Ashok Rao

Mr. Ashok Rao is a successful serial entrepreneur in the United States. He has created four successful high-tech startups in the past two decades, and took one of the public with a market cap of $400 million. This made him the first Indian-American to take a technology company public on NASDAQ. In 2007, he was awarded the Distinguished Alumnus Award for Entrepreneurial Achievement from his alma mater, Marquette University. He was also selected as one of the top 100 South Asians in America in the book Lights of South Asia. In final mention, he received the 2008 APAHA George H. W. Bush award for Arts Achievement. Asia-Pacific Business and Technology Report was able to get a few minutes alone with him after he visited Seoul to give a special presentation on entrepreneurship in mid-March – ed.

Q: Even though you are a well-known entrepreneur in the US and India, for the benefit of our readers in the Asia-Pacific region, can you let us know about yourself and your main business in the US?

A: My career has been a mix of coming up the corporate ladder until I was 40 years old, and then switching to do four start-ups. So I’ve had a mix of the corporate world and the entrepreneurial world. That entrepreneurial world was a real heady and satisfying experience. Terrifying also.

Q: Do you think that your corporate experience enabled your success?

A: I don’t think it was the only reason, but I think it was very helpful in terms of knowing the basic ingredients such as understanding finance, being on top of the numbers, hiring practices, compensation practices, and incentive schemes. I could try and select the good and avoid the bad of what I had learned. Most importantly, I think you have to disconnect from the comfort level of salaried jobs with lots of people to delegate to, secretariesm, and all the other perks that come with having a high level corporate job. These perks go out of the window if you want to be successful as an entrepreneur.

Q: Do you think that the US is unique in providing opportunity for entrepreneurs?

A: Opportunities exist everywhere. Look at India for example - fantastic opportunities exist. But the US is the most efficient capital-raising system in the world, for large amounts or small. The most efficient engine for raising capital is the combination of Wall Street, venture capitalists, angel investors, along with IPO s. Very efficient. Last year was a blip in the US ; we had to pay the price for our excesses. Also I think the US has a true start-up mentality, it is part and parcel of American thinking. Starting your own business, striking out on your own, building your own enterprise, it harkens back to the frontiersman spirit that built the US , how America was settled, barely 200 years ago. It is ingrained in the psyche of most Americans. Immigrants have arrived in the US with the same ethic – an immigrant frontiersman ethic. “I can make it work.” Whereas in the East, particularly Asia, they have this whole business of respecting the older person and the more senior you are, the more respected and entrenched you become.

Q: In Korea there is a strong governmental presence in supporting venture capital firms In the forms of government run incubators, government sponsored research grants, and low-interest government small business loans. As an entrepreneur, do you think that has an effect on start-ups, and if so how?

A: It all depends on whether the government interferes or not. There are lots of rules and regulations that companies have to abide by - even with private capital - such as loan covenants. In the end, if the government is giving money to start-ups, I’m happy. They are encouraging entrepreneurship. The number one problem for start-ups is not having enough money - to grow, to make payroll, etc. If the government does not demand onerous restrictions, I think getting money from them is just great. We have the SBA [Small Business Administration] in the US , which is in charge of handing out loans to small businesses in the US , but I wish the US would do more. Maybe because there’s such a vibrant venture capital and angel investor climate in the US , the SBA tends to be real slow and bureaucratic in comparison - slow to maneuver, and they don’t approve a lot of loans. However it does not make much difference in the bigger picture in the US . I think government involvement is terrific if the money does not come up with a lot of overly onerous strings attached. For me, if anybody gives me money for my start-up, I’m thrilled whether it is the government or private investors. Not everybody can bootstrap their way up like Microsoft did. Backing startups is not only terrific but essential. In a country that is not naturally entrepreneurial, start-ups need to be encouraged.

Q: Also, in Korea, most small and medium businesses have one customer for their services, which is one of the big conglomerates such as Samsung, LG , or Daewoo. Some people say that this situation is not conducive to the growth of small and medium businesses. What is your opinion?

A: I agree with that. You should never be dependant on a single customer... unless you have a sweetheart contract with that one customer. But even that is risky. What if they go belly-up? You should never put your future in the hands of one customer, you should diversify. However, if you aren’t a true entrepreneur, but an offshoot of a bigger company like LG or Samsung, that’s okay. But it’s not true entrepreneurship.

Q: Is it hard for a small company to go global?

A: I think it has become astonishingly easier than ever. The technology, the ability to compete just like the big boys, the systems and marketing materials, and web sites all make it possible for small companies to have a global reach. One can reach anybody today, anytime. Just 20 years ago you needed complete infrastructure. For example if you wanted to sell in the Far East, you probably had to open a Hong Kong office - you needed an office, some salesmen, an office manager - lots of stuff.

Q: Is it better to look for local business first when starting up a new company, or to look for international business?

A: Local business first. Well, it depends on your product. Like the example I gave when I spoke the other day - this one lady in Houston, 99% of her business is outside of Houston, and she doesn’t travel. She sells vitamins and health foods via the Internet, and her products are easy to ship. If you’re building locomotives it’s a little different. You can’t just put a locomotive into a box and ship it wherever. So it also depends on the product.

Q: In your talk on Friday you mentioned the organization TIE . What exactly does that stand for, and what would it take to start a chapter of that organization here in Seoul?

A: It stands for The Indus Entrepreneur. It is the world’s largest organization of entrepreneurs. Originally it was a play on words. It was started by successful Silicon Valley entrepreneurs from the Indus region, and the “I” in TIE stood for Ind-US . Today the “I” in TIE could very well stand for “International.” TIE is all about three things: mentoring aspiring entrepreneurs, fostering entrepreneurship globally, and creating networking opportunities for all its members. The people who started TIE were those successful entrepreneurs who had made it, but they really had to break through glass ceilings, bloody their noses, and do a lot of “heavy lifting” to get where they were. Back in the 70’s, Indians in the US were not considered good CEO material. They were considered good engineers and good accountants. Those at the very forefront of trying to build companies were always faced with the objection that “sure you’re a great engineer, but we should bring in an American with experience to be the CEO .” We didn’t have a lot of support systems or advice, so we made our mistakes by the bucket load. The founders of TIE came together to form an organization to mentor aspiring entrepreneurs who were trying to build businesses, and to create an ecosystem for fostering entrepreneurship. We currently have over 20,000 members in 55 cities and 14 countries. We should definitely create a chapter here in South Korea. Kuala Lumpur, Melbourne, Sydney, Stockholm, London, Manchester, Brussels – all of these cities have TIE chapters, along with over 40 chapters in the US , Canada and India. What you need to do here in Korea is to understand what TIE is all about first. Then you need to get together a group of people who are willing to start the chapter and use it as a vehicle to attract entrepreneurs. TIE can then become the premier vehicle in Korea for mentoring entrepreneurs and fostering entrepreneurship throughout the country. Also, you would need to arrange for speeches and lectures from prominent business leaders, as well as “hands-on” style workshops. For instance, in Houston we have had a series of workshops on, for instance, how to write a business plan; how to speak and communicate; how to network; how to form a company; and how to protect your intellectual property. We also give legal and accounting advice to startups. These kinds of workshops attract about 50 people, whereas 300 people show up for our bigger keynote speeches from successful “superstar” entrepreneurs.

Q: What kinds of resources do you need to start up a chapter?

A: The primary resource you would need is a full-time executive director. When you’re starting up, particularly when none of you is totally familiar with the TIE system, it is a good idea to have a full-time executive director to manage the dayto- day. Your charter members should be involved in driving the organization, and regular members, though less involved, would benefit equally. The Bangalore charter, for instance, has 250 charter members and 1,500 regular members. The largest chapter is Silicon Valley, CA with almost 400 charter members. The smallest is Ottawa, with 14 charter members and only a part-time executive director. Your sources of income are primarily membership dues and sponsorships. Some revenue can be generated by charging admission to events. Of course it costs you to run the events too, so how much you can charge for the events is also important.

Q: Can you please define your concept of angel investors in more detail? Is Korea the right place to have angel investors?

A: The answer to the second part of your second question is “yes.” Korea is the right place. Angel investors are people who have acquired a certain degree of discretionary wealth that they can use to help people start up new businesses. Venture capital investors do not usually finance companies that are just barely starting up. They go for more proven companies. They ask you to prove that your business model works, and the only way to prove that is to do it first. Angel investors are the less draconian in their expectations and demands. I think Korea is an ideal environment for angel investors, because there are many successful and wealthy people in this country, i.e. the heads and senior executive of companies like Samsung, LG and Hyundai. They should be doing some angel investing to help some startups. Angel investors might get involved in a business that they feel good about, like Green Technology. Or they may invest in glamorous stuff like movie making, so that they can meet actors and actresses. Angel investors want to make money, but it is not their sole motivation, unlike a venture capitalist. An angel investor has secondary motivations.

Q: What business field would you recommend as a good one in which to start up a new venture in Korea?

A: Alternative energy. Any kind of alternative energy. Solar, wind, biofuels, biomass, fuel cells, anything like that. If I were to start another business in the US I would do it in alternative energy. Our planet is going to hit the wall in hydrocarbon based energy resources, whether it is 20 years from now, or 50 years from now. Investing in alternate energy is a smart thing to do.

Q: You said that innovation is the core of entrepreneurship. But government regulations, moral qualms, and national interests sometimes stifle innovation. What can the entrepreneur do to deal with anti-innovative powers or influences?

A: I can only answer that question by giving the example of the fellow that started Sula Wines in India - not a country that made or drank much wine till recently. Today the wine industry is a smash hit and growing at over 60% per year. The founder of Sula Wines literally invented a new market in India. It took him three years to get the government permit to grow wine from grapes. He said he lived in Delhi, on the doorstep of the Ministry that eventually granted the permits. He simply wouldn’t give up. And the government was anti innovation, and anti-alcohol, at that time. But he somehow figured a way out. However, sometimes there’s never going to be a way to figure it out, and then you should move on. Sometimes you have to throw in the towel and do something else - or move to somewhere where you can implement your idea.