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The Best of Startup Paradise 2019 - Hawaii Business Magazine

Posted: 02 Mar 2019 12:06 AM PST

28 profiles of entrepreneurs, startups and organizations that were nominated or won awards from the Hawaii Venture Capital Association.

Meli James, President, Hawaii Venture Capital Association; Founder, Mana Up | Photo: Aaron Yoshino
HVCA Awards
Deal of the Year
Entrepreneur of the Year
People's Choice Startup
Social Impact Entrepreneur of the Year
Clean Tech/Ag Entrepreneur of the Year
Corporate Intrapreneur of the Year
Startup Paradise Champion
Investor of the Year
Island Innovator of the Year
Tech Entrepreneur of the Year
Student Entrepreneur of the Year
CPG (Consumer Packaged Goods) Entrepreneur of the Year
Startup Paradise keeps growing and delighting us with creative ideas and passionate entrepreneurs.

By Steve Petranik

You will learn about many of these people and projects on the following pages, but I wanted to begin this report with an overview of the local innovation economy, so I interviewed Meli James, president of the Hawaii Venture Capital Association and founder of Mana Up. Here are condensed highlights from our conversation.

Petranik: How is HVCA helping to grow Startup Paradise and are you making progress?

James: HVCA has been in existence for 31 years, acting as a catalyst, encouraging conversations, fostering entrepreneurship, supporting education and highlighting important topics. Our luncheons and breakfast panels bring together business people, investors and entrepreneurs for discussions on new areas like medical cannabis, or on topics like innovation or the part played by accelerators and on industries such as fashion, food and energy. We frequently involve legislators and political leaders so they learn what's important to us, and we hear their strategy for supporting innovation, entrepreneurship and small business.

The Deal and Entrepreneur of the Year awards allow us to share new success stories every year, and we believe they provide motivation for entrepreneurs.

Petranik: What is the state of venture capital available for these startups in Hawaii?

James: One of the interesting changes is growth beyond traditional venture capital. There are mission-driven investments such as those Ulupono Initiative makes, banks are taking a broader look at loans, there's also private equity and social impact funds. Entrepreneurs can now look at a diversity of investment opportunities, whereas in the past they had to fit a specific profile to get investment. We're also seeing different types of pay-back structures for the investor.  For instance, Hawaii Angels is doing investments with royalties.

Petranik: What do you see as Hawaii's sector strengths that startups and innovation companies can build on? 

James: A good example is Elemental Excelerator with its eye on energy and ag and their focus on looking at solutions to local problems that have global impact.

The Maui Food Incubator is another example: It is focused on food products and value-added food products with a Hawaii origin. Mana Up is focused on local consumer packaged goods companies that exemplify the brand of Hawaii. Business opportunities from intellectual property created by students; faculty; and staff at the University of Hawaii, especially at the Burns School of Medicine and other strong departments like CTAHR (College of Tropical Agriculture and Human Resources), are promising.

With fashion, we're seeing successful entrepreneurs use culture and sense of place. We also are hearing that the way we solve problems in Hawaii offers lessons that can be learned throughout the world.

Tourism is also interesting: We have 9 million tourists coming here. How can we make tourism work for our community so we don't export as many of the profits earned from dollars spent here. Increasing visitor spending with locally owned companies could have a huge economic impact. 

Petranik: One of the categories for the HVCA awards is social impact. Do you see social impact startups as a big part of Startup Paradise?

James: Absolutely. Social impact startups and investors are part of a global trend. They look at the triple bottom line, quadruple bottom line. Good examples here in Hawaii are Ulupono Initiative and Hawaii Investment Ready with Lisa Kleissner and Neil Hannahs. Those are incredible programs that have a big emphasis on social impact. We now see a lot more submissions for the social impact category than almost any other category.

Petranik: What are the biggest obstacles to growing Startup Paradise?

James: Based on a roundtable discussion with many small business CEOs we just had, I think you can sum up the challenges as bureaucracy, labor and shipping. Bureaucracy in government makes it so hard to do business here. The cost of shipping to and from here is a challenge, as well as the lack of labor and access to talent.

"We have 9 million tourists coming here. How can we make tourism work for our community so we don't export as many of the profits" – Meli James, President, HVCA

And mindset: A lot of times entrepreneurs can think bigger. When we have more tangible success examples of small business, innovation and startups, we will see a mindset shift. About six months ago, I was talking about Mana Up with a venture capitalist in San Francisco and he said, "Meli, you need to think bigger." He called me out on it and I think I think pretty big. It was like, "Oh, I'm having to take my own medicine."

It's great that through these awards, through this storytelling, we're able to help create that mindset shift. It's not so hard to do here. You can hear all these new examples every year.

We have really smart people here, but I think we can create more of that critical mass of smart people. That's when you really see magic happen. If we create more companies that are owned and operated here – at least headquartered here – we can create the kind of C-suite talent that companies need and create even more revenue-generating companies that have high-paying career jobs.

In a lot of metropolitan hubs, people can jump from job to job, building different kinds of experience and growing their value and salaries.  Here, we don't yet have that breadth and depth of companies. When we get that critical mass of interesting jobs with adequate and motivating salaries, we will have an environment that allows people to enhance their value by moving from job to job or industry to industry.   

Petranik: What are the advantages of membership in HVCA?

James: If you're a founder and you're looking for a community of like-minded people, HVCA is where you can plug in to learn, network and be inspired. Or if you're in the business community or corporate world, HVCA provides inspiration, continual learning and offers a different way of thinking and solving problems. 

We have an award that we started a couple of years ago called Corporate Intrapreneur. This award recognizes that an entrepreneurial and problem-solving mindset is seen more and more as a skill for leadership in any kind of business. The award demonstrates how an individual can be an entrepreneur within his or her own company by seeing opportunities or finding solutions for inefficiencies.


Deal of the Year

Recognizes the Startup Paradise company that received the largest financial deal of 2018.


Rich Razgaitis
FloWater Inc.

Rich Razgaitis, CEO and co-founder of FloWater, is on a mission "to democratize water and decentralize water purification" by bringing people back to the tap. 

Because of FloWater's launch in 2013, 110 million fewer single-use plastic bottles have been introduced into the environment, Razgaitis says. Today, more than 1,500 of the company's portable water purification "refill stations" are used across all 50 states. 

FloWater received $15 million in series B funding in December from Blue Investments and a subsidiary based in Stockholm, and the Hawaii Venture Capital Association has named this its Deal of the Year. The money puts FloWater closer to "our intended goal of dismantling the single-use plastic water bottle industry," says Razgaitis. 


Entrepreneur of the Year

Individual or team that has gone above expectations with their company. A clear example to other entrepreneurs.

Steve Haumschild
Lanikai Brewing Co.

With successes ranging from renewable energy to extreme sports tourism, serial entrepreneur Steve Haumschild is now blending his passion for business with science at Lanikai Brewing Co. in Kailua.

Haumschild says Lanikai produces craft beers from Hawaiian grown ingredients, including locally "bio-prospected" yeast strains that will debut in a series of Hawaiian Wild Ales, soon to be distributed across the Pacific Northwest, Australia and Japan.   

He says he's devised the first all-electric commercial microbrewery design, reducing environmental impact and energy costs associated with traditional brewing. Haumschild has shared his technology with nearly 80 entrepreneurs.


People's Choice Startup

Chosen by the Innovation Community, this company is a model to others based on its successes, popularity and community support.

Keoki Tavares
Aloha Elixir

Keoki Tavares developed his line of botanical-based elixirs, sprays and candles in 2014 as a "tool for shifting energy from negative to more positive intentions."

Tavares says he is an intuitive consultant and psychic healer. "I'm one of the top intuitives in the country, and as my clients come up with issues, I wanted to create something tangible to help them heal."

According to his website, Tavares has always been interested in growing and working with herbs and native Hawaiian plants as part of his healer's journey. Aloha Elixir products are available at and eight stores across Oahu.


Rosalyn Ardoin
Little Hands Hawaii Sunscreen

Rosalyn Ardoin, nurse and founder of Little Hands Hawaii, developed her formula for an organic mineral sunscreen after she had her first child because she didn't want to put harmful chemicals on her baby's tender skin or into the ocean.

"It's important for me to provide something other mothers can trust for their babies," she says.

She says her husband, Little Hands co-founder Michael Koenigs, lobbied for passage of the Hawaii law that, in 2021, will make it illegal to use oxybenzone and octinoxate in sunscreen sold here because they harm the marine environment.


Troy Christopher Plota and Sascha Scheider 

On Valentine's Day 2018, self-described "founders of motion art" Troy Christopher Plota and Sascha Scheider launched Plotaverse, an app that allows artists, photographers, advertisers and social media influencers to animate and share HD quality images across all devices and operating systems.

Plota says top influencers including Paris Hilton, Ariana Grande, Kourtney Kardashian, Land Rover, GoPro and Red Bull have seen audience engagement increase four to five times with Plotaverse images. "Anyone can create their own reality."

Scheider says the company's first mobile app had more than a million downloads after being featured in the iPhone 10 launch.


Madame Donut
Donut Dynamite

Desiree Parada gained national renown as "Madame Donut" with her 2016 win on the Cooking Channel's "Sugar Showdown." She crafts artisanal brioche doughnuts from locally sourced ingredients at Donut Dynamite, her shop in Wailuku, Maui.

The graduate of the Culinary Institute of America in Napa Valley, California, worked for years as a pastry chef in high-end restaurants before venturing out on her own, with no business plan and just a tiny trailer plus a passion for making what she describes as the "humble" doughnut.

"I want to make fun food that involves the community," she says.


Steve Sakala
Mana Artisan Botanics

"Agriculture is the foundation of all culture," says Steve Sakala, co-founder and CEO of Mana Artisan Botanics.

Mana Botanics produces artisanal hemp extracts infused with locally grown botanicals at Sakala's Honaunau Farm on Hawaii Island. 

The farm also offers educational ecotourism retreats exploring the benefits of permaculture, CBD and hemp while providing "an opportunity to experience Hawaii outside of the tourist market, that keeps the dollars local and contributes to the maintenance of a sustainable farm," Sakala says.

His ag-research company, Green Hawaii Genetics, is growing hemp seed varieties for the state Department of Agriculture's Industrial Hemp Pilot Program.


Kelleigh Stewart and Brandon Damitz
Big Island Coffee Roasters

Portland transplants Kelleigh Stewart and Brandon Damitz purchased their Puna district farm in 2010 and taught themselves how to grow, roast and mill coffee.

Stewart says their coffee won the Hawaii Coffee Association's 2013 Statewide Cupping Competition, becoming the first farm outside of Kona and Ka'ū to achieve significant industry recognition.

Stewart says other industry accolades, certifications and successes rapidly followed, including a USDA grant that helped make commercial coffee grading available to neighboring farmers. Stewart says this "essentially put the Puna and Kau regions on the coffee growing map."


Social Impact
Entrepreneur of the Year

An entrepreneur or company that substantially contributes to helping solve some of Hawaii's toughest problems.


Josiah Akau
Kinai Eha

Josiah Akau says he formed Kinai Eha in 2017 as a nonprofit occupational skills training program to empower youths who did not graduate from high school "to become leaders and change-makers in their communities."

The licensed contractor and U.S. Army Corps of Engineers veteran has volunteered for years, working on wheelchair ramps and other home accessibility projects for kupuna he met while working as a fireman in Waimanalo.

Akau realized he could "bring generations together" while teaching valuable construction skills to at-risk youth – guiding them to build rather than burn bridges.


Liza Rodewald
Instant Teams

"We build remote teams for companies in a unique way by accessing the military spouse power pool," says Liza Rodwald, CEO of Instant Teams.

Co-founders Rodewald and Erica McMannes launched their employment services company in 2016 after personally experiencing the frustration of trying to secure long-term jobs when their military spouses are subject to reassignment every two or three years.

The company uses a proprietary application and vetting process that focuses on "culture fit, personality and skills matching," Rodewald says. The result is remote teams that meet both the employees' and company's needs.


Nohea Hirahara
Native Stories

Nohea Hirahara was on vacation in Rome when she was inspired to create Native Stories, a nonprofit that creates and publishes podcasts of native cultures through a mobile app and website. 

"I was listening to a mobile app in the Colosseum and I thought, I can totally now relate to this place because I understand it a little more. Once you start getting history and understanding of a place that's when you're able to connect."

Hirahara says she hopes her audio storytelling format will allow more people to easily access Hawaiian history, unadulterated by tourism and colonial perspectives.


Clean Tech/Ag
Entrepreneur of the Year

An entrepreneur and company whose technology supports a greener future or helps farmers with innovative agricultural practices.


Louis Concato, Brenden Millstein and Raphael Rosen
Carbon Lighthouse

Childhood friends and Harvard physicists Brenden Millstein and Raphael Rosen founded Carbon Lighthouse in 2009.

Since then, the company has used its energy efficient building technologies and services to help 600 buildings nationwide save money while reducing harmful emissions equal to the output of six power plants, says Louis Concato, executive account manager for the company's Hawaii office. 

A $65 million funding deal in October puts the company on track to mitigate the emissions of another 50 power plants per year by 2020, Concato says.


Fred Lau
Mari's Gardens

Landscaping contractor Fred Lau established Mari's Gardens in Mililani as an ornamental plant nursery in 1976. When his son, Brendon, graduated from UH in 2010 with a degree in tropical agriculture, the family business expanded into aquaponic and hydroponic food production.

It now produces 12,000 to 16,000 pounds of lettuce a month, plus cucumbers, tomatoes, tilapia and swai fish, Lau says.

"None of it goes off-island," says Lau, whose crops are served by dozens of restaurants and hotels and sold by retailers like Safeway, Foodland, Whole Foods and Down to Earth.


Ted Peck
Holu Energy

Ted Peck says most tech companies tend to operate on the premise: "That's our hammer, so everything's a nail." Peck says Holu Energy is different because it is "technology agnostic," so its solutions can involve solar, wind, hydroelectric, battery storage or other options.

Peck says Holu can deliver "stable, reliable, clean energy to low-income tenants in a way that is commercially viable." He says he's also assembled a deep bench of experts and a "global powerhouse" investor to develop a 400-megawatt offshore wind farm that could provide a quarter of Oahu's electricity by 2023.


Corporate Intrapreneur of the Year

A person who creatively challenges traditions and changes a company's culture to ensure fellow employees are engaged and can be intrapreneurial.


Peter Fukunaga and Julie Yamamoto
Hui Car Share

Hui Car Share is a global pilot program for Toyota launched in Hawaii 18 months ago, says Peter Fukunaga of Servco Pacific, who directs the local program with Julie Yamamoto.

The service offers different membership levels, with hourly rentals starting at $9.95. A smartphone app handles everything, including acting as a digital key to the vehicle.

"Right now, you walk up to the vehicle and access it with your phone. But in the future, the car will come to your phone." Fukunaga says.


Startup Paradise Champion

Someone who consistently contributes to the success of Hawaii's startup community.


Karl Fooks
Hawaii Strategic Development Corp.

HSDC President Karl Fooks believes the agency's mandate is to support a self-sustaining entrepreneurial ecosystem in Hawaii. 

He explains that HSDC does not invest directly in companies but in private sector venture capital partnerships that inspire, accelerate and fund startups: Blue Startups, Elemental Excelerator, GVS Transmedia Accelerator and XLR8UH. A report by Startup Capital Ventures says that between 2010 and 2018 these accelerators and venture capital organizations directed nearly $250 million in funding for Hawaii-based startups.

"There are hardly any companies that are active that haven't benefited either directly or indirectly from our investment," Fooks says.


Investor of the Year

An outstanding individual or entity that has invested substantially in the Hawaii startup ecosystem –with time, talent, money, inspiration and public service.

Chenoa Farnsworth, Maya Rogers and Henk Rogers
Blue Startups

Co-founders Chenoa Farnsworth, Maya Rogers and Henk Rogers have raised $120 million in capital for 76 businesses in their cohorts since launching the Blue Startups accelerator in 2012.

"I get particularly excited about entrepreneurs who are working to solve real problems in the world," says Farnsworth, who is managing partner.

She says Volta Charging and FloWater are prime examples of Blue Startups' successes in impact investing. "Both are doing very well financially but they have a double bottom line. They are also helping the environment," Farnsworth says. 

She says when it comes to choosing candidates for the company's competitive mentorship program, a "lack of coachability" is a deal breaker and that successful entrepreneurs must be able to "adjust on the fly."


Island Innovator of the Year

Celebrating innovations that help islands like Hawaii's, solve a major problem in communities, the ocean or the aina.

Brynn Foster
Voyaging Foods

"To make a healthier community you have to build it," says Brynn Foster, founder and director of Voyaging Foods, which mills certified gluten-free flour from traditional "canoe plants" like kalo (taro), uala (sweet potato) and ulu (breadfruit).

Foster also developed the recipes for her line of baked goods and dry mixes, now sold at Whole Foods, Neiman Marcus and specialty stores throughout the Islands. 

"This is definitely an innovative product or niche," says Foster, adding that her long-term goal is to create sustainable markets for small-scale farming in the Islands, including plans for a mobile mill.


Tech Entrepreneur of the Year

Honoring the entrepreneur who has created technology and innovation to make our lives better.


Andrew Fowers
Shaka Guide

After more than a decade in tech development, Andrew Fowers and his wife, Rita, released Shaka Guide in 2016. Their GPS-based tour guide app responds to the user's speed and location, and is now available for Oahu, Maui, Kauai and Hawaii Island.

Fowers says that "scrappy entrepreneurship and bootstrapping your way until you find success" has helped Shaka Guide to evolve as "the next generation of travel."

He believes that audio augmented storytelling will "redefine how people experience destinations in the future, not just in Hawaii but globally."


Jared Kushi, Cyril Moukarzel and Steve Markowitz

Jared Kushi, Cyril Moukarzel and Steve Markowitz launched LifeDNA in May 2017 with nutritional supplements tailored to each customer's DNA. They later added skin care products, personalized reports and consultation services, says Kushi. 

The next step is using epigenetics to demonstrate specific cellular changes and benefits of using LifeDNA's personalized supplements and regimens, he says.

Kushi previously helped many local startups while working with Blue Startups, Hawaii Angels and the Hawaii Venture Capital Association. "I learned a lot from advising and we wouldn't be where we are now without Blue Startups," he says.


John Olkowski
NuSight Medical

In July, NuSight Medical's founder, Dr. John Olkowski, launched NuLids, the first home-use medical device for treating chronic dry eye, according to the company's website.

The corneal transplant and laser eye surgeon, who has been practicing medicine in Hawaii for 30 years, says his clients' feedback on NuLids has been rewarding. "I'm the inventor and the chairman of the board, but I'm also the doctor. I get to see the patients come in and hear their responses and see how happy they are." 

NuLids is available in 200 medical practices across the U.S., he says.


Student Entrepreneur of the Year

Honoring a younger member of the innovative community with a passion for learning and the tenacious spirit of an entrepreneur.


Rose Wong
Kolohe Ocean Gems

Rose Wong designed and marketed her first line of jewelry at age 16.

Then in 2018, she was named Hawaii's winner of the Global Student Entrepreneur Awards, where she debuted her upscale jewelry collection, Rose Gold. She told Hawaii Business then, "Now that I've seen what it's like working for myself, that's what I want to stick with, and I hope Rose Gold will be the next Cartier."

The student at UH Manoa's Shidler College of Business has since added apparel to her lineup, and says she's working on an order for 10,000 units for a national subscription box.


Keanuenue DeSoto
Anu Style

Keanuenue DeSoto founded Anu Style at age 12 and her first swimwear collection, titled Makaha Fierce, sold out at its debut showing. "The goal of that line was to empower girls and to let them know they can do anything," says DeSoto.

Local design icons Manaola and Kini Zamora attended her first show and have become mentors and social media supporters. 

DeSoto says her next line is inspired by her love for the ocean and by Hawaiian culture and values. She says her aumakua are "leading me toward the way that will really have the best impact on the world."


Kealakekua Meyer and Kamahao White
Rooted 684

Kealakekua Meyer and Kamahao White founded Rooted 684 last year during their senior year at Roosevelt High School. All funds from Rooted 684's T-shirt sales support nurseries dedicated to preserving native Hawaiian plants, White says.   

White says the fundraising venture is named after a Hawaiian proverb, or olelo noeau, which translates as "beloved children are the plants." 

"We put a specific plant that is currently endangered and endemic to each island on the shirts, and we include a moolelo, or story, about why that plant is important to the Native Hawaiians and to Hawaii."


CPG (Consumer Packaged Goods) Entrepreneur of the Year

Presented to the Entrepreneur whose CPG company has consistently seen month over month growth in revenue and customers.


Dylan Butterbaugh
Manoa Chocolate Hawaii

Dylan Butterbaugh was hanging out in a friend's UH lab "for fun" when he became intrigued by research being done for local cacao farmers. "Within six months I realized I wanted to start a chocolate factory."

Butterbaugh launched Manoa Chocolate Hawaii in 2012 from a small factory and store in Kailua. He started "very small" with retail sales, then began wholesaling to Whole Foods, Foodland and Down to Earth, and followed with exports to Japan, Singapore, Europe, Canada and the Mainland, he says. 

"We've just been growing that way, slow and steady, for almost seven years now."


Mele Kalama-Kingma

Mele Kalama-Kingma's Native Hawaiian roots inspired the formulas she developed for her artisanal, organic body products company, Mamalani.

The mother of three, who holds an MBA and two BAs, blends her expertise in business and science with ancestral knowledge of Hawaiian botanicals. The company is named for her grandmother, a hula teacher whose respect for the aina is a value that Kalama-Kingma applies to her product creation and recyclable packaging.

"I value where we live so much that I don't want to make more waste," she says, adding that she is also testing bulk sales at Down to Earth stores.


Kyle Spencer, Dario Phillips and Wylie Von Tempsky

These three friends who love the ocean, surfing and art were once creative directors, graphic artists and marketing directors for Quiksilver, Hurley, Nike, Billabong and DC. Now they are focusing their expertise in the action sports apparel industry on their own business, Slowtide.

The company launched three years ago and now has 1,000 retail partners in the U.S., Japan, Australia, Canada and Europe, including REI, Urban Outfitters and Amazon, Spencer says.

Slowtide produces beach and bath towels, blankets and ponchos "inspired by all bodies of water and our love for art," he says.

How the centre of gravity of India’s startup ecosystem is shifting towards B2B startups - Economic Times

Posted: 02 Mar 2019 10:31 AM PST

Brand ambassadors can work wonders. Umesh Sachdev, 33, knows well how to make that magic work. The co-founder of Uniphore Software Systems — a littleknown Chennai-based startup that uses technologies like speech recognition to help improve customer experience for enterprises — has managed to get a formidable brand ambassador who also do duties as investor, mentor and salesman, all rolled into one.

In December 2017, Cisco's ex-chairman John Chambers acquired a 10% stake in Uniphore. Since then, the startup has been on a roll. Virtually in every media briefing in India, the Silicon Valley veteran has spoken fondly of Uniphore's potential. Last year, nudged by Chambers, Sachdev shifted base to the Silicon Valley. Awards, accolades and big-bulge customers have followed. The startup's deal sizes have become bigger even as its business cycles have become shorter.

UDAAN founders:Sujeet Kumar, Amod Malviya & Vaibhav Gupta valuation: $1 bn+ funding: $249 mn

INMOBI founders: Naveen Tiwari, Mohit Saxena, Amit Gupta & Abhay Singhal valuation: $1 bn+ funding: $221 mn


FRESHWORKS founders:Girish Mathrubootham,& Shan Krishnasamy Valuation: $1 bn+ Funding: $250 mn


Coming Wave
BIG BET :As the B2C wave led by copycat startups matures, founders and investors have started eyeing the B2B space

With IT services outsourcing losing steam, B2B wave holds big promise for India

Digitisation and formalisation of economy have opened up small businesses as an attractive customer segment

Cloud computing, pay-per-use model and desk-selling give Indian startups a global edge

Gaining Pace: There has been a steady YoY increase in the number of B2B startups being set up as a percentage of the total:


PINE LABS Founders: Rajul Garg & Tarun Upaday Valuation: Unicorn status likely in 2019 Funding: $227 mn

GREYORANGE Founders: Samay Kohli & Akash Gupta Valuation: Unicorn status likely in 2019 Funding: $180 mn


RIVIGO Founders: Deepak Garg & Gazal Kalra Valuation: Unicorn status likely in 2019 Funding: $230 mn

LENDINGKART Founders: Harshvardhan Lunia, Mukul Sachan Valuation: Unicorn status likely in 2019 Funding: $155 mn

DELHIVERY Founders: Sahil Baria, Mohit Tandon, Bhavesh Manglani, Suraj Saharan, Kapil Bharti Valuation: Unicorn status likely in 2019 Funding: $258 mn


ECOM EXPRESS Founders: K Satyanarayana, Manju Dhawan, Sanjeev Saxena, T A Krishnan Valuation: Unicorn status likely in 2019 Funding: $179 mn

DRUVA Founders: Jaspreet Singh, Milind Borate Valuation: Unicorn status likely in 2019 Funding: $200 mn

Uniphore, which today has more than 100 enterprise customers globally and serves more than four million end users, last year signed up one of the biggest US-based insurance MNCs as its customer. "We grew 300% last year and are set to maintain pace this year," says an upbeat Sachdev.

Uniphore is at an inflection point. In three years, Chambers expects Uniphore's revenues to surge from $9 million in 2018 to $100 million, with more than 500 people on staff. Like Uniphore, startup India, too, is at an inflection point.

The centre of gravity of India's startup ecosystem is shifting in favour of a new breed — business-to business startups with enterprises as their primary customer.

Eschewing the early scramble to build big consumer-facing enterprises with discounts and attendant cash burn, investor interest and entrepreneurial activity is moving towards a more sober part of the startup spectrum.

Udaan, a B2B marketplace born in 2016, is the company that has reached the $1 billion dollar valuation milestone the fastest. Browserstack, a seven-year-old bootstrapped webtesting platform, is now valued at $500 million, despite raising its series A funding just last year. From GreyOrange to Freshworks, Rivigo to Pine Labs, LendingKart to Druva, India will likely have more than 10 B2B unicorns by 2019.

(Older B2B software-as-a-service companies such as Zoho, Tally and Eka Software have also seen greater traction in recent years).

This isn't just about the big breakout startups. Data trends signal a broad secular shift. According to the consultancy firm Zinnov, B2B startups were just 26% (900) of the total 3,100 startups in India in 2014. But growing at a faster clip, they now comprise 43% (3,200) of the total 7,400 in 2018.

Similarly, according to Tracxn, overall funding in B2B startups have been rising — from $797 million in 2014 to $3.7 billion in 2018. In comparison, total funding in the B2C segment rose from $4.4 billion in 2014 to $7.6 billion in 2018.

This shift is especially visible in the seed stage where in 2014, the number of B2B deals stood at 33, almost half of B2C at 60. By 2018, the gap had narrowed to 71 B2B deals as against 88 in the businessto-consumer or B2C segment. "B2B startups are the next big thing to watch out for.

Most of them do not require too much money and we will see a different measurability index emerge for them," says Arun Natarajan, founder, Venture Intelligence.

New Turn
For multiple reasons, the rise of B2B wave marks an important turning point. Over the last two decades, startups in India have come a full circle. From being on the fringes in the corporate world, they have moved to the mainstream. Stable big corporate jobs, once the mainstay of Indian jobseekers, has become passe as startup jobs have become aspirational. Entrepreneurs are now the new celebrated heores that young college graduates want to emulate.

But the wave so far has largely been dominated by B2C startups. In their DNA and construct, B2C startups are different from the B2B ones. Often copycats of global giants such as Amazon and Uber, firms such as Flipkart, Ola and Swiggy have been low on innovation, even if they have had to do considerable work to customise for local conditions. Targeting India's upwardly mobile consumers, these businesses were built on discounts and freebies.

Seeking bigger consumer mindshare, they sought publicity and funds proactively. Not surprisingly, valuations and fund raise have been important milestones for these giants as their media-savvy founders hogged the limelight.

Under the radar, away from the headlines, B2B startups are different. "B2B vs B2C are like chalk and cheese. The former build software to solve problems of other enterprises and hence must have deep understanding of the business. The latter solve needs of the consumers and hence must connect with consumers well," says Sachdev of Uniphore.

Not surprisingly, B2B startups occupy a quieter world. Not for them the valuation froth and deal frenzy associated with their glamorous B2C counterparts.

Often bootstrapped, the size and frequency of their funding rounds are also lower. Their founders rarely make headlines and they downplay their unicorn status.

Despite their size, most aren't household names and perhaps never will be. "Startup ecosystems evolve in phases. Typically, B2C comes before B2B. Since 2017, India is seeing a dramatic shift towards B2B. We will see creation of big technology product startups," says Atit danak, engagement manager, Zinnov.

Different Breed
The first thing you notice about B2B startups is their global flavour. While headquartered in Chennai, Uniphore's two founders are both based outside — in Singapore and in the US.

"The B2B market in India is small. Our competitors are mostly US companies who are focused on relatively larger organisations. With their cost structures, it doesn't make sense for US firms to sell to a small firm in Prague.

We focus on that long tail," says Girish Mathrubootham, cofounder of the unicorn Freshworks, which is headquartered in the US and has offices in Germany, the UK, Australia and France.

They think global from day one. "You must build a global product," says Nishith Rastogi, ex-Amazon and ex-eBay, who cofounded, an intelligent logistics automation platform for logistics companies.

Their product was available in several languages from day one. "This comes handy in countries like East Europe. 2018 was our first year of internationalisation. We are looking at the US, Canada and South East Asia," he says.

Rohit Chennamaneni quit McKinsey in 2015 to co-found Darwinbox, which automates and simplifies HR processes for enterprises. The startup today has more than 100 enterprise customers in India and South East Asia, including names such as Paytm and Swiggy.

Investments in B2B startups are often front-loaded. Rastogi spent two years putting together a team and developing the product. "Once the product rolls out, you see accelerated growth," he says. The startup has 85 employees and more than 50 customers. Forty are from India.

Agrees IIT alumnus Vinay Kumar Sankarapu, who cofounded AI startup in 2013, a deep learning platform that sits on top of enterprise systems, making them self-learning and intelligent.

"We have very experienced hands with deep domain expertise," he says. With 21 people, 15 of them engineers and AI experts, it spent three years developing the product before launching it.

They have eight customers (some fortune 500 MNCs) in India and is now looking at markets in the UK and Singapore. "The toughest part for a B2B startup is getting your first customer," he says.


Also, B2B startups are less fund hungry and start making money much earlier in the growth curve. Rahul Garg, with two decades of experience including with Google, co-founded Moglix, in 2015.

Think of Moglix as a B2Bfocused startup, a master supplier of sorts, trying to solve the problem of poor vendor supply ecosystem in India. With 12 warehouses and Ratan Tata among its investors, it expects to operationally breakeven next year. Unlike B2C, B2B isn't a winner-take-all market. "You don't do irrational discounting as enterprises will be wary of such behaviour," he says.

Money with a Spin
All this means B2B startups have very different expectations from their investors. While money remains a big factor, "B2B startups want investors to open doors and bring domain expertise," says Sateesh Andra, managing director, Endiya Partners. Adds Rastogi: "We are engineers so we understand product and technology well but not enterprises. Our investors understand it well and that helps."

Hiring top seasoned talent for a littleknown startup is a challenge. "There is lot of affinity for young engineers to join B2C where brand recognition is high," says Rohit of Darwinbox. Having investors, especially strategic and pedigreed ones such as John Chambers and Ratan Tata, help. A better understanding of the dynamics inside B2B startups, too, is critical.

"Sales cycles can be as long as 10 months. Many investors don't fully understand this. Their B2C philosophy 'take more money, grow faster' doesn't work here," says an entrepreneur who asked not to be quoted. In the US, the maturity of investor ecosystem is very high. With over 35,000 funds, there are many specialist funds with deep domain understanding. It is for some of these reasons that Uniphore's Sachdev hopes to raise the next round of funding from a US-based fund.

Eyeing the emerging wave, many investors have begun reshaping their strategy. Singapore-based Pravan Malhotra, head (Asia internet and Southeast Asia investments) at IFC, says since 2016, they shifted focus to B2B startups and have invested in startups like Moglix.

Ditto for Manish Singhal of Pi Venture and Alok Goyal, partner, at Stellaris Venture, who are only investing in B2B startups. Entrepreneur and now investor Vivek Mansingh of YourNest says their B2B-focused firm is a co-creator right from the idea stage to marketing.

Shifting Tide There are very good reasons why this shift is happening now. First is simply the cyclical nature of the startup world. "Everything here happens in cycles. B2C space has matured. In areas like fintech and blockchain, all bets are taken. B2B is still at a nascent stage in India," says Kris Gopalakrishnan, angel investor and a cofounder of Infosys.

But there are deeper reasons shaping the B2B wave in India. Broadly there are three categories of B2B startups. There is the software-focused SaaS startups such as Freshworks, who do software products targeting global customers. There are startups like Darwinbox that start their journey focusing on Indian companies but slowly expand overseas.

Then there are companies like Moglix and Delhivery that are not exactly SaaS companies and remain focused on solving India problems. "The first bucket has become interesting in the last five years. Thanks to cloud computing and desk-based sales model, India has a completely new class of global Saas startups serving global customers," says Sharad Sharma, cofounder, iSPIRT Foundation.


The second bucket (SMEs) has become interesting as the SME digitisation wave sweeps the world, especially Asia, where over 90% of all companies fall in this segment, says Malhotra of IFC. Comfort with technology has risen with a generational shift. Online presence — either for tapping customers or filing tax returns — have become a necessity.

In India, for example, GST and formalisation of the economy is changing the status quo. India has 50-odd million small enterprises, the likes of kirana stores, mobile stores and small restaurants. "GST was a trigger. A cheap smart phone with low-cost data was the enabler. Small businesses that never used technology are now potential customers," says Dev Khare, partner, Lightspeed India.

India's Strength

Between August 2017 and December 2018, number of IT returns filed almost doubled to 7.2 million from 3.76 million. Under GST, about 11.7 million enterprises have registered with 5 million being new registrations. These small businesses have many problems, like access to funds and credit, turnaround of receivables, filing GST, logistics etc. Digitisation is helping boost efficiency, cut costs and automate, while removing intermediaries (CA to file tax returns, for instance).

"This market did not exist three years back. Companies like Udaan and OkCredit are taking a stab at solving their problems. For the first time, tech startups that target India's small businesses can be scaled efficiently," says Khare.

Seed Stage Signals

These small businesses behave like consumers. Fund constrained, you have to show them the product value for free before they buy. Thanks to SaaS-based pay-peruse business model and cloud computing, the entry threshold has lowered.

Fortunately for India's B2B startups, because of their DNA and cost structures, the USbased firms find it difficult to address this segment here as well as in their domestic market.

"India missed all the three digital waves in the past of mobile, social and cloud. Think of Whatsapp, Facebook and AWS. We became big users without any homegrown companies capturing the market. India has a rare $1-trillion opportunity to ride the Saas wave," says Suresh Sambandam, CEO, KiSSFLOW.

S Gopalakrishnan
"Startup world moves in cycles. All bets are taken in B2C. At an early stage now, B2B is the next big thing" S Gopalakrishnan, cofounder, Infosys

India is the only country where the knowledge of IT services (thanks to IT outsourcing giants like Wipro and TCS), product (thanks to MNC R&D hubs) and startup energy (India is among the world's top five startup ecosystems) converges with thousands of engineers with deep understanding of global enterprises.

"There is a rekindling of interest among large MNCs like Intel, Cisco and Target to tap into India's startup innovation and fill in the product gaps in their business portfolio," says Guhesh Ramanathan, founder, Excubator. For example, an MNC making accesscontrol devices wants to launch products based on facial recognition and is now scouting for startups that can help fill the gap.

Umesh Sachdev
"Having a strategic investor and mentor like Cisco's John Chambers makes a huge difference" Umesh Sachdev, cofounder, Uniphore

"Right now, we are seeing the Indian arms of MNCs giving mandate to Indian startups. In 18 months, I see global HQ mandates coming here. That would be a big inflection point," says Ramanathan.

That journey will come with its own challenges. Building products and marketing skills aren't India's strengths. Investor ecosystem in India is still evolving and not so deep.

Vivek Mansingh
Vivek Mansingh
"Competing with the best, B2B startups must build global products and have a strong go-to-market plan" Vivek Mansingh, YourNest Venture Capital

"The government doesn't understand SaaS companies that have IP and very different needs. Setting up specialised SaaS accelerators across states to tap into the opportunities will help," says Sambandam.

If India manages to make the right moves, we could see a wave of truly global breakout startups. And they could be the true successors to India's low-cost IT services providers.

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