The VC Circle blog has just posted information about a new venture capital fund launched by a Pune based association – Indian STEP and Business Incubators Association (ISBA). ISBA is an association of startup/business incubators, incubatee startups, and other people interested in this ecosystem.
The fund will focus on sector-agnostic investments in companies with no proven track record.
Arihant Group, a company engaged in steel manufacturing in Pune, has contributed a major chunk to this fund while the other investor in the fund is Mumbai-based Adventa Infratructure Pvt Ltd.
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The fund looks at an average investment of Rs 2.5 crore, and expects equity stake somewhere between 5% and 30% in investee companie
The ISBA was set up in 2004 and aims to promote business incubation activities in the country through exchange of information, sharing of experience, and other networking assistance among Indian Business Incubators, Science and Technology Entrepreneurs Parks (STEPs) and other related organizations engaged in the promotion of start-up enterprises.
These are the planned activities of ISBA:
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Provide advice on finding out the requirements and conditions for starting an incubator, creating business plan, recruiting incubator managers, and incubator development issues;
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Maintain and update a data base containing the contact information of business incubation experts;
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Lobby for Indian incubators at national and international levels;
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To organize workshops, conferences, seminars, or training services;
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Publish a newsletter;
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To organize media conferences and other activities to create awareness about the incubator programme and get public participation;
I want to estimate the number of innovative enterprises in India, and look into their (in)ability to access risk capital.
Why? Because I’d like to know how many Indian enterprises may offer higher returns than FDs, bonds, mutual funds & stocks. But with a lower risk than a VC funded startup.
Why? Because I believe it is possible to raise & deploy a large amount of risk capital to a large set of Indian companies. $1B+.
Why? Because 95%+ of innovative enterprises lack access to risk capital. And 95% of ‘rich’ Indians / NRIs lack access to private equity investments in India. That’s my hypothesis.
So what? Well, there’s a business model in here somewhere.
Definitions & Numbers
I’m mixing up the various terms used to describe relatively young & relatively small (by revenue) companies. These include: startups, Micro, Small and Medium Enterprises (MSMEs), Small Scale Industries (SSIs), new ventures, spin-offs, spin-outs, etc.
Per the 2006-07 census, there are over 26 million MSMEs in India. ~ 97% of these won’t show up in MCA statistics since they are unregistered or operate as sole proprietorships / partnerships.
A company is Micro, Small or Medium depending on the amount invested in plants & machinery. MSMEs employ ~ 60 million people (= 3 Mumbais) and contribute ~ 20% to India’s GDP.
Of these, over 98% are ‘Micro’ enterprises. The majority are ‘one-man shows’ that provide services to local markets with minimal investment. They use traditional techniques, have no formal management practices and lack access to bank credit.
The numbers are huge from a micro-finance perspective. But I’m looking for candidates for risk capital. Time to narrow down the potential market.
Innovative (M)SMEs
How many MSMEs have an innovative business model or technology, that is fairly scalable? Who knows! Let’s make a few random assumptions and pick numbers out of thin air. ‘Micro’ enterprises are less likely to be significantly innovative given their constraints. That leaves say ~ 0.5 million Small & Medium Enterprises (SMEs) to choose from.
Ignore stuff like product vs. service, urban vs. rural, geography, etc.. Let’s assume that at least some % of these 5 lakh SMEs are innovative enough. To qualify, they should have products/services with some ‘edge’, which provides growth & profits. These SMEs were ‘Micro’ at birth, and since they are still around, they must be doing something right.
Maybe 2% of SMEs meet this criteria. That’s 10,000 innovative (and perhaps risk capital worthy) enterprises across India.
My assumption of 2% may be wildly off, but remember that I left out 25.5 million ‘Micro’ enterprises. If even a fraction of those get added to the ‘innovative’ pool, the 10K number suddenly looks small.
Risk Capital for Innovative (M)SMEs
Most MSMEs rely on family, friends & personal networks for funding. Only a select few have access to risk capital from angels, VCs, and certain schemes from government/banks. For example:
On average, < 100 Indian companies get VC funding every year.
On average, angels & angel networks (eg. Mumbai Angels) fund ~ 50 startups every year.
On average, government schemes for startups (eg. DSIR’s TePP, TDB seed funds) fund ~ 100 enterprises every year.
On average, ~ 50 companies get listed (via IPOs) on our stock exchanges every year. Of the ~ 2000 companies that traded publicly, 80%+ are quite illiquid.
On average, bank lending to MSMEs accounts for < 10% of total commercial lending. It’s usually in the form of secured, collateralized debt – not ‘risk’ capital. With personal guarantees from borrowers. And probably only to the ‘Medium’ enterprises.
By any measure, this is hugely insufficient in the context of my 10K estimate. And it gets worse:
The average VC deal size in India is ~ 20 crore. That puts the average pre-money valuation at 40 – 60 crore.
To stand a chance of an IPO on the NSE or BSE, a company must ideally have revenues of over 100 crore.
While governments & banks may be more open to smaller deals, they offer a different set of challenges – slower processes, risk-aversion, stringent spending terms & conditions, limited exposure to risk capital, etc.
SMEs need to invest 10 lakh – 5 crore in their businesses. In the Indian VC world, this would count as ‘seed funding’ or ‘early stage funding’. It is supposed to be followed by Series A, B, C, … on its way to a 100-1000 crore valuation. But not every SME is a glamourous, Silicon Valley style, tech startup. Not every SME is addressing a 1000 crore market. Or even a 100 crore market. So all this talk of ‘seed funding’ is irrelevant.
Bottom-line: There is a tremendous shortage of risk capital – in the 10 lakh to 5 crore range – for innovative (M)SMEs.
[Caveat: Then again, how many of these business owners are willing to part with equity?]
For the MBA/VC types, here is what the SAM (serviceable/sellable available market) looks like: 10K SMEs * say Rs 50 lakh per SME on average = Rs 5000 crore = $1B. Maybe much more!
Demand is not a problem. What about supply? Time for Essay #2.
What: Talk on “Web applications from the ground up” by Mitchell Tannenbaum, organized by Pune Linux Users group, and SICSR When: Monday, Feb 8, 2pm Where: SICSR Registration and Fees: Free for all to attend. No registration required
Details
This talk will cover web applications from a few different angles, starting with what they are and how they are commonly used; this will be a kind of quick behind the scenes look as well a tour of common use cases. Then it will look deeper into building them using two frameworks, Drupal and Django. This will help those of you who are interested in starting new projects and are not yet familiar with some of the available tools.
Next, a look closer at the different projects you can use to assemble your full stack. These are the underlying components of web applications; the most common configuration is called LAMP: Linux Apache MySQL and PHP. However we’ll also cover alternative web servers, database engines, and scripting languages, notably: nginx, SQLite, and Python.
Finally, get some hands on experience with modular development and middleware to see how web applications can be used in all types of environments. This demonstration will illustrate the power of effective and efficient web application programming and how any environment can benefit.
About the speaker – Mitchell Tannenbaum
Mitchell Tannenbaum is a Social theorist and Software architect. Mitchell recently finished his studies at University of Florida where he also worked at the Advanced Computing and Information Systems Lab on distributed systems at various layers. His current technology related activities are with team based software development for cultural growth and economic liberation using free web applications married with virtualization. Also check out Mitchell’s profile on drupal.org
This post is just a reminder that you should check the PuneTech calendar on a regular basis. There are a number of events that happen in Pune every week and we try to list them all in our calendar. Basically, the PuneTech calendar is automatically populated from the common/open tech events calendar for Pune on upcoming.org. Anybody can add events there – and you’re encouraged to do that.
This is an example of effective use of technology in public life in Pune. Sakaal Times reports that first-time corporator Rajendra Gorde, is using SMS to not only stay in touch with his constituents but also to provide them with useful information.
Excerpt:
Rajabhau, as he is popularly known, has created a personal data-bank of nearly 80 percent of the electorate in his ward. Not only does he know people by name, where exactly they reside and the number of people in their families, but he also knows their birth dates, anniversaries and other important dates. Most importantly, he has the cellphone numbers of each of these people.
So, it is possible for him to send out personalised greetings, good wishes, condolences and other messages to each and every individual in his database. While this kind of SMSes help Rajabhau to establish a personal connect with his voters, what makes him stand out as a corporator are the public service and informational messaging that he sends out to hundreds of people every day.
For instance, he secured the names of all secondary and higher secondary students of municipal schools in the city who had secured 80 percent and above marks. It was a pleasant surprise for 83 such students when their parents received individual SMSes from Rajabhau informing them that they were eligible for grants of Rs 15,000 and Rs 25,000, respectively, under a PMC scheme for meritorious students.
And apparently, residents are finding this service useful.
The most popular messages are the ones informing people about water cuts and power shutdowns. It enables people to prepare for exigencies and not get caught unawares.
PuneTech readers will note that this is very similar to what SMSOne has been doing in over 500+ villages and urban localities in Maharashtra and a couple of other stages. Unlike Rajendra Gorde, who is using this “SMS newsletter” concept as part of public service, SMSOne has been running this as a for-profit business, and it appears to be doing rather well. SMSOne appears to have shown that this is indeed a sustainable business model.
Given the really low cost and low technology requirements for setting up an SMS Gateway, this idea is something that many others can and should implement. I see few “web-2.0” businesses/services that are using SMS as an add-on to their website/service. And I see fewer still who are fully SMS based ideas. But, considering that India probably has 50 million internet users, and 500 million SMS users, I think more and more people should be looking at SMS as a primary enabling technology.
What:Pune (Microsoft Technologies) User Group‘s Community Tech Days When: Saturday, 6 February, 9:00am-5:15pm Where: International Convention Center, MCCIA Center, 5th Floor, S.B. Road Registration and Fees: This event is free for all to attend. Register here
Community Tech Days
This will be a day full of technical presentations covering ASP.NET, REST applications with .NET, Win 2008 R2, Exchange 2010 etc. The detailed agenda is as follows:
GNUnify symbolizes the philosophy behind Free/Open Source Software (FOSS). It makes an effort to unify and strengthen the FOSS movement. Initiated in the year 2003, GNUnify has soared to become an international convergence of open minds. It brings together some of the world’s leading speakers to share their knowledge and experience, with students and developers.
It has 1-hour presentations on tech topics, 2-3 hour workshops, installfests, and “birds of a feather” discussion groups.
The CFP (i.e., call for papers, i.e., the call for presentation proposals) is currently open, and if you’ve done any work in any open source technology, you should consider submitting a presentation proposal. It helps the community – because more presentation proposals means that the organizers get a larger pool to select from, and can thus put on a higher quality conference. You could choose to do a presentation that is basic, targeted towards beginners and students, to initiate them into the world of open source, or if you have expertise in a specific field or FOSS software package, you can target your presentation to other professionals in the field who would like to learn from your experiences.
Submit a proposal. It takes very little effort right now. All you need to do is submit a one-paragraph abstract of what you’re going to talk about. The conference is on 19th and 20th Feb, in Pune, giving you enough time to prepare.
Why bother?
This PuneTech’s standard exhortation as to why PuneTech readers should submit proposals for such CFPs. We first used it for the CFP of the IndicThreads conference on Software Quality, and are repeating it here with minor changes:
GNUnify is a good conference.
If you’re accepted as a speaker, you get travel costs (upto Rs 5000, based on actuals) and accomodation. (All those reading PuneTech from outside Pune, grab this chance to visit the most happening tech community in India.)
Become famous: being a speaker at a national conference is good for visibility, and all engineers should strive for visibility. It’s very important. Almost as important as being a good programmer. (Maybe more?)
Help out a good Pune initiative. More submissions will improve the quality of the conference, and having a high quality conference in Pune improves the overall stature of Pune as an emerging IT powerhouse.
Last Saturday, Pune played host to a number of science and technology innovators from around the country, as a part of the Innovations 2010 conference.
Overall it was an interesting conference, a little hat ke. There was much less software/IT/web-2.0 kind of stuff, and much more basic science and technology. Also, it was not all targeted towards startups; which means that they also highligh individual innovators’ ideas that are not necessarily going to become a big business (for example, a method for cleanliness at a railway station), and also some interesting ideas from larger companies (e.g. the rapid DFM review and collaboration solution for injection molding from Geometric). Such innovations are not normally included in places like proto or headstart.
The event was kickstarted with a keynote by Sanjay Nayak, CEO of Tejas Networks, which is a Bangalore based optical networking startup. Tejas, which has been around for the last 5 years or so, is profitable and has revenues close to $150m. That is quite an impressive feat from an Indian high-tech startup, selling products from India worldwide. It is also a shining example to the naysayers who keep on saying that Indian product companies cannot sell products in the US. I hope that more people follow Tejasâ lead and venture into the space. Sanjay mentioned that India itself is a great market for petrochemical and telecom markets, and if you design products that satisfy the needs of these markets, you will have the advantage of selling close to home in the markets you know; something that your gadzillion dollar competitor does not. That said, it is imperative that the products you build are international class; in other words, you must implement internationally standard processes and techniques to make this happen. One thing that is lacking in India is government support â by making a policy that Indian Govt agencies/companies must buy from Indian product companies if the product quality is on par, the government will give a significant boost to innovation in the high-tech space. Instead of innovating for MNCs, people will start innovating for their own companies.
The Main Course – The Innovations
Here is a list of the innovations that were presented. These are mainly short, one or two line descriptions of the main innovation. You’ll notice that there are a bunch of Pune companies in this list.
Electronically driven supercharger
Rajeev Ranadive, Automotive Robotics, Pune Company
Customers like powerful dynamic cars, but don’t want to pay for it. More accurately, they want extra power during acceleration or climbing. Not really required all the time. And turbochargers run all the time, which is a waste. Instead, they have a electrically driven supercharger which provides the extra power only when needed, and at low engine speeds, it charges the battery. Hence it require lower electrical input, and higher mechanical output.
This company was also at proto.in Pune, but here they presented a different innovation. Which is pretty cool.
HyCator Cavitating Reactor Engine
Anjan Mukherjee, HyCa Technologies
HyCa was pretty much a repeat of their proto.in, Pune, presentation, so not repeating it here.
Generating electricity from ocean waves.
S.G. Kanitkar, Enviro Abrasion Resistent Engineers Pvt. Ltd., Pune Company
Their system is called ANEESH (Adaptive Near-shore Energy Extraction and Supply Hydrokinator. This mechanism has lower initial set-up expenses (“capital costs”) than solar or biomass energy, and cost and capacity utilization factor is comparable to other renewable energy sources. They have a prototype that is 1.5m x 4m x 6.5m which generates 2 kW of power. They need collaborators for electrical systems and electronic controls to complete the full system. In addition, they want people who can liaise with government bodies to ensure that they get past the appropriate regulatory hurdles.
Avoiding crap at the railway station.
Rajendra Ladkat, individual inventor, Pune inventor
The current method is just a hole in the train compartment and the crap ends up on the tracks everywhere and anywhere, including the railway stations. Ravindra has invented a simple mechanism which ensures that the waste matter is discharged only when the train is going at high speeds, which is a much better place to discharge it than when the train is stationary. It is a simple vertical HDPE pipe, with sloping sides and two flexible flaps. The flaps open when the train speed goes about 40kmph. Trial was conducted in Pragati express in Jan 2009, and the trial was found to be satisfactory by all stakeholders. Economics: 9000 passenger trains with 40000 comparments (which means 1,60,000 potential installations). This totally costs 48cr (contrast with Rs. 4000 cr. allocated by government for green toilets.) He is looking for business collaborators.
Design for Manufacturability tool for CAD/CAM software
Bhaskar Sinha, Geometric Software, Pune Company (mostly)
DFM = Design for Manufacturability. Designers can check for manufacturability in their CAD tool itself. When the designer is creating a design in CAD, the tool will check and validation the design from a manufacturability point of view. It points out problem areas and indicates what constraint was violated by the design. Contextual help at this point gives the user information about best practices (and this can include knowledge from the customer company itself.) (@aparanjape thinks that this kind of functionality should be there in major CAD/CAM products, so it’s not really clear what the innovation here is.)
Non-duplicatable material for security (ID cards, etc)
Raman Nanda, Bilcare, Pune Company
NonClonable security technology, from Bilcare. Consider ID cards, driving licenses, ration cards, health cards, NREGA cards. Any of them can be duplicated. Bilcare has used nanomaterials and micromaterials to develop a material that has a unique “material fingerprint”. This is invisible to the naked eye, but machine readable. And since it is at the micro/nano scale, it is not duplicatable. It cannot be reproduced, even by the original manufacturer (or Bilcare). This technology can be integrated with any security technology, like barcodes, RFID, or magstrips. They claim this requires significantly lower total cost of ownership, since this technology does not require any electronic parts in the card. It requires the scanner (i.e. the device that is used to check the identity) to be connected to a central server.
Tree Climbing Device
Mushtaq Ahmed from Kashmir, and Sham Antoorkar from Ahmedabad
They have invented a simple mechanical (non-electronic) device that can be used by unskilled people to climb trees/poles/etc easily and safely and allows resting while climbing. Mushtaq invented the device and Sham make some changes to make it commercially viable. The plan is to launch it by March 2010.
Rotory variable compression ratio engine
Das Ajee Kamath, Gyatk
You can’t put petrol in a diesel car, or diesel in a petrol car. VCR = Variable Compression Engine, would allow you to put any fuel in any engine. And this is an idea that companies all over the world have been working on for 20+ years – but it has significant limitations. Gyatk has invented a rotory VCR, which overcomes the limitations. They have a working prototype, and patents in 40+ countries, and engagement with two major auto companies in the country.
Health emergency alert system for Seniors
Umang Salgia, Wellcore Corp. Pune Company?
A device that seniors can wear on their body and it can automatically detect emergency situations, or the person can manually activate it, and it sends an alert to the appropriate person/organization. It monitors vital signs, motion, blood pressure etc. And the alert also gives the location of where the emergency happened.
I think Wellcore has a development center in Pune. (Given that both founders are Pune folks, I’d guess that it is mainly a Pune company, but I cannot find any information on their website, or anywhere else on the web. Can somebody confirm?). It is interesting to note that Wellcore also presented at CES (the Consumer Electronics Show, at Las Vegas, the biggest electronics conference in the world) this year, and was chosen as one of the top ten products by this website.
Document sharing with remote control of secure information
Rahul Kopikar, Seclore Systems
A system that allows sharing of documents but where the original document creator retains control of the sensitive information in the document. At a later stage, if the document creator can revoke the permissions and the document will become unreadable.
You, me and Disaster, a card game for increasing disaster management awareness
Peeyush Sekhsaria, Handesign, Bangalore
There is a need to get individuals and communities involved in understanding disaster management. Hence this is a card game that allows people to understand disaster management in a fun settings. Serves like a facilitation tool for teachers, trainers, social workers etc.
Making rain – a low cost way of seeding clouds and causing rain
Shreehari Marathe, individual inventor, Nanded Maharashtra
Seeding clouds to cause rain involves spraying clouds with appropriate minerals. Conventionally done by aircraft. Shreehari invented a way of doing this by burning tyres and putting the salt on it. The smoke carries the salt to the clouds and results in rain. (For reasons I cannot pinpoint, this idea is causing a bad science alert for me. I wonder whether this idea has been proved under scientific, controlled conditions. It is possible that this whole idea suffers from confirmation bias, and other such statistical anomalies.)
What: Pune OpenCoffee Club meeting for all those interested in doing a startup and looking for co-founders and/or ideas When: Saturday, 16th January, 10am Where: Symbiosis Institute of Computer Studies and Research, Atur Centre, Model Colony. Map. Registration and Fees: This event is free for all to attend. Register here: http://punestartups.ning.com/events/startup-aspirants-mela
Startup Aspirants Mela
Sumedh Inamdar called this event with the following pitch:
I am a startup aspirant, and want to meet other people who are looking for co-founders and/or ideas. Can we all such people meet on a saturday?
Are you a domain expert who has a great business idea, and are looking for a co-founder who can handle the technology part? Are you a group of techies who are looking for a good sales+marketing person? Are you an enthusiastic youngster who would love to work on a startup idea but don’t have an idea yet, and all your existing friends want to continue their boring jobs at Infosys/Wipro?
Welcome. This event is made just for you. Just show up – no preparation required, no permission required, no registration required.
So far, about 35 people have confirmed, and another 15 have indicated that they might attend the meeting. The idea is for each hopeful to give a short pitch about themselves – their background, what sort of work/ideas/startups they’re interested in, and what kinds of co-founders they are looking for. After this is done, there will be time for mingling where people can try to find their startup soulmates.
Are you a person who thinks of Pune as a retirees paradise? In that case, start showing up at POCC meetings, including this one, to see the energy that Pune still has.