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NASSCOM Product Conclave 2008, Bangalore
By Ankur Sharma | August 18, 2008
NASSCOM’s Product Conclave 2008 was an insightful experience in ways more than one, especially for software product startups in India, who, according to its estimates, have been growing at 44% CAGR. Currently pegged at a miniscule $1.4 Billion, the software products industry is slated to grow to $10-12 Billion by 2015.
Dabbling in topics ranging from customer experience to funding options available, it hit the right spot for technology companies who are always looking for learnings for processes, hiring, funding, product management, and last but not the least, growth.
Funding
Funding has become such a hot topic in the Indian technology diaspora, that no discussion can be complete without it. NASSCOM of course has recognized that it is a major challenge for the Indian product start-ups. Lot of interesting facts came up during the discussion on funding. Here are a few to ponder upon:
• There are about 225,000 angel investors in U.S, as compared to approximately 225 in India.
• A new form of funding, called debt financing has been initiated, started by banks such as the Silicon Valley Bank.
• Since 2005, the VC investment in India has grown at a CAGR of 42% to reach $543 million in 2008
• Funds in the software products segment have grown at a CAGR of 43% from $76 million to $156 million in 2007
• Over the next four years, 1000+ companies are expected to get total funding of over $80 Billion.
Some good pointers were also shared during the session on VC, raising some important questions and concerns, like:
• Addressing opportunity in terms of size and money correctly - not too less not too much!
• What is the peak amount of money required? How shall the funds be disbersed (stage wise)?
• Do you have a killer product demo? It really helps.
• If you are not good at negotiations, get an investment banker involved.
• Do not give out too much information too soon. Sign an NDA if you need to.
• If there are multiple partners (and there are usually), do not assume that all are informed well about your product.
Most importantly, do not use PE only for money, use them as a valuable resource for strategy, access to new customers, and valuable information on execution.
Many funds are looking proactively at the Indian companies. One such fund is IDG, which is focused on product companies. IDG has already invested $50 Million in Indian companies, out of which $38 million is invested in product startups. NASSCOM has also started its own fund called Innovation Fund for early stage/pre-revenue startups.
Growth
A lot of insights were also shared with the audience which would undoubtedly be useful to software startups. For instance, it was advised that a company should partner with a VC/PE company run by an entrepreneur, who understands and empathizes with the mindset of an entrepreneur. Secondly, a product startup should be open to new emerging markets, and avoid keeping all its eggs in one basket. The number of product startups in India is pegged at 371 (since 2001, with 100 in the last one year) and this should only grow as the issues such as management, funding and processes are smoothened over time.
Moreover, the experts also concurred that the gestation period of a product startup is higher than a services company, and therefore patience is a virtue that entrepreneurs cannot afford to lose. Unlike services companies where the revenues pour in on a recurring basis, product companies need to start with a clean slate every month, and make more sales than those in preceding quarters to grow consistently.
Companies were also advised to focus on newer sectors like Defense, Automobiles, Power Distribution companies, Railways as the companies in these sectors are looking for more than ERPs, and offer a lot of potential.
Strategy
One of the points that came up during the discussion was a lack on inclination on the part of Indian startups to create official price lists. It was shared that presence of a well defined price list can often make a big difference in fostering credibility and trust. Moreover, it was also advised to create geography-specific price lists as the products can often command higher prices, upto two or three times, in certain countries, thereby boosting revenues.
The companies were advised to take into account diversity in processes, users and systems and make the products fairly generic while retaining the competitive edge with high flexibility and customizability quotient. Also, a long-term mindset has to be inculcated, and short-term gains have to be forsaken many times (a strategy adopted by the makers of highly successful Tally software in India). Many product startups go the service route for short term benefits when they should do the vice versa.
A very important point discussed in the meet was the skewed outlook of many entrepreneurs when looking at numbers. One of the most useful things I heard from one of the panelists was that indication that even a small percentage could represent a large consumer base (especially in a country like India where 1% represents millions of users – enough for a company to grow for decades). Therefore, a product targeted at merely 5% of any industry could become very successful whereas another targeting 50% could fail because of still competition.
Technology
The highlight of the session was the elaborate discussion on SaaS (Software as a Servie) and challenges revolving around this subject. Various pros and cons were discussed in this forum, mainly revolving around pricing flexibility, product bundling, cost advantage, and feature availability on the one hand, and security issues, bandwidth (connectivity) hassles, and lack of awareness on the other. The problems are apparently more concentrated in tier 2/tier 3 cities that have the cost advantage, but suffer with infrastructure issues.
Platform as a service was also thoroughly discussed, suggested by the experts to be ideal for companies with distributed computing and infrastructure and/or large storage requirements.
Product Management
Rightly pointed out by one of the speakers, product management remains a mystery as confounding as a rubik’s cube. While some label it an engineering activity, others believe it should be the burden of the RnD team, and even fewer who believe it should be marketing’s prerogative. One thing though, that everyone seemed to agree on, is that is a bridge between the product and the customers, and is a predominantly investigative processes where the feedback is used to improve the product itself.
Some other activities that are a part of product management are release planning, demo planning and organization, roadmap definition, and competition analysis. Understanding pain points of the customer via direct interaction, and addressing them is also a part of product management.
Go-to-Market Strategy
Various steps were outlined for the go-to-market strategy planning and implementation for product companies.
• Assess the real market size, via reports (Forrester, DataMonitor, etc) and your own investigation of the market.
• Evaluate the current environment (which stage is the industry in currently) and the competition in the space.
• Assess the entry barriers
• Future market trends – where will the industry head in the next 10-15 years.
• Delivery model – SaaS/On-premise, Support, Costing
• Macroeconomic factors – Government policy, regulation, compliance
Overall, the conclave was a good learning experience, and the discussed points were quite useful for budding entrepreneurs who dream of having a successful Google, or Digg out of India. A recommended event to network and learn!
Topics: Domestic Market, Entreprenuership, Industry News, Making Great Products, SMEs, SaaS & Hosted, Technology |
November 21st, 2008 at 3:33 am
Hello Ankur,
You have captured the challenges & opportunity very well. In my capacity as a Product Manager, I have been working with companies and universities taking new product ideas and technology to market.
In the initial phases of the product cycle it is essential for the companies to focus on working with the customers very closely. While a lot of the issues with bridging this gap are made irrelevant due to various communication channels available, it still pays to have someone on the ground closer to the customer.
I am curious to know if the issues for Product management for startus based out of India were discussed at this meet and if so what suggestions were given?
-Rajeev Kutty
November 21st, 2008 at 3:45 am
Hello Ankur,
You have captured the challenges & opportunity very well. In my capacity as a Product Manager, I have been working with companies and universities taking new product ideas and technology to market.
In the initial phases of the product cycle it is essential for the companies to focus on working with the customers very closely. While a lot of the issues with bridging this gap are made irrelevant due to various communication channels available, it still pays to have someone on the ground closer to the customer.
I am curious to know if the issues for Product management for startups based out of India were discussed at this meet and if so what suggestions were given?
-Rajeev Kutty
February 4th, 2009 at 11:30 pm
Great post. Well articulated.
Siddharth
IIT-G
(Batch 2004 - Design)