THE ECONOMIC TIMES MUMBAI FRIDAY 14 AUGUST 2009

INDIA EMERGING

The hinterland is becoming the hotbed of enterprise

Piruz Khambatta
Chairman, Rasna
Piruz Khambatta joined his fathers business when he was 18. Since then, the fruit juice concentrate maker has grown ten-fold and spread its wings to 40 countries. Khambatta is now taking Devils Workshop, a new bakery chain, national.

SMALL TOWN ATTITUDE

Every failure is exciting. I get a kick from making a success out of a product that failed in the first attempt
Which entrepreneur did you take inspiration from? My father Areez Khambatta has always been my strength. An entrepreneur to you is... Someone who maps out the future and works on innovative products keeping in mind the need of the consumers. Your favorite business mantra... Youll succeed only if you are thinking long-term. Your contribution to society as an entrepreneur... We recently set up the Khambatta Centre for Excellence in collaboration with the University of North Texas. What do you do when you are not at work? I am trying to write a book these days. Are you reading any these days? Lots on Swine Flu on the Net (laughs). But I just finished Blue Ocean Strategy by W Chan Kim and Rene Mauborgne.

hen Lakshya Institute launched in Patiala three years ago, its founders were out to prove a pointthat they were teachers by choice and that the location of their business didnt matter. The IIT coaching institute they started is showing resultsthis year 161 of its students have been selected by the IITs and all of them are from Patiala. Surprisingly, none of Lakshyas founders hail from the city. There is enough demand here but when we began there was very little awareness about the IITs. We had to create the market from scratch and serve it, says Saahil Harjai, Lakshyas head of business development. The startup broke even in the first year and generated revenues of around Rs 3 crore last year. Small towns across India have been under the radar when it comes to showcasing entrepreneurial success. And young talent in tier-II and tier-III towns has traditionally chosen to work for big name multinationals, especially IT and ITeS companies, over starting their own business. But theres evidence to prove that the next wave in startup businesses could well come from there. The Economic Times, during its recently concluded Power of Ideas programme, received a staggering 12,000 entries from aspiring entrepreneurs across India. Of these more than a third came from smaller cities such as Aizawl, Allahabad, Jallandhar, Jamshedpur, Patiala, Nashik, Rajkot and Tiruvananthapuram. Awareness about entrepreneurship is improving in these cities and so the startup ecosystem is evolving rapidly. Events such as HeadStart and Startup Saturday are regularly organised by The Indus

An evolving startup ecosystem is helping entrepreneurship take root in places far away from our big cities, says Ravi Teja Sharma

WE ARE NOW SEEING A NEW WAVE OF ENTREPRENEURSHIP FROM TIER-II CITIES. THEY ARE LESS EXPERIENCED AND HAVE FEWER ROLE MODELS BUT THEY ARE EQUALLY GOOD
MUKESH SINGH

KHAMBATTAS ADVICE TO STARTUPS

Walk on the path not tread by others. Never say NO Be an entrepreneur only if you have the passion Be prepared for the brickbats and the downfalls Be thorough about the regulatory environment Lead by example... do it yourself before you delegate

10 Reasons FAIL WHY STARTUPS

TIM DRAPER, MD, DRAPER FISHER JURVETSON

They run out of money. They are too optimistic about when their product is going to be accepted by the market Founders dont have complete faith in each other. They fight instead of delegating, trusting and verifying CEO hires weak team members. Strong CEOs sometimes try to carry everyone with them They want to do too much. A successful startup finds a narrow niche that they can dominate and then expands They go after too small a market They dont charge enough from their customers to survive. They often think their mentors/investors are their customers, and think that a nice sale is all they need They hire too many people up front They get unlucky. Competitors, new technologies, et al They dont work hard enough or fast enough or smart enough. All those little decisions add up to an outcome. They dont take enough risks.Some startups think they should operate like big firms. They can never beat MS or Google at their own game. They should get creative and do things differently, even at the risk of embarrassment

Entrepreneur (TIE) in cities such as Chandigarh and Ahmedabad. We are now getting requests from places like Kochi, Trivandrum and Pilani to organise Startup Saturdays, says Aditya Mishra, cofounder, HeadStart Foundation. Deepak Ravindran of Innoz, a mobile VAS (value added services) startup in Trivandrum, says that if one has a great idea and manages to put a good team together, location doesnt really matter. Innozs founders met each other at their engineering college in Kasargod, Kerala. Being in a small city has its advantages, like lower costs of infrastructure and talent. On the other hand we are away from our clients who are mostly based in Delhi and Mumbai, says Ravindran. Being in a small city the Innoz team had to make extra efforts to gain visibility. They worked social networking sites like Facebook to the hilt and took help from events such as HeadStart and Proto. In a small city, if you want to do something, you need to try on your own and find support, says Ravindran, adding that if they were based in Bangalore, it would be easier to find new talent. We have to do a lot more convincing here to get people to work for a startup. Here they would much rather work for large IT companies, he says. Vijay Anand, founder, Proto agrees: There is a lot of human talent available in small cities. Also, there is not much of capital required to start up in a small city, Innoz has two productsSMS Gyan, an on-demand service, which provides information collated from different web services, and a mobile file-sharing application called Tranz, through which

one can send files to friends on the phonebook using Wi-Fi or GPRS. Innoz got space and support from the Technology Business Incubator (TBI) at Trivandrums Technopark. Such incubators are also coming up many other small cities, especially the ones with premier institutes like the IITs and the IIMs. For some businesses, small cities are where the market is. For the two-and-a-half month old startup Ambicales, Uttaranchal is

BEING IN A SMALL CITY HAS ITS ADVANTAGES LIKE LOWER COSTS OF INFRASTRUCTURE AND TALENT. BUT WE ARE AWAY FROM OUR CLIENTS WHO ARE MOSTLY BASED IN DELHI AND MUMBAI
the target market. Its renewable energy business operates from Dehradun from where it plans to tap the hinterland. The original plan, says co-founder Sudhir Manchanda, was to set up a manufacturing plant to make biomass briquettes that compress biomass to increase its calorific value. To pool in the initial capital required to set up the plant Manchanda and his partner Mayank Agarwal, both from IIT Roorkee, decided to start consulting in the area of small renewable energy projects. Uttarakhand is our target market as there is lot of biomass available and Dehradun was the per-

fect location, he says. The only problem they faced so far was in getting an Internet connection. This has affected productivity but they are confident that it will be resolved soon. One refrain many entrepreneurs have against starting out in small towns is that they are far removed from potential investors. But for a venture capitalist or an angel investor, location is not a constraint while considering a startup contends Saurabh Srivastava, co-founder of the Indian Angel Network (IAN) headquartered in New Delhi. The only issue is accessibility. If we cant reach them, it will be difficult to mentor them, he says. The IAN is now cultivating angels in smaller cities so that when IAN members collectively in a new venture, the angel closest to it can do a better job of mentoring. We are now seeing a new wave of entrepreneurship from tier-II cities. They are less experienced and have fewer role models but they are equally good. It could, however, take some time before an effective startup ecosystem develops in these cities. Till then, there will many more startups like Kochi-based CashNxt which will end up shifting base to larger cities. After spending over a year in Kochi, Anish Achutan and his team decided to move their mobile payment service business to Bangalore for better prospects. We decided on this because of the lack of access to investors and talent in the financial services space in Kochi, and also because most of our key clients were in the larger cities, says Achutan.
ravi.sharma4@timesgoup.com

What Flu? Buck the Trend, Send Staff Home

Small companies can experiment with allowing staff to work out of home and save costs
SCARED THAT the outbreak of Swine Flu may make a dent in your business? Dont worry. One, like many experts say, the flu isnt that scary. Two, this may be your opportunity to experiment with new strategies, like finding out if allowing employees to work out of home is a workable idea. While many companies, especially IT majors, have already asked employees to go on holiday if they suspect they have been infected with the H1N1 virus, many others have recognised the threat and have asked employees to work out of home. There are work-flow changes when employees work from home. You need to make sure people can communicate if they decide to work at home. But that said, its an opportunity for companies to experiment with this system, says Jasjit Singh, assistant professor of strategy at INSEAD, France. Companies like Ducom and Quest Global are asking people to report from home. We are experimenting with this for the first time because of Swine Flu. But it might be possible for some staff from accounts and finance to work out of home in the future, says Anirudh Dube, managing director of Ducom, which supplied critical equipment for the Chandrayaan satellite and is also a supplier to Tata Motors. The company has not had any swine flu cases so far but has kept the option of allowing staff to work out of home. Though the cost savings from this experiment might only be marginal at the moment, Dube says that as the number of employees grows, the cost savings will surely be higher. Working out of home will easily save companies 23% of the cost of organisation, says Rajeev Karwal, founder of SME advisory firm Milagrow. Karwal points out that a number of SMEs are experimenting with this concept already, even before the current Swine Flu scare. People are starting to experiment with new ways of working. It is a forced utilisation of technology, he adds. If the experiment is successful and efficiency levels dont dip, Karwal expects many companies to start using this concept in a more widespread manner and encourage people to work from home. It is clear that if Swine Flu gets out of control, it could mean a huge opportunity loss for corporate India, and especially for smaller companies, which form the backbone of industry. Swine Flu could have widespread economic repercussions. Remember, entrepreneurs are a mobile class, warns Anil Bhardwaj, secretary general, Federation of Indian Micro and Small & Medium Enterprises (FISME). But companies are looking at the positive side and experimenting with a concept which otherwise has only been debated for a long time now. Nikhil Menon & Anirvan Ghosh
nikhil.menon@timesgroup.com

DILBERT

by S Adams

ALL ABOUT THE DRIVE

With Carnation, Jagdish Khattar is adding that extra mile to aftersales
PHOTO: AMRENDRA JHA

SMETICKER
MSME PORTAL
The National Small Industries Corporation has launched a new B2B web portal which aims to provide web-based marketing support to MSMEs in the country. This will help MSMEs enhance domestic as well as global trade through promotion of their products. The portal will provide specific database searches, sector specific domestic and international tender notices, business trade leads from more than 200 countries. It is one of the most comprehensive portals in the segment with more than 2.5 lakh MSMEs contacts and is available in 10 different languages. A call centre has also been set up to answer the queries of MSMEs.

ts been 19 months since Jagdish Khattars term at Maruti-Suzuki ended. But the founder of Carnation Auto India bristles at the fact that nearly everyone, including colleagues, still refers to him as the former managing director of Maruti. It's a tag hes in a hurry to get rid of. As he proudly shows us around his new headquarters off the Noida expressway near Delhi, it's hard to tell if Khattar has indeed moved on. The self-assured tone of his voice, the spring in his step and the deftness with which he handles questions belie any notions that hes a startup entrepreneur. And if there are any signs of nervousness that come with going solo at 66 years of age, Khattar is not showing it. Carnation is a bold new experiment in the Indian automobile industry. Modeled on similar third-party formats in the West, it plans to create a nationwide network of multi-brand outlets which will trade in new and used cars, and spares and accessories, offer service, insurance and finance all under one roof. I realised that in the next 3-4 years the country would be going multibrand and no one was doing it, he recalls. In many European countries, for instance, third-party chains occupy one-third of the after-sales-service market with the rest divided between authorised dealerships and neighbourhood workshops. In India this category has been absent so far. More than half the people in India do not visit the dealer workshop after their car warranty expires. They go to their neighbourhood workshops but these are technologically ill-equipped and will have a problem once Euro-IV norms come in force. Carnation was formally launched in June this year and already has 10 com-

Jagdish Khattar, Founder, Carnation Auto pany-owned outlets across India along with six joint ventures with local players (Carnation has majority stake) in different states. The second generation is not keen to join the family dealership. They are sitting on prime locations which theyd rather lease out to retail chains and mall developers. We offer them a better alternative, says Khattar. With a multibrand model, dealers will be able to attract a larger pool of car owners, and a bouquet of services means better revenues for them. While Khattars model is ambitious, its by no means the first. MyTVS from the TVS Group, Mahindra FirstChoice and Reliance AutoZone have launched earlier with similar models, but havent gone national. Scale is the most crucial element in such a business, and Khattar is focusing on growing his network before launching all services. That could take over a year. Partnerships are also important to deliver on the multibrand, one-stop-shop promise and brands like Bridgestone, JK Tyres, ExxonMobil and Castrol have come on board so far. The company is funded by Premji Invest (Rs 80 crore) and IFCI Ventures (Rs 28 crore) in addition to Khattars own contribution. He adds hes on the verge of finalising a Rs 170-crore loan from a bank. In the beginning, though, Khattar recalls that funding sources were hard to come by. Some of the leading lights of industry said they'd like to partner with me but their equity model was sweat equity. It was like being employed by them. They could've put in a couple of hundred crores but I said no because I wanted to be in control of my business. Hes finally had his way. With the bite still intact from his Maruti days, and that air of confidence one cant help but wonder if Khattar can really break away from his past. The Swift DZire car he drives ensures he wont. Carnation shows, he will. Vikas Kumar
vikas.kumar@timesgroup.com

ENERGY ISSUES
According to a paper titled Indian Industry: Growth & Gloom by the Associated Chambers of Commerce and Industry of India (Assocham), the changes in prices of energy resources have a more significant impact on the small manufacturing units. This is because their cost of production is comparatively higher due to low economies of scale and tighter profit margins. To offset the increased cost of production, small manufacturers may either restrict their further investments or alternatively increase the price of goods. Both the options could negatively affect the growth of the industrial sector.