(From left) Ravi Narayan, MD of Microsoft Ventures; Karthee Madasamy, MD of Qualcomm Ventures; Jayanth Kolla, founder and partner of Convergence Catalyst; Leslie D’Monte, technology editor, Mint; Rahul Chandra, co-founder and MD of Helion Venture Partners and Arvind Tiwary, chair, IoT forum, at The Indus Entrepreneurs. Photo: Ramesh Pathania/Mint
(From left) Ravi Narayan, MD of Microsoft Ventures; Karthee Madasamy, MD of Qualcomm Ventures; Jayanth Kolla, founder and partner of Convergence Catalyst; Leslie D’Monte, technology editor, Mint; Rahul Chandra, co-founder and MD of Helion Venture Partners and Arvind Tiwary, chair, IoT forum, at The Indus Entrepreneurs. Photo: Ramesh Pathania/Mint

Start-ups must find their own sweet spot

If an Internet of Things solution fundamentally solves a business problem, then it is highly valuable and can be adopted

Investors are warming up to the idea of the Internet of Things (IoT) as more start-ups emerge in this space. While IoT as a concept has been around for a while, Kevin Ashton, a British technology pioneer, is credited with coining the term. Start-ups, meanwhile, are taking advantage of IoT technologies and developing innovative products and services that are catching the eye of investors, according to experts who participated in a panel discussion at the IoT event organized by Mint on 16 March. The panellists included Ravi Narayan, managing director of Microsoft Ventures; Karthee Madasamy, MD of Qualcomm Ventures; Rahul Chandra, co-founder and MD of Helion Venture Partners; Arvind Tiwary, chair (IoT forum) at TiE (The Indus Entrepreneurs) Bengaluru; and Jayanth Kolla, founder and partner of research firm Convergence Catalyst. The discussion was moderated by Leslie D’Monte, technology editor of Mint. Edited excerpts:

Narayan: Companies are beginning to implement IoT in the consumer space because that is where they are able to identify problems and are able to relate better. However, if a company is out there solving a business problem, serving consumers within an IoT infrastructure, it may not necessarily be called an IoT company. Start-ups take a very puristic approach when it comes to IoT, in terms of what the exact definition is and what it consists of. While there may be a definition of IoT, a lot of companies may be creating solutions and getting traction, but they may not consider themselves fitting into the IoT space. IoT will come out in four phases—operational efficiency, pay for use, pay for outcome and the whole economy using it. There will be an issue regarding product versus services IoT companies. Product companies in the IoT space may need to watch out on their design, and services companies may get stuck by not being able to create the right product. We will go into combined business models and we need to keep in mind that security and privacy issues must be tackled and thought of.

Chandra: There are many start-ups coming up in the IoT space, which provide different solutions in the space, but the problem is these IoT solutions are too small to be meaningful. The last thing a venture capitalist (VC) wants is to invest in one-time hardware device kind of companies. What we are looking at is how do you convert that product into a continuous revenue chain.

Madasamy: We have already done five IoT investments globally and I am not as sceptical as the others are. IoT as a word has come into existence recently, but the solutions are being provided for quite some time now. If an IoT solution fundamentally solves a business problem, then it is highly valuable and can be adopted. Some of the things that we see in India are around manufacturing, floor automation. We usually don’t have much of an idea of how these machines are working and our IoT solutions are improving efficiency. The things that an entrepreneur must keep in mind is that there should not just be a one-point solution, but also there must be a solution for efficiency and cost.

Tiwary: I am very bullish on youngsters working in wearables devices and funding is available easily for those working in the home automation space. IoT is not a proven technology—there is no proof, it is a discovery. Discovery is at both the consumer and supply levels.

Kolla: With consumer IoT, we are entering into an era of intelligent machines, with machines talking to other machines, from the information era that lasted almost 25 years. In all the eras, the disruptive initiatives have been led either by the governments or the investors. The next bunch of start-ups have figured out that there’s no point in competing with a Nike or an Apple.

Chandra: There are toothbrushes being made with sensors that can tell your brushing habits and how you can take better care of your teeth. The world will become one full of sensors. However, that raises concerns about security and privacy. While India is still dealing with lack of set standards and interoperatibility, it needs to be prepared for getting monitoring regulations in place. Many Indian IoT start-ups that provide healthcare services, serve US customers through pre-orders. Last year, the US Food and Drug Administration put in place special screening rules for healthcare wearables. India needs that kind of preparedness.

Kolla: India in the IoT space is still at the alpha stage, while worldwide it is at the 0.3 beta stage. By the time IoT becomes mainstream and pervasive in our lives, it’ll be in version 4 or 5. The good thing is that there are around 415,000 dedicated IoT developers globally and 40% of them are in India and China. With sensors’ price dropping, not only new companies, but also existing companies are taking advantage of it. We have seen in mobile era, people who had platform won. Crowdsourcing innovation and creating platforms have been important in the mobile era or post-personal computer era.

Madasamy: The companies need to go through three, four generations to get it right. Companies have their own hypothesis about what really would work with consumers and then quickly make alterations. A consumer solutions company would have to have it in its DNA to make changes quickly to actually meet a need. The company should be able to justify that why its solution cannot be brought in by an international company and why has it been made fundamentally for India. If the companies have those mindsets, then funding is available.

Chandra: It is important for companies to create a first blast of consumers where you are reading the demand by pre-orders or crowdfunding—a good indicator of what the outside demand is. Information just for consumption is not going to be interesting beyond a point unless there is an ability to create an ecosystem and the information is tied up to an actual use case. How a company thinks about the device and the ecosystem that uses the device is the thought process that will make the business model interesting.

Tiwary: Start-ups shouldn’t worry about VCs as they come in very late when the company is trying to grow. Companies must worry about establishing their sweet spot, features, prototype and operational advantage. First, it is very important to make good teams that are very multi-disciplinary, but unfortunately we don’t have too many industrial houses and designers, prototype builders to help companies source a lot of stuff. Companies can get manufacturing done in small volumes. They should get a budget for three-four years as deciding features and pricing are important things and take up a lot of money. For that, start-ups need to have support from angel investors.

However, what must be kept in mind is that winning awards and moving from one incubator to another does not help, and it takes away a lot of focus from creating the proposition and owning the product proposition value. If companies get it right, eventually funding will happen even if it is not a VC. Funding is available to grow once the price point and proposition is created.

ashna.a@livemint.com

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