Company Watch

"Domestic markets hold poor lure for VCs"

n a country where PC penetration is as low as five per 1,000 people, Inabling Technologies stormed the domestic technology market in August 2001 with its indigenously produced revolutionary e-mail device for the rural market, the I-station. Priced at Rs 7,000, the low cost e-mail device doesn't require a computer to send and receive messages. Despite the dramatic debut, the company has not performed as well as expected and is facing a cash crunch. In the last eight months, the company has sold only 3,000 units. AssureConsulting.com grills Chief Technology Officer Inabling Technologies Mr. Narsimha Prabhu on the last eight months of the company's performance.

Is it true that Inabling Technologies is facing an acute crunch and angel investors such as B. V. Jagdeesh have pulled the plug?

B. V. Jagdeesh has not pulled the plug, He was an angel investor and typically seed stage investors do invest at the later stage. Yes, the company is facing a crisis. We were expecting a second round of funding but on account of September 11 and the downturn, we were unable to secure funds.

It's approximately a year since the I-station was launched? The company's target was 64,000 units in the first year of operations? How has the product performed in the last eight months?

As the first Indian product designed for Indian conditions, the product has been accepted by the market. Our initial apprehensions about the product's acceptance have been dispelled.

Our target in the first two years was 64,000 units. So far, we have sold 3,000 units. This is primarily because the last nine months have also been a period of market learning and we've had to refocus our target segment. Initially, our target audience constituted people who are not computer literate or tech savvy. But a large number of initial customers already possess a computer and bought the I-station as it offers them certain advantages over and above the computer. For example, in the time required to boot a computer, one can already access mail over the I-station. A large section of buyers are people, who use the device to communicate with children abroad. Independent businessmen. LIC agents, small businesses and the government are other segments.

What are the e-governance projects I-station has made difference?

With the help of the government, technology has reached the taluk level in a large number of areas. The government is making use of the I-station to penetrate deeper down to the village level. One, the I-station is a convenient to use and handy device; two, for the cost of one computer, the government can install three to four I-stations. In Mandya, the I-station has been installed at the Panchayat level and is being used by the entire village in a big way. Villagers, for example, use the mail service to register grievances with district officers.

I-station was launched as a revolutionary product that would help bridge the digital divide by providing connectivity to rural India. Now, it appears to have become a product of the urban middle class.

This remains a strong target segment. Marketing has three aspects - marketing strategy, distribution networks and product promos. To reach the rural market the distribution mechanism needs to be very strong and needs to be backed with product education and frequent advertisements.

Once people are able to see, feel and touch the product, they accept the product. For people to understand that something like the I-station exists and is useful, we need to spend large anounts on promotion. And we have not been successful here.

Is this because of the fact that the company did not get its second round of funding Are you scouting for second round of finding?

Actually, we are not looking for funding as such but for strategic partnership with companies that have the reach and right networks to market the product. We are holding talks with some agencies whose names I cannot disclose.

Also, we need to have distribution agencies that have a reach in semi-urban and rural areas and who are comfortable with the product. Commodities like TV and refrigerator are ubiquitous today and require no training but the I-station is the first product of its kind and distributors are not accustomed to technology gadgets and need training.

The product assumes that there is a pre-existing need for an e-mailing facility? The rural audience needs information on market movement of crops, weather conditions etc....

Our failing has not been a lack of demand, but an inability to meet that demand. Inabling technologies also runs an information service to which people can subscribe to fulfilling such needs. In fact this has been extremely popular.

The I-station was pitched as connectivity device. Has the demand for the I-station been hit by fall in telephone prices?

I would say we operate in a different space. E-mailing needs are specific. For example, in the case of a milk federation, a large number of milk societies spread in villages. It's not possible to do so over phone. They need to communicate milk movement to the district office or a villager needs to register a written complaint.

Do you face competition from the Simputer?

No, the Simputer will sell at a retail price of Rs 15,000 and we have a definite price advantage. Also, we are ahead in the market place and are trying to consolidate on that.

Is your major market the government and do you feel a real desire on part of governments today to bridge the digital divide?

In the order of customers, it's the government, small businessmen and the individual user. We would however like to focus on Individual users.

As for the government, at least in AP, Karnataka and Tamil Nadu there is a commitment at the top level. This is not necessarily reflected in the lower levels of the bureaucracy and educating this section makes our job difficult.

As a company with an indigenously produced product primarily targeted at the rural market, do you see a bias against companies operating in the domestic market?

The export market is definitely more lucrative. We call ourselves an IT superpower but the use of IT in domestic markets is pathetically low. 0.6 per cent of our population has computers. Corporates constitute ninety per cent of this figure.

Funding agencies don't consider this segment lucrative and tend to opt for approved business models. The Indian domestic market does not have an approved business model as yet. Last year VCs invested heavily in dotcom companies offerring candy floss content and services. Ninety per cent have gone bust. We are into ground level operations. Some investors such as Infinity Ventured and ICICI have stood by us but among a majority of corporates and VCs there is a bias.

Also just having applications and devices aimed at the rural market is not enough These need to be integrated with information which the government can provide. Application that will make job easier is not enough The applicationms which have helped to make job easier not there. Having the content is not easier.

Will Inabling Technologies remain a one-product company?

Most small business and people don't need a great deal of commuting powder but specific e-mail devices. We have developed product for micro-finance, pharma sector and sales force automation. The underlying technology is e-mail but over and above that we have introduced specific applications.

Are you confident of going IPO?

At the moment that's not our primary focus We know that there is as demand is for our product and want to spread our services and marketing network in the interiors.

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