An opportunity to "interview" (by email exchange) Sramana Mitra fell into my lap this week. Mitra is an entrepreneur, consultant, and the founder of the "One Million by One Million" initiative. Among many other things, she is knowledgeable about Indian tech companies. Her recent post, "Indian Product Entrepreneurs: Your Time Has Come," is the backdrop for this Q&A.
Q: I've read your post about "product" companies in India, with interest. I don't know as much as I should about startups and emerging companies in India. Would you mind briefly putting India's venture and emerging company scene in a global context? Are the paradigms for starting, financing and exiting similar to those in the US, or like Europe, or unique to India?
Mitra: India now has a good sized venture industry with many global players operating in India. The seed capital / angel investment eco-system is quite immature. Cost-structures being low, and because of a legacy outsourcing industry, Indian entrepreneurs bootstrap more, which is a good thing.Exits are a more recent phenomenon, but not very different from the US, except, the Indian public markets tolerate much smaller deal sizes.
Q: You use the term "product companies" very deliberately, I think to distinguish them from businesses that provide staffing on an "outsourced" (a pejorative word for you, I take it) basis for others. Is there more to the term "product company" than that? Is there a US-equivalent to the term "product company?"
Mitra: Product company is a term applied to businesses that build one product and sell it to many people, as opposed to services which have to be repeated for every customer over and over again. The notion is the same in the US.
Q: Would the new class of product companies in India ever "outsource"anything to companies based in the US, Europe, or elsewhere?
Mitra: I doubt it. They may outsource to lower cost destinations within or outside India. They will sell to US, Europe.
Q: Your post suggests SaaS businesses based in India have a competitive advantage over American counterparts, in that Indian companies don't incur the same sales and marketing expenses. Why is that? Is it that customers in a given market, once established by venture backed US companies, will go looking for the lower cost provider? Is it because wages for sales and marketing talent in India are that much lower than in the US? Or is there something else unique about SaaS companies in India that make sales and marketing less relevant?
Mitra: I don't think I ever said that Indian companies don't incur the same sales and marketing expenses. But your second comment is true ... customers who have been sold higher priced solutions will be coming looking for lower cost providers, and this is a dynamic that is already playing out.
Q: You describe the current moment of opportunity for Indian entrepreneurs as one of arbitrage, of taking already successful SaaS concepts and executing them in lower-cost realizations. Longer term, do you envision Indian innovation to be more IP based? Or is IP not the future of innovation, broadly speaking?
Mitra: There is no lack of IP based innovation even if you execute on an existing idea. Technology is moving so fast, there is always opportunity for enhancing products. That applies for the Indian SaaS and other product companies as well.
Q: I know you are based in Silicon Valley. Do you think that geographic region's leadership, in terms of innovation and the ecosystem of education, talent and financing to nurture innovation, is sustainable long term, or will other regions supplant California? Put another way, will it remain Silicon Valley's birthright to generate IP and new and innovative business models for the rest of the world?
Mitra: Silicon Valley remains a unique place, the biggest cultural asset being that it is a culture that doesn't penalize failure, which is essential to encourage experimentation. I have never seen any other place like this.In theory, it can be supplanted. In practice, we are yet to see anything comparable.
Q: What kinds of investment opportunities are there for US based angels, in Indian SaaS companies?
Mitra: Huge opportunities. Investors interested can contact me, and I would be happy to plug them into such opportunities in our portfolio.