Manu Rekhi News

We’re living in the Golden Age of Indian entrepreneurship in Silicon Valley

A Kauffman Foundation report reveals that 33% of all immigrant-founded companies in the US have Indian founders, more than any other minority ethnicity combined.

In the 1980s, the first generation of Indian entrepreneurs broke through the glass ceiling and began making a mark on the American technology landscape as startup founders and CEOs. Among these legends was my partner, Kanwal Rekhi, along with Vinod Khosla, Naren Gupta, Prabhu Goel, Suhas Patil and many more who went on to found notable companies like Sun Microsystems (acq: Oracle), Excelan (IPO) and Cirrus Logic (IPO).

A second and much bigger wave came during the dotcom era of the mid-90s, when people like Sabeer Bhatia (Founder of Hotmail), BV Jagadeesh (President & CEO at Netscaler, later acquired by Citrix) and Ram Shriram (founding board member and one of the first investors in Google) made their mark.

Since then, the US has continued to experience wave after wave of successful Indian-born founders and CEOs. A recent report by the Kauffman Foundation found that 33 percent of all immigrant-founded companies in the US have Indian founders, more than any other minority ethnicity combined.

Today’s startup cycle boasts its own share of renowned Indians leading the charge at exciting and impressive companies:

Jyoti Bansal famously waited seven years for his green card before finally starting AppDynamics, which was acquired this year by Cisco for $3.7 billion.

Dheeraj Pandey went from being voted “Best All-Rounder Student Among All Graduating Students in All Disciplines” at IIT Kanpur to lead Nutanix, Inc. to a multi-billion dollar IPO late last year as CEO and Co-Founder.
Manish Chandra shifted his focus from enterprise software to consumer internet businesses, ultimately becoming CEO and Co-Founder of Poshmark, the largest social fashion marketplace for millions of users worldwide.
And of course, don’t forget that Indians have penetrated the top ranks at global Fortune 500 companies, including Google, Microsoft, Adobe, Pepsi, MasterCard and Wayfair, to name just a few.

Successful exits on the rise
Indian-founded US companies have also provided some incredible acquisition opportunities. Since 2012, more than 25 Indian-founded companies have seen M&As worth more than $500 million (Figure A and Figure B). Topping that list is Western Digital’s acquisition of SanDisk, worth a whopping $19 billion, followed by several acquisitions from Cisco, HPE and SAP.

Figure A: $500M+ Mergers and Acquisitions of Indian-founded US companies since 2012

Figure B: Timeline of $500M+ M&As of Indian-founded US companies since 2012

Another way to consider how Indian entrepreneurs have made their mark is to examine the fascinating array of IPOs in the last five years across multiple sectors (Figure C). The software and services sector comes in at a combined market cap of $26.2 billion. And while the pharmaceuticals, biotechnology and life sciences industries came in at second place based on the number of IPOs (6), the retail industry saw a much larger market cap of $6.67 billion, compared to just $397 million.

However, most notable are companies that were acquired post-IPO, including Auspex Pharmaceuticals (acquired by Teva Pharmaceutical Industries for $3.5B), Nimble Storage (acquired by Hewlett Packard Enterprise for $1.9B), and Cvent (acquired by Vista Equity Partners for $1.65B). In fact, 10 of the 34 companies — approximately 29 percent — were acquired after IPO.

Figure C: US Companies that went public over the last 5 years who have Indian Founders and/or Co-Founders, including any post-IPO acquisitions and/or closed companies.

 

 

What’s next? A peek into the future
So what’s next for the golden age of Indian entrepreneurship in Silicon Valley? It seems that future and continued successes are already well in the making, judging from the proliferation of Indian-founded Unicorns — startups valued at more than $1 billion — in the US. (Figure D). Fourteen out of 261 total unicorns boast Indian founders, for a combined valuation of $35.17 billion and combined funding of $81.8 billion. The #1 industry for Indian-founded unicorns? IT, followed by healthcare.

Figure D: Current Indian-founded US Unicorns

 

Conclusion
With many Indian-led US companies well on their path to a successful exit — creating jobs and wealth — there is also a big wave of entrepreneurship building out of India itself.

If just 1 percent of the Indian population were to become entrepreneurs (half the rate of in the U.S.) India would have ~13 million tech entrepreneurs. This is transformational not only for India, but worldwide; imagine the impact on the global technology ecosystem.

With two very large movements underway, Indian entrepreneurs have gone from yesterday’s tech outsources to today’s tech innovators, disrupting global markets.

The role Indians play in America’s billion-dollar startup ecosystem

Then and now: The role Indians play in America’s billion-dollar startup ecosystem

OBSESSION

Future of Work

August 17, 2017 Quartz India

With Indians facing a wave of criticism in the US for allegedly taking away American jobs, an Indian-American venture capitalist is trying to highlight the long history of their positive contributions to Silicon Valley.

The stereotype of Indians in the US tech industry has long been focused on the legions that provide inexpensive labour for the sector. However, over the past decades, Indians have also nurtured iconic businesses, from hardware-maker Sun Microsystems to the early e-mail giant Hotmail, and turned into some of the biggest entrepreneurial leaders and job creators.

In a report from July 2017, Manu Rekhi, director of venture capital firm Inventus Capital Partners, which is based out of Bengaluru and San Mateo, California, took a closer look at how Indians have made a name for themselves in the American entrepreneurial landscape.

The foundation

A host of Indian-origin leaders have come to be household names today, including Google’s Sundar Pichai, Microsoft’s Satya Nadella, Pepsi’s Indra Nooyi, and Adobe’s Shantanu Narayen. But the seeds of their success were actually sown decades earlier.

The first generation of Indian entrepreneurs arrived in the US in the early 1980s. “Among these legends there was my partner, Kanwal Rekhi, along with Vinod Khosla, Naren Gupta, Prabhu Goel, Suhas Patil, and many more, who went on to found notable companies like Sun Microsystems (acquired by Oracle), Excelan, and Cirrus Logic,” Manu Rekhi told Quartz.

Most of the early entrepreneurs had migrated to America at a time when global exposure was scarce and their understanding of consumer behaviour in the US was limited, Rekhi said, so they founded engineering-heavy systems and networking companies, instead of consumer-facing ones.

The network

As more Indians began launching their ventures and the doors to the US opened wider for foreign students, Indian founders shifted their focus away from enterprise to consumer-oriented companies. The biggest example of this evolution is perhaps Sabeer Bhatia’s founding of Hotmail.com in 1996. Bhatia, a BITS Pilani student who transferred to California Institute of Technology to finish his undergraduate degree, pursued his masters at Stanford University and worked at Apple before launching the email service.

The 90s were also the years when Indian-origin leaders turned into mentors in the Silicon Valley ecosystem. Serial entrepreneur BV Jagadeesh helped raise the seed money for San Jose-based Netscaler, and went on to become its president and CEO by 2000. He is still a managing partner at KAAJ Ventures, which makes early-stage investments in startups, and an adjunct professor at Santa Clara University, teaching classes on early-stage startups and valuation. Venture capitalist Ram Shriram, a founding board member and one of the first investors in Google—his stake in the company was valued at $1.3 billion in the mid-2000s—is also mentoring budding startups.

The acceleration

When the millennium bug bit, companies led by Indian entrepreneurs moved toward more advanced technologies, Rekhi notes. For instance, Jyoti Bansal started management and operations analytics firm AppDynamics, which Cisco acquired for $3.7 billion in March 2017. Indian Institute of Technology (IIT) Kanpur alumnus Dheeraj Pandey led cloud-computing software company Nutanix to a multi-billion dollar initial public offering (IPO) in 2016. And Manish Chandra, CEO of the social fashion marketplace Poshmark, created a product that would be “unheard of 20 years ago,” Rekhi said.

Despite comprising less than 1% of the US population, Indians founded 8% of all American technology and engineering startups by 2012. The group has started a third of the immigrant-founded startups in the US. The firms they founded also provided great acquisition opportunities and made high-value public debuts, Rekhi said

The era of returns

Although the first Indian-American founder-led Nasdaq IPO happened in 1987 with Excelan going public, the pickup in big-value exits came in recent times.

In the last five years, the software and services sector, with 17 companies, tops the list of IPOs led by Indian founders and co-founders, with a combined market cap of $26.2 billion. Pharmaceuticals, biotechnology, and life sciences came in second in terms of the number of IPOs (six). However, the retail industry saw a much larger market cap of $6.67 billion, compared to pharma’s $397 million.

US Companies that went public over the last 5 years who have Indian Founders and/or Co-Founders, including any post-IPO acquisitions and/or closed companies.
US companies with Indian founders and/or co-founders that went public over the last five years. (Manu Rekhi)

Ten of these 34 companies—approximately 29%—were acquired following their stock-market debut.

Even before the turn of the millennium, companies like IBM and Intel had been making acquisitions, but mostly of outsourcing services companies where “you’re basically buying manpower,” said Rekhi. But between 2012 and 2017, more than 25 companies led by Indian-origin entrepreneurs have seen mergers and acquisitions worth over $500 million, Rekhi found.

“Topping that list is Western Digital’s acquisition of SanDisk, worth a whopping $19 billion, followed by several acquisitions from Cisco, HPE, and SAP,” Rekhi noted.

500m+ mergers and acquisitions
A brief history of the $500 million-plus M&As. (Manu Rekhi)

Today, 14 of the 261 unicorns (private companies valued at over $1 billion) in the US are headed by Indian-origin founders. Together, these 14 startups have a combined valuation of $35.17 billion and funding of $81.8 billion, with the IT industry taking the lead, according to Rekhi.

Beyond the Big Guys: 13 Smaller VCs to Keep on Your Radar (Infographic)

By Catherine Clifford for Entrepreneur

Almost half of venture capital dollars were raised by five firms in the three months ending in September, according to the most recent report from the National Venture Capital Association.

Despite a top-heavy VC market in the U.S. dominated by a handful of large players, there are a lot of smaller, active, up-and-coming VC firms in the U.S. that ought to be paid attention to. The infographic below, generated by Pulp PR, highlights 13 U.S. venture capital firms, each with a total fund size of less than $150 million, as well as their particular area of interest.

For example, Hatteras Venture Partners, headquartered in Durham, N.C., is a $125 million fund focused on health and biopharm startups. Live Oak Venture Partners, based in Austin, Texas, is a $109 million fund with particular interest in digital media and social media startups.

Related: Venture Capital’s Big Boys Getting Bigger

While the biggest VC firms may get all the attention, being backed by a smaller firm may be a better move. A report from the Kansas City, Mo.-based entrepreneurship organization The Kauffman Foundation released two years ago called “We Have Met The Enemy…And He Is Us,” slammed the VC market for being dysfunctional and suggested that Kauffman would itself invest in smaller VC funds going forward. Experts argue that at smaller VC firms, the partners are more hands on and more committed to seeing the companies they invest in succeed.

If you’re seeking VC backing, have a look at the infographic below for some inspiration.

 

1414435541-beyond-big-guys-13-smaller-vcs-keep-your-radar-infographic

 

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