Who is the Indian tech entrepreneur? Are there traits that characterise the brave ones that take the leap of entrepreneurship in a tough market like India? Do founders with work experience fare better and does this vary by sector? Do founders from specific schools have an edge when it comes to fund raising? Do graduates from certain schools show better entrepreneurship capabilities than others? Are certain founder types better equipped to build a B2B versus a B2C business? Is there a difference in the fund raising ability of female and male founders? Does ability to fund raise extend to exit outcomes?
What was surprising to us was the total lack of data to support or refute many of these questions. Lots of anecdotal viewpoints and small sample sizes based on what one saw at individual VC firms, but hardly any data intensive analysis over a reasonable time period that could paint a more accurate picture.
With this in mind we collated granular data on every tech startup in India that ever raised more than $2M in funding since 2005. This covers 448 companies and 987 founders. The $2M cut off is arbitrary and used as filter for a meaningful sample size of founders who have managed to raise a round of capital generally needed to build a scalable business. We agree that fund raising is not the only criteria for start-up success but given the early stages of the Indian venture ecosystem evolution, it seemed like a reasonable filter.
The answers are not a short cut to finding the next great entrepreneur or the next innovative business model. What it does provide is a window into history and how tech-entrepreneurship is evolving in India. It also raises interesting points of debate – if VCs are funding cookie-cutter entrepreneurs, whether entrepreneurs are just chasing me-too models, and the relationship between funding, ability to attain profitable scale, and exits.
We broke up the analysis along a few major dimensions -– work experience, academic background, sectors, business model choices, fund raising, and exits. Complexity comes from the inter-relationships so we are presenting our analysis by anchoring on each dimension and highlighting relevant cross-dimensional data points.
This first post focuses on founder work experience. In follow on posts we’ll pivot to founder academic background and funding. At the end of this write we have shared our data approach and methodology for those interested in the approach.
The myth of the inexperienced start-up founder
A common image of the Indian tech entrepreneur is a twenty something with an IIT/IIM degree straight out of school or with just a couple of years of work experience. This is far from reality. The average work experience of the Indian founder who has raised $2M or more since 2005 is around 10 years. This encompasses 432 companies and 955 founders, whose work experience data was available in public domain.
We further broke this by founding year cohorts. The average work experience of an Indian founder moves around a bit but not dramatically from the 9-11 years range. The average work experience of founders in 2015 and 2016 seems higher because of our $2M+ funding raised qualifier. There are many companies that did not make the cut off of November 2016 as they were in the process of raising a follow on round. This contributed to increased averages for 2015 and 2016. However it may also be a hint that founders with more experience may raise funding faster. We have plotted the entire distribution in the chart below.
Prior work experience does not seem to influence magnitude of capital raised
The graph below represents the relation between avg. founder experience in a company and the funding raised by company. On the X axis, we have the founding year to see if there had been any trend in this data over a period. The bubble sizes represent capital raised and are evenly spread across the length of Y axis across years, suggesting that there is not a strong correlation between funding raised and work experience of founders. The largest 3 bubbles (Flipkart, Snapdeal and Ola) are very close to the X-axis where avg. work experience in the founding team is approximately 2 years. There is something to be said about technology based disruption and youth. Many of the biggest tech startups successes globally Google, Facebook, Snapchat, and AirBnB were started by founders with limited work experience – which probably allows innovative technology solutions unhindered by traditional thinking and past failures.
Founder work experience by sector
There is broad dispersion in terms of founder work experience by sector. Certain sectors such as Legaltech, Healthcare, Fintech, Enterprise Software, and Logistics etc. have founders with work experience well above the average. These tend to be complex industries where there is significant value in having deep understanding of the domain. New age areas like online travel and food tech are at the opposite end of the spectrum. Foodtech companies such as TinyOwl, and Zomato have founders with lower average prior experience at 5.6 years. This data is simply a snap shot of what has transpired to date and the averages across sectors. There are several examples globally and in India of tech innovation and successful companies having been founded by entrepreneurs with no prior domain expertise.
We took the top 3 sectors with the most founders – Ecommerce, Enterprise Software & Tools, and Fintech to see how founder backgrounds differ. We have only considered the last company where the founders worked before starting on their own. Consulting firms such as Mckinsey, BCG etc. are bucketed under Consulting – Global; companies such as Cisco, Microsoft, and Trilogy are bucketed under Tech – Global. Second time founders are in Ex-Founder category; and founders who were employees at a prior start up fall under the Startup – India or Startup – Global categories.
It is interesting to note that in Ecommerce, a majority of founders were associated with the startup ecosystem in some capacity before founding their own companies.
In Enterprise Software & Tools which includes all SaaS companies such as Freshdesk, and Networking companies such as Aryaka, many founders (43%) cut their teeth at global tech companies (Microsoft, Amazon) or Indian majors (Infosys, Wipro).
Fintech is a complex sector where in addition to solving for volumes or reimagining a better consumer experience, entrepreneurs need to navigate the maze of complex regulatory oversight in the sector. One in every three founders in fintech who has successfully raised over $2M previously worked at a financial services company – Global (Citi, Barclays) or Indian (ICICI Bank, HDFC) etc.
Founder work experience and choice of business model
It is generally believed that B2C companies dominate the Indian startup landscape. This is not supported by data. Since 2005, 239 B2C companies and 209 B2B and B2B2C companies were founded which raised more than $2M+. It was not surprising to see B2B and B2B2C have higher average founder work experience than B2C. Selling to businesses, especially in India, is tough. In the B2B space, founders with some prior work experience seem to have have greater success in getting things off the ground – hiring for enterprise selling roles, alliances, and networks to open doors for initial pilots.
Large company mafia
We wondered if there are large enterprises in India that nurture entrepreneurs of the future. Do these companies enable networks that later benefit their alumni when they start their entrepreneurial venture. Our data based on those that have staying power to raise over $2M in funding shows that Microsoft is the most successful platform. There have been 14 start-ups founded by ex-Microsoft employees that have gone on to attract seed and series A funding. This is followed by Amazon, Yahoo, and Mckinsey. This list of the top 10 platforms shows that tech companies and consulting companies (Mckinsey and BCG) are major contributors to the Indian start-up-ecosystem. What does not yet make a splash on the list are the alumni of large Indian startups – Flipkart, Ola, and Snapdeal. We see a lot of entrepreneurs that have cut their teeth at these firms and it’s a matter of time before they make the top ten list.
Founders experience and exits
We took a look at the top exits among India tech start ups and founder experience at the time of starting. The vast majority of the exits seem to reflect companies with experienced founders. However its interesting to note that Directi which was one of the larger tech exits did not raise any funding and had founders with limited prior work experience. Again a strong argument that the truly disruptive solutions often emerge from first principles thinking and when not coloured by past experiences in the industry.
In our next post we’ll discuss founder academic backgrounds and data derived relationships to funding, business models, and exits.
Data and methodology:
We created a comprehensive data set covering parameters such as undergrad alma mater of the founders, last company before they started their entrepreneurial journey, sectors, exits and work experience. This data set was primarily created using the data available via CB Insights, Tracxn, Linkedin, Venture Intelligence, and Crunchbase.
We analysed 448 companies which were founded in the year 2005 or later and which had raised $2M or more until November of 2016. These companies had a total of 987 founders which we used to create founder specific data sets. The companies in our data have raised a total of $18.2B across 1153 deals over the last 10+ years.
Correction: We heard back from the Directi founder Divyank Turakhia and he was kind enough to correct an error on our part. Bhavin and Divyank sold Directi in 2014 for $160M to Endurance International. We had incorrectly stated that Directi was sold for 900M. It was Divyank and Bhavin’s next venture, Media.net that was sold to a Chinese consortium for $900M (but this was not an India based business). We have corrected the table above to reflect this.