Starting a Startup: The Innovation Mission

In the last five years, the economy has witnessed a significant rise in the number of startup companies, which is still growing. In fact, billions have been invested into Indian startups in the last few years. As per the reports, over ninety per cent of the startup activity in India seems to be happening in top six cities of Bengaluru (28 per cent), Delhi-NCR (24 per cent), Mumbai (15 per cent), Hyderabad (8 per cent), Pune 96 per cent) and Chennai (6 per cent), and also in Kolkata, Ahmedabad, Kochi, Jaipur and Thiruvananthapuram. The story of any startup is sweat-blood and glory. At a CII organised CFO Meet, some of the entrepreneurs of most well-known startups in Pune and key players in the startup ecosystem, discuss and talk about their journey and the challenges they faced through their growth story. The panellist for the session were, Ashvani Shukla, CEO, Aeron Systems Pvt. Ltd.; Girish Chandra, Chief Evangelist, e-Zest Solutions Ltd. (Moderator) and Ashish Goyal, Co-founder, EarlySalary. Corporate Citizen brings you the first part of the riveting discussion

"Every company or industry is now thinking of some kind of innovation by either investing in a startup or accelerating a startup by having one of its own. Startups as an industry have started getting more mature"

- Girish Chandra

GIRISH CHANDRA

GIRISH CHANDRA: What’s really happening with startups? Is everything going good with startups or is there something we have to tell? A pretty big investment has come into the country, specifically into startups. Most of the startups are technology startups, with a focus on technology or the use of technology or enabling technology to deliver some kind of business. Big investments coming into startups in the last few years mean something. Either business has become better or the ecosystem is getting stronger, or the investor has more confidence because the early-age startups have been delivering in a big way. Whatever the reason, this is a big investment and another fact is that the distribution of the big investments coming in is really complex. About ten companies have picked up 65–70 per cent of the investments and we know all these companies. Which means that startups are booming and everyone is pursuing it. It doesn’t matter which industry we belong to, every company or industry is now thinking of some kind of innovation by either investing in a startup or accelerating a startup by having one of its own. Startups as an industry have started getting more mature.

Comparing the cities according to investments, if you see the numbers Bengaluru has got the highest investment and comparing that with Pune, Pune is at least in the top five place, which is a good news but not good enough as we have to go a long way.

When I use WhatsApp, my son uses Snapchat and that itself is a difference from a cultural standpoint. The young generation are on Snapchat and Facebook and their parents are not connected with them on Facebook. So, their way of looking at a startup, leading a life, the sense of job security, is totally different and that is going to impact in a very big way on the startup ecosystem. We have heard these words like co-working places, co-housing spaces, tech driven living, innovation labs, and big companies have come with their own accelerators. We have heard the term “Unicorn”, which means to be a billion dollar company. Freelance workforce the new workforce will end up in becoming more of freelancers, they will do the work at their will and not as a job. These are a few trends and that’s where the money is all going in.

THE AREAS OF INNOVATIONS FOR STARTUPS:

The first area is the intelligence part of it, where everything is trying to be intelligent a washing machine or a television wants to be an intelligent thing. You are already seeing android and voice controlled televisions. Why it has manifested as a used case there is a lot of technology that is moving behind.

The second area is ‘experience’ we will have our jobs totally reskilled in the coming years. What we did a few years back and what we are doing now, and what we are going to do in another 10-15 years, is going to be totally different. The age group and economics is going to impact that. For example, I will talk to you through one of my bots and that kind of a change is already happening. But there is security for data and information, because a lot is being collected. So, the new business of data management and security will also thrive in the coming years.

"The one thing we realised very early in the game is that being in the business of lending money, you have to be on a constant churn to raise money, that’s our raw material. Over a period of time we learnt so much about consumers and came up with our own products"

- Ashish Goyal

ASHISH GOYAL

Q: Tell us about your journey, why you started your startup business and where did you see the opportunity?

EarlySalary

ASHISH GOYAL: We started EarlySalary in October 2015. The concept of EarlySalary came to mind when I and the co-founder, Akshay were discussing and found out that there was a unique problem. We saw that our juniors would run out of money till 15th of every month. When we looked back at our own life when we were young we faced the similar problem we would ask our friends and a family member to lend us Rs.10,000 with a promise to return on the 1st of next month. I think everyone here might have experienced the same. Then, we looked at the financial ecosystem I come from a financial background what we realised is that as for a company there is a CC limit, there is a working capital limit, but here there is no such concept available for a salary advance. If you need the money and you go to a bank and say I want Rs.10,000 for 15 days, banks will not entertain you. They are ready to give you rupees two lakh for two years to pay it back. So, we realised there could be a large opportunity out there and the ecosystem and technology can enable it.

So, when you give Rs.10,000, the other challenge that came in was that it has to be cost-effective. You can’t lend a large amount of money. And that is where we spent a lot of time figuring out how do we price the product. Over a period of time, we came with a much cheaper product, as to how to sustain giving out Rs.15,000, for say, 15 days and it should not cost a lot. You can’t charge Rs.1000 for lending Rs.15,000 for 15 days. It has to be cheaper, the processing fees has to be lower, opex should be lower and so on. With this idea, we went to our first investor and the one thing we realised very early in the game is that being in the business of lending money, you have to be on a constant churn to raise money, that’s our raw material. So, we went ahead and raised our first round of funding. We went through our ups and downs.

Over a period of time we learnt so much about consumers and came up with our own products. Like today, our customers can take money for 15 days, two months or 12 months. When we spoke to our customers they said that they use most of their money on Amazon or Flipkart, so we went ahead and tied up with three e-commerce giants, Amazon, Flipkart and Big Bazaar. They are the largest online offline retailers in India and we made a deal where we allowed our customers to take six month zero cost EMI from them. This allowed our customers to stay with us. Which allowed us to create new products and have more engagement with our customers.

Over a period of time, we aim to be the first choice for salary advance for corporate employees and for young India, and offer many kinds of products for our customers, whenever there is a financial need. Everything is on mobile we are highly focused on digital. Our core focus is on automation and risk management, which has helped us in reaching where we are today. We are only on mobile and if one has to take a loan they have to download our app, whether it is on iOS or Android. We have a tech team, who work on the frontend and backend. There is a large team which analyses the data. Today, there are underwriters in our company, who take care of over 40 thousand applications, which come every month to us. Almost 70-80 per cent of these applications goes through the system with no human intervention, with all the checks and balances, fraud analytics etc. We have invested heavily in technology and analytics.

"As entrepreneur, one basic founding principle was that we have to be sustainable. A business has to run on profitability, we have to make products that customers want and we will generate revenue and be sustainable"

- Ashvani Shukla

Aeron Systems

ASHVANI SHUKLA

ASHVANI SHUKLA: My journey started when I was in college, as a teenager I was very enthusiastic about aerospace defence. Fortunately, I got into IIT Kanpur and joined Aerospace Engineering in all those four years what I realised was, anything our country is using in aerospace defence, almost 99 per cent is imported and less than a per cent is being made in India. So, I was wondering that as an engineer in India, are we not good enough engineers or we are not good enough businessmen. Why do we do not see this as a business, in this case, aerospace or defence industry? So I thought, instead of questioning other people, can I do something on my own, to prove many others wrong. I took up this challenge and thought let us start something in the aerospace industry. I started this company in 2008, called Aeron Systems, with one of my friends who had graduated in electronics. Together we came to Pune and founded this company.

The first product we were looking to build was the Inertial Navigation System. This is a system that is extremely critical for anything that flies. Without this, you can’t actually know where you are. Once this is fitted within the aircraft, vehicle or car, it tells you your position, your altitude, acceleration, orientation, speed, it gives you measures for over 15 parameters. This was one of the critical systems which was not available in India. In all aircraft, missiles, guns and military vehicles, this navigation systems they are using are all imported. There were only two places where some kind of research was going on, one is in the DRDO, which is basically looking at all the missile programmes, and the other is ISRO. So, 95 per cent of the Indian market is available and fulfilled by foreign market. So, we thought let’s address this market. But the issue of developing the technology was difficult, everything was proprietary based and restricted.

We thought we will do the investment and do the R&D, but then it’s not easy you don’t get VC money or investment for a hardware company, not even now. So, in 2008, obviously, it was a challenge, plus as entrepreneur, one basic founding principle was that we have to be sustainable. A business has to run on profitability, we have to make products that customers want and we will generate revenue and be sustainable. So, we started development in the Inertial Navigation Systems (INS), simultaneously we used technology that we are developing for aerospace defence and come up with products in M2M (Machine to Machine), there was no IoT at that time. We started making wireless data loggers to be placed remotely in India’s toughest conditions. Reliability was one of our core forte and the algorithms that will make the system work very efficiently. Essentially, today we have products in Inertial Navigation Systems, which are internationally qualified to military standards, which are the world’s toughest standards for any hardware or electronic products. You will be happy to know, one of our products is getting on board fighter aircraft. That’s for the first time an Indian INS system is getting on board fighter aircraft.

On the IoT side, it has been a very good journey. There we have solutions around the devices that we make and these solutions are into the renewable energy sector. India’s fifty per cent of the capacity of solar plants are using our systems to monitor their plants. There we have been the market leader. One of the important aspects that we have been looking at is that the hardware or product company fundamentally, is a profit making company, so on every unit transaction that you have, you choose to make a profit or not make a profit. Customers would not force you to really do business in loss, rather, they want you to make profits so you are sustainable you are there tomorrow when they need you. So, customers have been our investors and well wishers.

e-Zest Solutions

GIRISH CHANDRA: e-Zest is a story that started from an engineering college project. So the three team members who did a project for the final year, took that idea into a business. That was called Robanto, which was like some robot that was supposed to assist armed forces to go to some inclement areas. That’s how it started they realised that they can’t get money from anyone in the market and then we came up with our own product called Cyber Café Management, which was very popular in Mumbai for 2-3 years. That’s the time when the software services industry was booming, so e-Zest decided to get into that. Eventually, we sold that product and got into software services, totally bootstrapped and now working with Fortune500 companies all over the world. Something that was started in a school dormitory, now has taken good shape where there are over 600 people of consulting team with offices all over the world. What we have done is we have invested in our people.