Recap of the 4 February 2010 roundtable by Sramana Mitra
For this week’s One Million by One Million roundtable, we partnered with the Indian Angel Network (IAN). India, as you all know, is a rising power in the entrepreneurship firmament, and the country’s entrepreneurs are making a long-awaited switch from pure outsourcing and labor arbitrage to now venturing into building Internet companies, cloud businesses, and, as you will see in today’s presenters, some very cool hybrid businesses that leverage India’s cheap labor pool and combined with sophisticated technology, deliver solutions to hairy and hard core problem domains.
It is particularly satisfying for me to work with these entrepreneurs, because I have long believed that India needs to diversify out of pure labor arbitrage. I deliberately wrote a highly controversial series of articles in 2008 [Death Of Indian Outsourcing] to provoke a debate on the topic. Other discussions on India’s need for product companies have also been equally controversial. But in the end, I believe, we have arrived at a better place as an industry where Indian entrepreneurs are thinking beyond outsourcing.
Meanwhile, outsourcing itself is absolutely booming. You can read more on the topic in Top 10 Outsourcing Trends Of The Decade, while I discuss some of the entrepreneur pitches we discussed today.
First up today was Ankur Tripathi with IRTEX: Indian Road Transportation Exchange. Ankur has underscored a very real and substantial problem in the transportation industry spanning road, rail, ship – that very often vehicle capacity goes under utilized due to lack of information on cargo and its whereabouts, and lack of communication among shippers and their clients. I like this business very much, and believe it can be a large, and important company. It reminds me somewhat of RedBus, India’s largest online bus-ticketing company, that went into a very low-tech, inefficient industry and completely changed its dynamics.
In today’s session, we primarily discussed Ankur’s scaling challenges and prioritization issues. We also discussed how to move this cash transaction oriented business to a more efficient, electronic payment mode. The industry is extremely low-tech, but in today’s India, everyone uses mobile phones. I pointed Ankur to Obopay, a mobile payment solution, by which, conceivably, he can turn the cash-intensive nature of the business to a more efficient and accurate workflow.
Delyver Retail Network
Then Praful Thachery pitched Delyver Retail Network – a home delivery solution through which Praful is already delivering food, flowers, and a variety of other products and services (like dry cleaning) to over 5,000 customers in Bangalore. The value proposition is sound. The Indian cities are incredibly crowded today and traffic is an absolute nightmare. Upwardly mobile consumers, I am sure, would welcome a service like Delyver.
Praful is looking to scale his business, and needs cash to open additional hubs in Bangalore, as well as elsewhere. He also wants to build optimization technology to make the delivery process – today managed largely by hand – better optimized.
For an investor, Praful needs to present a thorough financial analysis – based on his first 5,000 customers – on what are the margins and mechanics of the business he is trying to build, and also a clear articulation of the growth levers.
Next Kiran Reddy presented Saagam.com. I learned that there are educational institutions in India that cater to non-resident Indians, and out-of-state students on a quota basis, but the information flow is extremely limited. Kiran is trying to bring transparency to the industry that currently has some awkward behavior like admission in exchange for donations!
I detected a major flaw in Kiran’s business model assumption. He wants 8% commission off the admission fee for every students that he helps the institutes recruit, yet the institute wants to slap that fee on top of their regular fee, and pass the charge on to the student. This creates a pricing model disparity, whereby, the tuition fee on Kiran’s site is 8% higher than if the student goes directly to the institute. Well, guess what? The students will do all their research on Kiran’s site, and then go buy from the institute directly!
Zuri Wine Tasting
Up last was Tuanni Price presenting Zuri Wine Tasting, a wine education service for African American women with a household income of $40,000 a year. Tuanni has come to realize that this segment has a somewhat specific palette – they like sweeter wines. And of course, at a $40k HHI, they cannot afford to buy Opus One or Stag’s Leap. But in their price range, say, $10-$25 a bottle, there are very nice wines from different parts of the world, and of those there are some that are better suited to the African American palette than others.
I like the precision of the positioning in Tuanni’s business. I also think this is a perfect e-Commerce / Web 3.0opportunity with a well-defined context. And she is also interested in doing a somewhat hybrid business with a physical tasting room in Los Angeles.
Speaking of which, I like this trend of hybrid online businesses. I like the way Ankur is using physical resources to address the challenge that his clientele is low-tech, non computer-savvy (forget Internet savvy), and hence unable to provide data through electronic means. Over time, Ankur will be in a position to solve this with technology, but for now, human intervention is just fine.
Similarly, Praful’s business is very much a hybrid business where, conceivably, consumers would order online (or by phone), and human beings do the actual delivery.
I think, hybrid e-commerce will be a trend this decade. A very good case study to refer to is Fresh Diet, in this context.
Overall, I’d like to suggest that entrepreneurs look at the trend more carefully, especially since these kinds of businesses also create a lot of jobs.
About Sramana Mitra
Sramana Mitra is the founder of the One Million by One Million (1M/1M) initiative, an educational, business development and incubation program that aims to help one million entrepreneurs globally to reach $1 million in revenue and beyond, build $1 trillion in sustainable global GDP, and create 10 million jobs. She is a Silicon Valley serial entrepreneur and strategy consultant who writes the blog Sramana Mitra On Strategy, and is the author of theEntrepreneur Journeys book series and Vision India 2020. She has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology.