Startup lessons from IIT-Delhi's first experiment11 min read . Updated: 24 Sep 2019, 08:09 PM IST
- Seventeen years ago, IIT-Delhi’s first startup was born. Its journey is a mirror to India’s startup ecosystem
- What happened to Kritikal matters because it is a window to a larger story about the world of Indian startups. Running a business in India is hard
Bengaluru: In early 2002, Dipinder Sekhon was in the final months of his five-year course in computer science at the Indian Institute of Technology-Delhi (IIT-Delhi). Sekhon, who was born and raised in Jabalpur, a small town in Madhya Pradesh, was one of the brightest students in his class. He had completed a fruitful internship at Mobileye, the pioneering Israeli technology startup that develops technology for autonomous vehicles.
Sekhon and a few dozen other students in the computer science course received an email from a professor, M. Balakrishnan, urging them to attend a forthcoming lecture on technology entrepreneurship. The lecturer was A.K. Sengupta, then managing director of the Foundation for Innovation and Technology Transfer (FITT), an organization that acted as the link between IIT-Delhi and industry.
Despite Balakrishnan’s enthusiasm, the students were indifferent. At that time, technology entrepreneurship or entrepreneurship, in general, wasn’t considered a viable career path for engineering students, unless one happened to belong to a business family.
Still, in deference to their professor, Sekhon and about 15 of his classmates attended the lecture in the spring of 2002. At the lecture, they were exhorted to continue staying in India rather than go abroad to study further. They were asked to consider technology entrepreneurship. Indian-origin engineers had helped build some of the largest technology companies in the US. Why not build a world-class technology firm out of India, Sengupta, the lecturer, asked of them.
For Sekhon and six of his classmates—Anoop Prabhu, Ashwani Gautam, Jatin Sharma, Nishant Sharma, Nishant Sharma and Soumyadeb Mitra (none of the Sharmas are related)—attending the lecture would turn out to be a fateful decision that has shaped their lives ever since. Instead of taking up employment or enrolling in a Master’s programme, they paid heed to Sengupta’s advice, banded together, and decided to launch a new venture. Five of their professors joined the seven students. In all, there were twelve co-founders—a very large number that would bring accidental benefits many years later.
The venture’s aim was ambitious, just as Sengupta had preached: to build technology products of the highest quality, as good as Google, which was on its way to achieving global fame back in the early 2000s. They didn’t have one idea for a product, they had several. Unschooled as they were in the ways of entrepreneurship, they decided to pursue all of them at once. One of the professors, Balakrishnan, came up with an appropriate name for the venture: Kritikal, an amalgamation of two words—kriti, which means creation in Hindi, and kal or tomorrow. The name encapsulated their desire to create futuristic technology products.
In August 2002, Kritikal Solutions Pvt. Ltd was incorporated as a company, becoming the first technology firm to be launched on-campus at IIT-Delhi, at least in this century. In the following decade, graduates of the college would go on to launch some of India’s biggest startups such as Flipkart, Snapdeal and Zomato. But while the founders of these firms were still in college, Kritikal was already in motion, striving to realize its mission of creating cutting-edge technology products. Even today, 17 years after its launch, the firm’s vision remains a work-in-progress, and Kritikal, somewhere lies in the grey space between success and failure.
What happened to Kritikal matters because it is a window to a larger story about the world of Indian startups. Running a business in India is hard.
Kritikal’s story is in equal measure heart-warming and cautionary. Encouraging, because with very little external funding —about ₹2 crore in all of its 17 years—th company has built a profitable, enduring business. It employs about 100 people, and has even spawned a subsidiary, Vehant Technologies Pvt. Ltd, that ironically is far bigger than its parent firm.
But it is also sobering: for all its toil and grind, Kritikal is still a small firm. Its reality is far removed from the cycle of easy money, massive fund raising, fast growth that is typically associated with internet and technology startups. In the startup world, lesser-known than the term “unicorn" is its Animalia brethren, the cockroach, which refers to companies that continue to persevere for years, even decades, embrace struggle despite finding little success. Most startups end up as cockroaches or failures; even a small degree of success is improbable, and only the rarest of the rare become unicorns. In this millennium, Kritikal can be called the mother of all cockroaches.
Kritikal’s journey is representative of the fact that for every Flipkart and Zomato, there are thousands of struggling ventures. Since 2007, more than 30,000 technology startups have taken off in India, according to data with Tracxn Technologies, a data analytics firm. Of these, less than two dozen firms have achieved unicorn status and a few hundred companies have crossed a valuation of $10 million.
Yet, Kritikal has survived, and continues to produce high-level technical work in areas such as computer vision, artificial intelligence, and internet of things. It has designed impressive technology such as underside car scanners; an OCR (optical character recognition) system that can be used for automated reading of number plates of vehicles, documents and books; electric vehicle chargers; and home automation systems.
In August 2002, seven IIT engineering graduates and five professors put up about ₹10,000 each to get Kritikal started. Since someone had to act as chief executive officer (CEO), it was decided that Sekhon should hold the title. The initial funding of ₹1.5 lakh came from the Technology Business Incubation Unit (TBIU), which was set up by IIT-Delhi in 2000 to promote entrepreneurship.
Kritikal set up shop inside the IIT-Delhi campus, building an office in the space provided by the TBIU, which also paid for computers and furniture. For these services, IIT-Delhi was compensated in equity shares and still holds about 5% in the firm.
Within a few months, Kritikal was on the verge of running out of cash, as its founders chased wild product ideas in their respective areas of specialization, such as computer vision and embedded systems. Chaos reigned as impressive academic theories couldn’t be converted into viable commercial business propositions. Sales efforts were haphazard. “Five professors and seven students—it’s too large a group. We were all from salaried, middle-class backgrounds. Not one of us had any business sense. (And anyway), five professors can’t agree on anything," Balakrishnan said.
The lack of early success, or even signs of it, wasn’t lost on the team. In 2003, one of the founders, Soumyadeb Mitra, gave up after recognizing the firm’s bleak prospects.
But soon, Kritikal would finally sign up a paying client. One of the professors had made introductions to Xerox ModiCorp, a joint venture between Xerox and an Indian entrepreneur, Bhupendra Kumar Modi. Kritikal was commissioned to make a blueprint for an office device that could host a printer, scanner, fax machine and other hardware (all in one). Xerox ModiCorp eventually collapsed because of corporate governance issues and the blueprint provided by Kritikal for the office device wasn’t commercialized, but the project did breathe some life into the firm.
Other projects, both from private companies and government agencies, started trickling in as Sekhon, the CEO, gradually imposed some order and set up a functioning sales team. Within the first few years, Kritikal realized that to survive it must take on projects regularly instead of waiting for a product idea of theirs to take off. From wanting to build its own technology products, the focus now shifted to collaboration and consulting work.
Entrepreneurs typically do not end up applying the specific technological areas that they studied in college. Not so with Kritikal. Its co-founders had studied computer vision, which involves replicating human readings of digital images and videos by computers or embedded systems, and they focused on the same areas at Kritikal.
A 2003 project with a government department involved helping build a vehicle underside scanner that could be used by security personnel to check cars and other vehicles for bombs. Kritikal would install cameras inside a road, which would scan the underbody of passing vehicles. The images could be examined on a connected device nearby. The scanners designed by Kritikal turned out to be an unexpected success. The company’s product cost ₹25 lakh, a third of the price of a rival product. Kritikal’s scanners were used at the residences and offices of chief ministers, central government ministers and bureaucrats.
This product, the company’s most successful initiative, is now showcased at the entrance of IIT Delhi. In its early days, the company was even part of campus lore. "Most graduates chose to go into employment and the preferred choices were companies like McKinsey, BCG and Schlumberger as they were the best pay masters. So, Kritikal Solutions was well-known on campus because it was a pioneer in the sense of students taking up entrepreneurship," said Pranay Gupta, who passed out of IIT Delhi in 2005, and co-founded 91springboard, a co-working startup, in 2013.
In 2005, Kritikal decided to spin-off a unit that would be dedicated to designing the underside scanners and related security and surveillance products. It was named Kritikal SecureScan, later renamed as Vehant Technologies. Two employees who had led the development of the scanner, Kapil Bardeja and Anoop Prabhu, became co-founders of the new company in August 2005. Vehant also received funding of ₹50 lakh from Amit Goyal, an entrepreneur and a former client of Kritikal’s. Soon, Kritikal, too, ensnared a financier, raising about ₹1.5 crore from Nucleus Software, an information technology firm. It sold a stake of nearly 30% in the deal. By now, Kritikal had grown to 25 people. It was time for them to move into a new office, and they rented out a property in Sector 16 in Noida.
The company’s struggles didn’t end though. Vehant would take as long as three years to find a substantial number of clients for its surveillance technology, while Kritikal only chugged along despite the funding round.
By late 2006, just as the firm had settled into the new office after delays in securing the lease, it was hit by a shocker: Sekhon had decided to quit. He had a vague desire to contribute to the development efforts in India, and narrowed down on a career in public policy. It seemed as if Kritikal’s false starts wouldn’t end.
Sekhon’s departure, and the handover to the new CEO, Jatin Sharma, another co-founder, was managed over a period of a year. Sekhon left around the middle 2007. He obtained a dual degree—Master of Public Policy, studying at the Sciences Po institute in Paris and at the London School of Economics and Political Science the next year. By the end of the course though, he changed his mind about wanting to work in public policy. Influenced by books such as The Road to Serfdom, written by the Austrian economist Friedrich Hayek in defence of private enterprise and attacking government involvement in the economy, Sekhon decided to return to the private sector. He rejoined Kritikal in 2009, not as CEO but in the role of director, planning and strategy. But he spent nearly half his time working for Freedom Team of India, a political organisation started by Sabhlok to further the cause of liberalism in India.
In the early part of this decade, Kritikal became heavily reliant on government departments for business. More than half of the company’s revenues came from defence-related tech research. It soon became evident that the sales strategy was flawed.
In 2013, the company was suddenly hit by a liquidity crunch. Payments by the government were delayed. The margins on these contracts were anyway much lower than the firm’s private sector work. In the second half of 2013, Kritikal found that it would fail to meet the salary payments to its 40-45 employees. The founders and senior employees of the firm were forced to reduce their own salaries and defer taking them for several months until the firm rebuilt its cash reserves.
The crisis was the last straw for two of the co-founders, CEO Jatin Sharma and chief technology officer (CTO) Nishant Sharma. Their exits were body blows. They had been the firm’s most committed workers apart from being the highest-ranking officials. It compelled the firm to consider the possibility of closing down. But it was decided they would continue. Sekhon returned as CEO and the other Nishant Sharma, another co-founder, became CTO. “Everyone had families and responsibilities and all that, and Jatin and Nishant felt that it was not feasible for them to continue," Sekhon said. “It is never easy when a founding team member leaves but we have always had spare capacity to absorb the departures, as such, because we had this advantage of a large founding team."
After Sekhon became CEO again in 2013, he rapidly moved the firm away from government-related work. Over the next five years, Kritikal signed up with consumer goods companies, retailers, electric vehicle makers, and other private sector firms. Since 2013, revenues have tripled, reaching around ₹15 crore in the year ended 31 March, Sekhon said. Its spun-off unit, Vehant, has taken off in a far bigger way. The firm generated around ₹50 crore in revenues for the year ended 31 March 2019. Documents with the Registrar of Companies show that Vehant is also a highly lucrative business: it earned a net profit of ₹11 crore on revenues of ₹45 crore in 2017-18.
Three members of Kritikal’s original founding team—Sekhon, Nishant and Ashwani Gautam—continue to be at the firm; Anoop Prabhu, who had moved to Vehant when it was spun off in 2005, continues to be that firm’s CTO. The five professors continue to provide mentoring and advice, and one of them, Anshul Kumar, is chairman of the board at Kritikal.
It could be argued that apart from Prabhu, who earns significant dividends at Vehant, the remaining founders at Kritikal would have accumulated a lot more wealth by taking up employment instead of slogging away at their startup. Yet, Sekhon affirmed, “No regrets, certainly."
Today, he and his team is convinced that the firm’s best days are yet to come.