The next leg of India’s software success story will be penned in small town India: Sridhar Vembu, CEO, Zoho Corp

Sridhar Vembu, Founder & CEO of Zoho Corp, explains why he has ‘ghosted’ VC funding all through and why germinating software startups in small-town India is a great idea.

Sridhar Vembu, Founder & CEO, Zoho Corp
Zoho Corp

Maverick entrepreneur Sridhar Vembu, founder and CEO of Zoho Corp, has always been an odd fish in India’s IT realm – be it his steadfast resolve to give VC funding a miss, to believing that a world-class SaaS product like Zoho Workspace could be built in a quaint little town deep in the hinterland of Tamil Nadu.

The global SaaS market is expected to reach USD 117 billion by 2022; at USD 3.3 billion, India’s SaaS ecosystem notches just 2.8 percent of the total market share. Part of the reason is that a majority of the 8366 SaaS companies in the country max out near the USD 10 million Accounting Rate of Return or ARR mark.

In the midst of fledgling software startups clamoring for their next round of VC investment, a nondescript little town in Tamil Nadu, and home to Zoho Corp, witnessed the software firm inch towards USD 350 million in annual revenues.

Computerworld, in a tête-à-tête with Sridhar Vembu, Founder & CEO of Zoho Corp, discusses the rationale behind why the country needs to look beyond metropolitan cities for fostering software startups and how remaining bootstrapped helps drive business growth and innovation.

Edited excerpts:

Tell us about the birth of Zoho – what sparked the idea and what vision did you have at that point in time?

I was living in the US at the time with my brother. When we would go out to shop, we would find products imported from all over the world, except India. That's where it began—with an urge to make in India. From the outset, we were clear that we wanted to be a product company, even though service companies were all the rage, and we wanted to build products that can compete at a global level.

AdventNet was started in 1996 (it was later rebranded as Zoho Corp). In the beginning, we started building products in very specialized markets – telecom, network management – and later diversified as we grew.

Your vision of Indian IT went beyond metropolitan cities, to smaller towns in India. What’s your opinion of small towns being the birthplace of new tech companies in the country?

With the population density of India, even in rural areas, there are a substantial number of people within a 20-30 km radius. With the spread of education and broadband, there is a large number of rural youth who are hungry for an opportunity.

We believe it is the job of the employer to provide training and build up the skill level because most of the specialized knowledge required in software or other technology development is best acquired by doing.

Smaller towns offer more space and lower real estate costs and while municipal infrastructure is not great anywhere in India, the relatively low population density of a smaller town compared to an urban megapolis makes them more liveable.

We ourselves have found a home near the Tenkasi town deep in southern Tamil Nadu, and there are plenty of towns all over India that will have a similar profile. Our goal is not to make Tenkasi another megapolis – that would defeat the purpose. Our goal is to locate high skilled jobs in smaller towns and help the regional economy of those towns and their surroundings.

The ‘bootstrapped v/s funded’ question has always hounded tech entrepreneurs. You’ve steadfastly believed in not going for VC funding. What’s the rationale behind the stance?

We are in this for the long haul. Being bootstrapped allows us to remain financially independent, and focus on actually growing the business, building products and investing in long-term R&D, instead of chasing some numbers and satisfying short-term goals set by investors.

A lot of Indian SaaS startups have capped around the USD 10 million mark. Barring companies like Zoho, Freshworks, and Druva, most of the newer SaaS players are not being able to make it big on a global scale. What in your opinion impedes their growth to the next level?

In order to make products that can compete at a global level, entrepreneurs need to invest in R&D. This needs funds and patience, and a focus on the long-term vision. 

Indian companies need to invest in long term R&D. That is the only path to sustainable competitive advantage.

As an early CRM & SaaS entrepreneur, what are your top three takeaways for IT entrepreneurs (both global & Indian) in the present day?

  • It is possible to build great R&D and world-class products from less well-known places.
  • It is possible to sustain the effort long term and make a dent in the global markets.
  • It is possible to serve customers well, keep employees happy while making a profit.

Copyright © 2019 IDG Communications, Inc.

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