Searching For the Next Big Thing; In Conversation with Ramesh Radhakrishnan, Artiman Ventures
Ramesh Radhakrishnan has donned many hats – he’s been an entrepreneur, vice president of a large organization and also a VC. He’s currently an investor at Artiman Ventures, focusing on early stage technology investments in India. Radhakrishnan’s record through his professional life has been full of accolades. From holding patents as an engineer to building companies and successfully exiting them to investing in companies that have exited profitably, he’s done it all. Often described by portfolio companies as one of the few ‘valley like’ VC fund in India, Artiman is known to have made high technology and high risk investments in the past. Their recent investment in Tonbo Imaging is one of those rare stories of a VC fund investing in a pure engineering product.
Here, we chat with Radhakrishnan on Artiman the fund, its investment philosophy, challenges specific to India, the prospect of more global businesses coming from India and advice for entrepreneurs to make a Global company from India.
On the Artiman Fund
Artiman is a 10 year old fund. We have raised about 3 funds so far and have primarily been a technology investing company. About 6 years ago, we went back and analysed the companies that we had invested in so far and we made a completely new thesis to differentiate ourselves in the venture capital community. What we did at that point was to identify a market of our interest and only invest there. We decided to go for white spaces. This is defined by 3 characteristics,
We want to target the global market and not restrict ourselves to a geography or a location. The markets that we want to target is in the north of 5-10 billion dollars. One of the reasons is that if you take a guerrilla in a large market, they account for 20 – 30% of the market share so even in a 5 billion dollar marketplace, you are only a 1.5 billion dollar player. So in a 300 – 400 million dollar market place, you are only a 40 – 50 Million dollar player which is not the place that you want to be as a venture capital firm. Of course there is the problem of already existing market leaders and that’s where the second characteristic comes in.
In order to change the playing field itself, you need to have a very strong technology or intellectual property (IP) and so, we’re looking for very strong technologies in these markets.
And finally, the technology we’re talking about should be able to give you a significantly large difference in performance. It could be in a single dimension or multi dimensional, but the key is that the technology should bring a significant difference to the marketplace. It could be cost or it could be performance. 10% or 20% increment will not do. Anything in the 20-30% range of increment is only good enough to be a feature in a product and not a stand alone one. For example, if you’re making another search engine with a 20% increment, the guerrillas in the market have the time, money, resources and the marketing to trump that. But if you bring something that is 10 times better, then we’re talking.
On finding companies with the potential to scale globally and working with entrepreneurs
These kind of companies aren’t easy to find and we work closely with entrepreneurs from a seed to series A level. We know the market that we want to target and the problems that we want to solve and we work with entrepreneurs on setting the goal. Sometimes it could be technology that the entrepreneur brings which can be used in another market or a combination of technologies that need to be used or even sometimes scraping the entrepreneurs original project and saying “here’s a real problem to solve and I know you are capable of it” and guiding them through the process.
We’ve used this technique to launch a bunch of companies since 2006 and being in this space, we have pretty much been agnostic to technology and market. We’ve worked right from chips breaking the 100 Gig barrier on CMOS, financial trading platform, a TV company, a pathology company and some life sciences companies. We have about 26 companies in our portfolio and in India we have been able to source 4 companies.
Challenges and opportunities for global businesses coming from India
Because we are a global fund, we require businesses coming out of here to compete with the ones coming from Palo Alto so the bar is very high. Having said that, you cannot ignore markets like India and China where there are some very specific problems to be solved. There is some very innovative technology coming from here and also some very good entrepreneurs. What is lacking is these entrepreneurs being able to bridge the gap to the market, identifying the right customer segment and thinking global. If you make a technology product specific to the Indian markets, there are not enough takers.
The Indian market is generally retail and there have been no technology acquisitions by big companies except in the high tech space.
What has really worked in India’s favour is a lot of valley based entrepreneurs are coming back to India. These are people who have held high positions at corporates, been successful entrepreneurs and have come back with experience and that, I feel this will act as a catalyst for more successful companies from India and I’m hoping they can create a new spirit in the ecosystem.
Other challenges specific to India that I’ve seen is the dearth in technology product companies in India and a lack of higher institutions that have documented research with technologies that can be productised. These are problems that are going to remain for a while and we will have to wait for systems to naturally evolve to being something like what it is in the US right now.
On making great technology economically viable
Lets take the case of our recent investment in the imaging company Tonbo Imaging. One of the biggest applications for their technology lies in the defense market, which is difficult to break into. But the same technology can be used in auto navigation, in manufacturing industry and in smart toys, perhaps. Now these are all adjacent commercial markets and catering to these markets makes the pie that much bigger using the same set of basic ideas.
Scope of global businesses coming from India
Globalization has moved from what it was 10 years ago to what it is today. The world is flat, and information is available all over the world. There used to be a time when the MITs and Stanfords had a closed group of people working on a specific cause and only they knew what they are trying to solve.
Disseminating that information was not possible, it wasn’t that they didn’t want to share it. Today, within a few days of some paper or some research being done somewhere, it is accessible to people all over the world and I can tell you that whatever is being worked on now, 10 other people around the world are looking at the same thing.
There is no reason why there cannot be global businesses from India. It was the access problem that was spawning small and local businesses, but that is no longer the case especially in hi-tech. A prime example is Guavus, a big data company that sells to top service providers in the US and the team that made the product worked out of Delhi. At the end of the day, Indian companies are going have to compete globally; either Indian companies have to go global or global companies will come to India. So there is no real reason to restrict ourselves to India.
Sectors in India that Artiman finds exciting for investment
There are lots of different areas that we have seen where big problems haven’t been solved, but to me, it’s water and power. There are no cost effective solutions at scale in these sectors today. Other than this, I think materials, healthcare technology and technology aided education are all things that excite us. Actually for that matter even entertainment is something that we’re interested in. For example, there’s no reason why we can’t have those 3-D concerts that we have in the US.
So we are constantly looking for problems that technologies can solve at a scale. It makes the most business sense and also a lot of social sense.
Advice to entrepreneurs on going global
Focus on differentiation. In a startup event I went to the other day, out of 30 companies, 28 of them were services companies and the message that they gave me was that they are the best in the world. But what is it that they are the best in and why; they couldn’t articulate.
Second thing, identify the problem that you’re looking to solve and that’s half the problem itself. Entrepreneurs have a hammer in search of a nail. My advice to them is to find the nail first and then decide if you really need a hammer for it. Figure out what the problem is. To make a global company, you need to identify a big enough problem.
Once you’ve done that, understand everything about the technology that you are going to use to solve this problem. Go all out on that and don’t be afraid to change the market. Maybe it will work and sometimes it won’t work, but its worth it to go all out without the fear of failure.
Learn more about Ramesh and Artiman here.