The next step

NOT ALL BUSINESS PEOPLE under 40 are entrepreneurs, nor are they all techies. Nor are they all dreaming of building the next Apple, or Amazon, or Microsoft. Most of the ideas featured here are not blockbusters; many of them are versions of existing businesses; sometimes, they combine different ideas to create a whole new one. What stands out is how these entrepreneurs (and let’s face it, most of the people on this list, barring a handful, have started their own venture) have gone about growing businesses. It hasn’t been about building the world’s biggest or richest company. It has been about creating value—one small step at a time. At the same time, they’ve almost always kept an eye on capital efficiency. The result: These companies have grown by 80% to 300%, even when the overall economy has struggled to grow in single digit.

PRAMEYA RADHAKRISHNA and Raghunandan G. are childhood acquaintances-turned-friends-turned-business partners. Both grew up in South Bangalore, playing cricket together. Unplanned, both went to the same engineering college, and even the same B-school, the Indian Institute of Management (IIM), Ahmedabad, reconnecting in the dorms. Raghunandan, Radhakrishna’s senior at IIM, joined Feedback Ventures in Delhi, while Radhakrishna worked in Hyderabad with a real estate firm. Both jobs involved a lot of travel, but they managed to catch up when their routes crossed.

At one such meeting in Bangalore, the two got chatting about local transport, and realised that their companies were spending way too much on taxis because there was no accountability in the disorganised cabbies universe: Drivers fooled fleet operators about their whereabouts, barely clocking three trips a day. To increase revenue, they overcharged. The two realised they could actually do something about it—and Taxi For Sure, a cab aggregation service, was born in 2011.

It was an idea executed over a series of small, well-planned steps. The first was to tap into the IIM, Ahmedabad alumni network. That led to alumnus Deep Kalra, himself a founder of a successful company, travel portal MakeMyTrip, giving them big-picture ideas, and referring them to India’s foremost Internet entrepreneur, Sanjeev Bikhchandani. Bikhchandani put them on to some venture capital (VC) folk, though nothing came of it then. The duo continued building a network of cab operators, before a chance meeting with Accel Partners’ Anand Daniel in 2013 led to funding from a syndicate of VCs.

WHAT'S THE NEXT STEP’ is something of a mantra with nearly all on the list. Most of the 40 businesses we have selected target local opportunities in areas ranging from home health care (Portea Medical), to real estate classifieds (Housing.com) to movie ticket bookings (BookMyShow)—and all have grown step by step. One of the few exceptions to this norm is Flipkart, the largest online store in India. Founders Sachin Bansal and Binny Bansal started off thinking very big—they wanted to build a national e-retailing giant across categories—and have grown exponentially.

The others on the list, however, started off with smaller targets. Zomato’s Deepinder Goyal, for instance, started a company called Foodiebay.com soon after he graduated. It didn’t work. He joined consultancy company Bain and Co. for a few years before returning to his enterprise in 2008, when he transformed it from a classifieds site to Zomato.com, a foodie destination now present in 11 countries. Similarly, Mukesh Bansal’s first gig was selling personalised T-shirts on Myntra. When he found that he couldn’t scale that up beyond a point, he converted it into a fashion portal.

With the next-step approach, the time window to capitalise on an opportunity is limited, as Little Eye Labs showed. In January, Facebook acquired it for an estimated $15 million (Rs 92.7 crore). It started as a tool for developers to test and analyse the performance of their apps on an Android platform. All five co-founders are Douglas Adams fans; their e-mail is 42@littleeye.co. Adams famously wrote in The Hitchhiker’s Guide To The Galaxy that ‘42’ is the answer to life, the universe, and everything. Ultimately, 43 seems to have been the answer; Little Eye was Facebook’s 43rd acquisition, a month or so before Zuckerberg swallowed WhatsApp for $19 billion.

The Little Eye founders met in 2004 at Rational Software (now an IBM company), which makes tools for software development cycles. They had created the Purify+ suite of products, which included software analysis and debugging tools. They went their different ways after that, till July 2012 when they reunited to create Little Eye. In nine months, they built a product for developers and testers to assess and understand minutiae like how much battery an app consumes, or what causes it to hang.

They took the product to national and international developer events, where the team presented papers, got feedback, and kept on with product iterations. By then, venture accelerator GSF was backing it, helping the startup find angel and seed investors, apart from giving myriad mentoring inputs.

The team presented the product at a developer event in London, where they also showed it to Google. “That helped us validate the product at a global level, and it created word of mouth,” says co-founder Kumar Rangarajan. In a year, they had 20 paying customers such as GE Medical Systems and Qualcomm, as well as up to 2,000 developers who were using the tool and contributing to it by providing feedback.

At an accelerator programme in Europe, a Facebook engineer spotted Little Eye making its pitch. He found them again at a premier Google event in the U.S., where the Bangalore outfit had its own booth. Here, Facebook’s product managers and senior engineers spoke with the Little Eye team. They asked for a report on how the Facebook app works. Another founder, Aditya Kulkarni, a Google alumnus, wrote the report which led the world’s largest social network to click ‘like’. From concept to exit, Little Eye had taken 18 months.

“People in India are seeing start-to-finish successes of first-generation entrepreneurs like redBus and Little Eye,” notes Krishnan Ganesh, a serial entrepreneur, who has backed up to 10 ventures in the past five years. “And more are getting inspired by this.”

IT'S NOT JUST the one-step-at-a-time approach that builds businesses. After all, every business worth its balance sheet does just that. What sets the entrepreneurs apart on this list is beautifully captured by Nexus Venture Partners in an idea called the Six Sigma Entrepreneur.

The Nexus criteria: One, the entrepreneur is targeting a large enough market. It can be in India or global (Capillary Technologies). Two, incredible passion. “This helps the entrepreneur deal with the ups and downs of business,” says Suvir Sujan of Nexus. Last year, as funding dried up from global funds, companies like enterprise security Aujas Networks found local sources like IvyCap & Rajasthan Venture Capital. Ditto with lingerie portal Zivame.com, which found a rupee investor in Ronnie Screwvala’s Unilazer Ventures.

Three, even if the field is new, the entrepreneur must have a strong understanding of and point of view on it. Four, they must have deep listening skills, to not just understand customers but also learn from business partners, teammates, and the ecosystem. If this leads the entrepreneur to unemotionally change the core business, so be it, as Snapdeal has shown since 2012. It moved from a discounting coupon business to marketplace e-commerce. Five, the first big set of sales is typically done by the founder as it was in the case of Eka Software. “Then, the same sales skills have to be used to hire the best guys internally,” Sujan adds, referring to the sixth trait.

Many investors also value the ability to focus on “reducing the per unit cost of the product or service to keep working towards or building profitability”, says Arvind Malhan, principal of New Silk Route Advisors, a PE fund in Bangalore.

Come to think of it, these traits are equally applicable to managers in big companies.

At Lenovo India, the head of its consumer business, Shailendra Katyal, chose profitability over market share. Even with his stringent profitability norms, Lenovo’s market share in personal computers grew by 7 percentage points in two years.

Taxi For Sure has five times less capital than competitor Olacabs, opting to be in fewer cities (three) and grow. It broke even in year one because of its capital-light model. In contrast, Olacabs is in six cities and co-founder and CEO Bhavish Aggarwal’s goal is to build a wider cab network. “We enable drivers to buy cars at cheaper rates, based on our partnerships with manufacturers and financiers. Many drivers on our cab network have grown to fleet owners with many of their own cars.”

The problem though is that there is limited money chasing a rising number of startups. There are fewer than 450 venture funds in India, even as IT trade body Nasscom has launched a programme to incubate 10,000 startups.

“The good news is there are many more seed funds, as well as incubators and angel investors among HNIs [high-net-worth individuals] at the ground level,” notes K.P. Balaraj, managing director of growth fund Westbridge Capital in Bangalore. “The venture community at the next stage is not large enough to fund growing businesses.” It leads to one or two winners in a category, and investors chase the winners at the cost of several others in that category. “It is just the nature of businesses,” Balaraj says.

Equally, a lot of the funding tends to focus on tech-oriented businesses. (This bias is reflected in the listing.)

Meanwhile, the big boys of India Inc., the Fortune India 500 companies, are concerned about survival. On the talent front, they continue to struggle to find the right people. “If big companies are setting up more offices in newer markets, they need the right people for the pipeline,” says Anu Zachariah, head of consulting at Development Dimension International, an HR firm. “If they hire from outside, the worries tend to be whether their HR systems can cope.”

Right now, startups are the avenue to take risks, learn, lead, force change, deal with setbacks, and build credibility.

AT THE TAXI FOR SURE office, I ask the co-founders: What next? Expansion to more Indian cities is inevitable, I reckon. But the next step, they say, is tapping into Asia and Southeast Asia, where there’s a substantial population of Indian migrants who are taxi drivers or operators.

Manik Arora, co-founder of IDG Ventures’ Indian arm, says there will be more under-40 stars in the mobility era. Before 2010, mobile VAS (value-added services) technologies yielded poor returns for investors and entrepreneurs. This was because carriers controlled billing, distribution, and marketing of value-added services businesses such as games and content aggregation. With app stores and the smartphones market exploding, Arora says “a mobile app in India can go global on day one”.