Ashish Gupta, a noted VC from India and a dear frend, is sharing his insights on Indian startup ecosystem with Sramana Mitra.I highly recommend this interview to anyone that wants to understand the VC scene in India. You can follow the interview on Sramana’s blog.
Dr. Ashish Gupta is a co-founder of Helion and serves on the boards of Gridstone Research, Jivox, Kirusa, MuSigma, Naukri.com, and SMS Gupshup. He has co-founded Tavant Technologies and Junglee. His investments include Daksh (IBM), Odesk, Obongo (AOL), Speedera (Akamai), MakeMyTrip, Merittrac (Manipal Group), and Kaboodle (Hearst). Ashish is a Kauffman Fellow and holds a Ph.D. in computer science from Stanford University and a bachelor’s degree from IIT Kanpur, where he was awarded the President’s Gold medal. He has written several patents, publications, and a book published by MIT Press.
SM: Ashish, to start could you give us a macro picture of what you have seen in the Indian venture market from 2005 to 2009?
AG: There are several things that are working. The number of people who are willing to be entrepreneurs and who have a very mature view of how to build companies as opposed to inexperienced entrepreneurs has increased. The entire ecosystem to support entrepreneurs has improved, although it is nothing like the Valley. That is not even a fair comparison because the Valley has a different value system.
Another interesting piece which is working is consumer demand. It has not only continued to speed up: What we see as a downturn is probably more of a consolidation phase as far as India is concerned. After the consolidation, growth will continue unabated. Clearly, some sectors are not going to be qualified as such. Real estate prices were way out of the ballpark, so that is not consolidation but rather correction. Consumer demand, however, went through a period of consolidation.
SM: Even on the real estate side consumer demand continues?
AG: It has gone back up. Pricing has readjusted, but demand has gone back up. The other thing that has worked reasonably well is the view that investors themselves are taking off that business. I think that all of us have learned a lesson in seeing where deals were overpriced. If you ask me to look back to 2005 until now and say whether the investor group is more mature, more committed, and better equipped, I would say absolutely yes. Was there misbehavior in the middle? Yes. Most of us will get punished for that misbehavior, but net/net is it an evolution in the right direction.
SM: I see two kinds of entrepreneurs working in the Indian ecosystem. One is the kind who goes back and forth between India and the US, and the other is the resident entrepreneur. Can you separate those two groups? Is there as much of an exodus from the Valley back to India as the press makes it out to be?
AG: From the perspective of returnees becoming entrepreneurs, those numbers are not very high. Starting product companies out of India is a mammoth task. I know several who tried to return to India and start a company, and they all returned to the US. A lot of the people who go back to India from the Valley are steeped in a product-building culture. A few who have returned and done well have morphed their companies into hands-and- feet-on-the-street kinds of companies. But there are not enough of those examples for me to tell you that there is a return exodus.
Most of the people who are relocating are returning to mid-level management positions inside of large companies. That, in my knowledge, defines the bulk of people going back. They are expats going back to Cisco, Intel, and IBM. That makes a lot of sense. When you want to go back, you want an institution over your head.
We are also beginning to see a fair number of people who are coming back to work for smaller companies. That is the number that is meaningfully accelerated, particularly over the past year. Is the exodus increasing? Compared to theplast five years? Yes, but for large and mid-tier companies, not to start companies. The romantic notion that hoards of entrepreneurs are returning to start companies is not something that I have seen.
SM: What about the category of entrepreneurs who are working in the Valley but leveraging India in a big way?
AG: You are probably talking to the wrong person in that regard. I have always been a skeptic of startups having engineering outsourced to India. Often what is saved in cost is paid for in time to market. It works with companies that have a founder class there who understands what product is being built without specs and who can complete it with the same intensity as opposed to trying to hiring someone there.
In that context, the number of people who are leveraging India to get stuff done, I think, has marginally gone down. Even the people who were doing it before were often doing it to get extension-type work done.
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