Technology entrepreneurs make giant leap from services to product development

Technology entrepreneurs who honed their skills by delivering services to overseas clients are turning to product development as money and talent become more easily available.

Quick to spot gaps in the market, these professionals, who have built up a base of capital and industry contacts, are creating products in areas such as online security and customer management for ecommerce companies.

"Services helped us remain profitable while gaining experience. It allowed us to ease into products without worrying about whether customers would buy what we have innovated and launched," said Sanjay Deshpande, CEO and chief innovation officer of Uniken, which builds security software.

Set up with Rs 15 lakh, Uniken has built a user base of 10 lakh in the past five years. Deshpande estimates the company that has received initial funding of Rs 30 crore from Nexus Venture Partners will earn revenue of about Rs 620 crore in the next four years. For Deshpande, the transition from services to products was a mental adjustment as he had built up a base to ease into a product venture without financial insecurity.

However, the transition is not always so smooth for many others. Shirish Deodhar, cofounder of Sapience Analytics, a company offering productivity solutions to companies, said starting a services venture first can backfire.

He first set up a services company, In-reality Software, that offered outsourced product development for US clients. "But we were totally absorbed by the services venture and couldn't focus on our product dream," said the entrepreneur who went onto sell his first startup to Symphony Services.

The second time around, he decided to focus completely on products mindful of the earlier experience. "We had to invest heavily, work on the product continually improvising it, and eventually hope that customers will want to buy it," he said.

However, as more investors begin to back technology product ventures, entrepreneurs are realising that it can be a high-risk, high-reward experience. In January, Little Eye Labs which develops technology to improve mobile application development, was acquired by Facebook for about Rs 90 crore within 18 months of being set up.

Sharad Sharma, co-founder of industry think tank iSpirt, is of the view that for those who don't have the risk capital, funding their product venture through revenue from services is a viable option.

Instaclique, which helps ecommerce companies convert browsers into customers is an example of such a strategy. "We started Niyuj as a services venture developing software for clients," said Avinash Shenoy, CEO of Instaclique.

Realising the opportunity to build their own intellectual property, Shenoy launched the product venture in 2012 that focused on the rapidly growing ecommerce space.