Vishy provides some details about Webaroo and what it means to be part of the IIT-Powai incubator.

What solution does Webaroo provide?

Webaroo provides technology that helps you search and browse web pages on the go, as well as organizing content you’d like to revisit. Webaroo has 3 main products for the laptop, mobile device and storage device.

When was and who founded Webaroo?

Webaroo was founded by 2 IIT alumni, Rakesh Mathur and Beerud Sheth in 2004. I (Vishy) was the first employee brought on shortly after.

How big is the team today?

Since the early days it was decided that all R&D will happen in India. Webaroo currently has ~90 people in India in 3 offices (IIT lab, another office in Powai and an office close to IIT Delhi). The Webaroo US team is 8-10 people that focus on business development and marketing.

Why did you choose to have your offices in or close to IIT campus?

Both the founders are IIT grads, so they had a strong network with IIT. Being at the IIT incubator enables Webaroo to hire some top engineering talent not only currently in school but also alumni who’d like to be closer to home/campus. I (Vishy) was excited to move back to Powai – the good old days J

How is Webaroo funded?

Webaroo has raised money from both individuals and VCs. We do not disclose the source, but let’s just say that the company is your typical Silicon Valley well-funded startup.

Tell me more about Webaroo’s products and their value proposition?

Webaroo was founded with the idea of building technology that would allow users to browse sites even when they were offline. It was a caching solution. While the solution is still the same, the company is also now focusing on improving the browsing experience even when online. The Webaroo solution allows you to save various formats on information (text, picture, video) from disparate source on a personal page, so that you easily view later or share with others.

Webaroo has solutions for laptop, mobile device and storage device. For mobile, there are preinstalled Webpacks for news, lifestyle etc, which allow to easily discover interesting content.

Are you focused more on mobile or laptop? More in US markets or India?

We are not focused on a particular geography and are bullish about both our products. Mobile product might be better received in India due to the high mobile penetration. One difference between the 2 products, is that we plan to market the mobile products more since believe the desktop product show grow virally.

Who is your competition?

We don’t have much direct competition today. Google Gears is a competitor but they are focused on the developers while we are more focused on end user.

Mobile access (even content) is more of a ‘mass medium’ in India today than the Internet. I think as the Internet grows to more users (or perhaps Internet will grow when) these vernacular languages will be increasingly important. (However, I don’t think the ratio will be quite as high since many transaction and information oriented sites will mainly be in English)

Nevertheless, vernacular languages should be an important part of any major Internet portal’s strategy. That’s good news from sites like Guruji, who really only have a shot at being a meaningful alternative to Google if this is true. Google also seems to be placing emphasis on Hindi – check out their awesome transliteration site http://www.google.com/transliterate/indic/

In my opinion, today in India, online travel agencies are better positioned than travel search portals/aggregators.

Online travel agencies typically build close business relationships with the service providers, transact on their own site and have offline operations to complement the Web Site. In contrast, search portals are typically online only and scrape the web to aggregate data from any and all sources possible (including online travel agencies) and redirect users to the source’s Web site to buy the ticket. Online travel agencies have higher expenses since they invest more in building relationships and need to have transaction capabilities on their site.

Airline and hotels are different games. But in both cases, travel agencies that have strong relationships with service providers have the edge.

Airlines

Landscape:

1. Concentrated market – Only a handful of airline and won’t balloon to hundreds
2. Commoditized product – Transparent prices and no price discrimination based on type of person or channel of purchase. (There is PD based on when you buy but source of purchase is irrelevant)

Critical success factors:

1. Provide better service/experience that individual airlines
2. Provide integrated choice for travel needs beyond air travel
3. Become the de facto brand
4. Provide value added service around airline ticket buying and flying

In a concentrated and commoditized market the role for any type of intermediary is low. It’s simply not that hard for me as a user to go to Spicejet and Jet Airways Web site directly to book my tickets.

However, travel agencies can provide a more standard user experience. E.g. I can store my credit card in 1 place and buy tickets over time from different airlines. In contrast, aggregators will redirect me to the relevant airline home page each time. There might be a ‘trust’ issue where users might not be comfortable providing their information to the agencies but I believe this is a small short-term issues that is solved with brand maturity and scale.

Travel agencies are also in a better position to provide value added services like pickup from airport, printing official tickets/boarding passes etc, since they are sure that the ticket was purchased (was bought on their own site). Travel agencies are also in a better position to provide bundling options, special promotions and even reward programs due to their tight relationship with the airlines and insight into buyer behavior.

US travel aggregators like Kayak, Sidestep, Mobissimo have received good traction. But they are in very mature market and most of these companies gain traction in the international airline space which is neither concentrated nor commoditized. Even after all this, these sites lag the travel agency sites like Expedia, Travelocity and Orbitz.

Hotels

Landscape:

1. Fragment market – Reasonable amount of hotel chains and a very large growing amount of independent hotels.
2. Differentiated product – High degree of price discrimination based on type of client (e.g. corporate) and channel of purchase.
3. Many concierge (add-on) services

Critical success factors:

1. Reach – Access to most number of hotels so users have choice.
2. Fully integrated- Simply listing hotel not good enough, need to provide at least availability and preferably ability to book rooms
3. Provide concierge (add-on) services like car reservation, site seeing etc as convenient and affordable bundles. Or even provide package tours especially for leisure travelers.
4. Best price

The biggest challenge of the hotel market is reach across the thousands of hotels. The search portals might find it easier to attain this wide reach. However reach alone, where you simply list the hotel and not provide at least availability is a bad experience. The ability to view, check dates and buy from one place is a much better experience. Just imagine the difference; instead of seeing a list of hotels and going to each one to check availability and price for a date, you are only returned hotels that are available for the dates you are traveling with the relevant price.

Apart from the large hotel chains that may have Web links to check their availability and price, intermediaries will need to build a business relationship. This is inline with the travel agency model.

Unlike airlines, price is a source of competitive advantage. The list prices in hotels still tend to be overpriced and most hotels give discounts based on type of customer or distribution partner. Intermediaries with strong business relationships can be the preferred distribution partner. They could also go a step further and buy inventory at bulk and then sell later. This would require a very good understanding of travel patterns of end users, which again, travel agencies are more likely to have (since rooms are bought on their site).

In short travel agencies work with the travel service providers whereas travel search portals/aggregators leverage the existing infrastructure. In a growing market, where everyone is trying to tweak business model and co-brand, a 2-way relationship is more valuable. Also it is a lot easier for travel agencies to back-fill their data using same techniques as search portals. On the other hand search portals will find it more difficult to adopt an agency model.

Online travel agencies are more expensive to build though. Cost of acquisition is not cheap and building relationship especially in the fragmented hotel market is very expensive. However since the dollar amount spent by the end user is fairly high (air, hotels etc), there is enough opportunity to build a profitable business. This is definitely a space where founders should look to swing big and seem large sums (millions of dollars) of financing!

In fact not only on the Internet is this happening. Currently in India we are experiencing formalization and consolidation of the retail industry very similar to the ‘Wal-mart’ way in the US.  Just like the India Internet, India retails has domestic players (Reliance, Pantaloon) as well as global leader (Wal-mart, Carrefour).

Here is a great anecdote of India-centric innovative execution. Kishore Biyani of Pantaloon subscribes to the notion that chaos in stores increases sales!!! Pantaloon at its core has the same business model as say Wal-mart in the US, but has changed the look of its store to appeal to Indians. Following is an extract of the Wall Street Journal aritcle.

“On a tour of one of his supermarkets, Kishore Biyani notes that shopping carts are getting stuck in the narrow aisles, wheat and lentils have spilled onto the floor, black spots cover the onions and it’s difficult to hear above the constant in-store announcements. He grins and congratulates the store manager.

Mr. Biyani is proving that modern retailing, with a bit of spice, can work in a country where traditional markets dominate. On the back of his success — and rushing to close his head start — are some of the world’s largest retailers. While few may subscribe to Mr. Biyani’s chaos theory of retail, all will be struggling to find ways to attract the millions of Indian consumers who are shopping at branded chain stores for the first time.”

Here are some details for the incubator

• Founded in 2000; this is the 2nd generation of companies.
• There has been some success stories like Right Half acquired by Stratify and Voyager2 acquired by Purple Yogi.
• Currently 16 companies in the incubator.
• Incubator provides space at reasonable (and potentially deferred) rent; great way to tap into IIT student and alumni talent pool.
• At least one of the founders need to have some ties with IIT
• IIT incubator, which is an independent legal entity, takes equity in the company.

The Chief Adminstrative Officer’s name is Poyni Bhatt and she seemed extremely passionate regarding helping these young companies make it to the next level, which usually is getting angel or institutional investors. IIT incubator is currently planning for expanding their facilities to host at least twice as many companies. They are currently fundraising by approaching alumni for grants as well as investors for a potential stake in incubator companies.

Most companies were pre-revenue and <10 people. Webaroo, 90 person strong company had ~40 employees there. Also most of companies (unsurprisingly) were solving complex technology issues like Fluid Dynamics and yield/durability management for manufacturing.

More details on the companies are available here

Indian companies should learn from Israeli ones. In the first quarter of 2007, 121 Israeli high-tech companies raised $406 million, most of whom are innovating for the global marketplace. For over a decade there have been multiple winners like CheckPoint, Comverse Technologies, many in the consumer Internet space like Mirabilis (sold to ICQ), Shopping.com (sold to Ebay); and many strong companies today like Metacafe, EyeBlaster, Jajah, Oddcast etc. (see more here)

So why don’t we see many Indian companies in this list. I believe it is due to

1) While there is an entire ecosystem for outsourcing and other services related activities, there isn’t a similar cross-pollination yet of skills/efforts for product innovation.

2) Both the services opportunity and perceived market in India seem so large, that companies are happy writing code for products conceived in the US (or elsewhere) or arbitraging global concepts for Indian market. While I am a fan of concept arbitrage for India markets, it stifles new product innovation required to compete in the global marketplace.

However these points also make a strong case to do more product innovation. 1) Given the strengthening of the India rupee, outsourcing over the next decade is likely to see slower growth. 2) While concept arbitrage will lead to some early successes mainly be being acquired by global players, many verticals in India are and most likely will dominated by global leaders (see earlier post for more detail)

Building products for the global marketplace by no means guarantees success. While you don’t run the risk of a nascent small market, you are competing with global incumbents. So there is a real need to innovate with entirely new products or provide dramatic improvement to existing products. For companies like Slideshare and DimDim, it is not enough to be an ‘innovative Indian company’, but they need be an ‘innovative company’.

Manik was fairly explicit about the types of companies and what he looks for in prospective investments. What’s interesting is that both the types of companies and stress on experienced teams is different from trend in the US, where VCs are willing to bet on college students building the next Web 2.0 application. I suspect many India VC’s have similar views; and this has to do with the fact that in fairly nascent markets (India Web, mobile content, enterprise software) and service companies, success is achieved by strong execution and businesses fundamentals rather than developing something that just sticks and rides the viral Web 2.0 wave.

Here are the responses that Manik provided.

What is the typical size of investments your firm is looking to make?

• USD $1 – $5 million

What are some verticals/industries you are currently seeing an interesting opportunities?

1. Niche outsourced services; e.g. Engineering and Design.
2. Digital Consumer
   1. Internet sites that are more transactional and with a strong localized angle. E.g. finance, trading, travel related sites.
   2. Less interested in social network type of sites at the moment.
3. Business software (Software-as-a-service) that caters to foreign markets as well as domestic.
4. Internet ad networks and other services that are building the components of the Indian Internet Value Chain.

While looking at a prospective company what is the most important thing you evaluated?

• Quality / experience of team. This is so important especially in Internet space where execution is so important.