Over seven seas: Why Indian companies are increasingly going global


While there are no numbers or research on how many Indian start ups have  global operations, I suspect it will be a sizable number – a number that is  growing every month and every year. No longer are Indian startups content in  serving merely the domestic market, this new breed of startups and  entrepreneurs consider the world as their market.

This, however, is not something that has happened overnight. We see a  considerable number of Indian companies like Zoho, Inmobi, Zomato going  global and one consistent theme is that the entrepreneurs have some sort of a  global stint. A recent report said that in China, 5 out of 10 billionaires are  Internet billionaires and the common thread is that they have all studied or had stints in the US.

I feel a lot of us in India have the global context, having studied or worked or having both those experiences. Global context enables us to understand what market opportunities exist and the emerging trends throughout the world. To build a global company you need to have a global perspective and you need people at the top who think that way.

The second big pointer is the evolution of the Indian IT industry. When we started the revolution of IT services in 1990s with companies like HCL, Wpiro and Infosys, it was all about labour arbitrage and how to get things done in a cheaper, better and more efficient way in India. Now that story has been beaten to death and people are more aware of what services companies are doing in the context of the opportunities that exist globally. Hence, instead of being a mere back end provider, people want to move up the value chain. People understand the opportunities and are now questioning why they can’t go out and address it.

Business today is borderless and in a global economy, boundaries have blurred and opportunities can be tapped across the globe. The intermingling of cultures and people on a very large scale has meant that whenever anyone thinks of any opportunity it is very easy to think about it as a global opportunity. Previously the thought process was limited to the market size of the domestic market.

For example, when we talk about selling to the travel and hospitality industry, we think about how many hotels exist globally and how many airlines operate across the world. The globalized nature of what we do today makes it much easier to implement ideas. There may still be some friction in the system, but today it is relatively easy to have the world as your playground.

It is also the question of market size. Although the 1.2 billion dollar home market may be a very big market, operating globally gives you a much bigger market size. Take for example the fact that 300 million tourist travel domestically, but the travel and hospitality market in India is fragmented. As a result the organized hospitality industry has about 120,000 rooms. New York alone has 120,000 rooms.

For us as a B2B player, we have to go where the marketplace is more mature. India today is as small as New York for us. Globally, we have 500,000 hotels and 500 airlines cater to. Even product companies that started with a notion of serving the domestic market have now gone global. It is also the case that if you are successful overseas, the domestic market tends to you accept you faster. Druva, Zoho are very good examples of that.

The ticket size for everything is much more globally. If a company sells something for a minimum ticket size of 10,000 dollars globally in India one has to sell it for 5000 $. The cost of operation for most of these companies, whether they sell domestically or globally, remains the same. Just by selling overseas, even for a small incremental change in cost, the company enjoys a much larger margin. It makes much more economic sense to go overseas, which means the opportunity size is much larger.

By going global Indian companies are writing a new chapter in how the world perceives us. Many of them are the future billion dollar companies and will serve to be great ambassadors of the entrepreneurial spirit that has gripped the country. With every globally successful company, India is creating role models for others to emulate


A Brave New World!!

The startup eco-system has come a long way in the country, especially in the last decade or so. People often ask me at various forums and events as to where I see the startup ecosystem heading in the coming years. While it may be difficult to predict precisely, there are perceptible changes.

While the turn of the century was about the rise of the Indian services and outsourcing industry, I believe today it’s about the product companies. The rise of the product startups in the country has been due to numerous reasons, but the stellar growth has only made things exciting.

One of the reasons for the mushrooming of product companies is due to people returning from overseas after they have sensed an opportunity. They want to build a product that addresses the market opportunity.  When I returned from the US, I saw some clear patterns and opportunities that I could work on. While one choice was to work with existing companies in the travel and tourism space, the other was to create a brand. I chose to go with the former.

The second clear reason is that people no longer want to do back office work for the world. For example a lot of companies in the space of analytic work around identifying patterns and ideas for companies that outsource work to them. You will see a lot of individuals from these companies building a product startup around the same principles.

This is the natural progression and the evolution of an industry. Outsourcing gained prominence because of cost arbitrage and then the IT companies started getting innovative to increase their share of the pie.  They started advising various companies on how they should re-engineer their business processes and additional things they could do. Phase 1 was about moving cost offshore and labour arbitrage while Phase 2 was making it efficient and optimizing it. Indian outsourcing companies started evolving their services by providing additional services and at the same time automating it and making it non-linear to people.

The natural progression after that is if employee of these IT companies were advising clients on how to make their business processes better and how to “go to market” more efficiently, what prevents them from going to market on their own? You will see a lot of companies that are an offshoot of big IT establishments. You see individuals go out and address markets problems and opportunities rather than work for someone else.

Carpe diem

Bbrave new worldeyond that, the services company has allowed people with similar ambitions to come together and seize the moment. Services companies have become the place where co-founders have met and most of the time the early hires in a startup are from these services companies. When there was a lot of movement around outsourced product management where companies outsourced their engineering work to India, it was obvious that employees from these services companies would get together and start a product company of their own.

The overall IT industry has evolved and the entrepreneurial ecosystem has been built to some extent and has gained velocity. According to Grant Thornton India Private equity investments in India amounted to $1.7 billion last month, taking the overall PE deal tally to $10.2 billion in the first 10 months of this year. Spread across 500 PE deals the investments are up 18 per cent in value terms and 37 per cent in terms of number of deals in 2013. The entire investment community, access to capital and breadth of funds has increased quite dramatically.

The appeal of being a part of a product company is far cooler and hipper, rather than being a part of an IT services firm. For an aspiring entrepreneur the IT services story has been beaten to death.  No one wants to start another company in the outsourcing space and given the number of successful product companies like Druva, InMobi and Zoho, people now have role models. As entrepreneurs see billion dollar companies are now possible in the product space, it serves as fuel to the entrepreneurial fire. An aspiring entrepreneur wants to build a product company that will address a global market need.

Role of industry bodies:

Industry bodies are also playing a role. Bodies like Nasscom have a separate Product council and Product conclave, which brings together a good collection of product companies in the form of peer-to-peer learning and experiences. Another body that is doing a good job is iSpirit that has some big initiatives. It puts a big focus on the M&A connects where they look to enable big US tech companies to connect to a lot of Indian startups. Hence, we have seen a bunch of startups being acquired like Little Eye Labs and few others. iSPIRT is providing a platform that enables big tech companies to acqui-hire, which essentially is acquiring a startup to get access to their talent. This helps both sides – buyers that know they can do a deal in India and integrate startups effectively and for the startup a viable exit route even if it’s not in a revenue generating state.  It is also extremely focused on peer-to-peer learning of product companies. From newsletters from founders and experts to roundtable interactions, the body looks to bring curated number of entrepreneurs to come and share experience of selling globally.

Nothing succeeds better than success and the early successes of various product companies have set the stage as role models. Once the momentum builds it breaks the inertia in the system.  I predict starting 2016, we will hear 3-4 billion dollar product companies coming out of India every year.  In that sense 2015 will play an important role in ironing out structural issues in the system and ensuring the ease of doing business is improved.