May 2024 | Athera's Odyssey: Embracing Change
From building games for Gen Alpha to lessons learned from building one of India's most innovating IT companies, dive into this month's edition of Odyssey.
In this month’s edition of Athera’s Odyssey, we cover
Portfolio Perspectives: Learn how Terra is building a gaming platform for an entire generation of digital native Gen Alpha kids.
Athera Almanac: A brand new series on some of the amazing startups we missed out on and what we learned from them.
Ecosystem Stories: We have a long-ranging conversation with Krishnakumar Natarajan (NKK) on how to navigate paradigm shifts in technology and business.
Pathways: Letters speak to us in a medium unlike any other, take a look at some of the most influential and touching letters in history.
Portfolio Perspectives: Terra and Building The Future of Gaming
After almost a decade of reimagining playtime for over 1.5 million kids with 50 types of interactive toys with PlayShifu, Vivek Goyal realised the gaming landscape was undergoing a subtle, yet profound shift which was that Gen Z and the gaming platforms that defined their generation, like Roblox, were growing up with them.
As Gen Z and Roblox mature, there is an opportunity for a new-age gaming platform tailored specifically for Gen Alpha. And that's where Vivek felt the need to start Terra Technologies.
Read on to know how Vivek is building the future of gaming as a home-schooling father and second-time founder with Terra. We’ll explore three crucial aspects of Terra as an early-stage gaming platform: The core audience, the business model, and the Indian gaming environment.
Gen Alpha: Humanity’s True Digital Natives
Vivek set out to create a Roblox-like platform tailored specifically for Gen Alpha – the true digital natives born into a world of screens and intuitive interfaces.
Gen Alpha's innate understanding of technology is unparalleled, it is a generation defined by technological devices like video games, smartphones and tablets, and speakers that talk back to you. What other generations see as cutting-edge is something embedded in Gen Alpha’s environment and it is all they have ever known.
Technology is also being adopted at a pace far greater than ever before. Radio took 38 years to reach 50 million users, the television took 13, the iPod took four, the internet three, Facebook just a year, and ChatGPT took 2 months to reach 100 million users!
Generation Alpha is inadvertently part of a global experiment with screens becoming a constant presence from a young age. This “screen-age” era has significant impacts, including shorter attention spans, gamified learning, increased digital literacy, and hindered social development, particularly for those in their formative years.
Vivek's observations of his own children's interactions with technology reinforced this trend, inspiring him to develop products that cater to the unique needs and preferences of an emerging digital native generation.
Terra is building its platform on the belief that addressing the needs of a very young audience requires a different approach than catering to older age groups which is why a gaming platform for four-year-olds demands a deep understanding of early childhood psychology.
This is different from developing games for older children who tend to mimic the behaviours and preferences of their immediate elders.
Inverting The Conventional Gaming Business Model
At the heart of Terra's mission is a commitment to empowering tomorrow’s creators by creating easy-to-master game development tools, today.
Vivek and his team recognized that the gaming industry's toolset had remained largely unchanged for over a decade. By building easier, more fun, and less skill-intensive tools – akin to what Canva did for design – Terra aims to democratize game creation and enable creators to build engaging experiences more efficiently and cost-effectively.
This approach not only lowers the barriers to entry for aspiring game developers but also fosters a more diverse and inclusive creator community.
As the cost of game development has risen significantly in recent years, with even simple hyper-casual games requiring substantial investments, Terra believes that a large, monetizable user base, will attract creators to develop amazing experiences tailored to specific personas.
On the creator side, the vision is to build the most fun gaming platform focussed on cognitive development in every game that you create. While these games will be very easy to build, the pressure of monetization in each game would be much lower given that creators spent less than hundreds of thousands of dollars to build a game.
The Mobile Gaming Revolution
The rise of mobile gaming is undeniable, with the younger generation increasingly gravitating towards mobile devices for their entertainment needs. Terra recognizes this shift and its potential to reshape the industry landscape.
Terra's focus on mobile gaming positions the company to cater for the preferences of Gen Alpha and set the stage for a new era of immersive, mobile-first experiences.
While the majority of revenue today comes from games in categories like PC, AAA (complex long-form games like God Of War), and mid-core (games that require commitment like Clash of Clans), the revenue mix will eventually shift to mobile as future generations spend more and more time on mobile.
Navigating the Indian Gaming Landscape
A key part of Terra’s success lies in the need for a shift in perception regarding gaming, emphasizing its potential to create positive change and drive economic growth.
While India's gaming market is expected to reach $3.9 billion by 2025, growing at a CAGR of 40%, Terra's current focus is on achieving long-term retention and engagement as a free-to-play platform.
By designing for metrics such as retention in weeks 6, 10, and 20, Terra aims to create a platform that keeps users engaged through a variety of games, meta loops, and social features.
Three Wishes for the Future of Gaming in India
Vivek and his team at Terra are optimistic about the future of gaming in India and emphasize the need for a change in perception, increased global investment (especially in growth-stage companies), and a supportive regulatory environment.
While shifting societal perceptions of gaming will take time, initiatives like the Prime Minister's Office promoting gaming as an industry can help accelerate this change, along with success stories of gaming studios and platforms that have been built in India and adopted worldwide.
By championing the positive aspects of gaming and advocating for industry-friendly policies, Vivek and Terra are laying the groundwork for a thriving gaming ecosystem in India – one that not only entertains but also empowers and educates the next generation of creators and innovators.
Athera’s Almanac: The Ones That Got Away
We at Athera Venture Partners, formerly known as Inventus India, have been around for a good while in India’s startup ecosystem, sixteen years, to be exact.
In this long winding journey of ours, there have been quite a few triumphs, but we've also had our fair share of missed opportunities.
Today, we would like to start a new series and open our "antiportfolio" diary– a collection of startups that slipped through our fingers and went on to achieve phenomenal success.
In the spirit of Bessemer Venture Partners, who coined the term, we believe in the power of transparency and learning from our mistakes. Over the years, we've had the chance to invest in some truly groundbreaking companies, but for various reasons, chose to pass.
Perhaps we were too focused on the risks or underestimated the potential of a particular market and the agility of the founder to adapt.
Today we want to celebrate the incredible journey of a particular company and the lessons we learned along the way. So join us as we delve into how and why we missed out on the first startup of our Antiportfolio series – SEDEMAC.
Ultimately, we hope that by sharing our experiences, we can inspire others in the industry to embrace vulnerability, learn from our mistakes, and continue to support the visionary entrepreneurs shaping our future.
SEDEMAC: Recalibrating our regulatory risk appetite, 2011-2012
In the early venture days of 2011, we were introduced to an entrepreneurial professor from IIT Bombay named Shashikanth Suryanarayanan (who still teaches there).
The company he started, SEDEMAC, wanted to manufacture and supply innovative,critical-to-the-application control products to leading two-wheeler and generator manufacturers.
To SEDEMAC, “innovative” meant coming up with first-in-the-world technology. The company in that sense was one of the first Indian “deep-tech” startups before the term became popular. We had also never invested in a manufacturing-focused startup that was innovating in a space that rarely sees any disruption.
So why didn’t we sign the dotted line?
During our due diligence, we discovered that SEDEMAC had overlooked an investment-related filing with the Reserve Bank of India (RBI). This wasn’t intentional, merely something that the founders didn’t know. While the founders assured us that it would be corrected, we weren’t able to build enough conviction to move ahead.
It turned out that the fine for the regulatory oversight was a paltry amount since the RBI took cognisance of the company and the founder's genuine mistake.
Today SEDEMAC is a profitable company with a revenue of over 500 Cr. Its technologies are used in over 40 Million 2-wheeler and 3-wheeler ICE and electric vehicles.
The SEDEMAC experience taught us the importance of balancing risk assessment with innovation potential. As investors, we must carefully evaluate regulatory challenges while recognizing that groundbreaking ideas often come with a degree of risk. We realized that the oversight in SEDEMAC's case was a minor hurdle that could have been overcome, and the founders demonstrated a willingness to adapt and conform to regulations.
Moving forward, we carried this lesson with us of finding the right balance between mitigating risk and supporting visionary entrepreneurs. This newfound perspective proved valuable in our future investments, allowing us to back companies like Policybazaar, which operated in the heavily regulated financial sector.
All dollars and investors are not the same
As we reflect on the different startups that we will feature in this “Antiportfolio” series, we're reminded of a fundamental truth in venture capital: all dollars and all investors are not the same.
Every investor brings a unique perspective and set of resources to the table, and missed opportunities for one firm could be perfect for another.
The story of SEDEMAC highlights the importance of strategic partnerships, domain expertise, and a shared vision for the future, beyond just financial capital.
Moving forward, we remain committed to being the kind of investor entrepreneurs can rely on – for capital, guidance, support, and a shared sense of purpose. Our antiportfolio is not a source of regret, but a testament to the resilience and adaptability of the startup ecosystem. It's a reminder that every missed opportunity is a chance to learn, grow, and become better partners to the entrepreneurs we serve.
Ecosystem Stories with Krishnakumar Natrajan (NKK )
Krishnakumar Natarajan (more fondly known as NKK by his peers) is a name that needs no introduction in the Indian IT industry. With a career spanning over four decades, NKK has been at the forefront of shaping the sector's growth. From the early days of Shiva computers and the Y2K boom to the rise of Indian IT giants and the digital transformation wave, NKK embodies the popular adage of “Been there, done that”.
Under NKK's stewardship, Mindtree grew from a startup to a globally recognized leader, crossing $ 1 Billion in revenue and 20,000 employees. NKK also served as the Chairman of NASSCOM in 2013-14, where he advocated for entrepreneurship and innovation.
Since stepping down from Mindtree in 2019, NKK has embarked on his next chapter as the Managing Partner at Mela Ventures, an early-stage fund backing.
In this wide-ranging conversation, NKK shares his insights on the accelerating pace of change, strategies for anticipating the future, and the mindsets that will define the leaders of tomorrow.
How to Think of Technological Change
Athera: You've had a remarkable career spanning several decades and technological eras, what has your key observation about technology been in all these years?
NKK: If you look back over the past few centuries across all major technological revolutions - the printing press in the 1700s, steam engines, electricity, mainframe computers, personal computers, the internet, smartphones, and now AI - two things are clear.
Each major innovation ends up creating entirely new industries and market leaders and productivity is dramatically enhanced.
Adoption cycles accelerate - it took maybe 100 years for the printing press to become mainstream, but less than 10 years for smartphones, and less than a year for ChatGPT to reach 100 million users
All of this is driven by the fact that the quality of life for the average person improves with each wave. Looking ahead, I believe the cycle times will keep shrinking as we move into the era of AI. The interval between the emergence of new buzzwords like GPT-3, DALL-E, and AGI will rapidly compress.
Athera: That's a fascinating arc. In a world that's changing so fast, how can businesses stay ahead of the curve? What strategies have helped you anticipate some of these shifts?
NKK: One of the key things is to keep your ear to the ground and intently listen to customers. Immerse yourself in understanding the problems they are grappling with.
It was this customer-centric approach that led me to realise in the late 90s, as the head of Wipro's e-commerce division, that the internet was going to become a major force for enterprises.
Customers were excited about the possibilities of leveraging the Internet but struggling to harness them. This insight became the impetus for founding Mindtree in 1999, which focused on helping companies leverage the internet.
We continued this tradition at Mindtree, making early bets on future trends. For example, we launched a dedicated digital business unit in 2011, much before most others, to drive end-to-end digitization for customers. This foresight powered us to become one of the fastest-growing IT services companies between 2011-16.
The Mindtree Mindset
Athera: Let's double-click on some of your initiatives with Mindtree. You set up an AI research partnership with Stanford back in 2016-17, well before the current boom. What was the thinking behind that?
NKK: At that time, AI was still largely seen as academic without mainstream applications. But we believed it had immense untapped potential for enterprises. The challenge was the lack of proven playbooks or best practices.
So we partnered with Stanford, which had one of the largest concentrations of leading AI researchers. The goal was to build our understanding of how AI could solve real business problems - things like comprehensive data strategies, integrating disparate data sources, and improving decision-making and customer experience.
Those insights shaped much of our work with key accounts. For example, we grew our business with a leading hospitality player from almost nothing to a 50-50 share with Accenture in 2-3 years, largely due to the differentiated thinking we brought to their data and AI initiatives.
We also launched a dedicated AI services division in 2018, ahead of the curve. While that bet may have been a little premature, many seeds of our current thesis for Mela Ventures were planted there - like our conviction around computer vision and AI's potential to transform real business problems.
A Final Takeaway
Athera: As we wrap up, any closing thoughts for business leaders looking to thrive in a world of accelerating change?
NKK: From day zero cultivate a healthy appetite for experimentation and risk. Not everything will work out as planned. At Mindtree, we bet big on the video surveillance market in the early 2010s as cameras went digital. But for various reasons, that business never scaled beyond $2-3 million USD. Fast forward to today, it’s a billion-dollar industry.
The key is to treat failures as learning opportunities rather than getting discouraged and to budget for the pain that will come with failure. The insights from our video surveillance initiative eventually morphed into our current thesis around computer vision AI, now a core pillar of our investing strategy.
Finally, to stay in tune with emerging technologies, there's no substitute for engaging directly with the ecosystem. I'm actively involved in growing the ecosystem itself, such as being a founding member of the Center of Excellence for AI and IoT, created by the Karnataka government and NASSCOM. This exposes me to the problems industries are trying to solve and help innovative startups in this space.
Engaging with industry associations is also crucial. As the chairman of NASSCOM, I launched the "10,000 Startups" program to support the startup ecosystem through mentoring and funding. While not always directly relevant to my work, these activities help develop pattern recognition for emerging opportunities.
The key is to immerse yourself in the ecosystem, engage with people, and actively work to grow the environment. This allows you to connect the dots, draw insights, and develop the intuition to identify promising technologies and opportunities at the right time.
NKK's journey showcases his mastery in navigating technological disruption, from early bets on the internet and digitisation to recent forays into AI and computer vision. His ability to anticipate and harness emerging trends has been a hallmark of his leadership.
However, his mindset is perhaps even more instructive - the curiosity to learn, the humility to put customers first, and the resilience to treat failures as stepping stones. As the pace of change accelerates, these qualities will increasingly distinguish leaders from laggards and serve as the foundation for building iconic, enduring enterprises.
Pathways
Over the last couple of editions of *Pathways,* we have expanded our recommendation horizon from just books to broader ‘reading material’. Continuing that spirit, this month we recommend select reads from a writing form that has not, perhaps, got its due in literature: Letters!
Letters offer a unique window into the souls of their authors, unlike any other art form - because they’re usually not crafted to be published to a wider audience. In particular, one-to-one correspondences of such nature that have now been made public will appear markedly different from architected, planned works intended for publication by the same authors. Enjoy! All our reads are equally light this time, so choose at will.
Do Scientists Pray?
In January 1936, a young girl named Phyllis wrote to Albert Einstein on behalf of her Sunday School class with this simple question. Einstein wrote back to her soon, in a short but layered answer rounding up an exchange on a fundamentally ‘human’ matter between two people whose understanding of the world could not be farther apart.
Pay It Forward
In April 1784, Benjamin Franklin, one of the founding fathers of the USA and a renowned polymath, wrote this letter to Benjamin Webb, a friend in need of monetary assistance. He encloses with the letter a humble monetary grant but calls it a loan under the condition that rather than paying Franklin back, Webb should repeat the gesture with someone in need, someday. Today, we call it “paying it forward”.
Why Explore Space?
In 1970, Sister Mary Jucunda from Zambia wrote to the director of NASA’s Marshall Space Flight Center, Dr. Ernst Stuhlinger with a fundamental question that many across the world have asked since and will continue to ask for the foreseeable future - How can he suggest spending billions of dollars on exploration of space when there are so many children starving on earth? Dr. Stuhlinger’s thoughtful, lengthy letter has gone down in the annals of history.
A Most Important Discovery
On March 19th 1953, Francis Crick (who, with James Watson, co-authored the academic paper that proposed the double helix structure of the DNA molecule) excitedly wrote this letter to his son 12-year-old son Michael. In the letter, Francis explains his discovery - a model of the “copying mechanism of life” - a few days before he submits his paper for publication. In April 2013, this letter became the most expensive in history after being auctioned for $5.3M. Beyond the content - which is a lesson in precise simplification - we also see the parent in Francis and the subtextual joy. It ends with: “When you come home, we will show you the model”.