The concept of Charter Membership is at the heart of the success of TiE. The initial idea was mooted by Ambrish Patel (AJ) and refined by Suhas Patil. Mentoring of the young aspiring entrepreneurs was one the original goals of TiE. Two classes of memberships were necessary to separate the mentors from mentees. Charter membership dues was set at $1000 whereas members only had to pay $100 per year.
TiE Charter Members, by definition, were people who had achieved a certain level of success and were now ready, able and willing to pay forward. They had to commit to spend time and energy to mentor younger generation.
The concept was further refined by Nitin Mehta to include people who are willing to spend time and energy to make TiE organization successful. CK Prahalad further talked about the ancient Indian tradition of Guru-Chela as a model.
Mentoring became one of the bedrock activity of TiE and contributed to its attraction to many people, both mentors and mentees.
This is the first annual report published in January 1995.
Please note the official history as published at the time.
Please note the list of the CM at the time. Also, 10 sponsors are listed. There is also a list of the office bearers. There was no official sponsorship chair at the time. Paul Gupta led the effort to raise sponsorship as a volunteer.
Of particular note is the philosophical framework listing a set of values that underpinned TiE. Not a word has changed.
TiE began as a dream of a few visionary individuals in the Silicon Valley and from these humble beginnings has become a global force in a short span of 8 years. It has grown enormously in stature and influence, and has been acknowledged in the Indus region as well as mainstream media. Membership has expanded out of the Silicon Valley into 22 chapters – all the way from Chennai (India) to London (UK) to Houston (Texas). The growth trajectory shows no sign of a slow down.
More importantly, the influence of TiE has spread from mentoring aspiring entrepreneurs in the Valley to continuously more ambitious pursuits. Some of the new roles that TiE has taken on include helping governments to develop policies that are conducive to entrepreneurship and wealth creation. From a nine Charter member organization, dedicated to sharing their knowledge and time it now has more than 300 charter members around the world and growing. TiE events – chapter meetings, TiECON conferences – are well attended. TiE is in an enviable position of restricting attendance in most events. Several individuals have worked tirelessly to build the TiE franchise (global recognition and a clear brand), TiE Experience (quality and dedication to creating wealth) and the TiE Spirit (individuals who are net givers to the community at large). This document starts with an unambiguous recognition of the extraordinary contribution made by a small groups of individuals during the period 1992 –2000 to build the spirit of giving, to be concerned about the well being of the Indus region, and the focus on bringing their knowledge and wealth to bear on promoting entrepreneurship in the community. Perhaps most importantly, TiE has made a substantial contribution toward helping people of Indus origin to break away from the mindset of helplessness and a feeling of “second class” citizenship and building the reputation of the community. This document celebrates the accomplishment of the original founders.
While TiE’s role in wealth creation has received much attention, the tremendous role it has played in mobilizing intellectual capital has not often been emphasized explicitly. Going forward, TiE must turn its attention toward creating a means for the intellectual assets of its members to be shared and focused toward achieving goals that benefit the organization and community at large.
As TiE grows and scales its operations, the focus of TiE leadership ought to shift to building an enduring and lasting institution that outlasts the founders. It is important to recognize that no Indus organization to date has outlasted their founders and the original mission including the “mighty” Congress Party. As circumstances change, the activity mix of TiE will evolve according to local needs. Selecting appropriate leaders based on the needs of the organization and not seniority has also been difficult in the Indus region. TiE must break the mold and prepare for orderly succession.
TiE has taken on a particularly ambitious and relevant set of goals, both for the expatriate Indus community and the Indus region. The basic beliefs and values of TiE are responsible for much of the growth and credibility the organization enjoys. The evolution of TiE as an organization must be consistent with these founding ideals. Based on my interviews, I was pleased to note that although there are differing opinions about how TiE should go forward, there was a tremendous emotional commitment to the ideals of the group. We have a chance to prove to ourselves and to the rest of the world that TiE can be the first Indus organization that can be global and reinvent itself from within. This document is focused on that issue.
The Challenges of “Success”
Due to the extraordinary success of TiE, it is facing a number of
organizational challenges at an early stage. In order for the integrity of TiE to be maintained going forward, we will have to focus our energy on developing a process to deal with the following issues:
How can TiE grow its membership base, geographic scope of operations and as a consequence competing agendas while maintaining unfailing dedication to the founding principles? Addressing this issue will require establishing standards for members and charter members and developing processes for transparent elections and conflict resolution. In short, how can we respect diversity of approaches while insisting on adherence to TiE principles?
How can TiE maintain, enhance and create a global pool of intellectual capital, which will maintain the continuity, and vitality of the organization? Our capacity to manage this process is a prerequisite for promoting entrepreneurship and wealth creation as well as achieving a credible voice in public policy.
How can TiE continue to build its credibility in the mainstream of the countries in which it operates (one of the biggest benefits that TiE members enjoy) while maintaining the focus on the needs of the Indus region and Indus community?
How can TiE retain its focus on meritocracy and fairness while also promoting an atmosphere of inclusion?
How can TiE establish standards for Charter members going forward while acknowledging the extraordinary contributions of time and resources by individuals to date?
How can we expand the membership base and outreach (e.g. students, more participation by women) and keep the focus on entrepreneurship?
These are pressing issues for TiE. An approach to dealing with these issues explicitly is to debate the nature of the organization we want to build. I have called this the House of TiE. Once we have agreement on what we want to accomplish and the principles behind that accomplishment, it is easier to develop the legal framework that will support the institution building challenge that TiE faces.
The House of TiE:
The House of TiE is a concept. It allows us to recognize and explicitly deal with the issues that are central to keep the spirit of TiE and the momentum of its growth. We need to build on our strength and at the same time transfer the “implicit beliefs and values” – the DNA of TiE as it were- to a larger group. Institution building is essentially the act of codifying and enforcing a few principles and providing for flexibility to reinvent the activity mix continuously.
As a starting point, we can conceive of the task as building the “House of TiE ” as consisting of five key elements:
The foundation of the House of TiE – the Spirit and the Values of TiE. Without it, the House cannot exist or grow,
The Roof of the House of TiE – the broad mission of what we are (TiE) trying to accomplish – the creation of a “Virtuous Cycle of Wealth” – and the capacity to continuously invent an activity portfolio that furthers the mission. We must retain our focus on the organizational values in the pursuit of wealth creation (e.g. material success as a by-product of innovation and fair play)
The support structures of the House of TiE – the standards, capabilities, the building blocks and the forums (fora) for impact and the evolving governance process.
Ensuring the conceptual and policy integrity between (1), (2) and (3).
Development of a consistent and coherent public relations strategy.
We will outline the building blocks of TiE one at a time.
The Foundations of the House of TiE:
The foundations of the House of TiE are clear and well articulated. The nine principles of TiE have been the inspiration to many a TiE charter member. It has also been the basis for the nature of activities that TiE has engaged itself in. The nine principles are:
Always provide an uplifting positive leadership role model
Be an idea and value driven organization
Be an open, inclusive, and transparent organization
Emphasize value-creation through informed entrepreneurship
Maintain high ethical standards
Display a rigorous, intellectually honest behavior,
Be modern, scientific and forward looking in approach
Be socially responsible
Be intolerant of pettiness, divisiveness and corruption
The exercise of these nine principles has already led to some defining characteristics of TiE.
The focus on the Indus region
Focus on the unifying arena of entrepreneurship and meritocracy rather than on divisive forces of religion and partisan politics
Focus on helping others – mentorship to aspiring entrepreneurs
Propagating and celebrating entrepreneurial success
Focus on succeeding through market based (transparent and open) competition, and most importantly,
Creating a “spirit of sharing”. This is a fundamental premise of TiE and one of the main reasons for its success. This assumes that all leaders of TiE will be “net givers” – that they will contribute more to the community at large, than what they take out. It also implies that there are a large number of potential entrepreneurs who are “Net Takers”. TiE is, therefore, a Forum for sharing consisting of both Net Givers (leadership of chapters) and Net Takers (potential entrepreneurs). Through the focus on mentoring, TiE will create opportunities for intellectual and professional enhancement for both ‘leaders’ and ‘members’.
As TiE evolves, the principles that constitute the spiritual foundation will be continuously interpreted. However, the stability to the institution will come from a constant and unvarying commitment to the principles. Institution building is an act of continuously balancing change (in activities) and stability (to values and beliefs).
The Roof: Visible Outcomes of TiE:
The visible outcome – the Roof of the House of TiE – is as critical as the foundation. The roof is always visible. TiE will be known, evaluated and emulated by what it does. TiE must exude an energizing aspiration.
For example TiE can commit to:
Promoting the entrepreneurial culture globally by opening a TiE chapter in every major center of economic activity in the world,
Helping to create thousands of entrepreneurs
Creating and sharing a coherent body of knowledge on entrepreneurship
Making a marked difference to the Indus region through entrepreneurship as well as to the communities where TiE is active
Achieving a disproportional identification with entrepreneurship such that
TiE = Entrepreneurship =TiE
in the minds of people around the world
The dominant theme of the Roof of the House of TiE is the Virtuous Cycle of Wealth Creation. Let us examine what it means:
Focus on a Clear Ideology. For TiE the ideology is that Wealth Creation through entrepreneurshipis both a legitimate and critical activity. Entrepreneurship is about innovation, risk taking, experimentation, vitality and change. Societies cannot progress unless they accept wealth creation as a social necessity.
Focus on Individual Entrepreneurs. TiE recognizes, explicitly, that individuals go through a cycle of wealth creation. For an individual, there is a virtuous cycle of wealth creation. Initially, an aspiring entrepreneur seeks and is given mentoring and support. He/she then creates a successful enterprise, creating wealth in the process – for himself/herself as well as in creating new job opportunities[1]. The third phase is in giving more of themselves for building other entrepreneurs[2]. Phase three is not about age but about accomplishment and maturation as a person. Some charter members are in Phase three at 35 and others not there yet at 55.
Focus on Institutional Impediments to Entrepreneurship. In the Indus region, this may currently translate into evangelizing the benefits of an open and market based economy and providing help in building the appropriate institutions. For example, it would mean a focus on the institutional infrastructure for entrepreneurship (e.g. what are the impediments to developing an active market for venture capital in India?)
Focus on Creating an Entrepreneurial Culture. This assumes that TiE must create a “critical mass” of leaders and role models, as well as those who aspire to become entrepreneurs. Growth is critical. TiE will focus on four elements of growth to spread the message of entrepreneurship:
Growth in number of chapters and membership
Growth in the number of environments – developed and developing markets (US/UK as well as India/Pakistan, Bangladesh and Nepal)
Growth in the variety of industries covered by the entrepreneurial drive – beyond IT
Growth in the mix of activities associated with entrepreneurship- from mentoring individual entrepreneurs to developing public policy positions
Focus on knowledge Intensive Industries. Consistent with the principles of meritocracy, modernity, global competition, and scientific outlook, TiE will focus on emerging knowledge industries – IT (its roots), life sciences, and professional services. The canvass is really large as many a traditional industry is undergoing massive transformation and becoming more knowledge intensive and professionally demanding.
Focus on becoming Inclusive: Inclusive does not just mean Indus region. It means becoming mainstream in countries where TiE intends to operate.
As TiE evolves, these foci will change and morph. However, the commitment must be to reinforce the association of TiE and Entrepreneurship. Moreover, the means of achieving these goals must be consistent with the values and principles of TiE if the organization is to retain its stature.
The Building Blocks of The House of TiE:
Between the foundation and the Roof of TiE are the load bearing structural elements. There are four structural elements:
The quality of membership of TiE
Capabilities
Forum(s) for Impact
Evolving Governance Process
The Membership of TiE:
The strength and influence of TiE will totally depend on the quality of its members. While size (number of members) and scope (number of locations) are easily measured, the quality of membership is critical. Establishing clear and unambiguous standards for inclusion is essential for furthering the mission of TiE as well as protecting the “brand” identity it has achieved so far.
TiE must insist that all its members subscribe to the basic foundational values, even if they do not all agree with the activity mix at a given point in time.
TiE will consist of two types of members:
Members of TiE
Charter members
Any (aspiring) entrepreneur can become a member of TiE. Members can be ‘net takers” at an early stage of their entrepreneurial development.
The leadership of TiE chapters will be elected from charter members of the Chapter. Charter members must conform to the following standard:
High achievers who have a demonstrated track record of entrepreneurial accomplishment, measured by the wealth they have created (e.g. market cap. of firms they have founded, number of professionals they employ, size of the investment fund they manage, ……)
Role models – successful, accomplished net givers. Those who are willing to contribute their knowledge and time to help others, an ongoing commitment to a minimum level of involvement ( e.g. number of hours of voluntary work per month,…..)
Those who can motivate and inspire others
Those who can bring substance to the pool of intellectual capital which is a foundation of TiE
Those whose business contributions are recognized by peers
Those who agree not to use the TiE forum solely to add to their own business/ professional/ investment status
Maintaining the integrity of TiE, its mission and its global impact requires that high standards be maintained. Charter members, who represent the leadership of the chapters and the Global TiE, are the stewards. Agreement on a clear and unambiguous standard for charter members around the world is critical to the ongoing success of TiE. Therefore, there is a clear need for Global TiE to be involved in picking the first group of charter members before starting a new chapter, reviewing and accepting nominations for additional charter members from the chapters, reviewing the status of the charter members periodically (say once in three years) as well as investigate complaints received from any of the members regarding the behavior of a charter member[3].
Local Chapters:
TiE members’ primary and ongoing contact with the spirit and mission of TiE will be the Local Chapters. Local chapters must have the freedom to experiment and be independent within the framework of the values and mission of TiE. However, all TiE chapters must create opportunities for:
Encouraging and promoting entrepreneurship in society
Mentoring young entrepreneurs
Allowing opportunities for networking among established and aspiring entrepreneurs
opportunities for socializing
Promoting the spirit of collaboration and meritocracy and
Becoming an Integral part of the community
This implies that all chapters must commit to a minimum set of activities – such as monthly meetings that are scheduled in advance. However, each chapter must retain the freedom to choose its activity mix based on the needs of its members. Each chapter is encouraged to build a permanent staff that can support a vigorous program of activities.
The activities of all chapters must be transparent such that other chapters can learn from the successful experiments throughout the world – wide TiE organization.
TiE Global:
The primary role of TiE Global is providing a unified voice for all of TiE. For TiE chapters and members to gain the benefits of association with TiE, its unique mission and values must be protected and nurtured. TiE Global is an elected body of leaders that ensures common standards around the world. TiE global will, in addition, develop an internal “think tank” on issues related to entrepreneurship, represent TiE’s position in public policy debates as well as fund research pertinent to the mission of TiE.
The relative roles of TiE Global and local chapters are symbiotic. Each gains in stature and influence from the other. But we must recognize that a certain tension is inherent in this relationship. Global standards must coexist with local experimentation, innovation and adaptation to local needs. Policy perspectives of Global TiE may not always sit well with local chapters. Global integration and local responsiveness will be an on going tension and a healthy one. However, TiE Global must establish a minimum set of “non negotiables” such as the values and beliefs, the broad mission of TiE as well as the standards for becoming a charter member.
Forums for Impact:
For TiE to continue to have significant influence on the Indus region as well as globally it must carefully select the forums through which it will make an impact. It is obvious that for the near future we have three distinct forums:
The focus on the Aspiring Entrepreneur.
Focus on public policy environment and making it hospitable for entrepreneurial development
Becoming mainstream – connecting with the communities at large
Aspiring Entrepreneur:
The most fundamental basis for influence is the number of successful entrepreneurs that TiE is associated with. The aspiring entrepreneur is the basic building block of impact that TiE has had and can continue to enjoy. The aspiring entrepreneur needs education, inspiration, and role models. The TiE monthly meetings, special seminars (e.g. on wireless), TiE Con and other regularly planned activities of TiE chapters, therefore, form the core forum for TiE.
Mentoring:
While the TiE meetings are educational and inspirational, mentoring is critical for the success of TiE. Members of TiE, the aspiring entrepreneurs are attracted to TiE primarily because of the opportunity to get some time with seasoned entrepreneurs.[4] Mentoring is a “one-on one” activity. It is time consuming. It requires significant commitment of time from charter members. Further, there is a need for “appropriate chemistry” between the mentor and the student. The special relationship between mentor and student can be abused for personal gain. Therefore, TiE must establish principles for mentoring.
Aspiring entrepreneurs have the choice of contacting any charter member on their own or contacting them through a TiE chapter,
If the contact is through a TiE chapter the candidate will have access to the list of charter members who are willing to mentor and the times they will be available. (TiE chapters must be encouraged to use their staffs to create specific dates and time slots involving members who are willing to be mentors). The candidate can use this as a “sign up” sheet.
Mentors will do this as a free service with no expectation of a reward.
Mentors must not solicit a business relationship as a precondition for mentoring.
Mentoring is an essential part of building an entrepreneurial culture and more importantly it is a true reflection of the spirit of giving by charter members. Mentoring must become systematic and organized rather than sporadic.
Investing in Ventures:
Aspiring entrepreneurs need access to venture funds and many of the charter members are angel investors. There is, therefore, a natural affinity between the two[5]. On the other hand, this relationship can lead to many misunderstandings among charter members and the public at large.
TiE must recognize the “win-win” in providing a forum for access to venture funds. The basic principles that govern this relationship must be:
An aspiring entrepreneur can approach any angel investor he chooses. TiE cannot and should not restrict this choice. A candidate mentored by a charter member may choose to go to another for angel funds.
If the candidate comes to TiE for help in generating first round of funding, then TiE must have a process of allocating opportunities for funding that project. Charter members who are willing to participate on a transparent basis should be allowed to invest.
The formal process must be based on selection of plans, presentation, exposure to charter members who are interested, and agreement on terms.
If an entrepreneur went through the TiE process for funding, it is reasonable to expect a small percentage of equity for TiE.
A chapter may chose not to have an Angel Forum in their chapter.
It is hard to make Angel Forums work. Differences in perceptions of the quality of the deal, valuation, percentage of investment allocated to each charter member, board seats, on going investment opportunities, and such present a complex mosaic and can lead to many a misunderstanding. It is important to realize that aspiring entrepreneurs prefer specific investors.
While the experiment in Silicon Valley has not been an unqualified success, there is enough strength of opinion among charter members that it was not given adequate time and/or defined processes to work. It is clear that for an Angel Forum to work, it must have its own clearly defined process of governance. TiE Global will develop the governance policy for Angel Forums.
Impact on Public Policy Forums:
It is clear that for creating a broad based impact on the Indus Region, TiE must endeavor with other similarly oriented groups to change the public policy framework. TiE has had a big impact already in India. However, TiE, given its current status, must pick a few critical policy issues – both in the USA, in developed countries (e.g. UK, Canada, Singapore) and in the Indus Region. TiE must commission detailed and well -developed position papers on these issues and must speak with one voice. Few shaped TiE’s positions on issues. As more and more of TiE’s charter members get involved in public policy issues (e.g. immigration – be it to USA, U.K, Canada, or Germany and Japan), TiE must develop a process for identifying and articulating positions that are consistent with TiE’s mission. Activism in public policy forums is critical to TiE’s mission and at the same time it is important to remember that any time TiE develops a position it is likely to become a political target as well. Being non- partisan, data based, well researched and consistent regarding a few big public policy questions would help TiE avoid becoming a political target.
There are several secondary forums that TiE can utilize to further disseminate the message of entrepreneurship and wealth creation. For example, TiE can fund the teaching of entrepreneurship in every college in the Indus region by leveraging its archives. Research based on information available to the various chapters and research in the public domain can lead to a significant contribution. TiE can also convert this knowledge into local languages for instruction and train the trainers.
There is a possible tertiary forum. A significant amount of leadership development and entrepreneurial activity is blossoming in villages in the Indus region- especially in Gujarat (Sewa) and in Tamil Nadu (Madura Bank efforts). Further, large number of NGOs are trying to create an entrepreneurial culture. TiE must actively co-opt these efforts without losing focus on its primary platform.
Becoming Mainstream: Getting Connected:
The success of TiE forces the question: how do we become mainstream in countries and regions in which we operate? Several possible definitions of what it means to be mainstream are debated. Here are some:
We should open up TiE membership to anyone interested in entrepreneurship. Members need not have any connection with the Indus region. The example of the Washington DC chapter is a case in point where about 70% of the membership is non- Indus. Further, most of them are also not entrepreneurs (senior managers from large firms).
We should become involved in local communities and teach them entrepreneurship. East Palo Alto is a case in point. Why is there so much poverty in the middle of the most entrepreneurial and wealthy society?
We should be involved in “social entrepreneurship”. We should be involved in and contribute to (both money and time) local communities and organizations.
We should be politically active and become involved in local and national politics.
There are probably more interpretations of what “becoming mainstream” means to TiE membership. At this stage of development, TiE’s mission is best served by focusing on:
Entrepreneurship and wealth creation,
The Indus region and connections to the region,
Active support of the local community organizations but not direct involvement in the work of the local organizations.
TiE must carefully separate the agenda and the interests of individual members of TiE with the mission of TiE as an organization.
Capabilities for Continued Success:
The success of TiE as an organization will depend on the capabilities that are built systematically. The requirements are simple to identify and difficult to build as every entrepreneur knows. We should, at a minimum focus on the following:
Resource Base of TiE: Both TiE Global and TiE chapters must have adequate resources to carry on the enlarging scope of work of TiE – from starting new chapters, developing a think tank and funding research. The importance of staff support, both at the Global and local levels, is also becoming very clear. TiE must develop an adequate resource base.
Continuity: TiE must ensure that there is a clear and unambiguous process of succession to positions of leadership. In a start up the founders are the source of reputation and stature. As the organization matures, the organization builds a stature of its own. Individuals and leadership teams can always make a difference but the goal of TiE should be to build enough stature for itself that continuity is not compromised.
Stability and Change: TiE leadership must consciously recognize that stability and continuity demands the capacity to change. The activity mix of TiE in 2000 is different from what it was in 1995. It will be different in 2005 as problems change and new opportunities to make a difference present themselves. Stability to values and beliefs must co exist with an ability to continuously evolve.
Growth: While growth for its own sake is not desirable, TiE’s role in making an impact on the Indus region requires growth in membership, scope of activities and chapters. The challenge is the quality of growth.
Creating Communities of Action: TiE’s success, so far, is based on building a community of like – minded high achievers. As TiE grows and becomes much larger, TiE will need mechanisms to build a virtual community around the world. Access and visibility to TiE membership, sharing of best practices, joint projects and collaborative efforts, require an infrastructure. The focus of TiE must be on building these communities within and across chapters.
We can add to this list of capabilities. The five mentioned above seem quite critical for long – term viability and continuity of TiE.
The Evolving Governance Process:
The governance process of TiE will and must evolve as the organization grows in scope and scale of its activities. Good governance is a judicious combination of formal structure, key processes, values and beliefs. All three are critical. However, in a voluntary global organization such as TiE, the importance of values, beliefs and behaviors of leadership overshadow the importance of formal structure. The governance process should be built to serve the following requirements:
The Privileges and Obligations of Membership:
For TiE to be a vibrant organization of volunteers, it must have clarity on the privileges and obligations of members to each other, to their chapters, and to TiE Global as an organization. Clarity to the role and responsibilities of charter members from whom the leadership of the chapters and TiE Global will be chosen is very critical.
A Democratic Process:
A transparent election process must be at the heart of the organization. At the start of new chapters, TiE Global will choose the leadership team of the chapter. However, all chapters and TiE Global must commit themselves to elections and a specified period of office.
Clarity to TiE Global and Chapter Roles:
The role of TiE Global and local chapters will evolve. We must, however, start with the assumption that the chapters will have significant autonomy within the broad boundaries established by TiE Global. To get started, TiE Global and the chapters must focus on their relationships along the following dimensions:
The basic values, beliefs and standards
The core activity mix
The protection and nurturing of the TiE franchise- the Brand
Financial obligations of chapters and TiE Global
The key processes for active and on going dialog between them
Recognition of Inherent Tensions:
Tie Global and Chapter leaders must recognize that there will always be tensions that are inherent in a global organization such as: Local autonomy and global standards, Change and stability, Innovation and Efficiency and transparency and control. These are not specific to TiE. All global organizations have to cope with these tensions. Therefore, a conflict resolution process is critical.
Conclusion:
Most of the structural elements of the House of TiE are already in place. The foundation – the values and beliefs – is well understood. The roof – the mission and the visible outcomes are rapidly evolving. The TiE franchise is a valuable lever for creating entrepreneurial drive in the various chapters and influencing the Indus region. The formal structure of TiE chapters and TiE Global needs to be developed. This formal structure must be part of the overall governance process. This document is about the meaning and role of TiE, a specification for the governance process and the role of the formal structure within it.
[1] TiE members have so far created $… in market cap, …… companies and more importantly ………… well paying jobs in the USA alone.
[2] The leading TiE charter members are typically mentors. They spend. Hours per month on the task of mentoring.
[3] This is not unusual for voluntary organizations. Rotary club, Lions, YPO and others have clear guidelines on who can be a member and the obligations of members to the organization.
[4] In a survey of 620 members of TiE, conducted recently by Mr. Sridhar Iyengar, contact with mentors was rated the most important reason for attending the TiE meetings.
[5] See the same survey. Access to funds was seen as the second most important reason for attending TiE meetings.
The Indians Of Silicon Valley The hidden geniuses of the tech revolution are Indian engineers–here’s how one bucked stereotypes, got rich, and has become godfather to a generation of immigrant entrepreneurs.
By Melanie WarnerMay 15, 2000
(FORTUNE Magazine) – Kanwal Rekhi’s got these big eyes that flicker when he talks. His shoulders are rounded and his large, thick frame shows marks of age. But when he speaks, his face, large and jowly, emits youthful energy. His speech is rapid and subdued, perhaps racing to keep up with his mind. Rekhi often leaps into new thoughts and words before he’s finished the last ones, which can make him hard to understand. This effect is compounded by a slight accent, an artifact of Rekhi’s having spent most of his first 18 years in Kanpur, India. Between the speech and the physique, he has more than a passing resemblance to Vito Corleone, the Mafia don played unforgettably by Marlon Brando in The Godfather. Which is rather fitting because Rekhi, 54, is the unofficial but quite undisputed godfather of Silicon Valley’s Indian mafia.
Not that it’s really a mafia, though some people call it that for fun. Rekhi, who sold his company, Excelan, to Novell in 1989 for $210 million (which was, at the time, believe it or not, a lot of money), doesn’t strike the slick pose Brando assumed as Don Corleone. Rekhi’s gray hair is always slightly disheveled, and befitting his background as an engineer, he comes off as disarmingly rumpled. Last year, Rekhi wore a tie exactly six times. For all but a few occasions, he dresses new-economy casual–khakis and a cotton shirt that’s likely to say something on it like EXODUS.COM and to have been a freebie from a company he’s funded.
When people call Silicon Valley’s Indian population a mafia, they mean that the immigrants who live in the Bay Area and work in high tech–roughly 200,000, according to siliconindia magazine–have formed an amazing web. Indians invest in one another’s companies, sit on one another’s boards, and hire each other in key jobs. Many live in close proximity and hang out together. The network might be only mildly interesting if so many of the Valley’s Indian immigrants hadn’t become phenomenally wealthy and successful in the past ten years. People don’t necessarily think of it this way, but Bay Area Indian immigrants represent America’s most successful immigrant group. Collectively, they’ve created companies that account for $235 billion of market value. If you add up just the net worth of the people mentioned in this story, for instance, you’ll get more than $8 billion.
It’s safe to say that without Indian immigrants the Valley wouldn’t be what it is today. Indian engineers have been coming to the U.S. in increasing numbers since the early 1970s; almost half the H-1B visas given by the State Department go to Indian engineers (H-1Bs are granted to foreigners who have specialized skills or are, oddly enough, fashion models). High-tech companies need people desperately–U.S. engineering schools simply don’t produce enough graduates to fill the specialized jobs the high-tech industry creates. According to the Information Technology Association of America, a trade group in Arlington, Va., more than 800,000 infotech jobs will go begging this year. And the engineers U.S. schools do produce typically aren’t as talented as those from India. Many Indian immigrants have graduated from schools that make Harvard and MIT seem easy to get into. The six Indian Institutes of Technology, created in the 1940s by Prime Minister Jawaharlal Nehru to educate engineers for public-works projects, produce some of the world’s smartest techies. Last year about 3% of the students who applied to IIT got in, while 11% to 18% were accepted at Ivy League schools.
Rekhi went to IIT Bombay and is personally worth more than $500 million. As head of The Indus Entrepreneurs, or TiE, the Valley’s large, influential Indian networking group, he’s at the center of a whole lot of wealth creation. Since he left his job as chief technology officer of Novell in 1995, Rekhi has poured millions of his own dollars into more than 45 startups founded by Indians, many of them IIT grads. But this sort of angel investing is not really what Rekhi considers his true calling. If you ask what he does, he’ll tell you he mentors entrepreneurs. That means, among other things, that every week he spends one or two days meeting with other Indians who want to talk about the companies they’ve started. (Rekhi says someone doesn’t have to be Indian to get a meeting with him, but most people he sees are.)
From 10 A.M. to 3 P.M., usually on Thursday or Friday, Rekhi sits in a small conference room in TiE’s charmless offices in an office park in Santa Clara and listens to pitches from three or four entrepreneurs. The scene unfolds a bit like the sequence in The Godfather in which Corleone entertains a stream of requests on his daughter’s wedding day. If an entrepreneur is lucky, he or she might leave TiE with the names of a few people to call from Rekhi’s long list of contacts. If he is really, really lucky, he might get some combination of Rekhi’s money, his commitment to join the board, and his promise to take an active role.
Because of time constraints, Rekhi does this with only a few companies at a time. Those he’s actively involved in now–Ensim, Instantis, 123SignUp, and Paramark–were all founded by Indians who attended IIT. Rekhi gave several hundred thousand dollars to each, but lately he’s been saying he’s not going to do that anymore; he realized last fall that he had so many investments, from both his own bets and those of the half-dozen large Valley venture capital firms he’s invested in, that he’d become more a business than a person. Although he’s made more money by funding entrepreneurs than he did by creating a company and selling it to Novell, Rekhi insists he doesn’t care about earning more. He’d rather help entrepreneurs for free. “I’ve got more money than anybody should. More than I can spend in ten lifetimes,” he says.
At a recent TiE networking event at the Santa Clara Marriott, Rekhi was doing what he calls “making myself available.” It was a Sunday afternoon and 400 people packed a large conference room to schmooze, compare notes, and, if they wished, get up on stage and make a two-minute pitch for themselves or their companies. Rekhi stood in the back of the room talking to people who opted to take their story straight to him. For about an hour an eager congregation surrounded him. Some he gave advice to on the spot. Others he told to call the TiE office and set up a meeting with him. Others he told he couldn’t help at all. When he’d finally worked his way through the crowd, he’d collected 20 business cards. “There are too many. I can’t keep up,” he said, shuffling through them.
It wasn’t always this way. Indians didn’t network with one another when Rekhi and seven other midcareer Indian entrepreneurs started TiE in 1992. Going even further back, Rekhi remembers a time when hardly any Indians were starting companies. In 1982, when he founded Excelan with Subhash Bal and Inder Singh, friends he’d made while working briefly at a startup, most of the Indians he knew were working as techies at big companies. The trio’s plan to run Excelan, which made gear for local area networks, was unusual because Indians were widely regarded as great techies but inadequate managers. So when three Indians who lacked a white guy went to raise money from VCs, they faced lots of slammed doors. Recalls Rekhi: “We’d always hear that the company didn’t have a ‘businessman,’ that there wasn’t anyone with a marketing background or selling expertise. That’s what they’d say. But the real issue was, Will customers buy from an Indian? Indians were seen as damn good backroom operations people, but are they good in the front room, running the show and selling to customers?” This helps explain why, despite the wealth and success of Indian entrepreneurs, there are still few Indian CEOs running high-tech companies. In many instances, VCs investing in an Indian-founded company have brought in a non-Indian CEO, relegating the founder to a technical role. In other cases, large companies have acquired Indian startups for their technology or their techies. Try to name half a dozen big high-tech companies with an Indian CEO; ten bucks says you can’t.
Rekhi and his partners did end up raising the money to fund Excelan, but Rekhi never got a full chance to prove himself as a boss. Now lots of small companies he has invested in are headed by Indian CEOs intent on remaining chief through an IPO and beyond. Like the dad who never made the cut for the varsity team, Rekhi delights in seeing members of a new generation of immigrants become superstars.
When he and his partners started Excelan, they decided that Singh should be the boss because he was the smoothest and most articulate. Despite his quick mind and knack for strategy, Rekhi lacked polish. He’d worked for 11 years at big companies, like mainframe-maker RCA Systems and government contractor Signal Link, but had never risen above systems engineer. Rekhi remembers asking about management jobs, then seeing people he considered less competent be promoted over him. “They’d say, ‘You’re a brilliant technologist, so we can’t afford to lose you.’ And they’d promote this other guy who didn’t know as much,” says Rekhi.
He got to serve as Excelan’s interim CEO after Singh didn’t work out. Though his term was brief, Rekhi worked hard to grow into the role. He shaved his beard and bought lots of suits and white shirts. On the advice of several directors, he underwent speech therapy for a stammer that had dogged him since childhood. To better understand the selling process, he moved his cubicle from engineering to the marketing department and often tagged along on customer calls with Excelan’s sales guys. Rekhi liked being boss and thought he was good at it. But when the time came for Excelan to go public, the board decided it needed someone who would play to Wall Street; it hired Dick Moore, a 25-year Hewlett-Packard veteran. Rekhi stayed as EVP and board chairman, and most employees still thought of him as the boss. Moore did pull off a successful IPO but couldn’t adapt to startup culture. Within a year he was gone. Again Rekhi stepped into the top spot until Novell acquired the company in 1989.
Looking back, John Dougery, an Excelan investor and director, admits that the board probably should have let Rekhi stay as CEO in the first place. “Back then, Indians weren’t perceived as winning CEOs. We didn’t know if people would trust them as managers,” says Dougery.
By the time Rekhi got to Novell, he knew a lot about business and felt he was qualified to run a large public company. In the early 1990s, CEO Ray Noorda was on his way out, and Rekhi, who was CTO, made it known that he wanted the top job. The board considered him briefly, only to opt for Bob Frankenburg, another man from HP. Rekhi had watched Noorda make what he considered dumb decisions–spending more than $1.2 billion to buy the PC software packages DR/DOS and WordPerfect. (“They were dead applications,” says Rekhi.) Now he watched as Novell’s stock sank and the company floundered under Frankenburg. By 1995 he had decided to quit. He took a vacation of several months with his wife and two kids, then packed up his boxes at Novell and carted them to his home in Los Gatos, Calif. For the first time in his life, he had nothing to do.
At first Rekhi went into a funk. “When you become successful, you become incompetent as a person, because all the little things are done for you by others. I didn’t even know how to make airline reservations or who to call to get a PC in my home,” he says. To ease the boredom and quit bugging his wife, he started hanging around TiE. Though Rekhi had helped found the organization, he hadn’t been active. In fact, he says that until 1995 he had little connection to the Indian community. His wife, Ann, is American (they met in Florida while he worked at a computer company and she served in the U.S. Air Force), and at least half their friends are American. Indian food is rarely served at home; Rekhi listens to Indian music only when driving alone. “I was as de-Indianized as anybody,” he says. But as he hung around TiE, something started to happen. People heard that the former CTO of Novell was there and began showing up to talk. Eventually Rekhi was advising as many as eight to ten entrepreneurs a day.
On a recent morning, Rekhi is scheduled to meet with Jay Karmarkar, a Ph.D. who was in the same class at IIT. Karmarkar arrives promptly at 10 A.M. and sits opposite Rekhi in TiE’s conference room. Karmarkar has spent the past decade running a small government contracting firm that does things like algorithm development, and looks the part. His glasses are one or two sizes too big, and his handshake transfers nervous energy that suggests meetings like this are a new undertaking. Karmarkar is here to see Rekhi because he has an idea for a network computer that will run on a stripped-down Unix operating system and be compatible with Linux applications. After chitchat about the genesis of his startup, Karmarkar launches into his business plan, which he’s laid out neatly on sheets of paper on the table. “What we want to do is an Internet terminal that we’ll sell for really cheap, probably $200. It’ll be light and efficient because we’re taking out all the bloated applications of the PC.”
Karmarkar barely gets to page three when Rekhi interrupts. “Stop right there. Everyone who’s tried to build a Web PC hasn’t succeeded. Larry Ellison’s lost millions on that,” says Rekhi, leaning forward, elbows on the table.
“Yes, but we’ve got a whole new idea for the operating system,” Karmarkar says, shuffling his papers in search of the slide that will respond to Rekhi’s objection. Rekhi doesn’t let him get to the slide. “I can get a $500 PC right now; how can you make it cheaper?”
“We’re going to build a stripped-down version of Linux…” Rekhi interrupts again. “The reason PCs are successful is because you have all these applications and software inside them. If you take all that stuff out of the PC, you end up having basically a TV. You take out all the value.”
Ten minutes later, Karmarkar is slumped in his chair, listening to Rekhi tell him how he’ll have to convince armies of developers to design applications for his operating system. “People will look at you, this new guy, and think, ‘Why should I trust him?’ How can you convince them you’re reliable?”
Karmarkar nods and says, “You have a point there.”
One reason Rekhi is so sought after by entrepreneurs is that he’s brutally honest. He can listen to someone and, within ten or 15 minutes, understand exactly what he is trying to do and offer unrestrained feedback. Unlike many VCs, who like to string along entrepreneurs in case they later have a change of heart about funding them, Rekhi calls everything as he sees it. “Totally lost” is his assessment of Karmarkar when I ask about the meeting several days later. Rekhi didn’t use those exact words with Karmarkar, but when Karmarkar requested that Rekhi refer him to some investors, Rekhi replied point-blank, “I wouldn’t send you to anybody until you figure out your plan. I have to feel good about someone when I refer them. Or else people call me up and say, ‘Why did you send me that one?'” When I catch up with Karmarkar a few weeks later, he says he’s never taken “that many bullets in ten minutes,” but that a lot of what Rekhi said was right and that he’s thinking about how to revise his pitch.
Most entrepreneurs Rekhi sees are savvier than Karmarkar, but many still orbit in a techie bubble. They load their presentations with details of exactly how their technology works. They use words like “pipelining” without explaining what they mean. They drone on after people have tuned out. Since most Indian immigrants come from a technical background, many find the social nuances of business daunting. “All these companies could have benefited from an hour with me,” Rekhi declares, as we head out of one of TiE’s monthly angel-investor meetings at the Silicon Valley Capital Club in San Jose. Five entrepreneurs have just presented their startups to a room of about 70 angel investors and not one gave a clear, compelling pitch. “That second one, I still can’t understand what they were doing,” says Rekhi.
By far Rekhi’s most successful mentoring achievement is K.B. Chandrasekhar. Chandra, as he’s known, isn’t the wealthiest Indian in the Valley–that distinction goes to Vinod Khosla, a co-founder of Sun Microsystems and partner at Kleiner Perkins–but as founder of Exodus Communications, Chandra’s the best-known Indian Internet entrepreneur. He pioneered server farms, those Internet data centers that house and maintain other people’s Web servers. Now Exodus is a $242 million-a-year company that employs 2,000 people. But when Rekhi met Chandra in 1995, he was running Exodus out of a small office in Sunnyvale that was overheating because of all the servers stacked on tables. He was almost out of money and, if he wasn’t able to raise more, would probably be returning to India with his wife and three kids. Rekhi became his savior.
They met at a TiE event. Chandra remembers the encounter better than Rekhi because Chandra was one of about three dozen people who came up to Rekhi that night. For some reason, Rekhi wrote on the back of Chandra’s business card “call this guy”; he can’t recall why, but he figures he must have been struck by Chandra’s energy. When Rekhi called two months later, Chandra told him, “I need $200,000 for payroll and I want to talk to you today.” Chandra had gone to the TiE event desperate. He and co-founder B.V. Jagadeesh had been funding Exodus from money they’d made developing software for large companies, but that wasn’t going to last. Chandra didn’t know any VCs or other people with money. He’d been in the U.S. just five years and, unlike most Indians in the Valley, hadn’t gone to an American grad school or an IIT–Chandra’s engineering degree is from the lesser-known Madras University. “My networks were pretty thin,” he says.
Rekhi liked Chandra’s ability to tell his story. He pegged the guy as a natural entrepreneur driven to see his ideas come to life no matter what the odds. But Exodus was an unfocused mess. Chandra was working on too many ideas. Says Rekhi: “He thought he could fund one business from the other, but I told him that almost never works.” Rekhi gave Chandra the $200,000 he wanted, but told him he needed to focus on one thing and suggested it be hosting other people’s Websites. Rekhi agreed to join the board and rounded up other investors, who together gave Exodus a first round of $3.2 million. Some of the investors were TiE members and others friends of Rekhi’s, like construction executive Ed Shay and venture capitalist John Dougery, who have since invested in almost every one of Rekhi’s deals. Helping Chandra proved Rekhi’s best investment decision ever. The $1 million he eventually put into Exodus for an initial 2% stake is now worth $130 million.
Chandra says he’d like to emulate Rekhi and mentor other entrepreneurs. But for the moment he’s trying to build a company he thinks will be bigger than Exodus. JamCracker, Chandra’s second startup, provides an online portal where IT managers can access and manage all the software their companies need. Rekhi is an investor and a director, but this time it’s not because Chandra needed money. Far from it. After turning away numerous funding offers earlier this year, Chandra raised his first chunk of capital at a rather stunning $80 million valuation. The price was too steep for Rekhi, so, as a thank-you for Exodus, Chandra sold him some of his own shares at a lower price. “I always ensure Kanwal gets a good deal. He’s my guru and my mentor,” says Chandra.
That sort of thing happens a lot in the Indian network. Take serial entrepreneur Naren Bakshi. When he presented Versata, his first startup, at TiE’s annual conference in 1995, he was really pining for the $800,000 Rekhi and 12 other TiE members eventually gave him. For his second startup, Xpede, a financial services company, and his third, a dot-com called BuildYourDreamHome, Baskhi, 56, had VCs lining up. He still cut Rekhi and other TiE members in on the deals. He told Xpede’s VCs that $1 million of the $10 million first round had to come from these angels.
As in all good networks, reciprocity keeps the wheels turning. Nimish Mehta, CEO of Impresse, which runs a Web service for corporate printing needs, was among the TiE members who invested that $800,000 in Versata. An investor in JamCracker, he’s also friends with Chandra. So when Impresse was raising capital, Chandra got to do something virtually every investor in the Valley would kill to do–he invested alongside Kleiner Perkins and Benchmark. Rekhi, because he’s the godfather and everyone wants him to invest, also got in on the deal. As did Satish Gupta, CEO of Cradle Technologies, a chip company. Why him? Impresse CEO Mehta, who left a job as senior vice president at Oracle, is one of four Indian angel investors in Cradle.
The wealth-creation potential of this network is huge. So naturally it was only a matter of time before the Valley’s money establishment discovered it. The same VC firms that used to look warily at Indians starting companies now trip over themselves trying to get Indian deals in the door. Scott Sandell, a partner at New Enterprise Associates, asks the Indians he’s already funded to send their entrepreneurial friends over to NEA. Of the 15 companies Sandell has funded at NEA, four were founded by Indians.
What VCs have realized is that Indians are not only some of the best entrepreneurs they’ve ever met, but they’re also wired into one of the Valley’s most precious resources–technical talent. Companies with Indian founders, especially ones who’ve gone to IIT, can often hire teams of developers faster than the average company. This can be a huge advantage in the Internet race to get up and running ahead of the other guy. Munjal Shah, a first-generation Indian American, says he’s had no problem hiring top-flight engineers for his company, Andale, which provides services to people who sell lots of stuff on auction sites. Shah met his two chief engineers, both IIT grads, through one of his angel investors, all seven of whom went to IIT. Shah thinks the connections enabled Andale to move much faster than it would have otherwise. “Our time to team was lower,” he says.
One recent day, as I walked through TiE’s offices with Rekhi, he showed me the brochure for the group’s upcoming annual conference. The first few years TiE held a conference, nobody of note wanted to come and speak. “This year we had people calling us,” Rekhi said with great pride. Jim Clark and Sycamore Network’s Gururaj Deshpande are the keynotes; McKinsey CEO Rajit Gupta is also speaking. Flipping open the brochure, Rekhi pointed out a long list of conference sponsors–Goldman Sachs, Morgan Stanley, Kleiner Perkins, KPMG, Internet Capital Group, and so on. The conference quickly sold out; 1,500 people signed up.
Such accomplishments attest to Rekhi’s success in developing the Indian network. “Some of my friends joke that we don’t need TiE anymore,” he says, which is why Rekhi has begun to turn to a place he thinks needs a lot of attention–India. “I call it the economic freedom movement,” he says. “Information technology is restoring India’s confidence. The change is amazing.” Among Rekhi’s India projects is a campaign to raise private money for IIT, which, despite its wealthy graduates, is still funded by $100 million a year from the Indian government. He kicked off the campaign by giving $5 million to his alma mater, IIT Bombay. Each time he visits India, which is frequently these days, Rekhi meets with Prime Minister Atal Behari Vajpayee or cabinet members to discuss economic reform. Rekhi wants the government to foster U.S.-style venture capital, so that India will become a haven for startups and not just a place to farm out cheap software development. In the face of India’s one billion people and notoriously sclerotic and corrupt bureaucracy, these would seem ambitious goals. But Rekhi is undaunted. “I have the time and the financial resources,” he says. “I want to transform India.” Don Corleone, it seems, is starting to act a little like Gandhi.
