3 IITians crack the affordable devices market, make INR 50 crore in first year

Is it possible to build affordable smartphones and tablets for the mass market without being tagged as ‘Low Quality’? Most of us would say No. Yet, 3 IITians — Ravi Jakhar, Aditya Agrawal and Rohit Sharma – have been proving otherwise with their Mumbai-based startup, ICE X Electronics. Within a year of their products entering the market, they have clocked sales of INR 10 crore in their own brand, and about INR 40 crore in other brands. The key to it is their refusal to compromise on quality, focusing instead on technological innovation to make their products affordable.

“Our industry (affordable smartphones) is branded as highly commoditized, the general perception being that companies are importing handsets and tablets from China and selling them here under their own brand names. We also work with Chinese manufacturers. However, we don’t just import products from there. At ICE, everything, from product conceptualisation to technology integration, is done by us,” says Aditya. An IIT BHU and IIM Indore graduate, Aditya has worked with top companies like E&Y and Bharti Airtel. He specializes in telecom practice.

Ravi Jakhar, Rohit Sharma, Aditya Agrawal — founders of ICE X Electronics

A gap in the smartphone market

In 2010, Ravi was advising several companies on organic and inorganic growth when he began interacting with some of the leading Indian handset manufacturers. After a series of discussions on fund-raising, he realized that most of them were able to build their business on distribution strength with little focus on technology innovation. He saw this as a gap in the business chain. He reached out to his college mates, Aditya and Rohit. Together, they launched ICE X Electronics in 2011. The vision was to build affordable smartphones and tablets for the Indian consumer with a clear focus on technology and innovation.

 

The company started its operations with a small team of six people, which gradually grew to 25, while keeping all non-core activities on an outsourced model.

Right from the start, the 3 founders were clear that to succeed in the crowded space, they had to innovate and differentiate wherever possible.

 

For instance, the core chipset for tablets is built for global users and the first such chipsets for wifi tablets did not have support for dongles from Indian operators. Besides, wifi coverage in India is very limited. So a lot of people who purchased wifi tabs initially could not use them well due to lack of wifi hotspots. “We worked with the chipset developers and got patches built to solve dongle issues and hence our tablets could be supported by all the major Indian dongles,” Aditya says.

“Even after the final assembly of devices, there are a lot of bugs which emerge in the software, thus leading to unsatisfactory user experience. A PCBA developer made a PCBA for a calling tablet, which was used by us and others as well. However, we were the only ones who launched the final product with calling tray and free of bugs,” he says.

 

Technical expertise is their forte. “We are the only Indian company in its domain which is working on latest technologies such as wireless charging, 3D printing, 22 language keyboard solutions, own OS etc. all of which help in making better devices for the end-user. We have a tie-up with FTK Technologies, an Israel-based company, to launch India

ICE was the official handset partner of Dhoom 3. They did a contest around the movie, where the winners met Aamir Khan

’s first 22 language-enabled tablet,” Aditya says.

It doesn’t end at sales

All ICE tablets come pre-loaded with a customer service app, which customers can use to get online help to fix small problems immediately – “This is a first from ICE,” Aditya says.

Apart from tie-ups with more than 400 third party service arrangements, the company also provides for a pickup and drop of devices after repair. Customers can call a toll-free helpline number to log in their complaint and request for device pickup. “ICE is the first company to launch a concept of doorstep after-sales service for tablets and smartphones, which is now being upgraded to an ‘engineer at home’ service,” he adds.

Currently, the company is piloting a new model of after sales service. They have hired repairmen to go to the customer’s house with a tool kit and repair the device at home. “This is a model frequently used by consumer durable companies but unheard of in the mobile and tablet segment,” Aditya says.

To boost their sales network, they are piloting a new model of sales too.

1. Campus Ambassadors

ICE has tapped into college campuses, a hot market for affordable tablets and smartphones. They appoint ‘Campus Ambassadors’, who are generally students perceived as influencers in the campus. These ambassadors promote and use ICE products, resulting in sales in the campus. The ambassadors also help their friends in case of any after sales service. “We have recently hired a few interns from IIT to identify campus ambassadors in more than 500 colleges over the next 2 months,” Aditya says.

2. Society Ambassadors

ICE is also experimenting with a new model of sales at the co-operative society level. The company is planning to touch base with housewives who have a large social network in their housing societies. These ‘Society Ambassadors’ will use and promote ICE products among their groups.

Challenge of changing perceptions

The biggest challenge before ICE was how to fight perceptions in the mind of general consumers that affordable handsets aren’t reliable, especially China-made handsets. “This perception has emerged because most other players have been importing low quality devices, and many consumers don’t think about the fact that China is the manufacturing hub for all brands, including Apple,” Aditya says. ICE tackled this by persisting with their focus on quality, and “over a period of time helped our supply partners understand how much of a difference a focus on technology can bring.”

The biggest regret Aditya nurses is that they couldn’t launch ICE sooner. “There were many firsts from the ICE stable and we couldn’t tell our consumers about it because we were so focused on bringing the best technology innovation to our phones and tablets that we didn’t give marketing its due.”

ICE tied up with Rajasthan Royals and released a limited edition tablet

 

Initially, the founders took a business call to go directly into the retail model. Typically, if you sell through retail outlets, the dynamics of the industry are such that there will be delays in payment collections. So if you don’t have an alternative sales channel supporting your business, going directly to the retail network can sometimes prove more of a roadblock. “Currently, we sell through all channels, including prominent ecommerce sites like Flipkart, eBay and Amazon. We have also launched our own exclusive online store icedigitalstore.com.”

The company has been funded internally, with the founders investing about INR 4 crore. “We have a turnover target of INR 100 crore this fiscal year. For this, we will be looking at raising some capital now from external investors,” he says.

Growth Strategies of Israel’s Burgeoning Medical Device Sector

 

Israel’s start-up community has gained wide recognition mainly because of entrepreneurs in the areas of communications, software, Internet and social media. Waze, a GPS application, made news because Google paid more than $1 billion for it. Trusteer — cyber security software — made similar headlines when IBM bought it for a similar sum.

Further out of the public eye, a similar flurry of activity is taking place in the field of medical devices. “Internet startups are sexy,” says D. Todd Dollinger, chairman and CEO of the Trendlines Group, a venture capital firm that focuses on medical and agricultural technologies in Israel. “It’s consumer products vs. medical products. When one uses medical products, you often don’t know their origin. Your doctor knows, but you don’t know.”

“Start-ups related to the Internet are fairly straightforward,” adds Guy David, professor of health care management at Wharton and a fellow at the Leonard Davis Institute of Health Economics .“To develop a successful [Internet] application you need an idea and programmers. But with medical technology, the matter is more complex because it involves potential structures in production.”

David notes that there are several things that make medical technology different from cellular or computer technology. “You don’t see the large global companies purchasing medical start-ups,” he says. “Besides, if you look at PillCam [a start-up in the area of capsule endoscopy] or ReWalk [a commercial bionic walking assistance system], they are brick and mortar in terms of development, not just software. They are real products.”
According to a 2012 study by Israel’s ministry of industry, trade and labor, the country was home to 656 medical device companies. Of these, 35 were publicly traded and 18 were owned by foreign companies. The global medical devices market was estimated at $322 billion in 2011. The Israeli market was $1.8 billion, but despite its relatively small piece of the pie, Israel is the leading country in terms of patents granted per capita in the medical devices field. In absolute numbers, it is fourth. “Few medical device industry executives would argue with the notion that Israel has been one of the leading sources of new device technology,” says Dollinger.

“It’s consumer products vs. medical products. When one uses medical products, you often don’t know their origin. Your doctor knows, but you don’t know.” –D. Todd Dollinger

“The industry is young” adds Eran Perry, managing director of Israel HealthCare Ventures (IHCV), a life sciences venture fund. Fifteen years ago, there was very little activity in the medical device field, he notes. At the first Biomed Conference — an annual meeting showcasing such technologies — there were a few people in a small room. Today, the conference fills an entire exhibition hall with thousands of people from all over the world.

Lean Companies

The sector has an advantage in that it can operate on a comparatively shoestring budget. Companies in Israel are very lean compared to those in the U.S., helped in part by the country’s start-up ecosystem: Clusters of similarly focused firms can share resources, meaning overall infrastructure costs are lower. Also, a singular feature of the industry is the small size of the companies in terms of manpower. About 56% have only between one and five employees. Only 3% have more than 100 employees.
“One of our recent investments is in Argo Medical Technologies, an excellent example of how a small budget can go a long way,” says Perry. Argo is a leader in the exoskeleton field; it has developed ReWalk, an exoskeleton suit that enables people with lower limb disabilities to walk. It was the first to reach the market with a U.S. Food and Drug Administration-approved device for rehabilitation centers, though the company’s investment was one-third that of the competition, Perry notes.

He also points to the success story of NanoPass Technologies, which develops micro needle-based systems for intradermal delivery of drugs and cosmetics. “When they approached us they had FDA approval, rich clinical data and impressive production capabilities. At that time, NanoPass had only one employee — the CEO,” says Perry. The company has since raised three rounds of VC funding. NanoPass has also announced several partnerships with multinationals, particularly in the area of prophylactic and cancer vaccines. But it has been hard work without support staff: “When becoming a CEO of a start-up company, or any company, one needs to be very persistent,” notes CEO Yotam Levin.

Fellow entrepreneur Uri Arnin started his company, Spine21, more than a decade back after learning that 40,000 surgeries were performed annually to repair spinal deformities on teens in the U.S. Spine21 makes bionic spinal implants. Arnin’s vision was to develop a device to correct spinal curvature over a long period, as opposed to one-time aggressive surgery. The result: the ApiFix system, a minimally invasive device. The seed capital of $500,000 came from the Trendline Group’s Misgav Venture Accelerator. Later rounds came from private investors. The potential market for ApiFix is $600 million in the U.S. and $300 million elsewhere. “We are running clinical trials in Israel, and in Hungary and Romania, where the approval process is comparatively fast. Based on these trials, some devices have already been sold,” says Arnin.

A Low-key Approach

But why haven’t these firms garnered headlines the way some of Israel’s Internet-focused start-ups have? “People who go into the medical technology field are not as hungry,” David notes. “They aren’t interested in making a quick buck. They know that it will take longer” for their efforts to pay off.
Medical products are not as global as IT, adds David. “If you think about the Intel chip, or if you develop software for Google, it will be picked up everywhere. With medical technology the ability to scale it up depends on the country.” Every product is not suitable for every market.
Recent developments in the U.S. are likely to make it an even bigger market. In 2011, the U.S. accounted for $600 million of Israeli medical device exports. Exports to Europe were around $400 million, with China and Japan at about $100 million apiece. David explains that most emerging technologies are patient-centered, and many Israeli companies have made considerable advances in these areas.

“People who go into the medical technology field are not as hungry. They aren’t interested in making a quick buck.” –Guy David

“If you look at the statistics, five years ago, less than a quarter of the companies were generating revenues,” says Perry. “Today, about 40% are selling a product. Israeli start-ups have not been strong in commercialization; they are better at development. But, in recent years, some of them have been forced to go to the next stage because finding a buyer for the company was taking too long.”
Companies’ having to prove themselves commercially is good for the industry because it is now learning how to penetrate different markets. Medical device companies also have an edge because they can break even quickly; in certain areas, the devices can reach the market in only two or three years.

What makes Israel a leader in medical innovation? “It’s the mix of people and the culture,” says Perry. “In elite technology units of the army, young soldiers learn how to work as a team and solve problems. The medical device industry is about defining problems which have to be solved.” Some immigrants to Israel from the former Soviet Union have come from key scientific sectors and have added their experience to the mix. Top-tier academia and a defense industry that continuously provides cutting-edge technologies are also important factors, Perry notes. In addition, the government has been very supportive in R&D.

Cognizant incubates employees' ideas for in-house start-ups

Cognizant Technology Solutions, one of the country’s largest information technology service companies, has devised an innovative way to create start-upsvwithin the organisation.

Considered a front-runner in evolving for technologies of the future such as social, mobility, analytics, and cloud (SMAC), it has been encouraging employees who come up with innovative ideas for specific client needs or which set the stage for the future. Once the ideas clear a feasibility test, the staffers are taken off their job and asked to dedicate themselves to the project. Cognizant also provides the needed resources and funding for the idea to incubate.

The company says 30 such ventures have been funded and some of these solutions— such as Cloud360 and TruMobi — have already been deployed at some clients. “We at Cognizant have realised we will never be smart enough to figure it out all by ourselves, so we have to democratise it,” Malcolm Frank, executive vice- president of strategy and marketing, told Business Standard.

LOOKING INSIDE

Cognizant says 30 such ventures have been funded and some of these solutions have already been deployed at some clients This comes at a time when the $100-billion software export sector is trying to regain its entrepreneurial spirit after decades of capitalising on lower costs and cheaper labour Google allows its employees to spend 20% of their working time on a project of their interest Google says some of its most innovative and successful platforms, such as Gmail, have emerged from this

This comes at a time when the $100-billion software export sector is trying to regain its entrepreneurial spirit after decades of capitalising on the lower costs and cheaper labour in this country. As it battles challenges such as emergence of SMAC, saturation of traditional IT spending, regulatory hurdles for offshoring and the rise of artificial intelligence, the sector needs to move up the value chain through intellectual property creation.

Ramesh Panuganty of Cognizant stumbled on the idea of creating a product called Cloud360 when he realised the sector was moving towards fluid computing models and infrastructure was becoming available as a service. This was in 2008-2009. “The word ‘cloud’ did not exist at the time but it was clear the economics of scale could not justify legacy infrastructure models,” says Panuganty, now venture leader of Cloud360 at Cognizant.

He compares the idea to the emergence of railroads in America, which connected the fertile agricultural land in the midwest to the barren one in the west. “Cloud360 is what we call the railroad helping our customers adopt cloud computing.” According to the company, at least 15 organisations have adopted Cloud360, which helps to lower the cost of managing applications and improving their performance. It manages applications across private, public and hybrid clouds and makes it easy to scale systems up or down, based on real-time needs.

“For those ideas that go on to become their own offerings, the founder often becomes the leader of that offering,” says Sean Middleton, chief operating officer, Emerging Business Accelerator, Cognizant. He adds the company's chief executive, Francisco D'Souza, was once part of a team of folks with an idea. "We make that career opportunity available to every one of our people today."

Google Inc allows its employees to spend 20 per cent of their working time on a project of their interest. The company says some of its most innovative and successful platforms, such as Gmail, have emerged from this.

 

Middleton of Cognizant says in a number of cases, ideas such as Cloud360 or TruMobior assetSERV spawn new business offerings that generate revenue streams. "In other cases, those ideas become sources of continuous improvement...In other cases, a thought leading idea might prove infeasible but by sharing it with a client, we deepen our relationship and give birth to a new idea.

Cognizant banking on ‘code halos’ to bag big deals

Cognizant has come out with a new approach called ‘code halos’ that it believes will open up more multi-million dollar business opportunities. The company, which expects to record 16.5 per cent growth in 2014, taking its revenues to over $10 billion, says the new approach will throw open business opportunities for itself as well as outsourcing companies, large and small.

 

The ‘code halos’ or virtual ‘halos’ will help companies make sense of Petabytes of electronic information from smartphones, wearable devices and any gadget that leaves a digital footprint.

“We call this data ‘code halos’ as it accompanies people, organisations and devices and, when properly harnessed, contains a treasure trove of business value,” said Paul Roehrig, Assistant VP and Co-director of the Centre for the Future of Work at Cognizant. Roehrig, along with Ben Pring, the other co-director, plans to launch a book on the concept.

 

Real-time data

Citing the example of Progressive and Allstate, two insurance companies Cognizant has deals with, Roehrig stated that with ‘code halo’ thinking, vehicle insurers can look at real-time data of people’s driving history and price their premium accordingly instead of blanket pricing based on old parameters such as age of the vehicle. “Insurance companies can create new business models, which can help in more tailored pricing,” said Roehrig. “So, a driver who brakes frequently puts more pressure on the vehicle and hence would incur a higher premium,” he added. Companies such as Cognizant are trying to take this approach in a market where competitors are speaking a similar language and offer similar technology services.

“Our competitors approach this from the technology side but the real pain problems are on the business side,” said Roehrig, adding that this kind of approach would help a start-up or a Fortune 500 company.

 

Software revenue

The market for this kind of offering is rising. According to Gartner, worldwide software revenue totalled $407.3 billion in 2013, a 4.8 per cent increase over 2012, driven by trends such as ‘big data’. Cognizant classifies revenues from such services under the head Social Mobile Analytics Cloud or SMAC. The company has clocked SMAC revenues of $500 million, more than most Indian software exporters.