Israel, far smaller than India, has managed to report the second highest number of merger and acquisition (M&A) transactions in the start-up products space. And, the nascent but fast growing Indian start-up system wants to understand why.
Nasscom, the body representing the $108-billion Indian information technology-business process management sector, is set to take its first delegation to Israel, to collaborate with the start-up ecosystem there.
"We were approached by the Israel Trade Council and they wanted to see how the two countries can collaborate and start a bridge building exercise that can benefit companies in both geographies," said Ravi Gururaj, chair-Nasscom Product Council (NPC), at a panel discussion on 'Opportunities and challenges faced by Indian tech product start-ups', part of the recently concluded Nasscom Product Conclave here.
While Nasscom is yet to decide when the first delegation visits Israel, it has planned two annual interactions. "In the first half of the year, we will visit Israel; later in the year at the NPC, we will invite a delegation from there to India," said Gururaj.
In 2013, almost 40 start-ups in Israel were acquired. According to PwC Israel, the value of M&A deals was up 16 per cent at $6.45 billion. Waze, a crowd-source navigation firm, was acquired by Google for $1 billion.
Six technology product start-ups at the NPC panel discussion agreed that although the ecosystem for start-ups was building, several hurdles remained. One reason for the success of Israeli firms is a tech-savvy local market. So, for product firms, the small domestic market works like a lab. In India, however, getting the first customer on board is extremely difficult and, hence, many prefer to tap the developed markets.
Toshinder Sharma, founder and chief executive (CEO), Wegilent, an IIT Bombay-incubated company, feels it is more of a chicken and egg situation. "When you go to domestic clients, it is always about who are your customers? Second, venture capital also asks how many clients you have in the US," he said. Shridar Shukla, managing director, kPoint, said though these demands were similar in most other markets, what was peculiar to India was the low pricing. Indian start-ups have matured a lot in terms of marketing and sales strategy. A majority of start-ups on the panel agreed the US seems to be a natural market. They believe targeting the Indian market not only requires a different sales strategy but even product focus.
Vaultize Technologies is an example of such strategy. Anand Kekre, CEO, says their enterprise platform is for the global market but they initially started as a back-up platform in the domestic market. "India was not ready for sync and share. We had some early wins in the domestic market. For the global market, we changed the marketing pitch," he adds. Vaultize is a Pune-based Enterprise.
LinguaNext Technologies' MD & CEO, Jagdish Sahasrabudhe, says: "Business is very local; you cannot have a global strategy. One should try and find early adopters by finding a cultural connect."Founders say several times, venture capital funders pushed them to have offices in the US. "When we approached VCs, the first thing we were told was that one of us will have to go to the US. We wanted to have customers in the domestic space. So, we decided to boot-strap," said Kekre.Nitin Agarwal, founder of Spatial Ideas, providing enterprise and mobile GIS solutions, has been tackling a different problem.
- While Nasscom is yet to decide when the first delegation visits Israel, it has planned two annual interactions
- Nasscom wishes to learn how start-ups in Israel have managed to connect with academicians and Silicon Valley in the US, what policies will be helpful and so on
- In 2013, almost 40 start-ups in Israel were acquired