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TECH TALK: Bootstrapping a Business: In India

October 21st, 2005 · No Comments

One of the first things an entrepreneur starting a products venture needs to think about is the availability of capital. If limited capital is available, then the most likely path which comes to mind is thinking about taking up services. I have seen many entrepreneurs do down this path and never return.

I dont have anything against doing IT or software services. In fact, the entire success of the Indian IT industry is built on the outsourcing model. My point is that it is doing services and products is like trying to mix oil and water; it just doesnt work.

Services requires a very different mindset from product development. It comes down to building IP (intellectual property) for others. There is someone else laying out the vision with the services company executing on it. (While this is starting to change, for most smaller projects, this still holds true.) It is also easy to get attracted by the dollar-per-hour earnings that the services business brings. With lower risk and higher short-term earnings, it is not surprising that entrepreneurs who have product dreams quickly leave those aside in favour of an immediate, steady (and growing) revenue stream.

So, how does an entrepreneur bootstrap a product-oriented business from India? If one can raise venture capital (or even angel funding), it becomes much easier because that capital buys time to build out the product and go to market to get customers. But what if that capital is not available? What if an entrepreneur has a big dream, a small team and little else? I have three suggestions:

Forget about Services: I think this is an important decision to make because this can mean going down the wrong path. It is not difficult to get projects to do in India given a few contacts globally and Indias arbitrage advantage. But for the reasons just discussed, doing Services is not going to lead down the Products path.

Focus on India: Too many entrepreneurs I have seen want to focus on creating products for the US market sitting in India! The first rule of product development is to be close to the market and customer. If one is in India, then one should look at the Indian market. If one wants to focus on the US (or any other market), then get at least some of the top management close to that market. I strongly believe that the Indian market has plenty of interesting opportunities in the technology space if one is prepared to look deep. India has the opportunity to leapfrog and become a model for addressing other emerging markets.

Get First Customer: Even if an entrepreneur eschews services and focuses on India, the challenge of getting the first customer still remains. This is where an entrepreneur has to use a mix of personal passion, network of contacts, and a vision of tomorrows world to try and get the first one or two customers. Profitability from selling to them is not as important as the opportunity. As the solution gets built, the entrepreneur has to architect it right so much of it can be re-used for others. In a way, the first customers help the entrepreneur bootstrap the business.

Building product companies out of India is not easy there have been only a few success stories. But it can be done. And for the ones who venture down this path, monetary rewards and great personal satisfaction lie ahead. But it is also a treacherous road strewn with failures. At the end of the day, it is the entrepreneur who has to make the call based on a self-understanding and analysis of the market realities. To those who chose the product path, what Id like to offer (as I have often done in these columns) are these inspirational words from Dan Bricklin, the creator of VisiCalc, the first computer spreadsheet:

Being a successful entrepreneur is tricky. You have to live with having control and not having control at the same time. Its like this: In big business, when you need to cross a river, you simply design a bridge, build it, and march right across.

But in a small venture, you must climb the rocks. You dont know where each step will take you, but you do know the general direction you are moving in. If you make a mistake, you get wet. If your calculations are wrong, you have to inch your way back to safety and find a different route.

And, as you jump from rock to slippery rock, you have to like the feeling.

TECH TALK Bootstrapping Business+T

Tags: Tech Talk

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