The Public-Private Partnership team which build Startup Village 1.0 in front of the College of Engineering, Trivandrum
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KRIS GOPALAKRISHNAN A spark which created a fire that is still ragingthat is how I see Startup Village. It has changed the perception of startups in Kerala and the rest of India over the last few years. Today, the startup fire is raging across India, in tier-2 cities and beyond, and in college campuses. This has become a priority for state governments and the central government. I am glad that I had a small role to play in stoking this fire, but little did I imagine that a hope would become the movement that it is today. Another hope is to see the youth taking responsibility and driving change. Sanjay did not just create a successful company but leveraged it to create a social movement. If it is difficult to create a successful business, then it is many folds more difficult to create a movement that is driving change across India. And he did not wait to become hugely successful (which is happening), but started the social movement in parallel. It is heartening to see Startup Village evolving into SV.CO, scaling itself up to reach students across the nation, leveraging digital technology. Sharing the story and the learning from it is important to make sure that the movement is scaled up and replicated. We need many fires to change India to become a developed country let the fire lighted by Sanjay and the believers, light many more.
Foreword At Startup Village, our mission is to build an entrepreneurial culture in society. Startup Village is a unique experiment in the evolution of the Indian Startup Ecosystem and the only Public-Private-Partnership incubator with the Government of India, Government of Kerala and private sector as partners.
At Startup Village, we are now beginning the next phase of our journey by launching the world's first digital incubator, SV.CO, for student entrepreneurs.
We have been consistently doing many experiments since 2005 and the learning from them has contributed immensely towards our current understanding of building startups and incubators. At Startup Village, we are now beginning the next phase of our journey by launching the world's first digital incubator (SV.CO) for student startups. This innovative approach, aligned with the honourable Prime Minister Shri Narendra Modi’s Startup India programme, has just received formal approval from our partners, the Government of India and Government of Kerala. As this is a key moment in our journey, we would like to share our thoughts on why we took this decision, and why the Government of India and Government of Kerala have aligned themselves with us and have formally approved this plan. This book is our story through my eyes.
Sanjay Vijayakumar Founder & Chairman
Our tryst with student entrepreneurship dates back to 2004, when the future founders of MobME were studying in college. Like most idealistic youth, we were constantly questioning how the world worked and why seemingly archaic rules were still in force: for instance how attendance measures our level of commitment, and how intelligence is tested by our ability to accurately reproduce the contents of a textbook from memory.
No one seemed to be challenging the status-quo, and whenever we tried to question people who could make a change, the only answer we received was that we would finally understand when we “grew up”. The twenty-year-old idealist that I was, I decided the best way of dissent was to create something new. The year 2005 was significant in two ways for many in my generation.
The Year 2005 was significant in two ways for many in my generation.
part 01
OUR ORIGINS
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It brought broadband Internet to the average Indian middle class family. YouTube still buffered but if you typed in Google.com, it loaded instantly. It was a relief from the dial-up-connection days, where it took 10 minutes just to get connected to the world wide web.
The first mobile phone revolution had just started and crossed 50M users. College students were starting to get their first second-hand Nokia 3310s and trying their hand at playing Snake. It was pretty obvious that this device would soon be in the hands of many Indians and there was going to be an explosive growth in the market, reaching over 900M users.
For the very first time in our lives, our thoughts and imagination began to run free. We soon started to learn how to use the Internet as a way to broaden our knowledge. Learning anything by heart or memorizing stuff was not required, and so began our voyage of true learning: the ability to understand and apply what was being learned to a real- life situation
I stumbled across Silicon Valley and learned how students in college started companies during a similar revolutionary period when computers were born and then went on after many decades to become Fortune 500 companies like Apple and Microsoft.
I was in the 2nd year of Industrial Engineering at the College of Engineering, Thiruvananthapuram, and quite curious to find out what other people my age were doing around the world. I stumbled across Silicon Valley and learned how students in college started companies during a similar revolutionary period when computers were born; they went on to become Fortune 500 companies, like Apple and Microsoft, several decades later. A combination of Paul Graham’s essay on “A Student’s Guide to a Startup”, my general aversion to the educational system that prevailed (which, I was convinced, was not giving me the education I really needed to face life), and the opportunities that were presented by the first mobile phone boom resulted in us thinking about building a startup while still in college.
part 02
Creating a in College There was no Technopark Technology Business Incubator (T-TBI) at that time, but then Technopark business consultant, RC Dutt, and the CFO, Dr. KCC Nair, were eager to experiment with us, as we were persistently following up.
From Coupon Sellers to Innovators, the story of Torque and MobME is fairly well documented through many articles in the media, both offline and online. Friends in college became co-founders, and soon started the search for a home like Y-Combinator in Kerala. We approached Technopark, Trivandrum, the only place we knew where Information Technology was happening, and said we wanted to build a startup.
Friends in college became co-founders and started searching for a home like Y-Combinator in Kerala.
With our team as a case study, Technopark applied to the National Science and Technology Entrepreneurship Development Board, Department of Science and Technology, Government of India, to set up an incubator. As the process took almost a year, we were given virtual admission to Technopark and allowed to use Technopark as our office address. This was an added bonus, as it instantly brought a sense of credibility to our fledgling startup.
part 03
Fundraising in College We had raised our first 80 lakhs of angel investment from a clutch of individual investors and professionals
By the time the official Government of India sanction of the Technopark Incubator came and the initial instalments of funds were released, we had already begun our last year of college. The Dubai housing boom was happening, and NRIs from Kerala were making significant wealth during that short period. We were quite lucky, in hindsight, that these events coincided, and by the time were in the final year of college, we had already raised our first ₹ 80 lakhs of angel investment from a clutch of individual investors and professionals.
To put the enormity of this achievement into some kind of perspective, let me briefly consider my own parents, both of who were civil servants - while my mother was a clerk at a PSU, my father was an engineer with the state electricity board. They both worked for 40 years of their lives and managed to save 40 lacs, and my first angel investment was double that. Immediately, the conventional path just didn't make sense to me anymore. I was convinced that a chance at success is there for people who take risks and dare to dream. After all, even the longest life is short, and it’s worth living a life of adventure than a life living by a set of rules someone created in the past in some other context. It dawned on me that a lot of the rules that I grew up with could be changed, but it’s not going to be easy.
Such thoughts led me to think of creating a new kind of institution where new ideas and risk-taking would be encouraged.
part 04
Growth of MobME and Technopark TBI The prevailing culture in Kerala at that point of time used to baffle me. The curious paradox was that while there was continuous cynicism towards being a businessman, there were few job opportunities to be had. The path taken by the average engineering student back then was way too predictable: get yourself an engineering degree, then go to Bangalore in search of a job. We wanted to see if it was possible to remain in Kerala and grow, so we took a conscious call to base MobME out of Kerala. While business requirements have taken us to many other cities across India, even in this 10th year of operation, we continue having our HQ in Kerala.
As the first company incubated at Technopark TBI, we were invited to join its Board of Governors since there was a need to have an incubatee on the board. Having had no prior experience of running an incubator, the officials at Technopark used our requirements as a template to create schemes that would be applicable not only to us but also all startups incubated there in the future.
By 2009, MobME had hit its growth stride and was sensing momentum. MobME won the Nasscom India Leadership Award for the Most Innovative Startup in India. For a state which considers itself highly literate and thus IT savvy, it was the first time that any company from Kerala had won this national award, and the Hindu ran a story on it.
The “Those college kids have still not shut down; if they can do it, may be we could do it too” mindset slowly started setting in amongst the youth, and in that one year, the number of applications received at Technopark grew from 20 to over 150. Both MobME and Technopark-TBI were making great progress and at the same time, facing their own challenges.
part 05
Challenges and Constraints of Government I have always been intrigued by systems, and rules that govern these systems. Steve Jobs was a great exponent of lateral thinking and his vision on how to change the world was one of the most important videos that influenced my thinking about these systems.
We developed an understanding that if you want to change the system, you need to change the rules, and that means working with whoever is in charge of the system.
Very early on, we developed an understanding that if you want to change the system, you need to change the rules, and that means working with whoever is in charge of the system. The most important rules that govern our life are created by governments, and with Technopark TBI, I was observing from very close quarters how such a system has an inherent bureaucratic inertia that’s difficult to overcome. Rules and processes that were once created to make the system more accountable became speed breakers as we received more applications from startups at T-TBI. The Government works with public money, and every rupee has to be accounted for. This means, of course, that formal systems have to be put in place, for decisions cannot be taken arbitrarily.
Such safeguards prevent misuse of the system but an unavoidable downside of this is that the system loses flexibility and speed. Though safeguards are generally a good thing, in the world of startups, decision making by committee is a painfully slow process. As for a startup, which by definition is an “un-established business that is losing cash”, by the time the system begins to kick in, it would most probably be dead!
part 06
Brainstorming with Dr. Mittal During an evening in the summer of April 2009, while in Delhi, I visited the office of Dr. HK Mittal, Head of the National Science and Technology Entrepreneurship Development Board (NSTEDB), Government of India. Diplomacy is not really my strength, and my exact statement to Dr. Mittal was, “You have no clue how to run Technology Incubators.” Dr. Mittal, who heads India’s premier programme for creating Technology Incubators, was stunned. However, being an open-minded individual, he quickly regained his composure and asked “Okay, what do you suggest that we change?”
The ensuring brainstorming that evening would eventually lead to MobME submitting an application to the NSTEDB during the National Advisory Meeting at Coimbatore in August 2009. The proposal was to set up a first-of-its-kind Public-Private-Partnership model incubator, where MobME would set up a not-for-profit society and commit to bring in 10,000 Sq.ft. of space and raise a grant of INR 2.5Cr - either from its own resources or other private funds - for supporting 48 startups over a five-year period.
The Brainstorming which happened that evening lead to MobME submitting an application to the NSTEDB to set up a first-of-its-kind Public-Private-Partner ship model incubator
part 07
Launch of Startup Village with Kris Gopalakrishnan as Chief Mentor
For the next two years, various technical and financial committees in DST deliberated over the application submitted by MobME Wireless at length. As for the Department of Science and Technology, which had until then funded mostly premier academic institutes like IITs, IIMs, IISCs or large IT parks (like Technopark or IKP Knowledge Park), evaluating the PPP model was a first.The application was, therefore, scrutinised at length to make sure that adequate oversight would be present. Side Note In 2005, while the stories that I had read about Silicon Valley left me amazed, a niggling doubt as to whether this could be in India also lurked in my mind. The only Indian IT success story that I could relate to was that of Infosys, an instance when average middle class Indians came together and built a globally successful and respected company. I didn’t know anyone on the leadership team at Infosys but that didn’t stop me from sending an email to Kris Gopalakrishnan, one of the founders from my hometown, Thiruvananthapuram, requesting for support and mentoring.
Kris responded to that email and also met us when he was in Thiruvananthapuram next. Meeting one of our heroes from college days was an incredible experience, and from that day onwards, I would send him an email every six months, updating him on our progress or lack of it.
After much analysis, in September 2011, the department gave its formal sanction orders to set up the incubator as a 5-year project. The incubator, registered under the Travancore Societies Act, was called the “Indian Telecom Innovation Hub-Technology Business Incubator” (ITIH-TBI), with a core thrust area on student entrepreneurship, telecom, mobile and Internet. I didn’t know where to get the 2.5 crores from, and I made a trip to Bangalore to meet Kris in October. The only parts that I remember from that conversation are: “Kris, you helped me by igniting the fire in my belly. We want to ignite a 1000 more such fires. Will you help me?”, and the one-word response he gave - a resounding “YES!” Kris agreed to become the chief mentor for the incubator and support us with necessary grants. Very soon other leading industrialists and well-wishers weighed in with more financial aid, and we were well on our way to launching an experiment that had neither been designed nor done before in India. While looking for space to set up the incubator, we met Mr. S Ramnath, who was the MD of KINFRA, a Kerala state government agency to develop infrastructure in the state. Mr. Ramnath listened to our proposal for space to set up this incubator called Startup City, a pun that was a reference to the Smart City project that I had been hearing about since the day I was born.
Entrepreneur Chasing dreams
Steps Indicates growth
Star in the sky Symbolizes victory
Final design Startup Village logo
Mr. Ramnath said he would offer space in the centrally located KINFRA Park at Kalamassery, Kochi, which was a sprawling 250-acre stretch of land with nothing but a building that had been lying empty for many years. I instantly agreed, and while leaving he said, “You guys are young and starting up, so replace the word ‘City’ with ‘Village’.
And thus originated the name “Startup Village” on that day in 2011. We asked a then little-known creative studio called WowMakers (who were incidentally incubated at Startup Village!) to design our logo. Today this iconic image has become the face of the Indian startup ecosystem for the international media, which pretty much use it as a stock photo.
part 08
2012-2015 A Social Experiment for Change Honestly, even I couldn’t be certain about our propects at that time, and the only way to find out was to launch and gauge how the youth responded. Within a week of launching, the 5000-sq-ftcenter was fully occupied, and for the next three years, applications just kept pouring in, until we got to a 6000-applications-in-a-1000-days situation, at which point we had to stop accepting any more. Innovation and execution at speed was in full force, with the tripartite MoU signed between the Department of Science and Technology (Government of India), Technopark (Government of Kerala) and MobME (the private entity in the PPP). The agreement assingned complete responsibility of vision, execution, gap-funding, financial management and daily operations to the host institution, MobME.
On April 15, 2012, Kris Gopalakrishnan formally launched Startup Village at Kochi and predicted that it would create a fundamental change in the entrepreneurial climate in Kerala. While it may not look so now, at the time of the launch in 2012, Sijo Kuruvilla, founding CEO of Startup Village, was worried whether the concept of startups would even generate interest in a state such as Kerala especially in a state like Kerala, where the general societal attitude towards entrepreneurship was, to put it mildly, hostile.
Kris Gopalakrishnan predicted that it would create a fundamental change in the entrepreneurial climate in Kerala.
We experimented quite a lot and did what we felt were the right things to do for startups. During those early days, neither rent nor incubation fee was collected from startups – from our own experience, we knew that the young founders coming to us simply would not have anything to spare; the gleam of expectation in their eyes, the obvious talent, and a passion to learn were all they had to offer.
“Young founders who will come to our incubator simply will have nothing more than eyes gleaming with talent and a passion to learn”
To build a world-class startup ecosystem, we realized that the presence of five things was integral:
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Amazing infrastructure that can house a thousand startups under one roof.
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A good number of incubators and accelerators that can offer support from pre-seed to Series A stage.
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A great talent pipeline (8th standard – 4th year of engineering students).
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Global exposure (read Silicon Valley).
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Adequate angel and venture funding.
To achieve this, many new initiatives were created with the support of the Government of Kerala, such as:
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Student Startup Policy - Students to be given 4% additional grades and 20% attendance for creating startups while in college. Learn to Code - India’s largest software & hardware programming education programme witnessed 10,000 Raspberry PIs given to 8th standard school children. And the thought behind this initiatve? Simple: if we need to build the next Facebook, we need world-class engineers. Startup Box - A scheme to distribute first-class equipment to college students. Every Startup Box comprised a Macbook Air, iPhone, iPad, Google Nexus, Amazon Kindle and other goodies. Startup Bootcamps - Entrepreneurial clubs that function in colleges, where complete responsibility for decision-making lies with students.
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SV Square - The Startup-Village-toSilicon-Valley programme where young college students were taken on a visit to Silicon Valley. MIT Fab Labs - A partnership was inked with MIT to bring the world's best Fab Labs for supporting hardware startups.
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Electronics Incubator – Maker Village, a new electronics incubator, was sanctioned by DEITY, Government of India, as part of the Digital India programme. IIITM-K is the nodal agency, with Startup Village and the Kerala Startup Mission as Knowledge and Infrastructure Partners respectively.
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Technology Innovation Zone - This is a major infrastructure project to set up half a million square feet of space on 15 acres of land at Kochi. The project will help house multiple incubators in Kochi, will be home to over 1000 startups at time, and include a live-work-play environment.
All these path-breaking projects were started as New Initiatives by PH Kurian IAS, who initiated, detailed and executed all the above for the first time in India. Kurian sir made the extra effort to find time, either during his early morning walks at Mar Ivanious College or during late-night discussions energised by fresh omelettes and black tea at the wayside "Thattukada"near his home, as he was already overloaded with work as both Industries and IT Secretary. The press in God’s Own Country covered these initiatives in all earnest, which some labelled as pure media hype; anyway very soon the word Startup became a talking point across households in the state. Darlington Hector, Senior Journalist with the Financial Express, noted this hype early on in a well-worded opinion article. However, on visiting Startup Village, he was convinced that there was action on the ground as well. The fact that Startup Village had a non-profit structure also helped in creating significant trust in the state, which generally viewed for-profit businesses with skepticism and cynicism.
part 09
The Comprehensive Report by Kerala State Planning Board and Andhra Pradesh Startup Policy
By 2014, the Indian startup ecosystem had started scaling dizzying heights, with funding pouring into the startup ecosystem. Founders became celebrities and Indian brands started becoming household names. To help Kerala reach the next level of growth, a committee was created in the Kerala State Planning Board, and one of the sub-committees was on Technology Startups and Entrepreneurship.
I chaired that committee with Federal Bank MD, Shyam Srinivasan and Kerala State Industrial Development Corporation (KSIDC) MD, Aruna Sundararajan, IAS, as members. The committee submitted a report in June 2014 to the Government of Kerala, which was used as a template by Andhra Pradesh Chief Minister Shri Chandrababu Naidu in September 2014 - with of course due modifications – to create India’s first Technology Startup Policy for the state of Andhra Pradesh. In November 2014, the forward-thinking Vice Chancellor of GTU, Dr. Akshai Agarwal, took relevant parts from the document and released the country's first University Startup Policy at Gujarat Technical University. In 2015, Kerala released its Technology Startup Policy, and since then many states have used this template to create state-specific startup policies.
Technopark TBI was upgraded to Kerala Startup Mission, and the responsibility of implementing the Startup Policy was entrusted to this government agency.
Technopark TBI was upgraded to Kerala Startup Mission, and the responsibility for implementing the Startup Policy was entrusted to this government agency. NITI Ayog Vice Chairman Aravind Panagaira in an article had stated: “It is said that only God, and a few good men and women, run India. One such man is PH Kurien”. “Bullet Kurian”, the IT and Industries Secretary of Kerala, succeeded in leveraging this significant momentum for a new budgetary allocation. Today, 1% of the Kerala state budget of nearly 500Cr is earmarked across various schemes for technology startups and job creation.
As mentioned earlier, government systems do work but at a pace of their own, so the results of these decisions will be seen in the coming years in the form of new schemes and announcements.
part 10
Scaling up Startup Village Startup Village went through an amazing journey en route to its initial destination. On the way, we had some really fun times as a team, and with the kind of freedom that is only limited by imagination, we carried out numerous experiments. While a few succeeded, many failed, but the overall progress was trending upwards. Our original commitment to the Government of India was to create 48 startups over a five-year period; however, we ended up supporting nearly 75 startups physically and around 425 startups virtually in Kerala and Andhra Pradesh. Collectively, these startups managed to raise over INR 45 crores in funding as well.
Kerala Startup Mission has released a detailed report on the latest figures in its Report on Kerala Startup Ecosystem that is a very insightful read.
Our commitment was to raise 2.5Cr, but we went ahead and raised nearly 5 Cr.
Though our commitment was to raise 2.5 crores, we generated nearly double that figure in the end. So rapid was our pace of execution that out of the committed expenses by the Government of India, we have surrendered capital grants worth nearly 53 lacs to avoid buying outdated equipment. Yes! Once a five-year project is approved, the process to change it is so time-consuming and challenging that it’s better to surrender the grants than utilize them. This and many other interesting lessons were learnt from our experience (for more, read: “Mistakes and Challenges”).
Part 11
Growth and Evolution of MobME The telecom industry reached its growth peak by March 2013, with the subscriber base close to the predicted 900M from its 50M subscribers in 2005. At MobME, we grew to over 150 people, and with explosive telecom growth over, we decided to look for other growth industries.
The smartphone industry, which was in its infancy, was rapidly ramping up, and we could see that this was just like the old revolution of mobile phones in India. One thing was clear to us: from 16M users in 2013, 900M Indians would have a smartphone and now a high-speed Internet as well on that smartphone.
We were a team of nearly 150 people, and it was not possible to pivot a business overnight with so many. We had to reduce headcount, which meant losing some good people in the bargain. This was a difficult decision, but the top 20 team-mates were given the task of exploring new ideas. We raised an additional capital of 16Cr from HNIs to pump in as seed capital into these ideas. My role at MobME began undergoing a fundamental change - from an operating CEO, I was fast turning into a board member who provided guidance and nurtured these early ideas to growth.
Sony Joy with the Chillr team at their awesome Bandra office Chillr, the brainchild of Sony Joy, co-founder of MobME, was first off the blocks, amassing more than INR 45C in venture funding from Sequoia Capital and other investors. This was the first venture-capital investment into any technology startup based in Kerala.
Another co-founder, Vivek Francis, created a mobile payment gateway, JetSetPay. Our leadership trio of Abe, Manu and Nithyan, meanwhile, created a big-data product called Geckolyst.
Davis from our team built the Digital Banking Labs division, while the extended leadership team also nurtured the legacy telecom business that was our cash cow.
From left: Sathya Kalyanasundaram, Sreekanth, Davis Parakal, Abe Sam Thomas, Sajith MR, Nithyan Martin and Manu Joseph We also successfully transitioned from a founder-CEO-led company to a professional-CEO-led one. As part of the next level of growth, we brought in professionals to fill gaps that the founders lacked skills to bridge. The most significant change was when in the third quarter of 2015, we brought on board seasoned industry veteran Sathya Kalyanasundaram (ex-Director of Finance and Operations at Texas Instruments) as the CEO of MobME. I now add value to the company as Vice-Chairman of the Board of Directors at MobME.
part 11
Celebrating Wins*
The job of any incubator is to create new jobs for the investment that went in. The total amount of investment that has gone into Startup Village till date is approximately 14.6Cr, with 4.8Cr from the Government of India, 1.65Cr from the Government of Kerala (75 Lacs through subsidised infrastructure for startups), 2.4Cr from the Government of Andhra Pradesh and 5.8Cr from the private sector. This has resulted in approximate 3139 new jobs being created and nearly 45 crores of funding being raised by startups. What these numbers really mean is that:
This has resulted in approximate 3139 new jobs being created and nearly 45 crores of funding being raised by startups. What these numbers really mean is that
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For every 1 rupee invested by Government, ₹1.22 was invested by the private sector into the incubator.
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For every 1 rupee invested by Government, ₹9.68 was invested into startups from investors.
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For every ₹15,309 invested by Government, a new job was created.
For its outstanding achievements at break neck speed, Startup Village set the record as the youngest incubator to win the Government of India’s award for Best Incubator in India at the National Technology Day 2015.
These achievements were made possible through the hard work of the founders of startups like Profoundis, iTraveller, Riafy Technologies, Asimov Robotics, WowMakers, Mindhelix, CAT Entertainment, Exploride Technologies, RHL Vision, Sastra Robotics, Sector Cube, and others that have graduated from Startup Village 1.0.
The key here is that 90% of the founders are first-generation entrepreneurs from a middle-class background, and they used their life force to create a technology startup through sheer will power.
These achievements were made possible through the hard work of founders of startups like Profoundis, iTraveller, Riafy Technologies, Asimov Robotics, WowMakers, Mindhelix, CAT Entertainment, Exploride Technologies, RHL Vision, Sastra Robotics and Sector Cube
Though small, startups like Asimov Robotics supply robotic arms that are used in space and at many leading universities such as Stanford. Exploride got underway the largest crowdfunding campaign in Asia. FIN Robotics launched Neyya, a bluetooth enabled ring, and the design firm Wowmakers has reputable clients like HDFC .
* All data provided by incubated startups.
Though we aimed to do more, we just couldn't scale up our systems or get the necessary resources in time for many of these startups to progress to a different orbit altogether. We have had our share of spectacular failures as well.
part 12
mistakes and challenges While Startup Village is built upon a vision to create an entrepreneurial culture in society, we operate in a real world that poses some significant challenges in making this happen. While we have faced and overcome innumerable financial and operational hurdles, there are many more to clear to achieve our mission. Here are some of the main challenges that we faced.
We have faced and overcome innumerable financial and operational challenges
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Teaching Entrepreneurship at Scale A lot of young people want to learn how to become an entrepreneur, and this means that we need lot a of teachers. Right now, our world is facing a dearth of quality doctors and tutors; similarly, there is a shortage of teachers and mentors for startups. Just like how a swimming coach needs to possess the skill of swimming, most great entrepreneurial teachers also have real entrepreneurial experience. And given the fact that swimming coaches might not be efficient football coaches, or that heart surgeons cannot be expected to perform brain surgeries, an expert in one type of entrepreneurship may not be an expert in another.
The fact remains that since 2000, approximately 500 startup teams in India have raised more than 1M USD, out of which only 200 teams have raised more than 10M USD in venture capital funding. The number of founders who have really seen the full cycle, achieved a liquidity event, and generated return on investment for shareholders is very low, so the number of mentors we potentially have is also low.
From this pool, getting great mentors to come to tier-2 cities like Kochi or Vishakhapatnam is very difficult.
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Scaling up Physical Infrastructure Due to lack of space to grow, Startup Village converted what was technically a water tank into an incubation space.
In November 2013, the total built-up space available at KINFRA High Tech Park was 15,000 sq. ft. Startup Village, for lack of space to grow, converted a structure designed to function as a water tank into an incubation centre.
The construction of a 100,000 sq. ft new building inches forward, with the government favouring contractors who bid very low to win a tender, a practice that leads to cash-flow problems. The Government of Kerala has earmarked 15 acres of land to create the Technology Innovation Zone; once ready, this will become one of the highly significant startup infrastructure projects that will come up for startups in India. Further, nine more states sent official delegations to visit and study the Startup Village model. With a small team, it was impossible to operate out of many states at the same time.
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Raising Matching Private Grants It’s mostly the super wealthy who donate to a non-profit and social cause, but there are way too many worthy causes, like education and poverty, that need more funds desperately.
Raising grants in India is very tough. It’s mostly the super-rich who donate to a non-profit and social cause, but there are way too many worthy causes, such as education and poverty, that need more funds desperately. Even with supporting legislations, like the fact that CSR funding can be accepted by incubators, raising the CSR grants required to build world-class incubators is near to impossible.
Limitations and Liabilities of Government Grant in Aids
Rule No 209. 6. 9 of General Financial Rules, Ministry of Finance, Government of India, lays down that for every rupee that has been received from the government, any organisation receiving grant has to sign an unconditional bond that in case of any financial misappropriation, the entire money has to be paid back in part or full. This is a standard clause while receiving any grant-in-aid and is required to protect public money from being misspent.
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Flexibility at speed is thus lost to account for compliance. If we change without permission, there is a legal liability to pay back the money.
However, in the fast-paced environment of startups and incubators, one has to be very responsive and adapt quickly. This means that the original five-year project approved will have to be changed frequently to adapt—to technology change—but to effect every change in plan, an approval from the National Advisory Committee of DST is required. This committee, however, meets only twice a year. Quick adaptablity is thus lost to account for compliance. If we change plans without permission, there is a legal liability to pay back the money.
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Inability to Provide Industry Compensation to Team Members Any organisation receiving a grant-in-aid also has limitations on how much compensation can be given to the team. To run world-class incubators, you need to provide generous remuneration packages that match international standards, but this is often not possible with the GFR Rule 209.6.4, as there are limitations on the maximum pay that is possible.
Great startups attract and retain high-quality talent by providing equity to early and key employees
Great startups attract and retain high-quality talent by providing equity to early employees who are instrumental in making them a success, but under a non-profit society structure, this option is also not available. For anyone who likes to know more details of how this system works, the General Financial Rules of the Government of India is a great place to start.
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Operational Delays Associated with Government Process Being extra cautious is the way the system is designed, but efficiency is sacrificed when it comes to use-cases like setting up Incubators.
The incubators which are approved by the Government of India submit a five-year plan at the start of the selection process. Even after a long-drawn-out selection process, which takes almost a year from the date of application to the first receipt of funds, is over, long delays at almost every step await. This delay is because the government system has been inadvertently designed for accountability, as public money is being utilised. Being extra cautious is the way the system is designed, so efficiency is sacrificed when it comes to use-cases like setting up incubators.
Inflexible Frameworks to Respond Quickly to Changes This approach, while ensuring some much-needed accountability, directly affects speed and efficiency. While in startups, innovation is rewarded and failure accepted as part of the journey, in government systems, mistakes are penalized and failure is not accepted - ultimately, someone has to be held responsible. While this works in favour of decisions that involve human safety, the approach fails in the context of startups, which function at a rapid pace, often breaking rules and challenging conventional wisdon.
7 Technology moves at a very rapid pace and creates disruptive changes in our society. The government system, on the other hand, has a rigid set of rules that needs to be followed. Startups create innovation by thinking outside the existing rule set, whereas government frameworks work on rules that are designed to actively avoid any misuse.
A typical example of this is acquiring infrastructure that a growing startup needs, like hardware (computers, mobile phones, etc) and specialized software (programming editors, graphics, visualization software, etc).
The Government System, on the other hand, is a system with a set of rules to be followed.
Delays in procurement at the government level mean that, by the time these grants are approved, the hardware and software asked for are already outdated, and while it’s still theoretically possible to change a requirement even after approval, the process of getting another round of approvals is long enough to make the new equipment outdated again. This is a vicious circle that currently has no solution.
8
Short Time Frame for Sustainable Incubators Incubator projects are designed with a mindset of achieving sustainability in five years. This, in my view, is entirely wrong. Angel and venture capital funds that invest in high-risk startups have a time duration of 10 years, from raising capital, to investing, to losing money in the early years in the startups that fail, and then waiting a further 8 to 9 years to finally receive money from the ones that do succeed.
Incubators are like houses for startups and need a much longer time frame of 15-20 years, perhaps like a housing loan, to become sustainable.
Incubators come even before: at the very beginning of a startup’s journey, when the founder most often shows up with a team, the desire to create a startup, and nothing else. They don’t have the ability to pay rents or utility charges. The equity that could be exchanged generates value by the sixth or seventh year and liquidity by the eighth or tenth year. From my point of view, incubators are like houses for startups and need a much longer time frame of 15-20 years—perhaps like a housing loan—to become sustainable.
Challenges to Host Institute in a PPP Model
9
The Positive and Negative Publicity An incubator like Startup Village gathers significant publicity and attention due to its uniqueness of being a Public-Private-Partnership and the bold, new experiments it pioneers. This creates both good and bad press. Positive news is always welcomed with open arms, but when detractors and cynics start throwing spanners in the works, bad press affects the remaining businesses. This would occasionally create nervousness among the investors of a host institute, especially when an irresponsible journalist or blogger decides to vent their emotions in the press or social media. Another downer is that, the clients of various business units of the host institute also get uneasy. Raising External Capital
An incubator like Startup Village gathers significant publicity and attention due to its uniqueness of being a PublicPrivate-Partnership and the bold, new experiments it pioneers.
A vast majority of venture capital investment in India comes from foreign shores. This capital from developed economies has investors who have strict provisions, like Anti-bribery Acts, to follow in their respective countries. Association with the Government, across the world, is viewed with the preconceived notion that a bribe is invariably involved somewhere along the way. This perception creates a fear in the minds of venture capital and other prospective investors as to whether an investment in a company that has MoUs with the government will create challenges down the line. We have faced real concerns and questions from investors while raising capital for MobME due to this reason. This destroys value for shareholders, whose primary motive to invest in the company is to generate returns for the risk taken by building technology products. Improving the entrepreneurial culture in society is not the primary concern on their minds. We didn't anticipate this when we started off, but we soon realised how real a concern it was from experience.
Balancing Personal Passion and Shareholder Interests
10
Startup Village has always been a very personal passion. It has been an idea that has grown in me, thanks to nature (no one really chooses where they are born, what religion they are initiated into, who their parents are or what their true mission in life really is) and a great nurturing environment at school. Over the fourteen years I spent at Loyola School in Trivandrum, the DNA to help others-a core value of Jesuit education-was ingrained in me. When I look back at my 10-year journey of building MobME, it is clear that we were able to grow not because we worked like bulls or lived like nomads. I’m sure every entrepreneur out there is working just as hard to build their future and change our world.
I’m sure every entrepreneur out there is equally burning his life force to build his future and change our world.
The reason why a bunch of young engineering students like us, all from a middle-class background and living in a small town in a remote part of India, were able to build a company that lasted 10 years and employed more than a 100 people on average during this time was the people around us. From our first mentors to our recent investors, countless hours clocked by team members, innumerable people in the startup community, general society, government, media, academia, those within and outside Kerala, those within and outside India, there were a lot of people who genuinely wished to see us succeed.
These are the people who believed in us when we had nothing to show but a big smile on our faces and a belief that we could do things which we had not done before. I still remember the day we got our first break at BPL Mobile Kerala (the pre-Vodafone, pre-Hutch days of 2006) to put a critical voice server for customers in their data center. Let’s not forget the fact that we didn’t have any prior experience in deploying mission critical systems for a telecom operator: we were still students at an engineering college.
The only difference was that we were kids with a hunger and burning desire to win, and we had an endless passion for technology and creating change.
The only difference was that we were kids with a hunger and burning desire to prove ourselves, and had an insatiable passion for technology and creating change. People believed in our abilities, and these very qualities helped us overcome the fear of failure and create a mindset to ignore other people’s opinions and build a will to persevere and succeed. We are really lucky to have a group of entrepreneurs as our investors in MobME; the decision to delink MobME and SV.CO, thereby allowing me to pursue my passion with SV.CO, has been supported by MobME’s board of directors.
Sony Joy at BPL Mobile Data Center in Kochi, 2006
part 12
Startup India: Building Next Generation Incubators With the Hon. Prime Minister launching Startup India in January 2016, a new thrust and direction for the creation of startups and incubators have been achieved in India. Our country needs a million jobs a month-every month-for the next 20 years to employ all its youth. The existing companies will not by themselves be able to create these many jobs. Thus, new companies will need to be created, and for this, India needs a multitude of incubators, accelerators, angel funds, angel networks, and venture funds, among other things, like the programme Skill India.
While many are aware of Startup India that is being implemented under NITI Ayog under Atal Innovation Mission, there is another key development with Dept of Science and Technology that has been given a 500 increase in funds this year to support the Startup India movement.
Any individual or organization which wishes to create more jobs for the growth of our nation can use the new NSTEDB Schemes or NITI Ayog schemes. The DST schemes have been significantly revamped as well, after a gap of nearly a decade, by taking into account the learning from all incubator efforts and experiments till date. In line with the achievements of Israel (see Startup Nation) and the move by its government nearly 15 year back to have for-profit incubators, NITI Ayog is conducting bold experiments by creating provisions for various new models like for-profit, non-profit, and Public-Private-Partnerships (PPP), and leaving it for incubators and their host institutes to decide which models suits them best. At SV.CO, we are aiming to align with the Startup India schemes of Atal Innovation Mission. We have consequently chosen a for-profit model for the next phase of our journey.
Side Note Here is the basic 101 to understand For-profit and Not-for-profit Incubators. Legal Structure: The terms "for-profit" and "not-for-profit" are usually misleading. For a large number of people, the term "for profit" means that there are automatically a lot of profits, and "not-for-profit" means there are not much profits. In India, there are a total of 5,82,889 companies, as per Indian Budget 2016. Out of this 2, 54, 079 or ~ 44% of companies together have 4,76 006 Crores as losses. The overwhelmingly large majority (94% or 5,48,690 companies) consists of those who are making a loss, zero profits, or a profit of less than 1Cr.
Only 6%, or 34, 199 companies, make a profit of more than 1Cr per year in India. All incubators that are either "for-profit" or "not-for-profit" must generate profits for sustainability.
If not, you need to get continuous grants or equity dilution to cover up the losses. In addition, the provision for continuous grants is not permissible as per GFR rules, and thus no Government of India schemes allow for it.
"Profits" simply mean that income is more than expenses. Any business, programme, project or incubator can be self-sustaining only if your income is more than expenses.
Distribution of Profits: In the for-profit model, the entity can legally distribute profits as dividends, while there is no distribution of profits in the non-profit version. Taxes on Profits : In either case, income tax has to be paid to the Government of India on profits made. Just 297 very large companies account for 60% of total profits amounting to 12, 08,656 Crores. Accounting Treatment: In Non-profit organisations, money coming in is "grants or donations", where the donor does not get anything in exchange for money donated. In the for-profit model, money coming in is usually treated as "equity", where one gets shares in exchange for money invested.
Side Note So a good question that naturally comes up is: why have Government-supported incubators remained Non-profit entities till date? The answer lies in Rule no 206 of GFR 2005, which says that you can only give grants to non-profit firms as a “general principle”. NITI Ayog has taken the view that creation of incubators under the Startup India Programme is not a “general case” and thus has included both for-profit and non-profit legal structure models along with the flexibility of the host institute being a PPP model, academic model or industry-led model.
DST, on the other hand, has taken a more conservative view of this interpretation and thus supports only non-profit models at present. Once the Finance Ministry issues a clear clarification on these GFR guidelines, DST may also, in future, support for-profit models.
6. In other countries, such as United States, all kinds of models have evolved: for-profit, non-profit and newer structures like public-benefit corporations.
Connecting the dots, looking back over 10 years, I have been deeply involved in creating a startup culture, right from a student entrepreneurship level to university policies ( in my capacity as governing board member at Kerala Technical University and in partnership with GTU), to advising chief ministers in Rajasthan and Andhra Pradesh, and being a representative of the Government of India in the Indo-US Science and Technology Forum established by the Govt of America and the Govt of India. This allows me to form a comprehensive view of what is happening around the ecosystem from the eyes of other experts at all these bodies: at university, state, national and international levels. And with that view, I can clearly say that it's a great time to start many different incubators to support the startup ecosystem.
The learning never stops in building incubators in India. Our experiences at Startup Village have been made public, initially through the handbook that we released in year 2, and then through the Impact Report, which was published in the subsequent year.
Currently Startup Village is knowledge partner to Kerala StartUp Mission, Maker Village, and Andhra Pradesh Innovation Society. Currently Startup Village is knowledge partner to Kerala StartUp Mission, Maker Village, and Andhra Pradesh Innovation Society. We would be happy to partner with more states, public and private organisations, and universities that wish to set up incubators based on any of the above models, and share our experience, as this is in line with our mission to create an entrepreneurial culture in society.
part 13
From Challenges to Solutions
Entrepreneurs are a breed of people who come up with solutions to challenges and overcome the impossible to make the future happen.
Every entrepreneur aims at creating the future. The future is always unknown and uncertain. The future has to be created within a limited set of known variables and an unknown set of unknown variables. Creating the future is not easy and is therefore certainly not for the weak or timid. Entrepreneurs are a breed of people who come up with solutions to challenges and overcome the impossible to make the future happen. For entrepreneurs who create the future, failure is not something to be feared but an oppurtunity to learn about what didn’t work and why it didn’t. We then try again.
In our minds, we have three significant achievements:
1 2 3
A healthy and growing startup community in our home state of Kerala, and early stages of a startup culture in Visakhapatnam. This includes a fully functional Kerala Startup Mission and Andhra Pradesh Innovation Society with the sole mission to create world-class startup ecosystems in Kerala and Andhra Pradesh respectively. A culture of startups has been seeded in both locations, especially amongst students. Early success stories of students who graduated in Six Ways and created a better future for themselves through entrepreneurship is now available as the timeframe of five years has passed. These real stories are inspiring the next generation of youth. Enough learning and data points for designing the next experiment to scale up Startup Village.
With this background, we proposed to the Government of India and Government of Kerala significant changes that would help us ensure that the next version of Startup Village continues to be in alignment with the Startup India Action Plan. There are four key changes that will happen during this transition.
1
Change of Operations from a Physical Incubator to a Digital Incubator, and Expanding our footprint from Kochi and Vishakhapatnam to all over India
In a physical incubator, we are limited by the space we have, but in our digital model, we can scale up!
This move addresses challenges #1, #2 and #3 (see “Mistakes and Challenges”). Our primary offering would be a digital incubation and startup learning platform at https://www.sv.co/. Startup Village will continue to be a Knowledge Partner to Kerala Startup Mission and Andhra Pradesh Innovation Society, and will now focus on creating a culture of entrepreneurship amongst engineering .students in India. As Lulu Mall is to Kochi and Flipkart to the nation, Startup Village 1.0 is to Kochi and SV.CO is to the nation. In a physical incubator, we are limited by the space we have but in our digital model, we can scale up to offer our basic introduction to Student Entrepreneurship course to all five million engineering students in India.
2
Raising resources for our mission through Equity, not Grants
We aim to attract funding into SV.CO from Social Impact Investors and Social Venture Funds for who social impact is of high priority. 3
With the Startup India programme by NITI Ayog, incubator frameworks have now expanded, allowing multiple models of for-profit and not-for-profit bodies to experiment with, and we intend to leverage this flexibility provided to raise more resources as equity instead of grant-in-aids. We aim to attract funding into SV.CO from Social Impact Investors and Social Venture funds for who social impact is of high priority. This move addresses challenges #4, #5 and #6. Note: Our best-case scenario is to be like Kickstarter, which is a Public Benefit Corporation. As the current rules in the Companies Act don’t permit this in India at this point, we aim to achieve a result as close to this by incorporating significant clauses to this effect into the AoA and MoA of SV.CO.
Change of Host Institute of Startup Village from MobME Wireless Limited to SV.CO Learning Platform Private Limited
SV.CO Learning Platform Private Limited is a subsidiary of MobME Wireless that we created to delink the business interests of MobME and the mission of Startup Village.
While this is currently a subsidiary of MobME, the majority of shares will be apportioned to Sanjay Vijayakumar, Vishnu Gopal and Gautham, who will make up the team running SV.CO. This move addresses challenges #7,#8,#9,#10.
4
Exploring New Business Models while Retaining the PPP Model with clear Roles and Responsibilities for the Government and the Private Partner
Startup Village is a mission in the PPP model. The MoU between the Government of India, Government of Kerala, and MobME clearly laid out that the Vision, Organisation, Management, Execution, Control of Operations, Fund-Raising, Choice of Incubation Models, Facilities Management and Fees, along with pro-active participation of other private sector players, is the role of the Private Partner. The financial support from DST, Government of India, is complete. The role of the Government of Kerala is that of a Knowledge Partner, and is based on the Government policies and schemes from time to time. At SV.CO, we will aim to stay off Grant-In-Aids. Instead, we will experiment faster and find long-term and sustainable business models. We will continue to work with governments to fund startups directly instead of routing investments and grants through Startup Village.
part 14
the sv.co secret master plan*
The SV.CO Team Our goal is to build an entrepreneurial culture in society. We plan to do this in 4 simple steps: Step 1. Create a Deep Awareness about Entrepreneurship in Students.
Step 3. Work Hard to Create Success for Student Founders.
We aim to achieve this through our MOOC (Massively Open Online Course), Six Ways: An Introduction to Student Startups
We will work hard to make success stories of these hundred teams by ensuring they get really amazing opportunities- funding, accelerators, acquisitions, sustainable businesses, or great jobs or admission to higher studies.
Step 2. Select Highly Ambitious Student Founders Twice a year, we will launch a nationwide challenge to select 1000 top student teams. We plan to filter and select ambitious students, and then give them a world-class learning experience of how to build a startup in six months, all of this while they are still studying. We intend to combine this with world-class exposure.
Step 4. Inspire Younger Teams with the Success Narrative Using these success stories, we then inspire 2000 more teams to become student entrepreneurs. The success of this will inspire the next 3000 and so on, till we reach a tipping point in student entrepreneurship in India, at which stage this will become a routine part of going to college and getting an education, and in the long run, this should give birth to an entrepreneurial culture in society.
We will work hard to make success stories of these hundred teams by ensuring they get options for funding, admission to incubators/accelerators, acqui-hire opportunities, becoming sustainable, getting great jobs or getting admission for higher studies. * Inspired by Tesla & Elon Musk.
part 15
THE age of Student startups Entrepreneurs create change. Change creates friction. Friction creates pain and yet, change precedes all progress. For India to progress from a developing to a developed nation, we need to leverage the innovation and creativity of our youth, popularly known as demographic dividend.
Every month, 1 million Indians turn 18, and this will continue for the next 20 years. To employ all our youth, we need 280M new jobs. All big companies that we see around us were once small startups. We need to create many more startups for growth.
In this 10th year of MobME’s operations, when I look back at its evolution since originating as a student startup, it's amazing to see how the employment we have generated is equal to creating employment for 22 lakh NREGA workers for at least one day, and how the taxes we have paid is equal to paying for 25Crore Indians to get one kg of rice. What one person can achieve individually pales in comparison with what a great team can achieve. What one startup can achieve pales into insignificance when compared to what a nation of startups can achieve. While existing companies power our nation, in order to leapfrog to being a developed economy, we need to create new companies and businesses. Timing is the most important element in the success of a venture, and we believe the timing is right for student entrepreneurship in India.
We believe young founders today are special. Never before in history has it been possible for so few to build products for so many. We have a unique opportunity to teach everyone how to build great startups, right in school and college
Many who learn will go on to build long-lived, thriving companies that'll shape our future. Many more will pick up great skills, knowledge and enriching experiences that can help them become interesting and amazing people: the kind of people who will make a difference in our world. For India, the future has not yet arrived.
Our future as a nation is yet to be created, and many startups will co-create this future that we will live in. We believe that the only limitation on this future is our imagination. We imagine a future where ambitious students will be entrepreneurs, and our mission at Startup Village is to inspire and empower many students to be co-creators of this future. And for those interested in world history, we think that this revolutionary period that we are living in right now will one day be known as the Age of Entrepreneurship.
Our future as a nation is yet to be created, and many startups will co-create this future that we will live in. We believe that the only limitation on this future is our imagination
Epilogue “A dream you dream alone is only a dream. A dream you dream together is reality.”
Artists of both music and technology have played a significant role in shaping our thoughts and culture. Somehow, by nature or nurture, they never see the world of rules but free their mind to imagine the world of possibilities.
-John Lennon
You!
We see a new possibility for India. We see a new future.
Resources To learn more about our story, we’ve prepared a page which has links to resources and data. To access that & download other versions of this book. Go to: https://sv.co/story. We’ve launched a free online course for student founders. Titled “Six Ways: An Introduction to Student Startups”, this course is available at https://sv.co/sixways. SV.CO runs a six-month program for student founders. Get guided through building a great product in college, and then get a chance to go to Silicon Valley. To apply, go to https://sv.co/apply.
