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16�THE ECONOMIC TIMES | BANGALORE | FRIDAY | 16 MAY 2014Power of Ideas

Low-cost-housing company Brick Eagle is now turning incubator to companies that operate in the sector. Company chief executive Rajesh Krishnan said they realised the need for an ecosystem to at-tract buyers to low-cost housing projects after being unable to clear inventory.Brick Eagle has already invested

in a branding and communications company to build low-cost real-estate players’ brands, a business process outsourcing company to sell flats at upcoming properties, and a maker of interior design software and interior contractor.It has partnered with a local

developer Eiffel Developers and Realtors to create an upcoming township in the outskirts of Pune. A teaser campaign led to Brick Eagle’s first investment, in brand-ing and marketing company Xeco.

“That low cost housing in India will be big is something everyone knows. But there is no ecosys-tem to make it mainstream,” said Krishnan. Krishnan and his team evaluated what are the basic services required in making, sell-ing, and buying a house at a sub-`15 lakh price. When a project is launched a sales team is required for the first two or three months

after which there is not much work for it. This made Brick Eagle fund a business process outsourcing ven-ture Phalcomm.Vishwanath Phalke, who is

currently chief executive of Phalcomm, was working on Xrbia when he and Krishnan mooted the idea. So far, for an investment of ̀ 2 crore, the company has sold around 450 houses through 25

operators at the Phalcomm centre. Phalcomm makes 1.5% of each transaction.The third Brick Eagle venture

is an interior designing and tech specialist firm JBR Interio Technologies. The company tar-geted low-cost housing interior decoration through its brand Infinite Idea. Shailesh Goswami, its founder and an ex-IBM verti-cal leader, is creating a portal on which clients can tinker with their interiors on a 3D tech model. “We are looking at three seg-

ments. The first is a traditional in-terior design business, the second – smarter small homes – because low cost doesn’t mean cheap, so furnishings are plush and the third smart urban designing,” said Goswami. As a result, Brick Eagle will buy 49% in Goswami’s compa-ny over two tranches. The first ̀ 3crore, and second ̀ 7 crore, soon after the online portal is launched.

DEEPALI GUPTA

THE COST FACTOR (`)

Salary of a Fresh Graduate/Engineer (per month)

Commercial Space /1,000 sq ft

Total Monthly Cost for a 10 member startup

Cost of Compliance Lawyer/Accountant fees for managing local/central taxes

400,000350,000300,000250,000200,000150,000100,00050,0000

Starting Up in Bharat

Away from big city lights, scores of young Indians are starting new ven-tures, encouraged by the rising needs of middle-class citizens and the

global reach that technology offers. In cities like Bhopal, Lucknow, Coimbatore, Vellore, Siliguri and Jodhpur, many young graduates from lesser-known universities and colleges are churning out products and services for customer at home and abroad.

These businesses, ranging from food delivery and enterprise software development to robotics training, are using the internet to connect with vendors and reach customers.

“With basic infrastructure avail-able, you can start an online busi-ness from any city,” said Navneet Chaudhary, the 21-year-old founder of Trainkhana, a food delivery ven-ture based in Jodhpur.

Fed up with the bad quality of food provided in India’s trains, Chaudhary, a third-year en-gineering student and son of a local farmer, launched the venture last year. He bor-rowed ̀ 1.5 lakh from friends and family, and travelled to almost 90 cities and towns to tie up with local restaurants that now deliver quality food to travellers. Users who log onto the portal’s website have to just enter their PNR number or train journey details. The food can also be ordered through its call centre.

At present, TrainKhana earns revenues of ̀ 1 lakh every month. “The money is sufficient for our 10-mem-ber team in Jodhpur, where the costs are low,” said Chaudhary.

Experts are of the view that small-town entrepre-neurs are hungrier for success and have a clearer view of the problems that ordinary Indians want solu-tions for.

“Small-town entrepre-neurs come with at least more 10 times more pas-sion and a fire in their belly,” said Vijay Shekhar Sharma, cofounder of One97 Mobility Fund. The $100-million fund has invested in ventures such as mobile security firm WaveSecure, mobile pay-ments startup MobiSwipe and ecommerce platform ZEPO.

Sharma, who hails from a small village near Aligarh, Uttar Pradesh, has built a ̀ 200-crore company that provides mobility so-lutions and has raised capital from global investment firms including SAIF partners and Intel Capital.

The lack of job opportunities outside the metros is also push-ing many to start up on their own. Bhopal-based Nemesh Singh struggled for over three years to land a job after his graduation. Fed up with failures, Singh and three batch-mates decided to start Appointy – a task scheduling appli-cation. The five-year-old company now grosses about $40,000 per month (`24 lakh) in revenues.

“With pervasiveness of the inter-net the location of a startup doesn’t matter now,” said Singh, who is targeting revenues of $4-5 million in 2015, from over 58,000 clients, all based in the US.

“We don’t want to move out of Bhopal due to the low cost of op-erations and quality of life,” said Singh, 34, who has rented a 4,000 square feet farmhouse for his 10-member team at ̀ 20,000 per month.

Such opportunity is beckoning even non-resident Indians who are not averse to settling down in non-metro locations which they believe

Building a Business Beyond the Metros

Bangalore may still be the startup capital of India but dozens of entrepreneurs are heading to smaller cities and towns of India to set up technology-led companies, find Harsimran Julka and Varun Aggarwal

Sapience Analytics, a Pune-based pro-ductive a productivity audit tool, was picked as one of the finalists at the Silicon Valley-based TiE conference, which sees participation from over a thousand tech-nology startups worldwide.Sapience will compete with 20 other

companies in the software category at the event to be held this week. The final-ists in each of five categories – software, mobile, internet of things, cleantech and life sciences – will make presentations, and 10 will be selected from each catego-ry to be declared as TiE50 Winners.The three-year-old company has

several large enterprises including IT firms and Fortune 500 compa-nies as its customers. Sapience’s technology audits the time used on vari-ous software allowing managers to split the computer time for each team mem-ber between work and personal activity.According to an IDC report, 30-40% of

web surfing in the office is aimed at non-work related websites.Last month, the company was also

selected as the top innovative company in InTech50, a meet-up of global chief information officers and 50 software

product startups from India. This has been a week of global recognition of Indian startups and entrepre-neurs.Naveen Tewari,

CEO of mobile ad network InMobi,

was featured in the list of top 100 crea-

tive people in the business in 2014 by Fast Company magazine.Tewari was in the list along with Mario

Queiroz, VP of products at Google, and comedian and actor Jerry Seinfeld.

Sapience Analytics Chosen Finalist at TiE Conference

offer better standards of living.“Talented research professionals

from across India are more willing to move to cities like Ahmedabad, owing to a better standard of living here,” said Apurva Shah, 45, who returned to his home town of Ahmedabad in 2005 to start the city’s first clinical re-search firm, VeedaCR, with ̀ 7 crore seed funding from friends and family.

“While there is 25% attrition in the industry, our attrition rate is just 8%,” said the management graduate from Boston University.

The company, with operations in Malaysia, US and Germany, earned revenue of ̀ 90 crore in fiscal 2014. It has acquired four companies in the United Kingdom and Belgium in past five years.

The growing number of regional air-ports is also helping the small town startup revolution. “Earlier we had to travel to Mumbai to fly anywhere overseas. Now we have connectivity to all major countries,” said Shah, who raised ̀ 50 crore from Actis Capital in 2007.

More investors are now keen to back such growth stories. “We actively scout for entrepreneurs and startups from small towns as they are more focused and understand the needs of Bharat than India,” said Bharti Jacob, founding partner at SeedFund, which has invested in Vaatsalya, a healthcare chain focused only on small towns of Karnataka and Andhra Pradesh.

“I tell people to take six months off and travel across small towns and villages of the Indian subcontinent to understand their real needs,” said Rajan Anandan, one of the most pro-lific angel investors in India who has backed over 40 startups. “The needs of people of Bharat and India are very different.”

Low operating costs is also a fac-tor for entrepreneurs who are re-locating to small towns. Last year Shanmugavel Sankaran, moved his company, Fixnix, from Chennai to Vellore, about 150 kilometres away. Apart from lower costs the town also hosts a number of engineering colleg-

es that provide a ready pool of talent.FixNix makes governance risk and

compliance software for firms such as Consim, Cipla and Hexaware. “Small town entrepreneurs should build contacts with the government and placement cells of local colleges, where they can get free incubation,” said Sankaran, 33, a former IT secu-rity manager at IBM and Microsoft.

Young graduates are all basking in the warmth of greater social accept-ance for startups.

After working for just ten months at a robotics and heavy machinery firm in Pune, Sakyasingha Mahapatra, moved back to his home town in Bhubaneshwar in 2010.His venture SakRobotix, sells robot accessories and provides hands-on trainings in robotics.

“For online education, it doesn’t matter where we are located,” said the 29-year-old, who expects his com-pany to earn revenue of ̀ 10 crore in two years.

harsimran.julka@timesgroup.com

1. Vellore-based Team of Fixnix Technologies, which makes governance risk & compliance software. Fixnix migrated ops from Chennai to Vellore, last year. 2. The founding team of Teabox - an online tea retail startup, based out of Siliguri, West Bengal. Teabox raised $1 million from Accel Partners, last year. 3. Bhopal-based founders of Appointy, Inc, which has 58,000 customers in the US.

THE ADVANTAGES: Affordable infrastructure and talent

Better recognition amongst local community

Seed money from family and friends is more easily available

Less employee attrition than metros

State governments of Maharashtra, Tamil Nadu and Kerala have schemes to help SMEs in Tier2 and Tier3 towns

THE DISADVANTAGES:High travel costs to other countries as some cities dont have regional airports

Disconnect with mainstream startups and investors in the sector

Unreliable power and slow internet speed can be big roadblocks

Corruption and bribery are a norm for things like service tax, labour law compliance and excise

Women security is a major concern in many small towns

TIPS: Pick a town with several technical colleges & connectivity

Outsource functionssuch as customer support

Build a network in local government

Travel often to metro cities to network and meet investors

Rope in a mentor/entrepreneur as a guide to measure your success

Invest in a leased line / good broadband connection and a power inverter

An office in a central location can avoid security issues

OUTSOURCING OPTIONS: FlexingIT

Guru

Elance

Odesk

Freelancer

ONLINE INVESTOR NETWORKS LetsVenture,

BankerBay,

AngelList

BEST PLACES TO OUTSOURCE CUSTOMER AND TECH SUPPORT: Philippines, Ukraine, Bulgaria, Argentina, Bangalore

NUMBERS THAT HELP

Tier-3 Town

Tier-2 Town

Any of 5 Metros

Akola, Jodhpur, Siliguri, Hubli

Lucknow, Ahmedabad, Kolkata,  Coimbatore, Vellore

Mumbai, Bangalore, Delhi, Hyderabad, Chennai

SOURCE: ET SURVEY

THE COSTS THAT DON’T CHANGE: IT & Telecom Costs: Prices of Computers/Servers/Broadband

COSTS THAT RECUR EVERY YEAR REGARDLESS OF LOCATIONDomain, Hosting, Cloud Storage, VAT/ Service Tax. (Some cities such as Delhi have waived off Professional tax)

3

1

2

933MILLIONMobile subscribers

243MILLION Internet users

50%

Cut in Intake by some large IT cos

Budget Builder Brick Eagle Turns Realty IncubatorDeal Corner

In Other News

Distribution of Housing Shortage Among Economic Categories (% in Millions)

12

10

8

6

4

2

0

TOTAL 18.78

EWS LIG MIG +

SOURCE: PLANNING COMMISION

56.239.5

4.3

Economic Category

%

Section

Economic Weakers Sec-

tion (EWS)

Lower Income Group (LIG)

Middle Income Group

(MIG)

Income

< `1.5 lakh per annum

`1.5 -3 lakh per annum

`3 -10 lakh per annum