Sujai Karampuri sent me his recent piece, Ground realities from a technology product company in India .
Sujai’s company Sloka Telecom is building Wimax base stations, and recently, they have won an important validation in France at Saint Medard en Jalles (5.8 GHz Wimax deployment).
I know that Sujai is pounding the doors of the VCs to get Sloka funded. His frustrations are real, and reflective of the situation and ground realities in India.
The biggest problem I see in his case is that there is no VC who is operating in India today who knows how to invest in a Telecom Equipment deal.
“Many VCs find Indian entrepreneurs clueless. There’s great deal of truth to it. But I also find many VCs in India equally clueless.” – Yes, Sujai, but that’s because the VCs who are playing in India have not identified Telecom Equipment as a category to assign partners to. You cannot expect random people with no domain knowledge to invest in categories that they know nothing about. You HAVE to find domain expert investors, as I told you when you came to see me here in Silicon Valley. And, you may have to find them here in Silicon Valley or in Boston. Probably not in India.
Another issue I see with your article, Sujai, is that you have equated “technology product companies” with “telecom equipment companies”. My personal observation is that VCs in India can tackle “software product companies” much more easily than telecom equipment.
In my Incubator Fund thesis, this is precisely the kind of problem that I am suggesting we address. An incubator would have a bias in terms of domain expertise and market focus. Just like we need incubator funds in India for SaaS, we also need one for Networking / Telecom equipment. Without these funds which bring together both expertise AND money, we have huge gaps in the early stage startup market.
Dumb money cannot possibly invest in really sophisticated technology, and pretty much all we have in India right now is dumb money. Hence the surge in retail, real estate, and consumer internet.
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Thanks for the comments.
I wrote that article only to highlight some of the realities. I have met many entrepreneurs who believe that VC money is just round the corner. This article was not to dissuade them from going ahead with their projects but only to give a little dose of reality.
The message was simple – “We are on our ownâ€.
That does not accuse or blame anyone for not supporting, helping or contributing. It’s entrepreneurs who build businesses. They should take the responsibility of building the business, including raising capital. The onus does not lie on VCs.
Thanks for all your suggestions and words of encouragement. I really appreciate that.
Bipin- yes, we are working on some partnerships and moving towards forming stronger relationships with such partners. But again, it’s definitely a slow process.
May be, the telecom equipment sector is out of favor for VCs, but it continues to be in favor for entrepreneurs and the customers. There is a huge addressable market, and there are expectations from customers, and there is demand. Entrepreneurs continue to serve those markets using different methods and approaches, some fail, some succeed. But the telecom equipment sector will continue to lure entrepreneurs because there is always a churn in the technology and equipment deployments and they throw open new opportunities each time. The way this business is being done is constantly changing. Entrepreneurs coming from this domain will see those changes happening and will take a plunge to take advantage of the changing dynamics. That’s why we continue to see so many telecom equipment companies proliferating in spite of cold shoulder interest from VCs.
Yes, I agree that doing a telecom equipment company out of India is quite risky. But then this is all about risk. If it wasn’t risky, then there would be many people doing it. In 1990s Indian telecom networks deployments lagged the American and the European deployments by nearly ten years. That gap is narrowing and within few years, Indian telecom network deployments may overtake the American and European deployments. There is a rationale for why telecom companies could be based out of India.
Hopefully we will have good examples and precedents in India to set new trends in investing to promote many more technology product companies.
In my opinion, there are inherent advantages in doing such businesses out of India. Once we see some successful examples, we will see a spate of companies. Analysts will do their analysis, authors will tell their stories (the way they wrote about Indian outsourcing phenomenon). However, it will take lot of time before such examples turn out to be successful. In this business, the barriers to entry are high, they require high capital infusion, and one has to wait long to call such companies successful. It’s a long drawn battle. But then there are always few out there ready to wage those long drawn battles.
Sramana,
Thanks.
The investors making money from Real Estate in India do not necessarily have any domain expertise. They just happened to be extremely smart callers of an early investment opportunity. In all probabilities, they are the same guys that made money by investing in a Bharti televentures or Idea Cellular also when telcos were getting all the attention and valuations.
They say a fool and his money will easily part. By that definition, even the legendary investors that diversify their portfolio across domains are all *dumb*. Quite funny that – the first names that came to my mind was that of Ratan Tata (IT/Auto/Steel/Hospitality/Beverages/Chemicals/ Retail/Infrastructure), Azim Premji (IT, lighting and soaps), Adi Godrej (Locks,FMCG,Pest control)…so on.
My point is so long as money is fungible, end use is not open to prescription. It swings with perceptions I guess.
Krish,
By “dumb money” I mean money without domain expertise. It is an intentionally provocative usage of the term. Lot of real estate investors are extremely smart with making money off real estate in India. Doesn’t mean they would be as savvy with software or telecom.
Alok,
Yes, the Telecom equipment sector is out of favor, and doing a telecom equipment company out of India is risky. Unfortunately, entrepreneurs do not often have the luxury or the experience of looking at opportunities the way VCs do – in terms of “sectors” and “trends”. They go where their expertise takes them. It is not a question of good or bad, it is what it is.
Rajesh,
It is not true that worldwide incubation has not taken off. Informal incubation has been the secret of many successes, and Stanford university has been a very successful incubator for a long time.
Sramana
Actually, I feel it can help if Sujai lobbies with state governments
in India. After all 3G is inferior to Wimax, and it is just political
reasons why 3G is winning.
The solution also then will have to be political.
That is the reality in India and one cannot ignore it or obfuscate
it with nice sounding words concerning markets/being closer to
customers etc.
After all, India is the fastest growing telecom market in the world.
regards,
Samir
So what to do if someone wants to make something that is “Made in India” in every respect?