Indian B-to-B founders are shifting base to Silicon Valley

What’s the point of so much shuttling?” Saket Modi, 29, asked himself a few months ago.Last year, the cofounder of Lucideus, a cybersecurity startup, spent four months in Silicon Valley. This year, in the first four months itself, he had to make seven trips from Delhi to California. Eventually, in July, Modi, who was living out of a suitcase, rented a studio apartment in Palo Alto and shifted base to the US.“There is something in the hawa here. It is pure magic,” he says over a WhatsApp call from the US. “The Valley plugs you into the cutting-edge world of technology and startups so beautifully.”Serendipitous meetings, for one, are frequent in the Bay Area. Just the other day, says Modi, he ran into Oyo founder Ritesh Agarwal at Curry Up Now, an Indian restaurant. Weekend get-togethers among top tech executives, especially of the Indian diaspora, add glue to ties. Anand Chandrasekaran, Lucideus’ first angel investor who was earlier director at Facebook and chief product officer at Snapdeal, invited Modi home for dinner one day. “He is family,” says Chandrasekaran. 70926686 There are plenty of opportunities to forge new relationships and deepen existing ones. Earlier this month, Modi went on a weeklong fishing trip to Alaska with former Cisco chairman John Chambers and a few other entrepreneurs. “What an incredible experience it was! One week of almost no internet, and spending time together in water all day. It was out of this world. At the end, you become friends,” recalls Modi.Lucideus, founded in 2012 and incubated at IIT-Bombay, counts Chambers, ex-Googler Rajan Anandan and Citigroup’s former senior vice-chairman Victor Menezes among its angel investors. After honing its product and strategy in the Indian market and now boasting an impressive customer list, including HDFC Bank and Delhi airport, Lucideus is setting its sights high and casting its net wide. The US has 40% of the $135 billion market for cybersecurity that Lucideus is tackling. Understandably, Modi’s shift to the US brings him closer to his customers. 70926694 Modi isn’t alone. A growing number of Indian entrepreneurs are shifting base to Silicon Valley, looking at it as their second headquarters. Jaspreet Singh, cofounder of data-protection startup Druva, perhaps kick-started the trend in 2012 when he moved to the US. It was the same year that Krishna Gopal Depura registered MindTickle, a sales-enablement platform, in the US. He says the company was designed to be in the US so they registered it there. “Till 2015, I was shuttling between the US and India, spending about one to three weeks every month there,” he says. He eventually moved to the US in 2015.The trend has gained momentum. Girish Mathrubootham, cofounder of Freshworks, has just moved to the US even as his company, which creates software solutions for enterprise support and sales, gears up for an IPO.Vinod Muthukrishnan, cofounder of CloudCherry, moved to the US in 2017. The other cofounder and CTO, Nagendra CL, soon followed him. 70926717 70926724 Umesh Sachdev, cofounder of Uniphore, shifted to the US last year and now has six of his eight CXOs, all locally hired, located there. Uniphore’s revenue growth has surged to 300%-plus from sub-100% after Sachdev’s US shift. “These days many Indian entrepreneurs reach out to me as a sounding board as they contemplate their US shift,” he says.A slew of other startups like Zinier, a modern field service management platform; Zenoti, which has business software for salons and spas; Helpshift, a customer relationship management platform; and CleverTap, a mobile marketing platform, too have joined the wave. 70926753 These startups share a few common characteristics.Most of them are B-to-B, riding the SaaS (Software as a Service) wave, on the back of cloud computing. US enterprise customers form their biggest market. Unlike fund-hungry B-to-C startups, these are bootstrapped or very measured in their fundraising, and have a frugal businessbuilding approach. They straddle India and the US and are equally strong in both countries — in India, where product development happens, and in the US, which is the hub of sales, marketing and customer support. Often, their customer-facing cofounder relocates to the US while the other holds the fort in India. The Indian SaaS wave began with companies like Zoho that targeted the long tail of small and mid-sized customers mostly via desk-selling. Now startups are moving up the value chain, targeting large Fortune 1000 enterprises. “Since the US is their biggest market, moving there dramatically improves founders’ understanding of their customers, helps build relationships and accelerates growth,” says Rajan Anandan, MD of Sequoia Capital India.Beyond H-1B Dollar dreams and an American zip code have always enthralled Indians. The 1970s and the ’80s saw a wave of bright IITians migrating to the US.They worked hard to integrate themselves into the economy and society. Another wave began in the 1990s, triggered by Y2K. On the back of labour and cost arbitrage, IT services outsourcing took off, creating success stories like Infosys, Wipro and TCS and sending relatively low-paid techies on H-1B visas to America. This helped millions of Indians live their American dream. Three out of four H-1B visa holders are Indians, according to a 2018 report of the US Citizenship and Immigration Services. 70926767 Under US President Donald Trump, the visa regime is getting stricter.Meanwhile, the Indian route to the US has taken a new turn with entrepreneurs like Modi. Comfortable in their skin and confident in their world view, they are pitching their tent in the mecca of tech world, Silicon Valley, and paying top dollars to hire local talent. The conversation is no longer about cost arbitrage and their dreams are no longer limited by the US boundary. Smart, young and nimble, they compete on equal terms with top MNCs and well-funded startups from across the world, baiting fussy corporate customers with their compelling next-gen tech tools. 70926796 It is a marker of the changing times. In the digital era where innovative garage startups are upending industries, and century-old businesses like Ford Motor are challenged by newbies like Tesla, Indian entrepreneurs are thinking big and global.Chambers, who has invested in Uniphore and Lucideus, elucidates: “Both the companies have what I look for in any startup — the ability to be No. 70926821 1 or 2 in their industry segment (globally) because they are disrupters.”Indian Roots, Global Shoots For enterprise software, the biggest market is the US. “You have to be where your business’ centre of gravity is,” says Sumant Mandal of March Capital Partners, a technology investment firm based in California, also an investor in Uniphore. 70926841 Druva’s Singh moved to the Valley in 2012 after being nudged by its investor Sequoia. “Israeli startups used to do this. Sequoia thought India could be the next. There was little precedence then,” he says. His visa got rejected. “The consulate in India did not even agree that I was an entrepreneur,” he says. So Druva went by the Israeli playbook — first hire somebody in the US and then get that person to hire the founder in the US on an L-1 visa. Now, almost all of Druva’s CXOs are based in the US. The US’s enterprise market is very different from India’s. In India, IT is a support function and customers’ priority is cost optimisation rather than quality. In the US, both venture capitalists and customers are very mature and willing to pay.They are also more open to dealing with a startup and trying new products. “In the US, you don’t sell features but value propositions,” says Depura of MindTickle.Indian startups land there with some unique advantages. 70927079 “Thanks to the IT outsourcing wave, nobody understands the IT architecture of enterprises and their processes the way Indians do,” says Ankur Kothari, cofounder of US-based Automation Anywhere.Abhinav Chaturvedi, partner, Accel, lists another: “India’s advantage is the cost per employee, a critical metric.” The abundant engineering talent in India is also a big plus. Modi recently met a founder of a $600 million Silicon Valley startup who groaned that Facebook had lured away three of his engineers at three times the salary. “What chance do I have? I can’t tell you how lucky we are on talent in India,” says Modi.Among the big positives in the US is an evolved investor ecosystem. “When we were raising Series A, we had six term sheets from possible investors,” says Modi. Term sheets — which outline the terms and conditions of a business agreement — from Indian investors ran into 15 pages with too much legalese. “With poor exits, they are extra cautious,” he says. He eventually went with Chambers, who had given a one-page term sheet, and money reached their account within 45 days. 70927086 Says Chandrasekaran: “Having a market in your backyard is a big advantage. If you start in India the bar is set very high as Indian customers don’t have a big budget and the product is built to the most stringent requirements.”India also offers a great testing ground to fine-tune products and build scale and credibility before reaching out to fussy global customers. “Once you are a champion in the US and India, you are prepared to tackle both developed and developing countries,” Modi says.Says Ashish Gupta, serial entrepreneur and investor: “These guys are competing against some of the best Valley-funded startups. Their future looks bright. Odds are favourable to them.”The network effect is providing some tailwind.Indians have risen up the ranks, especially to CTO roles, in US enterprises. The IT outsourcing wave has created networks, familiarity and credibility. This means that Indian founders have a rich network of mentors and angel investors to help open doors to Silicon Valley.Modi of Lucideus has an enviable tech advisory board that includes the CTO of PayPal, Sri Shivananda, an Indian.“Of course, your product has to be good, but with so many Indian CXOs here, you get your foot in the door relatively easy,” says Depura.The valley life Living in Silicon Valley has its own charms and challenges. “I wanted our office in Palo Alto, in the heart of Silicon Valley and close to Stanford,” says Sachdev. But when he began house-hunting there, he realised the rentals were “crazy”. He finally leased a cheaper space in Fremont, about 15 miles away, and hence has a longer commute.Workday begins early in the US. Breakfast meetings mean 7:30 am. For Pavan Sondur of Unbxd, which has operations spread across multiple time zones, the day begins even earlier — he is in office by 5 am. Unlike in India, meetings are data-driven. And there is a big thrust on automation tools. Sachdev, for instance, uses 11 HR automation tools.In Silicon Valley, tech-driven entrepreneurs seem to speak the same language. “This is the densest region in the world for talent in artificial intelligence and machine learning,” says Sondur.Solutions to complex business issues — how to hire, how many to hire, what’s the optimal revenue per employee — are often tossed around over Friday drinks.Work culture, too, is markedly different. Instead of the relationship-driven culture in India, it is more professional in the US. Contracts are sacrosanct.The founders have had to make plenty of lifestyle adjustments as well. “In India, there is so much help. The US has more of a DIY culture. Even billionaires do their dishes.That adjustment was tough,” says Sachdev.It is tough on spouses too. Singh’s wife had to quit her MNC job in India to join him. She reskilled herself and did her third master’s to start work in the US.The after hours have taken a distinctly Californian vibe. Indoors-bound Indians, used to weekend movies and parties with family and friends, are turning outdoorsy.“The infrastructure for outdoor activities is incredible here,” says Muthukrishnan of CloudCherry. Beaches, forests, trekking trails, skiing slopes, lakes for angling add to the weekend life. If you are nostalgic for cricket, even that is possible. “We have many cricket teams featuring a strong Indian diaspora,” says Muthukrishnan, who plays cricket every weekend. Meanwhile, whisky- and beer-loving Indians like Sachdev are developing a taste for wine in the land of vineyards.It is not entirely rosy. Local hiring is among the biggest pain points. Almost all of them are hiring their senior executives locally. “Bay Area is costly. We are a small company. With no network and credibility, initial hiring is tough,” says Muthukrishnan.Unfamiliarity with cultural nuances can create problems. “It takes a while to decipher their body language — what they say and what they mean,” says Depura, who made a lot of hiring mistakes initially. People with great communication skills are able to convince that they are the best. “You need to be cautious. In the US, reference checks are important,” he says.Indian startups need to grasp the value proposition of equity, which is something that Silicon Valley understands.Also, there will be a learning curve for Indian companies as they shift their thrust on from IT services to software products.Two much? Managing two headquarters and team expectations in two geographies is challenging.Chaturvedi of Accel says, “It is critical to have good communication channels.” Sachdev faced issues at Uniphore. When the founders moved to the US, the company created a layer of director and vice-presidents in India. But, with the C-suite in the US, the staff in India felt a bit disconnected. “Travelling frequently — once in six weeks — and getting an India MD have helped,” says Sachdev.Israel has struggled to transition from a startup nation to a scaleup nation. Its startups, high on innovation and technology, were often acquired before they scaled up. Will Indians too face the same predicament? Cloud-Cherry has just been acquired by Cisco. “VCs in India are smaller. So the ecosystem may not have patience and may seek exits to get their money back,” says Singh of Druva. After a few cycles, he hopes, things will get better. “Initially, we got lucky. Now we are seeking investors who have experience and are aligned with our vision.”Even as the wave grows, it is clear that it holds enormous potential if Indian startups play their cards right. “This is the first time I am seeing globally competitive startups coming out of India. I am excited,” says Mandal of March Capital. Adds Chandrasekaran: “These startups are leveraging the best of both worlds. They are going to be trailblazers.”And hopefully they will be the rightful inheritors to the bastion that India’s IT services industry has created.

from Economic Times https://ift.tt/34iwkEz