Business

Digital Native Startups Break Rules, Junk Manners

By Narayanan Madhavan
Hindustan Times, New Delhi.

Besides a gurgling fountain near imposing pillars at Bengaluru’s Ritz Carlton’s hotel, there is a statue of artist Pablo Picasso: old, bearded, crouching, pensive. The basement below presents a stark contrast.

Dozens of 20-something software developers in T-shirts watch spellbound in darkness as a Twitter evangelist outlines ways they could make money. Everybody is looking to ride India’s Internet boom.

Youth, optimism and thinking big are now the defining traits in a city whose mild weather is heated up by young and restless entrepreneurs. In such a mood, reckless, impulsive talk is not just accepted. It is almost celebrated.

So, Housing.com CEO Rahul Yadav’s recent outbursts evoke chuckles, not anger. There is almost a strategy behind this in a city now swarming with angel investors, mentors, early stage financiers, mature venture capitalists and even ruthless hedge funds — all of them looking to ride India’s emerging broadband and smartphone boom with high returns as they look for the next billion-dollar companies in the world’s fastest growing major economy.

Mumbai-based Yadav, a 26-year-old IIT dropout, raised eyebrows this month in an open spat with investors led by Japan’s Softbank, when he told the veterans who put their money where his mouth was that they were “intellectually incapable” to have a sensible discussion — as he prepared to quit. A peace pipe was smoked and he stays on as CEO to run a company that thinks global and wants to change the way people finance, buy and use homes.

“It all depends on what the fight is over. I think his (Rahul Yadav’s) method is wrong but he is showing ownership,” says Abhilash Goyal, 35, an IIT graduate and founder of Tracxn Technologies, which tracks documents startups for financial investors.

Goyal was an associate at venture capital firm Accel Partners that first invested a million dollars into e-tailer Flipkart.com, founded in 2007. The e-tailer’s current valuation is put at $15 billion — and this is the kind of dream that fires jeans-clad geeks to sprout words like “disruptive” and “game-changer” and hire similar sloggers with dizzy dreams.

Softbank and Yadav were not available for comment for this story, but the Housing.com founder said on a Reddit.com chat: “Issues I have raised are very important for the Indian startup ecosystem” after telling a newspaper that he was not a diplomatic person.

“Maturity is overrated. Life is short,” says Sachin Bansal, 33, CEO of Flipkart, who is the biggest icon of the current mood.

“Internet companies need to be built by the young. They get it,” says Vaibhav Aggarwal, 29, founder of Casa2inns.com, a budget accommodation startup, as he mills around at a party for entrepreneurs by venture capital firm Accel Partners.

You can almost smell the rosy mood in the night air at the JW Marriott where Scotch and wine flow as easy as talk on high growth.

Such rosiness may cause apprehension in the minds of those who saw the “Dotcom Meltdown” of 2000 that saw big-talking Internet startups go belly-up. But there is hard money and logic backing the current run as Internet penetration is zooming unlike then.

Investors and mentors say the new-age startups being founded by these times are led by “digital natives” who can connect better with fellow teens and 20-something customers who have grown up with gizmos like themselves.

“The current generation of entrepreneurs are largely Millennials and more technology capable that ever before. They want to disrupt and challenge the status-quo with their technology prowess. Their passion, raw determination and creativity is something we have not seen in our eco-system before,” says Prashanth Prakash, partner at ccel. “They will claim a giant share of the future Unicorns from India and are a very big asset.”

“It is better to be young and clueless. You don’t have fear,” says Bharati Jacob, partner at Seedfund. “Rahul Yadav can (still) become a great CEO.”

The CEO in the new culture is a learner who builds a team, not a know-all. The maturity, in true, Bangalore tradition, is outsourced to external partners.

Hema Ravichandar, consultant who once headed human resources at software leader Infosys, says young CEOs need coaches.

“Founders have charisma but need to listen more. CEOs need coaches. Whether the coaches come from the VCs or an ecosystem of advisers is a matter of detail.” Wharton-educated Bharati Jacob coached Phanindra Sama, 34, who sold bus booking startup redBus.in to South Africa’s Naspers group for an estimated $200 million (R 1,250 crore) last year. The BITS, Pilani-educated engineer started the company when he was only 26.

“It was like a teacher-student relationship. We could open up and talk to,” says Sama, almost making the CEO’s job sound like that of trainees.

Jacob and her Seedfund colleague Sanjay Anandram, who sold his startup in the Silicon Valley two decades ago, are new age gurus.

In an auditorium shaped into a design hub, the two 50-somethings sport long kurtas and jeans at a “Launchpad” event hosted by Google, teaching entrepreneurs how to run a business — almost like a college class complete with huddle sessions. These are no corner-office CEOs.

“You are beginning to see first generation entrepreneurs in India who are making money. And one success begets a hundred wannabes,” says Anandram, who wants to replicate the California culture in Bangalore.

However, underlining professionalization, he points to how Sequoia Capital’s Mike Morritz brought in Tim Koogle from Motorola to run Yahoo. More recently, Twitter brought in Dick Costolo as CEO and Facebook brought in Sheryl Sandberg as COO to help founders.

Founders are not exactly willing to let go.

“Look at investors as partners and leverage the rich experience they bring to the table,” says Bhavish Aggarwal, 29, the IIT-educated CEO of Ola Cabs, which has acquired TaxiForSure for an estimated $200 million.

“Not everybody who is young is a brat,” declares IIM-educated Aprameya Radhakrishna, 34, am who sold TaxiForSure to Ola. ” Making it a point to get feedback and improve is key. This is an attitude.”

There is certainly ground for tensions between investors and founder-entrepreneurs, but most agree that VCs like to be hands-off benefactors if they can help it, while some play coaches.

“The amount of compressed learning we have to go through is very high,” says Flipkart’s Bansal, admitting to differences of opinion but swearing that young founders have a lot to offer.

“Outside professionals should be absolutely the last resort for a startup. Founders are in the best position to lead companies,” he says, adding that even in companies like Twitter and Facebook, the founders themselves took the lead in bringing in outsiders, and not hustled by investors.

“The age gap between investors and founders these days is such that you tend not to understand each other. So you ignore the noise and focus on core issues. Investors need to learn how to talk to the younger lot,” says Tracxn’s Goyal.

“Entrepreneurs are able to think out of the box. Seasoned people are linear thinkers.”

Both venture capitalists and entrepreneurs swear by professionalism, but the bias is now clearly for youthful passion. And software code seems to matter more than old-fashioned code of conduct.

Jacob cautions that everything, however, has a limit.

“Young CEOs are a problem when they succeed too soon and start believing their own marketing spiel,” she says.
That may be another story.

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