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ENTREPRENEURS AROUND THE WORLD

India: The Next Big Startup Nation?
 

India has been synonymous with IT services for a while. But a hotbed for promising startups? Not so much. A new trade organization wants to change that.

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India's status as a global IT services hub is well-known. Its place as a software product hub? Less so. That last part is what a serial entrepreneur and angel investor Sharad Sharma aims to change.

Sharma is one of the founders of iSpirt, an acronym for the Indian Software Product Industry Round Table. Founded in February of this year by a consortium of 30 Indian software companies, iSpirt aims to promote tech entrepreneurship in India and to expose those companies to global markets where they have been otherwise overlooked.

Why Starting Up in India Is So Hard

The problem is not that India is lacking for talented technologists making innovative products, Sharma says. Quite the opposite. The problem is that those entrepreneurs lack the resources in country to get their products to scale (and in some cases, to sale). "Even in the Valley, creating private wealth requires public works. You don't have Google without Stanford," Sharma says. "But in India, public money is being used for roads and healthcare. It's just not available."

So Sharma, and a group of like-minded "ecosystem evangelists," as he calls them, decided to pool their resources to start a think tank that would break down barriers that have traditionally stood in the way of Indian software companies. iSpirit's goal is threefold:

  • Strengthen the Indian economy by helping companies scale
  • Encourage more M&A activity around Indian start-ups
  • Develop new technologies that can solve India's own social and political ills

"In the U.S., any problem you want to solve, people bring technology into the picture early on, but that's not how it is in India," Sharma says. "If we want to change India, then technology can be a leverage point." In addition to traditional software-as-a-service companies, Sharma hopes iSpirt will also strengthen businesses working on products that solve big problems, like mobile health technology to lower maternal mortality rates and identity authentication technology to reduce fraud.

"We believe technology at large can really solve social problems," Sharma says. "If I were to make this argument in New York, everyone in the room would nod. But if I were to make it to the members of Parliament in India, they wouldn't. That's the advocacy part we need to do to get more buy in for technology like this."

The Plan

To help companies scale, iSpirt is launching a series of bootcamps, the first of which was held this month in the city of Pune, where some 125 entrepreneurs gathered in groups of about 15 to learn what it takes to scale a company. The problem with scaling in a country like India, Sharma says, is that the local talent pool of people who have done it before is so small.

"In the U.S., you find a product-market fit, then when you start scaling, you find people who have been there done that before, and hire them," he says. "In India, we don't have that option at all." The bootcamp brings together some of India's most accomplished entrepreneurs, including Sharma, who sold his company Teltier Technologies to DynamicSoft in 2003, to walk new entrepreneurs through the process. iSpirt also requires each business that comes through the bootcamp to sign a "pay it forward pledge."

"It says when they're in a position to give back, they'll pay it forward," Sharma explains.

As these companies mature, iSpirt will also play a big role in shopping them around to potential acquirers like Google and Facebook, through iSpirt's M&A Connect program. Though Sharma knows it's critical for companies to scale and grow independently in India, he says in order for India to continue attracting investor capital, it's equally important for Indian start-ups to have a history of successful exits.

As part of the M&A Connect program, iSpirt has partnered with the Silicon Valley-based investment bank Signal Hill, and has provided the bank with a list of companies ripe for acquisition. iSpirt has also partnered with Stanford University to conduct a comprehensive study of Indian software companies' success and failure rates. "We have anecdotal evidence, but we thought it would be important for us to have data to layer around it," Sharma says.

The Next Israel?

Of course, making the introduction is the easy part. Navigating India's rampant bureacracy and opaque government standards is another, for international buyers. That's why, Sharma says, perhaps the most important role iSpirt will play is smoothing the friction between buyers and sellers. "We can't change the laws," he says. "What we can do is be there to help people work the system."

Already, iSpirt seems to be making a difference. This month, the technology blog rumor mill was buzzing about two different iSpirt-supported companies, Little Eye Labs and Frrole, being eyed as potential acquisition targets by Facebook and Twitter, respectively. Sharma, for one, is tight-lipped about both, but says simply that in 2014, at least five acquisitions will happen that can be directly traced to iSpirt's matchmaking.

In many ways, Sharma says, iSpirt is hoping India can become the next Israel, aka startup nation. "They've done a phenomenal job as a tech center," he says. "We'd like to emulate their success and do even better.

Last updated: Dec 16, 2013




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