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Internet startups need to adapt, redefine and persevere in the new environment

Madanmohan Rao reports from the TieCON 2002 conference in New Delhi

There is certainly diminishing morale in the long Internet winter, but Internet startups need to persevere in the face of adversity, adapt to environmental changes, and redefine their business offerings and strategies.

Entrepreneurs, investors, consultants and policymakers gathered in New Delhi recently for the TieCON 2002 summit of the US-headquartered coalition The Indus Entrepreneurs (www.tie.org), called "Upside in the Downturn."

While many startups in India have already folded, quite a few have successfully reinvented themselves in these turbulent times, according to Renuka Ramnath, CEO of ICICI Ventures.

"We invested in a startup called EasyBuyMusic, which began as a logistics enabler of music for the major Indian portals like Rediff, Indya and Sify. They have accumulated a database of a million email ids and 1.2 million cellphone numbers, and have also expanded into logistics for Indian music in the international market," said Ramnath.

Adjusting to the dotcom bust, the company has extended its logistics capability to companies like Nestle, Cadbury, Jet Mall, and BPL Mobile.

Other companies in the ICICI portfolio include RelQ (a software verification and validation company with clients like Wells Fargo, CitiBank, Hitachi) and Subhiksha (a grocery chain in Tamil Nadu which leverages IT for better customer service and aggregated buying).

"The phoenix will definitely rise from the ashes," agreed Arjun Malhotra, co-founder of HCL and TechSpan. "There has been an oversupply of companies like Scient and Viant targeting the same space of Web solutions. The unpredictability of the business environment has reduced visibility from 3 years to 1 month," he said.

It would be useful to remember that all the good companies in Silicon Valley were built up in downturns, said Sridar Iyengar, partner at KPMG in New York. "This is the best time to build a company," he advised.

Many dotcoms focused on the media business, ranging from infrastructure to content, but did not understand critical issues like online content quality, channel conflicts, and media distribution, according to Siddhartha Ray, CEO of Network of the World (India).

Entrepreneurs should concentrate on anticipating change and not forcing change among media consumers, advised Deepak Shourie, CEO of Discovery India and founder of Outlook magazine.

"We are now in an environment where great value is place on media houses which can deliver services for integrated branding across multiple media platforms," said Mahendra Swarup, managing director of Times Internet.

"The Internet will be the central platform for transforming media entities," he said.

The wireless Internet also holds much promise in Asia, and Indian companies have a lot to gain by partnering with Japanese companies in this regard, said Toru Arakawa, CEO of Access, which holds an 80 per cent market share in the browser market for NTT DoCoMo's iMode phones.

Other opportunities are opening up for India in IT-enabled services (call centers, financial accounting, elearning) and biotech (bio-informatics, contract research, digital libraries). TiE offers mentoring services for startups in this space, and is already expanding to about 10 countries.

"We need a dialogue between the IT and pharmaceutical sectors to explore synergies on these expanding fronts in India," said Kiran Karnik, president of NASSCOM.

The 20-million strong Indian diaspora can play a major role in boosting the home base, as with the case of the 55 million overseas Chinese, said L. M. Singhvi, Member of Parliament.

Indian companies should be focusing not just on IT and ITES but also manufacturing, advised management guru C.K. Prahalad. India's priority should be on 10-15 per cent economic growth per year and creating 10-15 million new jobs per year, he advised.

"The last time India set an overarching goal for itself was in 1929 during the freedom struggle," Prahalad observed.

Indian companies need to compete globally as well as create new markets at home, otherwise it will fall way behind other Asian players like China. Opportunities actually lie in converting the bottom of the economic pyramid into a source of innovation, which can then be used to tap other similar shantytowns around the world which account for a total of 1.5 billion people.

"We seem to be imagination-constrained, and not resource-constrained," Prahalad said.

"The oil of this century for India is the minds of its people," said Dr. Mashelkar, director general of CSIR.

Companies like GE have recognized the intellectual strength of India's PhDs, but India needs to focus more on the rest of iceberg and improve basic education as well as create a better climate for globalisation.

"The only dotcom India really needs is HassleFree.com," he joked.

"India cannot run its economy with brakes on. India should be setting itself up as a strategic alternative to China. We need a sense of urgency in moving ahead," said Kanwal Rekhi, president of TiE's Global Board.


The writer can be reached at madan@techsparks.com


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