Kanwal Rekhi News

‘Any fool can raise startup’s  valuation by pumping in cash’

Originally published on LiveMint

A patch of earth next to a haystack in the backyard of a bungalow in Nizamabad near Hyderabad is the unlikely setting for a gathering of entrepreneurs and investors. Even stranger is the centre of attraction: iconic Silicon Valley entrepreneur and investor Kanwal Rekhi, who was the first Indian-American founder to list a venture capital-backed company on the Nasdaq.

A large figure with a cap and floral shirt, Rekhi appears disinterested, eyes half shut, head tilted. That notion is quickly dispelled as he picks a thread in the conversation and starts making sharp observations on everything from India’s yo-yo telecom policies to Masayoshi Son’s misadventures with an oversized SoftBank fund. In between, he excitedly spots a mongoose in the field and draws everyone’s attention to it.

Not many would do what Rekhi did at 75: he took a flight from San Francisco, landed in Hyderabad in the early hours, and drove to his Bay Area friend and fellow investor Raju Reddy’s home town in Telangana to support a social entrepreneurship project.

From the moment he arrives, Rekhi is surrounded by locals and visitors. He pays as much attention to IIT Hyderabad’s founding director Uday Desai as he does to a Nizamabad school student showing off a 3D printing project.

A buffet dinner at a school campus follows a fireside chat at the Nizamabad chapter of The IndUS Entrepreneurs (TIE), a Silicon Valley networking and mentorship organization Rekhi co-founded in the early nineties. Reddy finally drags him away for a much-needed night’s rest.

That energy and enthusiasm, combined with endless intellectual curiosity and a raconteur’s love for storytelling, gives a clue to what made him succeed, first as a pioneer among Indian-Americans to adopt the Silicon Valley way and then as a mentor to other Indian entrepreneurs, including Reddy, who followed his lead.


“I enjoy it when I learn something new from entrepreneurs, new thinking, new ways of doing things,” Rekhi tells me over lunch when I get a chance to sit beside him. “You see a new idea and ask questions to learn more. In the process, you’re also making that person see it from different sides.”

He has been doing this from his early days as an investor and a mentor at TIE after packing his bags from Novell, which had acquired his company Excelan. “When I talk to 10 entrepreneurs and see 10 different ways of doing things, I cross-breed ideas, asking if they had thought of doing it this way or that.”

Another attribute is his “radical candour”, which he practised intuitively, long before a book by that name became famous. Many entrepreneurs who come to him puffed with their ideas might go away deflated after hard questions, but they would be better for it.

“To simplify business is a big part of my approach,” says Rekhi, citing the example of one of his early bets as an angel investor: Exodus, the internet hosting company founded by K.B. Chandrasekhar and B.V. Jagadeesh in 1994, which was listed and was a $20 billion company at its peak. Although it collapsed after the dotcom bust, Rekhi is said to have turned his $200,000 investment into a $100 million exit before that.

“The Exodus business plan was very complex at the outset. They wanted to do data centres, manage the customers’ servers, develop applications, maintain the applications. I kept saying that’s too complex, let’s simply do data centres. I simplified their business 99% and by doing that, the company took off like a rocket.”


Rekhi has a remarkable success rate of 40% as an angel investor, compared with the usual venture capitalist (VC) hit rate of 10-20%. He invested as an individual in 50 startups, 21 of which gave him exits through IPOs or acquisitions, including Raju Reddy’s Sierra Atlantic that Hitachi bought. It’s still a coin toss. “I can never tell which entrepreneur is going to succeed,” he says. “I can usually tell who’s not going to succeed after meeting a person. Despite that, 60% fail.”

In his own case, the ability to foresee which technology would click and being bold enough to bet on it made him succeed as an entrepreneur. It’s hard to envision that in the 1980s era, before the advent of the internet. The PC revolution had arrived, and it was clear to Rekhi that networking the computers would have a multiplier effect.

Ethernet had evolved as the hardware standard for connecting computers, and Intel was developing networking chips. But a trio of Indian engineers—Kanwal Rekhi from IIT-Bombay, Inder Mohan Singh from IIT-Kharagpur and Naveen Jain from BITS Pilani—jumped the gun with their startup Excelan, which was the first in the market with networking boards.

Apart from the speed of their hardware design, they picked TCP/IP as the software protocol for networking, even though Intel, Xerox and Digital had adopted other protocols. The US army had developed TCP/IP for its Defense Advanced Research Project Administration (DARPA) network.

“It was designed for an unreliable, slow network, whereas Ethernet was very reliable and fast. So, putting TCP/IP and Ethernet together wasn’t considered smart because they were mismatched,” recalls Rekhi. “But my reasoning was simple. TCP/IP worked with all computers and operating systems. So if I made it work with Ethernet, I would have an instant solution for a lot of customers, ” he says. TCP/IP went on to become the standard protocol for the internet. The rest, as they say, is history.


Coming to the present, Rekhi likes the India-to-global story with enterprise software. But he remains sceptical of the VC-driven consumer internet play in the domestic market despite Walmart’s acquisition of Flipkart, which he feels is a one-off. “I’ve looked at Oyo, Paytm and others. None of them is becoming a profitable business, but the founders are living very well. Vijay Shekhar Sharma of Paytm has bought a $12-million-dollar bungalow in Delhi, right?” He feels it’s one thing for a publicly listed company like Amazon to have grown with losses in its initial years, because it was under the close scrutiny of market analysts who had access to company financials. It’s another matter when a private company grows with mounting losses and increasing valuations. “Any damn fool can raise a company’s valuation” by pumping in money but that doesn’t make a sustainable business model, he feels.

So, he’s not surprised by reports that Masayoshi Son’s SoftBank is struggling to raise a second fund because investors aren’t seeing returns from the supposedly new model of mega bets by the Japanese giant. “Everybody, including the founder, was selling WeWork equity. He (Son) was the only investor who kept raising the price.” That ended badly, and Rekhi feels a similar fate awaits the SoftBank investment model.

Kanwal Rekhi's Blogs

Moving forward….

Ever since I left my corporate life behind in 1994 I have been engaged with great entrepreneurs as a mentor, angel investor and venture capitalist.

Under the TiE tutelage I’ve mentored thousands of entrepreneurs in Silicon Valley and India. I engaged with my alma maters IIT-Bombay & Michigan Tech and preached the gospel of entrepreneurship.  At IIT, I help set up SINE to encourage entrepreneurship which has spawned many great startups.  For the last 15 years, I travel to Michigan Tech twice a year to engage with students and faculty, and Tech is now producing startups also.

As an angel investor I invested in 54 startups, mostly in Silicon Valley.  It has been my good fortune to work with people like BV Jagadeesh, KB Chandrasekhar, Raju Reddy, Manish Chandra and many others. 23 successful outcomes including six public companies came from those investments.

As I engaged with India more, it became necessary to build a VC platform.  Inventus Capital started as a cross-border franchise that invested in India and in Indian-American startups in Silicon Valley. Inventus Fund I and Fund II invested in 40 companies, about half of them in Silicon Valley. These included market leading companies like redBus, Policy Bazaar and Power2SME in India; and Poshmark, Credit Sesame and Sierra Atlantic in Silicon Valley.

As we move forward, we are simplifying and expanding Inventus with a pure play India fund and a pure play Silicon Valley fund. This will allow me to personally focus more on Silicon Valley where I’ve had great success.  I will still work with our India team, mostly as an adviser and mentor.

Our new structure allows investors to pick and choose the geographies they are interested in. We’ve always welcomed individuals and family office LPs, not just institutions, as they bring unique insights and refer great entrepreneurs. Our new structure also now offers Indian investors a way to participate in our Indian-American successes in Silicon Valley, without any issues related to round-tripping.



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


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.

Manu Rekhi News

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


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.

Manu Rekhi's Blogs

Can India create the next Google?

Start-up India can become a reality. But for that, government needs to update policy.

The sun may set last in California, but start-ups are first to rise on this Californian coast,” began Prime Minister Narendra Modi in an address to Silicon Valley on September 26, it is lamost obvious that for this they have to use a reliable agency such as the best phoenix marketing agency to assist them.

PM Modi, in his first-of-its-kind visit to Silicon Valley last weekend, discussed the burst of innovation in India and continued collaboration with the United States. Indian start-ups received more than $3.5 billion in venture funding in the first six months of this year alone. India is now the largest tech incubator in Asia, the third-biggest in the world, and it’s on track to become the global leader. There has been tremendous progress and we have much to celebrate.

The question Indian entrepreneurs must propose in return is: “How can India become a place where start-ups rise to the same greatness as in Silicon Valley?”

Indian entrepreneurs have built our country into a strong contender for the next tech hub, in spite of regulatory hurdles. The results of a recent survey on cross-border deals demonstrate the urgent need for India’s government to update policy. The American Bar Association recently asked 300 US- and India-based attorneys about, among other things, doing business in Southeast Asia. Many respondents said they were hesitant to engage with Indian companies, citing several regulatory problems inherent to the region. Sixty-five per cent of those surveyed reported it is difficult to work with Indian companies. Only 40 per cent said the same of working with Chinese companies. US start-ups were considered the least difficult to work with, at 30 per cent.

If these obstacles were to be removed, one could only imagine India quickly growing into the superpower it has always wanted to be, bringing jobs and economic resources to a country at a crossroad.

Modi’s strong focus on “Start-up India” is very encouraging to those of us hoping for an international playing field that gives Indian start-ups a fair chance. In order for Start-up India to succeed, the government must rework the system to make it a more efficient and pro-business meritocracy for that they need to start reimagining the company to manage workplace efficiently and produce better results.

Start-ups are responsible for two-thirds of the jobs in the US. The same can be true of India with the implementation of streamlined policies addressing the entire life-cycle of a start-up (creation, growth and shutdown). If unleashed, Indian start-ups will employ a majority of the 10 lakh youth that join the workforce every month. Start-ups will employ the next generation.

To truly move the needle on the Start-up India vision, the government needs to do at least the following.

First, decide the rules. Regulators must stop procrastinating on making difficult decisions. Investors don’t want to hedge bets on a country lacking reliable rules. A tax treaty with the US is another policy that demands attention. Currently, most venture capital investments into India’s technology product industry are being routed through Mauritius or Singapore because of their favourable capital gains exemptions in the event of an investor exiting. It is to India’s advantage to allow investors from Silicon Valley to work with Indian companies directly, without Mauritius as a middleman. A zero capital gains regime will substantially increase flows even from individual angel investors. In any case, around 80 per cent of start-ups fail, leading to no capital gains taxes. There is no revenue loss for the government here, even while it will earn personal income and other taxes from employees of these start-ups until they fail.

Second, make the rules simple. Tax laws should not only be certain, they should also be simple. The government must ensure consistent application of clear tax rules. Enough of officials chasing larger tax notices!

On Sunday, I was able to attend a breakfast with senior government advisors leading the Start-up India initiative. The meeting was extremely collaborative and they solicited detailed feedback on how to make Start-up India a reality. It was encouraging to see the bureaucrats with a sense of purpose, as they laid out their objective to have positive policies that nurture a start-up throughout its business life-cycle: One, simplify company creation; two, introduce a bankruptcy law; and three, streamline issues around exits and liquidity.

We also discussed in some detail how to streamline exits in terms of M&A and IPO. There is now a direct line of communication between the policymakers in government and TiE (The Indus Entrepreneurs,

an organisation fostering entrepreneurship) in Silicon Valley. The Indian government will benefit from working with TiE and investors, who together bring deep institutional knowledge of creating and scaling start-ups.

TiE’s Billion Dollar initiative, meanwhile, has united top legal minds, investors, entrepreneurs, think-tanks like iSPIRT (Indian Software Product Industry Round Table) and trade bodies like Nasscom (National Association of Software and Services Companies) to consolidate key policy recommendations. The next step for this group is to include other voices and provide a single body of unbiased feedback.

The plan set forward by Modi’s team is a major leap forward and reflects the prime minister’s view that start-ups are “the engines of progress”. India is home to some of the world’s most brilliant technical minds, most innovative start-ups and a growing collective of venture firms. If China can create large success stories like Alibaba, why can’t India create the next Google, it’s not like they don’t have one of the biggest social media presence in the world, they are getting instant Instagram views even right now.

Modi embodies the traits of an effective and empathetic CEO of 1.25 billion people. He has hired and appointed amazing talent to carry out his vision. As an investor, my bet is that Modi will “scale up” India to great success.

The writer is director of Inventus Capital Partners, a US-India venture capital firm.


Parag Dhol's Blogs

Parag Dhol: Venture investing is his forte

Parag Dhol, Managing Partner, Inventus Capital Advisors, Bengaluru, has been a venture investor for more than 20 years, backing nearly 30 companies resulting in 14 exits including three IPOs. Parag’s venture capital career began at ICICI Venture in 1993, where he was part of the core team investing in the country’s fast emerging technology, media and telecom sectors.

In 2000, he moved to GE Equity where he continued his early-stage investment focus. Inventus has committed nearly 70 per cent out of its second fund of $106 million. It finished investing out of its first fund of $52 million in late 2012. In these two decades in venture investing, Parag has seen a wide range of entrepreneurs and ventures. He says that when he started out, the entrepreneurs had nearly 20-30 years of experience in industry and were into offering services – CAD/CAM and the like. Now, the entrepreneurs are young, many hardly with any prior work experience, and come with plenty of ideas and are looking to change the sector they have entered, says Parag, 46.

Education: I took the beaten path: mechanical engineer from IIT, Delhi, and MBA from IIM Bangalore.

Prior experience: Corporate venture capital. I worked in ICICI Venture during its venture capital days, as against its current PE avatar. Then moved to GE Capital and subsequently to Intel Capital, before joining Inventus in 2008.

Sectors interested in: Technology, broadly speaking. Software, internet and mobile. I have generally been bottoms-up. That said, quite a few marketplace/two-sided networks and B2B software companies in our portfolio.

Investments: eDreams, FundsIndia, Power2SME, PolicyBazaar and Vizury.

Typical working day: There is no “typical” working day, but I end up spending time on Gathering – generating deadflow (panels at events); evaluating the ones we find interesting, as well as much larger number of those we have to say a no to – never easy; interactions with existing portfolio, including regular board meetings.

Hobbies: Too many for the 24 hours of the day. Movies, reading, swimming, running, cycling, watching sports (football, in particular), trying to be an Atticus Finch like father to my son.

Gadgets: Kindle, a relatively recent acquisition, for the way it solves the single-purpose use case. I love my Nexus phone, as well, especially the quirky parts of Android (unlike the other “idiot proof” OS it competes with). Am not a measurement economy believer, though.

Advice to entrepreneurs: In the current charged environment, would reiterate the basics – focus on customers, existing/prospective employees and partners.

The money/VCs will come if you do a good job there. Unfortunately, I see many entrepreneurs today putting the cart (VCs) before the horse (customers).


General News

California’s tech ties to India are about to get a boost

He’s a vegetarian, practices yoga and tweets selfies.

Narendra Modi is so California.

But the Indian prime minister is looking for more than superficial connections when he visits Silicon Valley this month in the first trip by an Indian leader to California in more than three decades.

In a two-day swing, Modi hopes to enjoy the warm embrace of a U.S. high-tech industry that already has strong connections with India and a thriving diaspora community that generally embraces his swaggering style.

The California trip will come on the heels of an address to the United Nations General Assembly in New York.

Facebook founder Mark Zuckerberg announced Sunday that he would host Modi for a town hall-style event at the company’s Menlo Park, Calif., headquarters to “discuss how communities can work together to address social and economic challenges.” Zuckerberg invited Facebook users to post questions, generating more than 22,000 comments in less than 12 hours.

The California-India connection is important to Modi as he tries to drum up more investment in his country, which currently posts the sharpest growth rates of any major economy. As China and other emerging markets slump, Modi, who took office 16 months ago, is seeking to position India as a new hub for manufacturing and the digital industry, vowing to sweep away bureaucratic spiderwebs that have long disheartened foreign investors.


The visit also marks the 64-year-old Modi’s ongoing effort to rewrite his relationship with the U.S., which once barred him from the country over concerns about his human rights record. To court Silicon Valley, Modi is not only relying on the region’s existing ties with Mumbai and Bangalore – India’s financial center and high-tech hub, respectively – but also appealing directly to Indian immigrants who are generally supportive of his optimistic, pro-business message.

Few world leaders could pack even one major U.S. sports arena, as Modi did in a speech at Madison Square Garden last year, but he’s expected to do so again Sept. 27 in San Jose. An Indian American group organizing a “community reception” for Modi at the 19,000-seat SAP Center says that more than 45,000 people have sought free tickets.

Modi is also expected to meet with other tech companies including Adobe Systems Inc., whose Chief Executive Shantanu Narayen was born in India, and attend events with Indian American entrepreneurs and social investors. Nearly 3 million people of Indian origin live in the U.S., according to estimates.

For Modi, “it’s a very well thought effort to capitalize on the connection he has with the diaspora and involve them at a point in time when India is perceived to be on a positive track in terms of governance,” said Subimal Bhattacharjee, a cyberspace policy analyst and former India head of General Dynamics, the U.S. defense contractor.

India already has a deep bench of high-tech workers who run the back-office systems of many U.S. tech companies. Modi aides said he is also due to visit the electric car maker Tesla’s facilities in Palo Alto to highlight his plans to develop clean energy.

Analysts say the greater potential for India’s economy – and U.S. investment – is in software innovation.

“We are seeing more and more companies in India become product companies rather than services companies,” said Ajay Chopra, general partner at Trinity Ventures, a venture capital group in Menlo Park.

Silicon Valley money has followed. The Indian restaurant-finder app Zomato, backed by Menlo Park-based Sequoia Capital, recently bought the restaurant review site Urbanspoon for about $60 million in one of the largest-ever U.S. acquisitions by an Indian start-up.

Nitin Pai, co-founder of the Takshashila Foundation, an independent think tank in Bangalore, said that so much of the city’s tech economy is tied to the American West Coast that “when it’s a public holiday in the U.S., you can feel the traffic here is lighter.”

Modi’s challenge is to turn those shared connections into a driver of economic development. He has launched an ambitious series of initiatives called “Digital India,” which aims to expand Internet access, boost electronics manufacturing and develop apps to improve the delivery of government services.

Of India’s 1.25 billion people, about 10% have decent Internet connections, while 40% have only basic connectivity. While U.S. technology hardware companies like Cisco Systems Inc. maintain back offices in India, few have manufacturing plants here – something Modi wants to change in order to create jobs for the 1 million young Indians who enter the work force each month.

Modi pushed his open-for-business message when he hosted President Obama in New Delhi in January, and his government has lifted some limitations on foreign investment.

But when India’s finance minister, Arun Jaitley, visited the U.S. in June, he heard longstanding complaints about his country’s thorny tax codes regime, volatile court system and often shoddy infrastructure. After scaring overseas investors by saying it would seek to collect billions in retroactive capital gains taxes, the government backed off the plan earlier this month.

”They haven’t done anything to impress people here that they are serious about the reforms,” said Kanwal Rekhi, a pioneer among Indian immigrant entrepreneurs in the U.S. in the early 1990s. “There’s a more welcoming tone, but there’s no substance yet.

“They should have the red carpet rolled out [for U.S. businesses], which I don’t see. We want to hear, ‘Here’s the set of rules we want you to play under,’ rather than this random set of rules coming from left field and right field.”

Last month, scores of U.S. university professors urged Silicon Valley executives to exercise caution in dealing with Modi because of accusations in India that he is pursuing an agenda biased in favor of the Hindu majority. Before he became prime minister, the U.S. denied him a visa for nearly a decade over allegations that he did not intervene to stop religious riots that killed at least 1,000 people, mainly minority Muslims, while he was chief executive of Gujarat state in 2002.

Experts say that after much talk of renewing the relationship, Modi “has to be much more specific and clear” about what India offers to U.S. companies, said Homa Bahrami, senior lecturer at UC Berkeley’s Haas School of Business.

“In the last 10-15 years, there has been a huge amount of investment in India, and today we have a critical mass of Indian entrepreneurs in Silicon Valley and indigenous tech companies in India,” Bahrami said. “I would say that’s a great foundation one can build upon.”


General News

Harnessing two worlds: From India to the United States

According to the India Startup Report 2014, there were 3,100 startups in India in 2014. By 2020, the number is expected to rise to 11,500. In a study by Inventus Capital Partners, the average deal size for a consumer technology company in India last year was three times more than the year before ($5.6 million in 2013 vs. $17 million in 2014).

Why is India the next big startup hotbed? A variety of reasons: evolving technology, availability of funds and a growing economy.

In addition to the reasons above that make Indian startups ripe for success, they are also taking advantage of the positive effects of globalization.

Globalization is continuing to break down boundaries, especially for Indian companies looking to enter the U.S. market. India is undeniably the world’s fastest growing startup ecosystem. As globalization makes the United States market more accessible and this sharp uptick in Indian startups intersect, innovation and entrepreneurism can prosper and grow in both worlds.

Globalization makes harnessing the two very different worlds of India and the United States not only possible but an attractive business proposition. How? Here are three factors:

Tools and Technology

New tools and technologies help to make up the modern office space. High-speed Internet allows for collaborative applications to facilitate a virtual workplace that allows team members to stay productive from anywhere in the world, at anytime. Google Docs, Skype, Trello, Git, Invision, and Amazon AWS are just a few of the applications making this possible. The ability to network beyond the walls of a single physical office and ultimately, a single market, provides a company with a great amount of flexibility.

Indian startups partnering with ventures overseas are more popular than ever. The cost of expanding to new markets is typically too big for a new startup to handle on its own. The best option is partnering with another company that is already there. For U.S. companies, this also gives them a way to enter India’s lucrative startup space. Thanks to new tools and technologies, talking face-to-face online or giving a presentation to potential partners who live on the other side of the world is as easy as knocking on a neighbor’s door.

Diverse Talent Pool

Breaking down the barriers of distance and physical office spaces has allowed Indian startups to access talent from anywhere in the world. Recently, Punit Soni, chief product officer at India’s largest online marketplace, Flipkart, stated that he was looking to attract global talent for the company. With a physically unrestricted, worldwide talent pool, companies like Flipkart can greatly expand their pool of candidates, making it easier to recruit top talent. A global talent pool also increases the chances of finding people who not only share the same vision for the business, but also bring with them the passion and skills required to elevate a company to its highest level.

Companies in India can tap into the same resources that Silicon Valley based startups have been hiring from (think: Stanford grads with computer science degrees). With a diverse team comes diverse perspectives, which allow for expansion and healthy growth of both a company and its ideas. And a company should strive to be as diverse as its users.

International Investors

Just as startups are crossing borders, so are angel investors and VCs. U.S. investors are flooding money into India’s startup ecosystem. According to Forbes, the U.S is India’s number one foreign investor and supporter with more than 11,000 deals. Even more recently, Silicon Valley VC Walden International stated that they plan to increase investments in India, particularly in technology and hardware startups. U.S. investors see tremendous potential in Indian startups.

According to Inventus Capital Partners, by 2020, nearly half (45%) of India will be online. To investors, that represents more than 610 million consumers and users.

Investments come from the other direction as well. Rajan Anandan, the managing director of Google India, was deemed India’s most “prolific angel investor.” The Stanford grad, who is now based in India, has a portfolio of more than 40 investments all over the world, including in the United States.

Globalization has no doubt played and continues to play a major role in breaking down boundaries between India and the United States. India-based companies, like InMobi and the well-established Infosys, have crossed borders and successfully disrupted their industries in both India and the United States – a task that seemed impossible even just five years ago is now within reach. And as the barriers come down, Indian startups are prospering and growing, bringing innovation and entrepreneurism to new markets, including the United States.


Manu Rekhi's Blogs

Chasing The Hottest New Trend Is A Sure Way To Kill Your Startup

By Manu Rekhi for Forbes

How many times has someone told you that the “grass is always greener on the other side”? That what someone else has or what someone else is doing is always better than your situation? Well those others are constantly chasing YAFOs, (Yet Another Freaking Opportunity) and YAFOs are an entrepreneur’s worst nightmare.

As we all know, every opportunity has an associated cost and every potential upside is balanced by a potential downside. But despite knowing these risks, we are prone to chase YAFO, constantly trying to diversify. We assume that putting all our eggs into one basket is irresponsible, hoping that by spreading the eggs out, we have a better chance of success. But the lessons we’ve been taught all these years turn out to be wrong, especially when it comes to startups.

Startups are new, volatile, and constantly incurring loss. By definition, they are under-resourced, facing years of trial and loss before they even begin to see profit. Relying on investment angels and hoping to hit the market at the right time, startups are risky.

Companies need to groom the resources they already have and focus on a single task at a time. “In 2011 when we decided to go not only mobile-first, but mobile-only when building our community marketplace for fashion, we were met with all sorts of reactions from blank stares to strong recommendations from advisors that people would not buy and sell fashion from their phones. Our laser sharp focus from the beginning has helped us build one of the largest fashion marketplaces in the world, where 95% of our sales comes via the mobile phone,” said Manish Chandra, founder and CEO of Poshmark.

By working on multiple goals at once, they may spread themselves too thin, preventing any goal or task from ever being met. Staying focused and zoomed-in to the target at hand takes practice, but will result in success.

Learning to master a market takes time and effort, but is worthwhile in the long-run. Mastering market success means not resting till ones vision is realized in every nook and corner of the world that needs it. Not stopping till everyone has heard your idea.

Imagine the first time you learned to ride a bike. It was time-consuming, frustrating, and it seemed as though you’d never get the perfect balance to keep the bike in motion. But, with a little perseverance and determination, you finally made the last push, riding the bike all on your own. And, once you learn to ride, you never forget. Markets are the same way. They have a mind of their own, but with a little perseverance and determination, you can understand what makes a market tick. Trying to tackle multiple markets simultaneously is like trying to ride three bikes at once – it simply can’t be done, unless you’re Elon Musk himself.

Mastering the market includes identifying potential risks, scaling the severity of the risk, and working to prevent risk. Potential risks include:

  • Market Risk: whether or not there is sufficient demand for what you have to offer.
  • Competitive Risk: is there a pressing need for your product? Are others after the same goals as you?
  • Financial Risk: securing outside funding and generating enough revenue to cover costs.
  • Systematic Risk: threatens the viability of the entire market.

By distinguishing between these four risk factors and how they relate to your startup, a company can take preventative measures and move towards the path to success.

Each startup, growing and fostering into a market, has its own economics. Mastering those specific economics is one of the primary objectives for an entrepreneur. By taking the time and ingenuity to first understand this market, startups can zero-in on the goal they wish to pursue, focusing on what truly matters.

Startups need to stay focused on their core market and one objective, being an expert in their industry. This mindset allows one to effectively compete with much larger players because they remain the best at what they do.

Everyone is always in search of YAFO. But it’s time to take a step back, take the road less traveled and put all your eggs in one basket. You may think it’s risky, but in fact, it’s the safest move you’ll ever make.

Source: Forbes

Manu Rekhi's Blogs


Apprise Finance Minister Arun Jaitley of bumps in M&As and investing.

Excessive red tape in processes such as early-stage investing and mergers and acquisitions is forcing young, promising ventures in India to shift overseas, a group of top Indian entrepreneurs and investors told Finance Minister Arun Jaitley during his trip to Silicon Valley, U.S., last week

They, however, welcomed the recent easing of listing norms by the Securities and Exchange Board of India to help start-ups raise money locally. Manu Rekhi, director at Inventus Capital Partners, told Mr. Jaitley: “A Facebook corporate development executive vented to me about the complexity of doing a deal in India. He mentioned that the $22 billion acquisition of WhatsApp in the U.S. was simpler than the $10 million acquisition of Little Eye Labs in India.”

“The red tape and ambiguity in Indian rules and taxes were overbearing,” he added.

Mr. Rekhi said Mr. Jaitley, who was on a nine-day visit to the U.S. last week, responded by acknowledging the issue, and saying the government is looking to make transactions simpler.

Mr. Rekhi was part of a delegation including Raju Reddy, founder of tech firm Sierra Atlantic, Kanwal Rekhi, managing director of Inventus Capital, and Arvind Sodhani, president of Intel Capital, which met the Minister. Naren Gupta, managing director of Nexus Venture Partners, Sanjay Mehrotra, co-founder of memory chip-maker SanDisk, and Ram Reddy, founder chairman of Global Industry Analysts, were the other industry leaders who participated.

“The Indian tech start-ups are shifting their headquarters to the United States and Singapore utilizing virtual data rooms, as it is lot easier for start-ups to raise money and have options for acquisition by tech companies like Facebook, Google and Twitter,” said Mr. Raju Reddy. He said it took just $800 (Rs. 50,000) to incorporate as a U.S. company online within an hour. One major issue Indian entrepreneurs in Silicon Valley discussed with Mr. Jaitley was the bureaucratic hurdle for early stage investors in India. “Why is investing in India so difficult and treated with disdain? As an investor why do I have to go from San Francisco to Delhi via Mauritius?” said Mr. Kanwal Rekhi, one of the India’s most senior venture capitalists.

‘It will be an exodus of start-ups’

As many as 75 per cent of India’s new tech start-ups (ranging from cloud, data analytics, security to mobility) that intend to raise seed or venture capital will be domiciled outside, says ISpirt, a software product industry think tank.

This year, three of four new technology start-ups that focus on the global market and plan to raise seed or venture capital are getting domiciled outside the country.

“There is an exodus of tech start-ups from India. Regulations have to change for early-stage investing, merger and acquisition transactions and initial public offering to arrest this,” said Sharad Sharma, cofounder of iSpirt. “SEBI has thoughtfully tackled the IPO part.”

Experts said about 95 per cent of start-up exits happen through mergers and acquisitions and only 5 per cent happen by going public.

Nine of the top 30 business-to-business software product companies by market capitalisation have already relocated to the U.S., Singapore and the U.K., according to iSpirt’s Software Product index (iSPIx), which tracks the growth of the industry. These 30 companies are worth about $6.2 billion (Rs. 39,341 crore), employing about 18,000 people, according to the index.

Top Indian companies such as online retailer Flipkart and mobile advertising firm InMobi have re-domiciled to Singapore.

Venktesh Shukla, president of entrepreneur network TiE in the Silicon Valley, said if the government wanted to give tax break, it should give it through the front door. “Don’t force investors to go through the back door and suffer needless complications of having a paper office in Mauritius,” he said,

Naushad Forbes, president of Confederation of Indian Industry, mentioned that the China growth story was fuelled by about 50,000 investments of $2 million (Rs. 12 crore) each over a decade. Half of this was from the Chinese diaspora. “We need Indians globally to invest in India.”

To this point, Manu Rekhi said that there was a need for India to adopt the global best practices as in the U.S, Singapore and Israel. For example, there is a need to make convertible notes possible similar to the U.S. where over 300,000 angel investors invest through convertible notes.

Convertible notes are debt instruments, a signed document from a company to an angel investor, intended to convert to stock once a start-up raises a larger round of financing from a venture capital firm.

“This instrument is most popular way of raising first round of funding by startups in Silicon Valley,” said Sanjay Khan, an associate at law firm Khaitan & Co.

Finance Minister Arun Jaitley, who met entrepreneurs in Silicon Valley, asked for support from the entrepreneurs and investors to work together to “recreate the magic” in India that Indian entrepreneurs have achieved in Silicon Valley. He said India’s potential growth rate of 8-10 per cent over the next couple of decades could be the new normal.

Source: The Hindu