Sramana Mitra: One thing you haven’t mentioned about this company is the business model and the monetization. What validation did you have that these 500,000 downloads were actually converting into paying customers?
Sandeep Singhal: Good point. They had a $10 charge for deploying their client for curl. It was a command line interface that you could commit into Postman. They were charging for that. More importantly, we spoke to some of the users who were at enterprises.
One of them happened to be our portfolio company and we asked the VP Engineering of our portfolio company how much they would pay for it. He drew out two or three other things that he needed to make this much more enterprise-oriented. He said, “If they fix all of these things, I’d be happy paying X dollars per month per user.” We spoke to a couple of people in the US. These are people who have downloaded the software in the US.
I had conversations with them to understand where they could see a product like this. They gave the same message. One person went to the extent of saying, “This thing is helping my team so much that if he were to add these features, I would pay $100 per user per month.” It was up to that. We were comfortable that there was a business model. Also there are companies who have been in the API space. This was much more on the developer side. We saw that there was openness to paying.
Sramana Mitra: Is this a trend that you are seeing – Indian developers doing open source projects and getting to some level of scale in terms of downloads and then going for financing? Is this happening at some degree of frequency?
Sandeep Singhal: Not as much as we would expect. I would have expected more of this to happen. We felt that we would see a lot more solutions around open source and on-demand SaaS software. In the initial days, we didn’t see many. The one company that we backed that did quite well was Dimdim, which was an open source WebEx solution that Salesforce acquired. There’s a concern of how you build a monetizeable business through open source.
Is the market you’re targeting really amenable to amortization around the open source? The second concern that we see a lot is around lots of IP. There is concern that if I go open source, then others can do what I’m doing and copy it. That’s one thing that I’ve seen with open source components in the US. It’s either you do it or your don’t. It’s a very clear philosophical view that I will build something in open source, let my IP in the public domain but with the idea that I own it.
It’s not that people don’t want to pay for open source. I will get paid for it and I will also get others to contribute to it. In India, we’ve seen at least some level of reluctance of open source because of this fear of IP loss which is not the case in the US.
Sramana Mitra: We’ve seen fabulous companies come up using the commercial open source model. The other thing that I should mention in this context is, there is a particular bootstrapping strategy that we espouse which is completely contrarian to most accelerators’ philosophy. It’s bootstrapping with a paycheck. Open source lends itself phenomenally well to bootstrapping using a paycheck. I’ve seen a lot of great companies that came out of bootstrapping using a paycheck mode.
Sandeep Singhal: There is a lot more that can be done there. I’m hoping that, over time, we’ll see more of that come out of India.
Sramana Mitra: Do you want to talk about another portfolio company in some details that highlights some trend that you want to talk about?
Sandeep Singhal: The other company is Arkin. Arkin is an example of a team that started cross-border. This is a team that came out of VMWare. While they were there, they recognized that there was a need to address this management issue in the software-defined networking area.
As you look at the software-defined data center, there were various tools that were there around managing the compute environment and virtualization. As networks were being virtualized, there wasn’t really a good solution to manage virtualized networks. The product manager from VMWare, the R&D team in India, and a Senior Architect left to start this company. They defined a very clear gap in the market with their knowledge of being in market.
Rohit was able to build his team in Pune in a much more cost-effective manner than would have cost for somebody to do that in the US. They were able to build out the product very quickly and get the initial traction. Recently, VMWare acquired them. Here’s an example of cross-border team from day one. In Abhinav’s case, it was Abhinav in India building out something. In the Arkin case, it was a global team from the start.