March 31, 2010

Entrepreneurship in Middle India: Article by Sanjay Anandaram

This article appeared originally in Businessworld. Reproduced with permission from the author.

A conversation I had late last year with a leading investment banker was telling as it testified to the rise of entrepreneurs from middle India –the India that lives in Tier 2 and Tier 3 towns inhabited by close to 70% of middle class India. He said, “We’re seeing an increasing number of deals outside the metros and we believe growth will come from those places. We’re therefore looking to hire people who can speak local languages fluently, have relationships in smaller towns, aren’t averse to traveling by train and bus and staying in non-5 star hotels!’ He was making an important point – wearing branded suits, speaking in clipped accents and doing business in the lobbies and coffee shops of 5-star hotels in metro India wasn’t where all the action was going to be!

India’s secular growth trajectory is being propelled more by domestic consumption than by anything else. In turn, domestic consumption is increasingly and rapidly being driven by middle India. Thanks to media exposure, telecom penetration, growing linkages with larger urban centres, rising incomes and enhanced distribution and penetration by consumer product companies, aspiration levels of this India are at an all time high. Growth opportunities abound across all sectors of the consumer economy – from personal grooming to retail to financial services to healthcare to consumer goods to education to…….the list is long. Not surprisingly, with the increased opportunities and awareness, interest in entrepreneurship is rising fast and by choice.

Representatives of this new middle India share some very interesting attributes as multiple studies have shown. For example, according to studies by Euro RSCG in 2005 and 2007, these include the following: confident and assertive, tend to be more socially aware, are proud of being Indian, unafraid of trying the unknown and belief in the family as the cornerstone of existence. Entrepreneurs emerging from these towns are also imbued with these attributes.

It is said that entrepreneurship cannot be taught but can be learnt. Role models are important in this regard. With increasing awareness of entrepreneurship, engineering and business colleges in many non-metro towns have entrepreneurship courses and get exposed to top class entrepreneurs through the efforts of industry associations and groups like TiE that has, for example, newly opened centres in towns like Hubli, Ahmedabad, Pune, Patna, Kochi and Nagpur.

While the hunger, awareness and aspiration levels are on par with those anywhere else, entrepreneurs from small towns face challenges as well:

1. Business skills: required to build professional well governed and large scale businesses. The need to think big, to implement processes and systems, have a team in place and a disciplined and focused growth plan.
2. Access to capital: this continues to be an issue. Traditional venture capitalists have no way of identifying and even conducting due diligence on these investment opportunities while these entrepreneurs aren’t familiar with venture capital and how to reach this class of investors. There are no angel funds available, raising money from banks has its challenges and friends, family and the community can only provide so much capital – not enough to build a large scalable business.
3. Networking: building relationships with customers, investors, advisors and mentors, investment bankers, partners, learning and sharing experiences through events and blogs for example, are harder to do. Many of the entrepreneurs aren’t very internet savvy either and aren’t aware of how to leverage social media tools.

Clearly, with the all around energy of a growing India pushing for change, these challenges can be easily dealt with as they inevitably will be and soon.

In Golders Green crematorium, Hoop Lane London there’s a statue overlooking the gardens. The statue is of a legendary Indian entrepreneur, born in 1894, and whose name is still among the most venerable in Indian business today. This entrepreneur left a small town in Rajasthan and traveled first to Mumbai and then to Kolkata, the great urban centres of the time to make his fortune. He established businesses in jute, sugar, autos, tea, textiles, cement, chemicals, rayon and steel tubes.

In tomorrow’s India, a GD Birla, will not have to travel from a Pilani to Mumbai and Kolkata to realize his entrepreneurial dreams. A Pilani, a Palanpur, a Patna or a Pune would be a good enough base from where to launch a global empire. The dreams, the will, the capabilities and aspirations exist. All that these places need is for resources -financial and non-financial- to become available. The good news? It will happen sooner than you or I can imagine.

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at The views expressed here are his own.

The Importance of Selling- Article by Sanjay Anandaram

Article appeared originally in Financial Express. Reproduced with permission from the author.

A Professor from an international business school writes a book. The book is published by a highly regarded publisher. The book has examples from the US, Europe and India. Then gets the book written about by giving interviews to bloggers, journalists from well known international publications and the like. Naturally, lecture tours are the next step. Local industry associations are then contacted (subtly and not so subtly) to invite him for talking about the book. Soon the India chapters of these industry associations too are asked to invite him for talks. As a gesture of goodwill, he says he will waive his usual speaking fees but he’d be glad to have the publishers bring in copies of the book that people could buy, perhaps at a discount. Helpfully, he explains that the book has sold tens of thousands in India already since it has many Indian examples. And he’d be glad to sign the books, at no charge presumably. It wouldn’t be a surprise if before long the good Professor is on a lecture tour of India talking to us about Indian companies.

Now lets us look at another example.

A Professor from a well known Indian business school writes a book. He self-publishes the book and then almost shyly informs his friends and acquaintances about the book. The book doesn’t have any exciting stories or examples. It has weighty recommendations for public policy. Unsurprisingly, the book is unheard and unnoticed. The Professor too doesn’t seem particularly motivated to aggressively push the book and himself.

Two examples that demonstrate two different ways of doing things. This is not a judgmental issue – about good or bad or a right or wrong. It is the way things are and, in my view, the lessons that need to be learned from these.

Indians in general tend to be inhibited (not understated) about their achievements and capabilities. In the corporate world, this shows up in laconic responses to questions. In lackluster product literature and web-sites, nondescript product and service demonstrations. The general mindset appears to be – build it and people will buy. It appears that we don’t think it “nice” to be seen to be talking about oneself, our company and its products and services. Almost a socio-cultural issue. But if we don’t start talking about who we are, others will! And before long, who we are gets defined by others! After all, if we don’t talk about who and what our capabilities are, how can we expect others to know of them? Why should someone else spend the time and effort to learn about us?

The importance of “selling” one’s side of the story is critical. The CEO has to “sell” the vision of the company to employees, customers, partners, vendors, government and investors. But we have to be very careful about this whole “selling” business as it conjures up images of fast and smooth talking salesmen with dubious integrity. Some aspects worth keeping in mind about selling:

1. listening to the customer, understanding the product / service, understanding what the company stands for and communicating it clearly and simply
2. building relationships with various constituents. Getting to know people and their motivations. Using relationships in a mutually beneficial manner without crossing limits of integrity
3. being persuasive, hard working and diligent to satisfy the customer. Being honest enough to inform the customer when there’s no solution or when there’s been a mistake.
4. being able to spot an inch-wide opening to drive a truck through!

Naturally, this requires great articulation, presentation and inter-personal abilities. And like everything else, these are learned through experience, practice and the desire to engage with the market. It is through this engagement that we learn about the market, customers and competitors; our offerings therefore get refined and better in response.

Winston Churchill once said this about a fellow parliamentarian, “He’s a very modest man. With much to be modest about!” Well, the next time we are modest about our ourselves, our company, its products and services, when we have every reason to be proud about, think about this! Yet, remember there’s a thin line between honestly and confidently talking about one’s capabilities and disagreeable cocky arrogance.

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at The views expressed here are his own.

March 08, 2010

"Confirmation Bias" - Article by Sanjay Anandaram

The CEO of the startup was conducting due diligence on a potential acquisition target. The Board (including him) had prepared a list of questions they wanted detailed responses to. These answers would then need to be cross-verified by the appropriate experts, lawyers and accountants. The founders of the potential acquisition target were known to the CEO for several years and they had done business together as well. The CEO believed that the acquisition would benefit his company and desperately wanted to make the acquisition happen as he believed it would double the size of his company, enhance offerings and customers and of course, provide some bragging rights since an acquisition tends to (at least initially) be an ego-booster. As the diligence process began, it started becoming apparent that the financial position of the target company wasn’t as healthy as had been conveyed or imagined. In addition, the customer base and sales pipeline too didn’t look as attractive. The Board started having second thoughts on the deal. The CEO aggressively pushed for the acquisition, so much so that he started rationalizing the deficiencies and gaps thrown up by the diligence. He also downplayed “bad news” (eg loss of a customer) or kept the information only with him. The Board wanted the CEO to look for other targets and options as well but having invested so much time and energy (emotional and otherwise) in trying to make this acquisition happen, the CEO wasn’t in a mood to listen.

The VC and the entrepreneur knew each other from over 10 years back. They had high regard and respect for each other’s capabilities. They had worked together at the same firm for over 7 years. Over the past 10 years, they had kept in touch socially. Both were well known professionals and who occasionally sounded each other out. Now the entrepreneur was raising money for his startup and the first VC he called was his former colleague. The VC wanted to do the deal as the team was high profile and the proposition though risky looked attractive. He was excited since this would be a proprietary deal without any other VC being aware of the opportunity. It would be a coup. He was very eager to close the deal at the earliest; the entrepreneur too, given his public standing, wanted to get the deal done quickly. Both had already laid out the PR release and the inevitable press conference that would follow the announcement of this high profile deal. The VC pushed the deal through his partnership, convincing them that there wasn’t any reason to do a detailed diligence as the team was well known to him, the proposition was attractive and that the terms of investment were attractive.

The acquisition, in the first instance, didn’t take place since the Board couldn’t reach a consensus. As more details of the target emerged, it started becoming apparent that there wasn’t much business sense in an acquisition; in fact, there would be a serious financial hit that the acquiring startup would have to take. The CEO who was adamant about consummating the deal and the Board had an acrimonious relationship thereafter, one which took a long time to heal. In the second instance, the high profile deal quickly soured as the VC’s friend just wasn’t cut out to be the CEO of a startup. There was a huge mismatch in expectations and styles of working. The high profile startup blew up leaving bruised egos all over.

Why do such things happen?

It was important for the acquiring CEO and the VC to remain dispassionate and detached so that they could take decisions in the best interests of their respective firms. However, they allowed their biases and preconceptions to overwhelm their usual decision making process. In fact, in such cases it is not unusual at all for a person to actively seek out information that reinforces these biases and preconceptions (eg by selectively recalling anecdotes) and ignore or overlook alternative view points. This is “confirmation bias”.

Companies too suffer from this bias. They believe their own PR and marketing hype and ignore dissonant customers and negative market feedback till it is too late. They don’t hear the little boy who shouts about the lack of clothes on the emperor!

All of us are guilty of this bias. But what’re we doing about it?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at The views expressed here are his own.