DARE - Because Entrepreneurs Do

As founder of India’s first VC funded company, Anant Koppar gave deep insights into building an IT product company in India, with discussion every aspect of founding a company. He had founded Kshema Technologies in 1997, India's first venture capital funded software services companies. He has currently started a new company called KTwo Technology Solutions, an Indian Origin Global Products company that develops products for Healthcare and Automotive sectors.

He said that there’s a common belief in India that entrepreneurs will not be able to build product companies, especially IT product company, which has come because of failures by several product companies had in past. He complimented those companies for existing in a place where no ecosystem existed. Most of these entrepreneurs had come from services background. They did not have a market where they cud test products easily, as Indian market was very nascent and there was little acceptance of an IT product from India.

However, in recent years, there are many more IT companies in India which are focused on Indian and global markets, both in B2B and B2C, all in diverse sectors. He talked on what is needed to build an IT products company in India, what elements of the ecosystem are needed and how an entrepreneur can take his company to build products and be successful.

First an entrepreneur should find out whether there is a market for a product in India, which many of us don’t do, but develop the product first and then find no takers. For him, the main idea with which he started was to look at necessity of the common man to use IT products, and how they can apply their minds to build products for the consumer.

Many of the products that came from outside India, say USA etc, were over-engineered products because of certain regulations and other issues there. Therefore, we cannot use those expensive machines here and need to develop affordable products to solve problems, and which can be accessible by masses. Therefore localization becomes a key for a product company.

So, we have a good market in India, which can be explored before exploring other markets. We can have different pricing policies, which can be based on geographies (e.g. low for developing countries and vice versa). Marketing and sales can be challenging.

Another vital aspect is the trait for a product company.

When I started, I had 2-3 areas to concentrate upon. One was automotive electronics, wherein we could build very cost effective and affordable solutions for Indian markets. So, we started building products and one of the successful products has been a hands-free car-kit. We also added streaming capacity to it for playing music from mobile. Maruti was very excited to take it, and it is today a Maruti Genuine Accessory.

When we started, we debated that we should look at generating some revenues, so we started looking at services projects, which is a big mistake one does. Some, there should be some stubborn ness to adhere to products rather than going for services or other ways of generating revenues. Also a product company should be very ‘intolerant’. It should say that I will be the first to market and will encash early opportunity.

Also, companies should not be focused on improving the product continuously. Once the product comes out, go and start selling the product. You will lot of information from the market about the product, which you can use to improvise the product. “I have learnt these from the strategies of Microsoft (MS), because when MS release its OS (Operating System), it’s never bug-free, so we can’t expect a small startup to produce something which is bug-free.

Another aspect for a product company is the mindset and the patience one needs to build a sustainable company. You need to look beyond success and minimum gestation period before you see success is about 5-7 years for a product company.

However, there are several challenges when we start a product company. We try to execute product building like a services project, and many of our people don’t understand what it takes to productize a component. So, we need to build teams, continuously educate them, on what kind of product processes are required to make sure we have a product that is liked by the end consumer.

Another problem from services mindset is that we start developing when consumer places a customized order, while in a product business we need to ideate, to see what is the product that would be needed by common man.

Pricing is another challenge. Generally people say, we used 5 resources for 6 months, so adding their cost + 30% of that, would give the pricing of the product. However he totally disagrees with it. You need to be wary of using cost arbitrage for pricing and the price it appropriately for the market.

A third significant challenge is the funding. You need to find out how to fund the company for the gestation period and to develop products which you will be able to sell quickly, to generate revenues. VCs will not invest in a pre-revenue company, and this has been the trend in India. So, you need to look at other sources of money like family, friends, banks (debt financing, personal loans). There is no clear answer on which source to use.

Second aspect of ecosystem is the support / ancillary companies. In the manufacturing sector, there are lot of ancillary units which can support by as you can outsource some parts / designs of the work.. So, you need to have an ecosystem of ancillary units. You need to have design houses (like the ones coming up Bangalore, Pune etc.) where you can have your electronic, mechanical or casing designs done. Developing them is a bigger challenge. And that is where he used his network of people from other industries like he built a product for Maruti by using a design house run by one of his classmates, for mechanical design. We collaborated together and worked on a plastic design. We keep building design houses and encourage them to support us I whatever we cannot do directly.

You need to do more research of the ecosystem to find out where all you can get things done at a cheaper price.

Finally, what is the need of the hour? The tem you build for developing a product is very critical for the success. The end customers are demanding very disruptive indigenous models; some ask for it on rental model, some say service etc. So, the team needs to evolve from creating the innovation to productizing it, unlike many of us who fail to do that.

Often we have an idea, which we think is useless or does not have a market. We need to create a market for the market, educate the end user in that discipline which could be any sector. And it requires a different mindset many times. In many sectors you will also need support from government like primary and secondary healthcare. And companies which are not used to selling to the governments will have a problem. We have struggled with this for four years. We have been able to monetize only 1-2 products. Monetization of an idea/ product is a bigger challenge one needs to address.

 

Koppar also answered the questions of audience like:

Q. You talked about the product company failures which paved the way for us today. Can you explain how?

Koppar: My idea of seeing companies is – why they failed instead of why they succeeded. Many companies have started with very good ideas or products but slowly they moved toward providing reference designs ad slowly to developing IP for others. So, these companies started becoming high-end services companies. That’s we were doing at Kshema also, which led me to think that we should focus on developing our own IP.

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