Bangalore: Where are all the software product companies?

Through the 1990s and the 2000s, that was a constant refrain of critics of the Indian technology business.

Back then, it was difficult to find product companies (though some did exist).

Part of the difficulty arose from the mindset of the people looking for software product companies—they were looking for Microsofts and SAPs.

Part of it also arose from the absence of the required start-up ecosystem for product companies in India—the entrepreneurship culture on campuses, angel investors, venture capital firms willing to look at product companies, and the market itself.

And part also arose from the sheer success of Indian IT services companies that attracted the best and the brightest.

By the turn of the decade, though, things had changed. Indian IT services firms were stuck in a rut (although some since seem to have figured out how to get out of it). Several campuses had their own entrepreneurship cells and student start-ups were becoming increasingly common. The domestic market had grown and evolved. And the emergence of platforms such as the cloud and models such as Software as a Service (popularly abbreviated as SaaS) had acted as great levelers. In MintAsia’s first-ever exercise to identify software product start-ups, we have managed to zero in on some relatively unknown gems, although some of the names will be familiar to people in technology and investing circles. The list was put together on the basis of discussions with venture capitalists and angel investors, as well as firms that track the Indian start-up story, and then finally vetted by on-ground reporting.

It is our belief at MintAsia that some of these companies will grow and achieve greater things, even as we know that some could fall by the wayside or be acquired (although the last too would be counted as a success). Still, this listing isn’t a normal distribution of start-ups. It is a subjective sampling of companies from the higher asymptote of a normal distribution. These aren’t your average companies—they are India’s hottest product start-ups:

Started by three Indian Institute of Technology-Kharagpur friends—Aneesh Reddy, Krishna Mehra, and Ajay Modani—in 2008, a few years after they graduated, Capillary, which has tweaked its focus incrementally over the years has stayed true to the core: using mobile technology to help retailers interact with (and manage) customers.

In late 2008, they formed Capillary Technologies with an initial seed investment of around $3,500 from the incubator at IIT–Kharagpur. After six months, the trio knew exactly what the product had to be—InTouch.

InTouch helps gather information from all customers using short forms and decides when the customer can be contacted, and with what kind of information (such as offers, say)—all this based on the intelligent predictive analysis of the information gathered. The information itself resides on the cloud, and the interaction is built around the short messaging service (SMS).

“Intouch is an intelligent customer engagement solution with the end-to-end approach and linkages to social, mobile and clientelling based lifecycle management tools. It helps deliver tangible sales growth and a clear return of investment," says Reddy.

As they worked with more retailers, especially in India and other emerging markets, they understood their clients and their clients’ customers better. The result was a complete customer relationship management (CRM) product, replete with analytics and the ability to interact with customers through smartphone apps.

The market for customer management solutions in most developed markets is competitive and crowded with companies such as SAP, Oracle and Mobiquest. Globally, the market for such software is estimated to be worth around $500 million and growing at 20%, according to the company’s research experts. Capillary’s low-cost cloud-based offering seemed to strike a chord even in developed markets and today, its serves over 10,000 stores in 16 countries. Its clients include Marks and Spencer, Puma, and Nokia, each of which paid $50,000 for the product annually.

Capillary Technologies co-founder Aneesh Reddy.

“In the next few years, we want to expand globally and get a higher market share in markets like the US, the UK, APAC (Asia-Pacific) and build more products for omni-channel engagement and superior integration with social and mobile to deliver a better customer experience," says Reddy.

“Capillary represents the next generation of product innovation out of India, with category defining B2C CRM software delivered to clients around the world with an easy to implement package that shows ROI in weeks post deployment. The strong team and clear product market fit led to Sequoia Capital’s partnership with Capillary," says Shailendra Singh, managing director, Sequoia Capital.

MINTASIA’s TAKE: A local solution that adds to client-insight and helps the company go
global with a product—that’s an impressive progression.

Imagine losing all the data on your smartphone or tablet.

That’s the fear that drives the growth of products such as Druva’s InSync.

That, and the growing trend that is abbreviated as BYOD, where companies encourage employees to bring their own devices (BYOD stands for bring your own device) and hook this up to corporate networks.

Products such as InSync operate in a relatively nascent segment of the security market, called endpoint security (it is called endpoint because devices, including computers and tablets and smartphones are usually at the endpoints of networks). The market for endpoint security is estimated at $10 billion and is growing at a yearly pace of 8.3%. And Druva’s offerings compete with the offerings from other start-ups such as Copiun Inc. and also technology giants such as Hewlett-Packard Co. (HP), EMC Corp., and International Business Machines Corp. (IBM).

Founded in New Delhi in 2008 by Jaspreet Singh, a young graduate from the Indian Institute of Technology, Guwahati, Milind Borate, and Ramani Kotandaraman, Druva moved to Mountain View, California (where it set up its second headquarter) in 2011.

Druva Inc. founder and chief executive Jaspreet Singh.
Druva Inc. founder and chief executive Jaspreet Singh.

Soon after, it launched its first offering InSync, built around an algorithm patented by Druva that encrypts the bulk data on these endpoints, and stores them either on the host storage system or on the cloud. The two-factor encryption algorithm uses a doubly secure method, where one part of the decryption key resides with the firm and the other with Druva. That gives InSync an edge; a Gartner report dated 9 October 2012 rated InSync the best among 12 products from rivals (including IBM, HP, and EMC). Druva protects the data of 2,000 clients and 1.8 million devices. Some of Druva’s biggest customers are US space agency NASA, Nikon Corp., Compagnie de Saint-Gobain and ICICI Prudential Life Insurance Co. Ltd. “With the right set of people, solid vision and great backing from investors, we are realizing our vision of building a billion dollar business to solve core challenges around enterprise mobility," said Singh.

“Today’s enterprises need user-centric solutions that are tailored for the mobile workforce, and are as easy to deploy and use as new age consumer technologies, without compromising enterprise governance. Druva is an excellent example of global enterprise product firms originating out of India," said Jishnu Bhattacharjee, partner, Nexus Venture Partners.

MINTASIA’s TAKE: We like algorithms, and this one actually seems to do something.

In July, Bangalore-based Eka Software Solutions, a company that offers trading and risk management software to commodity and energy traders, paid around $20 million to buy Australia’s Matrix Group. The deal gave it access to clients such as Rio Tinto and a footprint in a country dominated by large commodity companies. It also came just a few months after Eka acquired Canada’s EnCompass Technologies for an undisclosed amount.

Both acquisitions are critical to Eka’s aspiration of being a global software product firm—although it counts the Tata group and the Aditya Birla group among its local clientele, it wants to focus on international clients, too, for its software suites that cost between $500,000 and $15 million, depending on the complexity of the supply chain involved. Eka remains privately held and didn’t disclose revenue or profit numbers.

Eka Software founder-chief executive officer Manav Garg. Photo: Aniruddha Chowdhury/Mint

The businesses Eka operates in—termed energy trading risk management and commodity trading risk management (or CTRM and ETRM)—are estimated to be worth around $4 billion, according to Eka’s internal research, and are growing at 11% a year. It’s a business that is dominated by firms such as OpenLink Financial, Triple Point, and SunGard Energy and Commodities. It’s an esoteric business for an Indian company to be in, and founder-chief executive officer Manav Garg’s background probably has something to do with that.

Garg, 39, graduated from New Delhi’s Indian Institute of Foreign Trade in 1998 and worked in the coffee trading business for two years. It didn’t take him long to realize Indian traders didn’t have either the supply chain or the risk management systems that their foreign counterparts did. “We are looking to be 400 people in the next 12 months. We recently opened an office in Singapore making our presence deeper in Asia," said Garg.

Today, Eka has 32 clients, 340 employees, and operations in six countries.

“Manav is a six sigma entrepreneur who is building a company that had the potential to be a global market leader at the time of our investment. Being a former coffee trader, he has a very deep understanding of customer needs and his product direction, setting and overall sales and technical leadership have led to many major customers going live on our solution," said Sandeep Singhal, co-founder and managing director, Nexus Venture Partners.

MINTASIA’s TAKE: Eka may be operating in a niche, but it is a good place to be in.

At the core of FreshDesk’s customer support software—which it sells as a service at between $16 and $40 a month for each customer service agent—is a simple premise: happy customer support executives make for happy customers.

That’s easier said than done. Customer support is one of those repetitive, mind-numbing tasks, albeit one that is critical to a company’s success, especially in the age of social media when an unhappy customer can amplify his or her angst on Twitter or Facebook.

FreshDesk does this by literally making customer support a game, but the frivolity suggested by that statement masks the seriousness with which the Chennai-based start-up approaches customer service, and the sound business logic that helped it focus its efforts on small and medium enterprises (although large firms such as Pearson Plc, ClearChannel Communication Inc, Toshiba Corp. and The Atlantic are all customers, too).

FreshDesk founders Shan Krishnasamy (left) and Girish Mathrubootham. Photo: Mint

Like several other offerings in the space, FreshDesk can help firms manage customers across email, phone, even social media. But it can also help them build communities out of such customers (which fewer rival software do) and it can break the monotony of customer support (which even fewer can do) by issuing badges, trophies and awards to customer service executives (or agents) based on their interactions with customers.

For instance, an agent who answers a customer query correctly, and in the fastest time, may win a SpeedRacer trophy. Globally, the market for customer support software is estimated at $18 billion, 37% of which is for support and after sales software, and is growing at 12.5%.

Over three years, FreshDesk has built a base of around 7,000 customers and has 120 employees. It remains privately held and didn’t disclose financial details.

“We want to provide everything a business needs to make clients fall in love with them," said Mathrubootham.

“We invested because it had a great founding team, an excellent idea in customer management and support, and a sizable global market. Girish and Shan were starting with a strong success building a scale business for global markets already," said Shekhar Kirani, partner, Accel India.

MINTASIA’s TAKE: There’s something very appealing about a company that tries to make fetch work fun.

The visual representation of data—and the more visual the better—is not a new trend, although it has really taken off in the past few years, partly as people try to make sense of data they now have on their hands, thanks to advances in computing and data mining and analytics, and partly as people try to make their websites more interesting. FusionCharts operates in this market, selling a product that costs, depending on whether it is a single-user software or a server-based application, between $199 and $50,000. The firm is privately held and doesn’t disclose its financials.

It may seem like a niche market—it is—and competition abounds. Google has a JavaScript chart offering, Google Chart Tools, as do other firms such as HighCharts, Charts.js, and Flot. But FusionCharts, used by almost all Fortune 500 companies (according to the company itself), LinkedIn, Google, and even US President Barack Obama (or at least, his people), is clearly a standout because it can embed into any office software application.

FusionCharts co-founder Pallav Nadhani.

Pallav Nadhani was 18 when he founded FusionCharts because he wanted more pocket money. His entrepreneurial journey started with an article he wrote for ASPToday.com, an online technology magazine, that spoke of a possible combination of animation software, Macromedia Flash and a business-like scripting language, JavaScript, to make a more interesting charting product called fXGraphs. His aim was to outdate boring, old-fashioned and heavy charts—like MS Excel. He used the $1,500 that he made from that article as a seed fund for his idea.

Developers from the magazine brainstormed if this hybrid was possible and, if yes, how they could build it. With many questions and some answers, Nadhani, who loved programming, wrote a code that combined JavaScript and Flash to build FusionCharts (dropping fXGraphs).

In late 2002, during the first seven days of the launch, they charged $15 per user—most of which went to transaction processing fees. The company incurred losses till Nadhani and Sanket Nadhani, co-founder and marketing head of FusionCharts, realized how to profitably collect money online. In 2008, Pallav Nadhani returned from the University of Edinburgh with a Master’s degree in computer science and hired more software developers interested in the firm.

FusionCharts charts come in different colours, shapes and sizes, and can be embedded into any application. They can also be used to build 3D charts and progress bars that dynamically change.

MINTASIA’s TAKE: FusionCharts could become a sleeper success or a choice acquisition
target. Either way, it works.

Making sense of data, or data analytics, is big business. According to market researcher Gartner Inc., the market is worth around $13.8 billion a year and is growing at 7%. It is a crowded market, with firms such as International Business Machines Corp. and MicroStrategy Inc. operating in it, but few Indian start-ups have managed to register their presence. One such is Manthan Systems. “What makes us unique is the way in which we bring the powers of statistical sciences, and enabling technologies to help customers, users make smarter decisions, of course, but also to optimize and/or automate underlying business process, and unearth patterns and associations, which otherwise are counter intuitive or remain subterranean," says Atul Jalan, the company’s founder and CEO.

Jalan is a serial entrepreneur. He founded three technology firms before Manthan—Micro Track Sciences, CyberTrek Technologies and Netkraft Technologies. At the time, Manthan, which means deep introspection in Sanskrit, was just the name of a folder on his computer—a place where he would store random thoughts.

Manthan was born after Jalan realized that data analytics was going to be the next big thing. This was back when Big Data wasn’t the buzz word it has become.

Manthan Systems founder and chief executive Atul Jalan. Photo: Aniruddha Chowdhury/Mint

“The timing was right, so was the team. Anybody who had the tools for collecting the right kind of data was very powerful and Manthan had it. For an Indian company to have all its customers outside meant it was a world-class product. I can say it with conviction today that we made the right choice," says Raj Dugar, managing director, FIL Capital Advisors India Pvt. Ltd.

MINTASIA’s TAKE: We have a thing for analytics.

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