Co-founder shareholding, not all black-magic

While a brave few take the Solopreneur route, most others like to take the more conventional approach of having a core founding-team, who come together to form a new venture. These are typically individuals who, believe in a common shared vision, have trust and respect for each other, and would provide significant contribution, one way or the other, in the journey, to making the venture a success.

Typically this bunch of merry-men and women would need to fit into some kind of an organizational structure, and even if they don’t, i.e.  adopt a largely flat organization model, they would have to at least decide on the shareholding pattern of the co-founders. This becomes mandatory while registering the organization as a Private Limited Company, as per Indian Company Laws Act. However, even if one takes the alternative forms of incorporation s.a. Limited Liability Partnership (LLP), they may choose to implement a pseudo/virtual shareholding pattern, which clearly spells out the share of ownership, share of profits and share of losses amongst the partners. Now I believe, that there are two approaches (roughly speaking) to arrive at the shareholding pattern, viz — Capitalistic approach and Socialistic approach. In this post, I hope to explore and propose something around the Capitalistic approach.

The shareholding, is not always or mandatorily in the proportion of investment brought in, although it is usually one of the determinants. While there could a equal share of equity for all co-founders, type of arrangement, which is what I call the Socialist approach, we shall see that is need not always be so. My exposure has been limited to some in Silicon Valley and rest in India, and here I have not come accross too many startups with the socialist shareholding pattern amongst co-founders. Note that, the shareholding pattern is not something that is usually disclosed by private companies. My impression is based on my discussion with friends working there, or some of the co-founders.

Until somewhat recently, I was of the opinion that it is “probably fine” to go with the equal-proportion approach. However,  I have increasingly become quite certain that it is not a very practical approach. Note that I am not saying that the co-founders cannot or should not have equal proportion. They very well may. All that I am saying is that, if it turns out that every co-founder deserves to own & bear equal-proportion of the equity/shareholding, after careful analysis of various factors, then so be it.  However, it is not fair, just to bring on-board a not-so-interested candidate as a co-founder, by enticing them with higher-than-just share of equity. It is potentially detrimental to the venture, to the potential co-founder himself/herself being on-boarded, and rest of the co-founders. In the capitalistic-approach to things, it is often believed that “everyone in a venture pulls their own weight”. This is especially true because there is always so much to do, so few resources to actually do what needs to be done, very little time, there are no redundancies and life is generally running on a scarcity mode. In this environment, if someone needs to pull someone else’s weight, especially over an unreasonably longer period of time, it bogs down the whole venture, and demotivates everybody. It is to say that, if you allocate more than the fair-share of equity to a co-founder, and they are unable to contribute value back to the venture in same proportion, you have unfairness breeding in the system. This, eventually affects other co-founders, and potentially even the early employees.

Now, I am a firm believer in the concept that “just an Idea” is not worth much, and also that one who conceives the Idea, cannot or should not stake claim to the largest share of the pie. More often than not, it takes several brains with significant creativity and value-addition to take the idea from it’s original rough-cut (or even seemingly polished) form to a form which is marketable, and monetizable. In taking the idea and converting it into a viable an sustainable business, there is some serious mountain moving involved. While one may consider one’s idea as novel and unique, more often than not, I’ve come across multiple people having the same idea in parallel all around the world, and potentially right there in the same city where you live. In this age of information, creative stimulus and unfettered access to knowledge, this is but obvious.

So, how does one settle on the shareholding pattern between the co-founders. More often than not, I’ve been told that it is just some black-magic, or there is a some secret formula. Through this post, I intend to put forth some thoughts and bring in the open as to what might be one (of the several possible) formulae in methodically, systematically and logically arriving at a shareholding pattern between co-founders. I do not claim the formula to be perfect, and in fact I just give the parameters of the formula, leaving one to fill in the coefficients / factors that assign weights to various parameters, and create the final formula. So here goes –

  • Early-belief-in-vision (& early contributions)
    People get attractive pre-launch offers on Apartments, when all legal implications are still not clear, there is no Government / City-planning authority approval, no banks approved loans yet. Beta customers are your early believes, they trust you, put their faith in you, and often are your best & most-loyal evangelists. They deserve a special place. They are typically the ones who would stick along the longest, and endure the pain, hardships of being early on board, so they definitely deserve a price for this. Early stage investors s.a. Angels, or Seed-fund stage VC’s, typically walk-away with rather large share of the pie. So, nothing new here. However, as we shall see, this is not the only key parameter in determining one’s share of equity.
  • Risk-taking (degree of risks one is taking)
    One very simple and easy yardstick to determine one’s faith, belief and conviction to an idea, is to see how much risk is one willing to take to prove one’s faith, belief and conviction. This is especially true for people who are known to be otherwise quite smart. Risk is taken in many ways, for example showing confidence without the fear of losing face, by making a sizable investment (time, effort and money), willingness to move out of your comfort zone and take extra pains. Indeed, there is a risk of losing all that you invested and getting nothing in return, but some valuable life lessons, however a risk-taker will be aware yet not afraid of the consequences, because they believe in the idea and believe in doing good. For example, moonlighting by bootstrapping your venture, while you retain your day job, is an indication of lower levels of risk-taking. However, one must however remember that degree-of-risk is highly contextual.
  • Depth-of-skin-in-game (what is one sacrificing)
    We all work for predominantly three reasons, viz — (1) Lead a comfortable life, providing for our loved ones; (2) Doing meaningful & interesting work, to derive satisfaction by way of contributing back to society; (3) Achieve the ambitions in our life, which BTW may be limited to (1) & (2) as well. While working for a startup (especially in the pre-funding stage) you would potentially get oodles of (2), and can always look forward to (3), but what takes a hit is (1), i.e. your level of comfort, lavishness of lifestyle and amount of time/money you are able to spend with/on your family, all go down — invariably, unless you are one of those with mega-bucks tucked away in your account, or son of a Rich dad. It is the hardships, which drive us, motivate us to elevate ourselves from the current situation and move to the high plane of not only higher satisfaction, higher sense of achievement, but also better lifestyle, ability to spend/dedicate more quality time with our family, loved ones. However until then, i.e. until we have achieved reasonable success, what and how much you are sacrificing is a measure of your commitment, dedication, faith and contribution to the cause, and thus a very important part of determining your share of equity. One thing that needs to be clarified here is that if you are a High Networth Individual, with loads of cash in bank and choose to make a sizable investment, that doesn’t demonstrate your skin-in-game, as much as it would, for a similar level of investment for someone who probably has only as much as cash in bank.
  • Volume-of-Investment
    Even if the founders who are boot-strapping the venture, i.e. not taking any salary from the venture, or even if they are, then it’s the bare minimum ‘sustenance’ salary (probably a small fraction of the market salary), most typical ventures still have expenses, overheads, cost of doing the R&D — computers, furniture, internet connectivity, telephone bills, hosting charges, water, tea-coffee, snacks etc. All these cost money. So investments are required. Also, there are stages in the evolution of any venture, where some sizable investment is required to cross the Chasm, or do enough to enable a Scale-up. This may not be the ones where the venture is trying to move from few thousand subscribers/customers to their first million, i.e. not exactly the level you’d see being raised by VC funding, or large Angel funding rounds, but typically what you expect from an organically growing company. These investments are still fairly risky investments, done by people who are already potentially not drawing salary from this venture, but contributing to it in real/hard ways. These investments are the life-blood of the venture, and also of the individuals. Thus, these deserve their due respect.
  • Value-delivered / Value-contributed, it’s criticality & significance
    In any startup, each and every hand is a useful hand, or at-least, should be. There are no redundancies, and always more work to be done than are people to do those. However not everyone delivers the same amount/degree of value. There would be some who work 16 hours a days, with high level of sincerity, dedication and focus, and then there may be some who are contributing not more than 2-3 hours each done. Apart from the question of volume, we have the question of quality. Some 8 hours dedicated with extremely high level of dedication & focus, with demonstrated productivity / outcomes, is lot more valuable, than 14 hours spent in-office or in-front of computer, with 6-8 hours spent on Facebook, Orkut or just chatting away or playing Farmville. However, if one does it with the intention of gaining traction in the Social-Network, for the organization, this is definitely useful & significant (okay, not including Farmville or Mafia-Wars). Significance, is a key term here as well, i.e. how significant is the work that you are doing, at the given point in time, given the current context of the startup. A person who sees himself as an out-n-out salesman, but not willing-to or able-to contribute in the grunt-work of coding, in a startup that is in very early stage of development, is not yet making significant value contribution. The same person becomes significant and critical ones the product / offering is ready to be taken to the market.

It is not too hard to imagine that the parameters mentioned above, are all quite subjective, and there is no absolute high/low, good-bad, too-less/too-much but relative between the co-founders themselves, and also subject to interpretation. Thus the final equity distribution would probably be subject to discussion, negotiation between the co-founders. How, I expect this post to help, is put some structure around this discussion, and knowing some of the key parameters, that should help put some reasoning behind the process. In spite of this analytical approach, it would be highly undesirable to have one or few of the co-founders harbor the feeling of being short-changed and thus distrust. This is the last thing one needs. Therefore, an amicable negotiation, and settlement arrived at early, for the share-holding pattern between co-founders is likely to prove to be a very good idea.

This post has been an attempt to capture some of my thoughts around the subject, but I do reiterate that readers are welcome to (rather encouraged to) share their thoughts and leave some constructive comments.

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Unique ID (UID) for India, inclusive Banking, thanks to mobile-VAS

In my previous post on the recently concluded Mobile India 2010 event, I had mentioned that Integra Micro Software Services was the second runners up. Their product was an ICT based Rural Banking enabler which permitted the use of Smart-cards and biometrics (fingerprint) based authentication for such a service, which permitted Banking transactions s.a. operating a Saving-Bank Account, to deposit or withdraw money. Such services were facilitated by a trusted intermediary/operator, who physically disburses cash, or collects deposited cash, there-by acting as a semi-ATM.

Their award couldn’t have come at a more opportune time, as Mr.Nandan Nilenkani seems to be very keen to enable Micro-payments, for the rural unbanked, under the ambit of the UID (Universal ID) project, as per this article. While there is definitely a strong logical relationship, between the UID project and Rural-banking project, and is definitely a very positive move, I am amazed at the similarity in terms of procedures adapted, pieces of technology suggested, when you compare with with Integra Micro has done, or are doing.

Quoting Mr.Nilenkani:

“This will create a whole new paradigm in the financial inclusion process. What we propose is really creating, in effect, a low cost, high volume equivalent of an ATM network. This device will be based on a mobile phone connection and would be made available at every BC. Customers would just have to get their identity authenticated and withdraw or put money into their bank accounts. This money will not come from the ATM, but from the cash drawer of the BC.”

This is a tremendous opportunity for people like Integra Micro, but what remains to be seen, and will be interesting is how the UID’s approach to the secure, unique ID, and that already chosen and implemented by Integra Micro, or some of its competitors match. I believe it shall be imperative, for such companies to adopt the UID’s technology of choice. Integra Micro is well placed because it’s approach to the unique and secure customer identification in form of Smart-card and biometrics (fingerprint technology), are much in line with the initial messages coming out of the UID camp. Way to go.

Mobile Telecom Industry in India, A perspective, from Mobile India 2010

Attended the COMSNETS hosted MOBILE INDIA 2010, with the event being titled ‘…for success in mobile VAS‘. Came to know about it thanks to the registration post on the MOMO-Bangalore list, a day before the event. The COMSNET event was held in Hotel Chancery Pavallion, Bangalore on 8th January 2010. Unfortunately got late in starting from home, and thanks to Google-maps, I lost another 30mins. Google-maps shows this hotel being somewhere behind ‘Bangalore Central’, however it turned out to be on F.M.Cariappa Rd (Residency Rd.) closer to the Richmond Circle flyover instead. So much so for accuracy. But, to be honest, this is probably the 1st time Google maps had let me down.

Anyhow, by the time I reached the ‘Grand Ball Room’, Sailesh Rao (MD, Google India & Voice Platforms AP)’s speech was getting over, which was the opening keynote. From the looks of the packed room, people standing on the fringes, and almost pin-drop silence, I could sense that I’d missed something very interesting. From the trailing end of the discussion, realized that he had talked about some kind of a spike in mobile-internet usage at Google sites, the day Aircel (I think) opened up mobile-internet service. Of course, Vishal Gondal (CEO, Indiagames.com) added a very flamboyant & somewhat-controversial angle to that ‘spike’, explaining what customer was actually doing, but more of that for later. Will try to add links to other blog-posts that I may find on this part, once I find some.

The first panel discussion was around Personalization and Social Network Technologies and Strategies for Mobile Services. The discussion was anchored by S R Raja (Sasken), and the panelists were V.Venkatesh (Bharati Airtel, CEO – Karnataka Circle), Alok Goel (Product Manager – Mobile Partnerships, Google), Vishal Gondal (Indiagames.com), Harish Gandhe (Canaan Partners). The theme chosen was supposed to revolve around Personalization, Social Networks and Community Development.

Raja started off by sharing something he heard of (ed: someone exaggerated, I think), that companies (ed: Telcos?) today are able to track / find-out where one is, with who he/she is, whom that am talking to, i.e. their spouse or the spicy-third person etc. This was to set the tone on how much data the Telcos have, that could be used to harness very deep and detailed Customer-Information. Well, I am sure the technology to do a lot of that (snooping) exists, but whether of not Telcos have those features activated, and if someone (without something like a court-order) can do any of such snooping and deep customer-behavioral analysis, legally, is doubtful. Anyhow, the point is, technology to do so, and the data that could be collected from various sources (not just call-logs) can be correlated and mashed together to arrive at very insightful information about behavior of particular subscriber(s). Usually though, Telcos and most other companies tracking consumer behavior track the behavior in a more generic fashion, and for a large group — i.e. a segment (could be a niche segment), without associating specific names or identities of the users.

Venkatesh (Airtel) did mention that Airtel (as many other operators), does collect some detailed demographic profile information of Postpaid subscribers (thanks to a probably more thorough and rigorous credit-worthiness check etc.), and somewhat sketchy demographic profile information for Prepaid subscribers. His take on personalization was greatly elucidated by a very pertinent example he shared of the Airtel ‘Ghar-ka-Radio’ service. With this service, a migrant worker (say from North, working in a Southern state), can listen to the Radio station (on Circuit-Switched Voice, I guess), of his home-state, and not the state where he is subscribed to the service. I am sure, this may be a good way to personalize all IVR interactions and customer-care interactions as well. During the ensuing discussion, Venkatesh shared the fact that Airtel is apparently launching a Mobile App-Store (the favourite theme of the season), with 800+ applications, and subsequently when I asked him a question on whether (& how) Operators will ensure that the ‘very rich’ set of customer information/intelligence which is gathered/available to the Telcos, does not get misused by over-zealous mVAS developers/application vendors, who are out to grab the larger share of the pie and limelight, and need to out-do each other, there-by needing to make their ware more and more smarter, by using more-and-more deeper customer specific personalization data. Especially so, as in India the regulators (to the best of my knowledge) are yet to form some privacy and consumer-data protection regulation. To that, Venkatesh’s response was that this was one of the aspects, which got sufficient focus on part of the operator, and one of the reasons the App-Store is taking time. Apparently the release is scheduled to be around Feb’2010 sometime. I wanted to ask the same question to Google, in spite of it’s do-no-evil policy, but then, we ran out of time.

Alok, the Product Manager from Google, had his take on the evident synergy between social-networks, smart phones and cloud-computing in the coming times, which is going to drive the customer-experience and innovation in the mobile VAS field. To stress on the increasing capabilities and computational power of Smart phones, he showcased (ed: and showed-off!!) the Google Nexus-One, Android based Smart phone. He talked about the increasing power and capabilities of such phones, which can “see” (5MP cam), “hear” and “feel” (touch sensing), apart from lot of other capabilities. This comment did set me thinking on what a powerful combination this makes, and how the Smart phone is probably getting exponentially Smarter than me, and possible ways in which it could even outsmart me. We’ll kept that for another post. Interestingly though, in spite of showcasing Nexus-One, I think I also saw an Apple iPhone in Alok’s hand. Alok talked about the floodgates of information and knowledge that such Smart phones will open-up to the masses, provided the mobile-internet becomes affordable for the masses. I did like a tag-line that Alok used, in describing the future of mobile-VAS, i.e. “Hyper personal social experience”.

Vishal Gondal, founder/CEO of Indiagames.com came out very strongly and in a very flamboyant manner, on what he felt was probably the real reason for the spike seen by Google, the day Aircel opened up mobile internet for it’s subscribers. He felt that instead of the subscribers accessing Google for it’s information and knowledge/utility oriented services, they probably were looking to download free bootleg mp3s, and some sleazy content for free, and reality is, that is what majority of Indian consumers using mobile internet want. While I felt that Vishal definitely had a point there, but the statement and it’s attitude was bit trollish, and drew a bit of a flam-war with Alok. Past history has definitely shown us in pretty certain and clear terms that ‘Entertainment’ that too mostly Bollywood driven is probably the strongest mobile-VAS segment, that has seen a big pull, from the Indian masses and has been monetized well. However, as most panelists eventually agreed, it had to do a lot with our culture, and also bit with our maturity in using the phones in “other ways”.

Harish Gandhe, from Cannan Partners (an early-stage VC firm, for those who don’t know), who has had been with Airtel in past and have heard him in other similar forums and have immense respect for his views, which I felt were quite moderate, realistic and inclusive. He talked about the need of Smart phones becoming affordable, and not just data-plans and the need for some technology driven innovation in the mobile-VAS segment, as the market for the messaging based VAS (shortcodes), entertainment/infotainment (ABC of mVAS) was pretty saturated, due to it’s low entry barrier. I think, broadly there was agreement within the panel that, while Entertainment in it’s several forms has been and shall continue to lead the demand curve in mVAS bouquet, but increasingly we should some information/utility and enterprise mVAS service pickup, and contribute significantly to the revenue growth. This would be fuelled by launch of 3G, provided the rate-plans are affordable as per Indian standards (and in line with the 1paisa/second type of rates we are paying for voice-services today). This would fuel innovation in the mVAS ecosystem, and that would leverage the abilities to Personalize the services thanks to social networks and behavioural data, using the power of the cloud.

The second panel discussion of the day was around a topic titled — Convergence and Mobile Broadband. This discussion was moderated/anchored by Karthee Madasamy (Qualcomm Ventures), and the panelists were N. Chandrasekhar (BSNL – Consumer Mobility, Marketing-VAS, Karnataka Circle), Zubin Dubash (Tata Teleservices), M Thiyagarajan (MoMo Bangalore), Amit Mehta (TCS, Head of Marketing and Sales, Mobile VAS), XXXX (Ed: XXXX replaced Zubin, forgot to note his name). Convergence now being an (at least) 5 year old story, by myriad of meanings associated, based on whom you ask and in what context, has the expected debate. While at the panelists shared an interesting set of aspects about how they defined or saw convergence, and how they felt, it could be fueled by the advent of mobile broadband, thanks to 3G, or not.

Thiyagarajan made an interesting point that the evolution on the device front, especially in this country, has been much faster as compared to the evolution on the network side, i.e. network has not kept pace in enabling enough features, that the devices support. Amit had a couple of interesting anecdotes about the ways in which we are already seeing a whole lot of convergence. Of course, when one goes to such events, one expect much of the discussion to centre around FMC, i.e. Fixed-Mobile Convergence, but glad to see that we have broadened our definition of convergence, and instead of talking of purely the technology driving the convergence, we did talk a bit about how this convergence is making a difference to the end-users. In this regard, Chandrasekhar made an important point that with a single-bill, a single-customer care number, a homogeneous IVR to interact with, and a single payment made for multiple services, consumer is the one benefitting from this convergence. I would have liked to see a bit of discussion around how the innovative bundling of services is impacting the total service uptake, reducing churn and impacting the ARPU, compared to the same parameters observed for each of the services individually. Put another way, is the whole (bundle’s impact) greater than the sum of all parts (different services) ?

The usual debate around whether or not, video would ultimately drive the adopting and usage of mobile broadband, was there. IMHO, depending on handset features, especially screen-size, the cost of circuit-switched video (H324/M), video can really play a tremendous role, more-so, I believe, for non-entertainment applications. Of course, the usual suspects, entertainment, s.a. Bollywood clips, and Sizzling news items will continue to rule the roost, but will be hard to monetize, unless operators impose strict walled gardens.

In another event that I attended last month (IMSAA’09, held at IIIT, Bangalore), a gentleman (discussion panelist, on the subject around Future of Mobility), from a large & renowned Tier-1 European operator had shared a rather radical view, that they were happy with the growth of Mobile Internet traffic, and not scared or worried about becoming dumb bit-pipes, with the services residing either on handsets (aka iPhones and Android devices of the world), or the Cookie-monster and it’s brethren. They are happy being a bit-pipe provider, for as long as they can monetize the growth in traffic, in proportionate terms. That seemed very pragmatic. Thus, I asked the question to Chandrasekhar, on what he thought about the existing feeling in the Indian operator community, i.e. whether they are willing to open-up and not worry too much about becoming bit-pipes. I liked Chandrashekhar’s pragmatic response, citing that what future holds is possibly a rather synergetic & sustainable ecosystem of players, including the operator, the content-providers, and the likes of the cookie-monster.

The third panel discussion was around — How Entrepreneurial Mobile VAS Companies Can Partner for Success. I have to admit, that this was one that I was awaiting quite eagerly. This panel discussion was anchored by Gulzar Azad (Google India), and panelists were Sandeep Sawhney (Aircel, Head New-Products & Innovation), Dilip Mehta (IIM Bangalore, Mentor at NSRCEL), Sanjay Swami (CEO, mChek), Vishwanath Alluri (Chairman & CEO, IMI Mobile).

Sandeep Sawhney started off by talking of the focus that Aircel has on mobile-VAS, and the fact which was out in the press just a day or two back, about Aircel and Infosys entering into a partnership, with Infosys hosting an AppStore plus developer platform, on behalf of Aircel. In a subsequent discussion thread, it was claimed that with Infosys running/managing this AppStore + DeveloperPlatform, it would become very easy for the Application developers to develop and publish their content, and would not have to deal with the operator. Technologically, I expect it be a storefront portal, developer portal over a Service Delivery Platform, but it is clear that it is hardly ever the enabling technology, but the procedures and policies they would ultimately matter. With another layer wedged in, the share of the revenue pie, gets thinner. And, this was one the pain points, that Dilip presented in a well articulate and passionate matter. He shared a very important statistic, i.e. until about 2-3 years back, at NSRCEL, he was receiving 3-4 (out of a total of 10 odd) applications every month, for startups seeking incubation services, who had an interest in Mobile-VAS. However, the current situation is apparently such that in the past 6 months hardly any applications have come-up, for startups with an interest in this space. He believes this is because none of them survived the revenue splice arithmetic. He reiterated the fact that the Operator’s dependency on mVAS and mobile-applications has reached an all-time-high, given the price-pressure on voice, thanks to the 1 paisa/sec (or even lesser) kind of voice-call price-points. With similar moves being discussed on ISD, STD and roaming front, voice-services turn in into true loss-leaders. With a stagnation of innovation in the mVAS and mobile-application section, thanks to the stifling thin revenue share available to small vendors, or application developers. He felt that there was a need for common uniting platform, to bring the ecosystem participants on a common ground, where all players participate on equitable or at least fair terms, that promotes innovation. On the topic of over-the-top VAS, Dilip cited the obvious fallout of monetization difficulty (charging difficulty), and somewhat cultural aversion of Indians (by and large) in using credit-card to make payments.

This is where, Sanjay (mCheck) came into the limelight, with mCheck and other similar micro-payment / mobile-payment companies being seen as the saviors. Sanjay took a moderate approach, and played a good devil’s advocate role, in putting some hard facts on the table, around the challenges that the operators are facing, and why they walk away with the lions share of the revenue, and why the rest of the ecosystem, and more-so, the application developer community needs to evolve and learn to deal with it. He agreed (and I believe in a much guarded fashion), that the micro-payment / mobile-payment that can be enabled for over-the-top VAS, is a possible side-effect of the service which they provide, and not something — by design. He expressed regulatory difficulties in increasing the bredth of the offering, to include more conventional banking services using this platform, but sure to be working to sort it out. He brought out a very key point, and that was about the impact of low-entry-barrier in the mVAS and mApplication on the quality of startups and their offerings. He stressed on the need to differentiate, and create sustainable differentiation and value-add.

Vishwanath (IMI Mobile), painted a rather dismal picture (to begin with) on how bad and unviable the mVAS ecosystem had turned of-late, in terms of revenue slices going from bad to worst, and some operators demanding advance payment of revenue-share, bank-gurantees etc., irrespective of whether or not the vendor makes any profit or not. While citing some report in ‘Financial Times’, London edition, which talked about the app-stores from the likes of Apple and Google, slowly eating their own children (i.e. the independent developers), he presented IMI Mobile’s plan to launch a platform which would potentially be better platform, to promote innovation in this ecosystem, in form of an App-Store + Developer-Portal, called ‘DaVinci’. Personally I would interpret (and hope) that as something which offers better revenue-shares and new business models.

To me, it is obvious that everyone, i.e. right from the Operator, to Content-provider/aggregator, to Handset manufacturer, to independent third-parties with deep-pockets wants to cash-in on the App-Store model. While the stores from Handset manufacturers have an inherent limitation in terms of offering applications for handsets from the particular manufacturer, the ones from Operators would typically have a walled-garden built around them. The content-aggregators, in the present settings have very limited freedom to work without going through the operators. We’d have to wait a bit to see indications of which ones would really survive, in a meaningful way. One thing though seems certain, and that is the key to the survival and success of such app-stores would be the: Richness, Bredth, Volume, Quality and Pricing of the applications on the app-store. And yeah, ‘exclusion’ isn’t going to work.

After the panel discussions, came what I was most excited about, i.e. the Entrepreneur’s Product Demos. There were 6 companies lined up. Demo Show Case Judges Panel comprised of Dr. G. Venkatesh (CTO & CSO, Sasken) and Sharad Sharma (Executive Council Member, NASSCOM). And, this is what they showcased:

  • Informate, with it’s Mobile Intelligence offering. Infomate is apparently a firm with focus on market research, and they have developed a small mobile application that sites on the handset, and silently takes note of various ways the user uses their phone, for example takes note of the incoming and outgoing calls (probably the SMSs as well), the time when they were made, the duration, and called/calling party numbers. It also takes note of the applications launched, how long you use them etc. This is a opt-in service, and people opting in (panelists, in the industry parlance) are told in advance about the information that will be collected, and they are given small incentives for the same, apart from the fact that they are able to observe their own mobile-phone usage on the website, just like post-paid users (who get a bill, or can check their bill/detailed usage online). They clarified that while this is an opt-in service, to ensure a quality of the sampling corpus, they hand-pick the panelists, and thus claim a reporting accuracy of 94% with a small panel-size of around 2000 (ed: IIRC). The outcome of the data-collected are some intuitive reports about how certain demographic segments are behaving in terms of their mobile phone usage. One important point to note is that, this application was available only for a set of Smartphones. The audience provided couple of interesting ideas on how their on-mobile “snooping” software could be used, s.a. for regulatory / law-enforcement purposes.
  • Eterno Infotech Pvt Ltd., with it’s product — NewsHunt. They had a very compelling presentation. Eterno has built a mobile platform which can help creating mobile applications that interact with users in vernacular languages, even on mobile platforms that natively do not support the vernacular languages, especially so, some lower end phones. Using this platform, they have created an application called ‘NewsHunt’ which which fetches and shows the current news from vernacular newspapers (Indian, so far — example: Dainik Jagran, Ennadu, Dainik Bhaskar etc.) in vernacular language. They had some excellent testimonials, and have a very strong support from Nokia, and won aware on Nokia Forum. Apparently, within some 3 months of their launch, the no. of downloads of their application on GetJar.com has exceeded that of other NewsReaders applications. They have created a good ecosystems of news feed providers (live from newspaper companies), and have revenue share arrangement.
  • Motvik Technologies, showcased it two products — ShowLiv and CMobi, mobile applications. While one is a live screen-capture for the mobile, the other allows live streaming video (with recording facility) on a social-network type website, to share the video with others. Excellent for creation visual user-generated-content. They showcased a video of a marriage ceremony recorded in some remote part of Andhra Pradesh, available on their website, which was shared with potential viewers. I think they have some good technology showcased there, and they have a good approach of identifying individual vertical markets to customize and license their software for. This takes them off the collision course with the likes of YouTube.com.
  • Airme, with it’s offering called Photowall. Airme seems to have already had some good traction with their offering called Photowall, since they are a featured service on MSN. Using the Photowall service requires one to download a small application to their handset using which they capture a photograph, and upload it immediately to multiple social-networking sites, with or without a voice-tag, a textual tag entered by the user. While uploading it also adds some interesting contextual information s.a. the location and weather in the city. The upload also happens to myphotowall.com, where they have a global photowall showing a mosaic (of sorts) of a large no. of most-recent photographs uploaded. They claim an upload time of less than 15seconds. They also have some kind of a collaboration / group-publish features, where 8 people can publish content to the same account, simultaneously.
  • Meragana
  • VoiceTap’s offering Expert Chat, is what the presenter claimed as being a way & platform, for knowledge / expertise seekers to get connected to independent experts, who are community reviewed and community rated (for their expertise). The platform uses the phone as the access device, and the Interactive Voice Response (DTMF and speech-recognition, using OnMobile’s Media Servers), as the mechanism for searching for experts and then getting connected to them. ExpertChat system acts as the mediator/broker and also ensures that expertise feedback is collected promptly, s.t. expert is rerated in near real-time, for their effectiveness.
  • Integra Micro Software Services, with it’s rural Banking solution. They had one of the more elaborate demo arrangements, since they showcased a purpose-built device, which was apparently an ICT based rural banking enabler. It addressed the needs of extremely safe, secure, robust device for performing monetary transactions (s.a. withdrawing money, similar to what you do with an ATM), from an SB account, Loan account etc., just as you would in a regular bank, we are so used to. The bank customers (in rural areas) are issued multi-purpose Smartcards, and so are the people who pay-out money (operators?, merchants?). The device uses voice-interaction in vernacular language to help rural illiterate (or semi-literate) customers to transact safely and easily. The authentication of user requires bio-metric validation of thumb print. It was quite clear during the presentation that it was a very well thought-out and mature product, in terms of functionality and applicability to the rugged rural settings. For example the ability of the device to work in places where power and connectivity are not guaranteed or continuous. They had a very impressive list of nationalized banks who had already deployed their device and the overall banking solution, all over the country.

The verdict — Eterno’s NewHunt was declared the Winner, and Integra Micro Software Services’ rural banking enabler was the Runner’s-up. I doubt there was anybody in the hall who would disagree with the ranking, although all other demoer’s had reasonably interesting offering.

I had attended the Mobile India’ 09 even as well, which happened in a smaller hall, with smaller attendance and was really impressed with the growth. Also, IMHO the quality of the panels was quite good. The thing that I really liked this time, was there was no (or very little) product-pedalling (apparent or direct), during any of the panel discussions. Events where you pay to get in, and then land up hearing sponsors spooning out their wares, feel so vain. This event, gladly wasn’t so. The discussions were one of the most open and honest I’d seen so far. That’s a very welcome change. A particular observation that I do have about most such events in India in general, is that they have a very ‘instructional’ setting. The audience is treated mostly a bunch of students, who are here to learn by asking question (and network during the tea/coffee/lunch breaks), and panel-members are the instructors. IMHO, the interest in such events, and their relevance would increase considerably if audience participation is encouraged further, and not limited to only asking questions, but to also making statements (sharing opinions) seeding further discussion. Also, time allotted to such questions was a bit too less, is what I felt. Other than that, just loved the event, and would like to congratulate all the organizers, including our friends from MOMOB, who did a fabulous job of pulling off another great event.

Comparison of Indian ISPs

The comparison of prices, bandwidth, high-level terms & conditions of the internet connectivity services provided by ISPs anywhere is a real maze. For the Indian market, I’ve created a simple MS-Excel worksheet, alas WordPress doesn’t allow me to upload it. So, if you feel that this data could be handy, you could click on the following thumbnails, to view the full-size tables, as images. Note that these prices are from February’2008.

ISP Comparison Table (Part 1) ISP Comparison Table (Part 2) ISP Comparison Table (Notes & Legends)

Incase, if you are interested in the Excel sheet, leave a comment.

In there, you would notice WiMAX services, from Reliance. I found it, when Google popped up an AdWords placed ad, during my ISP plan & review searches. Subsequent to it, I have also come to know that TataIndicom (rechristined as TataCommunications) also has launched WiMax services. Read the reviews regarding the quality-of-service being provided. I’d grade (based on the reviews), the WiMax services as still largely, “in-trials” with lots of initial hiccups etc. If that were not the case, I’d have happily switched to WiMax, but still haven’t.

Mobile Internet penetration in India

Mobile Internet, means different things to different people, and the answer depends on who you ask. People may relate the term “Mobile Internet” to a wide variety of service, technology, device or access mechanism. Fundamentally, it is Internet-access with mobility. The most common usage of this term however, refers to users who access Internet using their cellular mobile handsets, excluding those who treat their mobile handsets as a modem connected to their laptops.

Let’s take some apples and oranges first. Inspite of the fact that in India PCs & internet connectivity for end-users have been around for longer when compared to mobile phone  & cellular services, the reality as most of us know today is that the number of mobile phones in India, far supasses those of PCs and especially those that are connected to the Internet in some form. Of course, not all mobile handsets currently in use in this country could be used to connect to the Internet, however the number of GPRS enabled phones (from the GSM camp) in use can hardly be called insignificant. Similarly in the CDMA camp, for a while most handsets are data-capable, although some are capable of browsing only operator’s portal, and not reach out to the general Internet. Even with GRSP enabled handsets, of the fraction of total subscribers having such hand-sets only a smaller fraction really subscribes to GPRS data services to connect to the Internet, while another small fraction uses the operator portal for accessing content. So, the question is, why is mobile-internet penetration so low in India ? Is this in-line with the global trends of mobile-internet penetration and market uptake ? What are the reasons for the level of penetration in this country ? What could change or improve the scenario ? Today we briefly expore and try to find answers for these question.

The low penetration of Mobile Internet could probably be attributed to the following reasons:-

  1. Handset capabilities.
    1. Small screen-size,
    2. Small keypad. Things like T9 / iTAP are probably okay for short messages, but for anything longer or with a mix of alphabets, numerals and symbols — they are still fairly painful. Even QWERTY keypads with minute keys make typing very difficult.
    3. Browser availablity,
    4. Browser ergonomics,
    5. Processing power & memory,
    6. Multi-media capabilities etc.
  2. Connectivity experience.
    1. Bandwidth available,
    2. QoS (very variable bandwidth availability, variable latencies etc.),
    3. Availability,
    4. Network Coverage
  3. Handset costs, for handsets which support somewhat usable browsing experience, are still 10K+, so not for the masses.
  4. Compelling content & that too at a price that people can afford or are willing to pay.
  5. Connectivity cost.

And IMHO, the reasons are more-or-less in that order of severity.

Note that 1st and 4th are a generic problem, world-wide (though many people don’t want us to believe that Compelling-content is an issue). Points 2nd, 3rd & 5th, are specifically relevant in the Indian context where next-generation high-speed mobile-internet connectivity is still a pipe-dream.

However, one feels very optimistic in this country because, once the spectral wars have died down and regulatory bodies brought some sense of semblence, the roll-outs of high-speed mobile networks should start happening. A lot will depend on the what price-points the handset manufacturers are able to offer. Volumes can do many tricks. Once more capable, mobile-internet friendly handsets become available at prices that people can start feeling very compelled to replace their current handsets, a mass market for mobile-Internet should crack open. Given the kind of love we Indians have for cricket, movies, songs etc., Entertrainment would probably be a big driver.

MVNO, in the Indian context

Mobile Virtual Network Operator (MVNO), are sometimes also incorrectly known as Mobile Service Providers (MSP). MVNO’s do provide Mobile services to subscribers or enterprises, however they do not own core network infrastructure. Some large & well-established MVNO’s do own some infrastructure s.a. Value Added Service (VAS) infrastructure or Service-Control infrastructure, however – not a very common thing. The MVNO’s buy discounted air-time in bulk, and make their money by rebranding & reselling air-time. MVNO owns the subscriber information, and takes care of customer-care, marketing and most importantly billing. The reason why MSP is not same as MVNO is because, while all MSPs are not MVNOs, all MVNO’s are MSPs. A telco’s owning the core network, are also MSP’s, but the term is loosely meant to refer to MVNO’s.

MVNO’s offered a good & profitable business-model few years back, when they were introduced. Take ‘Virgin Mobile’ for instance. The success, led to MVNO’s sprouting up like mushrooms in moist grasslands. The excellent marketing momentum, the differentiated service offerings and service levels that that large and generally established brands created in form of MVNO’s, slowly started losing steam. In a few years, as the mobile telecom industry’s average ARPU’s were dragged by gravity, and customer-churn ruined profitability predictions,  the Telco biggies owning the core-network, saw the (by-then) somewhat ailing MVNO’s as easy prey. While the weak died or withered-away, the better of the lot got consumed by the brick-n-mortar Telcos. It gave the Telcos immediate (large) subscriber-base. As a result, the reality today is that very few MVNO’s are doing well or even surviving.

Now with the phenomenal growth of mobile subscriber base in India and China, MVNO’s are getting attracted to these markets. Of course in India, regulatory constraints limit the operation in true MVNO model, however, a smart exclusive Franchaisee model is being adopted. The Franchaisee model and MVNO model are however not necessarily first cousins. While we need to wait to see how the model plays out in India, the difference that one may expect are that the customer-care and billing are not operated by the MVNO(-like) Franchaisee, but by the host Telco. Some “patch-on” branding will be possible (e.g. Franchaisee branded post-paid bills, or franchaisee branded SIM-card packs & recharge-coupons), however, it may not have the same impact of a true MVNO’s all-pervasive branding. And then, if the Telco’s were to host the rather ‘costly’ liability of customer-care & billing, the amount of discount they would be able to offer to the Franchaisee wouldn’t be in the typical range of 20-25%. As anybody could guess, most Indian telco’s are already under a tremendous cost-pressure. Another factor is that the churn in Indian Telcom industry is generally driven by one strong factor, i.e. “perceived cost/minute”. Quality of service, or quality of customer-care, differentiation in terms of Value Added Service availability or even coverage, are not highest determinants.

Net-net, it does not take a lot of imagination to analyse the viability of the MVNO / Franchaisee model, and predict the outcome. However, it could certainly make the already competitive Indian mobile telcom market, hotter.