Archive for February, 2007
Hunting down the Next Big Business Idea
Posted by ajit balakrishnan in Blogs on February 18, 2007
In a world awash with capital everyone is out hunting for the next Big Business Idea.
The variety of available capital is mind boggling: venture capitalists ready to throw their money at unproven concepts, private equity players ready to inject large dollops to grow businesses, buyout funds ready to recast ageing businesses, funds devoted to make private investments in publicly listed companies, mutual funds to support public offerings and hedge funds ready to gamble on any idea of any scale.
All of this capital is chasing the next Big Business Idea. Where do you go looking for it?
Public imagination and the work of business journalists make big business ideas seem synonymous with big business personalities. In this recounting, Bill Gates is the titan who thought up the software packages that drive personal computing; Jamshed Tata is the one who conjured up a steel plant in the wilderness of
Yet, this recounting of business history may just be another version of what modern historians snigger at as the Great Man Theory of history, the attempt to explain history through individuals with great personal charisma and overpowering intellects. Thus the Great Man theory would examine the Second World War by focusing on the big personalities of the conflict: Churchill, Hitler, Mussolini, Franklin Delano Roosevelt and Stalin, and view the events of that war as arising from the actions of these Great Men.
The story of the Indian pharmaceutical industry spells out the processes by which the forces of a long wave are harnessed to achieve industrial leadership through policy interventions by government. In the 1950’s, when synthetic drugs were all the rage, a German pharmaceutical product, Thalidomide, caused 10,000 children to be born with birth defects. As a strong reaction to this, the
This might then be the clue to look for. Hunt down the idea that makes lives of ordinary people better and you will find the Next Big Business Idea.
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Needed: 10,000 Angel Investors
Posted by ajit balakrishnan in Blogs on February 18, 2007
First published in The Business Standard
The slightly built young man sitting across the table from me did not look like the typical entrepreneur that one meets in
“So, what do you think of my business idea?” he asked.
I hesitated to reply. In one respect at least his business idea was possibly a great one- it was something I had never imagined as a possible business. After all, when the Wright brothers managed to stay aloft in their contraption for ninety seconds who would have imagined that it was the start of the gigantic airline industry.
The young man had emailed me out of the blue wanting to bounce off his new business idea.
What intrigued me was that this was the third such request for “advice” that I had received this week. And last week there had been another three.
All were based on a genuine technological innovation. All the ideas served to meet a genuine need or solve a pain point in the lives of millions of people. None of these prospective entrepreneurs were from the traditional business communities. Practically all their fathers were professionals, not businessmen. All were products of elite institutions like the IITs, National Institutes of Technology, Indian
Yet they all have a common refrain- they are finding it difficult to get venture capitalists interested in their ideas.
In a sense, this is understandable. A venture capitalist fund of $150 -200 million may have a genuine problem in financing a start-up this early and this small. The fund’s overhead cost limits are such that they can afford at best two or three experienced people to find and make investments and work with entrepreneurs. This naturally limits the number of deals they can do to ten or fifteen a year. Thus, they tend to concentrate on deals of larger sizes, say, and a minimum of Rs 10 crores as the starting investment. But what the new breed of talented, young entrepreneurs need is just a fraction of that amount. On the other hand they need dollops of time from their investors to guide them through the crucial initial steps of establishing a business.
The business ideas that are emerging this year are very different from the ones of the Bad Old Eighties.
The ideas of that time mostly involved cornering manufacturing or import license for something that was in short supply. Unfortunately, in this regime there was absolutely no incentive to invest time in technical innovation to, for example, reduce manufacturing costs, because you could get far higher results by influencing the Customs or Excise officer to classify your product under a category that attracted a lower rate of duty.
Highly qualified young graduates of our top institutions had no stomach or perhaps no family connections to play these games, which is why so many of them emigrated to the
Today’s new crop of young technology entrepreneurs sees a ray of hope. Domestic markets getting to be large enough to support innovation, the technical innovation needed is something the feel they can master. But they are getting stuck at the first step- finding the capital for their start-up ventures.
In the
The capital such angel investors need to put in is in the Rupees one to two million range. This will help the young entrepreneur take the first step, set up shop and make a working prototype of his new product and find the first few customers. This capital will help him focus on the crucial product development stage and not get distracted by having to earn revenue from unrelated activities merely to meet payroll.
In the
There are already a number of such angel investors operating in
What will bring
Ellen Gets Outsourced
Posted by ajit balakrishnan in Blogs on February 18, 2007
First published in The Business Standard
I looked around at the young, fashionably dressed women and men in at the hip lounge bar at the W Hotel in
Light powdery snow covered the streets outside and there was a slight chill in the air but that did not seem to deter the holiday season shoppers thronging the streets gawking at the lavish displays in store windows.
I had first met Ellen a few years ago when we were looking to rent an apartment in
It was Ellen who had introduced us to this bar at the “W” Hotel. She had a great knack for finding chic places that were also great value for money. Ellen had mastered the art of stretching the salary she earned from a middle level information technology job at a
“I got outsourced”, she said quietly, looking into her drink, her blue eyes starting to mist over.
“How could that happen!” I exclaimed. “You’ve been in your company for so long, you know your job well and your boss is a good friend of yours. I remember meeting him and his wife at your place.”
“I am sorry to hear that,” I said. It was my turn to stare into my drink and contemplate the irony of my feelings of sorrow at what had befallen Ellen.
Like other Indians, I have marveled at the turn of events by which
Did economic development have to be such a zero sum game where India’s moment of triumph has to be a moment of sorrow for western white collar employees like Ellen?
“ Don’t worry,” said Ellen as she saw the perplexed look on my face. “I have unemployment payments to tide me over. All I need to do is skimp on things like having expensive Cosmos at places like this”
Ellen shrugged her shoulders. “ This thing happens to everyone here from time to time. By the time my unemployment payments run out, I’ll get another job. Anyway, the Indian girl who took over from me from the outsourcing company is really good. She has a computer science degree, she is in her twenties and knows all the latest technologies. You know I don’t have a computer science degree. I got this job in the boom ten years ago when they were desperate for anyone ready to work in information technology”
Ellen was no economist but I could see that inside her was encoded the mantra that had driven western societies ahead of countries like
Several months later I caught up again with Ellen. Her unemployment pay had run out and she had cut back almost completely from hip places like the one we had met at the last time. She was working at several part-time jobs.
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