INDIA GROWTH STORY: REDISCOVERY OF INDIA

India's homegrown startups have new competition from expats who are venturing into niche segments untapped by local entrepreneurs

THE year 2002 was a watershed in former radio presenter, war journalist and marketing professional René Seifert's life. Seifert had to leave his job as director-entertainment for Lycos Europe after the dotcom bust and used his severance package to travel the world. "It was a great chance for me to see places like Thailand, Russia and Cuba," reflects the 38-year old half-German, half-Croatian Seifert. After his whirlwind sabbatical, Seifert sat down and considered his options. Business was clearly the way to go. "India and Ireland were both emerging as global sourcing destinations, but I felt that the former had greater potential," he says.
    In July 2003, Seifert came to India and met with officials from the Indo-German Chamber of Commerce, apart from local lawyers and chartered accountants to do his homework. Convinced of his decision, he launched Level 360 the same year. "I soon realised that networking is of the essence in India, especially to get through all the bureaucracy. You have to know all the right people to get your work done - and some of the wrong ones too," he chuckles. Seifert also recalls an interview with a candidate who had applied for a job, "In response to a question about his family, he just went on and on about them. I was taken aback, but soon realised that Indians put family above a lot of other things."
    Level 360 initially tried to make money by selling low-cost gold and silver jewellery on EBay to customers in Germany and the UK. The jewellery was sourced from Canada and shipped to the buyers. But in November 2004, he realised this line wasn't profitable enough. "I then looked around and wondered which of my skills and experiences I could best leverage," Seifert says, adding, "I realised that a lot of German companies could benefit from the outsourcing wave, if only someone could connect them to software vendors in India." It was an idea that clicked. Four years down the line, Level 360's 12-member team works for 25 German clients spread across sectors such as Internet and Web solutions, retail, logistics and manufacturing and has annual revenues of around a million dollars.
    Unlike Seifert, Belgian Quentin Staes-Polet, CEO and cofounder of Mumbai-based Kreeda Games, was no stranger to India. As IBM's former media and entertainment practice leader for Asia Pacific media and entertainment, Staes-Polet frequently travelled to India. "After joining IBM in 2001, I saw first-hand the emergence of telecom, broadband and mobile in India," Staes-Polet remarks. Having realised that online gaming was picking up fast and also that there was no established player in the massive multiplayer online gaming (MMOG) space in India, the idea to start Kreeda came as a flash of inspiration to Staes-Polet.
    With Ramesh Anumukonda (now Kreeda's chief gaming officer) and Robin Alter (Kreeda's CTO), both former IBM consultants in tow, Staes-Polet started Kreeda in Mumbai in August 2006. "Between us, we had the technical skills like game creation, marketing and finance. We chose Mumbai, as it is the media and entertainment hub of the country," he reveals. Staes-Polet used his contacts to obtain funding from two VCs, SoftBank China & India Holdings and IDG Ventures India. The two funds collectively hold under 50% stake in Kreeda.
    Kreeda's first product was DanceMela, a multiplayer online dancing-cum-social networking game which was free for users. The original game was developed by a Chinese firm, 9You. Kreeda licensed the game from 9You, localised the content and characters and launched it in India. "We couldn't develop the game ourselves, because that is a lengthy process that costs millions of dollars. Plus we don't see that kind of talent here in India," he says. Though a recent FICCI-KPMG study states that the gaming sector, led by online games, is growing at 33 % and is estimated to touch Rs 2740 crore by 2013, from Rs 650 crore in 2008, the market in India is still led by gaming over LAN networks in tiny cyber cafes. Rues Staes-Polet, "The biggest barrier is that the PCs here are generally old and slow. On top of that, the Internet bandwidth isnt conducive to large online games either. And when you have a hetereogenous target audience, that's bound to affect usage too."
    In the last two-and-a-half years, Kreeda has got about 100,000 registered users. However, the largest chunk of Kreeda's revenues currently comes from lighter online games that they develop for foreign clients. However, if things pan out right, Kreeda plans to enter the mobile gaming space in some time.
    Brian Choudhary and Giuseppe Mozzillo met in 2004, while studying at the London School of Economics (LSE). When Choudhary learnt that Mozzillo's extended family had been in the cheesemaking business in Italy for centuries, he wanted to visit his village to know more. "I saw how different cheeses were produced and the thought struck me that we could do this in India," he says. Choudhary, with Indian and Serbian parents, had already seen quite a bit of India since his childhood. But though the duo was enthusiastic about the proposed venture, it wasn't until 2008 that Exito Gourmet, their Panchkula-based company was born.
    "Both of us were working regular jobs for those three years—I, in New York and Giuseppe in Spain. During that time, Giuseppe met Jorge Tapia Chavero, a lawyer who also wanted to come on board. But in 2004, the laws on foreign direct investment in the food processing sector were unfavourable and we had to wait a while until they were eased by the Indian government," Choudhary says.
    The Indian market was emerging slowly as awareness about different kinds of cheese grew. However, Indians are sensitive—and somewhat entrenched—in the views on milk products. "It was a risk," Choudhary agrees, "But we still decided to go ahead." In June 2008, the trio came to India and met Puneet Gupta, an Indian importer of cheese. Since he knew the Indian market well, Gupta joined Exito Gourmet as CEO. Choudhary himself handles the role of CFO. The total initial investment that went into the company was over Rs. 10 crores.
    One of the earliest issues was getting all the necessary permits. "You have all kinds of food production and industrial permits to get, and the process was a long one." Recreating the flavour of authentic Italian cheese in India was also a challenge. "We put a big premium on the quality of milk we bought from our local suppliers," Choudhary reveals. Producing approximately 20-30 tonnes of eight different kinds of cheese (annualised) at present, Exito Gourmet aims to produce around 100 tonnes a year soon. Their clients consist of five star hotels and restaurants.
    French airman Roger Langbour was posted at the French Embassy's administrative wing in the seventies. But when he retired in 1975, he didn't leave India. He married an Indian in 1981 and tried setting up a business of his own. By 1992, he had tried his hand at many different things, including handicraft exports, which didn't work too well. "You have to have the feel for a business. If you don't, then you shouldn't do it," he says. That's when he decided what he wanted to do—sell organic poultry and vegetables to hotels in India. This was an area that was yet untapped.
    India had just started opening up and new affluence brought fresh demand. "I started at a small, crowded place behind Palam Airport in New Delhi. After starting, I went back to France for a while to learn new techniques of poultry farming and breeding at the famous Vendee farms," he recalls. As an air force man, Langbour wasn't equipped to be on a farm, but he learnt. He also improved his English in the meantime by going to the UK and learning the language. "When you want to do something on your own, you have to make the effort," he adds.
    Langbour's French Farm specialises in rearing Muscovy and Peking ducks, apart from quail, rainbow chicken, turkeys and pigs which go to leading five star hotels in the country as well as to expats, embassies and individual customers. Langbour bought his current 3-acre farm, which is beyond Manesar in the NCR in 1994. "I got the land along with Francis Wacziarg of Neemrana Hotels. I took three acres and he bought the other 4.5 acres of the total land I was offered," he says.
    Looking back at his journey, Langbour says he really didn't have to compete with anyone. "No one was doing what I was doing and so I had an advantage," he says. But working with hotels, he says, is a difficult task. "They don't pay on time, but they want the best possible quality at the lowest prices. And there is rampant corruption," he explains. Nevertheless, his business has moved from just offering poultry and pigs to also growing organic vegetables, but that is only for private customers. French Farm's turnover is now over Rs 1 crore.
    Chris Baker, 45, came to India from the UK five years ago to join an MNC real estate firm. Though he always harboured entrepreneurial ambitions, it was a sudden turn of fate that made him take the plunge. After quitting his job nine months ago, Baker found employment with a real estate consortium as senior vice president. However, the consortium is yet to start operations in the country. Baker, who lives in Bangalore with his wife, started bangalore buddy .com, late last year, just before the meltdown hit India. This site aims to be a one-stop shop for expat travellers, and has a dedicated team of writers who are carefully chosen to review and rate various places in town, like hotels, restaurants and weekend getaways. Bangalorebuddy claims to have around 1,500 registered users.
Baker invested Rs 20 lakhs to get the team going and get the website started last year in November. The revenue is coming in from service providers, like hotel chains, who are paying to get listed on the site. However, the site had to reduce its prices after the downturn hit the hospitality sector. The registration fee is now at Rs. 20,000, down from Rs. 25,000. Baker is now looking for investments from VC funds. "Since we are already earning revenues, and growing at around 100%, I am optimistic of securing funding. We also plan to hire 160 people in the next two years."
    The recession has not deterred Ema Trinidad, a US-settled native of the Philippines, from starting off a new antiageing clinic called S2 at Indiranagar in Bangalore. "The beauty business is recession-proof," says Trinidad. Prior to starting her clinic five months ago, she was a global supplier for a US-based cosmetic product company. In the next two years, Trinidad plans to earn Rs 20 lakhs a month from this one centre alone, and is already seeing high-status women queuing up at her doors. Charging anywhere between Rs 1,000 and Rs 2,500 per sitting, S2 is targeting an elite audience with its first outlet. Two more outlets in Mumbai will start by 2010.
    For both Baker and Trinidad, the going has not been smooth. One of Baker's biggest priorities was sending his son to study abroad. This, at a time when he was coping with the uncertainty surrounding his new job. For Ema, launching S2 slam-bang in the middle of recession and locating full time to Bangalore was a challenge. But they still persevere, for the Great Indian Dream is more powerful than perhaps we ourselves realise.