In 2-3 years we expect startups to shift focus from consumer internet to core technology: Rajesh Kumar, head of Tata Elxsi's INCUB@TE

17 Jul, 2015

Even as the Indian IT industry celebrates a startup wave and India is being lauded as the country with arguably the third-largest startup concentration globally, here is an incubator finding it difficult to spot early stage companies that it can bring on board.

Tata Elxsi, an engineering design and services company that is part of $100 billion Tata conglomerate, had launched its startup incubation centre INCUB@TE in early 2013. It has so far incubated only three companies while the fourth one is just about to be on-boarded.

However, Rajesh Kumar, vice president, strategic initiatives, Tata Elxsi, believes it is just a matter of two-three years for India to see core technology startups proliferating. A computer science graduate from IIT Kanpur and 18-year-veteran in Tata Elxsi, Kumar overseas the company's INCUB@TE. He has shared with his view on startups in core technology areas. Excerpts:

What was the driving force for Tata Exlsi to start an incubator programme?

We are a design company. We primarily work with product and solution companies providing engineering services and design. In the process, we accumulated good amount of experience on product development working with established companies and startups from the US.

Our primary offering is in the area of emerging technologies. At any point of time we would be working with at least 8-10 startups. We have worked with 60-70 startups in the US in areas such as semiconductor development, developing software layer of semiconductor, building software components and full solutions starting from mid-2000. Along the way, we thought should we not look at a business model which is not headcount-driven where your revenue is linked to the number of people work on your projects. While our core business will remain in IT services, having gained experience in product engineering and startups, perhaps we can collaborate with startups and have some kind of financial interest and promote them as our path towards products and solutions.

What is your experience working with the US startups?

The challenge of working with startups, be it in the US or anywhere, is that the risk is very high. You don't know their trajectory. The changes in product focus, ad hock and unplanned actions as they keep responding to market and other stakeholders, unpredictability of their financial position etc are challenges. Today they are pretty well-off and they give you a project. You don't know their financial position by the time you deliver the project. But we enjoyed working with them.

What is the track record of your incubator programme?

We announced our incubator initiative in mid 2012 and formally launched it in 2013. We have so far incubated three companies. While the first incubatee cloud telephony solution company Big V Telecom graduated six months ago, two others—hospitality technology solution provider Sismatik Solutions and mobile tech firm Street Smart— are still in the incubation stage.

What is your approach in selecting startups for your incubation programme?

We look for firms in automotive electronics, broadcast and consumer electronics, consumer electronics and communication. Within these, we are looking for startups which are market facing with their product and solution but their strength is in platform.

You launched INCUB@TE in early 2013, but you have incubated only three startups so far. Why?

Our handholding is for longer duration and therefore we will select only a few. But that is not the reason why we have only three. The reason is that we are not getting too many. We do not want to stop at three. We would like to go to six-eight, but we don't find too many choices. In India, you don't have too many startups which are coming from core technology sectors. In e-commerce, you are using technology to make a difference and that is required very much. But that is not our focus area and therefore we have been selective in startups we work with.

How is the pipeline for the INCUB@TE programme looking like?

The fourth startup will soon be admitted into INCUB@TE as selection has already been completed. The startup that works in Wi-Fi technology was chosen from the previous batch of Nasscom 10,000 Startups Programme. We are waiting for it to cross one of the milestones. Most of its work base is in Hyderabad. It has to close one product development cycle before we onboard it. Relocating it in the middle of that will be a distraction for the firm.

And we are evaluating some from the latest batch of the Nasscom's startup programme.

How do you look at the journey of startups incubated at your centre?

The focus of Big V Telecom is to scale up and it got 30 enterprise customers which include small offices and institutions. As for other two companies, every fortnight they are getting investor calls and one of them got two serious acqui-hire offers. We want them to scale up before taking such strategic steps.

Going forward, what is the prospect of core technology startups in India?

The moment e-commerce market saturates, the scene is going to change drastically. We believe it is a matter of a few years. Right now, funding is coming in consumer internet so that the courage of conviction is missing to jump into core technology areas. We strongly believe it is a matter of two-three years for the shift in focus to take place. Suppose Smart City becomes a big project you would see any number of IoT startups coming up in India.