Indian-Americans Colonize Net Economy

While Indian-Americans in the '70s and '80s typically were successful middle-management professionals in various areas of the economy, they're now becoming Internet entrepreneurs and a driving force of the booming Internet economy.

With fewer than 1 million of its sons and daughters in the United States, according to the 1990 census, India has contributed immensely to the development of communications-technology enterprises, and specifically in recent years to Internet networking technology.

Analysts said Indians are involved in management at 40 percent of the start-ups in Silicon Valley - and that both a highly effective form of self-selection among India's most daring, ambitious, intelligent and skilled citizens and the open, meritocratic culture of Silicon Valley are the reasons. Of course, as East meets West, it helps to drop a name or two. That's where the Indian-American "old boys' network" comes in.

"The first step is always difficult. The difference between you and hundreds of other companies could be if you know someone," said Kash Mitra, founder and vice president of marketing at Tiara Networks, a networking equipment start-up.

One of the best examples of that is the story of Exodus Communications, a company whose market value has ramped up to about $4.4 billion in just a few years. Founder K.B. Chandrashekar was having trouble getting financing for his company from the venture capital establishment in the early 1990s. He ended up turning to fellow Indians for a crucial $3 million. His partner in the effort, B.V. Jagadeesh, now mellow and wise from the experience five years ago, can laugh when he tells his story.

Exodus started out selling Internet service to small businesses. The company worked out of a communal office space, sharing fax, phones, copy machines, etc., with other small businesses. And even though it was small, Exodus knew it had a larger part to play. "We wanted to publicize ourselves, but we were one among 2,000 Internet companies," Jagadeesh said. The company started to gain notable clientele. Exodus, which comprised 20 employees, eventually moved into a small office in Sunnyvale, Calif., and shopped itself around to well-known venture capitalist firms from Sand Hill Road to Manhattan. It got to talk to the VCs, because it had some contacts, but that was only helpful in allowing it to make a presentation. Still, it didn't have an in.

"The problem was, we were not in the position to convince the VCs that we were going to be a multibillion-dollar company. At least they did not see that from us," Jagadeesh said.

But one night in December 1995, at a party, Chandrashekar bumped into Kanwal Rehki, a networking pioneer who had founded Excelan and later sold it to Novell. The party, specially sponsored by The Indus Entrepreneurs, a career networking group that promotes start-ups, was a perfect place for the two parties to accidentally meet.

"Kanwal had quit Novell. We were not really friends, but we knew who he was; everyone knew," said Jagadeesh, who also had worked at Novell. Excitedly, the men told Rehki about their Internet software company, which at the time was self-funded. And although at that time Internet fever only rose as expectant sweat on the brow of industry onlookers, the conditions were right for Rehki's input. Companies like UUnet Technologies and Netcom On-Line Communication Services were showing off strong stock. "We presented our idea to him. He saw in us the energy that we had in this new area of the Internet," Jagadeesh said.

Rehki, in turn, got excited - enough so, in fact, that he presented them with a $250,000 check, Jagadeesh said. "The moment he did that, a lot of other VCs came to us, we got contacts from everywhere," he said.

Exodus now is in a steep growth period; revenue last year was $52 million. Analysts said it will reach $160 million this year.

The Indian connection doesn't only help in getting funding. What may be most important to gain from the alumni of the Indian-American experience is advice. For example, Rehki , now an executive at Cirrus Logic, handed over more than money to the Exodus folks. He advised them to focus on a specific business problem to solve instead of broadly consulting in various areas. Today, that advice comes in handy for Jagadeesh, who is dispensing his own similar advice to start-ups as a charter member of TIE.

Incidentally, Rehki went even further when Chandrashekar was looking for help starting Exodus. "I told him he needed to hire a speech therapist to work on the accent [and also learn] how to give presentations, how to become a real-time thinker, how to interact with Americans he wanted to hire," Rehki said.

Indian ties also are helpful when it comes to finding good engineers, especially since venture capitalists won't give away money unless a solid management team is put in place.

"That's where I think I benefited the most. I knew Indians, and they recommended me to people that I hired. Money in the Valley right now is in abundance. The people are not," Tiara's Mitra said.

The success stories in the Indian community go on and on as the network is constantly tapped for leads for funding and management. For instance, Vani Kola needed help with her business plan for RightWorks. She got much of the assistance she needed - from business plan critiques to venture capital introductions - from other South Asians.

Also, Jagdeep Singh established Lightera Networks independently of his ethnic old-boy network. He ended up getting financing from one of his most prominent countrymen in Silicon Valley, Vinod Khosla, a partner at Kleiner, Perkins, Caufield & Byers venture capital.

Indians involved in Internet companies are changing the landscape for Indian-Americans in the U.S. And the Indian contribution to the networking world is only accelerating.

"In Silicon Valley, [Indians] have managed to be very successful and start a large number of companies - far more than you would expect in other industries," said professor AnnaLee Saxenian of the University of California at Berkeley, author of a new study, Silicon Valley's New Immigrant Entrepreneurs.

Now, a new generation "haven't even bothered to go into corporate America - they've just plugged straight into the start-up world," said Sukumar Ramanathan, a money manager and business editor at India Currents magazine.

Indians started 385 high-tech firms in Silicon Valley from 1995 through 1998, or 9 percent of Silicon Valley start-ups. Indians are principals in such "dot com" enterprises as AtWeb, Hotmail, Junglee and NetObjects. They also have been prime movers in many hot networking companies, including Cerent, Juniper, Lightera and Sycamore. Networking giants like Cisco Systems and Lucent Technologies have lined the pockets of Indian honchos in a string of acquisitions, said Yogesh Sharma, editor of Silicon India magazine, ticking off Acclaim Communications, Berkeley Networks, Lightera, Pipelinks, Sentient Networks, Torrent Networks and Yago Systems. And the ranks of top engineers at Intel, Oracle and Sun Microsystems are chockablock with Indians, making them fertile incubators for new ventures.

The Indian surge is creating a new level of wealth in a community where almost half the high-tech workers were professionals, making an average $45,269 salary, and the 15 percent who were managers averaged $52,095. The high-tech readership of Silicon India magazine is indicative: Almost two-thirds have household incomes of $100,000 to $200,000, and 20 percent earn more.

But it was not always so. In the early 1980s, when companies like Excelan, Sun, Integrated Systems and Integrated Device Technology were founded, Indians were known to the business establishment as engineering professionals without finance, marketing or sales skills. They also didn't have a strong tradition as technology entrepreneurs. This generalization was partly true, partly self-fulfilling prophecy. "These are engineers at heart, and that's what they know best," Sharma said. "It's a geek factor."

Isolated from capital sources, and from one another by careerism and fragmented social institutions, Indians in technology by and large remained corporate professionals rather than entrepreneurs, Rehki said. The rise of the Silicon Raj is fueled, in the first instance, by sheer numbers and raw talent. But the entrepreneurial spirit is part of the Indian-American's mental profile.

"A lot of this has to do with the immigrant experience," said Pushpendra Mohta, executive vice president at TCG Cerfnet. "These people have packed their bags and moved across the world. They're not afraid of making changes; they're risk takers."

"The Internet is a great equalizer in more than one way," Mohta added. "The people who make it out here tend to be already highly educated. In many cases they study from the same texts as the U.S. engineers and do the same exercises. They speak good English. And they're uniquely adventurous. They are equipped to compete with the best."

What's more, India exports only a few software titles. In India, according to Mohta, engineers do not live in an environment that spurs new uses for software. PC penetration is very low. "Creative people are not in the right environment there. If they didn't come here, they wouldn't even know to think of these things. It ignites their imagination," he said. Much of the best higher education in India is in engineering, and opportunities are available to a wide swath of a population otherwise sharply divided by region and class.

In a population of some 800 million, about 500,000 students take qualifying exams for the Indian Institute of Technology, a highly regarded institution with five campuses but only 6,000 freshman engineering slots.

The top students get scholarships for graduate study in the U.S. An impressive 55 percent of Indians working in Silicon Valley have advanced degrees, more than triple the proportion of whites, according to 1990 census figures. Top U.S. engineering graduate schools have gained so much respect for IIT graduate that they have taken to calling Indian campuses to say, "These guys are great - send me all you got," said Ramanathan, at India Currents magazine.

IIT alumni in the U.S. form a ready-made old-boy network. "It's almost like a complete transplant from Kanpur or Bombay to Stanford," Ramanathan said.

Additionally, Indians who immigrate to America are self-selected for adventure and "are inherently risk takers," Saxenian observed.

"You grow up expecting to work really hard," but also to earn a big payoff, venture capitalist Khosla said. It's a "perfect match" for the entrepreneurial profile, he added.

Comfort Zone

But, largely, birds of a feather flock because of the comfort factor. "Indian entrepreneurs feel more comfortable coming in and talking to us about their businesses," said Ravi Mhatre, principal at Besemer, a venture capitalist firm. "They feel comfortable in the community to learn in a nonthreatening environment."

Of course, secluded networking in one ethnic group is not enough. "You want to go mainstream," Rehki said, relating a founding principle of TIE. "You want to be seen as people who are not closed in."

The Internet is also stretching its Indian connections. Start-up Ecode.com, for instance, hired a few people in the Valley and a few in India.

"It was cheaper to do work in India," Khosla said. "More and more of the [software] contracting will be in places like India."

But that means, as the world becomes truly global, and Internet culture sets in, borders will mean less, and cultural ties will morph. "Most Indians are very willing to go work for another Indian, so it is slightly easier to attract talent," said Sachin Shah, a young Indian-American agent at PR-Vantage, a technology public relations firm. "But even that's changing as Indians like myself who have been brought up in the West are not so tied to the homeland."