02/26/07

02:35:26 pm, Categories: Entrepreneurship, Business Trends, KPO  

Entrepreneurship in the high-tech sector will undergo some dramatic changes over the next decade. I have developed a little visual model for the processes used by entrepreneurs to raise money, hire exec talent and develop & support products. Big caveat here. My experience is primarily in the high-tech sector and the only offshore experience I have today is in India. So, please extrapolate to other sectors and the BRIC (Brazil, Russia, India, China) block as appropriate.

A couple of notes on how I came up with the above model.

  • The model in the 1980s is pretty obvious. This how the Ciscos & Oracles started
  • The model in the 1990s started leveraging the BPO trend to move the product development & support functions to India
  • The 2000s, particularly 2005 - 2006, have seen the emergence of a new breed of start-ups in India. By some accounts, over 200 KPO startups have been launched in India in 2006. Also, we saw most Tier 1 & 2 VC firms from the Bay Area set aside funds to seed India based companies. On average, these funds have corpuses to the tune of multiple hundred million dollars! Sequoia Cap, for example, has an India focused fund of $400M. Today, the situation in India is that there is too much money chasing too few deals. My unvarnished assessment is that this smells like the Bay Area of the mid 1990s where there were many good technologists but few seasoned entrepreneurs. But as with most dire situations, this too shall improve. Which leads us to the 2010s
  • The 2010s, I believe, will see a good set of start-ups in India, particularly focused on KPO (Knowledge Process Outsourcing) offerings. The availability of money, a sustained advantage in the KPO market, improving infrastructure & a maturing labor force will be the cornerstones for a large number of these start-ups. By some measures, the Indian KPO market will be the same size as its BPO market ($17B) by 2010. I have already run across several KPO firms that have good ideas & less than stellar management, but have secured seed funding. Deja vu, anyone? Hopefully we will have the business discipline to not get too excited and remember the key lessons from the mid-1990s.

So what does this mean for the entrepreneur? I think the entrepreneur of the 2010s has to:

  • Develop global expertise in short-order. GPs at tier 1 VC firms are on record saying that outsourcing of some sort is now a requisite in business plans, because otherwise, the start-up is wasting the VC's money
  • Hire cross border exec teams. Critically, the entrepreneur will need to ensure that his professional network is well balanced and reflects the reality on the ground
  • Gain first hand experience of the emerging markets. It is a question of when, not if, the BRIC block will transform itself from a cost center to a key market that entrepreneurs will need to be acutely aware of. My bet is that will happen in the early part of next decade (2011 - 2015)

Would be glad to hear what you have to say ...

Sampath

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