India shouldn't try to be factory of the world: Gururaj Deshpande

Sandbox's Gururaj Deshpande says entrepreneurs should focus on designing and manufacturing for India

For over a decade, Gururaj Deshpande, Indian-born Silicon Valley technologist and investor, has focused on building entrepreneurs at Sandbox in Hubbali. The effort now is being replicated in Telangana and Varanasi and Deshpande is setting up India’s largest incubator to promote more startups. In an interview with Alnoor Peermohamed, he discusses India’s startup ecosystem, the need for innovations outside metros and the new Trump administration in the US

Edited Excerpts:

What’s your view on the success of Sandbox? You spoke about the ecosystem building process, do you think it’s been a success in that perspective? Is it applicable in other states?

Definitely. I’m pretty pleased. It’s just that it takes a lot of patience and experimentation. Maybe the next one does not have to be this long and this expensive. We’ve spent about 10 years and Rs 200 crores, that’s some serious money. And it seems to be working. There are thousands of people excited about it and I think a sandbox is mostly a cultural change and it cannot happen top down, it has to happen bottom up. The more backward the community is, the longer it takes. Unfortunately, the steady state that we’ve reached right now is that in the impoverished places people sit and complain that the government needs to take care of them, and so even when you say “hey, you can have fun solving a problem” they’ll say “Why?”. So it’s a cultural shift, but once people get a taste of it, it just takes off.
 

It’s a slow long process, but we’ve been able to do it a little faster in Telangana and because we have all this stuff, we can inject this DNA into another environment a lot easier. So I’m hoping that the third, fourth, fifth sandbox will be a lot easier.

Any plans on setting up more Sandboxes?

So we have one in Varanasi and one in Telangana. So the financial model is this, sandbox is the one we fund, and now we have a lot of partners that are coming in. But if there is another philanthropist that wants to start another sandbox, he can either duplicate what we’re doing himself or he can fund it and we’ll do it for him.

Today’s most dominant startups in India are in the internet ecosystem. But they’re serving a very small population of India’s population. Is that okay and are you seeing new guys who are willing serve the rest of the 800 million people in India?

I think it’s slowly beginning to happen in the IITs and IIMs, I’m glad they’re trying, but they’re so far removed from the customer base that I don’t know how successful they’re going to be, but that’s why I’m so excited about the hub in Hubli, because people live right here.

I think an entrepreneur has to be embedded in the life of the customer. He has to live the same life that they live. Otherwise, it’s very hard to design a solution for someone who doesn’t live like you. But it’s just a matter of showing that opportunity, getting the ball rolling like software business as a service, once TCS got going then we had Infosys and a whole bunch of people. I think if we can make this successful, there will be a lot of other people who will jump into it because they see it as an opportunity as opposed to doing good for the world and all that.

There’s a huge cry for India to jump onto the hardware manufacturing bandwagon and being someone who’s been involved with a few companies in that space, what do you think India should do?

The mistake that India should not make is trying to be the factory for the world. But you can make a lot of things for people in India. A lot of it has to be re-innovating for India, be it farm equipment, medical devices, educational tools, they are real things that you have to make and they may or may not have volume. But, it’s a product that does not exist in the world. China and Taiwan manufactured products that existed in the world cheaper, but that’s not an opportunity for India. Because it’s going to take a long time before we can develop our own infrastructure and ports and so on.

So we have shown that we can do service and design for others. Now, it’s time to show that we can do design for ourselves. Those designs and manufacturing will not be complicated. We should be able to build that manufacturing base. But IP and the companies should be owned by us. Then we can export it to the rest of the world.

When will the rest of the underserved 5 billion be ready?

They are already ready. Building the volume for 5 billion customer base will take time and then you can ship it to the rest of the two billion. For example, a blood test in the US is about $1,200. it’s very clear right now that there are different ways to do that for $2, but that market can never accept that $2 blood test. One, it won’t be as good, and people who have a business model relying on $1,200 can never make a living on $2 and therefore the low-cost solution has to happen in countries like India, Africa, etc. It’s such a massive scale that the quality gets built in automatically and once the quality is there, it can go up to the remaining 2 billion people.

You were part of Obama’s national advisory council on innovation and entrepreneurship. How will that role change under the Trump leadership?

Not much. I think the US will continue to be innovative and entrepreneurial because that’s the only way to create jobs in the US. The big companies will continue to lose jobs because things are changing, so I’m not sure if the policy on that will change. Innovation and entrepreneurship are essentially a tool, so it depends on what you want to target it at. You can target it at climate control and the environment or you can say I will put it on Oil. So the jury is out, but when Trump says America first and business first, moving too far away from that social responsibilities can be a little damaging. I am not sure if one person can change anything dramatically, because the institutions in the US are very strong. I think the future for the US is entrepreneurship.  

Everyone’s been talking about how demonetisation is going to bring down India’s GDP growth. What are your views on demonetisation and should India really chase GDP figures or we must look at improving our human development index (HDI)?

I think they’re all linked. GDP growth creates more income for people and human development does happen.

I’m not worried about demonetisation much. It is painful for people who live here, but it’s a transient, it’s a blip. I came from Boston 3-4 weeks ago and it has been a very interesting experience. When I was in Bangalore, everyone was so upset with demonetisation that it was affecting the poor people. But when I came to Hubli and spoke to these poor people, they say “what demonetisation?” A vegetable vendor told me “Rs 500 note? I’ve never seen one” and everyone else said we saw a blimp for 6-7 days but then it came back. I’m not sure, but I think this movement towards online is a good thing. I hope the Prime Minister doesn’t end everything at demonetisation and keeps pushing the ball forward. I don’t know what the next trigger is, but if he can keep pushing and get all the black money out and make everything more and more accountable, it’s a good thing.

On GDP growth, I think India has to focus on building infrastructure, it’s the fundamental thing that enables the growth. It’s the one that attracts the capital.