief of what CGTMSE is all about? To make it short, we want that entrepreneurship should be encouraged in the country. We have a large population of youngsters who are looking for jobs; but jobs are not easily available. To create more jobs, we need more businesses; we need more entrepreneurs, many of them in the small and micro sector. But even after 60 years of independence, when you go to a bank and ask for a loan the problem of collateral keeps coming up. This has been the biggest problem that small and micro entrepreneurs have been facing in the country. Bankers usually look at small and micro enterprises as high risk. So, the government decided to set up a credit guarantee organization that would provide comfort to the bankers in lending to the small and medium sectors. There is nothing new about credit guarantee. It is not as if we have found some new solution to the problem. Credit guarantee organizations have been around in so many countries. We have a single product whereas there are many variations of this around the world. In the Indian context, it is for the ﬁrst time that micro and small sectors are been looked at as special focus areas. That is the reason why the government set up this agency. If you see our performance in the last 7-8 years, we have not even touched one lakh cases. This is a very small number, considering the overall picture of the micro and small sector in the country.
and then the second issue of collateral comes in and we will step in. So, banks have to move from collateral-based lending to project-based lending, which was not happening. Now, it is happening, but in a very small way. Secondly, in banks, in lending, there are issues in terms of accountability. Whether there is collateral or no collateral, if any loan goes bad, there are accountability issues. So, many managers are very right in saying, why get into all these hassles? Don’t lend and you won’t get into any problems. That is another way of playing safe. But in the last couple of years, we are seeing a shift in the bank’s perception. If you see our own experience, out of one lakh cases that we did, more than 75% were done in the last 2-3 years. This year, in the ﬁrst quarter itself, we have done about 12,000 cases. I think there is gradual shift taking place. But like I said, in this country, whatever you do, it is like a drop in the ocean. One can never get the feel that you have done enough. Just a hypothetical question, you said you have done about a lakh cases so far. If you were to fully utilize your capabilities how many cases can you guarantee? You want us to do ten lakhs? More? We can do that! Right now, we have about Rs 1,900-2,000 crore available with us. If we were to leverage this, say by ﬁve times, we can easily guarantee loans of about Rs 10,000 crore. And this is a very conservative estimate.
investor of the month What only less than a lakh entrepreneurs? What is the limiting factor? We face a unique situation. Unless a loan is given, we can’t cover it. So, we actually need to encourage the bankers to lend to the sector. We also need to see that they lend to the sector without any collateral. These are two very important things. Bankers take a very cautious approach because of the small size of each deal and the high churn rate, the heightened default probability. They are also right in a way. If you do not reliable ﬁnancial statements and credit records, banks take a very cautious stand. Without all these, it is very difﬁcult to assess the reliability. CGTMSE has been set up to reduce the risk in lending to the micro sector. Like you said, banks need to be encouraged to lend. Is CGTMSE doing anything to encourage that? If the proposal is otherwise good, banks in the normal case should lend with or without collateral. If the proposal is not so good also, banks may lend for various reasons. What we are trying to tell the banks is -- you don’t appraise the collateral but the project. If the project is good,
There are guarantee organizations abroad, which have been leveraging much more like for example in Germany, where the leveraging is 25-26 times. There the banking systems are far more sophisticated. Our committed corpus is Rs 2,500 crore (2000 crore from the government and 500 crore from SIDBI). If you take ﬁve times leveraging, we can do about Rs 12,500 crore of guarantees as on date. We have in place the technology to support us and we are quite conﬁdent of our ability to scaling up. But, we are dependent on the bankers. This is a demand-driven scheme. The more the bankers demand, the more we give. Ultimately, the entrepreneur cannot come to you directly. He has to come through the bank? We have no relationship with the entrepreneur. We have relationships with the bankers. How can the entrepreneur make the bank move his case to you? One is the awareness. If you are not aware, you cannot ask for it. Second, the banker also should be aware. It is not only that the client is aware but the bank is not aware. If both are aware, then I think there is a lot of positivity and synergy. AUGUST 2008 57
Our experience shows that wherever clients and bankers are aware, coverage has been higher. Any geographical patterns? Tamil Nadu and Kerala. Tamil Nadu is the highest in terms of numbers and Kerala is number two. If you look at Kerala’s example, today you cannot call it one of the most economically developed states, but the coverage of our guarantee scheme has been quite good. That shows that if you have a very knowledgeable banker and a well-informed public, the marriage can be good. Let me come back to the guarantee part speciﬁcally, is it an overall guarantee for the entrepreneur or is it the guarantee for the project? I, as an entrepreneur, could have multiple projects under guarantee? The scheme says upto Rs 50 lakh per borrower. There could be multiple projects covered. Suppose, you take a loan for Rs 10 lakh; subsequently, you want to expand, you can take another Rs 10 lakh and so on till 50 lakh without collaterals. As an entrepreneur, can I demand the bank to move it to you? I think we need to move to that position, where every individual as a matter right should be able to ask for that. Ultimately, the banker decides. He can always say this is not a viable proposal and you will have a tough time explaining to him that it is a viable proposal. What can an entrepreneur do to move his case to you? One he needs to be sure of what he is getting into. He needs to have a very proper assessment of his own project. He needs to be able to convince the banker that is worth investing. Then when it comes to collaterals, he can always mention our scheme. Typically when a bank comes to you after appraising a project do you do a repeat appraisal? Here in India, we have chosen a model where we trust completely on the banker’s ability to assess the project. We don’t question them. How much time does it take for you to process an application? It takes 24 hours or less.
What is your default rate? Default rate is negligible. Our total guarantees as on date must be around Rs 3,300 crore, and we would have paid out around Rs 11 crore. There is not a single case pending with us for pay out. That is also a 24-hour turnaround. The bank makes a claim today and tomorrow morning, the cheque is out. They do the due diligence and they get to you? There is no due diligence. If something goes wrong, they have to ﬁle the claim with us. While ﬁling the claim, there are ﬁve or six columns they have to tick. One is whether the guarantee is valid. Whether they have classiﬁed the speciﬁc loan as an NPA (non performing asset) in their books, Third is if they have classiﬁed it as an NPA, have they issued a recall notice, fourth is whether they have ﬁled in the appropriate forum, and ﬁfth whether there is a certiﬁcation from an AGM level ofﬁcer. If these things are there, we simply issue a cheque. There is nothing more we need to know. Once that has been done, there is no value addition from our side. We pay 75 % of the guaranteed amount immediately. The remaining 25% we pay after the total process is over. After the decree is obtained. Ultimately we share the default 3:1. Is that why the banks are holding back because they have to bear 25%? You cannot have a situation where you have a 100% guarantee scheme. If you see internationally also, guarantees have been ranging between 50-80%. There is a case where they have done 100%, once I think, but they found the default rate rising dramatically. We need to be somewhere where it interests the banks to get covered, but at the same time it cant be 100% in their favor. 75% to 80% is the global practice. What is the biggest challenge going ahead? One is that we need to scale up in a big way. That is the biggest challenge. Second is that more than actually covering the number of loans, personally I feel, that CGTMSE should be in a position to encourage the banks to lend at a lower rate. If that happens then I think the guarantee mechanism can work well because it removes a lot of apprehensions of the banker should come down for the SMEs. When that DAR E happens the take off stage would be ready.
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The Online Advertising Food Chain Online advertising is growing by leaps and bounds, but are there opportunities for smaller players? /Sreejiraj Eluvangal
t is said that during any economic downturn, the ﬁrst sector to get impacted is advertising as it is the ﬁrst place where companies like to cut back. However, thanks in part to a small base, the Indian online advertising and marketing sector is growing at a fast pace, offering many opportunities for different classes of people. From around Rs 150-200 crore in the ﬁnancial year 2007, online ad spends targeting Indians are expected
to have jumped to around Rs 500 crore in FY 2008, according to industry estimates. “In 2008-09, we expect it to hit Rs 900 crore,” says Mahesh Murthy, whose ﬁrm Pinstorm alone would have bought Rs 115 crore worth of ads by the end of this year. In other words, Pinstorm, which claims a market share of around 15% in India, will alone oversee ad sales almost 50% higher than the total industry turnover of Rs 80 crore during 2006. While still accounting for just
around 5% of the estimated Rs 15,000 crore spent on advertising in India, online promotions account for between 15 to 20% in places like the US and parts of Europe. Recently, a new media specialist research ﬁrm eMarketer, revised down its estimate for online promotion expenditure by US companies due to the economic recession. Yet, the new estimate for 2008 for US companies alone stood at US$ 25.9 billion (Rs 111,000 crore), up 23% from its estimate for 2007.
opportunity/advt To understand the opportunities thrown up by the new medium, it is important to understand the ‘food chain’ of the online ad market. As in traditional mass media advertising, online marketing has also started throwing up different strata of service providers. Between the advertiser on one end and the website owner or publisher on the other, there are many layers of service providers.
The Network or The Media Agency The most important intermediary is the ad or afﬁliate network. This is in effect, what brings the advertiser and the publisher together and is the closest equivalent to the media agency of traditional advertising. The simplest model of the online advertising chain can be formed with just these three participants, with the ad network helping the advertiser and the publisher discover each other. In this respect, an ad network is like the traditional media buying agency, helping big companies buy ad space on TV and newspapers. However, the analogy cannot be taken very far due to the fact that unlike in the traditional media world, there are no big networks or websites that attract most of the online eyeballs. Each of the billions of pages of web content is a potential vehicle for advertisement, and the number of
AD REVENUES THROUGH GOOGLE Figures in $ billion
10 8 6.33 5.79
3.38 2.69 1.59 1.55
2004 Google sites
website owners would be in millions, rather than the tens of TV and print publications that a traditional media buying agent has to deal with. The huge number of ‘publishers’ creates two problems. One, that it is not possible to manually manage the placement of ads across billions of pages of web content. The second is that it is also difﬁcult to determine the ‘ad rates’ to be applied to each of these pages.
US ONLINE AD MARKET 2007 Total Others Referrals Classiﬁeds Display incl. video Search
Partner sites While the ﬁrst problem resulted in the automation of ad placements, the second led to the evolution of alternate standards for measuring the impact and reach of a publication or webpage. Thus, most of the ads today are placed by algorithms that ‘read’ the content of a webpage and gauge the potential interests of its readers from the content itself. As for the second difﬁculty, as it is not possible to keep track of how many visitors each page of a website has, unlike tracking popularity of the 9 O’ Clock news, ad networks have evolved the concept of pay-per-click. Under this system, the publisher is paid according to the number of relevant visitors to his or her page as measured by the number of people clicking on the ads. The shift to a pay-per-click model also simpliﬁes the ﬁrst problem of intelligent ad placements, as the publisher now has the incentive to make sure that the most relevant ads from the network are displayed on his pages. Many older networks, especially those that pay on the basis of sales or leads instead of clicks, still rely on the publisher to choose the best ads from their networks. AUGUST 2008 61
INDIAN ONLINE AD SALES 900
800 700 600
500 400 300 200
100 0 2007 However, their success has been eclipsed by the emergence of Google’s automated ad placement mechanism called Adsense Adwords. While preventing the network from being overwhelmed by the sheer scale of manually choosing the right ads for the right page, the automated system has the additional advantage of being able to periodically refresh the ads displayed on pages frequented by the same group of viewers, further increasing the chances of clicks. The automated, and therefore low cost, ad selection system has brought in even relatively low-trafﬁc websites within the reach of ad networks, and therefore, extra ad revenue. The success of Google’s Adwords Adsense can be seen in the huge growth that the revenues generated from the program have shown. From just around US$ 100 million (Rs 430 crore) in 2002, the program single-handedly generated revenues of US$ 5.8 billion (Rs 24,500 crore) in 2007, around 17.5% of the total global online ads and promotions business. With the US$ 2.4 billion that the number two ad network—Yahoo—generated for its publishers, the two networks together accounted for a quarter of all online advertising and marketing revenues for 2007. 62
The business of ad networks, therefore, is restricted in its scope for new entrants. However, there are some smaller networks, that still rely on the publisher or the website owner choosing the links he or she wants to display. Such networks have survived by specializing in verticals and having a different business model. Unlike the two big networks, which calculate the impact of the ads based on the number of people clicking on them, the specialized networks such as Commission Junction offer much higher commissions to the publisher, but only for getting their readers to ﬁll out forms or purchase online. While each click on the big networks may get you as little as ﬁve cents (Rs 2.30), in these networks, typically called referral networks or cost per action (CPA) or cost per sale (CPS) networks, publishers can expect to make between US$ 10 to US$ 30 (Rs 430 to Rs 1,290) per lead. Unlike the automated click-based networks such as those of Google and Yahoo, CPS or afﬁliate or referral networks are areas that are yet to see much traction in India. Typical ‘actions’ on the basis of which publishers get paid include ﬁlling up a loan request form or a car enquiry form.
A big plus for referral networks is the ability of the publisher or the site owner to ﬁne tune the displayed ads. For example, a website on latest cars can host referral ads for cars, spare-parts, car insurance, etc. Many publishers prefer such nonautomated networks due to the control that it gives them over the links as well as the chances of higher revenues in case of niche websites. “For example, if you have one lac unique visitors per month and around 300,000 visits or impressions, then a referral network may work better for you. If targeted properly, around 9,000 to 10,000 out of the 100,000 can be converted. Each hot lead can fetch US$ 25 to US$ 30,” says Suresh Reddy, chairman and managing director of a Hyderabad-based digital marketing company Ybrant Digital. The two big challenges in this space are the recent entry of Google’s own referral network, as well as the little headway the business has made in India. Traditional afﬁliate marketing is expected to generate commissions of US$ 2.27 billion this year in the US alone or about 8.75% of the total online ad spend there, according to eMarketer. In India, however, they “accounted for less than Rs 10 crore out of the total Rs 600 crore online ad spend last year—around 1.67%,” according to Mahesh Murthy of Pinstorm. With the recent announcement of the Google Afﬁliate Network, there are fears that Google may also ‘algorithmize’ the online afﬁliate marketing industry, just as it did the CPC industry. Shawn Collins, a long time afﬁliate marketing industry observer based in the US, however feels that the higher level of involvement between the brand, the afﬁliate network and the publisher will make it unsuitable for automation. Automatic networks are notoriously susceptible to fraud and unscrupulous marketing practices, such as repeatedly clicking on the ads
opportunity/advt placed on one’s own website. “Afﬁliate marketing is ultimately about relationships,” he says, “and companies will not want to expose themselves to liabilities for their brand, can-spam, etc. by automating everything.”
The Optimizers Or The Creatives Most of the smaller companies no longer entertain hopes of growing into big enough ad networks to challenge the hegemony of Google and Yahoo. Many, however, have carved out a niche for themselves, in a role similar to that of a creative agency that makes the ad in the traditional world. These ﬁrms offer their services to advertisers, promising to make their advertising strategy more effective, like a creative agency would. Like a traditional creative agency that is tasked with designing the most effective message within a given TV time slot or newspaper print space, the optimizers set themselves the job of getting the advertisers, value for their money. Such optimizers owe their emergence and existence to the preponderance of algorithms in determining visibility in the world of online advertising. Display advertising, whether algorithmized or not, and whether in the form of text links, pictures or video, is usually targeted at static content. However, it suffers from the disadvantage that, like in traditional media, the viewer or reader is usually trying to focus on something else and the ads turn up as intrusions or distractions. Yet, there is one publisher whose readers are usually receptive to suggestions and advertisements—the search engine.
Google stats (2007) Total Revenues
$ 16.59 bn
From Adv & Mkg
From the US
% given to publishers*
*not applicable to revenues from google's own pages SOURCE: Google investor relations
Thus, notwithstanding the fact that Google and Yahoo operate the largest ad networks online, they generate more revenues from their roles as publishers of search results than as ad network operators. For example, while Google generated US$ 5.8 billion in 2007 by placing ads on the millions of pages included in its ad network, it generated almost double that, US$ 10.62 billion, by placing ads on its own website—its search results pages. Similarly, Yahoo generated US$ 3.67 billion worth of advertisements on its own pages in 2007, compared to US$ 2.4 billion on those of its partners. According to eMarketer, search pages accounted for ads worth US$ 8.62 billion of ad-spent in the US last year, comprising 40% of the total US online ad-spent. Besides this, even display ads, including picture and video ads, are increasingly being delivered on the basis of search algorithms applied to the target publisher’s page. A new crop of companies have made themselves a business by ﬁguring out the most lowcost way to put the advertiser’s message in front of the surfer.
“In search, the better you are, the more margins you can deliver,” points out Vivek Bhargava, CEO of a contextual marketing company, Communicate2. “It’s about expertise. If I can get him the same amount of display or trafﬁc for Rs 150 for which he is spending Rs 200 now, he saves Rs 50 and we get a share of the savings,” he adds. Pinstorm too works on similar principles. “We will deliver the most bang for the advertisers buck,” says Mahesh. “In our case, we don’t even involve the client in details such as how we are going to use paid listing on search engines etc. All we say is, let us measure the impact of our campaign, in terms of increased trafﬁc, higher visibility, etc. and pay us for it. Whether we use paid search or displays or optimize your website or write reviews is immaterial.”
Next Is What? The next step, most people realize, is in selecting the ads not just on the basis of the search term or the content of a website, but on the past behavior of the viewer. This, however, may create further stumbling blocks for the independent ‘creative’ experts, as most of the user data is with companies like Google and Yahoo who offer ‘logged in’ and therefore, traceable, experiences to Internet users. While it is easier for Google or a social networking website like FaceBook to keep a tab on what their users do online while logged in, it will be trickier for third parties. “We believe that this information will also be made available to third parties, at least by some proDAR E viders,” says Mahesh.
AUGUST 2008 63
For DARE July 2008 Cover Story
Who will be the next manufacturing super power? England
Petrol engine Electricity
Cheap goods Massive scale
we had invited our readers to complete the story and stand a chance to win a Blackberry Bold. The following have submitted their analyses by commenting on our website or sending it to our email: • Abhineet Anand
• Hashmath Askiri
• Anil Arora
• John Amalraj, MD, Skylark Information Technologies
• Anilkumar Narayan Shetty • Ashish • Ashutosh Agrawal • Bopanna • B.R. Pai, CMD, VWF Industries • Clementina • Cyrus Vesvikar • Devin Gulati • Ellango, Benzene International • Gary Monteiro • Harish Kumar
• Pulkit Somani, Junior Consultant, Zensar Technologies • Rahul
• Kuldeep Kaul
• Ramesh Kumar Jha
• Mathew Thomas
• Ravi Jagani
• Mohan Kulkarni
• Sami M
• Mohammed M. Firooz, S.Y. B.com Student
• Sanjay Sethi, VP - Food Industry Practice, Technopak Advisors
• Navin Arora
• Shankar V
• Parimal B. Shah, Lovson
• Shishir Goel
• Suneel kumar
• Pradeep Panicker
• Swati Rana, Biotech student
• Pratik Mistry
• Vijay Bhasin
Thank you all! For those who have not sent in their analysis yet:
The last date for submission is August 15, 2008. 64
Political stability anyone? T
he Congress party-led United Progressive Alliance government has obtained a new lease of life for a few extra months after winning a vote of conﬁdence in the Lok Sabha on July 22. Rahul Gandhi made an impressive speech aimed at the youth that sought to cut across ideological lines and emphasize ‘national interest’, the much- used phrase. Omar Abdullah was even better, striking a popular chord with the intelligentsia with his spontaneous sincerity. After many months, Lalu Prasad Yadav did what he does best, keeping the nation in splits with his witticisms. Despite his Communist afﬁliation, Mohammed Salim used the capitalist analogy of a debit card to make his point effectively. Prime Minister Manmohan Singh left his barbs till the very end—a speech he could not read out—urging LK Advani to change astrologers and arguing that the Left wanted him to become their ‘bonded slave’. Sonia Gandhi kept quiet and true to her Sphinx-like reputation, rarely displayed her emotions. As for Speaker Somnath Chatterjee, he remained safely ensconced in his spacious seat, refused to resign and was promptly expelled by the party he had been a member of for four decades, a few days before his eightieth birthday. So who won? The government, of course! What about Indian democracy? What will the world remember the country by? As a multi-party, highly heterogeneous, vibrant, if anarchic country? Or as a corrupt society where the elected representatives of the people can be ‘purchased’ for a pittance to vote this way or the other or not at all? What will be the abiding image that will remain in the minds of the people? Dr Singh waving the ‘V’ sign? Or a bunch of MPs storming into the well of the House just before voting was to commence displaying bundles of currency notes alleging that they were sought to be bribed to go against the diktat of their party, in this case, the Bharatiya Janata Party? Unfortunately, the government’s ‘victory’ in having its way as far as the India-US nuclear deal is concerned is going to be overshadowed by the less than honorable manner in which the UPA government won a conﬁdence vote with its new-found ally, the Samajwadi Party led by Mulayam Singh Yadav and his voluble second-in-command Amar Singh. The government survived not only on account of the fact that the SP replaced the Left to extend support to it, but more on account of cross-voting by Opposition MPs. What is evident is that if it had not been for nearly two dozen MPs belonging to the BJP as well as the coalition it leads, the National Democratic Alliance, switching sides while voting or abstaining/ 66
/Paranjoy Guha Thakurta
absenting themselves from the House, the conﬁdence motion would have been defeated. It was hardly a coincidence that the BJP MPs who displayed currency notes in the House disrupted the proceedings of the Lok Sabha just before voting on the conﬁdence motion was to take place. Did the leader of the Opposition and BJP’s PM-inwaiting LK Advani guess at that time that the battle had been lost? Did he realize by then that at least eight of his MPs would defy the party’s whip? Or did he secretly conspire to help the government in order to keep the Bahujan Samaj Party’s Mayawati at bay? Why did the television channel that conducted the sting operation showing the MPs being offered bribes decide not to broadcast the story and instead handover their tapes to the speaker? Clearly, there are many more questions to be raised than answers to be found. The infamous nexus between dirty money and politics in India is an issue that is not going to die down in a hurry. Thanks to a more proactive and vigilant media, this phenomenon is now out in the open for everyone to see and is not taking place behind closed doors. This vulgar display of corruption does not do any Indian proud, even if the PM believes the nuclear deal with the US will make every citizen of the world’s largest democracy hold her or his head high in the comity of nations. It will indeed take a lot of convincing on the part of the government to make the proverbial aam admi believe the nuclear deal will help light up homes in hundreds of thousands of villages. Still, the government will proceed super-fast with operationalizing the nuclear agreement, ﬁrst with the International Atomic Energy Agency, then with the Nuclear Suppliers’ Group and ﬁnally, with the American government headed by lame-duck President George W Bush and the US Congress. The Left may be obdurate and pathologically anti-American. For the Congress, however, the SP may not be such an easy partner to get along with. But India’s ‘grand old party’ is not overly concerned because the next general elections are not all that far away. The Congress hopes to improve its position substantially in the three BJP-ruled states of Madhya Pradesh, Chhattisgarh and Rajasthan when assembly elections take place in December. The ruling regime clearly hopes this would act as a morale booster in the run-up to the elections. The Congress is hoping the contradictions between the Left, the BSP, the Telugu Desam Party and other smaller parties would prevent the newly-conﬁgured ‘Third Front’ from becoming a signiﬁcant political force. But that may just be wishful thinking. For the incumbent government, the most important electoral consideration would be its ability to control runaway food inﬂation. It is expecting a record harvest to mute inﬂationary expectations. Otherwise, the future prospects of the Congress do not appear particularly bright. D A R E The author is an educator, an economic analyst and a journalist with over 30 years of experience in various media—print, radio, television, Internet and documentary cinema.
DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DAR DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DAR DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DAR DARE D RE DAR DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE D RE DAR DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE D RE DAR DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE D DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE RE DAR DARE D DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE RE DAR DARE D DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE RE DAR DARE D DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE DARE 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Online m vie rental business
Pitched at a nascent stage: Discover what it takes to start this business, the challenges you may face and what the market looks like /Mohita Nagpal
e are a nation that is proud to be called movie crazy, where an estimated 1200 movies are churned out annually and even cynical look-alikes of ﬁlm stars make fortunes overnight. A place like this is certainly a good market for movie rental business. As times and technologies change, a few players have attempted to transform this unorganized pirated CD-wala business into a chic, stylized online movie rental business. What started off with a few small regional players saw the landscape changing with the advent of national operators. Seventymm was one of the ﬁrst to hold nationwide operations. Launched in 2006, it was soon joined by the likes of Moviemart and Madhouse media (subsequently acquired by Seventymm). Of late, a few more names have entered this segment including Catchﬂix, Flickxpress and BigFlix (Reliance ADAG). The basic idea is simple—to provide licensed movies on rent to the customer whenever he wants, at his doorstep. The modus operandi is also similarly simple—or at least it seems to be. The customer pays upfront for a membership and then plac-
es an order for a movie, on the Net or on phone or SMS. The customer can also decide a time slot for delivery and the movie is delivered and subsequently picked up. There are monthly subscription plans ranging from Rs 200 to Rs 1000 depending upon the number of movies to be ordered. Few players also charge a refundable security deposit. The key to success is in having a large enough subscriber base and achieving a high number of turns per DVD.
The elements License To rent out movies legally the rental company needs to procure a rental license from the home video rights holder. These annual license fees range from a few thousands to lakhs. Copies A license is not enough. Multiple copies are purchased from the distributor and the catch lies in buying sufﬁcient number of copies. The idea is to maximize the run of a copy without compromising upon customer satisfaction. There are a lot of permutations and combinations that are taken into account before placing an order. The number depends upon
Sector Overview Major Players Seventymm, BigFlix, Moviemart, CatchFlix Challenges Piracy, Service Quality, Capital Intensive Competition Piracy, DTH movie on-order, Broadband Downloading, Video libraries the title and the expected demand for the title. As Suresh Mansharamani, founder of Moviemart explains, “We purchase movies from the distributors at a discount on the MRP. When it comes to popular Hindi ﬁlms, we buy copies equal to ﬁve percent of our subscriber base and for less popular Hindi movies, one percent is sufﬁcient. A hit English movie would mean buying one percent of subscriber base and a normal English movie means a quarter percent of the subscriber base.” Logistics Multi-city operation means managing demand and supply of movies across different cities. A situation where the demand of a movie exceeds availability in one city while copies are lying idle in another city can easily arise. According to Kamal Gyanchandani, COO, BigFlix Entertainment, he uses order processing, business intelligence and demand forecasting systems to manage demand. The whole distribution system works on hub and spoke model. “We manage logistics through our own warehouse and inventory management at our distribution centers. Delivery is through third party logistics vendors.” Customer Care Online movie rental is a service-oriented business. Most players utilize in-house customer care teams and call centers. Apart from dealing with customer request, they also work at increasing the subscriber base.
opportunity/entertainment Delivery This is the customer-interaction part of the business. All companies claim free home delivery within a few hours of the order provided there is no queue for the movie. Most prefer setting their in-house delivery team, while BigFlix has outsourced the function. Why an in-house team? Flexibility seems to be the driving reason. According to Shubhankar Sarkar, COO of Seventymm, “If the customer is not available, the associate can wait for some time, visit again on the way back, or re-schedule the delivery. We provide an option of delivery preference for each day of the week. So, one can ask for an ofﬁce delivery from Monday to Friday and home delivery on weekends. These help in minimizing the cases of failed deliveries.”
Challenges Start-up and growth capital This business is as capital-intensive
as it can get. The whole business runs around your ability to license titles, stock copies, acquire subscribers and service them well. Madhouse Media faced problems in getting seed capital and had to dip into the founders’ savings for Rs 10 lakhs ($23,000 approx). Subsequently, it raised two rounds of angel funding of two crores. But it faced the music again when it required venture funding to take the business to the next level. As Nandini Hirianniah, Cofounder, Madhouse Media reminiscences, “There were a few risk factors that went against Madhouse getting venture funded. A team of ﬁrst time entrepreneurs, Reliance Entertainment’s announcement of entering the movie rental business, Moser Baer announcing movies on DVD for ﬁfty rupees, not having started the business in a major metro (we started in Chandigarh) and an inexperienced CEO were some of
Proﬁt Margin Cost at which one DVD is bought by the company Average run of a copy Cost of renting one movie Average no. of movies ordered by one customer Courier charges per delivery Cost for supplying movies to a customer in a month Average monthly plan subscribed by the customer Proﬁt margin
Rs 300 20 customers Rs 15 12 Rs 2 Rs 204 Rs 650 Rs 446
25% discount is provided by the distributors to movie rental companies. Average monthly plan is derived through ﬁgures provided by a single company. The cost does not include ﬁxed cost like machinery, licensing, etc.
KAMAL GYANCHANDANI COO, Bigﬂix Entertainment
In India, the online rental market is at a nascent stage. The potential of the market is easy to establish by the fact that currently there are more than 15000 home video libraries operating in India. In USA, rental business is roughly $10 billion, which is about 45% of the overall home entertainment business. them.” Ultimately, they went the M&A route and on June 1 2007, Madhouse became part of Seventymm. Moviemart, launched in April 2006 with a seed capital of two crores have invested another three crores till date. Backend technology A good technology backend is critical for this business to run as well as scale. Customer databases, warehouse management, customer and
with Targeted Communities AUGUST 2008 69
SHUBHANKAR SARKAR COO, Seventy MM
We are looking at expanding to 40 cities by 2009 end. We may use hub and spoke model to expand to some of the tier two cities, which will be serviced from the mother warehouse of a neighboring larger center. title history, logistics management, demand forecasting, data mining, etc all of these are technology intensive activities and almost all players have had to innovate from start and reinvent the wheel when it comes to technology deployment.
Size of collection You don’t stand a chance to become a major player in this business with a few hundred titles. Given today’s metro culture, you need to have a huge collection of titles including movies of different genres and languages catering to diverse audience tastes. Seventymm, for example, boasts of 18,000 titles in 14 languages.
Customer service This is where things may not be up to the mark, yet. There have been continuous complaints from customers about shabby customer service. Tales of endless calls to customer service asking for a particular movie in vain, or deliveries of unordered movies dot various sites that discuss such things. So as they say, treat your customer as the king because probably he won’t blink an eye before deciding to switch over to the services of the friendly neighborhood video library-wala or the neighborhood pirate. Piracy Piracy has been the biggest challenge faced by this business vertical. In fact it challenges the very viability of this business. “Why will someone pay ﬁfty rupees for renting a DVD when he can own it by paying just half?” These players currently operate in a market segment that likes its movies served clear and unclipped. However, most do believe that the business would
Other USPs The market already has a few established players. So, players have started using innovative ideas to distinguish themselves from the competition. BigFlix is trying to cater to a global audience; particularly the NRI audience by offering movie downloads at their site. The customer can download the movie and keep it all his life. Down the line, they plan to incorporate a download to rent option, where the subscriber can download a movie to watch within three days, at the end of which it is non-viewable.
Eyeballs Through 12 Websites
realise its true potential only when piracy ends or is signiﬁcantly curbed. As Gyanchandani explains, “Piracy can be reduced at best with a decrease in the gap between theatrical release and the home video release of a movie; the discretion of which totally lies in the hands of the stakeholders of the ﬁlm. We would like to combat piracy with the help and combined effort of all other organized players in the industry.”
opportunity/entertainment Market Size
NANDINI HIRIANNIAH 2005-6
Entertainment and Media Industry
7.6 billion USD (INR 35,300 C)2
18.2 billion USD (INR 83,740 C)2
Indian Film Entertainment
1.5 billion USD (INR 6,800 C)1
3.33 billion USD (INR 15,300 C)1
87-217 million USD (INR 400-1000 C)2
434 million USD (INR 2000 C)2
Home Video Rental
409-817 million USD (INR 1,880-3,760)3
Installed base of DVD players
11 million (by end of 2006)4
66 million (by end of 2010)4
Seekers + Households
32.5 million households5
*1 USD=INR 46 *C = Crore 1. Source: PricewaterhouseCoopers-FICCI: The Indian Entertainment Industry, An Unfolding Opportunity- Report March 2005. 2. Business world, January 2005, PricewaterhouseCoopers-FICCI: The Indian Entertainment and Media Industry-March 2006 3. See Appendix Home video rental market: 2010 4. Source: iSuppli Cor, November 2005 5. Seekers: households with annual income of INR 200,000 and above. Source: The great Indian Middle Class: Results from the NCAER Market Information Survey of Households (2004,NCAER and Business Standard)
Flickxpress has come up with a kiosk model for renting movies. It is similar to an ATM wherein you swap your membership card, enter the password, choose the movie and pick up the disc from the dispenser slot. Although the one time cost of these kiosks comes out to be pretty huge, the operational costs are expected to be extremely low. Currently, ﬁve kiosks are operational in Bangalore and Naren Pasuparthy, founder, Flickxpress is leaving no stone unturned to expand the operations rigorously. “We launched Flickxpress just three months back and the response has been overwhelming. We are in a midst of ﬁnalizing more locations for setting up our kiosks. We want to be in every market area, big grocery
shop, and mall so that the motto of our business—entertainment on your terms—is fulﬁlled, he adds.
The Market The way the future of this business is looking, it’s all rosy out there. The ﬁgures are pleasing. Moviemart has seen more than 100% growth each year since 2006. Seventymm had more than 200% growth after the completion of ﬁrst year in operation. Bigﬂix has grown at 400% month by month in the last quarter. According to Mansharamani, this particular industry is growing at 30% per annum. Add to this the estimates done by ASSOCHAM that state that the size of the Indian domestic ﬁlm industry is likely to double to
Co-founder, Madhouse Media
For a movie crazy nation, a movie rental service has a large potential. Also currently, with consolidation in the market and a couple of major players in the business, it is bound to grow further. So, young entrepreneurs with a fresh point of view, the passion to do things right and do them well can bring a new dimension to the business. Rs 400 billion (around US$10 billion) in the next two and a half years. According to the FICCI- PWC report 2008, the home video market has witnessed dramatic changes in the last four years, having achieved a growth rate of thirty per cent. Its contribution stands at eight percent of the overall ﬁlm industry revenues in 2007, up from six percent in 2004. In 2007, the home video market was estimated to DAR E be Rs 7.5 billion.
Across 15 Magazines AUGUST 2008 71
It is a fast way of manufacturing products with intricate designs. How does it help your manufacturing setup? /Arunjana Das
apid prototyping is a set of manufacturing processes that cut down on production time or costs of products with complex and intricate designs. If you are in the manufacturing business involving fast turn-around times, smaller batches and requiring some amount of accuracy, you need to rapid prototype.
RP processes depend on 3D CAD (computer-aided design) models of the product to manufacture the prototype. 2D blueprints or drawings of the object are converted into 3D CAD models and fed into RP machines. The nomenclature may be somewhat misleading, for rapid prototyping is not as rapid as it sounds. It just
Where is it used? Watch industry, automotive precision assemblies, lifestyle products, jewelry and shoe industry, consumer durables and packaging, medical industry and telecom
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Methodology The basic methodology for all current rapid prototyping techniques can be summarized as follows: 1. 3D CAD models made from 2D blueprints, then converted to STL or other compatible formats 2. RP machine processes the converted ﬁles (usually by creating sliced layers of the model) 3. Physical prototype created layer by layer 4. Supports, if any, are removed 5. Prototype surface cleaned off residual stock material (powder, liquid, etc.) happens to be much faster than traditional manufacturing processes. Producing a design prototype through RP may take anywhere between a day and a week, depending on the material, machine used and design complexities. The earlier myth associated with RP as to a perceived higher manufacturing cost is melting away fast. As a matter of fact, RP cuts down on material wastage and hence costs, by increasing accuracy and reducing the reworking frequency. Hence, RP is now fast becoming a part of a greater manufacturing philosophy—rapid manufacturing (RM).
Where is RP used? RP evolved primarily as the means for concept modeling and design veriﬁcation. This was because of the faster turn-around times along with the dimensional accuracy achieved in the prototype. Over time, it was used to conduct validation of, what is known in manufacturing jargon as, ﬁt, form and function. It has come a long way from validation to batch-production. In the present day, it is used in diverse manufacturing sectors, ranging from watches, automotive precision assemblies, lifestyle products, jewelry and shoe industry, consumer durables and 74
strategy/manufacturing packaging to medical equipment industry and telecom.
How does it work?
At one end is the design software and on the other is an automated machine. The design software could be any of the regular CAD software used by manufacturing ﬁrms. The most popular are ProE, SolidWorks, Catia, etc. The interface used for communication between the two is STL, an interface associated with Stereolithography—one of the early RP techniques. Developed by 3D Systems, an RP services ﬁrm based in the US, Stereolithography still remains a much favored choice amongst manufacturers and RP service providers. The CAD models of the product to be prototyped are converted into the .STL format, which in simpler words, means that the surfaces of the CAD model are triangulated and are expressed in the form of these triangles with respect to the corresponding axes and vertices. ProE, SolidWorks, etc., are also used extensively. The automated machine to be used depends on the RP technique that is being employed. The earliest RP technique was, of course, Stereolithography, the process of making structural and design changes in light-prone epoxy resins using laser beams. Later came in processes such as selective laser sintering (SLS), laminated object molding (LOM), fused deposition modeling (FDM), etc. All these processes have been collectively termed as solid freeform fabrication (SFF). The processes used are mostly additive. It means that the ﬁnal prototype is constructed from simple stock materials such as powder, sheet, gas or liquids, through layered manufacturing. The prototype is constructed layer by layer using high-energy beams to either fuse the material together or cut through that what is not required. Certain RP processes do not use energy beams, relying simply on binders and a piston to bring pressure on consecutive layers to bind them together.
2. Used for manufacturing complex designs
Who ought to RP? RP processes score mostly on three
3. Useful in industries prone to shorter product life-cycles counts on a case-to-case basis: production time, production costs and accuracy. It’s not necessary that you will beneﬁt on all three counts at the same time. The scoring is on a case-tocase basis, as in most cases RP is pitted against several other competing technologies depending on the requirements of the manufacturers. Say a valve manufacturer, XYZ, wants to launch 2,000 units of a new kind of valve before the yearend. RP might cost it a little more than the traditional tooling methods, but it will cut down on production time and will provide the required accuracy. Hence, XYZ cuts down the time-to-market delay and saves on the possible corresponding losses in business that would have occurred on account of the delay. Take another case, that of an irrigation equipment manufacturer, ABC, who produces pipes of different dimensions. ABC requires pipes in high volumes and the dimensional tolerances might be higher than in the case of valves. In this case, RP is not the right tooling method. As already mentioned, RP is hence appropriate for products with complex designs, possessing short design cycles and produced in smaller batches with reasonable accuracy. With the upswing in the number of manufacturing startups in the country providing diverse products with equally diverse designs, it is imperative that they are on their toes design-wise. For, in the fast-driven markets of today, shelf lives of products are getting shorter and shorter, spelling out the need for techniques that will reduce manufacturing times and yet come out with products with complex designs and acceptable qualDAR E ity and accuracy.
5 VCs Talk About Their Marriages Unlikely keys to success for VC-backed companies
t’s the chemistry,” explains Balaji Srinivas of Aureos Capital, trying to pin down the key to investment decision making. VCs
repeatedly emphasize the importance of their relationships with the entrepreneurs they back. Indeed, one could almost imagine them using a personal
ad to source deals. Especially since a leading venture ﬁrm, Canaan Partners, has joined with Bharat Matrimony. It’s generally understood that venture capitalists invest money in young or expanding companies. But how many know about the large role the VCs promise to play in building the companies? Or the importance of their contributions? So, when one looks at the morethan-money role of the VC, it’s perhaps not a surprise that ‘chemistry’ between the VC and the entrepreneur is an unlikely key to success.
The vows VC’s make Talk to the new breed of Venture Capitalists, and you’ll discover that they promise far more involvement than your regular ﬁnancier would provide. Says Alok Mittal of Canaan Partners, “We tend to be active investors, we involve ourselves in Board-level issues including strategy, recruitment and fund raising.” “You have these Ministers in the King’s Cabinet,” Balaji Srinivas of Aureos Capital explained, “My style is more about sitting in the back-ground and enabling people to achieve their dreams.” The experience a Venture Capitalist brings to the table, combined with his understanding of the industry, his network and solid funding can act as rocket fuel for a young organization. Asked if she would ever give entrepreneurs the money, walk away and tell them to come back with the cash, Bharati Jacob of Seedfund laughed, “There isn’t a VC who will say that to you! I will agree in print to that. Everybody claims to be a value added investor – more than capital, more than money.” 76
DARE.CO.IN Promises kept? From the VC perspective things seem to be working, as Avnish Bajaj outlines Matrix’ involvement in one of their portfolio companies: “In Four Interactive we invested in two guys and the business plan. And we engaged right from product strategy, hiring and building the team, when do you raise more money and all of that stuff.” Moving to the other side of the equation, several recently-funded entrepreneurs conﬁrm that their VCs keep fairly close tabs on their companies, either through informal chats, emails or regular meetings. Some, like Phani, co-founder of RedBus, an integrated bus ticketing website, interact with their VCs on a daily basis. RedBus recently received an investment from Bharati’s Seedfund. All in all, these entrepreneurs agree that VCs live up to their promise of ‘more than money.’ “They see the market differently, and lot of the business issues we discuss are fundamentally about building a company,” claims Sanjay Swamy, CEO, mChek, a company with an innovative mobile payment solution. “We appreciate their perspective.”
Experience Matters This kind of engagement by VCs marks an evolution in the practice of venture investing in India. Over the past 18 months, a number of top tier overseas ﬁrms have entered India, including Matrix Partners, Canaan Partners and Sequoia Capital, bringing talent and a lot more money to the table. These new players join a group of home-grown VCs who have built signiﬁcant experience over the past 7 – 10 years. Bharati, formerly at Inﬁnity, has some 10-12 deals under her belt, having evaluated perhaps thousands of companies. Balaji, who was at Carlyle Group before launching Aureos’s India presence, has done 25 – 30 deals in the past 10 years. Adding a different perspective to the pool, recently more entrepreneurs have turned VC. They bring credibility
gained through hands-on experience. Both Alok Mittal of Canaan, co-founder of Jobs Ahead, and Avnish Bajaj of Matrix, founder of Baazee.com, fall into this category. Kanwaljit Singh emphasized Helion partners’ strong entrepreneurial operating backgrounds. He is very clear about preferring to invest in the spaces where he has experience. “We have the contacts and understanding of those industries,” he says.
Meeting Your Match Since every VC has his own particular strengths, ﬁnding the right match between VC and entrepreneur is important for the ultimate success of the enterprise. Perhaps surprisingly, given the number of deals each VC declines, the control does not rest entirely in the hands of the venture capitalist. Entrepreneurs are actively choosing their VCs for their particular skill set or industry experience. Kavita Iyer of Minglebox.com believes she has an advantage in partnering with Sequoia Capital, globally the leading investors in the internet space. “Sequoia has funded the likes of Google, Yahoo and Youtube at very early stages,” states Kavita, “So they have a wealth of understanding in our domain.” Raghav Kher (Seventymm) too was clear from the outset that he wanted to work with VCs that would help build their business. And he seems happy with the choice, stating that, “Matrix has a lot of connections in India where as DFJ has a lot of connections in Silicon Valley.”
But is the chemistry right? With both VC and entrepreneur so passionately involved in the enterprise, getting along is just good business sense. “The most important thing, after all, is if you really like the founders of the company; that you think these people are compatible….it’s just very personal,” Balaji explained. Kawaljit agrees that the ﬁnal critical element when deciding to invest in a
company rests on “our chemistry with (the team), our comfort with them.”
Till debt do us part Personal connection is all very well, but money remains the bottom-line – in fact venture capitalists ‘partner’ their portfolio companies in order to promote growth and manage the associated risk. As Kanwaljit explained, “we are responsible to our investors… so in the end it is a ﬁnancial exercise for everyone around the table.” Therefore, however personal the relationships, VCs will play hard ball if required to protect their investments. And though Balaji is willing to give the entrepreneur space to a certain extent, he insists on a balance so the entrepreneur “doesn’t go so overboard that he pulls even the existing business down the drain.” With the view that the end justiﬁes the means, most are willing to do what it takes to ensure success. Avnish puts it succinctly, “If the market opportunity is fabulous and you have a B team, you can always hire an A team.” Kanwal agrees, “When the business reaches a certain stage of growth, there might be a potential for the company to bring in a different proﬁle of senior management - could be a CEO or COO.” So when business potential outgrows its founders, it‘s amply clear which horse the VC will back.
Enjoy the ride All things told, venture capital – for those that fund, as well as those funded – can be a wildly exciting ride. A ride where the ultimate highs don’t just come from the money, but from new ideas. Entrepreneurs live in a world where dreams can come true and if the match is good, VCs can provide just the right help. As Alok Mittal of Canaan Partners puts it, “We don’t call ourselves venture capitalist as much as venture catalysts, and money is just one of the pieces that go into catalyzing growth”. D A R E More articles on www.nenonline.org. Content provided by NEN AUGUST 2008 77
Is the highest price always the best price?
Avnish Bajaj, Matrix Partners y advice to entrepreneurs? May be I shouldn’t be telling them because it will become harder for me to negotiate… but you know the negotiation will be around valuation. So as an investor, I will put up 10 points, all of which are important to me. And if the entrepreneur is only thinking: ‘valuation, valuation, valuation’, I will make sure I will get nine in my favor and then give a little bit on valuation. So a smart entrepreneur needs to realize that negotiation is actually a package deal of all these 10 terms. The important terms? Things like what is the instrument in which the VC is investing - almost always preferred stock; what are the rights of that preferred stock; what are the things that the entrepreneur will have to seek the VC’s permis-
sion to do; the size of the option pool; the conditions under which the entrepreneur and the VC can ﬁre each other: What happens if new money has to be raised? What happens if the entrepreneur wants to sell out? What happens if the VC wants to sell out? All of these are extremely critical.
Balaji Srinivas, Aureos Capital ay there are three VCs who are interested - you obviously look at which VC gives you the maximum amount of money for your company’s shares, and you go with him. And that is how deals are generally done. But from an entrepreneur’s perspective, it is important to know the expectations of that VC: what are the terms he has put in, that could hurt the entrepreneur three to four years down the line? For example, there could be performance expectations. One VC could say: I will give you x valuation. And another one could say: I will give you 3x valuation, but you have to perform 2x. And if you don’t perform, maybe he will make your life difﬁcult, and maybe take away some of your ownership.
Alok Mittal, Canaan Partners t’s not just money; it’s way beyond that. Choosing a partner is much more critical, in my view, than focusing on whether I can get an exact term. If the business does well, you are going to make enough money. You are going to make enough money that you don’t care beyond that; the terms won’t matter so much. The key is to have the right partner.
Avnish Bajaj, Matrix Partners bviously don’t be stupid. I would never ask somebody to take more than 25% below what they could get from somewhere else. But at the same time, don’t just look to get the highest price for your company, focus more on Alok Mittal working with the right people who can help you grow a business. That would be my advice. NEN asks: Do VCs overpay for their companies sometimes? Do you ever get swept up in competing for deals?
Alok Mittal, Canaan Partners aintaining discipline is an elusive goal. It is especially hard for ﬁrst time VCs to keep exercising that discipline. Booms and busts happen because sentiments ﬂy. But I think there is another important element: all partners must agree before a deal is done. Hopefully if I am not exercising restraint and discipline, my partners will.
More NEN Straight Talks on www.nenonline.org
AUGUST 2008 79
Winners take it all The second edition of TiE-Canaan Entrepreneurial Challenge witnessed great enthusiasm from 140 early-stage startup teams that sent in their plans. Out of those, three took home the prize The Winners • Equitas Micro Finance: A Chennai-based micro-credit startup • Dhruvaa Software: Provides data protection and storage services, based in Pune • iKen Solutions: Develops business systems backed by artiﬁcial intelligence
Jaspreet Singh, Co-founder, Dhruvaa Software
f entrepreneurship is about that “lunatic belief” that one can ﬁnd one’s way despite all odds, then the winners at the TiE-Canaan Entrepreneurial Challenge are brimming with conﬁdence. The second edition of the contest culminated into an award ceremony on July 5 in New Delhi. Out of the 140 business plans that landed after the contest went live in April this year, eight teams were distilled for the ﬁnal round. These were Dhruvaa Software, Ginni Systems, Infogile, Equitas, GoodMorningResearch.com, iKen Solutions, HealthcareMagic.com and 11rupees.com. The uniqueness of the contest lies in the mentoring that the short-listed teams received from veteran entrepreneurs before the ﬁnal round presentations to the jury. Most of the teams praised the mentoring sessions as “valuable”, and some even polished their business plans to include minute details that they would have otherwise missed out.
The jury that vetted the business plans of the eight ﬁnalists to choose the three winners included Mahesh Murthy, Founder and CEO, Pinstorm, Pramod Bhasin, CEO and President, Genpact, Saurabh Srivastava, Presi-
dent, TiE Delhi, Raman Roy, Chairman, Quattro BPO Solutions, Sanjeev Bhikchandani, CEO, Infoedge, and Alok Mittal, MD, Canaan Partners. Many of them confessed that selecting three winners was not an easy task as several business plans were neck-andneck. But being a contest, they had to zero in on three of the very best. One of the jury members felt that “Each of those 100-plus business plans were good and there is a strong likelihood that they will succeed.”
Siddharth Goel, Co-founder, iKen Solutions
DARE.CO.IN The winners—Equitas Micro Finance, Dhruvaa Software, iKen Solutions—will now get further mentoring from Nasscom, Canaan Partners and the jury members. They also get access to investors such as The Indian Angel Network. The icing on the cake is a course at the Center for Executive Education at the Indian School of Business (ISB) in Hyderabad. A representative of each of the winning teams will get to attend the course, which typically costs Rs 3 lac, which will be waived for these participants. Equitas Micro Finance is a Chennai-based microﬁnance startup. The ﬁrm was co-founded by PN Vasudevan jointly with M Anandan and P Nandakumar. Vasudevan has prior experi-
P N Vasudevan, Co-founder, Equitas Micro Finance
(L-R) Alok Mittal, MD, Canaan Partners; Saurabh Srivastava, President, TiE Delhi; Raman Roy, Chairman, Quattro BPO Solutions; Sanjeev Bhikchandani, CEO, Infoedge; Mahesh Murthy, Founder & CEO, Pinstorm ence in the NBFC business, as he has been a vice president with Cholamandalam Investment and Finance. iKen Solutions is a software product company that specializes in intelligent business systems backed by hybrid artiﬁcial intelligence techniques (expert 82
system, case-based reasoning, neural networks and genetic algorithms). It is an IIT-Mumbai research spin-off. The founders—Rajendra M Sonar, Aditya Goel and Siddharth Goel— want to make every software product and solution intelligence-ena-
bled and add intelligence in every business process. Dhruvaa Software was founded in 2007 in Pune. It is in the business of data protection and business continuity products. The company aims to target the US market in a big way. D A R E
An Entrepreneur’s Best Friend: Failure The reaction to the fear of failure separates an entrepreneur from a non-entrepreneur /Anurag Batra
ntrepreneurship is a skill set to earn proﬁt for taking risks. Risk arises out of fear for failures. Hence, proﬁt is a reward to entrepreneurs for ﬁghting against failures. I have always believed in the fact that you learn more from failure than from success. If you study the accomplishments of most successful entrepreneurs across the globe or in India, you will realize that most successful entrepreneurs have tasted failures before they tasted success. Even if we go back in history, we have many names like Thomas A Edison, who discovered 1,500 ways NOT to make an electric light bulb, Abraham Lincoln, who lost several state elections before being elected president! Once I was attending a conference in New York, I told my friend, “Failure breeds success. Others might argue that failure breeds more failure, a sense of loss, or a loser mentality. I welcome the inquiry and the chance to respond because I believe there is more to learn from our failures than from our successes.” In my opinion, there is a lesson to learn in each failure we experience.
How a person reacts to a fear of failure is what I believe separates an entrepreneur from a “non-entrepreneur” (I think I just made that word up). A “non-entrepreneur” typically fears failure and avoids it at all costs. An entrepreneur embraces it and knows it is part of growing and being successful. Am I talking of lower level of achievements as equivalent of failures? No, I am talking of real disappointments and grand plans going away as failures. I am sure you are also thinking that am I suggesting that one needs to fail or engineer failure before one succeeds. No, not necessarily.
Failure breeds success. Others might argue that failure breeds more failure, a sense of loss, or a loser mentality. I welcome the inquiry and the chance to respond because I believe there is more to learn from our failures than from our successes
As you know an entrepreneur’s risk appetite can get him/her to take on initiatives more than his capabilities or resources. He or she can take decisions that turn into losses. There is an old saying “Nothing succeeds like success.” I would like to modify it to “Nothing succeeds like failure” or still better, “If failure is around, success can’t be far behind.”
What is more important is what we learn from failure and how we deal with it. Although nobody wants to be a failure, it can be said that there’s no better education for an entrepreneur than failure. I believe what an entrepreneur has to do to be truly successful is shake off past mistakes, just as a good shooter in basketball must not let a missed shot affect his/her next shot. Break down those past mistakes and squeeze as much knowledge as possible from those mistakes. Now it is important to note that an entrepreneur should not get used to failure. Mistakes do cost money and too many of them will put someone out of business. What I’m saying is that an entrepreneur’s plan must include steps to avoid failures, but the plan must also account for failures as well. By that same token, just as an entrepreneur must learn from failures, their employees also learn from failures. My philosophy as an entrepreneur has always been to provide employees a safe environment to make mistakes and put them in situations where the mistakes they make can have limited negative impact on the company. As the employee gains conﬁdence and proves himself/herself, a manager’s job is to place them in an environment that is slightly less “safe” and increasingly more challenging. DAR E Anurag Batra is real life, ﬁrst generation entrepreneur who is Much Below Average (MBA) from the prestigious Management Development Institute, MDI. When he is not busy writing such columns, he can be reached at email@example.com. Anurag is the co founder and editor-in-chief of exchange4media group which includes exchange4media.com.
No dearth of ideas
Innovative startups rule the roost at the fourth edition of Proto.in where technology weds creativity
ndeterred by the topsy-turvy global ﬁscal scenario, over 400 participants came together to cheer the spirit of entrepreneurship at the fourth edition of Proto.in, the country’s most talked-about tech startup event. The two days (July 18, 19) at the Indian Institute of Technology - Delhi (IIT-Delhi) were packed with interactive talks, startup showcase, innovation jam, and quiz. The event gave a fertile ground for networking to budding and veteran entrepreneurs, investors, and professionals. The 16 startups that showcased their products and services on the second day of the event were a good mix of technology and innovation. Take for instance, Blink Media, founded by Devang Raiyani, Hemang Shah and Sawan Rupar. The trio unveiled an intelligent shopping cart that sports a screen that helps users track products and its location inside the store. Similarly, Datatype Equipment, a company founded back in 1983 by Santosh Dawara and Anjali Gupta, introduced Lipikaar, an Indic language expression for online and desktop users. The product is now patented and allows a simpliﬁed typing method for both monolingual and bilingual users.
Company - Soliton Technologies, Product - Spot-It, Founder/CEO - Dr. Ganesh Devaraj
Company - Picporta, Product - Picporta, Founder/CEO - Pulkit Gaur
Company - The Hiring Tool, Product - Hiring Tool, Founder/ CEO - Nupur Panjabi, Sumit Panjabi
Company - Lifeblob, Product - Lifeblob, Founder/CEO Pranav Bhasin
Company - Tiriyo Technologies Consultancy Pvt. Ltd., Product - Recruiter Pilot, Founder/CEO - Dinesh Neralla
Company - Muziboo, Product - Muziboo, Founder/CEO - Prateek Dayal, Nithya Dayal
Company - MindHive Labs Solutions Pvt. Ltd., Product - LordsOfOdds, Founder/CEO - Hariharan Krishnamoorthy
Company - AKVENTURE Info Pvt. Ltd, Product - Lootstreet, Founder/CEO - Kaushik Mukherjee, Arun Balakrishnan
Company - Four Factions, Product - Apnabill, Founder/CEO - S.K. Jain
10. Company - Storrz.com- JustOnDemand Technologies, Product - Storrz, Founder/CEO - Chandan Maruthi 11. Company - Crederity Inc, Product - Crederity Card, Crederity Trust, Founder/CEO - Rakesh Antala 12. Company - Blink Media Pvt Ltd, Product - Intelligent Shopping Cart, Founder/CEO - Devang Raiyani, Hemang Shah, Sawan Rupar
AUGUST 2008 87
event/proto.in 13. Company - Ferox Foods Pvt. Ltd, Product - Makhana Flakes and Popcorns, Founder/CEO - Bhism Narayan Singh 14. Company - NextBit Computing Pvt. Ltd., Product gCOSign, Founder/CEO - Vishal Borker 15. Company - Datatype Equipment Private Limited, Product - Lipikaar, Founder/CEO - Santosh Dawara, Anjali Gupta 16. Company - Eko India Financial Services Pvt Ltd, Product - SimpliBank, Founder/CEO - Abhishek Sinha 17. Mahesh Murthy of Pinstorm
A couple entrepreneur – Prateek and Nithya Dayal – showcased Muziboo, a website that values feedback to amateur and professional musicians. Chandan Maruthi showcased Storrz, a shopping platform. Pulkit Gaur’s Picporta is an image search website while Hariharan Krishnamoorthy’s Lords of Odds gives a virtual betting experience. Rakesh Antala showcased Crederity, a company he founded in 2006. Crederity provides certiﬁcation against ID and resume fraud. Besides the keynote address by Kiran Karnik, former president, Nasscom, those who brought to life the “startup school” sessions included Murugavel Janakiran of Bharatmatrimony.com, Mahesh Murthy of Pinstorm, Sameer Guglani of Morpheus Partners, Bhavin Turakhia of Directi, and Kiruba Shankar of F5ive Technologies. While Narayan of 20:20 Media talked of branding strategies, and Amit Ranjan of Slideshare focused on viral marketing, Gaurav Bhatnagar DAR E of Tekriti Software talked of funding.
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Hotel Maurya Sheraton, New Delhi, October 22nd - 24th 2008
Entrepreneurship Comes of Age
H Valedictory Session
H Session on Internet SIG – Future of Internet
H Session 2– Healthcare Opportunities
H Session 1– Retail
H Real Estate/ Infrastructure
H Session on Lifestyle
Day 3 - 24th Oct. 08
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H Session 6– Mobile/ Telecom
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H Session 4– Grassroots Innovation & Entrepreneurship
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H Session 1– Media & Entertainment
H The Entrepreneurial Eco System – Report
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Day 2 - 23rd Oct. 08
H TiEcon Curtain Raiser & Dataquest Awards Night
H Eco system Bazaar
H Company Showcase : Short Listed Entrepreneurs present to investors
H Workshop for Entrepreneurs by Deloitte on Exit Strategies
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Building enduring brands: Learnings from hereditary food biz Maintaining the pull and mysticism of your brand without an advertising budget is not an easy task. Right? But every Indian city has an eating joint that is a legend. They have not just survived, but thrived generation after generation with just word of mouth publicity. How did they achieve this? /Mohita Nagpal
What does the magic? Koshyâ€™s Know the customer, transparency, moderate pricing, old world charm Karimâ€™s Secret recipe, old world charm Tunday Kababi Secret recipe, moderate pricing Azad Hotel Old chefs, signature dish Das Khaman House Retaining old chefs LMB No franchisee
cross the country, in every city there’s at least one food joint that generations have sworn by; that has passed the test of time to emerge with better brand recall than all others. Be it the Mughlai delight of Karim’s in Old Delhi, the rosgullas of KC Das in Kolkata or the shrewsberry biscuits of Pune’s Kayani Bakery, each has a fan following that crosses local boundaries, and will wait in queues to satisfy their gastronomic desires. How is it that in today’s age of cutthroat competition, these brands survive and prosper with no advertising, no brand campaign and no repositioning? Are they changing with time? How are they responding to the challenges and opportunities that the current generation has to offer? What is it that these brands have done to maintain that mystical aura around them? What is it that has helped them thrive? Whether it is Azad of Trivandrum or Koshy’s of Bangalore or Das Khaman House of Ahmedabad, they all have a proud heritage that goes generations back; a heritage and a story that is as much a part of their brand as is the taste of the dishes they offer. Take the noble man whose name we do not even remember, but whose
An incomplete list of generations-old eateries Karim’s - Delhi LMB - Jaipur Koshy’s - Bangalore Tunday Kababi - Lucknow Azad Hotels - Trivandrum Kayani Bakery - Pune India Coffee House - Bangalore K.C Das - Kolkata Paradise - Hyderabad Fountain Plaza - Mumbai Dasprakash - Chennai Babu Moshai - Delhi Das Khaman House - Ahmedabad Kandoi Bhogilal Mulchand - Ahmedabad
Do you know of a business that has survived and thrived for generations? What is their secret? Share your insight at www.dare.co.in
place in Lucknowi history is ensured forever because of his love for kebabs! As he grew old and lost his teeth, he did not want to let go of his love and so commissioned his one-handed (Tunda) chef to prepare kebabs that would not require chewing. And thus, Haji Murad Ali gave Lucknow and the world, melt-in-the-mouth (galawati) Tunday Kebabi. In Delhi, fans of Karims will not forget to thank Mughal emperors in their morning prayers. The Mughals are long gone, but the legacy of Mughlai food remains intact in Delhi by the mouthwatering Karim’s. The Karims were hereditary cooks to the Mughals, The sepoy mutiny and the dethronement of Bahadur Shah Zafar saw them ﬂee from the Red Fort to escape the wrath of the British. The year 1911 and the coronation of King George V, saw Haji Karimuddin move back to Delhi to open a Dhaba for the coronation. This Dhaba, serving Alu Gosht and Daal with Rumali Roti was the precursor to today’s Karim’s.
How to build a legacy? “Our ancestors just gave one advice for running this business: Never compromise on the quality of food. If situation demands, increase the price or let the output be low, but never ever compromise on the quality of food. It is the only reason people come to us”, says Zahamuddin Ahmed, the fourthgeneration director of Karim’s. According to Ahmed, the ingredients are the key to what sets them apart. Karim’s recipe is a closely guarded secret. It is the ladies of the house who prepare the spices (masala) to be added in the food. If the recipe were to be disclosed, there would be hundreds of Karim’s, says Zahamuddin. Mohammad Usman, the third generation heir of the savory Tunday Kebabi, shares the same opinion. “Coke originated in America, but it is made world-over. People come to us because they get the melt-in-the mouth kebabs only here. If our recipe would be made public, there will be no more queues for our kebabs”. Another factor that is working for Tunday is celebrity endorsements.
ZAHAMUDDIN AHMED Director, Karim’s
Our ancestors just gave one advice for running this business: Never compromise on the quality of food. It is the only reason why people come to us. According to Usman, Amitabh Bachchan, Sonia Gandhi, Shah Rukh Khan and Javed Akhtar are just some of his loyal customers. Meanwhile, Koshy’s of Bangalore does not believe in any secret recipe, so much so, that they have an open kitchen that anyone can walk into. Established in 1940, it is currently run by the third generation, brothers Prem and Santosh Koshy. According to Santosh, “It’s the ambience and old-world
MOHAMMAD USMAN Co-Owner, Tunday Kababi
If our recipe were to be made public, there will no more be queues to eat our kebabs. AUGUST 2008 91
Das Khaman House, Ahmedabad
charm that brings people to Koshy’s time and again. And that is what we have retained”. The price has been only moderately hiked to meet the rising cost of raw materials. The proﬁt margin does go for a little beating, but the customers are more than happy, says Santosh. The charm of this old world restaurant is aided by the simplicity of home cooked food, and direct interaction with customers According to Santosh, “We make it a point to meet every customer. We know most regulars by their names. If we are not around, they get worried if something is wrong.”
Co-Owner, Azad Hotels
Our customers say that our biryani still tastes the same as it used to 50 years ago. This is because we use a centralized kitchen wherein the most experienced cook prepares biryani. 92
How successful can this approach be? Well, they claim to be one of the highest taxpayers in Bangalore! Uniqueness and quality is the buzzword for Lakshmi Mishthan Bhandar (LMB) of Jaipur as well. It is as old as the city itself. Godhamalji Kayal, the migrant who started the business with a jalebi stall, would never have dreamt in his wildest dreams that his humble jalebi stall would not just survive, but would be a legend in its own right, three centuries later. Currently, Radheshyam Ghodawat and his son Sanjay are handling the business that has been transformed into a sweet shop, a restaurant, a hotel and a confectionary. According to Radheshyam, the biggest reason behind their success is that they have not followed the franchisee route. “We sure want to expand our business, but not at the cost of compromising on the quality and hospitality. If we go for franchisees, there’s no surety of customers having the same experience there”. Cut across to the south and Wazim Azad, the third generation co-owner of Azad Hotels in Trivandrum is clear that the secret is all about maintaining the uniqueness of the hottest selling dish. “If that uniqueness changes into a generality, then the magic is gone and the public would no longer experience the nostalgic moments that they associate with you. People say that our biryani still tastes the same as it used to 50 years ago. This is because we use a centralized kitchen for all our restaurants, where the most experienced cook prepares the biryani,” says Azad.
Tunday Kababi, Lucknow
Handling Challenges Is it that history is all that you need to keep going? Clearly not. However, they have no dearth of the older customers. In an era of McDonalds and Baristas, each one of them is adapting to the changing demographics of their audience in different ways. Established in 1922, Das Khaman House is believed to be serving the best khaman in Ahmedabad. Kunal Thakkar, fourth generation owner of Das Khaman House, says that of late, they have started preparing variants of khaman in different colors and ﬂavors with more attractive packing that appeals to a younger audience. Koshy’s has started Jewel Box, which has a youthful ambience and music playing but serves the same food to a younger audience. Azad felt it was important to move away from a middle-class only image. Currently they have nine restaurants, smartly distinguished in bazaar, residential and hybrid categories. Bazaar is the restaurant in a popular market – and that’s where they started off, dishing out biriyani, chicken and chapatis. Residential category restaurants are aimed at the more up-market crowd. According to Wazim, “We noticed that our restaurant was very popular among the middle-class, but the upper class used to send their domestic helps to get our food packed for home.” The swankier avtar of Azad in the residential areas now have no dearth of the DAR E well-heeled crowd.
Create your own jewelry Imagine, create and wear a new style everyday. De Lemon’s do-it-yourself bead kits enable customers to create jewelry, matching their own taste, dress and style /Shilpi Kumar
ure, there is nothing novel about launching your own jewelry store. Particularly, with a number of fashion accessory stores mushrooming in the country, chances are yours might even get lost in the cluster. But De Lemon, a beads jewelry store recently launched in Noida, is taking no such chances. Enabling the customers to play up on both, styles as well creativity, the store attracts not only teenagers and adults, but also children towards its jewelry. So, what is their USP? Just reﬂect back on the number of times you have entered an accessory store and didn’t buy something because you liked the color, but not the design or vice versa. Well, with the induction of do-it-yourself bead kits, De Lemon has the an-
swer to all your fashion woes. Housed in an especially dedicated corner of the store, these kits give the consumers the liberty to pick their own choice of beads and design their own set of jewelry. The customers that do not trust their creative instincts need not fret. The store’s attendants are more than willing to suggest designs and show you how it’s done.
An Assortment of Beads The do-it-yourself kits make one-third of the De Lemon store, the other twothirds accounting for loose beads and jewelry. The kits come in ten different sizes, ranging from Rs 99 to Rs 1999, giving the customers the luxury to pick according to how much jewelry they want to make, and the variety that
they are seeking in the bead designs. They are also color-coded, so depending on the color desired, a variety of hues of that color are available within the kits. Besides the beads, each kit contains a ﬁsh hook, eye pin, bolt ring, latching hook, patch hook and a nylon thread that are required to make the jewelry. The bead kits come in the shape of ﬂowers, hearts, stars and bags that especially attract children. Says M K Nair, manager of De Lemon, “Our customers have especially liked the packaging of these beads, and constantly give us feedback on how attractive and useful the kits are even to store other items.” Those who are extra creative or do not want to be limited to one shade of color and design, can take their pick from loose assorted beads placed in bowls. De Lemon’s collection includes more than 300 different shapes, 100
Chinese bead kits are not color coordinated and come in extremely shabby packaging. They are more like toy kits for the children. Our jewelry, besides addressing these problems, can be worn by people of all ages and its quality standards are approved by Wal-Mart. — M K Nair Manager, De Lemon, Banaras Beads Limited colors and around 2000 different designs of beads. The beads’ material ranges from glass, bone, shell, horn, mother of pearl, silver, terracotta, wood, ceramic, chevron, brass and white metal. De Lemon also has provisions to custom-make bead designs according to the customer’s preference. “We recently got an order from a wildlife organization, asking us to make beads in animal prints like tiger, giraffe, leopard and zebra for promotional purposes,” says Nair.
Entering the Domestic Market De Lemon is the brand name of Banaras Beads Limited (BBL), a company established in 1940 in Varanasi, which deals in manufacturing and exporting beads and glass jewelry to retail showrooms like Target, Wal-Mart, Cosco and Micheals. After the tremendous success of BBL jewelry and especially the do-ityourself kits in the international market, Ashok Kumar Gupta, the chairman and managing director of BBL, decided to test the product with the Indian audience. “He showcased the kits in his friends’ parties, birthdays, marriages, etc and soon enough enquiries started pouring in. That is when we decided to open a ﬂagship store in India,” says Nair.
Planning the Big Launch Before the launch, a market survey was conducted to ﬁnd out some of the key concerns that needed to be addressed. The survey conveyed that presentation
of the product was extremely important to the consumer. “Due to this, we not only decided to update our jewelry designs every ten days, we also decided that continuous interaction with customers was absolutely necessary. This would help us in updating our jewelry and incorporating customers’ demands in our product range.” Another key concern was of pricing. With jewelry costing as low as Rs 19, it was ensured that it is affordable to all. “Customers also asked us, how we would fare in comparison with bead kits coming in from China. They are more like toy kits for the children. But that is hardly a competition for us. Our jewelry can be worn by people of all
ages and its quality standards are approved by Wal-Mart,” says Nair. The do-it-yourself kits have been so successful that BBL is expecting Rs 5 lac worth of sales in A-class cities and Rs 3 lac and Rs 2 lac sales in B- and C-class cities, in the ﬁrst six months. They are planning to open 100 more showrooms in Delhi NCR, Bangalore, Pune, Chandigarh, Hyderabad, Kerala and Srinagar, in the next three years. Besides this, they are also looking to have a presence in retail outlets such as Pantaloons and Shoppers Stop. Plans to open showrooms in the international market, especially in the Middle East are also underway.
Glance at Future Innovations
DARE/the big idea SECTOR: Jewelry BIG IDEA: Do-it-yourself kits for customers to make their own jewelry CLIENTELE: 70% teenagers, children (ﬁve years and above), adults COST OF KIT: Rs 99 to Rs 1999 BRAND: De Lemon PARENT COMPANY: Banaras Beads
Being a 2000-year-old tradition, there is nothing new about being in the business of bead making. But BBL believes in doing small things in order to stand apart. As said by Nair, “Soon we will be conducting jewelry making competitions amongst school children in the Delhi NCR region. They will all be given a bead kit and the ones that come up with the most creative designs will be given prizes.” They will also be using their enormous collection of colored beads to teach nursery children about colors. “It will be something along the lines of an abacus, where slots would be assigned for speciﬁc colors, and the children will have to place beads of that color in the assigned slot,” says Nair. Their future plans also include using beads to make colorful corporate DAR E gifts such as paper weights. AUGUST 2008 95
covered in this issue, in alphabetic order; ﬁrst appearance
3D Systems ............................................................... 74
FICCI ......................................................................... 71
Neyveli Lignite Corporation ....................................... 55
3DSoC ....................................................................... 29
Nirula’s ....................................................................... 43
Adaptive Planning...................................................... 46
Food and Drug Administration ................................... 40
AK Beauty Academy.................................................. 41
Fountain Plaza........................................................... 91
Pepsi .......................................................................... 25
Al’s Tattoo Parlor and Body Piercing Studio .............. 37
Google ....................................................................... 30
Pingdom .................................................................... 50
American Tattooing Institute ...................................... 38
Himalayan Crest Power ............................................. 19
Pinstorm .................................................................... 60
AshKumar.com .......................................................... 41
Himurja ...................................................................... 19
Pizza Hut ................................................................... 42
ASSOCHAM .............................................................. 71
Host Tracker ............................................................... 52
Aureos Capital ........................................................... 79
i2k2 Systems ............................................................. 30
Power Finance Corporation ....................................... 22
Aweber communications............................................ 49
IBM ............................................................................ 29
Ramco ....................................................................... 52
Azad Hotels ............................................................... 91
IIT, Chennai ............................................................... 55
Reliance Power.......................................................... 20
Babu Moshai.............................................................. 91
India Coffee House .................................................... 91
Remember The Milk .................................................. 50
Banaras Beads Limited ............................................. 95
Indian Renewable Energy Development Authority .... 22
Ron Tattoos................................................................ 37
Barista ....................................................................... 92
Infoaxe.com ............................................................... 30
Rural Electriﬁcation Corporation................................ 22
International Small Hydro Association ....................... 20
Rural Innovations Network......................................... 55
Bhilwara Energy ........................................................ 20
Jaiprakash Hydro Power ............................................ 20
Sage .......................................................................... 48
Bhrama’s Mehendi ..................................................... 40
Jaypee Group ............................................................ 20
Saigun ....................................................................... 52
Big Flix Entertainment ............................................... 68
Jumbo King................................................................ 43
Border Roads Organization ....................................... 22
Karim’s ....................................................................... 91
SAP ........................................................................... 52
Kayani Bakery ........................................................... 91
Canaan Partners ....................................................... 79
KC Das ...................................................................... 91
Servals Automation ................................................... 55
Center for Aging Services Technologies .................... 33
Knowledge Tree ......................................................... 48
Seventymm ................................................................ 69
Chennai Port Trusts ................................................... 55
Koshy’s ...................................................................... 91
Silverstripe Software.................................................. 30
Click Density .............................................................. 50
Lakshmi Mishthan Bhandar ....................................... 92
Spentex ..................................................................... 18
Communicate2 .......................................................... 63
Liquid Planner............................................................ 49
Spiceworks ................................................................ 49
Constant Contact ....................................................... 49
LNJ Bhilwara Group .................................................. 20
Sproutit ...................................................................... 48
Cosco ........................................................................ 95
Madhouse Media ....................................................... 69
Survey Monkey .......................................................... 48
Crompton Greaves .................................................... 30
Matrix Partners .......................................................... 78
Das Khaman House .................................................. 91
McDonald’s ................................................................ 92
Tata Power ................................................................. 20
Dasprakash ............................................................... 91
Microsoft .................................................................... 30
Tunday Kababi ........................................................... 91
De Lemon .................................................................. 94
Mike’s Body Art Studio .............................................. 38
Wal-Mart .................................................................... 95
Delantt Consulting ..................................................... 52
Milagrow Business & Knowledge Solutions ............... 28
DreamFactory ............................................................ 49
MindMeister ............................................................... 47
World Bank ................................................................ 22
eMarketer .................................................................. 60
Moser Baer ................................................................ 69
entrip.com .................................................................. 29
Ybrant Digital ............................................................. 62
Erasmic Venture Fund ............................................... 44
Zimbra ....................................................................... 52
Facebook ................................................................... 30
National Entrepreneurship Network (NEN)................ 29
Zoomerang ................................................................ 48
covered in this issue, in alphabetic order; ﬁrst appearance
Abhishek Bachchan ........................... 41
M K Nair............................................. 94
Abraham Lincoln................................ 84
Aishwarya Rai.................................... 41
Mahesh Murthy .................................. 60
A K Verma.......................................... 19
Manmohan Singh .............................. 66
Akbar Khwaja .................................... 42
Michael Cowasji................................. 38
Alok Mittal .......................................... 79
Mohammad Usman ........................... 91
Amitabh Bachchan ............................ 41
Mohammed Salim.............................. 66
Angelina Jolie .................................... 37
Momaith Khan ................................... 37
Anil Gupta .......................................... 38
Mukund Choudhry ............................. 18
Anna Saheb ....................................... 54
Mulayam Singh Yadav........................ 66
Antara Mali ........................................ 37
Mumtaz .............................................. 39
Anthony Hsiao ................................... 29
Nandini Hirianniah ............................. 69
Arun Alva ........................................... 37
Naren Pasuparthy.............................. 71
Ash Kumar ......................................... 41
Omar Abdullah................................... 66
Ashok Kumar Gupta .......................... 95
Paul Basil ........................................... 55
Avnish Bajaj ....................................... 78
Prashanth Prakash ............................ 44
Bahadur Shah Zafar .......................... 91
Prem Koshy ....................................... 91
Balaji Srinivas .................................... 79
Radheshyam Ghodawat .................... 92
Bhramadevi Sharma .......................... 40
Rahul Aggarwal ................................. 30
Christina Aguilera .............................. 37
Rahul Gandhi..................................... 66
David Beckham ................................. 37
Rajeev Karwal.................................... 28
Deepa Sharma .................................. 40
Raju Mehandi Wala ........................... 40
Demi Moore ....................................... 40
Rani Mukherjee ................................. 41
Dheeraj .............................................. 43
Rekha ................................................ 41
Emraan Hashmi ................................. 37
Saif Ali Khan ...................................... 37
Esha Deol .......................................... 37
Sanjay Dutt ........................................ 37
Gwen Stefani ..................................... 40
Sanjay Ghodawat .............................. 92
Haji Karimuddin ................................. 91
Santosh Koshy................................... 91
Haji Murad Ali .................................... 91
Satya Vyas......................................... 28
Javed Akhtar ...................................... 91
Shah Rukh Khan ............................... 41
Jaya Bachchan .................................. 41
Shawn Collins .................................... 62
Jeremy J Siegel ................................. 34
Shilpa Shetty ..................................... 41
Julia Roberts ..................................... 41
Shubhankar Sarkar............................ 69
Kamal Gyanchandani ........................ 68
Siddarth Jonathen ............................. 30
Kandoi Bhogilal Mulchand ................. 91
Siddhartha Govindraj ......................... 30
Karan Arora ....................................... 37
Somnath Chatterjee........................... 66
Kareena Kapoor ................................ 37
Sonia Gandhi ..................................... 66
KC Das .............................................. 91
Sudipta Sengupta .............................. 44
King George V ................................... 91
Suresh Mansharamani ...................... 68
Kiran Nadkarni ................................... 44
Suresh Reddy .................................... 62
K K Venkatraman ............................... 29
Thomas A Edison .............................. 84
Kunal Thakkar.................................... 92
Vahid Berinjian................................... 42
L K Advani ......................................... 66
Victoria Beckham............................... 37
Lalu Prasad Yadav ............................. 66
Vivek Bhargava.................................. 63
Lara Dutta .......................................... 37
Wazim Azad....................................... 92
Laura Parkin ...................................... 29
Zahamuddin Ahmed .......................... 91
DARE is not an acronym. It represents the daring spirit of the entrepreneur. The red color for the R of DARE represents the ﬁre in the belly of the entrepreneur. You could think of the D representing the face, A representing the chest, R representing the belly and E representing the feet of the human body. Hence the red R. The entrepreneur dares to do things. (S)he dares to do things differently
SMS “DARE <your comments, questions or suggestions>” to
56677 email@example.com AUGUST 2008 97
0 0 2 NOV
RECAP M AY
JULY 2008 98
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RNI No.DELENG/2007/22197. Posting Date: 2nd & 3rd of every month. Posted at HSO PSO. Posting Date: 5th & 6th of every month. Posted at Lodi Road HPO.
Published on Feb 14, 2011
O S Vinod, CGTMSE Varsha, the rain gun Create your own jewelry columns / investor of the month / innovation / Sensitive brands Political sta...