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BW Businessworld

The Silver Lining

Photo Credit :

launched the Bonobo Bar Love Food in
December 2008, when the slowdown had
already set in (Pics by Subhabrata Das)

If the economic scenario does not appear auspicious, look again. Partho Dasgupta did. When the former chief executive officer of Future Media decided to quit his job and start Aurora Comms, a media company, in January 2009, he was banking on what everybody fears: the global slowdown.
“During boom time, everyone is on a high horse,” Dasgupta says. “This [the slowdown] is the time when you can redefine business relationships and get the best deals. Clients have started to look beyond the top guns, so new companies have an edge, and we can offer better deals.”
Shailendra Kumar, author of Gold: God’s Own Country, also used the recession to his advantage by starting the Commodity Research Group, which prepares research reports on investments in precious metals. “I believed that this recession would bring a boom for precious metals like gold,” says Kumar. “I was right.”

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Similarly, Nevil, Parth, Sahil, Karna and Anup, five friends in their 20s, launched the Bonobo Bar Love Food, a high-end resto-bar in Mumbai’s Bandra, in December 2008. Part of their fund raising was done during the recession, which was tough. But, “other existing players compare things with a year ago and feel they are slow now”, says Nevil Timbadia. “But we feel good. When the economy picks up, things can only get better.”
In fact, “recession has helped me market my brand better as competitors are not making much noise now,” says haute jewellery designer Varuna D. Jani, who started her first exclusive store, also in Bandra, in January 2009, despite the lull in the luxury segment.
“This is the best time for start-ups to make an easy entry and gain a greater market share,” concurs John W. Mullins, author of the New Business Road Test and professor, entrepreneurship, London Business School. “A new company can use the stability resulting from the downturn to its advantage. When things look up, there is a chance that this company can be the lone remaining big player in its market.”

SHINING THROUGH: Varuna D. Jani opened
her first jewellery store in January, and says
it has been easier to market her brand

It Is Up To You
In an employment climate that makes a secure job an oxymoron, inhibitions restraining risk-taking and failure are no longer a deterrent. Already, student members in the entrepreneurship cells or e-cells of the National Entrepreneurship Network (NEN) have increased from 45,100 in the last fiscal to 71,901 this year. “My only fear is that students should not take up entrepreneurship because placements are bad,” says NEN executive director Laura Parkin. “They should only take the plunge when they are passionate about it.”
Indeed, the lack of a legacy can be an advantage. Back in 2000, was catering to back-end operations for IT start-ups in the Silicon Valley. In the bust that followed, most of its clients shut shop. K. Ganesh, then founder and now chief of e-learning company TutorVista, decided to provide voice-based call centre services to established companies, which meant huge investments in infrastructure, higher capex and a mature sales force. This complete and successful change was possible because the company was still young. “Had I been 4-5 years into servicing the start-ups, I would have had to close CustomerAsset,” says Ganesh.
“People are smart enough to look through the recession and identify opportunities,” says Shanghai-based Rama Velamuri, associate professor at the China Europe International Business School (CEIBS). “This is a time when you get affordable talent with reasonable salary expectations.”

Hyderabad-based e-brand merchandising company eYantra was born during the crash of 2000, but it managed to grow 314 per cent in 2001-02. “The biggest advantage I had was that I had a very good team with almost zero attrition,” says founder Phani N. Raj. “Employees became accommodating and were willing to put in long hours.”
Moreover, “entrepreneurs are able to cut down significant costs in real estate”, says Rajiv Singh, CEO of Mumbai-based Team India Managers (TIM), which buys franchises of different companies such as Spykar, Dosa Plaza and Avalon, to partner with entrepreneurs. In recent months, there has been a steady rise in the number of entrepreneurs working with TIM.

Also, in good times, VCs get higher returns by investing in the market rather than in start-ups. Unlike in the US, in India, there is no mandate to make VCs stick to their portfolio and invest only in start-ups. “But now, with the markets down, some money is actually flowing into funding new ventures,” says Anil Gupta, professor of entrepreneurship, IIM-Ahmedabad.
While capital-intensive models should be avoided, new services — that help other enterprises reduce costs by lowering energy consumption and improving logistical efficiency — are likely to fare better. “In this kind of ‘lateral VC’, one enterprise providing services or materials can hold equity and, therefore, will not only provide the service, but also extend its social capital and network to the client,” says Gupta.

And, “companies that have control over access to customers will flourish”, says T. Muralidharan, chairman of TMI, a Hyderabad-based talent management company. “This is the time for partnerships.”
“One [more] advantage a new entrant has is that incumbents are likely to be distracted in fighting fires,” says Sridhar Iyengar, a US-based mentor and angel investor. “This may allow a newcomer to build his business outside the glare of competition.” And shine.
mahul dot brahma at abp dot in
(Businessworld Issue Dated 24-30 March 2009)

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