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The marketing whizkid tells you how to connect with customers the way the corporate guys can’t PG 42 ALSO


marketing masterpieces PG 52 Fixing three common online mistakes PG 60





MARCH 2013  VOLUME 4  ISSUE 7  `100





The Customer Connect STARTUPS AND NEW BUSINESSES most often get busy trying to solve basic problems of setting up and growing the business: Getting a bunch of guys who believe in their ideas and would be willing to fund them, and later making tedious pitches to venture funds or private equity people who would be willing to take these ventures to the next stage of growth. In this conundrum, they don’t focus on understanding the market, mapping it right and figuring out whether the product or service they sell really has any future at all. Very often, new ventures also fail because the business owners could not understand the market correctly, or failed to connect with customers with the right message which would resonate with the customer. Of course, the product is king, and a bad product will never work. But the reason why even good products sometimes fail is because they didn’t connect in the right way with customers. New business owners or those in the early stages of growing their businesses often don’t understand the real value of marketing—how they can convey the benefits of what they are selling to the vast pool of potential customers out there. Sometimes, consumers may not even know a need exists until you tell them the benefits of a product which may change things for them. The most obvious examples are the iPod or the iPad, two devices which addressed needs which the market initially did not even know existed. In this issue, we bring you a clutch of stories

and insights which we hope will reduce some of the confusion on what marketing is all about and tell you how some thought leaders and companies are using powerful tools to get their messages across to the maximum number of people. While maverick marketing whizkid Seth Godin—whose followers seem to be growing by the day—tells you how to be disruptive in getting that message across to customers, we also get you 10 amazing marketing campaigns which we believe drive home the point that, more than what you say, how you say it out there in the market is going to be critical for your business and help you stand out amidst the clutter. We do believe that startups and emerging businesses need to learn newer and more disruptive ways of getting their messages across in a world where attention spans are shrinking and new competitors coming in every second. The Union Budget 2013 presented by Finance Minister Palaniappan Chidambaram is also demystified in a separate booklet with this issue. While the Budget was steady and workmanlike, it does contain good news for angel investors, startups and micro, small and medium enterprises and the FM deserves kudos for recognizing the role played by these segments in the economy. We will now need to build from here.

Very often, new ventures fail because the business owners could not understand the market correctly

Sourav Majumdar Editor-in-Chief  Intelligent Entrepreneur  March 2013 5

FOUNDER & EDITOR, NETWORK18 Raghav Bahl PRESIDENT & EDITORIAL DIRECTOR, TV18 Senthil Chengalvarayan EDITOR-IN-CHIEF Sourav Majumdar DEPUTY EDITOR Ankush Chibber ASSISTANT EDITOR Shonali Advani PRINCIPAL CORRESPONDENT Pranbihanga Borpuzari SENIOR FEATURE WRITER Shruti Chakraborty FEATURE WRITERS Avanish Tiwary Ashna Ambre ASSISTANT EDITOR (HEAD OF COPY DESK) Sulekha Nair COPY EDITOR Julie Sam ART DIRECTOR Arko Provo Mukherjee SENIOR VISUALISER Pradeep Belhe SENIOR ILLUSTRATOR Chaitanya Dinesh Surpur EDITOR - PHOTOGRAPHY Mexy Xavier PHOTOGRAPHERS Joshua Navalkar Nachiket Gujar CONTRIBUTORS Shereen Bhan, Sudipta Datta COLUMNISTS R Jagannathan, Bharat Banka, Nandini Vaidyanathan



ADVERTISING SALES SENIOR VICE PRESIDENT - SALES Siddhartha Chatterjee Pratima Madaye, (Mumbai)

Rohit Bandekar, (Mumbai)

Mridul Dwivedi, (Delhi)

Megha Saini, (Delhi)

Dennis Mathew (Bengaluru)

Madhivaanan (Chennai)

Rocky Joseph (Hyderabad)



NEWSSTAND AND SUBSCRIPTIONS DISTRIBUTION HEAD Sunil Nair DY. GENERAL MANAGER Manoj Palsay North: Kamal Bisht, Ashish Chakravorty East: Debraj Sur, Amit Singh West: Soorendra Desai, Sachin Kamble, Sanjay Bhujle, Dinesh Davidga, Abhijeet Roy, Pranav Dave South: Kirupanand S, Devraj N (Bangalore), GS Mahesh (Hyderabad), Venkata Narasimman (Chennai), Manivannan S (Coimbatore) SR. MANAGER-SUBSCRIPTIONS Sheetal Kotawdekar CO-ORDINATORS Rahul Mankar, Anant Shirke, Sarita Quartos, Chaitali Parker, Kamlesh Madkar, Vaibhav Ghavwale SERVICES Circulation Services If Entrepreneur is not available at your news stand, or for other news stand queries, write to Subscription SERVICES For subscription queries, write to or call +91 22 30034631-34 or toll free 1800 200 1021 PERMISSIONS For permissions to copy or reuse material from Entrepreneur, write to

Views and opinions expressed in this magazine are not necessarily those of Network18 Media & Investments Ltd (Network18)*, its publisher and/or editors. We at Network18 do our best to verify the information published but do not take any responsibility for the absolute accuracy of the information. Network18 does not accept the responsibility for any investment or other decision taken by readers on the basis of information provided herein. Network18 does not take responsibility for returning unsolicited material sent without due postal stamps for return postage. No part of this magazine can be reproduced without the prior written permission of the publisher. Network18 reserves the right to use the information published herein in any manner whatsoever.

Published by Lakshmi Narasimhan and printed by Mohan Gajria on behalf of Network18 Editor-in-Chief: Sourav Majumdar Printed at Infomedia Press Limited (formerly known as Infomedia18 Limited), Plot No. 3, Sector No. 7, Off Sion-Panvel Road, Nerul, Navi Mumbai 706 & published at Network18, ‘A’ Wing, Ruby House, J.K. Sawant Marg, Dadar (W), Mumbai 28. Published by Network18 under license from Entrepreneur Media Inc, U.S. Entrepreneur is a registered trademark of Entrepreneur Media, Inc., 2445 McCabe Way, Irvine, California 92614 U.S.A. Entrepreneur is published in the U.S., Russia, Philippines, South Africa, Mexico, Middle East and China. Copyright©2009 Entrepreneur

*Ownership of this magazine stands transferred from Infomedia18 Limited (Infomedia18) to Network18 Media & Investments Limited (Network18) in pursuance of the scheme of arrangement between Network18 and Infomedia18 and their respective shareholders and creditors, as approved by the Hon’ble High Court of Delhi and the necessary approval of Ministry of Information and Broadcasting is being obtained.

6 Intelligent Entrepreneur  March 2013




16 The Price Factor

Vikram Sood asks entrepreneurs to follow an outcome-based pricing model

39 Say Yes to Nas-tees Mumbai-based startup No Nasties designs, produces and sells completely organic T-shirts

18 Social Media for Business

Nandini Vaidyanathan has dos and don'ts to help improve customer reach

By Julie Sam

20 Engaging in Job Creation


Tara Thiagarajan touches upon the topic of microentrepreneurship

48 Creative Cuts A state-devised policy is giving Karnataka’s animation, VFX and gaming sector a much needed push

22 Make Success ‘Antifragile’

Author of more than a dozen bestselling books, Seth Godin, also writes one of the most popular marketing blogs on the Internet. His entrepreneurial mantras are uncomplicated, which makes everyone want to stick around By Corie Brown

24 Vision Inc.

Richard Branson says selfmotivation may not be enough on your entrepreneurial journey

32 ‘Anyone can start up’ Traveler and entrepreneur Chris Guillebeau has tips on how anyone, anywhere can start a business

Nandini Mansinghka tells you how you can get the best deal from your investor

28 Fixed vs Growth Mindsets

By Shruti Chakraborty

52 10 marketing masterworks An effective marketing campaign can etch your brand's name in people's minds for a long time. Read about some strokes of marketing genius

LEGACY 58 No storm in his teacup The tea industry has been seeing volatile weather, but Aditya Khaitan has taken the dip in productivity in his stride. His company McLeod Russel is looking at new ways for growth By Sudipta Datta

MY STORY STRATEGY 60 What’s your marketing malfunction?

29 Dilemmas and Blessings

Online marketing can have its challenges. Find out where you are going wrong with it

Anurag Batra advises entrepreneurs to learn how to let go of talent

By Ann Handley

62 Mimicking the dragonfly

30 A New Series of Sovereign Bonds

Defense systems company Tonbo has gone from selling technology to full-fledged products globally

Bharat Banka has some suggestions to help Indians get better social security benefits



By Jennifer Wang


26 The Valuation Discussion Decoded

Manish Sabharwal talks about how important it is for companies to cultivate a growth mindset

By Shonali Advani

42 Myth Buster

R Jagannathan asks entrepreneurs to keep their options open

By Ashna Ambre

34 No Kidding


Co-CEO of Archie Comics Publications Nancy Silberkleit, who, as a child, had no love for reading, shares her journey



Arko Provo Mukherjee


There are many more women entering the legal field now than there were when Naina Krishna Murthy started her journey By Ashna Ambre

Glenn Glasser

8 Intelligent Entrepreneur  March 2013

64 One for the road From modifying motorcycles and custom making them, Vardenchi Motorcycles will now be manufacturing its own range By Pranbihanga Borpuzari



88 Steady, not great

STARTUPS 94 Keep Talking

Nokia’s latest, Lumia, is as good as any Smartphone out there. But is that good enough for Nokia?

Ravi Saraogi and Umesh Sachdev, Co-Founders of Uniphore have developed speech recognition and voice biometrics platforms By Shonali Advani

By Ankush Chibber

89 A little latitude The Latitude 10 is a good tablet to surf the web, work Office documents, etc. But will it work at places that have more complex requirements? By Ankush Chibber

68 Not a Smoky Affair Street food vendors often use unhygienic cooking practices which have a negative impact on their health. Svati Bhogle has found a solution By Shonali Advani



96 Hire and drive

106 Be a Leader

81 The Partners Chip In

Zoom Inc. lets you enjoy the benefits of using a car without having to own it

Vivek G Pawar left behind his life in the US to come back to his roots and set up Sankalp Semiconductor

98 Bill It

If you can get the best out of your employees, you are a leader. But don’t rush in By Avanish Tiwary

108 Reduce Shipping Costs

By Shonali Advani

Not reining in your shipping costs can result in your profits growing smaller


By Shruti Chakraborty

110 Tap and Foster Employee Ideas Companies need to retain talent the right way for better organizational results

By Pranbihanga Borpuzari

ChargeBee has found a way to simplify the task of raising invoices and generating bills for online transactions By Ashna Ambre

100 Pins and Pens

82 ‘As you deal with challenges, you get resilient’ offers stationery to furniture for small and large enterprises online

Awaaz Entrepreneur’s Harshada Sawant talks to entrepreneurs on the aspects one should consider before starting a laundry business

By Avanish Tiwary

103 Good Catch

SPECIAL REPORT 83 Taking the Next Step

By Ashna Ambre

113 Merchandize your Brand It can open up new and exciting business opportunities By Raghu B Viswanath

116 Enter South American Markets Among emerging economies, South America has become a destination for new ventures By Sheshadri Vasudevamurthy


BANK CHAT 84 ‘We’ll never sacrifice asset quality for market share’ HDFC’s Vice Chairman and CEO Keki Mistry discusses his strategy and why he believes the bank can grow by around 20 percent on a sustainable basis

Quick service restaurant Fisheteria wants to popularize seafood in the void between fine dining and fast food

By Sourav Majumdar



118 T-Rexton

91 Cheap Tricks While taking the cheaper option may seem like an attractive option, it may not always be the best By Erika Napoletano

92 Asset Allocation for Entrepreneurs A judicious assessment is necessary while investing in safe and risky assets By Bharat Phatak

10 Intelligent Entrepreneur  March 2013

By Ashna Ambre

Mahindra & Mahindra and Ssangyong’s first product, the Rexton is up for a fight with the established players By Ankush Chibber


CONTACT INFO • Write letters to: Entrepreneur Network 18 Publishing 2nd Floor, ‘A’ Wing, Ruby House, J.K. Sawant Marg, Dadar (W) Mumbai - 400028 ..................................................... • E-mail: ..................................................... • To Subscribe: SMS IE to 51818 Call 91-22-3003 4631/33, or Log on to ..................................................... • For subscription queries: customercare@ Letters may be edited for brevity and clarity. 12 Intelligent Entrepreneur  March 2013

Taxing Times

Aiming Higher

This e-mail is in reference to column ‘It Isn’t About the Budget, Silly’ by R Jagannathan in the February 2013 issue. It is said that the super rich must pay more taxes—at higher rates. But the super rich earn more and pay more taxes otherwise too, then why legally extract more of taxes from them? It has already been proved beyond doubt that a lower tax rate yields more revenue. Higher rates for the high income bracket leads to more black money. We must rather simplify the tax laws instead of lengthening the list of deductions and exemptions. The bigger problem is the diminishing purchasing power of the rupee due to sustained inflation, which the government has failed to control. So while the cost of living goes up, the average Indian is struggling to earn a decent income. Therefore, it is necessary to raise the income-tax exemption limit to at least `6 lakh for individuals. With critical medical costs shooting up, it would also be a good idea to raise the reimbursement from `15,000 to `30,000 without the submission of medical bills. - Mahesh Kapasi Via e-mail

This e-mail is in reference to the article ‘Indie Up Rising’ by Jason Ankeny in the February 2013 issue. The future of gaming will increasingly be in the hands of companies like Bolt Creative and Imangi Studios which focus on extreme gaming applications. This article would have also inspired many young developers in game development to explore new opportunities in this core area. Inspired by Allan Dye and Dave Castelnuovo of Bolt Creative, I hope many Indian developers will join the race soon. Thanks for sharing bundles of knowledge with the audience. Great work! Keep it up Team Entrepreneur. - Jatin Dutta Via e-mail

Inspiring Read The column on ‘How ‘Cultured is your Business?’ by Ravi Kiran which spoke about organizational culture was wonderful. The ideas were splendid and impeccable for my startup! The categorization of 4 C’s: collaborate, create, control and complete was really worth thinking about. - Shubham Khichi Via e-mail

From the Web On the story ‘How To Optimize Lead Generation’: This is a very important topic and wellarticulated as well. To add to ‘Focus on your callers’ skills’ within the skill sets, the questioning skills will make all the difference. The BANT (budget, authority, need and timeframe) questions need to be more of a dialogue to understand the prospect situation. - Manoj On the column ‘Doomsayers’ Oracle’ by Shruti Kohli: This column is written using high quality wit and satire—I like this style of writing. Another thing is that all that

you’ve said in this column holds true across the board. We have too many of these uncles and aunts and all of them who think achievers are big zeros. Some won’t give you credit even after you have achieved. And just to tell you that even though a handful of people may be there to discourage, know it always that the world is with you. Good luck Shruti! - Deepanita Banerji This column is an awesome piece! This piece makes me your fan…absolutely! The column has a very good use of wit. I will be reading your columns every issue now. Sure thing! - Sakshi


Startup Festival


tartup Festival, a four-day mega-event co-anchored by TiE Bengaluru, will unite thousands of people and over 100 partners under one brand to celebrate Bengaluru’s rise as the startup capital of India. The event has not been designed as a regular conference, static at one location. Instead, it will take place across four locations in the city: Koramangala, Indira Nagar, Jayanagar and Palace Grounds, one on each day. The festival brings together entrepreneurial veterans, aspiring entrepreneurs, mentors, investors, and thought leaders for a series of activities that go beyond the typical conference format. The day will start with Startup Pump, an early morning, energizing workout session at partner locations. The Powerhouse session will bring together thought leaders, visionaries, executives and policy makers to discuss the future of Bengaluru as an entrepreneurial hub. An interesting aspect of the festival is the Startup Crawl where 50 of Bengaluru’s

startups open their offices to participants to host sessions on starting a venture in a 30-minute workshop format. Fifteen topics ranging from product design to building a team will be covered over three days. In addition, the four-day event will have opportunities for entrepreneurs to connect and have one-to-one networking sessions with investors and mentors at the breakfast Reload sessions. Also at the epicenter of the festival is Launchpad, where startups can unveil their products in a seven minute demo to investors and mentors. Phanindra Sama, CEO of Redbus; Deepak Ravindran, CEO of Innoz Technologies; Shivakumar Ganesan, Founder of Exotel and Rajat Dhariwal, Founder of MadRat Games will be among those who will be speaking at the event. Date: March 7-10 2013 Venue: Bengaluru Fee: `899 Contact: or Website:

CII Knowledge Summit


he CII Knowledge Summit is a wellestablished exclusive platform that has been effectively delivering quality by bringing together leading national and international speakers, to share information on the recent trends and important issues concerning the field of Knowledge Management (KM). The theme of the summit is ‘KM for double digit growth’. The event will hold a session called ‘KM–A Driver of Competitive Advantage and Business Growth—the role of Business Intelligence Analytics and Corporate Learning in building knowledge corporations’ which will focus on the role of business intelligence and learning models to enable corporations to become truly knowledge-driven. There will also be a session called ‘Unlearning for Innovation and Growth:

KM–The Strategic Facilitator’ which will highlight how KM facilitates and supports the process of unlearning as organizations move ahead on their journey of innovation. Ajay Nanavati, Managing Director, 3M India; CP Gurnani, CEO, Mahindra Satyam; Anand Deshpande, Founder, Chairman and Managing Director, Persistent Systems Ltd, Aditya Chandrasekharaiah, Lead Consultant, Zensar Technologies and Arun Gupta, CIO, Cipla Ltd will be among the speakers at the event. Date: March 6-8 2013 Venue: The Lalit, Mumbai Fee: CII Members: `8,000, Non-members: `9,500 Academia: `5,000 Contact: +80 2328 9391 Website:

Statement about ownership and other particulars about newspaper/periodical namely Intelligent Entrepreneur, as required to be published in the first issue of every year after the last day of February Form IV (See rule 8) (Press and Reg. Of Books Act, 1867) 1.Place of Publication: Ruby House, ‘A’ Wing, JK Sawant Marg, Dadar (West), Mumbai-400028. 2.Periodicity of Publication: Monthly 3.Printer’s Name: Mr. Mohan Gajria Nationality: Indian Address: Ruby House, ‘A’ Wing, JK Sawant Marg, Dadar (West), Mumbai-400028. 4.Publisher’s name: Mr. Lakshmi Narasimhan Nationality: Indian Address: Ruby House, ‘A’ Wing, JK Sawant Marg, Dadar (West), Mumbai-400028. 5.Editor’s Name: Mr. Sourav Majumdar Nationality: Indian Address: Ruby House, ‘A’ Wing, JK Sawant Marg, Dadar (West), Mumbai-400028. 6. Names and addresses of individuals who own the newspaper & partners or shareholders holding more than 1% of the total capital : Network 18 Media & Investments Limited** is the owner of the publication namely Intelligent Entrepreneur, having its registered office at 503, 504 & 507, 5th Floor, Mercantile House, 15, K. G. Marg, New Delhi - 110 001. Details of the shareholders of Network 18 Media & Investments Limited who holds more than 1% of the paid up equity capital of the Company as on 20-02-2013 is given below: 1 RRB Mediasoft Private Ltd., 403, Prabhat Kiran 17,Rajendra Place New Delhi 110008 2 RB Mediasoft Private Ltd., 403, Prabhat Kiran 17, Rajendra Place New Delhi 110008 3 RB Media Holdings Private Ltd., 403, Prabhat Kiran 17, Rajendra Place New Delhi 110008 4 Watermark Infratech Private Ltd., 403, Prabhat Kiran 17, Rajendra Place New Delhi 110008 5 Colorful Media Private Ltd., 403, Prabhat Kiran 17, Rajendra Place New Delhi 110008 6 Adventure Marketing Private Ltd., 403, Prabhat Kiran 17, Rajendra Place New Delhi 110008 7 Shinano Retail Private Ltd., 4Th Floor Court House Lokmanya Tilak Marg Dhobitalao Mumbai 400002 8 Nexg Ventures India Private Ltd., C-157, Industrial Area, Phase - VII Mohali, Punjab 160055 9 Arizona Global Services Private Ltd., 1204, 12Th Floor Hemkunt Chambers 89, Nehru Place New Delhi 110019 10 Acacia Banyan Partners Citibank N A, Custody Services 3Rd Flr, Trent House, G Block, Plot No. 60, BKC, Bandra - East Mumbai 400051 11 Independent Media Trust (Held In The Name Of Its Trustee) Empire Complex 1ST Floor 414 Senapati Bapat Marg Lower Parel Mumbai 400013 12 Network18 Media Trust (Held In The Name Of Its Trustee) 503 504 And 507 5Th Floor Mercantile House 15 Kasturba Gandhi Marg Delhi 110001 13 Network18 Group Senior Professional Welfare Trust (Held In The Name Of Its Trustee) 503 504 And 507 5Th Floor Mercantile House 15 Kasturba Gandhi Marg Delhi 110001 I, Lakshmi Narasimhan, hereby declare that all particulars given above are true to the best of my knowledge and belief. Dated: 20th February 2013 Lakshmi Narasimhan Signature of the publisher ** ownership of this magazine stand transferred from Infomedia Press Limited (formerly known as Infomedia18 Limited )( hereinafter “Infomedia”) to Network18 Media & Investments Limited (Network18) in pursuance of the scheme of arrangement between Network18 and Infomedia and their respective shareholders and creditors, as approved by the Hon’ble High Court of Delhi and the necessary approval of Ministry of Information and Broadcasting is being obtained.

Intelligent Entrepreneur  March 2013 13


GET YOUR BUSINESS VALUED Running a business is not a cakewalk. At every stage, one can be inundated with problems ranging from regulatory to operational, taxation to HR. If you have any queries on running a business in India, write in to us at and our experts will answer your queries Q: My father is running a successful small scale industry for the past 35 years. Now he is close to 70 years and being the only child I wish to see him retire. I am not interested in running the company even though it is doing quite well. We do not have any loans or liabilities. How can we unlock the potential of this company and what are the steps we need to take in case we want to sell the company? How do we find a buyer? What are the documents we need to get ready? What should will be our first step? We are paying our IT returns. - Shweta Jaikumar A: Selling an on-going business is a fairly complex activity with the following key steps—financial and legal due diligence, business valuation, marketing of deal, commercial negotiations with potential buyers, deal closure and legal documentation. It may be prudent for you to engage an investment banking company, which will help you go through the sale cycle. You may want to first get your business valued through the investment banking company. This will give you an indicative value of your business and will help you decide on whether you want to go for outright sale or work towards increasing the business value. For improving the valuation, you will be required to work towards maximizing cash generation and growth prospects of the company. Answer by: Ramendra Shukla, Associate Principal, Friends of Ambition, a growth advisory firm focused on middle India

Q. I want to form a pvt. ltd. company. What is the legal procedure to be paid by my company? Can I draw a salary? – Asked on A: Certainly, you, as the founder of the company, can be paid by the company. There are different ways in which 14 Intelligent Entrepreneur  March 2013

you can be paid. If you decide to act as the employee of the company, then the manner in which you can be paid is a salary. Here you would, like any other employee, need to enter into an employment contract with the company, and receive remuneration. In addition to this remuneration, on the basis of this employment contract, and a specific clause for bonuses, you may be paid a bonus at either regular intervals or on the achievement of certain goals. For example the bonus could be paid every quarter (three months), `5,000, or for every 10 happy customers a `1,000 bonus. What may also be done is that you could be paid by way of consultancy fees—for your expertise in management and your time. So, if you are going to be managing the marketing efforts being made by your company for instance, you may derive your salary/remuneration in the form of this consultancy fee. Shares are a good way of deriving remuneration in the form of dividends. This can happen by the company giving you a certain amount of shares at regular intervals. For example, your Shareholders’ Agreement could state that you will get 0.2 percent of the shares of the company every two months. Dividends are the payments made to the shareholders of a company out of the profits made by the company. For example, if the total profit of your company in a particular year is `1,000,000 and you want to distribute 10 percent of that as dividend, and you hold 49 percent of the shares of your company, then you would be entitled to get `49,000 as dividends. An uncommon way is through the payment of a commission. For example, the company sets a goal that on the completion of every 500 clients, `50,000 will be given to you as the founder. This could be a form of payment. Answer by:, a legal advisory firm

Q: I’m a retired Naval Officer and opened an IT company SSE at MIDC Mahape in Navi Mumbai. I have all the development infrastructure but there is no perceptible business growth of my unit for the last four years. What strategy should I adopt to give momentum to the business growth of my IT company? - Lt Cdr Harcharan Singh (Rtd). A: Business growth is a complex issue and defies simplistic solutions. There are many reasons why growth stalls, but fortunately nearly 85 percent of those are within management control. This means you can do something about your business. Since your letter does not tell us much about the specific kind of IT company you are running, it is difficult for us to be specific in our analysis. But the first thing you should do is meet a few of your existing and past customers and ask them to give you an honest opinion about your product and whether there are any areas in which they would like to see improvements. If you are in a B2B business, you need to remember that client referral is a big thing and your current and past clients, if they are happy, can open doors for you and sometimes, all you need to do is ask. Answer by: Ravi Kiran, Co-Founder and Managing Partner, Friends of Ambition

Q: What powers and responsibilities does a nominee have? – Asked on A: A nominee is a representative of the investor or the third party getting involved in the company—a dual, almost conflicting position. A nominee is appointed to have the power to supervise and sit in on the proceedings of the board, and to be present at the meetings of the board. As the director of the company, he has to serve the company and take actions which are in the best interest of the company. Since he has been appointed to protect the interests of the investor investing in the company, he has to also make sure that the investor’s interests are safeguarded, even if that in some cases means going against the interest of the company. Answer by: Disclaimer: All answers have been provided on best efforts basis, without any prejudice and based on limited information provided by the readers. Neither the organizations involved [Network 18, Entrepreneur, Vakilsearch and Friends of Ambition] nor their employees, allies, and associates take any responsibility—legal, financial or otherwise—arising out of application of advice given herein Intelligent Entrepreneur  March 2013 15



The Price Factor ‘Outcome-based’ pricing is an efficient way to grow the value and revenue in your business

[ VIKRAM SOOD ] IN THIS ARTICLE, I AM putting forth a new and revolutionary working and remuneration methodology for the entire marketing communications (Marcomm) industry. In fact, I feel by March 31 this year, every brand and business owner should already be demanding this. And halt contracts if they are denied this privilege.   Outcome-based pricing  I am proposing a revolutionary new model for paying your branding and marketing consultants or partners (however you want to call them). ‘Outcome-based’ remuneration can be a percentage of the growth they drive for your business. When you pay your fund manager or wealth manager a percentage of the outcome they create for you; why not pay your branding, marketing, advertising consultants and partners the same way? Isn’t their job also to grow the value and revenue of your business?    Billing vs building  As I see it, branding, marketing and advertising industries are reactionary industries. When mass production became the norm, mass consumption became the need and advertising was born. Let’s go back to 1836. La Presse, a French newspaper, for the first time ever, introduced paid advertising to reduce cost of the newspaper for readers. And that model continues even today. Every new medium grew on the ads which discounted its reach. Television-films, Internetdisplay/cost per click/cost per action and mobile; the story is the same. We have moved to a knowledge economy and are well on our way to a conceptual economy. In this age, the only thing which hasn’t changed is the billing behavior which builds nothing. As business owners and investors, your responsibility is to deploy capital in the most efficient 16 Intelligent Entrepreneur  March 2013

manner to achieve your business outcome. It is your Marcomm or corporate communications partner’s responsibility to achieve this. Every smart Indian business owner’s responsibility today is to acknowledge that the system this 400 year industry is using is not building anything, it’s only billing. You need to rethink every think from an outcome perspective, and work with Marcomm partners to bill your brand.

Outcome-based thinking

Once you shift to an outcome mode, you can build your business faster than before by thinking like an investor and forcing your partners to think the same. Outcome-based thinking encourages teams—internally and externally—to question everything, structure curiosity into research, think openly, and create brand-led innovations, which create lifelong bonds with consumers. Six years ago, using outcome-based thinking, I created original comic book characters and experiential books to sell it to a kids’ paint brand. This ensured the client did not spend a naya paisa on mainstream advertising in five years. Kids love the books and change room themes after reading these comic books. And to top it all, the comic book had a brochure builtin, and still sells for `300 per copy in Mumbai.

A parting thought If the outcome-based pricing model for your branding agency, advertising agency, marketing agency looks new to you, just look at what is considered the most sacred business—arts. An artist puts life and soul into a canvas or a Carrara marble, long before the auction hammer comes down. VIKRAM SOOD is the Co-Founder & CEO of And Then Consulting



Social Media for Business Expand your customer reach with these dos and don’ts

[ NANDINI VAIDYANATHAN ] IF THE EARLY YEARS of 2000 were all about the and Google Chrome—in fact, I love Google Jam on Internet, from 2006, it has been all about social Chrome which allows up to three people to jam media. First, it was the obsession of living out our online and even choose your own instruments! entire life in the public eye, giving a blow-by-blow  You can create content on blogs and Tumblr account of who we are, who we are with, what we (Tumblr is a microblogging and a social networkdo with them, where and sometimes even why. ing site, where you can combine text and pictures) So in the beginning it was all about voyeurism  You can react to stimuli in your environment within one’s network. using Rotten Tomatoes (movie rating site) and When the companies discovered these voyeurs Burrp (event/restaurants rating site). were also either their existing customers or  You can categorize and organize stuff using prospective customers, a simple social networkHashtags (add the hash to your content and it ing platform transmogrified will tag all similar content in itself into a potent marketing your network), StumbleUpon Given the buzz about tool. Until then, the word ‘viral’ (create categories like social media, it is was an adjective that described music, jokes, fiction etc) and quite fashionable to a particular kind of fever. Now Delicious (which allows you every marketer set his sights to bookmark not just on your say that we use social on going viral in the market. laptop but on web, so all those media technologies in Given the buzz about social who are browsing can see business media, it is quite fashionable them) to say that we use social media  You can consume content technologies in business. Most using a RSS (Really Simple of us have no clue why we Syndication where content should use it, how we should use it and what we comes to you, e.g. ESPN Cricinfo sends cricket should expect it to do for our business. Let me updates to your mobile), and widgets (which unravel it for the uninitiated. sit on your device and gives you updates, e.g. a weather widget). What are social media technologies? Broadly, all of the above can be labelled as It is social because it connects multitudes of social media technologies. people and facilitates their interaction (although some may argue that in fact social media has How is social media different from other media? made people more isolated!).  It is viral—it can reach a huge number of And it is media because it is published people in the shortest possible time. content. So what are the things you can do on  It is engaging—you can maintain high interest social media? levels by using content strategically.  You can share videos on YouTube, and pictures  It is cost-effective—whilst it costs money, on Flickr, Pinterest and Instagram. it does not cost as much as print and TV and  You can connect with people on Facebook, considering its potential for reach, it is the most Twitter and Google+ bang-for-the-buck tool  You can collaborate on Wikis, Google Hangout In a business context, these properties of social 18 Intelligent Entrepreneur  March 2013

Photo Sanjay Ramachandran

media can be effectively exploited to acquire new customers, retain existing customers by engaging them and getting existing customers to acquire new customers (this is where you maximize your benefit through social media). Thanks to social media, you don’t go around spending money on acquiring every single customer. You spend on one and the customer will bring the next customer and so it grows virally. The best thing is that your cost of customer acquisition and retention will reflect favorably in your profit and loss statement.

What are the reasons for which you can use social media?

 You can measure conversion (how many actually bought. In a travel portal for instance, it is measured as ‘from look to book’)  You can measure influence (in the Delhi rape victim Nirbhaya’s case, huge support was mobilized to influence policy making through social media)  You can measure sustainability (what is the attention span, is it lasting or fleeting?)

What are the tools for measuring social media effectiveness?  You have Facebook Insights which gives you the analytics in terms of traffic, demographic profile, page views, external referrers, etc.  You have Twitter Meter that gives you the most frequently used twitter words, trending etc.  You have YouTube Insights which allows users to understand audience profile.  All social media sites have pretty much developed fairly sophisticated analytics to help you measure the effectiveness of each of your campaigns on each of the social media.

 You can use it to acquire new customers.  You can use it to keep your customers engaged and involved. It is not just external customers but your internal ones too, your employees.  You can use it to create awareness if you have a new product or a new geo footprint.  You can use it to simply inspire the world.  You can use it to build your brand. Most people assume The bottomline really is that that using social you can use social media simply How much will a startup typito engage every stakeholder in cally need to allocate for social media is all about your habitat! media for a year? ‘posting’ content. By talking, listening, energizLike I said before, social media On the contrary, ing, embracing and supporting is a tool for implementing your it is more about you can engage with your audimarketing strategy. It is not the ence in different ways. strategy itself. ‘managing’ content Whatever you do, just rememMost people assume that ber this. Before you embark on using social media is all about an exciting ride on social media; ‘posting’ content. On the define the purpose, the expected outcome, target contrary, it is more about ‘managing’ content. audience, and your evangelist (Celebrity as in the So you will need to spend on a social media case of Lux or laymen as in the Dove campaign). agency (whose job it is to ‘manage’ the campaign), Define your goal first. Draw up your strategy an in-house content creator, Facebook Ads, next. Then choose your social media. prizes for contest, collaterals, videos and Social media is a marketing tool. Don’t confuse the like. So all told, you will need to allocate a it with strategy. It could be a single channel or minimum of about `10 lakhs in a year! multiple ones. Your choice should be governed by your goal. Disadvantages of using social media If you can’t measure something, it is of no use There are various disadvantages but the biggest to anyone. The effectiveness of social media can downside is that once you have put something on be measured. the Internet, it is very hard to retract. As Kevin Rose, the founder of Digg said, it is like What can be measured? trying to take pee out of the swimming pool!  You can measure footfall traffic (how many people visited your Facebook page for instance) NANDINI VAIDYANATHAN teaches entrepreneurship,  You can measure reach (how many liked it mentors entrepreneurs ( and has enough to share it with their network) authored the bestseller Entrepedia. Intelligent Entrepreneur  March 2013 19



Engaging in Job Creation

From income generation to micro-entrepreneurship, it is time to flip the paradigm [ TARA THIAGARAJAN ]

LESS THAN 50 MILLION PEOPLE are employed in the formal economy. That’s less than 5 percent of India’s population. What this means is that most of the country operates in the informal economy and most are by definition ‘poor’. When we speak of the formal economy, which accounts for almost all of our GDP, we often throw around terms like value creation, entrepreneurship and job creation and the like. But when it comes to the majority of India’s populace, we flip the paradigm to ‘income generation’ and ‘livelihood creation’ and use this interchangeably with micro-entrepreneurship, which it is not. It may seem logical, that after all, poverty is the lack of income and most of India has little of that. So, it is best to rush out to generate some income to feed yourself. Except that it’s not.

Value creation The wealth of a country, and largely organizations and individuals within it, depends on the value it creates. Wealth is not money printing. It is about how well we engage our resources to build new possibilities—make things better, faster or cheaper, and enhance our own capability as human beings. Grand stuff, all that; but it matters because for a healthy economy the money supply must track this—our collective value. It, therefore, makes for ineffective and potentially ugly economics if everyone is simply rushing to grab a piece of a fixed pie.

Generate income The unfortunate paradigm of income generation is to begin with some sort of hand skill—basket weaving, tailoring, mushroom cultivation and the like—with the expectation that someone (a non-profit or failing which, God or government maybe) must come along and compensate them for the energy expended. A belief we relentlessly 20 Intelligent Entrepreneur  March 2013

perpetuate through government schemes and non-profit is that hard work and sacrifice should be rewarded by someone, regardless of whether it is effective or useful. No matter that there may not be an accessible market or any market at all for the product. No matter that they are cost inefficient. No matter that the product may be of too poor a quality to be of value to anyone. Such income generation schemes are not empowering because they work inside out. They begin with a skill and search for a market rather than the other way around and are littered with bad economics, disappointment and shattered expectations. This is the inverse of entrepreneurship which begins with identifying a need and creating value that serves that need. If we believe in the human potential of our populace, then our goal should be to empower people with the tools of entrepreneurship, to seek value paradigms that begin outside in. And if we must help, we should do this by exposing people to markets, standards and competition.

Failure—the better teacher Hand-held ‘income generation’ schemes are more gentle and assuring of income in the shortterm. ‘Make and we shall support you’ (at least until we run out of donor money). Genuine entrepreneurship comes with little assurance and is littered with failure. But it is in the failure that we learn our most significant lessons; the ones that teach us what can go wrong and how to rise above. The failures sow the seeds for something better, raising the overall standards and productivity of the system. So, let’s go from income generation to micro entrepreneurship, flipping the paradigm from inside out to outside in. TARA THIAGARAJAN is Chairperson and Managing Director, Madura Microfinance Ltd.



Make Success ‘Antifragile’ It is best to have options in business, since high performance is fleeting [ R JAGANNATHAN ]

IN A WORLD WHERE VOLATILITY is the norm and predictability of future events next to impossible, governments, corporations and even individuals need to rethink their game plans. The world has been lurching from crisis to crisis—the 1980s Wall Street meltdown, the 1990s Asian collapse, the turn-of-the-century dotcom bust, and, most recently, the sub-prime bubble burst in 2008—not to speak of political upheavals of every kind; but we still want to believe that there is something called a safe path to growth. In fact, one can safely predict that the flood of cash created by the US Fed, the European Central Bank, the Bank of Japan and others has created so much government debt, that even this has to be reckoned as a future crisis in waiting. We just don’t know when that flood will overwhelm us with another crisis. In the 20th century, we have gone through all kinds of ideological fads to organize our economies. We had communism, capitalism, socialism, and mixed economics. Nothing worked forever. We’ve had big government, small government, Keynesian quick-fixes, monetarist predilections, and what-have-you. What we don’t have is one effective economic silver bullet to solve all our problems.

Corporate jargon On the corporate side, the kind of management fashions that have come and gone are simply too many to enumerate: we have gone through re-engineering, downsizing, rightsizing, de-layering, kaizen, lean management, Six Sigma, diversification, horizontal and vertical integration and then divestment. We’ve also had the mantras of globalization, localization, glocalization, outsourcing, in-sourcing and a zillion other ideas—each of which has had its time in the sun and then been consigned to a lesser existence. 22 Intelligent Entrepreneur  March 2013

What we don’t have is one management idea or strategy or technique that will work for any company all the time.

Success stories As individuals, we have found success and failures even more difficult to predict. A school dropout will become the world’s biggest millionaire, the guy who topped in class will be a clerk in some back office or audit assistant. Success, effort, IQ and excellence may have some correlation, but it is increasingly hard to explain why someone succeeds or fails. Bill Gates had success gifted to him by IBM and never looked back. Steve Jobs flopped in his first try, but in his second coming took the world by storm. Other good guys failed merely for being in the wrong place at the wrong time. As for lesser folks like you and me, despite thousands of self-help books to guide us, success or failure seems fairly unique and arbitrary—or even whimsically determined by fate, with God playing the fool all the time. So what am I driving at?

Prediction impossible You can’t predict who or what will succeed with any degree of certainty since success needs a whole lot of elements to come together at the same time for the individual or company or economy. So should you leave it all to luck and develop a kind of fatalism about success and failure? Nassim Nicholas Taleb, author of two brilliant books, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets and Black Swan: The Impact of the Highly Improbable, has come up with a new insight in what he considers the final and most definitive work in this trinity. It is called Antifragile. Photo Joshua Navalkar

You call something fragile if it can be impacted negatively by every passing wind or even a strong wind. In short, a fragile thing is something that may fall apart if it receives some kind of shock. ‘Antifragile’ is the opposite. Let’s hear Taleb on this: “Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk and uncertainty.” He calls this phenomenon antifragile—which is not the same as being strong or robust, since something that is robust is only less fragile, it is not antifragile.

and external to the firm, and it is not possible to hold most variables constant and identify the effect of just one.” Moreover, “in business, a firm’s performance is relative more than absolute, so that even if a company does things well in an absolute sense, it may still fail if rivals do things better.” Rosenzweig’s conclusion: “If we look over time, the strongest pattern is of temporary success— high performance tends to regress to the industry mean. Very, very few companies avoid this pattern—and just as you think you have found one, wait a few years and you will likely find that it, too, conforms to the pattern of regression. I Temporary rewards am not saying that high performance is random, A large farm that produces one very high-yieldbut it is fleeting.” ing crop variety may be very productive in To which Taleb’s antidote would be to make a one season, but very vulnerable if a super-pest firm not robust, but antifragile. And what would emerges and destroys the entire crop. But a farm that mean? It could mean preparing for volatilthat produces several different varieties of crop ity, not putting all eggs in one basket, investwill find that at least some ing in ‘options’—that is in crops survive the pest. This What we don’t have is smaller startups or competifarm is antifragile. In fact, with or ideas that may or may one management idea tors every pest attack, it will grow not take off, where success can more pest-resistant strains— or strategy or technique be scaled up once it is visible, that will work for any and failures quietly written off which is how evolution worked for us, through trial, error and company all the time. at small cost. retrial. By constantly mutating and responding to stressors Make your company scalable in the environment, the weak The essential point is this: it is species were eliminated and the stronger ones best to fail quickly and small. But if something survived and prospered. smells of success, it should be scalable. In fact, the survival of Hinduism in India— As an individual, this advice is sound. Take despite all its flaws—is the result of the whole of small risks to grow your wealth, but not such a society being antifragile. The profusion of castes, big one that it will ruin you, if you called wrong. each in some antagonism to the other, ensured For governments, antifragility means investthat even when some succumbed to invasions ing in lots of things that make its people producand conversions, the others survived and prostive; encouraging smaller firms and small, pered. Many other monocultures could not stand well-capitalized banks. the onslaught of stronger religions. This is not to Nothing should be too big or so all-powerful eulogize caste blindly, but just to point out that that one failed business or economic experithe collection of castes gave Hinduism an antiment can ruin the prosperity of an entire popufragile character for thousands of years. lation. This is what happened when the US In the corporate sphere, we know how book created banks that were too big to fail—and they after book on excellence has gone wrong in trying almost took their governments down with them to predict the right ingredients of lasting success. when they did. The truth is there is no one formula for winning, Unfortunately, this is exactly what the world and no formula, even if it results in a win, will is doing even now. Governments are making the work forever. As Phil Rosenzweig, author of The world economy fragile by taking on excess debt Halo Effect, told a writer and a colleague from and making themselves too big. The world econthe DNA newspaper in an interview some time omy is heading back to fragility. ago, success factors are difficult to nail because “there are so many things going on, both internal R JAGANNATHAN is the Editor of Intelligent Entrepreneur  March 2013 23



Vision Inc. Entrepreneurship demands more than just self-motivation

[ RICHARD BRANSON ] IF YOU AREN’T GOOD AT motivating yourself, you probably won’t get very far in business— especially as an entrepreneur. When you’re starting up a company, for the first couple of years afterward, there will be stressful days, and a heavy workload. You have to be able to give the job everything you’ve got every day, or it will easily get the better of you. The ability to tap into your determination and grit is not just an innate skill. You can teach yourself to get up every day and try to keep a new business going despite long odds, partly by structuring your life and job to make sure you are working toward your larger goals.

Outdo yourself I always wanted to go out there and prove myself, but I was very shy when I was young. And it was clear that I would have to master this, if I was going to succeed. My timidity could have easily held me back if she hadn’t helped me come out of my shell. My mother taught me to dive into situations even if I wasn’t completely sure about my abilities, and solve the problems that came up as I went along. When I was almost 12, she once sent me alone on a long bike-riding expedition to another town, knowing that I would be fine, but also that I’d have to find water and ask for directions along the way. Before I left school at 16, I was already working on launching what became one of my first businesses, Student magazine. Then my friends and I put ourselves in a position that forced the issue, by moving into a basement in West London that served as both our office and our living quarters, and gave our magazine everything we had. There were times when we struggled to pool together enough money to afford a proper meal—that in itself was a great motivator to follow through on calls to potential advertisers. 24 Intelligent Entrepreneur  March 2013

We were willing to live with such uncertainty because we wanted to give our generation a voice on issues that we felt strongly about, such as the Vietnam War; this shared goal meant a great deal to everyone involved. Understand what your main motivation is so that you can focus your efforts on reaching those goals. Structure your job—by delegating some work—so that you can spend as much time as possible turning this energy to your company’s advantage.

Share a vision These days, one of my goals is to keep challenging myself. I see life as one long university education, in place of the one I never had—every day I learn something new. I’ve found that I often learn a great deal from the people I meet, and some of them have inspired me. Meeting Mick Jagger and Steve Jobs had a big impact on me. They accomplished so much in their respective fields that spending time with them made me think about what I might do in mine. Afterward, I was more motivated than ever to do the best possible job in my own business. You should work on building a business you’re proud of. This has always been a motivator for me. If money is your only motive, then I believe you shouldn’t launch the business at all. Once you know what your own motivations and aspirations are, talk to your employees and colleagues about theirs, if you haven’t already. Structure their jobs in a way that allows them to tap into this energy, too. With you and your employees approaching your work with renewed energy and commitment, you’ll find that there’s little that you can’t accomplish together. ©Entrepreneur Inc. All rights reserved. RICHARD BRANSON is the Founder of the Virgin Group



The Valuation Discussion Decoded Key points to obtain a better deal from your potential investor

[ NANDINI MANSINGHKA ] IN THE FIRST MEETING WITH a prospective investor, entrepreneurs should only spend about the last 25 percent of the allotted time on the valuation discussion. More time should be spent on the team and business (50 percent) and the rest on financials and operating plan (25 percent). The investor would have made up his mind, to invest or not, through the first two segments itself. Here are some key concepts decoded for you.

Discounted cash flow is irrelevant During early stage, investors invest in you and your idea. While we have that great looking Excel sheet with fantastic growth plans and discounted cash flow (DCF) valuations, for the investor, it’s precisely that: a great looking Excel sheet. DCF-based valuation will mostly not be used!

Investment by promoter shows commitment The investor will evaluate your commitment to the business based on the money you have invested. More than the exact amount invested, what is critical is your investment as a proportion of your ability to invest.

Customer traction is critical Except for a technology product business, both consumer-focused and B2B businesses will require demonstrated traction for the valuation to improve. A business, which has demonstrated customer traction, will command a higher valuation than a high potential plan on paper.

Last drawn salary is a non-issue The valuation of the company is dependent on what you will earn next. While most investors understand the promoter’s right to a reasonable salary, the discussion will fall through if you are either looking to draw market-level salaries or build that into the valuation. 26 Intelligent Entrepreneur  March 2013

Relative valuation and people The promoter looks at the valuation of similar but larger companies in the recent past. The investors are focused primarily on how they or their peers have valued companies of similar stage or sizes in the past few months.

Pre-money and post-money valuation Pre-money valuation means the valuation of the company before the investor invests in the company, while post-money valuation means the valuation of the company after the money has been put in. When you as a promoter discuss your valuation expectation with the investor, you are always talking of the pre-money valuation.

Are you thinking equity stake or valuation? There will be a huge gap in valuation expectations between investors and promoters. A way to solve this is to arrive at a valuation number acceptable on both sides. Another is for the promoters to raise a smaller round of fund, diluting stake they are comfortable with.

General thumb rules for stake sale  Seed round: After 25-40 percent sweat equity, rest of the equity is to be split between promoter and investor on the money invested by each.  Angel or Early VC round: Angel investors or early stage VC funds typically look to owning between 20-40 percent of the company.  Series A round: Investors will look to own 10-20 percent of the company. Delay looking for external funding as far as possible. A business with demonstrated traction will always bring in a higher valuation than a concept stage company with several investors competing to be a part of your growth story. NANDINI MANSINGHKA is a seed stage and angel investor



Fixed vs Growth Mindsets Having a growth mindset plays an essential role in taking a company ahead [ MANISH SABHARWAL ] THE FINALE SONG I AM WHAT I AM in the Learning to grow Broadway musical La Cage aux Folles carried an This brings us to a wonderful book called important message about accepting people as Mindset by Carol Dweck, a professor at Stanford. they are. A higher tolerance of diversity has made Professor Dweck believes that companies and the world a better place. But how do we, as compapeople have two views of the world: Fixed or nies or individuals, know what we are capable of? Growth Mindsets. I know many individuals who talk fondly Fixed mindsets believe that individual or about their teachers or companies who talk corporate capabilities are like shoe size or height; about board members who pushed them to be something given that cannot be changed. But more than they were. In fact, the most imporgrowth mindsets are people and companies who tant management and self-help book in the world view capabilities as muscles; something that can may be Pygmalion by George be developed with hard work, Bernard Shaw (better known High expectations give determination and time. by the movie, My Fair Lady). It It is not surprising then that you the permission to is a book about the power of Dweck’s research suggests push yourself beyond high expectations. better outcomes for indiwhat you are. When High expectations give you viduals and companies with the permission to push yourgrowth mindsets. you do that, you self beyond what you are. In fact, a growth mindset become who you could When you do that, you become is nothing but another word or should be who you could and should be. for entrepreneurship. Because entrepreneurs know that Set realistic goals entrepreneurship, like science, Most companies recognize the power of goal is hypothesis testing: You can’t prove anything setting. However, too many companies sabotage right but have to prove it wrong. their future by taking too short term a view of A growth mindset gives you permission to themselves and their people’s capabilities. think about a future different from the past. It For instance: ‘We are good at engineering, but creates high expectations. bad at marketing.’ ‘She is not good at selling, but Most importantly, a growth mindset makes great at operations.’ ‘Don’t ask him to do someyou responsible for what happens to you. thing he is not good at or he will leave.’ ‘Focus on Of course, companies cannot become exceppeople strengths rather than weaknesses.’ ‘We tional in everything they do. Hence, much of their are not good at handling small accounts.’ successes is beyond their control. Of course, individuals and companies have Companies with growth mindsets recogcore capabilities. But there are very few companize that fate is what happens to you. And nies which are successful in the long term, for destiny is what you do with fate. And this is an some areas of their operations are not performing unfair advantage. well. In contrast, most successful companies are great at a few things by continuously trying to be MANISH SABHARWAL is the Chairman of good and moderate at other areas of operations. TeamLease Services 28 Intelligent Entrepreneur  March 2013



Dilemmas and Blessings Learning to let go of talent brings in new individuals and presents new opportunities to organizations [ ANURAG BATRA ] BEING AN ENTREPRENEUR IS LIKE growing up. You confront and learn a lot as you go along. Like in growing up, entrepreneurship presents many dilemmas for entrepreneurs. However, once in a while, stopping, looking back and contemplating facilitates ideas and foolproof execution.

Vexed situations The action and doer orientation of entrepreneurs presents unique situations and hence, dilemmas. What if the entrepreneur and his or her organization have witnessed many employees quitting, to later become their competition? Shouldn’t the entrepreneur be happy that he/she is an institution which has been the ‘birthplace’ of many new entrepreneurs? In the knowledge economy that we operate in, talent grows enterprises. How do we de-risk the enterprise from the talent? How do we make sure talent is a catalyst and not a hindrance? Some of these initiatives have chipped away from the entrepreneur’s own venture; some may have been unlawfully stolen databases, people and Intellectual Property Rights. How does an entrepreneur prevent this phenomenon from happening again and again? I have looked at Zee Group and Subhash Chandra who has built the Group from scratch, facing these dilemmas from time to time and coming out a winner, stronger at that, each time. Zee and Chandra created the category of TV broadcasting, be it in general entertainment channels or news; but as he grew, a number of his ex-colleagues and ex-employees went on to start similar or competing ventures. Chandra and Zee marched on creating bigger successes, thus raising the bar. I was thinking of this issue when I recalled a story that Chandra told me which provided answers to the questions on entrepreneurial dilemmas.

Chandra started out early as a 16-year-old working with his grandfather. His father believed that Chandra was liberal in his attitude with the people he dealt with. Chandra told his grandfather that his father’s belief was not true as being liberal-minded, he and his enterprise were gaining so much more. Four decades after this idea was articulated, Chandra’s belief still holds true.

De-risk your business The second thing that I have seen Chandra and other entrepreneurs do is to be calm in all situations, i.e. detached. Pursue excellence, but be detached. The third lesson I have learnt from entrepreneurs, especially from those in the media, is to de-risk the business from individuals. While talent is important, the brands are bigger than individuals and bench strength is a must so that there is a pipeline of talent. My personal view from having faced this situation more than once is that this is part of growing up and destiny. Entrepreneurs have to live by a fourfold credo in relation to these dilemmas:  Do the right thing for the right reason in the right manner, and not for individuals;  Learn to accept co-existence as a way of life and learn to appreciate it and thrive on it.  Create a bigger line; grow your business with even more vigor and vitality having learnt new lessons, and;  Every change presents an opportunity and brings fresh talent to the fore. When you have these guiding principles, these dilemmas disappear. ANURAG BATRA is a first-generation entrepreneur who was Much Below Average (MBA) at the prestigious Management Development Institute, MDI. Anurag is the Founder and Editorin-Chief of exchange4media Group which includes and Co-Founder of Governance Now Intelligent Entrepreneur  March 2013 29



A New Series of Sovereign Bonds It’s time the government thought of an option which will serve as a self-funded retirement plan [ BHARAT BANKA ] HERE ARE FEW PERENNIALLY PROBING questions that the Indian economy keeps facing with differing responses from various quarters. Let’s look at a few of these statements:  India lacks state-sponsored social security benefits, in contrast to those available for the likes of baby boomers in the western world.  Leaving state-sponsorship alone, even viable long-term private avenues for an Indian citizen to plan social security benefits for her retirement are almost negligible.  The market for long-term sovereign securities is concentrated with commercial banks and arguably, the longest tenure gets saturated at a 10-year paper, with shallow depth for 30-year paper.  The Indian saver, a significant 30 percent plus of annual GDP, being constrained for safe and secure long-term avenues to deploy his savings, is forced to park it in deposits with banks.  Interestingly, the liquidity generated by the banks arising out of such deposits from Indian savers is invested by the banks in Indian longdated government securities, partly due to mandatory requirements and partly due to lack of better arbitrage avenues for surplus liquidity.

Creative policy Now, just imagine if the government got somewhat more creative and could come out with an on-tap issuance of long dated sovereign bonds with the following indicative features:  Sovereign bonds: The sovereign guarantee to ensure zero risk on defaults or fear of default.  Investors: The series to be offered only to noninstitutional or non-corporate investors in primary issuance with PAN numbers. The investment by ultra high net worth investors should not be a concern.  Liquidity: The bonds to be listed on stock exchanges to provide liquidity to primary 30 Intelligent Entrepreneur  March 2013

investors, whereby secondary purchase will be open to all, including institutional or corporate investors to add depth to the market. It will also allow the government to buy back these securities from the open market, if it chose to do so.  Terms of the bond: To keep the coupon around 6 percent, make it tax-free and with a monthly payout option. The investment should be kept outside the definition of net wealth. Ideally, the bonds should be offered only in dematerialized form and those who don’t have one, can be provided one almost free of cost.  Why the yield? Why tax-free and why monthly?: A sovereign rate of 6 percent is sustainable for levels of growth and inflation in an economy like India, even for as long as a 50-year tenure. Keeping it tax-free will avoid hassles of TDS for individual investors, and monthly interest option helps individual investors meet their expenses.  Long tenure: While the longest sovereign bonds, though illiquid, are 30 years; this series can be perpetual bonds with tenure of 50 years (call option at the end of 30 years can be added).  Why such a long tenure?: In the absence of state-sponsored social security or retirement benefits, it could serve as a self-funded retirement plan. An adult of 18 years starting to invest in this bond will be able to see through the first series till the age of 68. The bonds would help the government to open up a recurring avenue to borrow and for a much longer term than today while freeing up the mandatory investment in G-Sec by banks to a large extent. It will provide an avenue to retail savers to plan long-term 100 percent secure returns. Any thoughts? (The views expressed here are personal) BHARAT BANKA is the Founding CEO of a leading private equity firm

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‘Anyone can start up’ Chris Guillebeau is an American entrepreneur, traveler, blogger, speaker and the author of two non-fiction books. He shares with Shruti Chakraborty the lessons and experiences he has picked up in his meetings with entrepreneurs across 192 countries Q: You have traveled extensively and have met entrepreneurs around the world. Tell us a little bit about your journey so far. What are the highlights? A: I have been traveling for the last ten years and writing about it for the last five years on my blog, The Art of NonConformity. I started a project to visit every country in the world and it’s almost complete now. Along the way, I met a number of interesting people and entrepreneurs who were doing different things. Most of the people I met did not have a business background or a business degree. Some of them just started a business because they lost their jobs and then ended up being more successful at the business than they imagined. I became an entrepreneur because I wasn’t a very good employee. I also did not like answering to someone else. About 12 years ago, I started out by creating a business in the online space and did a few other things before I eventually began travelling. I am a full-time writer now. I wanted to tell the stories of the people I met and provide a blueprint that others could follow to build successful businesses. This is how my ‘$100 startup’ concept came to be. That is also the name of my book, The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future. The message is primarily about freedom—helping people live with more freedom, more independence and to depend on themselves for their success and security. Q: How do you encourage this philosophy that you are talking about? 32 Intelligent Entrepreneur  March 2013

Is that also the focus on your blog? A: The blog’s theme is unconventional strategies for life, work and travel. I haven’t written my blog for people of one country or only for a certain kind of people. I have been writing to create awareness about creative employment across countries. I want to help people understand what is it they want to do in their lives, how they connect to others and what they can build for themselves in the process. Q: How was your experience in India? What is your opinion on the entrepreneurial environment in the country? A: I have been interacting with students in different business schools. In India, I realize that a lot of students aim to graduate and work for a big company. Some of the business students seem to realize that working for a company isn’t the best choice. They are taking the entrepreneurial plunge. I want more people to take up entrepreneurship and not look at it as something risky. Many students I interacted with had one question: What if I fail? The model of the $100 startup is to promote more people to look at entrepreneurship as something which is not risky. I encourage people to start a business with a small investment and start with a

“The idea is to focus on skill, passion and value— that is how a lot of people have found success”

product that has a strong likelihood of success. While entrepreneurship is active in India, I hope more students will go the entrepreneurial way soon. Q: What are the key aspects you address in your book for aspiring entrepreneurs? How relevant is it for today’s young entrepreneurs? A: One of the important things we address is the value of conversions. We encourage a person to look at something they love doing and then help them connect that to something which is useful and desirable for others. The idea is to focus on skill, passion and value—that is how a lot of people have found success. Another aspect is to help people understand skill transformation. This means if you are good at one thing, then you are likely to be good at a number of other things that require the same skill set. Say, if you are trained to be a teacher, you are likely to be good at crowd control, working with children, etc. So the idea is to use that to your advantage. We encourage people to start up quickly with a small investment. Q: In which countries, from the ones you have travelled, have you seen entrepreneurship flourish the most? Surely, there must be one or two nations who go the distance for entrepreneurs? A: I don’t think there is a way to say that with certainty. Because yes, while there is more paperwork involved in starting a business in countries like South Asia or Africa, there are so many people doing so many interesting things in these countries. There are so many micro-entrepreneurs in

these countries. So it’s tough for me to say [about entrepreneurs]. I believe entrepreneurship is India’s DNA. You see entrepreneurship everywhere around here. Even those who don’t know the word are making a living for themselves and doing something on their own, even in the slums.


Chris Guillebeau

Q: Have you met some interesting entrepreneurs whose stories you can share as examples? Or entrepreneurs who have done what you encourage your readers to do as well? A: In India, I met a man in Hyderabad. I have written about him in my book. He used to make spreadsheets and got really good at it. He began to help other people and created a business out of it. Most people don’t like working with data and numbers; so he was able to make a million dollar business. Another entrepreneur I met was passionate about travelling. He would use the frequent flier miles [he accumulated] to book tickets often. He then started booking for other people and made a business out of it. There are a lot of such examples. Q: Amongst the entrepreneurs you have met in countries around the world, what, in your opinion, are the common challenges they face? What advice do you give them? A: There are many challenges common to entrepreneurs around the world. One of them is: ‘I have five ideas. Which one makes the most business sense?’ followed by, ‘How do I grow it?’ I always advise people to take action quickly rather than deliberate over a long period of time. People need to invest in one idea, may be not all their resources, but start working on one. I would advise people to think about what they are passionate about. If you can’t think about it, ask your friends what you are good at. Then find a way to package it correctly. You don’t need to be an expert at anything. You just need to be passionate about something. In this way, just about anyone can start up. You could be sitting at home or between high paying jobs. Photo Amit Kumar

Intelligent Entrepreneur  March 2013 33

IPAD ADVT.indd 161

9/17/2011 12:24:05 AM


[ memory lane ]



The Co-CEO of Archie Comics Publications and daughterin-law of one of its legendary founders, Louis Silberkleit, says the comic book is a valuable tool for developing literacy among first-time readers Nancy Silberkleit


hen I stepped out of the classroom to preserve the 70-year-old legacy that I was bestowed with, I doubled over with fear and doubt about what I had got myself into. I was going to be a Co-CEO of a publishing firm and I had no idea about business. Another thing that was going to be a problem was the fact that I had never read a comic book. I knew about Betty and Veronica, but I had never read an Archie comic.

You can start at zero

NON-CONFORMIST: Nancy Silberkleit

34 Intelligent Entrepreneur ď‚„ March 2013

I had no love of reading. As a child, I had to repeat first grade because I could not read and that is where the love for reading died for me. It angered and shamed me. At school they gave me remedial books but I am sure if someone would have given me a book with graphics in it, things would have been very different. My husband passed away four years ago never knowing I had to repeat first grade—I never talked of this before. Now I realize I need to tell more people. It cannot be the anger in me. It needs to be the fire in me to create change. When I decided to take the job (in 2009), I made a mental note that I would read those comics and get the job done. Once done with the current issues, I decided I would start reading all the back issues and start finding my favorites. Very soon, I was going to the bookstore and picking up Photo Amit Kumar

bestsellers. I had found my love for reading once again. I was sure I wanted to get people to read more and so started holding comic book fairs in schools. The kids at the fairs loved them and I felt that I was onto a good thing. It was also a good thing for our brand as we were directly reaching out to our customers. Giving people the chance to get out of the box is what I love doing. Today, I am talking to illiteracy groups across the US, where one of seven adults cannot read.

Set yourself apart I always felt that I was defined as someone who is not smart because I could not read. Later on, I was put in this box of being a teacher. But if I would not have had the teaching degree, it would have been hard for me to grasp being a publisher so quickly. Being a teacher taught me how to research and to react in different situations with individuals, especially children. As I was thinking of saying yes to the job, I realized that I would need to have a business card that defines me—that can say what I have done, where my MBA is from, what my experience is, etc. But I realized that I had done nothing to put in there. But I still needed people to notice me. I decided to have a business card that had a slogan, a color and a scent. On one side of my card I have the scent of Betty and on the other, the scent of Veronica—engraved under a patch. Whenever I present my card, the person has the choice to either scratch the side Betty is on or where Veronica is on. Betty and Veronica were the ones who defined my character. I think I have both in me. Don’t doubt them. They are powerful identities as they have reached out to people the world over for the past 70 years. Now when I talk to people about entrepreneurship,

I tell them that it is very important to have a business card which is different. And people talk about it. When you go to meet somebody, carry your props that help people remember you.

Find your voice Betty and Veronica gave me a rebirth. I now realize that I have a voice and that one should never let anyone define who they want you to be. I am the first woman executive to walk into Archie Comics’ top office. I did not know of this before and if I did, I wonder if I would have taken up the job. It is intimidating because it is a very male-dominated industry. And I was always quiet, not opinionated, and never confident.

GIVING PEOPLE THE CHANCE TO GET OUT OF THE BOX IS WHAT I LOVE DOING. TODAY, I AM TALKING TO ILLITERACY GROUPS ACROSS THE US, WHERE ONE OF SEVEN ADULTS CANNOT READ Today, I love my voice and love inspiring people to feel strongly and speak up. I go by the practice of having slogans. My first one was ‘Comic Book + Children = Reading’. Over the years, it has evolved to ‘Comic Book + Children = Reading, Knowledge, Confidence and Creativity’. When I was about to start the comic book fair, I wanted ideas from my colleagues at work. I put out a white box outside my office soliciting ideas but everyone had their hands full. As a result, no ideas got into the box. It is good to have people helping you out but not everyone can do

everything. As an entrepreneur, if you want something done, it is on you to do it. You are going to have bricks thrown at you, but you have to find ways to maneuver around them. Once you maneuver around the obstacles, you will realize that you have come out with something even better than what you had started with.

Be ready to change Digital media has opened Archie’s comics to everyone. While my husband was around, he was afraid that technology may lead to piracy. As soon as the new management came on board, we got the digital versions up. People nowadays want to be able to read a comic book instantly and not have to go to a bookstore. I think about Louis Silberkleit and John L Goldwater, the two Jewish gentlemen (and founders of Archie Comics), taking the idea of a school and emulating what was going on in it. The 1950s…the mother at home… one child…this was all fantasy. They were creating entertainment for us but did not realize how powerful it would get. The reason I think Archie Comics has survived 70 years is because of the fact that this was a fantasy world people aspired for. Lives are complicated but reading an Archie comic helps you get lost in a different world for sometime. I am proud that I am able to keep my family legacy going and it is very special to me. What would Archie comics be without the Silberkleits and Goldwaters? The families went hand in hand. Recently, some people thought I was selling my stake. I wonder how these people did not realize that I have been a teacher. A teacher does not get into teaching to become wealthy but to expand and explain the world to his student. Archie gives me the ability to have the world as my classroom. As told to Pranbihanga Borpuzari Intelligent Entrepreneur  March 2013 35


[ gavel strike ]

BY DECREE Women entrepreneurs in the legal field in India are few and far between. Though the legal fraternity is now seeing more women entrepreneurs, Naina Krishna Murthy started her journey when few dared to do so A shna A mbre


aina Krishna Murthy, 39, Managing Partner at Krishnamurthy & Co. is often asked: Is K Law [as the firm is now popularly known] a second generation commitment for her or a firm started by her husband that now she is a part of? “It’s good when people underestimate one’s capabilities because it feels great when expectations are later exceeded,” says Murthy, who founded the firm. Graduating from National Law School, Bengaluru in 1996, Murthy bagged a plum campus placement in the legal department of Arthur Andersen. Though the opportunity was huge, things did not go the way she had imagined. After two years, Murthy quit and moved to Delhi to work at a law firm at one-third the salary at Andersen’s. It was a risk that did not pay off. The work environment at the new firm was not conducive and after six months, Murthy moved back to Bengaluru. In 1999, she worked as an in-house legal advisor for Biocon Ltd. The brilliant starts and almost immediate shutdowns in Murthy’s professional life brought about a realization—it was time to start a firm.

Setting base The idea of starting a firm seemed lucrative but had a number of associated challenges. The first was capital. “I had no idea of the financial needs 36 Intelligent Entrepreneur  March 2013

for setting up an office. Coming from a middle-class family, I was apprehensive of asking my parents for money,” says Murthy. With `60,000 sourced from personal savings—Murthy bought a computer, a printer and an internet modem— and set up her first office in her residence in late 1999. “I carried out all jobs, big and small for the office— going through cases, delivering documents and meeting clients. I had to do everything as I couldn’t afford to pay others and myself a salary,” she adds. In fact, Murthy charged no fees from most of her first-time clients. Instead, she asked for a guaranteed second assignment if they were satisfied with the quality of her work. The strategy worked. By end-2000, with her new team of two, Murthy took on twice the amount of work that came her way, unlike earlier. This work was primarily associated with understanding contracts for IT companies that had branched out of the US and had set up base in India. In 2001, Taneja Aerospace & Aviation Ltd., a company that operates in the aviation and aeronautical space in India, became Murthy’s first big client. It got off Murthy’s firm to a flying start. With this assignment, Murthy unlocked her firm’s brand value and established a name for herself in the market. With stability came more clients and consequently, more work.


Naina Krishna Murthy

Murthy realized it was time to get out of the residence set-up and look out for office space. Her first office space, she recalls, “was one-tenth the size of my current office. My clients today would be appalled to see that space.”

Reinventing the wheel It is often said that marriage changes things for women. And so it was with Murthy. After successfully establishing her legal business firm for eight years in Bengaluru, Murthy got married in 2008 and had to relocate to Mumbai. Work took on a new dimension in Mumbai, with Murthy starting a new

forward; she built everything from scratch for K Law. Being a new name in the legal fraternity, she found it quite tough to convince clients about the quality of services offered. “I was competing with well-known, established firms and persuading clients not to judge my work by the lack of experience in terms of years, which was a very difficult task,” she points out. Another challenge for Murthy was attracting the right talent and retaining it. In the initial stages, paying high salaries was not an option due to which she lost out on a number of good workers. Now Murthy invests a lot of time and effort in building relationships with clients and employees. An open door policy has helped getting the best output, she says. Vishwanathan points out that Murthy and her team work on three prime fundamentals. “First, she ensures the complete involvement of each team member on a transaction and enables them to respond and assist the client at all times. Second, she makes sure that there is adequate partner attention on each case. The last: her ability to consistently fulfil commitments on turnaround time.”

Today and tomorrow

office in the same business space. She says, “The good thing was that the Bengaluru office was doing extremely well, but I did not want the pressure of the new office [in Mumbai] to be borne by it. So I decided to replicate things.” Replicating things was not an easy process because the dynamics and logistics were quite different in the two cities. Murthy, however, worked hard and expanded her business. She now has offices in Chennai and New Delhi. “Naina’s ability to build a legal services organization in just a decade as a first generation entrepreneur is highly commendable,” says Raji Vishwanathan, Chief Legal Photo Nachiket Gujar

VALUE DEALS M&A (2012) : $500 million PE and VC (2012): $60 million Advisor-Financial Services, Larsen & Toubro, an engineering and technology company. Murthy’s commitment and passion is sustained with focus on growth, consistency in delivering quality advice and client loyalty, she says.

The leader within Murthy says her challenges were multiple. She had no legacy to carry

Today, K Law provides a wide spectrum of legal services in various business sectors. Its primary practice includes corporate, commercial (private equity, mergers and acquisitions and, securities laws), banking and finance, infrastructure, real estate, intellectual property and dispute resolution. Murthy also mentions that the firm has worked with over 2,000 different clients since inception. The firm works with 500 to 600 clients actively at any given time. Murthy’s current focus area is her team and workers. She wants to create a healthy and happy work environment; if her team is in the right shape then everything else would fall in place. “My team is the only legacy I believe I have. I must invest in them,” she says. Intelligent Entrepreneur  March 2013 37


[ teeing off]

Say Yes to Nas-tees No Nasties wants you to wear good, and we don’t mean in the visual sense only Julie Sam


ne look at Apurva Kothari’s business card and you get what he means when he says that social entrepreneurship is not his choice of profession—it is a way of life. Kothari’s card is made by an initiative called, Are you Recycling, Reusing, Recycling? (RUR) that uses recycled paper to make business cards. Kothari was only 22 in 1997 when he migrated to the US to pursue his Masters in Computer Engineering at 38 Intelligent Entrepreneur  March 2013

the University of Texas. Post his education, Kothari landed cushy, salaried jobs with some Fortune 500 companies there, living the American dream. While still in the US, Kothari read articles and research papers about the increasing suicide rates amongst Indian cotton farmers. “Figures show that in the past 15 years, over three lakh [particularly cash crop and cotton-growing] farmers have committed suicide. This translates into a suicide every half an hour,” says Kothari. While the end-products from the very cotton these farmers grew were part of a multi-billion dollar industry, they were not benefiting at all from it. Rather, they were getting the harshest

ORGANIC BIZ: Apurva Kothari

end of the stick. In his heart, Kothari knew that he had to do something to correct this, while in his mind he was aware of the impracticality of leaving a cushy, comfortable job in the US.

Back for good In January 2010, Kothari finally decided to come home. He noticed that there were farmer cooperatives and firms working directly with farmers on inculcating fair trade and organic practices, but no one was working directly in the local consumer sector to create a market for what these farmers were churning out. It was on this premise that Kothari founded No Nasties, an organization that designs, produces, and retails 100

percent organic T-shirts. The prices start at `799. Between January 2010 and March 2011, Kothari dedicated his time in developing his idea along with Diti Kotecha, an independent travel photographer and graphic designer (who left the firm later), in the fixing up of a plan, and talking to possible suppliers. He also created a pilot line of T-shirts, designing them himself as well as finding other designers for them. It was in April 2011 that the No Nasties line of organic and fair trade T-shirts went live. These products are now sold via a number of retail stores as well as its website from where it gets most of its orders. The company also takes international orders from the US, UK, Austria, Germany and Japan. Kothari emphasizes that it was important to create a brand that people want to associate with. “If you ask someone to change their dressing style or lifestyle, it doesn’t work—it is a much larger gap to bridge. Indians are brand-conscious. They will happily shell out money for a Nike T-shirt even though the quality may not be that great compared to a locally designed T-shirt," he says. With No Nasties, Kothari has tried to create a brand that leverages its ecofocused identity without being preachy. A good deal of the visibility he gets is thanks to marquee clients like the band Indus Creed, singer and artist Monica Dogra, and Sankalp Forum, among others.

organic cooperatives. Of these, he later picked Chetna Organic for supplying organic cotton for his T-shirts. Kothari then also engaged with Shop for Change, a not-for-profit company that supports poor farmers and artisans in India, who certify No Nasties as fair trade. The products that No Nasties retails through its website are shipped via Mirakle Couriers, a firm that employs the deaf. Incidentally, No Nasties is the first e-commerce client Mirakle has worked with. Even the packaging paper No Nasties uses comes from RUR, the same forum that makes Kothari’s business cards. The company also contributes its profits at the end of the chain towards good. It uses a chunk of these profits

Finding the right partner

Giving a leg up

No Nasties is involved—from start to finish—with entities focused on making a conscious effort towards driving good in the society. Kothari explains, “It was a conscious effort to involve with every organization that is connected with social good. It took a whole year to find the right partners to work with, and we picked these vendors after meeting several others around the country.” The firm’s current partners came through networking and a bit of luck. During his earlier travels to India, Kothari met a few people involved with

Started with Kothari’s funds, No Nasties clocked a turnover of `12 lakh in 2011 and broke even in the same year. In the current financial year, it has clocked a turnover of `25 lakh. In all, Kothari has invested about `8 lakh of his own in the business and has also always been open to external funding, but not at the cost of his firm’s foundations. Kothari comments that scaling up in the country for his kind of business is not an easy ride given the high input costs, including real estate costs, as well as for producing

Photo Joshua Navalkar

FITTING IN Launched in: April 2011 Initial investment: `8 lakh Investee: UnLtd India Org 2011: `80,000 2012: `2 lakhs Revenue: FY12: `12 lakh FY13: Approx. `25 lakh

to support Tsunmika, a not-for-profit organization based in Auroville, which helps women affected by the tsunami disaster of 2004 to make dolls.

the T-shirts, something which is taken care of by Rajlakshmi Mills, a sustainable textile maker located in Kolkata. “The industry is not as organized as one would like it to be. To expand, one might have to look at other factories in other states,” he says. One of the possible locations could be Tirupur in the state of Tamil Nadu, he mentions. The biggest hurdle for Kothari, however, was to overcome his personal limitations as an entrepreneur. “Given my lack of experience as an entrepreneur, I may not have always chosen the right thing. This is where an investee like UnLtd comes as a godsend,” explains Kothari. UnLtd India, an investee in social businesses that also provides incubation support for social entrepreneurs, invested `80,000 in No Nasties in 2011 and then an additional `2 lakh in 2012 along with mentoring and support. Karen D’Souza, AssociateIncubation Support at UnLtd India, explains that the advantage Kothari has is that he has a clear vision of what he wants to achieve with No Nasties and the confidence to be able to do it. D’Souza, however, warns that the organic, fair trade, ethical movement in India is very niche at the moment and only prevalent in cities, particularly among the younger, middle class. “Although this space has large scale potential [India has overtaken Turkey in the production of organic cotton], awareness is low. This means a lot of the produce is consumed in exports. No Nasties is going to be challenged in the coming year to create a large scale movement and awareness among consumers from all demographics in India,” she says. Whatever may be the market challenge, if you asked Kothari, the numbers on the retail end would never be his metric to measure No Nasties’ success. It will be the dent he can make in the cotton farmer suicide rate, which disturbed him all those years ago while living and working in the US. Intelligent Entrepreneur  March 2013 39


Myth Buster iconoclast

Seth Godin

has one of the most-loved marketing blogs on the Internet, has penned more than a dozen bestselling books and launched a social site that attracts more than 50 million viewers per month. Yet he makes little effort to cultivate a following, preferring to be discovered virally. Those who do find him stick around for his uncomplicated entrepreneurial mantras, which boil down to this: Make something happen. Now, he says, the time is ripe for impresarios and artists to take the lead in the business world. He sat down with us to reveal the philosophies that have brought him to this point, as explored in his new book, The Icarus Deception Corie Brown photography by Glenn Glasser

42 Intelligent Entrepreneur ď‚„ March 2013

“Icarus. The original myth had two parts. Daedalus said to his son, ‘I fashioned these wings for you. Two rules. Don’t fly too high, or the sun will melt the wax. But, more important, son, don’t fly too low. Because if you fly too low, the water and the waves will surely weigh down the wings, and you will die.’ We’ve left out the second part of the myth. We don’t say to people anymore, ‘Don’t fly too low.’ All we do from the time they are 4-year-olds is warn them against hubris. We have created this industrially-led structure that says:

“ How


you !” Intelligent Entrepreneur  March 2013 43



the late 1990s, when the Internet was a toddler, Seth Godin grasped the personal nature of the digital economy and made a fortune teaching people how to build direct-marketing relationships through e-mail. His groundbreaking book, Permission Marketing, detailed his strategy and made him the go-tomarketing guru for web pioneers. During the next decade, Godin wrote a dozen zeitgeist-savvy business books, penned a popular column for Fast Company magazine and started a daily routine of posting to, which has long been in the top 10, if not No. 1 or 2, on the AdAge Power 150 ranking of marketing blogs. In 2005, he launched Squidoo, a website that helps hobbyists publicize and monetize their personal passions and now attracts more than 53 million unique visitors a month. And then, three years ago, he dropped out of sight. “I made a decision to write for my readers, not to try to find more readers for my writing,” he explains. “I don’t do outbound stuff to interrupt strangers.”

A disruptive and destructive change

Godin isn't as bald as he appears in pictures. The white duck down encircling his head is trimmed close. Sinewy and alert, he is also gracious and relaxed and makes a habit of preparing his favorite lunch of brown rice, vegetables and a fried egg for guests who visit the apartment he has transformed into a homey office in downtown Hastingson-Hudson, New York. For the past three years, Godin has continued to write his daily blog and maintain a lecture and workshop schedule. He has no full-time employees. When he needs help on a project, he taps a small circle of regular collaborators. He is not a Facebook fan or 44 Intelligent Entrepreneur  March 2013

tweeter; he has no publicist. Books from his publishing venture The Domino Project, launched in conjunction with Amazon, did not have major publicity pushes or wide release at bookstores; instead, its provocative ideas spread virally, as the slim volumes were passed from one person to the next. With his new book, The Icarus Deception: How High Will You Fly?, Godin ends his self-imposed exile. Published by Penguin Group’s Portfolio, the book was funded publicly via a Kickstarter campaign that raised $287,342 from 4,242 people in 30 days. “I am more proud of this than anything I've ever done,” Godin says. “Icarus feels urgent enough that I wanted to reach a group of people I can't easily reach with a blog

and anyone else who isn't afraid to express themselves have the opportunity to find an audience. “The sooner you deal with this and embrace it, the more likely it is that you end up on the side of the chasm with the people who can’t believe their good fortune, as opposed to people who are cursing the darkness,” Godin says, delivering his heaven-or-hell scenario with equanimity. “I'm pretty sure I’m right. What I’m not sure of is how long it will take and how unevenly it will be distributed.” “We've left the industrial era, the era of Mad Men, the era of ‘Build a system, spend money and grow it,’” he goes on. “The recession is permanent. The cyclical one is over, but there is a permanent decline in industrial labor that is going

“He really makes you think. He is never going

to tell you what to do. He is never going to give you the answer. He is going to steer you in the direction to get there.” —Michael Landau, CEO, Drybar, a hair salon chain post. And I wanted to be able to talk to those people with authority, so that they open up and give it a try.” Starting with this, his first-ever major magazine profile, Godin is aiming to connect with should-be, almost-are or want-to-be artists. They need to know, he proclaims, that this is their moment. “How many people get to go to work every day and say, ‘This might not work,’ and then go [do it]? The answer is, not enough,” he says. “But it is going up. And that’s what the book is trying to sell people. It is trying to sell them the joy of being able to say, ‘This might not work.’ Because it is so cheap to fail today compared to what it was to fail 50 years ago.” Success, meanwhile, has never offered more rewards. “We are paying people more money and giving them more freedom than ever before to make art,” he says. It isn't just painters and potters and poets. Entrepreneurs, marketers, crazy people who dance on street corners

to continue for the rest of our lives.” What we have now, he maintains, is a ‘connection economy,’ in which impresarios are the new big men on campus. “We are in an era of handmade insights, of human beings who touch other human beings in some way, making change happen.” As good as that sounds—and Godin assures it is good—such a change can be both disruptive and destructive. Expect collateral damage: Some people will not be able to make the shift from working for others to working for themselves. All this is detailed in Icarus, which Godin describes as a ‘screed.’ But though written in his discursive, stream-of-consciousness style, the book is neither long nor a rant. It is Godin’s clarion call, a public appeal to seize this moment of opportunity and riches before the barriers are rebuilt. If enough people make enough good art, impresarios might rule the world—an idea Godin finds appealing.

Make a mark

Walk into any bookstore and you will find titles promising to liberate you from ennui, a hundred fast rides to wealth and fame. The self-help guru of the moment is Tim Ferriss. His narcissist’s guide to getting rich by working very little, The 4-Hour Workweek, covers all the bases. Godin’s books take the opposite tack. Rather than ‘how to,’ they are ‘what is,’ capturing big-business trends in short, evocative phrases. Unleashing the Ideavirus (2001) is a strategy for inspiring change in society. Purple Cow (2003) discusses the power of being unique in a world of sameness. And Tribes (2008) explains the new ways we are organizing ourselves in a hyperconnected world. Whatever the particular market phenomenon he is describing, Godin’s central message is the same: Face your fears. Risk failure. Struggle. Persevere. Be free. He offers no shortcuts or detailed directions. “Seth is one of the few people I know about whom I would be comfortable using the overused term guru,” says Kevin Kelly, one of the visionaries behind Wired magazine and author of What Technology Wants. “Technically a guru is an enlightened teacher of wisdom, not a mere expert. Seth is a legitimate guru. He dispenses wisdom and teaches wisdom. He is forever reminding everyone of the unchanging truths, and then overturning everything else, and constantly questioning his own—and your—discernment between the two.” Michael Wayne was building his digital media company, DECA, when Godin released Tribes. “He captured what we were thinking and experiencing before anyone had a name for it. I bought the book for everyone in our office,” Wayne says. Godin calls himself a teacher. He’d rather give his students a compass than a map. “I'm trying to say to people, just for a minute: Put on a set of glasses and see the world as I imagine it,” he says. “Does it work for you? Does it feel right? Does it make sense? And, if it does, don’t do what I just said to do —

“He has a deep understanding of how entrepreneurs think, of what it takes to build trust with customers, and how to grow businesses in environments with great uncertainty. He is a hugely valuable voice to us...he pushes us to think bigger and bolder about tackling poverty.” —Sasha Dichter, Chief Innovation Officer at Acumen Fund, a non-profit global venture fund

that's a cookie cutter. Invent your own next chapter.” At the time Godin started writing, his students worked in office buildings for companies with big marketing departments. Today he speaks to individuals who embrace what he says about the post-industrial world and are eager to leave the platitudes of the corporate world behind. The ubiquitous checklist of ‘foolproof’ steps to solve problems is “an easy sell,” Godin says, “but it isn’t true.” More important, “it isn’t going to put a dent in the universe. The way you make something happen is to do something that a fool could screw up. These things aren’t foolproof. They are risky, scary. They require vulnerability and a willingness to be in the world.”

stead of horseback riding or swimming. “Canoeing was hard and scary, and the wind could blow you across the lake if you did it wrong,” he says. “After a year of not doing it right, I could talk to people and get them to sit up straight, take different kinds of chances, to breathe differently, to engage in the moment in the boat. And I changed them, and I changed me in the process. I did it for five or six years. I was really good at it, and I really loved doing it, and I’ve been trying to re-create that ever since.” After graduating from Stanford University’s business school in 1984, Godin started a book-packaging company, peddling finished concepts to publishers. He had an early success, followed

Learn new tricks

Buffalo, New York, in the 1960s was a painful obstacle course for a scrawny kid growing up with what he now thinks was attention-deficit disorder. Everyone played hockey, so Godin did too, despite heart-stopping fear of being slammed into the ice. And everyone went to summer camp, so Godin’s parents sent him off to Camp Arowhon in northern Ontario. “I didn't like it much as a kid,” he recalls. “Camp was about fitting in, and there was a fair amount of bullying.” He stuck it out, though, finding his niche as a canoeing instructor. Godin’s job wasn’t just to teach canoe tricks—he had to convince campers to do that inIntelligent Entrepreneur  March 2013 45


Postscript: ‘The Tribe Finds You’ I approached the research and writing of this profile wearing two hats. I was both a journalist and an entrepreneur. My standard curiosity spiked with skepticism made room for a bit of optimism that perhaps I’d learn something that would help me build Zester Daily, the journalists’ business cooperative I founded. I asked Godin about skills, talent and connections. “If I were talking to people who are diamond-cutters or cardiac surgeons, I think we can agree that skill first, second and third are all I care about,” he said. “But almost everyone who is making progress in today’s economy isn’t doing something with a certified skill. So the skills we are talking about are the skills to connect with people, to see the world as it is, the ability to imagine a different place you would want to take the world. These are fundamental human skills, not something you learn at Harvard.” I asked about money. “Anyone subscribing to this magazine has enough resources to put something into the world and see what happens. It has never been easier,” he said. “We just connected you to a billion people for free. It costs you nothing to start that eBay business. If no one buys your stuff on eBay, then don’t sell it. It costs by 900 failures. Then, he says, he found his groove, before completely screwing up. “This T-shirt here is one of my most treasured possessions,” he says, pulling out a garment featuring the cartoon face with round glasses that has since become his logo. “Forty billion dollars is what this T-shirt is worth.” In the early 1990s, before the online world had fully formed, Godin snagged a magazine assignment to write about “cool things” happening on the Internet. He parlayed that into an $80,000 book deal, Best of the Net. The T-shirt was part of the package. “I hired a lot of people,” he says. “It took six months. We made a 250-page book, and it sold less than 2,000 copies.” At the same time, Jerry Yang and David Filo saw what was going on with the Net and said the best way to tell people is to start a search engine. And they started Yahoo.

you nothing to buy Google Ads. If no one clicks, you don’t have to pay anything. It costs you nothing to have a blog and give away every secret you know. If no one reads it, nothing happens.” The thought of failing makes me sad, I told him. “If Zester doesn’t work, it will be because you have been protecting yourself from being sad,” he said. “Art is painful. Bob Dylan got booed offstage when he went electric. He got booed offstage when he went gospel. The Monkees never got booed offstage.” Then I asked about finding an audience. “Generally, the tribe finds you,” he said. “If they are hiding, you are never going to find them. And if they find you, it is because you are being generous to others who are in your tribe. Generosity in the industrial setting means giving them stuff. But I’m talking about giving them kindness and attention and connection. “I thought what was neat about Zester,” he added, “besides the writing being really good, is that the tribe of people who are going to spend the time reading is exactly who a certain group of people need to reach with their advertising. But they aren’t going to do it willingly. They are only going to come along after you are so dominant in the space that they have no choice. The key is, if every one of your users gets you 10 more, and you do that three times, then you win.”

“I knew what they knew,” he continues. “I had the resources they had. And I created a book that sold nothing, and they created a company worth $80 billion. I figure I would have had half of that, so that is why the T-shirt is worth $40 billion.” It was an invaluable lesson, says Godin, who went on to launch Yoyodyne, an internet marketing company he sold to Yahoo for some $30 million in stock in 1998, when Yahoo shares were rising $2 per day. Yoyodyne was a scrappy little company that punched above its weight. When everyone else was treating internet users as a commodity, Godin preached relationships. “Seth likes to say there are two ways to get married,” says Michael Landau, a colleague at Yoyodyne who became vice president of brand marketing at Yahoo and is

“For an entrepreneur, Seth provides a fresh insight into consumer psychology and marketing trends, but at a higher level, is more suited to someone who has already covered the basics.” —Jessie Paul,

CEO at Paul Writer Strategic Advisory, a marketing advisory firm

46 Intelligent Entrepreneur  March 2013

now CEO of Drybar, a chain of chic hair salons. “You can go up to every single girl you meet and hope that you get some random sucker who agrees to do it, which is what traditional advertising does, or you can take a more methodical approach: Ask someone out on a date first and get to know them. Then another date. And, eventually, get married.” Yoyodyne, Landau adds, was an ‘intoxicating’ experience. “The world was changing in a big way, and no one knew what to do. Desperate is probably the wrong word, but clients were anxious and grateful for someone helping them figure it out.” Godin needed a way to explain exactly what he did for clients. “We weren’t selling ads, so what were we selling?” he recalls thinking. “I got in the shower one morning and didn’t get out until I had my answer. Just as the hot water ran out—15 to 20 minutes—I had it. What we do is ‘permission marketing.’ We deliver anticipated, personal and relevant messages to people who want to get them.” He laid out the philosophy in Permission Marketing. “Seth has created his own school of marketing,” contends popular Sili-

con Valley blogger Guy Kawasaki. “He doesn’t fit into anyone else’s. He’s all about clear differentiation, permission and not asking customers to do something that you wouldn’t do.” Landau calls Godin a mentor who ‘truly changed the trajectory of my career and my life.’ That said, he adds, Godin “can be the most frustrating person because he really makes you think. He is never going to tell you what to do. He is never going to give you the answer. He is going to steer you in the direction to get there.” At Drybar, Landau has been struggling to control costs, in particular the cost of taking phone reservations. He was thinking about offering

“He first wrote about permission marketing in the ’90s, but it is relevant now more than ever. To target your audience accurately so that you are only communicating with people who are interested in what you have to say.” —Sidharth Rao, CEO and Co-Founder at Webchutney, a full service digital consulting & advertising firm $1 off to anyone who booked online, but Godin’s advice changed his mind. “Double what you spend on telephone operators,” he told Landau. “Encourage customers to call in—these people love connecting with your brand. They are your evangelists.” Landau says those words ‘completely shifted’ his thinking. Indeed, “Never squander your relationship with your customer” has been a Godinism for 20 years. A year after the Yahoo buyout, Godin left Silicon Valley to live a writer’s life in the Hudson Valley, helping people improve their marketing skills. “What’s really cool, which I didn’t plan on, is that it applies to people way down the hierarchy of scale and profitability,” he says. “It applies to second-grade teachers, a waitress in a restaurant who wants tips to go up, or musicians who want to make a living. And that’s all new.”

The Icarus Deception is a dare.

Indicating a giant compilation of the best of his blog posts, a gift to the Kickstarter investors in the project, Godin says, “The name of the book is This Might Work, but if you turn it over, the back cover says This Might Not Work. And if you open it, you see a list of all of my projects that have been complete failures. You have to embrace the stuff that doesn’t work or you don’t get to play.” But if you can accept that, and you offer your art to the world, Godin contends, life improves. New things are possible—witness the artisanal revolution that swept through the food world a couple of years ago. Mass-market producers like Procter & Gamble are

losing more shelf space to impresarios. “If it isn’t going to happen in your industry, then your industry is dead, and you should get out of it. It will downsize and cost-reduce, and you can’t win there,” Godin warns. “The connection economy creates abundance,” he notes. However, “there are not going to be jobs like we used to think of jobs. Those jobs are going away. But the number of opportunities for tribe leaders goes up.” This is because the connection machine and the marketing machine and the announcement machine that is the Internet allows everyone to create. “I can't even go to the edges of how revolutionary this all is, because people can keep coming up with stuff that is even closer to the edge,” he says. “The thought that there will be franchises where there is no franchisor isn’t that big—it is only two years from now. The idea that if you can’t get on TV, you will make your own show and broadcast it is happening right now. No matter what field you are in, your bluff is called. You can no longer point to boundaries that are there, because they are pretty easy to surmount, if you want to. “In 1918, the one thing you wanted to hear was ‘Make sure you have an assembly line. Make sure you have mass production.’ In 1950, the one thing you wanted to hear was ‘Buy more ads.’ [Now] the only thing you need to hear is ‘Be more generous. Make more art so that you can be trusted.’ If you try to maximize those things, everything else will take care of itself.” ©Entrepreneur Inc. All rights reserved. Corie Brown, a former Los Angeles Times Editor, is founder and GM of Zester Daily, an international journalism cooperative Intelligent Entrepreneur  March 2013 47


[ special effects ]

Karnataka’s animation, VFX and gaming sector is picking up steam, pushed by a state-devised policy Shonali A dvani


you recall the visual effects in the James Bond flick Skyfall? How about Life of Pi, Sherlock Holmes, Harry Potter or Pirates of the Caribbean? Apart from being Hollywood hits, these movies have another commonality—India’s IT capital Bengaluru. Surprising? Unknown to most, a large chunk of animation and visual effects for these blockbusters were made in the local studios by Indian talent.

New source Karnataka is a relatively newer and smaller hub for animation, visual effects (VFX), gaming and comics (AVGC) in comparison to Chennai, Hyderabad, and Mumbai. They have been around for over a decade, and are bigger in terms of all measurable metrics. Lately, Bengaluru too has been finding its feet overseas. In early 2012, Karnataka became the first Indian state to unveil a policy for the AVGC sector, recognizing its growth potential. This policy was a result of the two-year long effort made by the Association of Bangalore 48 Intelligent Entrepreneur  March 2013

Animation Industries (ABAI), which began its operations in 2005. The policy’s salient features include focusing on bridging the demand-supply gap for people in the sector, attracting global companies in the field, capturing a larger share of outsourced international AVGC work, and facilitating a legal framework for IP creation and protection. In addition, the

STATE FUNDING AND ASSISTANCE Amount to be raised: `54 crore Finishing academy and incubation center: `10 crore (State Government contribution 20 percent) Post production and DI facility: `6 crore (State Government contribution 20 percent) IP creation: `1 crore Digitization of 10 art schools: `10 lakh for each school

policy envisages an environment that promotes growth of indigenous digital content, education and entertainment for masses, and the setting up of a Center of Excellence with state-of-the-art facilities. This acts as a catalyst for the industry and for developing AVGC parks on the special economic zone model. “This is the fourth knowledge industry that Karnataka has a firstmover advantage with after science, IT or ITES, and bio-technology,” says Biren Ghose, President, ABAI and Country Head at Technicolor India. Part of its mandate is a venture capital fund worth `50 crore jointly funded by the government of Karnataka with private venture capitalists, of which the government’s contribution is 26 percent. “We expect to see more traction in the first quarter of the next fiscal. We have not finalized a prospectus for funds yet,” mentions Ghose.

The metamorphosis All statistics reflect an upward swing. The Indian animation and VFX industry is valued at `3,100 crore and



gaming at `1,300 crore in 2011 with an expected CAGR of 17 percent and 20 percent respectively, between 2011 and 2016. “Right now, we are less than one percent of the world markets—that is the head room we are looking

at. Karnataka would provide this resource to promote a local pool of talent,” states Ghose. Bengaluru became the focal point for studios driven by the IT industry, availability of local manpower, infrastructure and talent from

neighbouring states. It started with Technicolor, when it set up India operations in 2007, its first animation studio worldwide, hence paving the way for others including Zynga and Tata Elxsi. Low budget, low complexity work from emerging markets has made room for major branded projects from the developed world, though it is still in the grasp of a few large companies. From working on one animated television serial a year in 2009, Technicolor now produces three to four full series annually. It also helped DreamWorks incubate a unit comprising of 210 people within its company, called DreamWorks Dedicated Unit, which has become an Asian landmark in animation content. Others soon followed it. Jai Natarajan, for instance, launched Xentrix in 2010, a firm that currently works with six clients on branded television series and theme park films. A popular name in Natarajan's portfolio


Photos Bmaximage

Intelligent Entrepreneur  March 2013 49


is the Care Bear series, where Xentrix worked on 22 of the 26 episodes. “In some cases, we contribute the supporting design. We don’t get involved in scripts, but how ideas are interpreted on the computer is up to us,” says Natarajan, CEO, Xentrix. He says, they could earn between `10-`30 crore for a television series project. Seizing the opportunity, Ankur Bhasin, CEO, Bhasinsoft India, has grown his firm from a pure web services company to an animation studio in 2004 that has been catering to the European market. Since 2005, the firm has been creating a television series for the German market through its client Saller, a sports goods company. Apart from animation, Bhasin’s studio now handles pre-production work—story boarding, developing characters and scripting. “International clients were not giving us creative control—this is changing,” he says. Its services include corporate and training videos and 3D modelling for product prototyping from a French client. “Our clients in Bahrain and Netherlands have become our representatives there,” he says, reflecting the changing mindset of the West. Bhasinsoft earns 15 percent of revenues from animation, 35 percent from web software services and the balance from gaming and apps—a vertical he launched in 2010 with its own web store themed around fitness and lifestyle, earning through ad revenues. On the VFX side, the story is different. Local demand from both Bollywood and southern film industries producing more effects-based movies has increased requirement and thereby work opportunities for small companies and freelancers. From an all-India perspective, Xentrix’s Natarajan says that VFX work for the international market is still limited to specific supporting tasks like rotoscopy or stereoscopic conversion. 50 Intelligent Entrepreneur  March 2013


IP creation

Toon talent

Local Intellectual Property (IP) creation has picked up steam in the industry, thanks to a few success stories like Chhota Bheem. Established studios, particularly, have attempted to do this in the hope of revenue they will generate in the world market. Like Bhasin’s studio that is working on a silent animated film about an autorickshaw driver which is slated to be out by this year-end. A key driver is the rising number of hand-held devices like tablets, smartphones, consoles that have opened avenues for interactive content, which ensures that creators are not limited by monopolistic channels. “Gatekeepers for that pipe have been telecom companies and the revenue share they offer game developers. It has not been conducive to the industry,” Ghose points out. “There is a better equation between them now and we will see substantial growth.” “The ratio of outsourced work to local IP stands at 5:1 and this will continue for the next three-five years,” Ghose says. There will remain a pricing divide for Indian versus global projects which is 25 times the factor in terms of budgets, Natarajan adds. In an industry where budget directly equates quality, IP, he says, will have to be created smartly based on audience demand. “Domestic IP outscores foreign IP hands-down. It is a question of everything aligning for them. Chhota Bheem earned more TRPs on Cartoon Network than any other show,” Natarajan points out.

Finding good industry-ready talent is hard and studios invest heavily in training to increase competency. “There is a mismatch of skill sets. Studios and private institutes work together to employ job-ready people,” says Bhasin. Eighty percent of the talent at Technicolor comes from outside Karnataka. “Right now our selection ratios are low at 1:10. It is difficult to find people ready to make a difference to a project immediately,” says Natarajan. He mentions plans of introducing an induction program for newcomers. Recruiting senior people is a challenge too. People may have years of experience but not the mind, says Natarajan. “Through the policy, we are trying to get government art colleges to understand digital production, so students are better prepared.” Students are trained on using animation software but are not ready for production, he says. In training institutes, the faculty does not hold industry experience and tends to be ex-students. Some like Bengaluru’s Asian Institute of Gaming and Animation (AIGA) differ. “The faculty needs to have worked on at least two AAA console games as minimum criteria,” says Hanif Mohammed, Director-Corporate Affairs, AIGA. The AVGC policy will address the gap in qualified trainers through a train-the-trainer program based on industry needs. “It should be seen as a strategic piece in India’s overall landscape.” Natarajan explains. Photo Bmaximage


10 marketing [ high point ]

masterworks From Red Bull's record-breaking sky diver to IKEA's tiny metro station apartments, these strokes of marketing genius got our attention Jennifer Wang


n the morning of October 14, 2012, Austrian sky diver Felix Baumgartner strapped himself to a helium balloon that carried him 24 miles above Roswell, New Mexico, to the edge of space. With just a spacesuit and parachute, he made a nine-minute, supersonic jump that catapulted him into history books as the first person to break the speed of sound in free fall—at 833.9 mph, or Mach 1.24—without mechanical intervention. This multimillion-dollar stunt wasn’t funded by NASA or SpaceX. No, this spectacle, seven years in the making, was the work of Red Bull. The energy-drink giant’s 'Stratos' campaign resulted in the most-watched YouTube live stream of all time (8 million concurrent views), a global broadcast seen in more than 50 countries and a documentary, Space Dive, produced by Red Bull with National Geographic Channel and the BBC. Marketing efforts don’t need to change history to be effective. The most innovative campaigns push boundaries in simple yet clever ways that can captivate audiences—consumers, the media and competitors alike—and change the way they think about a brand or concept. With that in mind, Entrepreneur searched for the most brilliant strategies from startups, corporations and charities in 2012, and asked experts to identify what made them so great. Here are our favorites. 52 Intelligent Entrepreneur  March 2013



Johnson & Johnson hired powerhouse New York City marketing agency JWT to create the augmented-reality Magic Vision app for Band-Aid’s popular Muppet-theme

HELP REMEDIES: INTERACTIVE AND POP-UP STORE Help Remedies, a New Yorkbased seller of first-aid products, kicked boring pharma marketing up a notch with What’s Wrong U.S.? (whatswrongus. com), an interactive website that tracks ailments like blisters, stuffy noses and sleeplessness across regions, based on weekly retailer data. Additionally, for the month of November, the company crossed into retail, opening a hip-looking pop-up pharmacy in Washington, D.C., offering relief for all kinds of pain, from headache pills to a 'relationship judge' to help people with heartache.

Live window displays enacting blister-inducing situations and bouts of nausea attracted foot traffic; the Night Pharmacy cocktail bar helped draw in customers, too. These are 'very, very good ideas,' JWalk’s Milligan says. “I have always been a big fan of repackaging basics and using design and communication to present things in a more compelling way.” Lesson: If you add value to customers’ lives with real content and helpful, fun services, they won’t soon forget you.

bandages. Once the app has been downloaded to a smartphone, it can be used to scan a bandage and unlock cute animations featuring Kermit and friends. The objective, according to JWT, is to ‘turn moments of pain into moments of delight’ and to distinguish the product from a slew of generics that vie for the attention of impressionable young minds and their moms. The campaign has earned over 115 million media impressions, and the app has a 4.5/5-star rating on iTunes. “Expanding on a product’s usefulness as an activation device for technology has a lot of potential,” says Michael Milligan, Chief Creative Officer of New York City-based JWalk, a marketing agency whose clients include Lacoste and fitness club, Equinox. “It allows Band-Aid to have a new relationship with their audience and opens up the concept of healing in new and innovative ways,” adds Milligan. Lesson: Incorporating cool, on-point technology helps you stand out in a crowded market and woo techsavvy consumers.


Intelligent Entrepreneur  March 2013 53





In a bid to attract Twitter followers, restaurant chain Mellow Mushroom and Atlanta ad agency Fitzgerald+CO put together the amusingly unnerving video series Follow Us and We’ll Follow You. The clips, edited from hiddencamera footage and set to ominous music, show actual @MellowMushroom Twitter followers being followed in real life. Intentionally creepy mushroomwearing mascots surreptitiously track the restaurant’s fans through a farmers market, library and even on a paddle boat. The fourth-wall-shattering campaign got thousands of likes on Facebook and was featured in a writeup in The New York Times. Ryan Berman,


Founder and CEO at San Diego-based i.d.e.a., who has worked on campaigns for everyone from Subway to UNICEF to Ringling Bros., chalks up the promotion’s success to an understanding of what makes social media aficionados tick: personal attention. “Many users on Twitter, Facebook and Instagram believe they are the star of their very own reality TV show,” he points out. “Those types of people… would probably love to be stalked by an oversized mushroom.” Lesson: The best way to drum up viral views and win over fans in social media is by engaging people both online and offline—and making them the stars of your show.


Over the past three years, Uber, a San Francisco-based car-service startup, has quickly expanded into 20 cities by deploying a ‘where you need them to be’ strategy at conferences and events. In 2012, Uber employed conversation-starting promotions like an on-demand ice cream truck, which celebrated the company’s ability to provide customers with many different 54 Intelligent Entrepreneur  March 2013


With a couple of attention-grabbing guerrilla stunts, IKEA drove home the point that its products can spruce up even the tiniest of spaces. The furniture company has set up living areas on subway platforms, in narrow urban alleyways—even underneath outdoor staircases in Tokyo. Most prominently, it constructed a fully furnished 581-square-foot apartment in a Paris Metro station, where five volunteers lived for six days. “Just like a picture being worth a thousand words, this is an excellent example of how to show off usefulness in a place with a high density population,” says Matt Murphy, CEO of Fusion92, a Chicago marketing agency that has worked with Disney and Sony. “Nothing like walking into a home and literally experiencing the product, and IKEA found a neat way for people to be able to touch and feel and see how the furniture can be used.” Lesson: Demonstrate the value of your product by bringing it directly to where consumers happen to be. You’ll be that much closer to making a sale.

car types, and the President’s Day ‘Ubercade’, in which riders were met with two SUVs and a sedan that swooped in and whisked them away in true diplomatic fashion. Ryan Graves, Uber’s Vice President of Operations, says each promotion attempts to infuse the brand personality into the ride experience: “Fun and efficient all in one. We like people to tell stories and subtly include Uber. We believe that every interaction with an Uber rider is…a chance to turn a normal user into a passionate evangelist.” Lesson: Give customers an experience they’ll want to brag about to their friends (aka your future customers).




Popcorn, Indiana, a purveyor of whole grain, glutenfree popcorn and chips (actually headquartered in New Jersey), scored major media buzz after unveiling the Popinator, a desktop popcorn “launching machine” designed in conjunction with New York City-based viral marketing agency Thinkmodo. A video showing off the voice-activated device, which shoots popped corn kernels directly into snackers’ mouths with a high degree of accuracy, got picked up by national news networks and has garnered more than 20 million media impressions; traffic to the company’s website jumped 2,800 percent in a week after the release. “We didn’t have a huge marketing budget,” says Director of Marketing Jeff Dworzanski, “but we were looking for ways to spread brand awareness and demonstrate how we are innovative by building a physical device that shows a new way of snacking.” Dworzanski notes that interest in the Popinator was so massive that the company is considering ways of commercializing it. Lesson: To get people talking about you, explore ideas that showcase fun new uses for your product. The bonus: additional potential revenue streams.

PUMA: SHOPPING AS A GAME Puma devised an in-store campaign to pump up sales of shoes endorsed by Jamaican sprinter and Olympic gold medalist Usain Bolt. Customers intending to buy “the fastest trainers in the world” grabbed a time-stamped ticket upon entering the store, and the faster they got back to the register with their purchase, the greater the discount they received. What’s commendable is how Puma was able to create a connection between the product, the celebrity endorser and the consumer, says Jason Abelkop, Chief Marketing Officer of nationwide restaurant chain Buffets. “Some companies spend a lot of money on celebrity endorsements, but few take it to the next level,” he says. Lesson: Empower and entertain your customers, and you’ll drive up sales.


New York-based fashion blogger Leandra Medine



As big as Japanese fashion retailer Uniqlo is—global 2011 revenue was estimated at $10 billion—it’s still relatively unknown in the US. So when the company continued its US expansion last year, adding stores in San Francisco and New Jersey to its three existing Manhattan locations, it made a grand entrance, with an advertising blitz that included a branded blimp and a Facebook sweepstakes starring feline YouTube star Maru, whose videos have nearly 160 million views. Uniqlo cultivated local interest. Its 'People' print and online campaign featured homegrown celebrities from each city wearing items from the brand’s 2012 collections. In San Francisco, ads showcased 49ers football great Joe Montana and New York-based fashion blogger Leandra Medine. “The campaign,” says Uniqlo Marketing Director Jean Shein, “worked on two levels—as independent campaigns to boost sales of specific items; and as a group to give a full picture of the brand to both new markets and reintroduce ourselves to New Yorkers.” Lesson: Make it personal, and tailor strategies to specific markets. Nothing annoys more than mass-market ‘spray and pray’ strategies. Intelligent Entrepreneur  March 2013 55




Samsung went head-to-head with rival Apple in its campaigns for last summer’s launch of the Galaxy S III smartphone—in ubiquitous TV, outdoor, online and print ads, Samsung took clever jabs at the iPhone 5—everything from the crazy queues at Apple Stores (“All I’m saying is that they should have a priority line for people who’ve waited five times,” one guy complains) to the iPhone’s overhyped ‘new’ features (“The headphone jack is going to be on the bottom,” someone gushes). Samsung implied that Apple might be getting too big to be cool in one memorable ad that showed kids holding spots in line for their parents. At the same time, Samsung backed up its campaign by advertising the

Galaxy S III’s own powerful features. John Ellett, Co-Founder and CEO of Austin, Texas-based digital marketing agency nFusion Group and author of The CMO Manifesto, says the campaign was impressive for having the balls to challenge a beloved brand in a way that actually made Apple loyalists stop and think. “It effectively used humor and truth and storytelling to highlight the differentiation in a way that’s getting people to say, ‘Maybe there is a choice.’” Indeed, in third-quarter 2012, the Galaxy S III was the bestselling smartphone in the world. Lesson: Don’t be afraid to tackle the competition head-on—even the giants in the field. You could win over all sorts of admirers.


OROVERDE: CLEVERNESS FOR A CAUSE OroVerde, a German foundation that works for rainforest preservation, teamed with Ogilvy & Mather’s Frankfurt branch to create the ‘Donation Army’. Trees in a pedestrianheavy area of the city were decked out to look like a brigade of homeless beggars, with donation cans and wooden hands holding cardboard signs proclaiming: “Need money for my family in the rainforest.” The cost-effective campaign solved two common problems: It eliminated the need to recruit dedicated volunteers, and solicited donations from passersby in a clever way. Ellett of nFusion says the ‘ultrasimple idea’ resulted in major stopping power among pedestrians, because the image of the tree army was familiar yet jarringly out of context. “The intrigue factor got people to like it and open up their change purse,” he says. Lesson: Create a visually arresting campaign and people will pay attention.


OroVerde's Donation Army captured pedestrian's attention 56 Intelligent Entrepreneur  March 2013

©Entrepreneur Inc. All rights reserved. JENNIFER WANG is a staff writer at Entrepreneur magazine


[ strong brew ]


Taking volatile weather and the dip in productivity in its stride, McLeod Russel, the world’s largest producer of bulk tea, is looking at new ways for growth, but cautiously treading on acquisitions Sudipta Datta


oom Dooma. Pertabghur. Phu Ben. Mwenge. Gisovu—some impossible to pronounce names roll off the tongue of Aditya Khaitan, Managing Director, McLeod Russel, as he talks about the 62 tea gardens the largest producer of bulk tea in the world owns in two continents, Asia and Africa. Paintings of tea gardens adorn the walls of his ninth floor office in the heart of the business district of Kolkata. There are magazines on tea strewn around and he explains that he likes to visit all his gardens at least once a year. At a time when the tea industry is in peril—production is down due to a long spell of volatile weather, the Indian tea bush is old and hence has productivity issues, there’s a huge labor shortage, the Iran crisis has hit exports and China, already the leader in green tea, is taking baby steps in black tea, India’s forte—Khaitan is relatively calm, extolling the values of patience.

Looking back McLeod Russel is treading cautiously, which wasn’t always the case. Though the Khaitans have been associated with tea for years—with BM Khaitan, Aditya's father, becoming chairman of Williamson Magor Group in 1964 after being invited to join the board— they began a journey towards aggressive growth only in June 2005. That was when McLeod Russel acquired Williamson Tea Assam from the Magor Group based in the UK. It was 58 Intelligent Entrepreneur  March 2013

troubled times in the Assam Valley and many of the big tea companies including Hindustan Lever were exiting the state. Sniffing an opportunity, McLeod Russel quickly moved in to buy Doom Dooma, Borelli, Moran and other tea estates. Over three years, it added 24 gardens by investing nearly `350 crore, a large part of it through debt. Remind Khaitan of the heady days of 2005-07, and he quips: “Just because things turned out successfully for us, it doesn’t mean we can continue in the same vein.” Khaitan’s rather conservative approach comes on the back of a ‘nightmarish’ year the tea industry has had. “Right from March to November last year, the weather was volatile—we had rain when a dry spell was required and vice-versa. As a result, the tea industry will start the year with a deficit for the second year in a row,” he says. India produced 988 million kg tea in FY12, the production is expected to be flat in FY13, with 2013 staring at an accumulated tea deficit of at least 100-150 million kgs. Tea consumption has grown at a compounded annual growth rate of 2.5 percent over the last decade but supply has struggled to keep pace, a trend mirrored in other black tea producing countries like Kenya. McLeod Russel, which produced 104 million kg last year, has seen a fall in domestic production to around 80 million kg. Its overseas garden output—22 million kg—helped it tide over the production deficit. “We were also

lucky to have been able to compensate our production losses through higher prices. We lost seven million kg of the domestic crop, but added five million kg from outgrowers, a three percent rise in production there. We will add five million kg more from outgrowers this year,” says Khaitan. By next year, the company wants to raise the quantity it outsources to 25 million kg. “We are tackling our crop position, uprooting and replacing old bushes. We did that a lot in 2005, when we were acquiring gardens and that has helped us to increase productivity. In order to make up the deficit, we are buying outgrowers leaf.” Khaitan mentions that the second vertical, the bought-leaf one, has become quite prominent and they will produce around 18 million ton in this category. Khaitan expects prices to stay `15-`20 higher per kg this season. “If weather is conducive, prices will remain at this level; if weather is foul, production will take a hit and prices will rise,” he points out.

Streaming through Though the burst of aggression and an inorganic route to growth helped it take production from 42 million kg in FY05 to 82 million by FY12 and an additional 22 million kg from overseas gardens, the Khaitans are not bullish on acquisitions right now. “The outlook on tea for the longterm is positive, and so assets are not only difficult to come by, but also highly priced,” explains Khaitan. “With the tea outlook positive for the next four-five years, people are holding on to assets, and we must learn to sit and wait. If it doesn’t make financial sense, we should not and will not buy.” There is a deficit in inventory, domestic as well as overseas. “But instead of buying gardens at a high price to spur growth, we would rather reduce our debt further and strengthen the balance sheet,” he adds. At the end of FY12, total debt was pegged at `166 crore from `450 crore in FY08. “We have reduced our debt considerably, but there is still some

HIGH TEA: Aditya Khaitan

left. Our aim is to move towards being a net zero debt company and then prepare a war chest for the future. We don’t have a large capital expenditure ahead (wage revision has been accounted for last year). We want to generate cash in the next four-five years internally to enable us to buy assets,” he says. McLeod's tea estates in other countries yield a sizeable output— four gardens in Vietnam (4.5 million kg), five in Uganda (15 million kg), one in Rwanda (1.7 million kg), five in West Bengal and the rest in Assam. In the quarter just ended, net profit grew by five percent year-onyear to `123 crore. It ended FY12 with a net profit of `294 crore on revenues of `1,445 crore.

Plucking the right leaf The toughest challenges ahead are labor and weather for McLeod Russel, besides other tea companies. “We have Photo Debasree Chatterjee

SOMETHING OLD, SOMETHING NEW  Riding on tea baron and father BM Khaitan's experience in tea, Aditya Khaitan, 45, has carried forward the legacy—in 2005, as Managing Director he was aggressive, overseeing a host of mergers, acquisitions and takeovers of tea gardens  In 2009, as the domestic tea industry faced a production crunch, and the black tea market expanded, he forayed into Vietnam, following that up with acquisitions in Uganda and Rwanda  He has innovated (replanting old tea bushes, introducing plucking machines) to improve efficiencies to find ways to combat labor shortage. We have introduced plucking

machines at some of our gardens, but that takes a toll on the quality of the leaf. We are also totally exposed to the weather. By being on both ends of the Brahmaputra, we face both drought and floods.” Ask him about the threat from China, and he says China is primarily a green tea grower and consumes almost everything it produces. It is just warming up to black tea and “that means a new market is opening up for Indian black tea producers; so China is not a threat, but an opportunity.” So, has the Indian tea industry done enough to hold on to its number one position as the largest producers of black tea in the world? “We could have done better,” smiles Khaitan, adding, “Tea is a boring business. What you invest today you don’t see for many years, there’s no instantaneous return tomorrow. But we are passionate about tea and are in it for the long-term.” Intelligent Entrepreneur  March 2013 59


[ quick start ]


MARKETING MALFUNCTION? Fix the three common online mistakes and reel in customers A nn Handley


e tried blogging,” my friend Pete said to me recently. “It

didn’t work.” Pete, who owns a seafood shop not far from the small town where I live, was referring to the WordPress blog he and his partners had started to provide information about specials and promotions. But, according to Pete, nobody visits the blog or comments on their posts. It drives no measurable awareness, traffic or sales. Can you relate? Do you get zero online traffic? Or maybe you have different marketing challenges: Perhaps you have traffic but aren’t converting those leads into paying customers. And when it comes to social media, maybe you feel like there’s no point, because

60 Intelligent Entrepreneur  March 2013

it seems as if you’re broadcasting into a black hole. Take a deep breath: You’re not alone. Here are three common mistakes marketers make—and how to fix them.

Mistake No. 1: Expecting a blog to effortlessly generate traffic and awareness. It’s true, blogs can and should do this (as well as help with search rankings). But it doesn’t happen magically; it takes more than a template, some filler text and a sprinkle of pixie dust. For a relevant, sustainable blog, your posts should address who you are and who your audience is, and they should effectively communicate these things in specific ways. First: What are you all about? What

makes you special? What’s the real value of what you offer? Your value as a business lies not in what you sell but in the bigger picture of what you are able to do for others. An artisan of hand-carved bookmarks sells, well, bookmarks. But what he really sells is the pleasure of the page—the joy of reading and discovery. Second: Who do you want to reach? Have you created an ideal buyer in your mind’s eye and communicated this throughout your organization? (Marketers call this ‘developing buyer personas.’) Do you understand your buyers’ needs and wants? Are you creating interesting, relevant, content for them—teaching them things, solving their problems —rather than just talking about yourself? Keep in mind that

blogging isn’t a one-and-done exercise; it’s an ongoing commitment, so invest the time to let it take root and grow. Third: Consider how you are getting your message across. Is your blog full of big chunks of unwieldy text? Or are you writing snappy pieces with images, videos and audio to tell your story with personality, empathy and utility? Do you see your blog as merely a task? Or do you see it for what it is: an inherently rich opportunity to connect with customers in exciting and unprecedented ways? (Hint: It should be the latter.)

Real-world application Instead of talking up specials and promotions, my friend Pete might want to use his blog to share seasonal recipes, cookbook reviews or behindthe-scenes views of the docks where he gets his fish. He could share his thoughts on the benefits of buying local or his perspective on sustainable fishing. He could organize a book signing and a tasting that involves a favorite cookbook author and post photos of the event online. Any of these ideas would tell a broader story that customers can find value in—a story of community, sustainability and responsibility. He wouldn’t be talking up his brand so much as sharing what his brand stands for—and giving customers a compelling reason to patronize his shop. Local Cape Cod oysters? Get in ma belly!

Mistake No. 2: Thinking social media is a black hole. Twitter, Facebook, Instagram, Pinterest and LinkedIn can suck up a lot of time for little return. The efforts of many businesses fall scattershot, wasted and unmeasurable. Your social media efforts should be intelligent and strategic, not haphazard. First: Identify specific goals. Do you want to grow brand awareness? Drive traffic to your website and generate sales? Grow your e-mail list? Next: Identify which channels will make the best use of your time based on where your customers are as well as your own inclinations. (How do




your efforts according to your stated goals. Pay attention to what’s working and adapt accordingly. How do you know what’s working? At a minimum, monitor your web traffic and Google Analytics. Additionally, use automation tools that can manage how you are engaging with customers across various channels, and track their behavior to understand the likelihood of a purchase.

Real-world application


For Pete, certain social channels might make more sense for his business than others. Perhaps he could shoot an earlymorning video at the docks and post it to Facebook as a means of talking about where our food comes from. He could even start an #uglyfish contest through Instagram and Pinterest; with his analytics and intelligence he might find that his Pinterest ‘Ugly but tasty fish’ board is generating high traffic to his website.





Mistake No. 3: You’ve got plenty of trafCONTENT CREATION







you know where your customers are? Ask them!) Focus on connecting with certain groups of people based on their stated interests and social activity. Identify influencers within your industry and communicate with them. Use social channels to listen and engage, rather than broadcast. (Pro tip: That listening thing is a vastly underrated use of social media for customer intelligence. Social networks are great places to mine for information about what people care about and what truly gets them excited and talking.) Measure

fic, but no customers Your target audience knows and loves you. People are connecting with your message. So why aren’t they buying? The key is to create a path to conversion for people who are already on your site. Make sure each page is optimized for getting visitors more deeply involved with your content or your business by embedding relevant calls to action. Don’t leave visitors hanging after a post, article or page—make it clear what you want them to do next.

Real-world application If Pete really wants to build a database of customers, each page of his blog or site should include a call to action, such as a newsletter sign-up or an opportunity to download recipes. He should embed those calls in three distinct locations: immediately under the header, after a post and on the sidebar. ©Entrepreneur Inc. All rights reserved. ANN HANDLEY is Co-Author of Content Rules and Chief Content Officer of MarketingProfs Intelligent Entrepreneur  March 2013 61


[ vision inc. ]


THE DRAGONFLY Tonbo, a defense systems company, did what every company wants to do. It went global—but its reasons were vastly different to the norm A shna A mbre


rvind Lakshmikumar, CEO at Tonbo Imaging Systems, is a nationalist at heart. He does not say it out loud. But you can sense it when he tells you with more than a tinge of discomfort that the Naxalites have better and more advanced defense equipment than the police forces fighting them. Lakshmikumar’s firm is responsible for fitting advanced camera systems in Daksh, the unmanned bomb defusal robot used by India's paramilitary forces and Arjun, the upgraded version of India’s homegrown main battle tank. These camera systems use thermal imaging to process images, thereby allowing soldiers to see during the night as well. Lakshmikumar completed a PhD in Robotics from Carnegie Mellon University in 1999. His entrepreneurial journey began when he was working at Intelligent Automation to build sensors and image signal processing for armed forces in the US. As an engineering graduate at BITS Pilani, you could say he had managed to live the American dream every Indian student of that era had. But fate had other plans for him. In 2003, Lakshmikumar relocated to India to head the Bengaluru-based research operations for Sarnoff Corporation (currently a part of Stanford Research Institute) that specialized in vision, video and semiconductor technology. But it was not a warm homecoming. Technology transfer issues and a reluctance to 62 Intelligent Entrepreneur  March 2013

operate in the defense space in India led to the winding up of Sarnoff’s local operations.

On ground “I decided to buy out the Indian operative unit of Sarnoff, to build and provide the same quality of sensing systems to the Indian and international markets. I closed the deal [in 2007] and called the company Serial Innovations,” recalls Lakshmikumar. Back in 2007, there were no ready clients for the company and Lakshmikumar’s initial days were spent in developing the technology. His first aim was to create a customer base and produce limited quantities of technology deliverables. The products that used the technological algorithms designed by the company include nightvision electronics, multi-sensor imaging systems, real-time video analysis and 3D imaging. These products are applied across infrastructural security, military reconnaissance, autonomous robotics and active safety for ground and aerial vehicles. The company received a round of funding worth `2.2 crore from Mumbai Angels in 2011, a chunk of which went into product development. Its clients now included the Defence Research and Development Organisation (DRDO), Mahindra Satyam and the Defense Advanced Research Projects Agency (DARPA)  of the US.  However, in the scheme of things that Lakshmikumar had planned, there was a big gap.

Revamping the firm Lakshmikumar’s focus was the Indian defense procurement market, which gave him a lot of stress. “Providing the Indian government with any defense equipment for the forces took a lot of patience and time. From preparing briefs to explaining the technology and finally getting sanctions and approvals potentially takes up one year,” complains Lakshmikumar. Convincing the government that the technology which Serial Innovations used was top notch and could compete with any other foreign provider was an immense task. The government, he says, still, prefers imports from Israel, Europe, Russia, and it is difficult to change the mindset even though the locally produced devices are 30-40 percent cheaper. This put Lakshmikumar on a new course. In 2012, Serial Innovations changed its name and restructured itself as Tonbo Imaging with offices in Singapore, Bengaluru and the US. “The decision to revamp the company was primarily to increase the scope and scale of operations coupled with servicing clients with products all across the world,” says Lakshmikumar. “We now develop the technology in India, and import the outer cases of the equipment manufactured from China and Taiwan. These outer coverings are then assembled and synced with the technology and sold as final products. In late 2012, US-based Artiman Ventures, a venture capital firm known for its investments in companies


IN DEFENSE: Arvind Lakshmikumar

operating in markets with large opportunities and no identifiable competitors, invested `34 crore in Tonbo. “The transition from Serial Innovations to Tonbo has been a strategic move. The disruptive technology, entrepreneurial team and the ability of the firm to be a global player have been the driving factors for influx of investment in Tonbo,” says Ramesh Radhakrishnan, Partner, Artiman Ventures, who has invested in Tonbo. Lakshmikumar says, even today, the Indian government prefers to import locally-produced devices from the international outlets of Tonbo and not the one based in Bengaluru. It was difficult, perhaps impossible, to service this need with Serial Innovations, he says.

Wide view Lakshmikumar says Tonbo is a Japanese word for ‘dragonfly’. “Dragonflies have multiple eyes. They perform local processing at every eye node and have a combined central processing at the brain. Tonbo is designed on the same principle of distributed apertures, local scene processing, and central scene level interpretation.” The human eyes have two apertures, light passes through them and then the image is processed. However, in the case of a camera, there is a single aperture that cannot cover a large spectrum of field view for image processing. To get around that obstacle, Tonbo is creating cameras that are small in size with multiples apertures to process images using low power levels—much Photo Bmaximage

like dragonflies do. Today Tonbo uses its basic imaging platform in conjunction with detectors, lasers, navigation sensors, and micro optics to design and build cameras for surveillance, industrial inspection, interactive toys and imaging systems for automotive driver safety, amongst others. It has 15 pending patents awaiting approval in the US.

Forward-looking Radhakrishnan says that Tonbo would mature to be a significant global player in the next six to seven years. Even though it is a startup, its products address the

areas of security, safety, automation and entertainment that have immense scope of growth. Lakshmikumar says his team of 20 from Sarnoff helped generate annual revenues worth `10 crore over five years to 2011 under the avatar of Serial Innovations. With Tonbo, Lakshmikumar is aiming higher. “I want to see Tonbo being identified and emerging as a BAE Systems [a British multinational defence, security and aerospace company] of India. India doesn’t lack the talent. The only thing it lacks is an environment for technological ventures to prosper,” explains Lakshmikumar. Intelligent Entrepreneur  March 2013 63


[ easy rider ]

ONE FOR THE ROAD Once a custom maker and modifier of motorcycles, Vardenchi Motorcycles will now manufacture its own range of fast wheels Pranbihanga Borpuzari


in school. A number of laws and mechanics are applicable to what I do today. I managed to mix a little bit of common sense with what I read about motorcycle designs and then over-engineered it,” says Varde.

ndia, already home to the largest two-wheeler manufacturers in the world, might now accommodate the manufacturers of the best looking motorcycles in the market. Vardenchi Motorcycles whirred its way into this segment with custommade motorcycles in 2005. Having established itself in the market, it now plans to widen its base and get into manufacturing, maintaining customization as its USP. Vardenchi is the brainchild of Akshai Varde, 32, who successfully managed to convert his hobby into a business. “Motorcycles have always been my passion. Even as a toddler, I always wanted to sit on a motorcycle,” says Varde.

Varde purchased his first motorcycle, a Royal Enfield Standard 350, when he was only 22 years old. Unlike youngsters his age, he wasn't satisfied with it and promptly set out to change its looks. He stripped it down, reinforced the chassis, restructured 64 Intelligent Entrepreneur  March 2013

First steps The bike that Varde customized and modified can now be seen as a

the body, added custom paint and chrome, cut the front end to give it a chopper look and fabricated almost everything from handle bars to foot controls. It took him six months to convert this bike into his dream machine. “I was a science student

beginner’s attempt at best. It was redone with the help of a local technician and fabricator and it took six months and `30,000 to complete it. People were amazed to see the final result. “The bike was big, long, bright orange in color, had lots of chrome


That is why my business took off,” explains Varde.


Making of a brand

and it garnered a lot of attention,” recalls Varde, talking of his creation. Stand-up comedian Ash Chandler got interested in the motorcycle and wanted Varde to build him one in 2005. That is when Varde rented a small space and started working on what was his first customer project. Later, a poultry shop owner

approached Varde. Gradually, word spread about Varde’s abilities as soon as his redesigned creations started cruising the roads of Mumbai. An auto magazine featured him, which led to further publicity. That got him 12 orders . Photo Joshua Navalkar

During that time, premium motorcycles were largely imported into India and the country did not have any major international brands in this segment. “You either rode what was available in the market or customized it.

In 2005, when Varde started off on his own, Chandler suggested a name for his company—Mumbai Motor Cycle Company. Varde and Chandler decided to try out the name for a year but soon realized that the brand needed a more personal connect with its customer. The name Vardenchi was selected—which in Marathi means, ‘Belonging to a Varde’. Though there are different types of motorcycles in the market, Varde is most comfortable with modifying a chopper. He explains that a sports motorcycle needs a much higher level of engineering than a chopper. Also, aesthetic art forms work better with a chopper. “You can customize and stylize it according to someone’s personality,” says Varde. Last year, Vardenchi got an opportunity which spun off an allied business idea. He worked on 50 big motorcycles in 2012. This encouraged Varde to dabble with kits and accessories for motorcycles. However, the cost of parts and fittings were sky high and Varde shelved the plan. “We are in the services industry and there are certain limitations. A customer must have a Royal Enfield motorcycle for me to customize it. Else, I will have to help the customer get a Royal Enfield in order to customize it. Royal Enfield motorcycles have a waiting period of sometimes as long as six to eight months because of its phenomenal demand,” informs Varde. A customer who owns a Royal Enfield motorcycle and wants to customize it can choose from a basic package costing `1.8 lakh. The price goes up depending on the range of customization, which can go all the way up to `4.5 lakh. “We also customize motorcycles Intelligent Entrepreneur  March 2013 65


for brands. We did it for Red Bull, Tron, and the Sunburn Festival. These cost more since the level of customization is higher,” points out Varde.

The big move Besides customizing, Varde wants to focus on the manufacturing aspect of the business. “We want to custom manufacture a motorcycle. This means we will retain the format wherein the customer approaches us and tells us what he wants. In return, we will start from scratch by manufacturing and delivering the bike to the customer's preference,” explains Varde. From the 50 bikes that Vardenchi customizes today, getting into manufacturing would mean the company can scale up at least 10 times. “We will not manufacture the engines, instead we will tie up with engine manufacturers like Royal Enfield. The Royal Enfield 500cc EFI engine is a brilliant engine and we are very happy with it. The gear assembly and transmission is ideal. We have already spoken to the company and they are very supportive of it,” says Varde. In FY12, Vardenchi made revenues of about `1 crore, but Varde is unsure about revenues this year since the company is in the midst of a major transition. “We are launching our motorcycles in the market and the entire effort is directed towards setting up of the project. Our current revenues might take a slight dip as a lot of effort is going into manufacturing,” says Varde. Vardenchi is investing about `50 crore through equity to set up a state-of-the-art plant in either Gujarat or Maharashtra. The staff strength, currently at 20, is expected to go up to 70 once the plant is up and running. Varde plans to launch his first set of bikes by the end of this year. While he is tightlipped about the project, Varde reveals, the plant would house machinery which would cater to every aspect of motorbike making—fabrication, chrome, etc. Tostart off, Vardenchi will soon open 66 Intelligent Entrepreneur  March 2013

VROOM IT Investment: `50 crore approximately Launch of bike: Around October 2013 Bikes customized till now: 250 Expected sales of manufactured bikes till end of 2014: 250 dealerships across seven metros and put in place a robust marketing and branding system. “I see a big demand for our kind of bikes and expect the premium segment of motorbikes to grow substantially in the next few years,” says Varde. This will put Vardenchi in direct competition with cult bike makers like Harley Davidson, which has a presence in India, and Triumph, which will begin operations soon. Varde, however, is unfazed. “Not one motorcycle of ours resembles the other. We are not trying to sell a motorcycle but the experience of creating one, owning it and passing it on to future generations,” points out Varde.

Up and about Varde is also setting up a proprietary design software, which will enable a customer to customize a bike according to his liking. When a customer walks in, he would be asked to fill up a questionnaire that would bring out his personality and make it easier to translate it on to the bike. “We enter certain criteria into the software and it comes up with a design of the bike. The design can be tweaked further and if approved, it goes in for production,” says Varde, adding, this method emphasizes the significance of dealers in the scheme of things in the company. Varde is mindful that everyone expects an Indian brand to be cheap and fun, too. More so from the auto industry, since it has not been able to deliver any lifestyle product to date. “The challenge is not the

manufacturing but the marketing and communication aspects. A lot of people are aware we customize Royal Enfield motorcycles, but our challenge now is to communicate that we are a manufacturer now and not a mere customization company,” says Varde.

Eye on services Service will remain a key part of Varde’s manufacturing initiative. Any motorcycle that is sold will be serviced every two months. The customer would also get the option to customize further in future to keep the bike ‘alive’ and pristine. “I would concentrate more on ensuring that we get the service aspects correct as we spread across India,” reiterates Varde. People who do not want to go through this process and want to buy a bike which has already been designed by the company, would be able to do so too. A base product would cost anywhere between `3.5 lakh to `4 lakh, ex-showroom. According to Yaresh Kothari, Research Analyst-Automobile, Angel Broking, demand remains strong in the greater than 250cc segment motorcycles. Its contribution to the total domestic motorcycle market is increasing even as overall twowheeler demand remains weak. “The share of the segment has increased from seven percent in FY2012 to 11 percent in year-to-date FY2013. The aspiration levels of the Indian consumers are on the rise which is driving the demand in the segment,” says Kothari. Varde says he wants Vardenchi to be a brand which will signify its exclusivity and also be a dream machine. He aims at the product being known as suited to a customer’s personality. “In future, if you see a Vardenchi at the next traffic light, it should look like an extension of the rider,” says Varde, of his handiwork. A wish that is not far-fetched considering clients are willing to pay for a desire on wheels.

In Association with

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[ flaming hot ]

Not a Smoky Affair Sustaintech’s stoves have given a healthier alternative to street food vendors in 177 towns of Tamil Nadu Shonali A dvani

Oh, when your heart’s on fire you must realize that smoke gets in your eyes—is a line from a song written by Otto Harbach for the 1933 musical Roberta, where smoke is a metaphor for the kind of love that blinds reality. Metaphors aside, smoke in its real form has more serious consequences that can cause grave harm. For instance, crude cook stoves used by street food vendors cause severe respiratory diseases.

Flame findings The vendors who feed millions of Indians are burdened with high medical expenses due to unhygienic cooking practices. Svati Bhogle, who has two decades of experience in sustainable technology development, was with the Karnataka State Council for Science and Technology where she was instrumental in the development of fuel-efficient biomass stoves. Later, as Secretary of the non-profit organization Technology Informatics Design Endeavour (TIDE), which develops technologies for fuel efficiency, she realized their efforts weren’t reaching the intended market. As an offshoot of TIDE, she launched Sustaintech India Private Ltd. with co-founders NV Krishna and S Rajagopalan in Bengaluru in 2009. The first product, Pyro Tava, was launched in June 2010 and its second product, Pyro Multipurpose Stove in January 2011, after conducting an extensive market survey in Tamil Nadu to understand customer needs. “We found a significant opportunity in tier II and tier III markets,” says Bhogle, Managing Director at Sustaintech.

68 Intelligent Entrepreneur  March 2013

Tamil Nadu was a preferred market for pertinent reasons primarily due to a healthy tourist population, high level of industrialization, a thriving street food culture and relatively high purchasing power. Its third product, the Pyro Tea Kettle, was launched in November 2012. The three innovations have been designed keeping a cook’s needs in mind—an improved stove, faster cooking, same fuel consumption, and a safe, clean working environment. “If customers find the place smoky, they will not come,” explains Bhogle. The mechanism used in these stoves do not disrupt traditional cooking practices.

Stove styles Pyro Tava, priced at `20,000-`22,000, is a flat top stove standing at 91 cm and weighs 110 kg used for cooking dosas, and omelettes. The body is insulated so heat does not dissipate and is concentrated to the tava. A flame regulator gives cooks the flexibility of maintaining high or low flames. “During nonpeak hours, the vendor can reduce the flame and save fuel,” she states. Smoke is released through a chimney and not at a cook’s breathing level. The interior geometry is made up of a grid where wood is placed and occupies a third of the tava’s height allowing controlled combustion of fuel. “The challenge is to ensure each part of the tava has uniform temperature,” says Bhogle. In regular wood fire stoves, sticks of logs burn from end to end. “If you want fuel efficiency you need to burn less wood, about half a stick,” Bhogle explains. With this grid, blockages ensure hot gases are forced to touch the tava equally. The Pyro Multipurpose stove, costing `14,000, is

used for heavy-duty cooking indoors and comes in three diameters—40, 50 and 60 cm. A cooking vessel is placed on the stove that stands at 91 cm. The wood burns completely in these stoves, thus releasing a mixture of carbon dioxide and water but no smoke. The tea kettle costs `20,000 and is designed as a water bath made from double-walled stainless steel, with an insulation in between. Fuel burns in a smaller chamber behind a water tank. It has smaller separate vessels for milk, coffee and tea decoction respectively. This saves over 50 percent fuel and uses less than one kg of wood per hour. “The price points have been identified keeping in view the requirement of profitability, competition and affordability. The products offer short payback periods and is the main justification for our pricing,” says Krishna, Director at Sustaintech. In early 2010, the founders raised funding from Chennai-based incubator Villgro Innovations Foundation. “The product is made up of rugged heavy-duty materials which makes it reliable and can be used by a vendor for over five years,” says PR Ganapathy, COO at Villgro.

Clean cooking Effectively, Sustaintech has given its

customers a convenient, easy to use innovation where cooks do not need to tend to fire all day. Both Pyro Tava and Pyro Multipurpose stoves offer 40 percent fuel savings, the founders claim. A vendor needs to use three kilograms of wood per hour instead of five kilograms used in traditional cooking mechanisms where fuel efficiency is also lower. The cost of wood is about `3.50 to `4 per kg. Normally, street vendors spend 20 to 30 percent of daily costs on fuel alone. Sustaintech had teething trouble getting market acceptance as vendors did not believe these stoves could save fuel given the higher upfront cost. As an initial strategy, they asked customers to pay only if content. “We started a vehicle campaign to showcase our innovation,” says Bhogle. They offered an installment scheme which is withdrawn once numbers grew through word of mouth. Currently, the firm operates on a direct sales model catering to street food vendors and institutions—ashrams, hostels and small hotels, selling through salesman and area managers from Erode, Trichy, Madurai and Udipi (which marks the beginning of the company’s expansion plans in Karnataka and Kerala). For easy financing options to customers, it has forged partnerships with two local microfinance institutions. Though products come with a one year warranty, Sustaintech now charges an annual maintenance fee, post-warranty, of about `1,000.

Firing ahead Bhogle is keen to experiment with a distributor model for better penetration, lower costs and to avoid dependency on salesmen. “Our processes have to be stronger and vibrant,” she mentions. Krishna sees transitioning from a person-driven company to a process-oriented entity as a challenge. Purvi Sapre, Investment Director at UK-based Low Carbon Enterprise Fund—an initiative of ERM Foundation that invested as part of a consortium of three investors in March 2011—feels the dealership model will allow for quicker scale as compared to relying on

their resources. “There is an increasing number of distributors in the region selling a portfolio of products. Sustaintech’s stoves would be a useful addition,” states Sapre. The founders too are optimistic. “The customer segment currently addressed also exists with variants across India. It is possible to customize our offerings for different markets,” points out Krishna. Villgro’s Ganapathy is confident they will be able to diversify into biomass-based cooking and heating equipment, as well as leverage customer relationships to deliver other valuable products.

WHIPPING IT  Seed: £40,000 (Prize Money from Ashden Award for Sustainable Energy)  Villgro Innovation: `25 Lakh  Consortium of Investors: • Low Carbon Enterprise Fund • Rianta Capital • Insitor Fund


Svati Bhogle

Photo Bmaximage

Intelligent Entrepreneur  March 2013 69


[ clean bill ]

STAR POWER Star Health and Allied Insurance is the country’s first standalone health insurance provider Shonali A dvani


is never too late to live your dream, V Jagannathan would tell you. Having achieved many accolades in his 35 year-long career in the insurance industry as Chairman and Managing Director of United India Insurance, Jagannathan was not ready as yet to call it quits. Eight years into Star Health, he is spearheading India’s only standalone health insurance provider. Headquartered in Chennai, Star Health and Allied Insurance Company Ltd. was set up in 2005, because Jagannathan, now 68, believed in the opportunity of health insurance—a space that was relatively untouched by public sector insurance firms who dominated the sector then. Private sector players that were coming up around the same time didn’t focus much on it either as it was seen as a loss-making proposition. The promoters of the company — Oman Insurance Company based in UAE, Indian business houses and Non-Resident Indians (names of the latter undisclosed)—had approached Jagannathan with the idea of setting up a firm in India. “I wanted to start a health insurance company only and agreed to join if my condition was met,” says Jagannathan.

Making a mark Jagannathan had relevant reasons for focusing on this segment and a far reaching vision too. About 40-45 percent of India’s population was in the middle-income bracket and covered 70 Intelligent Entrepreneur  March 2013

properly. “In the health [space], if you are careful, you can do a good job. It is a wide market,” he reiterates. Business reasons apart, he looked at this opportunity as a humanitarian activity too. “I had a gut feeling we won’t make a loss,” points out Jagannathan. The firm secured its license in six months. With paid capital of `108 crore, an amount that is enough to start a multi-line company, he launched a standalone health insurance firm with three broad verticals—personal accident, health, and overseas travel insurance focusing largely on retail customers as its base. The company started working with state governments since 2007 as it built its retail business and that gave them lot of visibility as a new player in the market. They were the sole insurers for Rajiv Aarogyasri Community Health Insurance Scheme in Andhra Pradesh covering over 12 crore people or 2.34 crore families including many who were below poverty line

COVER STORY Members: 3 Lakh Hospitals: 5,800 Products: 29 Employees: 5,500 Total Offices: 214 Corporate Clients: 1,800 Revenues: FY11-12: `1,100 crore (`502 crore from retail)

(BPL) families, on the back of a 3,500 strong team. In addition, they won the tender for the Apathbandhu Personal Accident Insurance Scheme covering BPL families in the same state. The second government project that the company procured was in Tamil Nadu where they were insurers for the 1.4 crore state government employees and their families. The firm led this project with four PSUs and ICICI Lombard as co-insurers. “Star Health gained popularity and this helped us build a name in the market,” says Jagannathan.

Something for all The company initially offered products with mass appeal for individuals and families, and built its portfolio step-by-step by recognizing customer needs. The health insurer has developed an extensive range of specialized products with several combinations. “We introduced some new niche products as well as a modified version of an earlier product, sensing limitation that exists or customer demand,” explains D Rama, Assistant Vice President for the Product Cell at Star Health. More than their numbers, Star Health’s uniqueness lies in their product innovations and some revolutionary policies, he adds. In 2007, it introduced Diabetes Safe for those declared diabetic. “It was a compelling need since India is a global diabetes capital. People had to be sensitized and needed a financing mechanism to provide some comfort



V Jagannathan

level,” says Rama, explaining the thinking behind this innovation. Star Health is also the first to introduce a policy for the HIV positive. “We studied the risk, and saw it is something we can take,” says Rama. This policy is sold through groups or NGOs and not at an individual level—a move consciously adopted due to the high stigma associated with this illness. So far it has issued 12 to 13 policies in this category for different groups covering over 7,000 people. “Our claims in this policy are at 66 percent,” she says. “It is a good ratio for a high risk population.” Two years later, in 2009, it launched a policy for senior citizens, a first in the industry. This policy was one that catalyzed other players to target the segment.

New networks Since its launch, Star Health entered into dialogue with service providers Photos Hari

or hospitals. Another novel and customer-friendly measure it adopted was an ‘agreed network’, an agreement it has with 1,600 hospitals. “We have fixed rates for some procedures, which ensures that patients with ‘Star cards’ won’t pay anything additional,” says S Sundaresan, Executive Director at Star Health. He has been with the company since inception and is responsible for claim operations, customer care, marketing and government projects. “We are 10-12 percent cheaper than others,” he says about the firm's competitive edge. It has been growing at 50 percent and has a loss ratio of 65 percent. “This is a rare phenomenon,” says Jagannathan. “We are particular about underwriting,” he adds. The firm will close this fiscal with `1000 crore in revenues, of which retail business will contribute `850 crore. Star Health owes its rapid growth to a network of agents, a number

that stands at 45,000 today. “Health insurance requires close monitoring,” states Sundaresan. While the trend in the industry was to hire third party agents, many insurance companies have now taken this in-house, explains Sundaresan. The firm's success can also be attributed to an array of salient features it provides such as a 24x7 call center that takes care of customer grievances and acts as a helpline for ailment queries on a network of 200-300 doctors across its 214 offices. Further, Star Health members can upload their entire medical record online, making it accessible from anywhere in the world. In 2010, the firm raised an undisclosed amount of funding from Sequoia Capital along with ICICI Venture. “Health insurance is underpenetrated in India and is a significant consumer need, given rising disease burdens. As a result, the sector is growing and we were attracted to Star Intelligent Entrepreneur  March 2013 71


not changed in villages when it comes to matters of health. “In emergencies, they go to a temple or a district hospital. If both fail, they blame it on fate,” says Jagannathan. The bulk of the company's revenues come from the health vertical that contributes 80 percent of total turnover. Till date, the firm has covered 14 lakh people which include corporate clients.


S Sundaresan

Growing aware

Health as an entrepreneurial leader, having grown rapidly since inception,” says Abhay Pandey, Managing Director at Sequoia Capital.

Rural inroads In its efforts to provide health cover to all, the company has designed a policy for rural population—Rural Micro Health Insurance. However, this business has not taken off completely because it is a tough segment to crack. “It is not remunerative enough for agents to sell since the premiums are low,” says Sundaresan. Star Health has sold only in small pockets of Tamil Nadu. So far as they don’t have the bandwidth in terms of manpower to reach the hinterlands of the country. “Customers should have cash to pay premium too,” points out 72 Intelligent Entrepreneur  March 2013


Sundaresan. This is another challenge for Star Health which it looks to solve. More than that, basic mindsets have

“We have a market share of six percent,” Sundaresan claims. In 2008-09, premiums for the insurance industry on an all-India basis stood at `31,159 crore of which health insurance was `6,625 crore, says Jagannathan. “The overall growth of the health insurance sector has been 30-35 percent year-on-year,” says Jagannathan. Sequoia’s Pandey estimates the Indian health insurance market at $2.5-3 billion (between `13,500-16,300 crore). “We think the sector will grow four-five times by 2018.” A large part of this growth has been thanks to growing awareness, medical inflation, and paying capacity of the middle-income population. “Awareness has increased only in a limited circle. Efforts have to be made by both regulators and the insurance industry. Customers need to understand it is a protective measure and not something to be used during emergencies only,” says Rama. Jagannathan is optimistic about the company's growth. “We are aiming to touch `2000 crore in revenues year after next,” he says. “Insurance is a competitive business. Three things matter—underwriting discipline, distribution reach and product innovation. The company is doing excellently on all fronts,” elaborates Pandey. Jagannathan has a desire to grow Star Health aggressively. Considering he transformed United India Insurance from a lossmaking entity to profits of `456 crore, Jagannathan would be hoping to build up a similar track record with Star Health.


[ digital space ]


CHIP IN Sankalp Semiconductor’s model is creating an ecosystem for entrepreneurs and students Shonali A dvani


hat would you do at Lake Tahoe? Most likely go on a vacation, stay at a ski resort and enjoy the scenic beauty of this large freshwater lake in Sierra Nevada, a mountain range in the US. Vivek G Pawar, 49, went there on a spiritual retreat in June 2004. In those eight days, he took two life altering decisions: One, to return to his roots, and the second, to become an entrepreneur—leaving the comforts that being a Program Manager with Texas Instruments (TI) in Houston gave him. Pawar joined TI in 1990 as a design engineer and held various technical and leadership roles during his stint in Bengaluru. He was sent to Houston for a project from 2003-05, where he managed teams across continents and multiple disciplines, and went on to receive TI’s ‘Customer Excellence Award’. Accolades apart, Pawar wanted more for the field. The information technology (IT) industry employs over 50 lakh people. One aspect of the semiconductor segment (hardware side of IT), is integrated circuits called Very Large Scale Integration (VLSI). He observed there are less than 5000 analog VLSI professionals in India. 74 Intelligent Entrepreneur  March 2013

These dismal numbers prompted Pawar to create an ecosystem for analog and mixed-signal services and solutions back home. Enthused, he launched Sankalp Semiconductor in October 2005. Sankalp works on designing VLSI (electronic chips) in electronic gadgets. There are two kinds of signals: analog and digital. Computers understand digital signals whereas humans, analog. This conversion of analog into or from digital and processing it is called mixed-signal chip design, a Sankalp stronghold.

Skin in the game Pawar needed employees with an entrepreneurial drive to become future leaders spearheading the growth of these services. He did not want employees who would quit for a hefty pay cheque from a multinational corporation (MNC), especially during a low phase.

IN CIRCUIT Manpower: 450 Seed money: `1 crore (self-funded and friends) Three-year revenue growth: 221 percent

This criterion helped him establish the ‘partner-practitioner’ model that the business has been built on since inception. Reaching out to senior executives of MNCs in the sector interested in entrepreneurial ventures, he offered them equity. “If they took a stake in the company, they would grow with it and stay,” says Pawar, Founder and CEO, Sankalp. He had a stringent filtering process to ensure everyone was on the same page. The first litmus test? A salary cut. Pawar also spent considerable time with each to understand their real reasons for joining. “Many people come with the idea that once there is an IPO, they will make money. That should not be the reason as there is a purpose beyond money—to create value,” he emphasizes. “If they are not sure, they will confuse themselves and the organization.” The decision proved to be wise and today Sankalp is led by 15 partnerpractitioners. Some even wanted to take the company to their home-state and make it a success there. Like early co-owner Mrinal Das, Vice President-Engineering at Sankalp. He joined hands with Pawar, his former colleague from TI, in 2006 and today leads the Kolkata and Bhubaneswar centers set up in 2010 and 2012

respectively. The company first set up base at IIT-Kharagpur, where it was incubated for two years from December 2008-2010, to gain a foothold in eastern India. “Any startup needs different kinds of people and skills to take it to the next level. I do not think Sankalp would have achieved this scale with a conventional model. All partners are really connected and have brought more people in rather than just being employees,” states Das, who spent four years in Hubli before taking business to the east. Before creating their own setups, Pawar insisted all partners spend substantial time in Hubli, a measure to guarantee commitment. Sankalp bought back all shares from angel investors after three years for the longterm benefit of partners.


Hitting a gold mine Five months into operations, a Sankalp customer requested for work to be done outside Bengaluru and this catalyzed a move to Hubli. “If tier II and III cities in India become successful, it will be good for India,” notes Pawar. Citing TI’s history, when they chose Bengaluru, an unassuming city then, over Delhi, he says, “Somebody took a chance. No high-tech company came to Bengaluru for five years. But once they were successful, everyone followed.” With the idea of re-creating this success in analog design, Sankalp took a leap of faith and did something transformational. “A company must be near a customer or a gold mine. For a high-tech services company, the mine is a college campus,” points out Pawar, who tried a different model to prove that campuses can serve a purpose beyond incubation. “So we said, let us stay there for 20 years,” he adds. Sankalp has been operating out of BV. Bhoomaraddi (BVB) College of Engineering and Technology since June 2006, thanks to the foresight of its principal, Ashok Shettar, who saw value in this alignment. They were ready to guide and train Photo Kiiran Bakale

Intelligent Entrepreneur  March 2013 75


students on analog and chip design, an area that engineering colleges do not have expertise in. Pawar outlines the two-pronged benefits, “With the CEO and experts sitting on campus, the college gets a lift because of the technology. We can recruit from this pool of resources a few years down the line. This creates an ecosystem.” To date, Sankalp has recruited 35 of its employees from BVB and do not take more than five students each from other colleges to prevent cliques. Seventy of 150 employees sit on campus, and the rest work at Aryabhatta Tech Park, Navanagar, Hubli. Indian-American venture capitalist and entrepreneur Gururaj Deshpande, a mentor to Pawar, says Sankalp has become a role model for entrepreneurial organizations in Hubli and changed its landscape over the past five years, a noteworthy development since it is not a traditionally entrepreneurial town. “When there is a problem, they look for someone else—government, a big business or a foundation to solve the problem. Sankalp, with the efforts of Deshpande Foundation, has given people the taste of personal initiatives. Vivek has shown what an entrepreneur can do when they take charge, own problems and solve issues,” Deshpande affirms. “People in Hubli,” he adds, “are now coming together to share and learn from each other and not waiting for outsiders to help them.”

Starfish syndrome Despite the impact, Hubli is not Sankalp’s headquarters. Interestingly, it does not have one. Pawar felt this conventional model causes friction between centers. Instead, he wanted to make them inter-dependent. It has additional bodies in Indore, Kolkata, Bhubaneswar and Bengaluru. Each site specializes in one area of competency, is a cost center, and is spearheaded by a leader. In effect, it has broken up its services into small segments. “Like a starfish, each part can grow its own body,” Pawar explains. Each center also houses small teams 76 Intelligent Entrepreneur  March 2013

SANKALP SPECIFICS  Hubli: Interface design Kolkata: Analog design Indore: Digital design Bhubaneswar: Analog layout and systems Bengaluru: System on chip

the team for managerial or technical issues. This model reduces our burden. Sankalp does not work with customers with a short-term view, but believes in developing strategic partnerships,” says a senior official from the design engineering department of a semiconductor company based in California, Sankalp’s client of six years for custom layout work.

Growing competencies of other specializations because, “this forms interconnections and reduces clashes,” the CEO reaffirms. Though in the short-term this is a costlier proposition, Pawar is confident it will reap long-term benefits, where each location can become a profit center for the company. Commenting on creating competency in focused functional areas, board member Mahesh Jadhav says that research has shown that small, focused teams rather than large monolithic research and development departments drive bigger innovation. Jadhav is also the Global LeadCommunications, Information for Media and Entertainment Industry at Cognizant Business Services.

Servicing the sector Sankalp offers three services options to its clients, 80 percent of who are based in the US, the rest in Europe, Japan and India. The first option is where customers pay according to the resources (time and material) spent on a project, when it cannot be pre-estimated. Second, in a turnkey project, Sankalp negotiates and quotes project prices beforehand. In the third option, the company takes on outsourced work for a customer’s client, when their teams are full. Here Sankalp works on specifications defined by the customer and pricing is based on a quotation and royalty fee. All its clients are semiconductor firms typically worth over $1 billion and Pawar claims that they have not yet lost a single client. “They employ a lead to every project, in charge of

In April 2012, product engineering and IT consulting company KPIT Cummins hived off its chip manufacturing unit in Pune to Sankalp for 15 percent equity creating a new entity called Sankalp & KPIT Semiconductor Pvt. Ltd, in Bengaluru. Kishor Patil, CEO at KPIT Cummins, said that they transferred 120 employees to Sankalp with this merger. “Sankalp is an ethical, team-centric, highly competent and focused company and are tapping a leader opportunity in India and also globally,” he says. For the remaining 20 percent of services that have not been spun into separate units yet, it will open centers in Tamil Nadu, Maharashtra, and Andhra Pradesh. “We started off with wanting to employ over 200 people, but have grown beyond that,” says Pawar. Deshpande explains that Sankalp’s growth is not constrained by lack of external funds and does not feel they should focus on it either for now. “If a partnership opportunity comes along that will help business, I would encourage that,” says Pawar. Jadhav is of the opinion that Sankalp’s model has a scope beyond semiconductors and can be applied to other R&D-intensive industries. “Increased use of semiconductors in consumer electronics, medical, automotive and other industries will drive need for innovation and collaboration,” he notes. Pawar wants to take technical capabilities a notch higher. “We want to move from analog design to being the go-to company for outsourced chip manufacturing,” he explains.

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[ episode 9 ]

'As you deal with challenges, you get resilient’

Awaaz Entrepreneur’s Harshada Sawant talks to Sushil Mungekar, CEO and Manging Director at Village Laundry Services and Scott Anthony, Managing Partner, Innosight on the aspects an entrepreneur should consider while looking to start a laundry business Q: You started Village Laundry Service (VLS) in 2009. How is your service different from other laundry businesses? SUSHIL MUNGEKAR (SM): Hygiene in laundry is the most important factor. The laundry services available in the Indian market face hygiene issues. The consumer who uses clothes like a branded shirt which costs `1500-`2000 is particular about hygiene. However, he does not know whether his clothes have been washed clean. We thought of basing our model on hygiene laundry. The value proposition for customers from aspiring middleclass who are ready to pay premium quality for hygienic services was 24-hour home delivery. Q: Scott, are you happy with the returns at VLS? Are you convinced that this business is likely to grow from here? SCOTT ANTHONY (SA): Yes. The interesting thing about the creation of a new business is that the business you start off and the way it exists today is completely different. They learn their lessons in the marketplace. We are incredibly pleased where we are today, even if this is not how we envisioned our company’s future. Q: What do you think about the market growth of a business in India? SA: I don’t have the statistics to prove my point but if you look at the Indian context—the population and the gaps in the market to provide a higher quality of more convenient laundry services—I think it is pretty fair to say there is a big opportunity here. 82 Intelligent Entrepreneur  March 2013

Q: What, according to you, was the biggest challenge to be addressed in the Indian market? SA: Giving birth to a new business in India is just brutally difficult. You really have to embrace the spirit of jugaad and the twists and turns and be ready to reiterate that at every moment. We had business model operational difficulties, challenges finding and educating staff, we had fires which burnt pieces of our business—you name it, we had to deal with it. The best thing about operating in India is that as you deal with these challenges, you get resilient. Q: In this business, what is the strategy of investment and where do you commit most of your money? Where do you break down the investment? SM: In a business like laundry, in my opinion there are three important factors. First, good catchment area in terms of location; second, investment in machines and detergents of high quality is important. The third and most important: the customer

CLEAN BIZ: Sushil Mungekar

base that you’re serving. You have to first determine the customers, what services it needs and then base your model accordingly. For instance, if you are serving the working professionals which include formal wear, then your model is different. Q: If someone wants to get into this business, what would your advice be in terms of target area? Were should the stores be opened first? SM: As I mentioned earlier, it is important to narrow down your customers. If you want to provide your services in the hotel industry, it is important to be be located in areas where hotels are present. Your catchment area will have four to five hotels within 2-3 km of your radius. Again, it is a receivables business where you will get money after two-three months from the hotels. If you want to do a residential business, you will have to identify the townships. VLS is a retail business which includes households and is a cash and carry model. Q: What’s your vision for VLS in the coming years? SA: World domination. That’s the plan for the coming five years; or at least domination in India. We have done a lot of experimentation in the country and I bet in the next five years this will be the dominant player in its segment in India. I think in the next five years you will see VLS spread across the country. Catch Awaaz Entrepreneur on Saturdays at 2:30 pm and 9:30 pm; and Sundays at 10:30 am and 8 pm on CNBC Awaaz


Taking the Next Step Entrepreneurs from Nashik got together to learn about what they can do to build sustainable businesses and global brands Shruti Chakraborty


here are entrepreneurs who come from the best business schools, set up their first startups during college, and raise venture capital to expand their businesses. Then there are those who have experienced none of these. Their mentors are not from a business incubator, or an angel investor, but their fathers or grandfathers. Their experience with business didn’t begin during business school, but often directly after school, probably at the age of 17 or 18. Family-owned businesses make up a huge part of India’s entrepreneurial landscape. Second or third generation entrepreneurs who came in and made some changes that took the business to newer heights are not uncommon in India. Nashik Entrepreneurs’ Forum organized the fourth edition of its event on building sustainable businesses for local entrepreneurs at the Taj Gateway Hotel, Nashik, on February 23. The event was attended by a number of members of family businesses and entrepreneurs from various sectors. Parimal Merchant, Director, Family Managed Business, SP Jain Institute of Management & Research, spoke to the entrepreneurs on the advantages and drawbacks of family businesses. He advised entrepreneurs who were a part of a family-owned business to have respect for the role played by each member. He cited an example where there was a family-owned business that had two brothers in the second generation of the business. While one brother seemed to be in office working long hours, the other spent his time socializing and not giving the business Photo Mexy Xavier

HELPING HANDS: (Clockwise from top) A session in progress at the event; Sanjay Lodha and Ajay Bohora of Nashik Entrepreneurs’ Forum

enough attention. While there was animosity brewing within the family, on taking a relook at the situation, they found that the brother who was socializing was contributing to the business by way of public relations and helping bring in business. The one who spent long hours in the office was, in fact, only executing the orders that came in. Other speakers at the event spoke on digital marketing techniques and how digital marketing could help businesses grow, and on building sustainable brands amongst other issues. Mahesh Chauhan, Founder, Salt Brand Solutions, spoke on building sustainable brands. Chauhan said one way to ensure that brands are sustainable is to first understand what is the

purpose of the business. Citing the example of Coca Cola, Chauhan said that while Coca Cola is a product with no health benefits, it has understood its purpose. By building campaigns that focus on making people happy and by associating with people’s moments of happiness, Coca Cola has created a strong identity for its brand. Kruti Lalit Kumar Jain, Director, Kumar Urban Development, spoke on building systems and processes. There were also speakers from other Tier 2 and 3 cities like Tarang Jain, MD, Varroc Group of Companies and Mukund Bhogle, MD, NIRLEP Appliances Ltd. from Aurangabad. Intelligent Entrepreneur  March 2013 83


‘We’ll never sacrifice asset quality for market share’ HDFC Ltd, India’s largest mortgage lender, believes it can grow by around 20 percent on a sustainable basis, given the low penetration of home loans in India. HDFC’s Vice Chairman and CEO Keki Mistry discusses his strategy with Sourav Majumdar. Excerpts: Q: What’s HDFC’s market share now? Q: Which is..? A: We’ve gained market share for sure. However, I’ve said A: Typically, 18-20 percent. But it’s not as if we’re averse to in hundreds of interviews earlier that when you’re in the further growth. So if you look at the current year, the first financial services business, the last thing you should think nine months, our actual growth in individual business after of is market share. When you’re lending, there’s no dearth of adding back the loans we sold in the last 12 months is as high people who want to borrow. So, by sacrificing your margin a as 31 percent, much higher than the target. The fifth objective bit, by sacrificing asset quality or going a bit easy on appraisis maintaining a balance sheet which is perfectly reconciled als, you can get all the market share you want. But that’s in the sense that we don’t take mismatches on interest rates not our objective. or mismatches on maturity. So market share really does not We have very categorically laid down certain core objecfigure in our objectives.’ tives for ourselves at HDFC—not in recent times; it’s been But if you actually look at market share, there is some there for probably two decades. RBI data which comes out every month. If you see that data, The first objective is that the return on equity must rise by housing loans in the banking system typically, in the past 100 basis points every year. If you see our track record from 12 months, have been growing at 13-15 percent and in our 1994 to now, every year, other than the year when we raised own case the growth we have seen in the balance sheet is equity, the return on equity has gone up by 31 percent. So it’s much higher, and we’ve 100 bps every year. We raised equity only gained market share. But I repeat, that’s not SHAREHOLDING PATTERN twice—in 1994 and in 2007. our objective. ( As on December 31,2012 ) Our second objective is asset quality. We’ve always said that asset quality is very Q: For HDFC, asset quality has always critical for us and that is reflected in the fact been a very important factor. What are that historically, over a period of 35 years, the key elements you consider our total loan losses—money that we’ve not when lending? 73% been able to recover—have been only four A: I don’t know how long this record can 10% basis points of our disbursals. continue, but we’ve seen 32 consecutive Our third objective is operational effiquarters till December 2012, where the ciency, which is reflected in probably the percentage of non-performing loans was 11% lowest cost to income ratios you will see lower than what it was in the previous year in the financial sector—not in India, not in at that time. Now, 32 quarters is eight years. 3% 3% Asia, probably in the world. You can imagine how much the economy  Foreign Shareholders - 73% Our cost to income ratio for March has changed in eight years. Interest rates 2012 stood at 7.6 percent. But then, we’re went up, came down, went up again and  Individuals - 10% not a bank and we’re selling one product. are now starting to coming down.   Financial institutions, banks and Insurance Our fourth objective is growth. It’s not that You had 2008-09, which was a terCompanies - 11% we don’t want to grow. We do. rible year in terms of global problems and  Mutual Funds - 3% We set a target for ourselves that we want India’s own issues. We’ve gone through  Companies - 3% to grow at a certain pace and we will ensure that kind of a period. And to repeat what we will grow at that pace. I told you earlier, it’s when you start going Source: HDFC 84 Intelligent Entrepreneur  March 2013

in for market share, when you start saying I need X amount of market share—someone else is growing and I need to grow faster than that—that’s the time when you start becoming a bit lax in terms of asset quality. We’ve never let ourselves become lax. Our focus has always been asset quality. We’ve always told investors over the years that we will never sacrifice asset quality or margins for market share. That is the basic philosophy we’ve ingrained within people here. When we give a loan to the customer, we never look at only the value of the property. We look at the repayment capacity of the individual, and based on that we decide how much loan we can give the customer. The property value only acts as a maximum. We will never lend beyond a certain percentage of the value of that property. The other strength is we’ve had very low staff attrition rates. People are experienced, they’ve been with HDFC for many years and have been trained in our way of doing business. Therefore, they’ve done so many appraisals in the past and know what to look for when a customer comes to them. Q: RBI has been keeping a hawk’s eye on the real estate sector and its risks for quite some time now. How has that impacted HDFC? A: Very little. What RBI obviously would not like to see is speculative activity in properties. Now if you look at our own business, our average loan size in the current year from April 2012 till December 2012, has been only `21.5 lakh. That’s the average loan size for new loans, not the average loan size for the book. For the book it’ll be much lower—probably `8 lakh or `10 lakh because it’s historical. So on a `21.5 lakh loan, if you take a 65 percent loan-to-value ratio, you’re looking at a property value of `30 lakh. Now, `30 lakh is not the kind of property people speculate or make investments in. Our loans go to middle income people who are looking to buy a house because they need a house to stay in. They are not investors, they’re not speculators, they’re end-users. Most of the loans will go to new properties, as they get constructed. Some of it will be for the secondary market, which are properties sold in the resale market, and that happens typically in big cities. So if you look at Mumbai, for example, if someone buys a property for the first time, he’ll buy a house or apartment in, say, Virar. Five years later, he builds up some savings, sells his house and buys something in, say, Mira Road or in Borivali. There’ll be someone who’ll buy his Virar apartment and we’ll be happy to finance that. So about 70 percent of our business is new properties and 30 percent is existing properties. I would say that almost everything—or a significant part of it, 95 percent plus—will be to people who are going and staying in the property. And they will typically be middle income, as reflected in the average loan size as well. Q: Today there’s burgeoning activity in the tier II and tier III towns. Has that reflected on your loan book as well? A: You know, 99 percent of middle class people may be aspirational and may want to buy a TV, air conditioner or a fancier Photos Mexy Xavier

car, but when they are buying a house they don’t like to leverage more than what is absolutely necessary. That is reflected in the fact that in all these years, our loan losses are only four basis points of our disbursements. Even though the loan is granted for say 12.5 to 13 years on an average, the duration of our loans is much shorter. The average duration of our loans will barely be five-and-a-half or six years. Anything between five and six years. So what happens is people keep prepaying loans all the time—about 12-14 percent of loans get prepaid every year. And every loan is an amortizing loan. It’s not as if people are buying properties they cannot afford to buy because there is an aspirational element. Q: I was talking more about entrepreneurship growing in these towns, and whether more customers can afford to buy property now as economic activity grows in these areas… A: Yes, that is true. If you look at our actual data, you will get the affordability ratio, which is the house price divided by the annual income. You will see that in the last 10 years, that has ranged from a low of 4.2 to a high of 5.5. This means a house Intelligent Entrepreneur  March 2013 85


costs roughly anywhere between 4.2 to 5.5 times the annual income of a customer. If you were to look at this number in the early-to-mid nineties, that ratio would have been as much as 20 times, meaning a house would cost 20 times the annual income of the borrower. Today that has come down to 4.6 times in the current year.

percent, which was 2008-09, at around 16 percent, but still in double digits.

Q: And you’re hoping to maintain that run rate? A: I would hope 18-20 percent growth will continue not for one, two, three, five years but for a very, very long period of time. And I say this on the back of Q: But in general, the lower the affordvarious reasons. One, if you look at ability ratio, the better news it is for penetration of housing loans in India, “Our loans go to middlelenders like you. it’s very, very low. In the US, housing A: Absolutely. income people who are not loans constitute 77 percent of GDP, in the UK it’s over 80 percent; Denmark is investors or speculators. Q: Despite all the regulation, what are nearly 100 percent, China is 20 percent. They are end-users” the risks you still see in the system? India is at 8 percent. Even if 8 percent A: I don’t believe there is a risk in the sysis to become 16 percent, we’re talking tem unless some bank is going and lending of a doubling of the existing stock of money to property developers for buying housing loans which would probably land. There was this land buying spree in 2006 and 2007. All take ten years and even then we would be lower than where that has, by and large, come to an end. The 2008-09 slowChina is today. down in the economy has really had a sobering effect on most The second thing which is known to all of us but maybe people. You know, in those days, in 2006-07, many developnot so much to the outside world is, in India people don’t ers wanted to tap the market and make initial public offers buy a house when they’re in their twenties. In the West, you and investment bankers kept telling them that the more the pass out of a business school and you immediately want to land you buy, you will get a fancy value. The valuation of the stay separately from your parents and at 20, 21, 22 people companies was dependent on how much land they had. So go and buy houses. In India, people don’t do that. Here it’s many of these guys went on a land buying spree. They would in the mid-thirties. The average age of a customer when he go and buy a piece of land, pay 20 percent for it, buy another takes a loan from HDFC would be anything between 35 and one, pay another 20 percent and a third. Then the time came 38. With 60 percent of the population being below 30 years of to make the payment for the first piece of land and the criage, all these people will, in the next five to ten years, need sis hit. And there was no liquidity in the system. That has housing and go for housing loans. So I believe 18-20 percent not happened since then. We’ve not seen anyone being on a growth is sustainable for a number of years. Now, it cannot land buying spree. be 18-20 percent every quarter. There will be quarters when The other thing was, till 2006-07, because there was euphoit is lower and quarters when it’s higher. But on a CAGR basis, ria—the economy was doing so well, the GDP was doing well 18-20 percent over five to seven years is achievable. and incomes were rising very rapidly—many developers went into constructing very expensive apartments. No one wanted Q: You don’t see this growth rate being impacted by a lack to focus on the small apartment, one-or-two-bedroom small, of availability? Like projects being stalled or scrapped? affordable housing units. When the slowdown happened in A: If you look at 20 years ago, people were buying properties 2008-09, those expensive apartments didn’t sell anymore. But in six or seven cities—Mumbai, Delhi, Chennai, Kolkata, the lower priced apartments continued to sell. So, post-2008Hyderabad and such places. 09, developers have become a lot more cautious and for every Today, the tier III and tier IV cities are growing so well. big property they construct, they also do one middle income, If you look at our January numbers, for example, Delhi NCR affordable kind of property. That’s as far as risk to the system continues to be our largest business centre. Mumbai, which went. But if you ask me what is the risk to growth, to my mind had slipped to number three for nearly two years, has started that would only be if people start losing jobs. Because in India recovering from December. In December it was marginally we have a very conservative middle class population and if higher than Chennai, and in January it is further higher. So people feel they’re not confident of holding on to their jobs or Mumbai is number two. Chennai is number three. Bengaluru not going to get their salaries, in that kind of an environment, is four, Pune five and Hyderabad at number six. But when we people won’t go and buy houses. talk of these cities, it’s not business generated in these cities itself. For instance, when we say Pune, it doesn’t mean Q: You’ve been having a 20 percent growth rate in loans given in Pune city itself. Pune would include places like general… Satara, Kolhapur, Ahmednagar. Pune is the hub. So the new A: Yes. We had one year when growth was lower than 20 places are clearly coming up. 86 Intelligent Entrepreneur  March 2013


[ luminous ]

STEADY, NOT GREAT Nokia’s latest Lumia is as good as any smartphone out there. But that is not good enough for Nokia A nkush Chibber

WHATEVER MAY BE THE COMPANY’S current state, no one can deny that Nokia is trying bloody hard to reverse its fortunes. But then there is also no denying that the Lumia range of phones could be the Finnish phone maker’s last hand at the table. We recently got our hands on the Lumia 920, the first phone on the Windows 8 platform out of Nokia’s stables. Our first impression was that it looks good, but is heavy—pretty much the standard first feedback from everyone. There are thinner and as good looking Windows 8 devices out there in the market (HTC 8X). Having said that, the heavy, solid unibody build means that the 920 can withstand a knock or two. The unibody form also means that you cannot access the battery or tinker with the onboard storage of 32GB. Completing the looks department are the three sets of buttons on the right side of the phone, for volume, power, and the camera, and sockets on the top and bottom for the earphone and charger respectively. The display on the 920 is spectacular to say the least. The 4.5-inch display rocks a resolution of 768 x 1280 pixel 88 Intelligent Entrepreneur  March 2013

LUMIA 920 PRICE `36,038 DIMENSIONS 130.3 x 70.8 x 10.7mm WEIGHT 185g SCREEN 768 x 1280 pixels, IPS LCD S & M 32GB & 1GB RAM BATTERY Upto 22 hrs on continuous use

resolution, which gives you a bright and sharp visual experience at all times. The display is also safer thanks to a layer of Gorilla Glass, which keeps the scruffs and scratches away. The 920 uses a 1.5GHz dual-core Snapdragon processor that ensures that Windows 8 easily tops Android in terms of smoothness. The interface is friendly and improvements include the ability to resize tiles on the homepage, a new notification tray, and a more fluid flow between apps and screens. But the biggest improvement is never having to use Zune again to put music and videos on the phone. Thank you Nokia and Microsoft for this one. Other positives to note are the native Office application, which is still very worthy and above third-party apps that do the same job, and the

wireless charging option, for which you have to buy the dock separately though. Battery life is another plus with a full recharge easily lasting a full day on normal usage. And finally, on to the two deciders. The worst bit about the 920 is that Windows 8 still stands woefully short when it comes to the apps department and this is expected to be the case for at least the next couple of years, even as the number of essentials has grown on the platform. For now, it loses both to Android and iOS. The best bit about the 920 though is its camera. The PureView camera is by far one of the best cameras we have seen on a mobile device—quite possibly the best. We can write and explain a lot of its features here but we are going to encapsulate it by saying this— it is as good as some digital cameras out there in almost all departments. So do we expect the 920 to succeed? Well at the `38k price point, it’s a tough call to make. Not to mention the fact that Windows 8 is still last on the apps pegging behind two very formidable operating systems. It’s a good hand Nokia, but not one you can raise the stakes on.


[ office tab ]

A LITTLE LATITUDE The Dell Latitude 10 is a tablet aimed at the Indian corporate employee who is shorn of mobile devices at his workplace A nkush Chibber

DELL HAS ALWAYS TRIED to marry the styling and form of its consumer products with the durability and reliability of its enterprise products. So it is not surprising that the first serious attempt to crack the enterprise tablet market comes from Round Rock. The Dell Latitude 10 is not the slimmest or sleekest tablet around. Black and boring is how you could best describe it at first look. On the front, you have a LED-backlit IPS screen that is surrounded by a rather large bezel. Not anything like the edge-to-edge stuff you see elsewhere. The bezel also houses the camera and LED indicator. The back and the sides are toughened up in rubberized plastic. The form is interrupted by USB, Stereo and HDMI ports, volume rocker, and security slots on the sides, while the top of the tablet is busy with the power and rotation buttons, as well as a SD Card slot and two microphones. The bottom has a proprietary dock connector, for which you have to buy the dock separately (`10k), and another micro USB port—both meant for charging the tablet. Interesting to note here that the battery is a removable one.

With a 1366 x 768 pixel resolution, the display is clear enough through viewing angles but watching anything more intensive, like a movie, is not a great experience. You can find better displays on cheaper and lesser known tablets. But then we doubt Dell is aiming for the movie-goer. Having said that, it was not clear to us who the Latitude 10 is aimed at. For one, we are bummed that there is no cellular data option. The idea of not being connected when on the road for any professional is sacrilege. But we are told that there is a cellular option that costs `6k more than the unit we got. While the stylus is a handy addition, there is not much that you can do the business-centric way first up with it. Yes, there is handwriting recognition but we really hope some other apps for business are on the way. Dell of course has added on all its enterprise related security features that would find favor with paranoid IT chaps. A firm can stay assured that as fas as the security and integrity of corporate data and network go, the Latitude 110 does the job and does it well.

LATITUDE 10 PRICE `35,990 DIMENSIONS 274 x 176.6 x 10.5mm WEIGHT 660g SCREEN IPS, 1366 x 768 pixels S & M 64GB & 2GB RAM BATTERY 5 hrs on continuous use

On the specs end, the Latitude 10 has storage of 64GB, while RAM tops out at 2GB. The tablet runs an Atom processor, which is strictly standard when it comes to perfomance. Not as good as some of the other dual-cores around. It helps therefore that Windows 8 in not an overly complex OS. The interface and apps are easy though don’t go looking for the desktop experience. From where we stand, the Latitude 10 is a good tablet to surf the web, work Office documents etc. Will it work at places that have more complex requirements? Maybe. Maybe not. Will it work for offices looking for more basic requirements? Yes. At `36k it is also priced well. It is cheaper than many other tablets and hybrids of similar configurations. Intelligent Entrepreneur  March 2013 89


[ spend a dime ]

Cheap Tricks

Don’t be a tightwad. Too much penny-pinching could break the bank Erika Napoletano


our friend who dabbles in WordPress gave you a screaming deal on your website design. And your niece— a junior in college who loves Facebook—will run your company’s social media accounts. Fantastic. Give me a shout in a few months. I’d love to hear about their work. My guess? You won’t have time to talk. You’ll be too busy hiring a professional designer to fix your website and doing brandrep damage control because your niece tweeted from the wrong account during an all-night frat party. Yes, it’s tempting to take the cheap route. It’s scented with top notes of bottom-line-enhancing pheromones that promise to add curves to your balance sheet in all the right ways. And you’d be a fool to walk away from a great deal, right? Not so fast. It’s time to start brushing off the allure of the cheap. Follow the path to better spending.

Get flexible Every business owner has to stretch the budget from time to time. Commit to being flexible and adjust your spending—when one balance-sheet line item goes up, another should go down. This will help you meet your business’s needs and protect your company’s longevity.

Look twice

Take your time When rushed, we tend to make lessthan-optimal decisions. Time is your greatest ally on the value front. Take as long as you possibly can to calmly explore and analyze available options, rather than automatically writing a check for the one that’s least expensive.

Buy once. Real values do come along; I call them bluebirds. But every time you think one of those bluebirds is flying around in front of you, there’s a chance it just seems really good because you’re comparing it to a pricier bird. If the cheap choice blows up and you have to pay to fix it, your budget will blow up, too. ©Entrepreneur Inc. All rights reserved. ERIKA NAPOLETANO is author of The Power of Unpopular and head redhead at Boulder, Colorado-based RHW Media.

COLD CASH SOBER SPENDING LEADS TO SUCCESS FOR A BEER-BASED PRODUCT When Ari Fleischer and Aly Moler were launching Frozen Pints, their Atlanta-based craft beer ice-cream company, they asked themselves one question: What is the smartest place for us to spend our startup cash in order to build this brand? The answer reflected their key concern: the quality of the product. The food and beverage business is all about margins. Fleischer and Moler could have cut costs by whipping more air into their ice cream or by using cheaper beer in their mix, but these decisions would have adversely affected the product. They knew they needed to put high-quality, tasty concoctions into consumers’ hands to keep Frozen Pints from ending up a novelty item. They spent more than two years seeking out the best ingredients and processes. Now Frozen Pints is sold in specialty stores throughout Georgia. Sweet success for Fleischer and Moler didn’t come from taking shortcuts—they cooked it up by spending their money wisely. “Focus on what your brand, company and product are about,” Fleischer says. “Those answers should guide your business-spending decisions at every stage. We’ll stick to buying the best ice-cream ingredients that money can buy, and buy our legal pads in bulk.” Turns out that value-based decisions can be…quite delicious. Intelligent Entrepreneur  March 2013 91


[ money matters ]

ASSET ALLOCATION FOR ENTREPRENEURS A judicious assessment is necessary while investing in safe and risky assets Bharat Phatak


hile constructing portfolios, it is customary for investment advisors to consider allocation between ‘safe’ assets and ‘risky’ assets. Safe assets give a predictable return and reasonable assurance about the refund of the invested amount at maturity. For instance, bank fixed deposits, company fixed deposits, debentures and government bonds are safe assets. Currently, tax-free bonds from government infrastructure corporations are also available.

Upside on risky assets Why invest in risky assets, when safe assets are available? Risky assets may not pay a regular income, their value may go up and down, and they may be illiquid. But historically, the return from appreciation of these types of assets has been far higher than safe assets. Hence, it makes sense to invest long-term money into these types of assets. Most of us are familiar with the large appreciation in real estate, gold and the stock market. The BSE Sensex has gone up from 3,377 on December 31, 2002 to 19,426 on December 31, 2012, which is 5.75 times in 10 years. This is equal to 19.12 percent compounded annual return. Many equity mutual funds have done better than the index returns after fees. The returns from appreciation from longterm assets are taxed lower. Equity long-term gains are currently tax-free. Hence, a judicious mix of safe and risk assets is necessary, to achieve both, safety and growth. There are some 92 Intelligent Entrepreneur  March 2013

special considerations for entrepreneurs in deciding this golden balance. Entrepreneurs have investments in their business. This is a strategic risk investment and the main source for wealth creation and concentrated in a single business. In constructing portfolios, he or she must take into account his exposure to this strategic risk asset, and accordingly reduce his exposure to outside non-strategic risk assets.

Diversification of non-strategic risks The pattern of non-strategic risk assets has to be different. As there is no management control, and only limited access to information, one must adhere to the discipline of not putting all the eggs in one basket. This is called diversification. In a stock portfolio, at least 15 to 20 stocks should be included. They should be from five to ten different industries. The entrepreneur may

find it difficult to find time to study and build this type of portfolio. Equity mutual funds will be a suitable answer for this. They follow the principle of diversification and focus on performing better than the Benchmark index. SEBI regulations also require mutual funds to observe limits of exposure to individual stocks and sectors. The entrepreneur is also aware that his own business can go through ups and downs. There may be expansion plans or acquisition opportunities in his business. Large sums of ‘own funds’ may be required for this purpose. The portfolio of investments should be reasonably liquid to accommodate such needs. Real estate investments are illiquid and may take six months to a year to realize. Fixed deposits, bonds, gold, stocks and mutual funds can provide the liquidity is a short period. Appropriate term assurance, accident and medical policies are also a must in an entrepreneur’s portfolio. Another unique requirement for the entrepreneur is to ensure that his portfolio of non-strategic assets is not linked or positively correlated to his business. You may be comfortable buying the shares of your customer company, as you are familiar with their business. It is also quite common to invest in their fixed deposit schemes. However, if the customer’s business passes through rough weather, it can adversely impact your business as well as your portfolio at the same time. BHARAT PHATAK is an Independent Financial Advisor


Buying stationery and supplies for your business is now just a click away, thanks to OfficeYes  PG 100

Photo Amit Kumar


[ one voice ]


ome businesses struggle, some fail, some grow to the next level and others find an idea ahead of the curve. Ravi Saraogi, 29, and Umesh Sachdev, 27, batchmates from IIT-Madras, fall in the last category. Though they just couldn’t scale Singularis Technologies, a startup in the mobile value-added service (VAS) space, they did not give up. In an effort to make the community around the telecom sector hear their story, they approached Professor Ashok Jhunjhunwala, Chairman, Rural Technology and Business Incubator (RTBI) at IIT-M. With his encouragement, the duo set up base in college campuses to start their business in mobile technology.

Vernacular voices “VAS mobile solutions appeal to the urban masses but a huge section of users in rural areas do not have solutions built for

Uniphore’s speech recognition and voice biometrics platforms aid communication in firms Shonali A dvani them,” says Sachdev. Working with low literacy levels and predominantly vernacular languages, they used voice as a medium for communication. This became a central theme to their venture, Uniphore Software Systems, launched in 2008, to address the needs of this market. Uniphore has developed two technology platforms: one for speech recognition that converts speech to text; and the other for biometrics or voice authentication. They have created two products on these platforms—both appealing to specific types of customers. VoiceNet, its

customer-centric product, ideal for low-cost feature phones, works over the Interactive Voice Response (IVR) channel suited for rural banking, insurance, retail, agriculture and healthcare sector. For someone living 100 kilometers from a bank, for instance, this product allows him or her to make financial transactions by just placing a call. It gives users a number to dial through which the IVR greets a caller as the bank recognizes caller identity. “The system asks a caller to repeat a phrase which is a biometric authentication. Once recognized, the banking system opens up,” explains Sachdev, CEO, Uniphore. The platform supports 14 Indian languages and spoken data is converted to text which is sent back to the bank’s core system. At no point does a caller use the keypad. Thenmozhi Shanmugam, Incubation Manager, RTBI, lauds it as a pioneering product. She


Umesh Sachdev (left) and Ravi Saraogi 94 Intelligent Entrepreneur  March 2013

Photo Arun Ramu

says, “Uniphore’s competitors have come only a year or two ago. They are well-positioned with an enterprise solution, and achieved 100 percent growth year-on-year.” The second product, mForce, is enterprise-centric, developed for smartphones and tablets. It is designed for banking, insurance, retail and manufacturing sectors, typically useful for employees on the field selling services in small towns. The entire process implemented on paper—form filling, scanning documents, photographs—that usually takes about 10 days, can now be done faster in real time, on an agent’s device installed with the mForce application, and at a lower cost. “The sky is the limit,” says PR Ganapathy, Chief Operating Officer, Villgro Innovation Foundation that invested in April 2010. “Because of the widespread availability of simple feature phones and lack of other devices, technologies like VoiceNet and mForce will enable a vast majority of Indians to cross the digital divide.” Uniphore has applied for patents for the developed algorithms—two on speech recognition and one on biometrics.

Dhanarajan says their volume of operations has increased. Each agent generates eight-nine transactions per month on the sales side, up from fourfive, though this number varies from branch to branch. They have rolled it out to 350 branches with 200 more left.

Real-time efficiency

Charge the large

Cholamandalam Investment and Finance Company, a non-banking financial corporation (NBFC), decided to move to handheld devices in 2010 to capture information real time and track activity of their field force. They had two basic criteria whilst evaluating multiple vendors which includes point of sale (PoS) devices. “We wanted technology that works on low-end devices, as all mobile devices in India are not mature or change constantly. We didn’t want to get stuck with a huge investment,” says Dhanarajan P, Associate Vice-President-IT, Cholamandalam. Dhanarajan explains that Uniphore satisfied this need and they have installed mForce on about 5000 Java compliant Nokia phones and have not faced technological glitches as yet. By March 2013, they will install it on 6000 phones.

Uniphore has targeted only large corporations as customers and not small and medium enterprises (SMEs), betting on a volume game. It will center efforts on this segment for the next few years. “Until we get a critical mass in volumes, we cannot afford to go below a certain pricing level that is only afforded by large corporates who see value in paying it,” elucidates Sachdev. Ganapathy reaffirms their strategy to scale. “SMEs will not understand the power of technology or leverage it for another 10-15 years, especially when it comes to serving the large swath of India’s vernacular-speaking, feature phone-using population,” he says. This decision was also taken as a measure to maintain profitability, which Sachdev said they have achieved since the last two years. Other than direct sales, Uniphore inked agreements with Tata

Talk price The firm works purely on a cloud-based model where a customer is charged for usage. “This has reduced the risk in a customer’s mind. They stop paying once they stop using. There is no investment on their part,” says Sachdev. mForce customers are charged per device, per month. Dhanarajan was tight-lipped on price points, though Sachdev indicated that it can cost an enterprise anywhere between `150`400 per user, per month. VoiceNet customers pay per transaction per call and rates are based on volumes. “It can be as low as 40-50 paise on high volumes or `5-6 on low volumes,” he says. The customer charged, for instance, would be the bank where Uniphore’s technology is installed. Selling to Indian enterprises, Sachdev lamented, has not been easy for a new innovative product, and harder than the western market.

SPEAK UP Clients: 40 Manpower: 65 End users: 1.5 million+ Revenues: FY12 `2.5 crore FY13 `5.5 crore Investors: National Research Development Corporation, Villgro Innovations, RTBI Investment—Total amount `50 lakh (2008-09) Teleservices and Atos, a French IT systems integration company between June-September 2012, who work as channel partners taking their products to the market. They have two more partnerships in the pipeline, though they haven't publicly announced it.

Across boundaries Uniphore’s core goal is to reach more enterprises and people in multiple languages. In 2012, it went international with one mForce client each in Sri Lanka and Bangladesh, in the pharmaceutical and banking industries respectively. India still remains a key focus despite encountering a fair share of challenges in monetization. The duo are looking at increasing the sales team from six to 30 in the next two years with a greater focus on marketing and brand recall value. South East Asian countries will be their next focus, Shanmugam mentions, as Uniphore is targeting 5-10 times growth going forward. Ganapathy and Shanmugam anticipate finding and retaining talent a foreseeable challenge as Uniphore scales, alongwith maintaining themselves as a dominant player. Speaking on foreseeable risks, Ganapathy concludes, “Uniphore’s biggest challenge will be building process maturity into their delivery and at the same time retaining their ‘nimble-footedness’ while innovating. Also, low appreciation value of voice and mobile technologies in Indian businesses proves to be a challenge.” Intelligent Entrepreneur  March 2013 95


[ first gear ]



Imagine a service that allows people to experience the benefits of using a car without actually having to own one. Zoom is making that possible Pranbihanga Borpuzari


reg Moran and David Back always had a strong passion for India, dating back to their time together at University of Pennsylvania where they pursued a course in International Relations. Both had a strong group of friends here too. “This helped us gain an early perspective on India. Post-school, we began focusing on sustainable enterprises,” recalls Moran. Moran, 27, and Back, 28, considered the idea of a membership-based selfdrive, car rental service. “I spoke with Moran about starting a car-sharing (as car clubs in the US are called) company abroad, taking a business model that worked in developed countries to developing economies,” says Back. After extensive research, they concluded that India was probably the best country worldwide for car clubs. Back says they were shocked by the absence of such a service in India.

Starting out Back and Moran felt Bengaluru’s population demographics was best suited to the concept and thus launched Zoom Inc., in January 2011. But even before they got started, they hit a road block. While executing the project, the duo realized the Indian government has a stringent law governing self-drive car companies. It stipulates that an entrant must start with a minimum of 50 cars and have five offices across the 96 Intelligent Entrepreneur  March 2013

state of operation. “Given that we are a startup, this was naturally difficult to meet,” says Moran, CEO, Zoom. Back serves as the President of the company. Heavy brainstorming led to a solution. They struck a 70:30 revenuesharing partnership arrangement with Ramesh Tours and Travels, a local car rental operator in Bengaluru, six months ago which allowed them to leverage the name for initial operations. This ensured that Zoom had complete insurance on all cars and total protection under regulations. Ramesh Tours has acquired seven cars for Zoom in their name which enables the startup to leverage necessary regulatory requirements. “We found it a unique concept for Bengaluru. We partnered with them as we think the service will work,” says Ramesh Babu, MD, Ramesh Tours. Moran and Back have spent the last two years on market research, general due diligence, developing backend systems, in-car features, and the website. By the time this issue of Entrepreneur is out, Zoom would have formally launched operations.

Providing a choice Zoom works on a membership-based model offering self-drive cars on hire, either by the hour or by the day without any rigid hire packages. The average price to rent a car would be `180`225 per hour. An integrated booking

and billing platform lets members reserve a car through the website or a mobile application, but only on advance payment using a credit or debit card. “Our service is designed to be hyper-local and will allow members to access cars that are within a short walk from their place of residence or work,” explains Moran. Each Zoom car will be equipped with a seven-inch tablet to help with navigation, also pre-bundled with the mobile application if members need to extend their reservation. “We are helping people deal with traffic and parking problems by providing real-time traffic monitoring solutions in the vehicle’s navigation system,” explains Moran. To ensure hasslefree parking for members, Zoom will partner with various establishments across the city, like shopping malls, to provide dedicated parking spots. Back and Moran say they are keen to solve the lack of choice in personal and private transportation in Indian cities with a simplified service, better distribution and using advantages of technology as an enabler. They want to bring the benefits of car ownership to countless Indians who do not wish to own a car but would like to access it on select occasions.

Making it work Zoom’s customer profile will vary depending on the location of its vehicles. “For residential complexes, we expect to attract a customer belonging to a family owning one vehicle, where other members too

know to drive. In most instances, they will need a car, for more than a few occasions a month. We found that they would like to have access to another car,” says Moran reiterating the market opportunity for Zoom. “Often their buildings do not have parking for a second vehicle.” At university campuses, Zoom will target graduate students with disposable income as well as college faculty. Hotel guests and corporate employees are another potential customer base for the startup. It will be adding luxury vehicles to its fleet and has tied up with German automobile major BMW for the same. Zoom expects to launch this service by July 2013.

Money metrics Zoom was bootstrapped till the summer of 2012 when it raised its first


Bharath Nathan, COO, Zoom (left) with Greg Moran Photo Bmaximage

IN-CAR FEATURES Real-time traffic solution

Navigation and parking help

Locationbased advertising Roadside assistance

round of capital funding. “We raised funds from various high net worth angel investors in the US, including Empire Angels,” says Moran, who mentioned they secured over $100,000 in initial funding from these individuals. Graham Gullans, Founder of

3G+ wireless connectivity

Route-specific deals

US-based Empire Angels, says he invested solely betting on the team and corporate partners. “Greg and David were able to accomplish a good deal while living in the US and hit the ground running when they moved to India. We are glad we invested early, enabling them to launch quickly,” says Gullans. While there is no credible study, industry veterans and operators say the car rental industry in India is valued at `15,900 crore and growing at over 10 percent annually. Over 95 percent of this segment is unorganized and a large section is chauffeur-driven. “We view the market as still largely undefined since a service like Zoom has never been introduced,” says Moran. Zoom is targeting revenues of more than `10 lakh in its first four months of operations starting February 2013 with seven customers till date. Moran claims their long-term goal is to touch `500 crore within the next few years. “Zoom needs to target other large markets in India once they prove their business model in Bengaluru. It can be easily scaled up on successful growth but needs to watch out for competitors,” foresees Gullans. The company is looking at Delhi and Mumbai as expansion targets. “Doing business in India is certainly chaotic. I like dealing with individuals, and find larger organizations quite difficult. For all the difficulties, it has also been rewarding. Starting Zoom has unquestionably been the hardest thing I have ever done and we are just beginning,” says Back. Intelligent Entrepreneur  March 2013 97


[ virtual invoice ]


ChargeBee has created a new segment in online transactions, simplifying the task of raising invoices and generating bills A shna A mbre


he advent of online shopping proved to be a boon to shoppers, given the comfort of a simple click. From a merchant’s perspective, billing software was the first solution to an offline process. A Chennai-based startup has come out with a quicker solution. “One goes to a store to buy a product, moves to the


(left to right) Rajaraman S, Krishnamoorthy S, KP Saravanan and Thiyagarajan T

98 Intelligent Entrepreneur  March 2013

billing counter and pays the amount generated by the machine. In case of an online purchase, the physical store is replaced by a website, the counter with a payment gateway and the system generating bills and invoices with our services,” says Krishnamoorthy S, 32, Co-Founder of ChargeBee, which seeks to simplify the billing process.

KP Saravanan, 34, Rajaraman S and Thiyagarajan T (both 32 years) worked as product managers and architects at IT product company Zoho. Rajaraman and Krishnamoorty studied at engineering college together. The four partnered to start ChargeBee in June 2011. The work experience in product engineering at Zoho gave the duo the idea to build similar products that included secure scalable applications. “First, we identified the nature and need for a product in the business-to-business space that could serve as a utility for a wide market spectrum,” points out Saravanan, CTO at ChargeBee.

While researching, they identified two areas of interest with web-based transactions. The first was the single sign-on mechanism that gets built for every application, where a user logs in to the desired web portal on a regular or more-than-once basis, like online stores or travel sites. The second being a need for a well-structured billing and invoicing systems used for recording and processing. They took a shine to the latter.

The making ChargeBee’s product is a result of changing trends in software application delivery over the last decade. Earlier, licensed installable desktopbased software was used widely that required a one-time payment for life usage, irrespective of the quantum. However, upgraded technology in the sphere of applications has familiarized users with the concept of pay-as-youuse. In this particular model, one-time payment is not made. “The pricing model for such web applications has been changing. Users don’t constrain their options by restricting use to any particular brand or type. Openness in shifting from one software to another is trending nowadays,” says Rajaraman, ChargeBee’s Co-Founder. From a business perspective, there is a constant challenge to keep pace with a continuously changing environment as well as to retain customers. This challenge enabled the founders to build a new system that could execute a software delivery model. Keeping focus on their strengths, they are looking to provide Softwareas-a-Service (SaaS). “The options for customers are manifold. The challenge is to target a particular vertical at a time,” says Krishnamoorty. This is due to the limited availability of time and resources and to provide intensive solutions to customer problems. “The nature of problems allows no decentralization of efforts at the moment,” adds Krishnamoorty. Gaps in the SaaS delivery model, operational since 2005, were particularly skewed towards billing inefficiencies which form a critical Photo Sekar

QUICK START Seed capital: `20 lakh Launched in: June 2011 Customers: 250 (various stages of engagement) Monthly transactions processed: 3,000

accounts. It has tied up with 30 payment gateways world over. “Subscription billing is a multibillion dollar market. Despite the early stage, close to $5 billion is being processed across various players. The immediate opportunity is in selling to SaaS companies,” says Suresh Sambandam, CEO OrangScape, also an investor in the startup.

Competition counts Value of transactions so far: $30,000 component. Every product of the SaaS model needed access to billing facilities. The billing solution is not a part of the functional operational software. The online retail industry is advancing towards the subscription model and hence ChargeBee is looking to provide a billing solution so that their customers do not have to develop such software themselves.

Business of billing ChargeBee raises invoices on the basis of which it charges its clients. If it provides its software to 10 clients who have 100 customers each that carry out transactions, then it creates invoices for 1,000 customers. It offers three price points—$49 (`2,640) per month, $149 (`8,029) per month and $249 (`13,418). Its customers are mainly in the US, Europe (primarily UK), Australia, and the Asia Pacific Region. “The world is moving towards an EMI-based economy. Subscription billing follows this pattern and the days when vendors charged huge upfront fees are vanishing across industries. ChargeBee is solving a problem in an emerging and growing business that has a global market reach,” says Girish Mathrubootham, advisor and mentor to ChargeBee and CEO, Freshdesk. The service is not constrained by the location of an end-user. The number of transactions for ChargeBee depends on the volume of transactions for its clients. Their services are integrated and complement payment gateway

Rajaraman mentions ChargeBee has five competitors in the US. However, they have created an edge for themselves by catering to small and medium businesses. Its product provides value-added-services to merchants on the back of analytics around usage by working on data derived from billing information. ChargeBee undertakes automatic invoice generation, customer communication and updates to customers. It stores credit card information for clients, charging them on a monthly basis—another competitive edge, and offers clients the option of choosing their own payment gateway company before integration. Saravanan and Rajaraman together look after software architecture and Thiyagrajan handles product management and customer care.

Future pockets Mathrubootham says the product holds potential to expand to multiple verticals. This could range from paying school fees via credit card, or automatic billing for magazine or health club subscription every month. He feels they can target developed or emerging markets too. The four are looking to scale client base nationally and internationally and will work on increasing the robustness of the platform. “Currently we provide services to a single vertical, product management SaaS. We will branch out across products of different verticals and the level of bifurcation would depend on the vertical,” says Krishnamoorty. For now, ChargeBee is betting big on the billing business. Intelligent Entrepreneur  March 2013 99


[ virtual depot ]

PINS AND PENS offers options ranging from stationery to furniture for small and large enterprises Avanish Tiwary


ana Athey, CEO of dogspot. in, an online portal selling canine products, used to run from one stationery shop to another in Chandni Chowk or in old Gurgaon to get his monthly supply of office stationery. “There are several distributors in Chandni Chowk but they do not stock all brands,” complains Athey. In April 2012, he heard about, a website which supplies stationery products to enterprises, and tried their service. Though he was unhappy with some delays in delivery of products, ordering everything from one window was undoubtedly a big relief. As their services improved, they continued to buy from OfficeYes, so much so that he places orders worth `7,000 every month. Now delivery has improved to two tofour days.

Promoters as investors The stationery portal was ideated by online venture builder Rocket Internet India, who were looking to build a founding team. In March 2012, Arvind Sivdas, 30, who was working with McKinsey and also had prior startup experience, approached them. “I liked the idea and agreed to join,” says Sivdas, Co-Founder and Managing Director, OfficeYes. Siddharth Nambiar, 28, 100 Intelligent Entrepreneur  March 2013

who was closely involved with the early stage ideation of the portal, too expressed interest in running it. “I was asked by the Rocket Internet team to co-lead OfficeYes,” recalls Nambiar, Co-Founder and Managing Director, OfficeYes. However, he joined them only after 25 days as he was working with the founding team of, also a Rocket Internet venture. Rocket Internet is famous for appointing their employees as founders of companies they invest in. “In all their businesses,” Sivdas explains, “Rocket Internet is the majority shareholder of equity, the incubator, and the original investor.”

The outlines Nambiar is bullish about the stationery market in India, which he estimates to be `75,000 crore and offers more than just pens and notebooks. OfficeYes is a business-to-business online portal that sells stationery products at wholesale rates ranging from small pins to furniture, desktops and even printers. The ratio of branded to unbranded items in their inventory, stocked at a warehouse in Okhla, is 80:20. Nambiar says their goal is to make OfficeYes in India synonymous with US-based Staples—the world’s

largest stationery company—just that he wants to operate online. “There is no one else in India selling office supplies in a more managed way. In the US, Staples earns approximately 40 percent of its revenue online. The long-term potential of selling stationery and office products online is massive,” says Nambiar. OfficeYes caters to behemoths like GE, Infosys and HCL and even small and medium enterprises. “The online model helps in providing effective service, and then you have that chain of long-term clients to justify the huge e-commerce company,” Sivdas says. Talking about their advantage over offline stores, Nambiar says an online model helps them maintain a larger number of stock-keeping-units (SKUs) and thus lets them offer a wider array to clients, as a one-stop shop for bulk buying.

Working widgets To make shopping easier, OfficeYes provides a micro site to clients (Eg: where their employees can directly order products by just logging in to the company account instead of routing it through their administration department. Another feature, a ‘combo offer’

Nambiar mentions, “is designed to make buying easier and economical for a company looking to quickly pick up a selection of complementary products.” Both Nambiar and Sivdas wanted a team with execution skills required for a portal. “We wanted to grow a business which focused on technology. We think it will give customers a better experience,” Nambiar points out.


Siddharth Nambiar (left) with Arvind Sivdas

OFFICE WINNERS Seed money: $5 million (`26 crore) Clients: 4,000 SKUs: 4,000 Categories: 8 Reach: Mumbai, Pune, Bangalore, Chennai, Hyderabad and Delhi-NCR. Next target city: Ahmedabad Abhinav Katiyar, who built websites such as and, was brought on board as their Chief Technical Officer in July 2012. “The technology vision at OfficeYes is to build B2B office supplies buying platform rather than just an e-commerce website. Our website can be customized for any company and its employees to take care of buying needs within minutes,” Katiyar explains.

Office-office Nambiar explains the sales strategy with both client segments. “We try and have a fixed, minimum basket size to order.” The basket size changes from company to company depending on the mutual agreement. The business model went through much iteration before they settled on the current. “We started out with free shipping, but realized we want to be profitable. So we went from free shipping to a minimum order of `500 and then changed it to `1,000,” he informs. For two weeks they tried to keep the minimum order at `2,000 but realized Photo Amit Kumar

it was a dud idea, as highlighted by the founders, since India was not ready for such big basket experiments. “The minimum basket size,” adds Nambiar, “determines the profitability of our company and customer experience too.” This ensures that they do not spend money on transportation just to deliver goods worth a few hundreds.

Priority on call For a pleasant customer shopping experience, OfficeYes has set up a huge back-end team for telephonic purchases. Once an order is placed, the client receives a confirmation over Short Message Service (SMS) assuring them of speedy delivery. It took them seven months to build this confirmation system and back-end customer care. “It is really a big deal for us since we have been in the market for barely a year,” says Sivdas. Six months into business, OfficeYes introduced ‘lightbox’, a feature which forces users to register after which they can view the inventory. Sivdas and Nambiar say that revenue per

customer has grown five times after incorporating it, though many users find it irritating. “I personally hate it, but it was my idea,” says Nambiar. Sivdas adds that they like to run things on an experimental basis. “It’s just that we are very data-driven and want our customers’ details so that we know each other. The lightbox is there because we want people to trust us."

The growth trajectory The firm started operations in April 2012 and began earning working profit from its first month of operations. “We are growing at 70-80 percent monthon-month,” says a proud Sivdas. The co-founders expect revenues of `13 crore in the first year, but expect to break even only by the third year of operations. The founders will be roping in more MNC clients as they feel it is a bigger opportunity. “It is easier to penetrate into MNCs because they are willing to buy more as their need is demanddriven,” says Sivdas. Intelligent Entrepreneur  March 2013 101


[ fish tales ]

GOOD CATCH Quick service seafood newcomer Fisheteria wants to fill the void between fine dining and fast food A shna A mbre


eing a vegetarian in India is not unusual; however, if you find baniyas—a caste known to be purely vegetarian on religious grounds—in the business of fish, you can be forgiven for being surprised. Shivam Gupta, 21, has a candid explanation for this. “I grew up seeing my father doing business in the non-vegetarian frozen food segment. I learnt from him that religious beliefs and livelihood must never be mixed. They must both be treated differently and with equal respect,” he says.

The bait Growing up in a business family anchored the seeds of entrepreneurship in Gupta from a young age. Whilst pursuing undergraduation in business management from Brunel University in London, a few market trends in the food industry stood out starkly for Gupta as they were not prevalent in the country. “Seafood in India has not entered the quick service restaurant (QSR) segment. Eating high quality seafood the traditional way is an expensive affair. A meal at any good restaurant costs `1,500 on an average,” says Gupta. Homeward bound in 2012, Gupta decided to tap the potential in the business of fish with his QSR venture, Fisheteria in Mumbai. Gupta had the herculean task of convincing his first investor, incidentally his father, on the feasibility of creating an affordable seafood brand in India. This meant he had to study market trends, analyze pricing and consumer preferences. 102 Intelligent Entrepreneur  March 2013

Breeding ground Dogged determination paid dividends. With a seed capital of `25 lakh financed by his father’s firm, West Coast Fine Foods Pvt. Ltd., an aquaculture integrated company, Gupta opened the first outlet in October 2012 at Infiniti Mall, Andheri in Mumbai. Gupta is the Director of Fisheteria, a wholly-owned subsidiary of West Coast. Later this year, it will be spun off as a separate entity. “We saw an opportunity in the market for Fisheteria as no one was serving seafood this way. Additionally, because our backend and core competency is seafood, we knew it would be easier for us than others. At the same time, you cannot miss the passion we have for food, especially seafood,” says Kamlesh Gupta, Managing Director, West Coast Group, Gupta’s father. According to a working paper

IN THE NET Size of India’s marine and fish industry by FY15: `67,800 crore Fish production in India: 9.3 million ton Seafood export value in FY11: `14,000 crore Seafood exports from India by FY14: About `23,500 crore Expected size of the food service industry in 2015: `62,500 crore Source: ASSOCHAM press release and IIM-A working paper

by Piyush Kumar Sinha of IIMAhmedabad in June 2012 (published online), the food service industry in India is estimated to have more than 2.1 million outlets serving diverse cuisine. The total food service market is valued at `43,000 crore. The organized segment of the restaurant industry at approximately `7,000 crore to `8,500 crore forms 16-20 percent of the pie. A rapidly growing fast food market in India also whetted the Guptas’ desire to brand seafood, coupled with changing dining styles. Kamlesh points out that fine dining is no more the norm and has given way to quick service that has almost become a necessity, a result of fastpaced lifestyles. Secondly, seafood occupies a large portion of the Indian diet these days with more people opting for healthier alternatives.

Diving in Fisheteria’s business model operates in two formats: kiosks and outlets. A kiosk is essentially a retail space of 12x12 feet where menu items are preprepared and served on order, essentially like a take-away counter. The outlets are spread over 100 square feet, has an order counter coupled with a back-end kitchen where food is cooked fresh by the staff. Frozen fish for both formats is procured from the parent company at market rates, to ensure quality. Both types of outlets have no dedicated seating areas and are present at food courts in malls. The menu pricing ranges from `20 to `300 per person. Gupta is contemplating on introducing the restaurant format where retail space will be exclusive to Fisheteria customers, so that they can order and eat under one roof, just like any other conventional fast food chain. “Fisheteria must be present at high street locations to get more visibility and attract eyeballs. Also, we need to come up with newer strategies to suit different target markets. For instance, we were present at the Derby this year with our stalls to reach out to



PISCEAN MEAL: Shivam Gupta


more people,” says Rahul Kulkarni, Marketing Head, West Coast.

Swimming ahead Currently, there are two kiosks and three outlets open since three months, with a staff strength of 22 working

across all five locales, and eight as back office support. Over `1 crore has been invested in opening these outlets. Gupta remained tightlipped about revealing revenue figures. In Maharashtra, potential targets for expansion include locations in Pune,

Nashik, and Nagpur. Gupta eventually plans to go outside the state and adopt the franchise route. “It will be easier to enter markets where seafood is not popular, as people are unaware of tastes, menu and importantly, have no prejudice against frozen seafood. In seafood eating regions, the concept of eating fresh fish deters the frozen fish segment,” says Gupta. People from fish eating regions, he explains, are of the opinion that frozen food is devoid of nutrients and stale, too. A fresh catch, being perishable, is consumed soon enough and thus does not lose its health value, they reason. Gupta realizes that in cities with low seafood eating population, changing people’s eating habits will take time. Therefore, Gupta is mulling over the idea of partnering and franchising with existing, well-trusted nonvegetarian food brands. Gupta plans to open 15 stores in 2013, primarily in big cities, both franchised as well as company-owned outlets. Fisheteria is only four months old, says Kamlesh Gupta, and maturity will depend on several factors including market acceptance, project execution, and scale. The startup has caught the attention of a few private equity firms who have approached Gupta with a keen interest to invest in the brand. “We are looking at scaling internationally, for which PE funding will be helpful. However, we do not have a figure in mind as of now, and will take it as it comes,” says Gupta. Seems like Fisheteria’s model may buoy up shoals. Intelligent Entrepreneur  March 2013 103


Be a Leader If you can get the best out of your employees, you are a leader. But don’t rush in Avanish Tiwary


rom the looks, one can discern between a leader and a boss. The leadership quality of a boss exudes his style, attitude and other qualities, which we expect a leader to exhibit. 106 Intelligent Entrepreneur  March 2013

Apart from the clichéd qualities which MBA students are taught in B-schools, there are many other traits which a leader should have. For starters, knowing your team and what they Illustration Chaitanya Dinesh Surpur

are doing is one of the most ignored qualities. Primarily, we need to differentiate between the term, ‘boss’ and ‘leader’. A good boss will, by default, be a good leader but the reverse need not necessarily be true. A boss by nature or the word’s etymology is very corporate-ish and is more of a ‘job’, while a leader is usually seen in a positive light. A good leader, who is also a boss, can change the negative connotation that is sometimes attached to the word ‘leader’. There are a host of things which a boss can incorporate in his or her working style to become a good leader. As leadership is a way of living and not something which can be switched on when the need arises and switched off when the work day is over, it will take time for a boss or a manager to be a good leader. Here are a few guidelines that could work.

Don’t sit on that hierarchy line It is very important to not make your not-so-important employee, say an intern, feel like he or she is the least sought-after employee. The freshers might not have experience but a fresher is called that for a reason—a fresher has ideas without any baggage or prior knowledge about what will work and what will not work. Often a fresher’s not-so-important ideas or plans might unknowingly prove to be the winning idea for your company. When the sense of hierarchy is diffused, senior bosses and managers become approachable to employees. This creates an environment which encourages ideas directly from employees to the boss. It is very important for a leader to develop and work with every employee.

Be uncomfortable with conventional ideas The problem with conventional ideas is that everyone has tried it. If you do the same, you can expect ordinary results. However, for excellence, you need to step off the well-trodden path and chart new goals worthy enough to inspire you and your company. The need for pursuit of excellence is what sets an excellent leader apart. It is not an easy task, of course. It does take a lot of effort to steer off and shed the tried and tested method to forge a new path.

Not everyone can take the risk of a new idea as it can fail. Only those who are willing to go the extra mile and dare to do things differently can hope to be successful. People who know what and how to execute it will be successful.

Communicate effectively This is something good leaders are born with. A good leader always talks to his employees on a regular basis. It is important to take everyone into confidence and discuss their thoughts with the team to make sure everyone is on the same page. Talking to employees about their working style and how they can improve on it helps to create a good working environment. Employees appreciate being told about their working styles and scope for improvement. However, there is a caveat: if this is not done properly, it may boomerang. Hence, communicate articulately to ensure productivity isn’t hampered.

Kill the problems soon Since there are multiple departments in a company, feuds are bound to surface some time or the other. A leader with alert eyes and ears should be able to address these issues on a priority basis as no productive work can be done with employees sulking in a corner over a petty issue. The trick is to deal with these issues immediately. Apart from employee dispute, a leader should make sure there is a feel-good factor about the company, and there is no negativity regarding the company’s growth. Nothing can be worse than bad employee morale.

Don’t be pompous This is a quality which is present in most good leaders. They don’t go on the dais while receiving an award and don’t pat their own back publicly for a brilliant idea. In public, they will say it is a team effort. At the same time, you should not undervalue yourself publicly either. Share the accolades in a way that it applauds the employees but does not disguise your contribution either. This article is based on conversations with various business leaders Intelligent Entrepreneur  March 2013 107


Reduce Shipping Costs If you don’t take measures to keep them low, these costs can eat into your profits Shruti Chakraborty


hipping your products could be one of the biggest costs incurred by your business after the product itself. E-commerce companies have used free shipping as a way to build volumes which has played a crucial role in their success. Customers too expect shipping a product they have ordered online to be a free service provided by the company. As fuel prices 108 Intelligent Entrepreneur ď‚„ March 2013

rise, the cost of shipping a product has gone up tremendously over the years. While not being able to provide free shipping could be a deal-breaker for you with regard to your customers, you have to analyze whether or not you can afford to provide that service. Also, it is risky to be building a business on the grounds that free shipping is your USP. Illustration Chaitanya Dinesh Surpur

If a customer is willing to pay for a product that he or she buys from your website, it is highly possible that he is comfortable paying upfront for having the product shipped, as long as you can provide a good offer on the cost of doing that. There are ways to ensure that you spend less on shipping products. Here are some ways in which you can keep your shipping costs low.

Check size and weight The cost of shipping a product is determined by its weight for most products. However, in case a light product is shipped in a large container, the volumetric weight of the product will also add to your cost. While deciding on your courier service, check the basic rates. Ensure you don’t add significantly to the weight or size of the product itself while you are packaging it. Be aware of the policies of the courier company you select for transporting your products. While some courier services do not allow you to ship products like perishables, drugs, machinery parts that have batteries; some companies may allow you to ship such products at a higher cost.

Avoid double shipping If you have a product that you get from a manufacturer in one part of the country, while your storehouse or inventory is at another location; check if you can make an arrangement for the product to be shipped directly to the customer from the manufacturer or producer, instead of first shipping the product to your storehouse and then to the customer. This may require you to make arrangements for branded packaging at the location, but this will help you reduce costs significantly in the long run.

Use air transport only when necessary It is important that your delivery is made on time and in the shortest duration possible. However, if you are relying on sending products via air freight to make this possible, it may significantly add to your cost. Use rail and road transport as an option for sending products. Many e-commerce players now do not promise delivery of goods within five or seven days. In such cases, you could opt for rail or road transport. You could also add a clause wherein a customer can pay for delivery if he is looking to receive the product urgently.

Encourage larger orders E-commerce startups now often give the option of free delivery only if you order for products worth a certain amount. Some products on your website may cost as little as `100 or less. If you are spending on free delivery on the same, it doesn’t make economic sense. Encourage customers to make larger orders. You could send products to a city that you get a lot of orders from as a part of the same package and thereafter have a local representative take care of local deliveries. Customers often fall for the ‘Free shipping for orders above `X’. If a customer is making an order of `600 and you have a clause that says ‘Free shipping for orders above `750’, the customer may buy another product to reach that order amount, rather than paying the `50 or `100 he will have to pay to get the product shipped.

Negotiate with your service provider There are a number of criteria on which you can negotiate with your courier service company. There may be some locations that you regularly ship your products to. Check for seasonal discounts during festival seasons. Many courier service providers have offers around Diwali, Raksha Bandhan, etc. Also, if you are doing all your dealings with the same courier service company, you can and must negotiate a good price on the grounds of bulk orders.

Seek group discounts If you are a small company and don’t have volumes to be able to negotiate on the basis of bulk deliveries, try and join a group or form one. There are a number of businesses that ship products to certain locations regularly. If you cannot find a group that is already doing this, you could consider joining hands with other e-commerce companies that operate in your area.

Open an account with courier companies Some companies like DHL offer an option of opening an account with them which enables you to get preferential rates on your products. Opening such an account gets you additional benefits like monthly billing and express services at a reasonable price. Many other players in the league of DHL provide these services. Choose the best to make it work for you and attract customers. Intelligent Entrepreneur  March 2013 109


Tap and Foster Employee Ideas Retain talent the right way for better organizational results A shna A mbre


iring employees with adequate mix of good skill sets and qualifications is indeed a challenge for every firm. It is equally vital to curtail attrition rates and create an enabling platform for employees to exploit

their creativity levels. The management at any firm is the facilitator of the work and its progress with focus on targets, numbers and achievements; while the employees chalk out a routine for completion of tasks. Employees are the ones usually well-versed with the daily challenges that affect productivity and efficiency levels. If their first hand experiences are take into account, structured well and then acted upon, a potential dent to the firm’s treasury can be avoided.

Value employees “Most companies that are leaders in their fields have embedded a continuous improvement culture and supporting process that allow them to relentlessly raise the performance bar on all relevant aspects. The ability to rapidly identify and execute good ideas from amongst employees is a key for such supporting processes,” says Arup Basu, President–New Businesses and Innovation Centre, Tata Chemicals. For an enterprise, employees are the only sustainable source of differentiation and having them highly engaged is a winning proposition. Employees work very closely, and hence their ideas are the most pragmatic and relevant, which can be executed successfully.

Owning up If employees don’t get the feeling that they are a part of the organization, they will rarely exhibit leadership qualities and integrity. Employees in an organization need to have a sense of ownership that cultivates feelings of duty and being involved with the firm. What is seen to be missing among employees is a basic sense of identification with the firm; however, this could be developed over time. Employees must be encouraged to participate in the strategic planning process. Contributing towards deciding on the firm’s 110 Intelligent Entrepreneur  March 2013

Illustration Chaitanya Dinesh Surpur

direction is a good building link for creating identification and ownership.

Ideas across topics Create a list of topics based on the objectives and related challenges for the firm. Then seek ideas on these topics, picking one topic at a time. Target questions that are result-oriented without limiting the flow of ideas. This technique helps in gathering a wide variety of ideas from many different perspectives. Employees from different departments, ranks, and geographies can be brought together to share their ideas.

Make participation an exciting affair Forced participation makes for one of the most ineffective ways of encouraging creativity in an organization. And the outcome will turn out to be only disappointing. Encourage employee involvement by communicating the benefits of their ideas to the organization, customers and the employees themselves. Exchanging ideas in an organization can be converted into a social affair. Create opportunities for employees to get together and brainstorm. It could even be a party or a get-together after office hours where employees can share their ideas with each other. New ideas need not be constrained or stifled by airing it within office premises.

Be approachable There is no fixed time like office hours for great ideas to pour in. Therefore it is vital to always keep your cabin doors and e-mail inboxes open to welcome great ideas. In other words, managers should have an attitude of valuing influx of ideas anytime without any hesitation. The open door approach builds trust and highlights an active interest in listening to what employees have to share any time.

Motivate the right way Always use motivation to help employees deliver great ideas. Money is one of the major factors which drive an employee to come up with great ideas. Use this as a bait. If you are using money as an incentive, don’t hesitate to offer an encouraging amount so that your employees will come up with some bright ideas that can help your business. However, monetary incentives cannot create a sense of ownership.

Ask questions, give feedback A boss never has answers to all challenging business questions. To get the best responses to such questions, setting up a questionnaire section or a question bank in the organization is a good alternative. How do you set that up? Simple. Asking several related questions to employees and getting them to clarify them is a good option. Employees feel great when their suggestions are taken by the boss. Positive feedback is always encouraging for employees.

Be on the same page The organizational challenges must be discussed in great detail to ensure that the problems are understood well by employees. There are no gains accruing from sweeping them below the carpet. Problems and issues in the organization must be thrashed threadbare with employees before asking for their ideas. This can result in better and more creative advice which may help target issues.

The process Basu also mentions that is important for employers to co-create with employees an inspiring goal that is relevant to the company’s canvas along with systems, to help align employees with the goal in a manner that is energizing. “Devise processes that allow employees to see clearly how their individual work is linked to the organization achieving that goal. Create deliverables and milestones that require innovation, teamwork and employees to cooperate amongst themselves. Execute these three steps very well and then get out of their way,” says Basu. He emphasizes that rewarding and recognizing the best employees on time, in a manner that increases their sense of self-worth and promotes cooperation, will bode well for the organization. Lastly, three thoughts must be kept in mind for the desired results. First, authenticity. All systems and processes must be foolproof. Employees by and large are a generous lot and will tolerate a small gap between what is ‘adopted’ and what is ‘experienced’. Second, fairness—especially relevant when devising reward and recognition mechanisms and enabling mid-course correction. Third, communication. This should be relentlessly observed and ideally, should be two-way and focused on shared learning. Intelligent Entrepreneur  March 2013 111


Merchandize your Brand It can open up new and exciting business opportunities R aghu B Viswanath


he world of branding is going through interesting times. The world has evolved from product branding to brand franchising. Branded merchandise has transformed many brands and businesses. While everyone has jumped onto this bandwagon, not many are aware that just like conventional product branding, there is a science behind branded merchandise too. Here are a few ways you can promote your brand.

Surrogate branding Branded merchandise has opened a world of opportunity for business. First and foremost, they are a source of surrogate branding. Perhaps, the first branded merchandise that comes to mind is the ‘Wills-Made for each other’ book and contest. Given the restrictions on cigarette advertising, the book was an excellent way to communicate the Wills brand promise of ‘Made for each other’. Liquor companies like Bacardi and Kingfisher have continued to use branded merchandise to communicate their parent brand’s values. Kingfisher has its calendar and Bacardi is known for its ‘blast music’ CDs.

Brand extensions Conventional brands have thrived by expanding into related product categories but the opportunity is limited. For instance, Lifebuoy soap can only extend to hand wash and products in the personal care category. Branded merchandise, however, can elevate your brand to straddle onto unrelated categories too, and thereby prolong the brand’s life cycle.

Revenue source Branded merchandise has opened up revenue streams that have sometimes exceeded the original product brand. Think of Disney and its characters. It is estimated that revenues from Mickey Mouse merchandise alone will soon surpass the revenues from the original film collection. Today, 112 Intelligent Entrepreneur  March 2013

branded merchandise for films is almost about 10 percent of the overall revenues in some cases. Hence, famous personalities take to this route and make more money with their image.

Customer touchpoint Conventional media has become extremely cluttered and competition is intense. Giveaways which touch customers’ lives on a day-to-day basis and reinforce your brand’s promise is a much better and simpler way of engaging with customers. Key chains, pens, CDs, playing cards and the like are all at some level reminders to your customer about your brand. This gives greater return on brand equity than on your marketing spends over time. The advantages of branded merchandise are plenty. Many companies have used it effectively. But the trick is to do it right, not mindlessly jump onto the brand-wagon! How do you get more bang for the buck you spend?

Identify your brand essence Brand essence is not just the unique selling proposition of your product. Purchase decisions are never based on rational thought processes. All consumer research and practical marketing experience has shown that emotions drive decisions and behavior. An international study has revealed emotions are twice as important as any other consideration when it comes to buying. Understanding the emotion behind the customer’s association with your brand is essential to distill your brand DNA. Walt Disney’s brand essence is ‘Making People Happy’ and not ‘Making Unique Animation’.

Recognize the larger business challenge The larger business challenge that constrains your brand or business needs to be understood. A restriction on advertising is a problem for some businesses. For some niche brands, being relevant to customers over time is a problem. For instance,


the Harley Davidson bikes are priced ultrapremium, and targeted at a small niche of biking customers. Such niche brands over time lose out on their loyalist base as its customers grow older. But Harley Davidson is not just about bikes. With clever merchandising comprising of leather jackets, accessories and Harley-Davidson clubs, they have elevated the brand to the status of an icon which never goes out of fashion.

Focus on the customer A customer is not a demographic statistic comprising of age, income, sex and education. Knowing him or her inside out is necessary to create the right branded merchandise. This means you should understand their habits, values, beliefs, culture and as many softer behavioral aspects as possible. Since hero worship is ingrained in the Indian psyche; branded calendars, T-shirts with a customer’s favorite heroes are bound to become a rage.

Find the right fit Your brand imagery and merchandise must be in sync. It must be an extension of the brand a customer can relate to. If your brand essence is about having ‘Good Times’, it cannot be used to give out CDs of a Sufi song collection, under the Illustration Chaitanya Dinesh Surpur

same brand name. A swimsuit calendar will most likely fit, instead. A sports brand like Adidas can have merchandise associated with sports or anything that stands for performance but they cannot use the brand for marketing stuffed dolls.

Make brand merchandise unique Imitation can be flattering, but is not good for your top-line or your brand’s health. ‘Merc star’ as a key chain does not add to the equity of the Mercedes Benz brand but actually dilutes it.

Be open to new business models The world of branded merchandising is evolving and so are newer models of business and partnerships. Virtual merchandise branding has taken over in a big way from product-based merchandise. Online games are a case in point. They have captured the imagination of both, young and old alike. Branded merchandise, if thought through well, can be a powerful way of not just increasing brand equity, but also opening up a new vista of business opportunity. RAGHU B VISWANATH is the Managing Director of Vertebrand, a global strategic branding and marketing consultancy Intelligent Entrepreneur  March 2013 113


Enter South American Markets Among emerging economies, South America has become a destination for new ventures in recent times Sheshadri Vasudevamurthy


outh America is the fourth largest continent by area and fifth largest in population, nearing 380 million. Among the 12 countries, Argentina, Brazil, Chile (popularly known as ABC countries)—in addition to Bolivia, Ecuador, Uruguay and Venezuela—are becoming popular choices for foreign investments and newer international businesses. The group of countries in the south of US is referred to as LATAM (Latin America) region owing to the predominant languages, namely Spanish and Portuguese. Thanks to economist Jim O’Neill from Goldman Sachs for his seminal work on the emerging economies, published in 2001, the term BRIC economy (standing for Brazil, Russia, India and China) was coined with the publication of this 116 Intelligent Entrepreneur  March 2013

Global Economics Report. Later Mexico was also added leading to term BRIMC or BRICM. LATAM and BRIMC thus form an umbrella of nations that are of interest to business community in addition to individual South American nations as they have a commonality in business and culture.

Economic landscape of LATAM and BRIMC Brazil stands out as a developed nation with GDP of $2.45 trillion while other nations are quickly catching up. In a 2012 Gartner report on emerging markets, LATAM was stated to generate nearly $326 billion in IT spending in 2012, of which professional markets was estimated at $157.7 billion and consumer markets to reach $168 billion. In 2013 Illustration Chaitanya Dinesh Surpur

and beyond, considered an important year for entrepreneurs in India and world over, the focus is on World Bank’s 2013 Doing Business report. An interesting development, which is primarily attributed to the recent governmental reforms, ranks Chile at 37 out of 185 nations for the ease of doing business. Brazil is ranked at 130, Argentina at 124 while India is at 132.

Hot market segments The pharmaceuticals, IT, agro-chemicals, agribusiness, steel, mining among others are some sectors where foreign investments have poured in during recent times from Indian companies including NRI firms. Other upcoming industries are cargo, mobile telecommunication and mobile applications. With the recent evolution of cloud computing, Brazil has shown the highest activity for newer ventures and emerging technologies such as Software-as-a-Service (SaaS). In line with this trend, Xervmon, our recently announced cloud management and spend analytics product, was received well with over 10 percent of customers coming out of Brazil just within 12 weeks of the launch. Interestingly, we have no field sales. The product is currently available as online self-serve model. Among other SaaS applications, customer relationship management enterprise resource planning, supply chain management have dominated this space among the LATAM business users. Indian IT companies have already established development centers, BPO, KPO and call centers in eight countries thus employing more than 15,000 Latin Americans. Being in the same time zone as the US, the near-shore business model has thrived well.

Kick-start your business Understanding the national economics and business area that is right for that region is the driver for starting a new business or expanding the current business into newer markets. A mandatory step is to find immigration and export or import requirements from each country before starting out the process. There are agencies with attorneys who work the entire process.  Registering the business name with government agency is a critical step.  Another important step is to register the articles of incorporation. This is the piece of document that enlists the nature of business, address, directors and shareholders.

 Department of Taxation requires an application for tax permit.  Additional local or zonal licenses and registration with the state government will be necessary and could change based on the nature of the business. If a foreign entity has stake in the venture, it may be required for federal, state and local governments to be notified and appropriate permits obtained. Brazil, Mexico, Peru, Argentina follow similar guidelines. The processes for the above nations are similar and even simple. Given governmental interactions, it is inherently time consuming.

Special attention to Chile Startup Program As highlighted before, Chile stands out among the South American nations as an entrepreneurfriendly nation. With an annual GDP growth rate of 4.1 percent, it is the fastest growing economy among South American nations. Vivek Wadhwa, entrepreneur turned academician, Vice President of Academics and Innovation at Singularity University, is an advisory board member of Startup-Chile—a program which was started as a government initiative in 2010. He notes Silicon Valley-style entrepreneurship is now spreading in South America. With $15 million as its annual budget, it has sought to attract early stage, high-potential entrepreneurs to bootstrap their startups in Chile. There are online resources that help avoid expensive agencies and the entire process is transparent with the Chilean government support.

Challenges and risks Corruption is present though waning, and entrepreneurs and business leaders should be aware and instead work on risk assessment and efficient ways of mitigating these risks. All South American countries have now adopted at least one of the prevailing anti-corruption conventions. Contract negotiation is a nascent function in almost all Latin American nations. In my previous role at NETGEAR, special attention was paid to regulatory compliance in contracts with suppliers to tackle corruption and bribery issues. On the business development front, channel partners and re-sellers were great to work with, once I learnt to handle the regional, cultural differences and negotiation styles. SHESH VASUDEVAMURTHY is a founding team member of Xervmon - an early-stage venture into cloud management and spend analytics. He tweets at @sheshadriv Intelligent Entrepreneur  March 2013 117

T-Rexton [ wheels ]

First out of the marriage between Mahindra & Mahindra and Ssangyong, the Rexton is up for a fight with the old boys A nkush Chibber

here is little to argue against the fact that Mahindra & Mahindra (M&M) really took it up a notch amongst domestic auto manufacturers when it came out with the XUV500 in late 2011. A true premium offering in the SUV segment by a home-grown brand had not been seen till then. You could argue that had it not been for the XUV500, Ratan Tata would not have commended the company like he did in his last AGM. Almost a year later, M&M decided to take it a notch higher when it came out with the Ssangyong Rexton, a large bodyon-frame SUV that is the first offspring from the brand’s acquisition of South Korean auto major Ssangyong.


Smart but never rough The Rexton, unlike the XUV500, is pitted against the bigger boys in the SUV segment i.e. the Toyota Fortuner and the Mitsubishi Pajero—both of whom have their loyal following

SPEC-WISE ENGINE Fuel Diesel Type 5-cylinder, 2696cc Power 162bhp (MT), 184bhp (AT) Torque 34.7kgm (MT), 41kgm (AT) DIMENSIONS Length 4755mm Width 1900mm Height 1840mm Wheel base 2835mm Ground clearance 252mm PRICE RANGE Ex-showroom price

`18lakh (MT), `20.15lakh (AT)

118 Intelligent Entrepreneur  March 2013

in India. In that sense, it does start from the back of the pack and has a tough little ride on its hands. The aforementioned two SUVs have one common thread— both have what you could call a tougher look; a very imposing road presence. Compared to them, and indeed the Ford Endeavour, the Rexton is more gentleman than ruffian. The curvy shaping of its bonnet as well as the front lampgrille assembly is softer to the eyes than the block-and-talk front-ends of the others. And that is a good thing for the professional, office going lot, is what we think. The exteriors overall all are contemporary in the European way—with the use of chrome across the grille, the styling across the seating cabin, and the wraparound rear windscreen. Inside, the contemporary styling continues. The cabin is posh in design and comfort, with soft leather seats that you would find in a German luxury car. The panelling work is tight—soft tough plastics that nicely fit together and house the touch screen interface for the audio and mapping system and the air-conditioning controls. Other features include a sunroof, parking sensors, automatic headlamps, rain-sensing wipers, cruise control and steering-mounted audio controls.

Tight at places The cabin space is aplenty overall but its gets progressively cramped as you go behind. The front two sit in more than a fair amount of comfort. The second row of seats would be a bit of a problem for anyone above five feet and eight inches, with their low-set installation and high floors. By the time you come to the last row of seats, the situation gets grimmer. If you are above the height of an average Indian male, be prepared to sit with your knees almost folded up to your chest. Plus, there are no headrests for you to find some succour by leaning your head back to get out of that almost foetal-position. Though there is some comfort thanks to the AC vents with their own controls. Having said that, we would like to point out that the case of a large exterior but cramped interior is an affliction seen in

other large SUVs in the country. The Ford Endeavour comes immediately to mind. Amongst the smaller lot, the Renault Duster and Skoda Yeti have a similar problem. Though the space bit is not as plush as exuded by the rest of the vehicle, we have to admit that the ride quality on the Rexton does make sitting in any row of the seats better than it would seem. We took it testing out over a fair bit of roads that were roads maybe about 15 years ago and are happy to report that the high-profile tyres do the job along with the suspension. We were spared where hatchbacks were doing wheelies.

Smooth but noisy The Rexton is available in 5-speed automatic and manual transmissions, but with the same 2.7-litre, in-line fivecylinder DOHC turbo-diesel motor. But the two variants are tuned differently. While the auto transmission variant that we trialled produces a fair 184bhp of power and 41kgm of torque, the manual variant tops out at 162bhp and 34.7kgm. Our automatic variant was more than a breeze to drive. It comes with a permanent all wheel drive that pushed it through to 100kmph in a quick 12 seconds while never showing any lag. Its power delivery through the city and the highways both was smooth and made for good cruising. The gearbox too coped fairly well though never being outstanding in handling the shifts. What we did notice was the steering was a little too light and delayed. So you can’t really go all out hugging corners in this one.

Photo© Gaurav S Thombre

On the mileage end of things, the automatic gave us 12kmpl on the highway and about 10kmpl in the city—figures that are not meant for the cost conscious but then, which large SUVs are? The problem we had was with engine noise. As the RPM increased, the Rexton seemed to get louder and angrier. While you would not hear much of it sitting insulated in an air conditioned cabin, it does not bode too well for your street cred.

Our take? There are positions to be taken for and against the Rexton when you compare it with contemporary SUVs in the market. While its looks, features, build and ride quality are major pros in its corner, the handling, noisy engine, and a lack of ‘fun’ riding quality are things that can put you off. But in the end, there is no denying that you cannot get this package at the price M&M is offering. The automatic variant Rexton at `20 lakh ex-showroom Mumbai is almost `2 lakh cheaper than other similar autos. Moreover, the manual variant, at a price of `18 lakh, is today the most affordable SUV in the premium class. This pricing strategy alone, we think, could make it gain favour with urban Indians looking to upgrade to a high-end SUV.

Intelligent Entrepreneur  March 2013 119


How effective is your marketing plan? Add up the points to find out if your company is doing it right Ross McC ammon 1. How ambitious are your revenue goals? a. Achievable (10) b. A liiiittle too lofty (5) c. Laughable (0) d. Totally absurd (-5)

d. Premier (0) e. Best of breed (0) f. Best in show (0) 17. which is not one of the ‘Four p’s’? a. Product (-1) b. Price (-1) c. Promotion (-1) d. Placement (-1) e. Prayer (1)

2. Do you know what you’re selling? a. Yes (0) 3. No, I mean, Do you know what you’re selling? a. Yes (-5) b. Yes (5) c. No (-10) 4. Which of the following irrelevant but search enginefriendly words are included in the title bar of your website? (Check all that apply) a. Bacon (2) b. Puppies (2) c. Bieber (2) d. N/A (0) 5. What Does SEO stand for? a. Search engine optimization (1) b. Seriously. Enough (with the) Optimization. (-1) 6. How well do you stack up against the competition? a. Well (3) b. Poorly (-3) c. What competition? (-10) 7. Which strategy is the most effective? a. Analyze your competitors. (1) b. Analyze your target market. (1) c. Slap some hunch on it. (0) 8. Where should you aim? a. Right in the middle (3)

b. Third or fourth ring out. Then sit 120 Intelligent Entrepreneur  March 2013

18. Are you apple? a. Yes (100) b. No (0) 19. How are your metrics? a. That’s a little personal (0) back and wait for the bull’s eye to move (-3) c. I’m a lawyer for Target and this constitutes trademark infringement. Cease and desist. Furthermore, I am alerting the media (-10) 9. Say you’re trying to sell an absorbent towel commonly called a chamois or shammy. What do you name it? A. Towel (-4) B. Absorbent Sucker-Upper (-3) C. ChamWha (-2) D. ShamWow (5) 10. Slapchop? a. I’ll take two, thanks (-3) 11. Which of these line items appears in your marketing budget? (Check all that apply.) a. SMS campaigns (2) b. Website (2) c. App (2) d. Trade conferences (2) E. Cocaine (-2) F. Miscellaneous pizazz (-4) 12. Which is your favorite punctuation mark? a. … (-5) b. : (-4)

c. ; (-3) d. ? (-2) e. ! (0) f. !! (2) g. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (-3) h. . (-5)

20. What is a metric anyway? a. Beats me (-3) b. No idea (-3) c. No clue (-3) d. I got nothin’ (-3)

13. Do you ever refer to social media as ‘social media or whatever’? a. Yes (-10) b. No (0)


14. What is your tweet rate? a. We don’t tweet (-5) b. Once a week or so (0) c. Once a day (1) d. Multiple times a day (5) e. “Hang on … Just need to… #stupidquiz … and …done! … Sorry, what was the question?” (10) 15. LinkedIn? a. Obviously (2) b. Let’s see: We’re linked in to the city water system. And we’ve got a phone line (-4) 16. Which supposed virtue is the greatest? a. Award-winning (0) b. Dynamic (0) c. Sustainable (0)

LESS THAN 0 POINTS: It isn’t working!!!!!!!!!!!!!!!!!!!! 1 TO 10 POINTS: The sandwich board is fine. Consider, however, the dynamic possibilities of a human sandwich board. 11 TO 20 POINTS: Your marketing plan is effective. MORE THAN 20 POINTS: Your marketing plan is so effective that your customers are tweeting your score on this quiz. MORE THAN 50 POINTS: You are the ShamWow guy. ©Entrepreneur Inc. All rights reserved. ROSS McCAMMON is an articles editor at Esquire and a regular contributor to Entrepreneur

Free 32-Page Budget 2013 Supplement




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GOING BY THE BOOK If there were points for not rocking the boat, Finance Minister Palaniappan Chidambaram would get a perfect 10 on that count. His Budget 2013 was devoid of drama, workmanlike and steady. For those hoping for Big Bang announcements by the FM, this Budget was a disappointment. However, the minister did make the right noises, kept the fiscal deficit for FY13 in check at 5.2 percent and put out a deficit target of 4.8 percent for FY14. He left the middle class largely untouched, but did tax those with taxable income over `1 crore—the super rich—higher by way of a surcharge. He focused on making the equity markets more attractive and gave several sops for the education, health and farm sectors. There were quite a few proposals for micro, small and medium enterprises (MSMEs) in this Budget, and MSMEs have even been allowed to list themselves on the SME platforms of exchanges without having to make initial public offers (IPOs). Angel investors and student startups have also been given a boost, which should be good news for the entrepreneurial community. Overall, despite some areas of disappointment and the lack of a big reforms roadmap, the Budget does address some problem areas and promises to get on the road to fiscal consolidation. We are delighted to bring you this Special Budget Supplement, in partnership with Grant Thornton, so that you get a deeper and clearer understanding of what the proposals mean for some important sectors. This ready reckoner, we hope, will arm you to plan your business strategy better.

Sourav Majumdar Editor-in-chief

CONTENTS 4 SME Inc. The role of Small and Medium Enterpris-

15 A Tale of Taxes Budget 2013 did not bring much good

es, the challenges and expectations from

news for industry at large, though SMEs

Budget 2013

scraped through unharmed

10 Broad impact of

18 One Budget for All

Budget 2013 on SMEs

Union Budget 2013 is getting cheers from

The government has extended non-tax

some sectors like agriculture and boos

benefits for India’s SMEs

from others like the auto sector

Cover Illustration Chaitanya Dinesh Surpur

4 Supplement with Intelligent Entrepreneur + March 2013



SME Inc. Role of Small and Medium Enterprises, the challenges and expectations from Budget 2013


Currently, SMEs employ nearly 81 million people in 36 million units across the country and contribute almost 45 percent to the total industrial output

mall and medium enterprises (SMEs) play a pivotal role in the growth of the Indian economy. Be it contributing to industrial output or generating employment, the SMEs have always made their importance felt through the remarkable progress achieved across traditional and emerging sectors such as manufacturing, food processing, pharmaceuticals, textile and garments, retail, IT and several other service sectors. Currently, SMEs employ nearly 81 million people in 36 million units across the country and contribute almost 45 percent to the total industrial output. In recent times, SMEs have been catering to Indian as well as international markets and have emerged as leaders even during the period of recession by restoring jobs and business activity. They serve as a prime vehicle for balanced regional development and the eco-

nomic upliftment of weaker sections of society. Due to their contribution to the Indian GDP, which as per the Economic Survey of India for the year 2012-13 is 7.9 percent, they can be aptly called the backbone of the Indian economy.

SEVERAL CHALLENGES Though the sector is flourishing and is expected to grow in the near future, it faces several challenges. To name a few—inadequate infrastructure, finance, nonavailability of highly skilled labour at affordable costs, are some of the problems which hamper the functioning of SMEs. In many areas, the problem is not only about getting financial aid but even the presence of lending bodies. Many SMEs dot the rural landscape of India and need funds there. The banks either have their own credit rating system or take assistance from the credit rat-


ing agencies. The trouble arises when the SMEs, who are already burdened with their basic survival, have to find a way to wriggle out of the sticky situation and prove a good rating as well. Technical upgradation is another important issue which the SMEs face. Lack of information on the latest technology available affects productivity and output which means that it hurts the bottomline. Further, cost of production is also comparatively higher due to lack of sophisticated technology. Smaller size of operation limits the bargaining power with suppliers. Quite often, SMEs are into sectors where there are too many players which make the competition intense. All these factors add up to low profit margins. Marketing oneself is another issue faced by

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SMEs. Professional agencies prefer to not engage with small entrepreneurs due to paucity of funds. For a majority, marketing implies advertisement or personal contacts. An important marketing tool available with small entrepreneurs for promoting their products is low pricing coupled with credit to buyers, which gives rise to a number of problems at a later stage. There are many ad hoc initiatives taken by the government to promote marketing of products and services of small units, yet no concrete action plan has been chalked out until now.

NEED FOR SUPPORT The inherent strengths of the sector need to be reinforced in the wake of increasing competitive pressures and tight global market conditions. To further empower the


An important marketing tool available with small entrepreneurs for promoting their products is low pricing coupled with credit to buyers, which gives rise to a number of problems at a later stage


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One must realise that the SMEs of today have the potential to become the MNCs of tomorrow


SME sector, it is necessary to support them, educate and empower them to make optimum utilisation of the given resources. To this end, the government could think in terms of leasing out premises to SMEs during their initial years of operation. Once they become financially stable, they could be given an option to buy the leased property at a fair price. Such a facility would enable startup companies to utilise their funds to gain stability and ensure growth. Also,


one must realise that the SMEs of today have the potential to become the MNCs of tomorrow. Thus, the banks and other agencies should take pride while servicing the SMEs as they are instrumental in ensuring an inclusive growth. On the technology front, SMEs expected initial funding to be supported by the government, while the private initiatives in this regard could be accelerated with appropriate tax incentives. SMEs also wish for subsidised marketing operations Illustration Chaitanya Dinesh Surpur


that would aid in increasing their visibility. From the tax perspective, while the last Budget introduced some welcome changes such as relief from long-term capital gains arising from transfer of residential property and investment in the plant and machinery for a new startup in the manufacturing sector, enhancement of tax audit limit to `1 crore; the idea of extending Alternate Minimum Tax (AMT) to partnerships, association of persons (AOPs) etc. became extremely unpopular. Although there was a provision in the Budget to exempt enterprises from AMT, provided their adjusted total income did not exceed `20 lakhs. This limit seems to be inadequate in the wake of major expansion and modernisation expenditure planned by SMEs.

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UNFULFILLED WISH LIST Some of the major changes on the wish list of SMEs from this budget were—a complete rollback of AMT levied on partnerships, AOPs etc., liberalised service tax levied on various services offered. This Budget was expected to address the SMEs woes by granting some relaxation on excise duty and making exemptions-related laws linked to the definitions of SMEs provided by the Ministry of Industry. Overall, taxes levied at customer level, distributor level and manufacturer level should have been liberalised for the industry in order to promote long-term savings. The SMEs also expected the government to introduce special tax concessions for long-term saving instruments.

This budget was expected to address the SMEs woes by granting some relaxation on excise duty and making exemptionsrelated laws linked to the definitions of SMEs provided by the Ministry of Industry

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Broad impact of Budget 2013 on SMEs The government has extended non-tax benefits for India’s small and medium entrepreneurs


Business incubators play a crucial role in supporting new businesses, which start small

he government has in the past taken several initiatives in making the micro, small and medium enterprises (MSME) more efficient and competitive. These include a number of schemes introduced with a focus on marketing and promotion, technology infusion, improvement of credit facilities, skill development programmes and other export incentives. These include the Marketing Assistance Scheme, Interest Subsidy Eligibility Certification, International Cooperation Scheme, the Trade Related Entrepreneurship Assistance and Development (TREAD) Programme for women, and the Focus Market Scheme (FMS) for exporters to promote exports to new markets and countries. To encourage the MSME sector, the Finance Minister proposed to extend these

non-tax benefits to these units for three years even after they grow beyond the MSME category.

INVESTMENT IMPETUS Another important step in this direction has been the enhancement of refinancing capability of Small Industries Development Bank of India (SIDBI) from the current level of `5,000 crore to `10,000 crore per year. Business incubators play a crucial role in supporting new businesses, which start small. The new Companies Bill provides for companies to spend two percent of average net profits under Corporate Social Responsibility (CSR). It is proposed that funds invested in technology incubators located within academic institutions and approved by the Ministry of Science and Technology or Ministry of MSME will qualify as CSR


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Micro, small and medium enterprises (MSME) have a large share of jobs, production and exports. Too many of them do not grow because of the fear of losing the benefits associated with staying small or medium

Photo Getty Images


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expenditure. This initiative will help in providing impetus to the research and development activities, which will help the country in developing new technologies and businesses. Tool Rooms and Technology Development Centers set up by the Ministry of MSMEs have done well in extending technology and design support to small businesses. They offer funding for participation in international fairs to help MSMEs develop overseas markets and encourage application of design and innovation to promote design as a valueadding activity. Thus, with the assistance of World


Bank, a sum of `2,200 crore is proposed to be allocated during the 12th Plan period to set up 15 additional centers.

LISTING ON THE STOCK EXCHANGE The listing of SMEs in the major stock exchanges of India i.e. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) began in the year 2012. This step was an important for the SMEs as it helped them in reaping the benefits from capital markets and also meant that we have an effective and well represented capital market. The cumbersome process of making initial pub-


lic offer (IPO) hindered the growth of the SME exchange. The Finance Minister in his speech has announced that SMEs will now be permitted to list on the SME exchange without being required to make an initial public offer (IPO). However, such issues will be restricted to informed investors only.

BOOST TO TEXTILE SECTOR As an incentive to boost the textile sector, it has been proposed to set up Apparel Parks within the Scheme for Integrated Textile Parks (SITP) to house apparel manufacturing units. An additional grant up to `10 crore to each has also been provided for setting up such Apparel Parks in the budget. Also, in an effort to address the textile industry’s environmental concerns,

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the government also proposed to implement the Integrated Processing Development Scheme, allocating a sum of `50 crore to the scheme. Further, in an effort to draw the handloom sector out of their distress, it was offered that they be provided with working capital and term loans at a concessional interest rate of 6 percent. In addition, a ‘zero excise duty route’ has also been provided to cotton and manmade sector at yarn, fabric and garment stages.

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INVESTMENT ALLOWANCE A new provision has been inserted in direct statute i.e. Income-tax Act, 1961 where an additional deduction by way of investment allowance of 15 percent is allowed to the business of manufacturing of an article or thing. However, this allowance is available only when the investment exceeds sum of `100 crore in new plant and machinery during the period April 1, 2013 to March 31, 2015. This allowance will be in addition to deprecation which the taxpayer is eligible to claim. It would be pertinent to note that the threshold limit of `100 crore would be hard for an SME to achieve and avail benefits therefrom. Thus this step would have been a welcome step for


SME had a lower threshold limit would have been proposed to avail this benefit.

SERVICE TAX AMNESTY Sometimes when an SME is on a steep and rapid growth path, its compliance obligations often lag behind the growth chart. A window of opportunity has been proposed by providing an amnesty scheme to encourage voluntary compliance by the service taxpayers. This scheme will be applicable to persons, who as on March 1, 2013 have pending tax dues for the tax period October 2007 to December 2012, in respect of which no notice has been issued by the tax department. Further, the taxpayers opting for this scheme would be required to make a declaration of their tax dues to the designated authority by December 31, 2013 and pay at least 50 percent of tax dues by that date and the balance by June 30, 2014. In addition, the proceedings covered by the period of declaration shall not be reopened before any authority or court.


OVERALL PICTURE Contrary to expectation, this budget was not a populist one. No major sops were announced for any segment. However, SMEs were an exception. Fund availability to SMEs have been augmented by announcements such as easier access to the SME exchange, doubling the refinancing capability of SIDBI, angel investors to get benefits as available to venture funds, and funding to speci-

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fied incubators to qualify as CSR. No direct tax sops have been granted to small entrepreneurs. In fact, the surcharge applicable on a firm is proposed to be higher than that of a company for income between `1 crore and `10 crore. Overall this is a good budget for SMEs and they can be expected to be the frontrunners in India’s quest to reclaim the growth trajectory.

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A Tale of Taxes Budget 2013 did not bring much good news for industry at large, though SMEs scraped through unharmed


he Finance Bill 2013 proposes no changes to the tax slabs and the tax rates, albeit, a tax credit to a maximum of `2,000 for the individual tax payers who are in the lowest tax payingbracket. A glimpse of the tax slabs along with the rates in respect of the individuals, HUFs, AOPs, BOIs, artificial juridical persons and companies is provided in the tables below– Table 1.1: In case of resident not exceeding the age of 60 years during the financial year 2013-14 INCOME SLAB


Up to `2,00,000


`2,00,001 to `5,00,000*

10 percent

`5,00,001 to `10,00,000

20 percent

Above `10,00,000

30 percent

Table 1.2: In case of resident whose age exceeds 60 years but not more than 80 years during the financial year 2013-14 INCOME SLAB


Up to `2,50,000**


`2,50,001 to `5,00,000**

10 percent

`5,00,001 to `10,00,000

20 percent

Above `10,00,000

30 percent

Please Note: *A taxpayer whose income does not exceeds `500,000 during the financial year 2013-14 will be eligible to claim a tax credit to a maximum of `2,000 before allowing any deductions from its gross total income **An individual assesse who at any time during the financial year 2013-14 is of 80 years of age or more would not be subject to tax to the tune of income upto `500,000 With the corporate tax rates remaining unchanged, the profits of the Indian corporates would be subject to the tax rate of 30 percent along with an additional burden of surcharge. The much talked about tax on super rich has found its way in the Finance Bill, albeit in a much moderate way. The Finance Bill proposes to levy a surcharge of 10 percent on an individual tax payer where his/her taxable income exceeds `1 crore during the financial year 2013-14. On the other hand, the government also proposes to levy the surcharge of 10 percent (currently a sur-

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charge of five percent is applicable on all companies and firms) on the tax payable by the companies and the firms where the taxable income exceeds `10 crore

and `1 crore respectively. A comparative overview of the effective tax rate in the hands of the Indian corporates and Super Rich is in the table below:




Income exceeding

High income earner

30.9 percent

Firms/ Co-operative societies

32.445 percent

Domestic Companies

32.445 percent

Domestic Companies

32.445 percent

`1,00,00,000 Income exceeding `1,00,00,000 Income between `1,00,00,000 and `10,00,00,000 Income exceeding `10,00,00,000

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Effective rate of taxes* Please Note: *Including surcharge and education cess. Maximum marginal rates for Super Rich has been depicted above For domestic companies, the aforesaid comparison between the effective rates of tax in the year 2012-13 and 2013-14 is in respect of those who are liable to pay surcharge. In case of a domestic company whose taxable income does not exceed `1 crore, it would be liable to pay tax at an effective rate of 30.9 percent (excluding surcharge). The increase in the surcharge would also have an impact on the effective rate under MAT, where the book profits of the company exceed `10 crore. The MAT in this case would rise to 20.96 percent during the financial year 2013-14 as compared to the existing rate of 20.01 percent. Effective rate of taxes on Foreign Company* *Including surcharge and education cess

No changes have been proposed in the rate on the levy of ‘Education Cess on Income-tax’ and ‘Secondary and Higher Education Cess on Income-tax’.

DIVIDEND DISTRIBUTION TAX In case of profit distributed by a domestic company, as per the proposed amendment, the company will now be liable to pay Dividend Distribution Tax (DDT) at the rate of 15 percent along with a surcharge and education cess of 10 percent and 3 percent respectively. Consequently, such companies will end up paying an effective additional tax by way of DDT to a tune of 16.995 percent as compared to 16.2225 percent as levied in current financial year.




Income between `1,00,00,000 and

Foreign Company

42.024 percent

Foreign Company

42.024 percent

`10,00,00,000 Income exceeding `10,00,00,000

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One Budget for All Union Budget 2013 is getting cheers from some sectors like agriculture and boos from others like the auto sector



OVERVIEW The automobile sector accounts for 22 percent of the manufacturing Gross Domestic Product (GDP) as well as four percent of the cumulative Foreign Direct Investment (FDI). The high growth potential of the Indian automotive sector has positioned it as one of the fastest growing passenger car markets as well as the fifth largest commercial vehicle manufacturer globally. Besides India is also the second Illustrations Chaitanya Dinesh Surpur

largest two wheeler manufacturer in the world. KEY EXPECTATIONS One of the key expectations from the Budget was a reduction of excise duty to boost demand. Further, the sector was anticipating a drop in the custom duty on steel and alloys used in automobile manufacture. The industry was also anticipating higher depreciation rate for such motor cars, MUVs and two-wheelers which are not used for hire. POSITIVE

ď ˝Exemption from Basic Customs Duty (BCD) to Lithium ion automotive battery for manufacture of lithium ion battery packs used in the manufacturers of hybrid and electric vehicles

ď ˝An extension of two years up to March 31, 2015 has been provided for the ex-

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Standard Chartered SME Banking – Realising Dreams! As an international bank with footprints in Asia, Africa and Middle-East, Standard Chartered has always been committed to the SME space. SMEs looking to expand their business, locally or internationally, are able to tap into our deep local knowledge and international network within our footprint. In a globalised market environment, we can't talk about restricting ourselves to a set of customers in one country or a geographic region. The trade links between various regions are so strong that we are working on all options to offer seamless banking services to our customers across borders. For our smaller business customers our main focus is on providing easy access to banking with simplified solutions and convenient transaction services. Innovation never stops at SCB SME banking. We strongly feel smooth cash flow is the lifeline of any SME and we have introduced a gamut of products to ensure just that. Our Straight 2 Bank (S2B) product is our online platform for your business transaction and information needs. We have even gone one step further to link our S2B platform with India’s leading enterprise resource planning software – Tally. This has simplified the way our customers’ way of doing business as their accounting and banking systems are seamlessly integrated. Idle cash is something that most of the SMEs are wary of. But we wanted to ensure even the idle cash starts giving them very good returns. Our proven investment advisory team with extensive in-house research facility has helped in ensuring healthy yields for our customers during all times through tailor made products. SMEs being fledgling organizations should be sufficiently protected so that an entrepreneur with a big idea and a right strategy is not affected by external uncertainties. Business protection features very high in our list of priorities and we have ensured we have in place experts for business protection needs with special emphasis on tailor made foreign exchange hedging strategies and insurance solutions. The SME segment has grown at more than twice the rate of GDP and its share is only expected to increase. We are very excited about the opportunity beyond metros and Tier-1 cities in the retail SME business and wealth management. In light of the constantly evolving needs of SMEs, we are concentrating on easing their passage online. This is a relatively new frontier and will help optimise efficiencies as SMEs grow. Rajeev Chalisgoankar Head - SME Banking, South Asia


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Standard Chartered SME Banking – Thousands of happy clients... “Our Banking Experience has been very good from the day we shifted to Standard Chartered Bank’s electronic platform called S2B (Forex Trade Rates). The online platform is indeed one of its kinds considering the convenience it has delivered to our banking needs and has played a major role in cementing our banking relationship with Standard Chartered Bank.” Rama Shankar Sharma Manager - Finance & A/c (APK identification) “We have had a nice experience through the S2B platform of Standard Chartered Bank due to its ability to provide fully integrated end to end services at the click of the button at office or elsewhere while travelling through Straight 2 Bank (S2B) web via internet. The software has enabled us to process our high volumes transactions (Multiple NEFT/RTGS & Salary transfers) with great speed, accuracy & precision. It also acts as a very powerful reporting tool which brings in a lot of convenience & transparency in monitoring our day to day transactions and considering the high volumes of transactions that our business generates (both domestic & international), the software has become a very integral tool to our book keeping process. The online platform is indeed one of its kinds considering the convenience it has delivered to our banking needs.” Sumit kapur Financial Controller (Santa Fe India Pvt Ltd) “roomsXML is an online hotels distribution system working with travel agents around the globe. roomsXML has been using Standard Chartered Bank (SCB) as its international banking partner since 2010. We are very satisfied with the product and service offering of SCB. We have setup our multi-currency accounts, forward contract facility and bank guarantee limits with SCB. This has helped us to efficiently deal with our global trade partners and scale up our business rapidly. I would recommend SCB to any organisation planning to expand their international business.” Ruchir Bang Executive Director (roomsXML Solutions Limited)

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emption from BCD & Special Additional Duty (SAD) along with concessional Countervailing Duty (CVD) for certain parts of electric and hybrid vehicles

Increased import duty for completely built cars and motorcycles may promote locally manufactured cars NEGATIVE

 Increased excise duty on SUV may hit demand and eventually affect the demand for auto components

 No reduction in customs duties on import of steel and alloys

02 IT & ITES

OVERVIEW India is regarded as the favored destination for software development, Business Process Outsourcing (BPO) and Information Technology Enabled Services (ITeS). The sector’s contribution to the national Gross Domestic Product (GDP) has increased

from 1.2 percent in 199798 to around 8 percent in 2012-13. It is also among the most significant contributors to the employment generation in the country. KEY EXPECTATIONS One of the key expectations was the need for rationalisation of treatment of software as ‘royalty’ by retrospective amendment to definition of royalty. Another was the rollback/reduction of Minimum Alternate Tax and Dividend Distribution Tax on units in Special Economic Zones. The industry also wanted the government to expand the existing R&D promotion schemes to include computer software. It was expected that Safe Harbor Rules relating to Transfer Pricing would be introduced.

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Funding to approved technology incubators to qualify as Corporate Social Responsibility expenditure


 `200 crore to be allocated to scale up and make available certain Scientific &Technology innovations to common people

 Based on the budget speech, it is expected that Safe Harbor circular for transfer pricing provisions will be brought in, after receiving the last set of suggestions of Rangachary committee NEGATIVE

 There are no positive announcements for the IT/ ITeS sector. The burning issue of dual taxability of software, under service tax and VAT remains unanswered

 Domestic tax rate Royalty /Fees for technical services payment to overseas vendors to attract higher withholding of tax @ 25 percent

OVERVIEW The country’s growth is intrinsically dependent on power. Some key factors that have been fuelling the unprecedented growth of the sector include economic growth, urbanization, industrialization, strong demand, active private sector participation, government support in terms of feasible programs and policies. The stumbling blocks of this core sector are fuel shortage, delayed regulatory clearances, higher raw material prices and poor financial health of State Electricity Boards. KEY EXPECTATIONS Some key expectations were the relaxation of cap

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on the lending limits and subsidy on the interest rates by banks to the power sector so as to fund new projects, and an easy clearance mechanism for import of coal. Other expectations included the extension of deduction under Section 80-IA of the Income tax Act, long term tax holiday for solar energy projects, inclusion in the negative list of service tax for ancillary services utilized in setup of Mega/Small Power plants. POSITIVE

 The last date, for availing tax holiday, by commencing business of generation and distribution of power, transmission and distribution of power by laying network of transmission and distribution lines or for undertaking substantial renovation and modernization of existing distribution lines is extended from March 31, 2013 to March 31, 2014.

 Generation-based incentive for wind energy projects to be reintroduced

 Framework to be put in place for a Public Private


Partnership with Coal India Ltd with the objective of reducing the dependence on imported coal


HEALTHCARE OVERVIEW India is posed as one of the largest suppliers of generic drugs to the world. The Indian healthcare and pharma industry is expected to benefit from increased budgetary allocations. According to the Pharmaceuticals Export Promotion Council of India, the sector is expected to grow at a massive rate this year. KEY EXPECTATIONS Tax and other incentives were expected to boost hospital infrastructure development and ‘infrastructure’ status for availing benefits. Reduction in the rate of customs duty from 10 percent to 5 percent on formulations was also expected. Service tax exemption was also desired on right to use trademarks or patents usually granted by an entity outside India to an entity in India.

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 MRP-based assessment has been introduced for Ayurveda, Unani, Siddha, Homeopathy and biochemic medicines with a view to reduce valuation disputes

 `37,330 crore allocations to the Ministry of Health and Welfare and `4,727 crore allocated for medical education, training and research NEGATIVE  Domestic tax rate royalty or fees for technical services payment to overseas vendors to attract higher withholding of tax at the rate of 25 percent



the backbone of the Indian economy and still makes significant contribution to the GDP of the country. Yet the sector is experiencing various challenges such as wide yield gaps, over-exploitation of water resources, credit facilities, warehousing and supply chain management POSITIVE

 Service tax exemption has been granted to testing activities directly in relation to agricultural produce. Earlier, the exemption was restricted to only seed testing

 Service Tax exemption has been extended to transportation of certain agriculture produce by road

 Clarity on definition of agricultural land and income from agricultural land has been brought about

 More support to eastern Indian states by allocating funds amounting to `1000 crore

 `500 crore to be made available through NAB-

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ARD to finance construction of warehouses, godowns, silos and cold storage units designed to store agricultural produce, both in the public and the private sectors

 `500 crore allocated towards crop diversification programme

 Scheme for rejuvenation and replantation of coconut gardens to be extended to the entire State of Kerala and Andaman & Nicobar Islands with a proposed outlay of `75 crore

 `200 crore allocated to fund pilot programme on nutri-farms

 Grant of `50 crore to Farmer Producer Organizations to enable them to leverage working capital from financial institutions

OVERVIEW The Indian textile industry has been a major driving force of the economy in terms of creating job opportunities to the marginal section of the society and foreign currency earnings. It contributes over 15 percent to the nation’s industrial output. KEY EXPECTATIONS Some of the key expectations were the moderation of customs duty and excise duty on fibers, credit at affordable rates, rollback of excise duty on readymade garments, export incentives on textile and garment products. Also, enhanced abatement of excise duty on branded garment, allocation of more funds for Technology Upgradation Fund Scheme (TUFS) were expected. POSITIVE

 `2,400 crore to be pumped in towards modernisation of powerloom

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 Continue TUFS for the textile sector with an investment target of `151,000 crore in the 12th plan wperiod

es at concessional rate of interest @ 6 percent

 Rate of excise on certain goods of cotton bearing a brand name or sold under a brand name has been reduced from 12 percent to 6 percent

 Excise duty exempted on certain branded goods such as carpets and other textile floor coverings

 Basic Customs Duty (BCD) on textiles machinery and parts reduced from 7.5 percent to 5 percent

 Ministry of Textiles to provide `50 crore to set up Apparel Parks within the Scheme for Integrated Textile Parks (SITPs) to house apparel manufacturing units

 Introduce Integrated Processing Development Scheme with an outlay of `500 crore to address the environmental concerns of the sector

 Grant working capital and term loans to weavers belonging to backward class-


 BCD on raw silk increased from 5 percent to 15 percent. Except this, the budget has been positive for the sector


OVERVIEW India is the 4th largest producer of crude steel in the world in which the SMEs play a vital role. The steel

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sector contributes two percent to the Indian economy. With an aim to sustain an annual growth of 8 percent, the sector requires the government to focus on supporting these small businesses and create an atmosphere conducive to their continued growth and development over the next few years. POSITIVE

 Retrospective export duty exemption from March 1, 2011 proposed on flatrolled products of iron or non-alloy steel, plated or coated with zinc falling

 Concessional rate of basic customs duty at 5 percent extended to Stainless Steel Wire Cloth Stripe for manufacture of catalytic converters and their parts

 Exemption from excise duty on waste/scrap arising out of manufacture of cold rolled stainless steel patties or pattas has been retained

 The Finance Bill 2013 provides for an additional deduction up to `1 lakh of interest on housing loan taken by an individual


from a financial institution in respect of acquiring a residential house, provided he does not own any another residential property on the date of sanction of loan. The proposed deduction may encourage the home buyers and ultimately will providing boost to the various sectors catering to real estate including steel sector NEGATIVE

 Compounded rate of excise duty on stainless steel ‘patta-patti’ increased from `30,000 to `40,000 per machine per month


FINANCIAL SERVICES OVERVIEW In the backdrop of global


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Dear Reader, At Standard Chartered, We have always appreciated the role played by SMEs in the India growth story. This appreciation stems from our in-depth understanding of the opportunities in this space & the challenges you face in your business. It is our endeavour to assist you in facing these challenges, by propelling your growth and partnering you in your success story.

We would like to welcome you to the standard chartered bank’s SME family with special set of offers •

Zero balance commitment current account for the first 3 months

Preferential rates on all our loan facilities

Preferential pricing on all Cash, Trade and Forex transactions

Comprehensive suite of wealth management solutions

To avail of the same, Do write to us: Call us on our Phone Banking Numbers: 39401616 / 66011616

Rajeev Chalisgoankar Head - SME Banking, South Asia

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recession, the financial services sector in India maintained its modest growth rate during the financial year 2012-13. According to a recent report by the Centre for Monitoring Indian Economy (CMIE), India Inc is likely to post 17.7 percent growth in net profits during the financial year (FY) 2012-13, led largely by the growth of its financial services sector. The report further pegs the growth of the non-financial and financial services sectors at 19.9 percent and 20.9 percent respectively. POSITIVE

 ECB limit for Non-Banking Financial Company – Infrastructure Finance Companies (NBFC-IFCs) under the automatic route enhanced from 50 percent to 75 percent of their

owned funds including the outstanding ECBs

 Income of Securitisation Trust from activities regulated by SEBI or RBI shall be exempt from taxation. Additional income tax @ zero percent, 25 percent and 30 percent shall be paid by the securitisation trust on income distributed to persons who are exempt from tax, individuals/HUF and other cases respectively

 SEBI (Alternative Invest-

From easy-to-implement growth strategies to insights from leading entrepreneurs, it’s all there in our website. So just log on to www.entrepreneurindia. in to find out all the ways and means to grow your business the way you’ve always wanted.

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ment Funds) Regulations, 2012 replaced SEBI (Venture Capital Fund) Regulations, 1996 (VCF regulations) from May 21, 2012. Corresponding amendment has been proposed which provides that the VCFs and VCCs already registered under the erstwhile SEBI Regulations as well as the VCFs and VCCs regulated by AIF Regulations will be eligible to claim pass through sta-

tus. This amendment has been brought with retrospective effect from April 1, 2013 NEGATIVE

ď ˝ Commodities Transaction Tax (CTT) at the rate of 0.01 percent will be levied on sale of commodity derivatives in respect of commodities other than agricultural commodities. could have a negative impact on the demand.






RNI No:MAHENG / 2009 /36730 POSTAL REG NO: G / NMD / 123 / 2011 - 13. Posted at P.C Stg. Office, GPO, Mumbai 400 001. 28th & 29th of every previous month. Date of Publication 25th of every previous month




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Zugeerl Entrepreneur India 2013-03  

Entrepreneur India setguul