SPANGLES IN THE DARKNESS

What do you do if your company doesn’t figure in the DQ Top 100 list or if

you are only an IT enthusiast with a great business idea? The more pessimistic

amongst the pundits would say — sell out to a biggie if you are small and

struggling, and if you have a great idea that needs funding, shelve it and get

back to your job. At the recently held TiECON in Santa Clara, Silicon Valley,

Vinod Khosla, VC extraordinaire from Kleiner Perkins struck a positive though

contrary note. He said that the current period of slowdown is the right time for

entrepreneurs to develop clear economic propositions that can add significant

customer value and get their businesses started.

However, anybody who now wants to set up one more Java shop or an ERP

implementation firm in this already overcrowded marketplace, surely needs his

head examined. This is an environment where the opportunities abound in ‘holes

and niches’ like web services, EAI and knowledge management. While the

horizontal and diversified services space is best left to the Top 20, there are

opportunities in remote services and security which will provide room for

multiple 100 crore companies to emerge.

There are opportunities aplenty in the extended supply chain, customer

interaction in large and medium business corporations, and the ability to build

remote voice and web support centers, ASP (application service provider) and MSP

(managed service provider) services for small and medium enterprises. Of the

thousand Indian dotcoms that mushroomed between 1999 and 2001, one of the few

that survived the bust was BconnectB. Starting off as an entrepreneurial venture

incubated within Aptech, BconnectB has become an integral part of a larger

solutions provider, Siemens Information Systems.

Prior to 1996, VCs would have been happy to hand out $15 to $20 million to

support a company up to its public offering or acquisition. As the gold rush

began with Internet ventures in the next four years, commitments grew to $ 40-50

million with multiple VCs participating in Series A and Series B rounds of

funding. Today, some of the more mature VCs are willing to back a good idea and

a management team through a 24 to 36 month commitment, based on achievement of

milestones. This is an advantage for a serious entrepreneur, who need not worry

about the practice of multiple funding rounds, which is already crippling many

firms today in search of Series B funding. It also serves as a deterrent to the

‘great idea only’ folks who would be unable to meet their milestones and

hence unable to go beyond the first few steps of company creation. Separating

the wheat from the chaff will be the automatic result!

The moral of this story is that there is no need to lose heart. At the TiECON,

one of the partners of Sequoia spoke evocatively of the meager funding of $ 2.5

mn, which they had provided to an entrepreneurial team not so long ago. That

team went on to create a mega corporation called CISCO. And Infosys chairman

Murthy recounted his company’s early beginnings when an American, Donn Lilles

was willing to trust them with their very first software order. Donn is today in

Pune, building another entrepreneurial startup with all the attention to quality

that startups need today to build sustainable value propositions in the new

global order. So let us not write off the small firm. The route to success lies

in a good value proposition, a rich niche and an outstanding management team.

Let us hope that at least one startup of 2002 will make it to the DQ Top 20 in

2005!

Ganesh Natarajan is the global CEO of Zensar Technologies, chairman of the

Maharashtra Council of the Confederation of Indian Industry and a member of the

executive council of Nasscom