Vijay Anand | The Startup Guy.

A New Kind of Incubation Model. Part III

Posted on: April 20, 2008

Ever since the journey with Proto.in started, about two years ago, I can safely say that I’ve sifted through atleast 300+ company profiles. I’ll hit you with the bad news first: Most of them are hopeless. They are half-baked solutions. They probably are great hobby projects and shouldn’t even allowed to be classified as a “startup” or a Product. Most of them lack business sense – to the point that if you did get a chance to see some of them, you might totally lose hope on the startup scene in India altogether.

Of course, the good news, is that the evolution is happening extremely rapidly. I am seeing lesser and lesser of the type of companies that I described above, and more holistic companies starting to appear. So what’s the issue? Not all is happy and merry yet.

Lately, I am seeing quite a bit of companies that seem to be addressing some very valid problems, and coming up with solutions that do make sense and would work. The only issue is that since most of them have a problem hiring, and a much bigger issue validating the concept and running the pilot that they end up building one piece of the puzzle and it takes them far too long to roll out the “solution”. The funny thing is that, mentally I can clearly see that there are different pieces of the same puzzle being put together by different groups. I simply can’t understand why they can’t collaborate and work together to target the problem.

So, yes, there are issues with this. First of all, since all of them are startups, and all being run by founders, there would be some issues with personality clashes as to how things are done. But lets face it. There are atleast seven players for every single component that is being made for the same problem out there. I think there are plenty of options of teams to choose from.

Before I do get blamed for pulling this out of thin air, here’s an example of something that works somewhere else. There is a Firm that I am aware of that operates out of an emerging nation. The way they work is that they fund certain entities to create knowledge and IP. Their IP could be as simple as a new recipe for a cake (quite seriously!). The firm identifies entrepreneurs in a location, and helps this entrepreneur create a franchisee location, and is given the know-how as to how to create these recipes and sell them. He is given just about six months of time when he is hand-held and guided on the art of running a businesses.

Six months later, the firm goes and finds an entrepreneur, exactly in the opposite side of the country and does the same thing. Follows up in another three months with another entrepreneur in another location, etc etc and repeats all above steps till they have five or six stable entrepreneurs who are running local units in different parts across the country. Then their only focus is to pump all their energy, and resources into these five units and watch with whom the entrepreneurial leadership kicks in. Once that is identified, they create a new entity, merge all these five units under it, place this “leader” as the manager, and take a stake out of this new entity.

The positive note for the firm in all this is that, they take equity out of a firm which has a high chance of success since its run by not one but five entrepreneurs who are well versed in the same business, understand local diversity, and have crossed the issue of scalability, and probably are leaders and hence will ensure that their local unit grows and thrives.

If you take that model and see how to apply a version of it in the context of India, and the technology space, I’d say that for most problems, the solution is broken and built by various companies – mostly small teams, two or three people. It would be interesting for a firm, or an incubator to pick a aching problem, and bring together startups who are building pieces of the puzzle. Come up with a formula (perhaps on revenue, team size, and product readiness) as metrics and figure out the percentage each company will hold, on a new entity that will be created and promoted as the solution to this problem.

Simple case in point: Ordering Food over the net. It is going to require a hotel network front, a logistics front, and perhaps a LBS, technology front. Hungry Bangalore + OrderMonger + Yulop is a solution to go with. You at least need these three bare minimum teams to come together if the Seamless web is the kind of end-result that they are aiming for. I am sure there are other alternatives and maybe other elements as well, that other companies can bring in.

Firms, since they do enjoy the same bird’s eye view that Proto.in enjoys can definitely put together this high level working arrangement, and someone will have to “architect” and manage these teams, atleast initially till their co-existence structure gets ironed out and they find their roles. But its certainly do-able.a

I strongly believe that this kind of lego-work will probably increase a few more holistic startups in the indian scene. If it does come together and work, it will probably one of the most high energy teams, since all the founders will be the guys who will be driving this, and there is no comparison to that – ever.

Related Posts:

A New Kind of Incubation Model. Part I

A New Kind of Incubation Model. Part II

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22 Responses to "A New Kind of Incubation Model. Part III"

Thats one very interesting idea.

Can you elaborate a bit on the example you have given – Hungry Bangalore + OrderMonger + Yulop – just to get a better sense of how you see it panning out…as long as it doesnt get you into trouble with those 3 companies ๐Ÿ™‚

I took a look at the 3 sites and it just got me more curious about how this might work? Are you talking about collaborating, sharing resources or some kind of consolidation?

I realize, I might be too fixated on your example rather than the idea itself ๐Ÿ™‚

This is exactly the solution for every startup, you need to keep in mind of how to work together within the ecosystem, unfortunately there hasn’t been a platform to share each other activities than to say compete with each other.

Its a good point raised by you Vijay, the same point was raised during Startup Lunch,Bangalore, we needed someone to work alongside for j2ME related, but unfortunately i can’t find a candidate nor get it done paying few lakhs through servicing industry folks, but i am aware of few startups who could actually pull it off, but how to approach them, in turn what would they get [barter services], well this is concept which is ben lacking even on the global front, hope to get a solution from proto shortly!

Vijay,

Using your example (Hungry Bangalore + OrderMonger + Yulop), why even restrict yourself to only one such combination?

Underlying all this, is the APIs. Like twitter & (most recently) friendfeed, if Indian Startups gave as much importance to surfacing their APIs as to they do to general functionality, they will enable mash-ups (“lego-work”)

THis is Gowri from ur I.I.Sc days Pls. call me on 09176614009

@Srinaganesh: Unlike pureplay internet sites which work in the US/UK market, it doesnt work here in India. We have less than 5million users on the net. The key to any internet site in India is something that uses the power of the net as a front-end to some brick and mortar store. Think like what Amazon.com did, in 95.

I am assuming that you havent built a product. Creating an API is not that simple. And just creating APIs and allowing everyone to use it and build is a strategy to create userbase, but not to create any value or bring in revenues.

The entire idea is to make mixes of various elements, and build a holistic business. Its possible that they all might split as three different entities to head in different directions once they are grown to be big enough.

Mashups are a “hobby”. Its not something that will help build something that will hold a long-term advantage. So, lets skip that.

hi vijay

i am the ceo of alabot.com also a startup and agree with what you have written.

i have often mulled over why people cant come together and create a symbiotic relationship. the main hurdle i feel is attitude – no one wants to lay their cards on the table, have a long term vision, dilute their equity in the market.

i am of the firm belief that collaborating and creating an ecosystem is the only way forward – no one can survive in isolation..

cheers

akshat

Akshat, I’ve tried out Alabot and was quite impressed. got a few more distance to go, but a solid start.

and yep, you are very much right.

Vijay, the approach you suggest is brave and one which if it does not succeed, people say ‘was destined to fail’.

I believe the problem is taking time out to invest for the future and equal alignment and interest from all ends. It could be impossible to get.

Is Seamless Web trisome just an example or are we working on getting them together? I believe that would be proof for other people to follow.

Harpreet, it was just an example.

Curiously enough many hobbies turned out to be great businesses. Take eBay…started off as a hobby for pez dispensers that Pierre Omidyar built for his girlfriend over a Thanksgiving weekend. eBay is a market leader today. Yahoo! started off as a hobby and David Filo will tell you. Yahoo! went IPO like eBay and emerged as a pioneer in the Internet space.

Ideas for a new business can come from anywhere, including hobbies. Half-baked plans often deliver fine, healthy babies..it is amazing how much can come out of good mentoring. You never know how new companies are formed and made. Ideas can come from anywhere as history will show you time and again.

Kamla Bhatt

Kamla, Great to see you here and you do have a good point. But turning a hobby into a business (which is essentially what the story of Google is as well) takes a lot of mentorship support – something that our “ecosystem” is not ready to handle yet. Yep, down the lane, two or three years or maybe five years from now, we’d probably have enough folks to groom these hobbies (even the likes of craigslist) into sustainable businesses. But for now, nope not sure.

I think “mentorship” is overrated. We are capable enough build a billion dollar business the way we want to. We do not want “training” for equity.

Not sure if I agree with you. What is needed is a supportive system and creating an ecosystem and that means nurturing. It is amazing what can be achieved by hand holding and mentoring and creating awareness.

Analogy: A good teacher can do a whole lot to help and mold students… a similar thing is needed for entrepreneurship in India.

Thanks,

Kamla

@Rajiv: I think that was quite timely.

@Kamla: This is essentially the issue. The expectations between the startup entrepreneur and the “mentor” is far from matching. I think a good teacher also requires a good student to work with. Now that’s a rare combination to come across, I find.

I spent the weekend in Delhi with a startup who wants a mentor who would let them do whatever they want to, and would just lend his name to raise funds. Unfortunately its not an isolated case.

Ah, you missed the point. A good teacher can work with a struggling student…that is the hallmark of a good teacher. When you make a conditional statement like that …I believe it will indeed be a great and trying challenge to find a good student. However, you will find students.

Here is something that a recent HBS article has to say about Prof. Christensen,who devised the case method study for MBAs

“Christensen believed wholeheartedly in “the teachability of teaching” and that “a good class discussion can be developed, rather than merely left to the randomness of chance or genetic.”

It is the experienced person who has the knowledge and knows the mistakes and errors he/she made when building their biz ..they have gone thro the unchartered territory as it were and learnt how to navigate the choppy waters.

Kamla: Can anyone be taught? Yep. Absolutely. So to quote the quote :), the key is in “the development of a good class discussion”. Most things unfortunately are left to chance and chaos right now, hoping that the pieces will fall in place. They are… but as per evolutionary standards, slowly.

Any any such orchestration is going to require a holistic perspective, control, and organization. Is there even anyone, even TiE, who posses such control?

Very interesting points. Especially since you have having had the experience of whetting hundreds of proposals i am sure you would thinking how come this guy missed that piece which the other guy has done. If only this guy had this piece would have made a viable proposition and so on.

I think that is where the entire aspect of Angel funding comes into play and i hope there is just a deluge of angel that can come into the indian market place to bring structure and sense into the entire startup scene. I think the lack of a sufficient environment to be able to support and grow startup teams is the core issue why there is a myopic view to solving a problem. Lack of experience among the start up members needs to be necessarliy supplemented by an environment that can address this limitation. How did all of the valley startup succeed in the first place. Even me as a pretty experienced professional with signifcant exposure to the market find it a enormous task to startup. And i am not talking about funding, just the lack of information, support, mentoring, support groups just scares most of the serious ones run away and a lot of the ones that attempt are pretty flaky.

Just my 2 cents

This model or should I say a flavour of it has been tried, personally I can say that I have tried to get several startups together NOT to work on different pieces of the same project but to work together in terms of mashing up, i.e hotels sites with mapping with reviews etc etc, BUT the hurdle faced, as is always the case with startups is the people. No matter which startup I have helped, consultant or ran, the problem is always the people (assuming the idea is half decent).

The people who start it, have a inherent ego, which is to be expected, if you ask a incubation model to work where diff pieces have to fit into the overall jigsaw, what you are asking is that the teams merge together (eventually), which begs the question who leads, there are mergers (very few) most are takeovers. In fact trying to adopt this model will lead to the same headache that VC’s have of getting the entrepreneur to step aside when the time is right.

I would personally just like to get all the MD/CEO/founders/whatever to actually talk to each other in the first instance, 300 plus startups each with a user base of perhaps 1000, thats 300K customers across India, thats not bad to prove a concept.

Iqbal

I have a great respect and admiration for what Proto.in has been doing. But I couldn’t take this kind of distressing picture of Indian startups. It may be true. It may be a over statement. Its not just a welcome signal that to be revealed. I strongly believe in placebo effect and it would be better to build a dream and share inspiring thoughts rather.

It is very essential for entrepreneurs to be tough and all that, at this stage, it does more harm than help building a dream. When you are a kid, what you need is an dream to live no matter how poor you are doing in all areas of your life. Because, it is too early to write off a wonderful person.

Murali, being nice and all as a person is one factor (and people who interact with me on a regular basis know that I do enough of that in real life). But when it comes to building a business and especially when you ask someone to invest time and energy into it, or ask them to invest, or ask them to partner with you, its crucial to get the act together.

As I say, nobody is ever going to bother with what you do, till the moment when you ask something from them. And when that happens, they might as well be prepared for it.

Proto.in has nothing to do with “creating awareness” about entrepreneurship. There are plenty of other organizations which do that, and we partner and support organizations and the unconference movements in making such things come to life. But Proto.in does mean business, and its a platform where you come to graduate into the real world scenario where money and revenue alone makes sense.

Time to learn the rules of the game, or perish. There is no two ways about it.

PS: It is not personal. I am sure they are all wonderful people ๐Ÿ™‚

Interesting read as always (Thanks Vijay!), and good points mostly. Since ours was one element of the example you brought up, I want to try and understand the full import of what you are saying – while the synergy between an Ordermonger.com and a yulop is obvious, I am not as clear about the hungrybangalore example, there is a significant bit of overlap between what OrderMonger and HungryBangalore have to offer (unless I am completely mistaken, which would be a huge shame). Care to elucidate with some specifics?

Arvind: The only thing a collaboration between two companies in the same space would give is the ability to cover multiple cities quickly (look at the case of what Yahoo! local is doing to companies such as Tolmolbol, but totally taking over the turf since Tolmolbol hasnt been able to scale and dominate quickly). A collaboration would certainly enable that, and the process to build and scale the business in other cities.

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