India partnered in a booming world economy over the past decade. During this time, international capital flowed into the country. This was supposed to be the next global hotspot for intense innovation and immense returns. Big venture capital firms like Draper Fisher Jurvetson, Kleiner Perkins and Sherpalo Ventures moved to India to harvest from the resource pool of over a billion people. Even as they set up their offices with their best and brightest, the markets in the USA started crashing due to the subprime crisis. Panic set in and global venture capital pulled out of India as fast as it came in. According to Thomson Reuters data, only $49 million of venture capital was invested in the first three months of this year compared to $116 million in the first three months of last year, a drop of 58 per cent.

Start-up companies that managed to be born during this period have had to learn to walk before they could crawl. With tightened purse strings and the landscape constantly changing under their feet, these companies have had to quickly become more disciplined and frugal. To make a tough situation even tougher, the existing venture capitalists who have been waiting in the sidelines refuse to part with additional money even though valuations have fallen and investments are cheap.

Despite this tough scenario, there are some new companies that are growing because of a unique product or marketplace. Savvy young entrepreneurs like Sam Goldman and Rajeev Vasudevan clearly understand the force of the masses, others like Poonam Bir Kasturi and Jignesh Jhaveri understand the power of their product. Here’s a look at their fledgling companies and how they are trying to take the recession head-on with their innovations.

D.light Design

AyurVaid
Rajeev Vasudevan has brought Kerala Ayurvedic treatment to state of the art multibed hospitals. A high profile start-up, Ayurvaid has well appointed operational hospitals in Bangalore and Kochi, with more opening in Mumbai. At a time when most start-ups have been hard pressed to raise money, AyurVaid closed a major round of funding with Acumen Funds in late 2008. These hospitals are run based on Panch Karma procedures for Purva Karma or Preliminary, Pradhana Karma or Main and Paschatha Karma or Post-main treatments. According to Mr Vasudevan, “The recession may put a temporary strain on opening big facilities but there is almost no effect when it comes to operational hospitals.” He says that his hospitals treat patients with chronic illnesses which are far more common and debilitating than a major one off injury or illness. With the interest that is building around the world for alternative treatments like ayurveda, this is a start-up that will be closely observed for some time to come.

Photolink
Jignesh Jhaveri created India’s first large scale home shopping catalogue for Hypercity. At Photolink, he has recently opened an 11,000 square feet indoor outdoor studio for commercial photography in Parel, Mumbai. Photolink is a one stop shop for commercial photography with photographers, shoot producers, web developers, copywriters, creative thinkers and brand managers all under one roof. When we asked Jignesh how he was coping with the downturn, he said expansion plans are definitely on hold. But his being a core product for his clients, he definitely sees no stops in production although there will be budget cuts now and then. Jignesh thinks that this is the time when he can actually help clients evaluate their investments in the creative process and use the downturn as a catalyst for change.

Daily Dump
Poonam Bir Kasturi who founded Daily Dump is an alumnus of NID. She has created the first commercial home composter in India - a product that converts household waste into compost or organic manure. Daily Dump was shortlisted to the top 30 from a pool of 588 nominated start-ups for the TATA NEN Hottest Start-up Contest 2008. The company’s enduring designs and holistic solutions makes it a welcome change for consumers who would like to use their household waste to compost where the only alternative is to use landfill sites and vermicomposting pits. Poonam feels that the recession actually makes her job easier. When people want to use and reuse their possessions, Poonam’s composting bins in beautiful designs fly off the shelves.

Q & A with Laura A. Parkin

Laura A. Parkin is the executive director of the Bangalore based National Entrepreneurship Network (NEN), which coaches young entrepreneurs and helps them with resources to develop their business plans so that they are ready to grow and scale. If necessary, these companies are also introduced to venture capital funds that will finance them for further growth.

How are young companies doing in a recession like now?
The ones that finance themselves with their own savings or bootstrap as it is commonly called are the ones that will fare better since institutional money is very hard to come by now.

What kind of companies will not be affected by the recession?
The cash businesses in India’s domestic markets like tutoring and mentoring companies will not be affected by the downturn.

Any advice to new entrepreneurs?
Venture firms will look at companies with proven revenue models. Valuations will be lower. There is going to be more scrutiny with business plans. So it is going to be a tough ride for the next few quarters.

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