A company that my brother cofounded just got acquired for around $50 million in cash. It had 40 employees and found a use for some cool technology that they developed in providing a Zero Touch Fraud detection solution. This year revenues were around $3-$4 million and next year may touch $10 million. I think they started the company in 2003. It took them 3-4 years to get to $50 million.
The reason I posted this was to get Indian product entrepreneurs thinking.
Are there some Indian product examples similar to this ? Are there any barriers that prevent Indian entrepreneurs in doing a 40 turns 50 in 4. ? I am sure there are quite a few barriers but Indian ingenuity is supposed to get past them. Right ?
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Well…it took this company more than $12 million in funding and 5 years to get to an annual revenue figure of a few million (considering that they had 40 employees, I guess this would certainly not be enough to reach profitability). I can see many product companies in India who can easily reach this quantum of revenues in a five year time period if they had access to even 1/10th of this figure but I am not sure if there are too many companies who have access to this type of capital and more importantly, a funding partner who is there with them for the long haul and not just for a quick exit…beyond that, what is more interesting is that the founders of this company are drawn from one of the most infamous examples of the dot-com egress – Webvan…it’s amazing that they managed to raise such a large amount of money even after this magnificent failure…in India, one failure would be enough to stigmatize the entrepreneur till kingdom come!
there are few product companies in india which are doing good work . like Cashedge , Crane software ,monsoonmultimedia etc.
even though there product is being deveoped in india there market is in US or Europe . in my opinion the biggest problem in starting a product based venture in india are
+ Lack of a domestic market and no respect for copy right ,rampant piracy
+ Low PC penetration
+ Absense of “Long Term ” capital investment as gestation periode for a product is very very long
+Too hot salaries in market right now so giving up the lure of Easy money is not easy , specialy when the revnue is not around the corner .
+this might be my subjective observation but most product start up are promoted by Techie geeks which have little or no sales skill and the mess up the product . this deter all would be enterprenuer .
Nice post Sanjay. Food for thought.
And I really like the fact that someone finally raised the question as to why Indian companies are scared to venture into the product domain. Somehow, Indian investors and entrepreneurs have this huge phobia for products. Probably, we just need a few success stories.
I’ll add one more interesting, myth-busting fact here since this acquisition is related to information security:
Most of the information security product start-ups based in Silicon Valley have (or aspire to have) their development and research bases in India in some way or the other. Some open up a private limited concern, while some partner-up with Indian companies to provide the infrastructure and resources.
For example, talking very specifically about the Intrusion Prevention System (IPS) companies; Blue Lane, Nevis, SolidCore, Sipera have their private limited concerns in India. Third Brigade, IntruGuard, Elemental Security have contractual arrangements. And the next-gen startups like MuSecurity definitely aspire to tap Indian talent.
That day is not far off when some entrepreneur will leaf out from these companies to have a our very own desi product startup. 🙂
Gaurav,
Maybe when India wins its first individual Olympic Gold it will also have its first World Class company. The next Olympics there is a chance ( shooting).
I think there are many fine companies now which are aspirants in quite a few domains. For instance IBM Global Services revenues dropped while Indian IT majors continue to grow rapidly. I know these are not product companies but I am fine with world class companies in any domain. The next crop of world class companies are being incubated and I hope we will get a new world class products company out of India by 2010 which is not a known name today.
I am not sure it is that easy to do a product company in India and exit whether through acquisition or IPO for $50million or 200 crores +. I think quite a few IPO’s in India were below that amount and I do not think any Indian product companies did an IPO outside India.
By the way I have nothing against service companies. I think they rock but my personal experience and therfore preference is for product companies.
If there are examples in India then of product companies that were acquired or did an IPO for $50 million + I for one would love to learn more about them. Naukri.com when it IPO’s ? Cybermedia ? Educomp ?
I guess it is not as difficult to “make a company, get it acquired” as it is to grow a world class company. According to me the most important question to ask is “Can India which sources the majority of IT staff across the globe, produce a google/microsoft/oracle/amazon of it’s own? A world class products company headquartered in india?” Is it possible to even dream that?