Bootstrapping: Capital from Customers
February 24, 2022
In this TechTalk episode, CEO of MulticoreWare and President of TiE-Silicon Valley AGK Karunakaran debunks the myth that entrepreneurs need venture capital to grow a successful business. Through his third:third:third philosophy, AGK talks with Amar Bhatkhande about launching a successful business, impact investing, and active giving.
AB: Welcome, and I'm not surprised at all. You are always on the cutting edge. I still remember it well, front seat, world's fastest roller coaster, and there we were. What a wild ride. During that trip, I also remember you mentioning to me about your third, third, and third philosophy. I'm excited to talk to you about more about that. First of all, can you tell our listeners a little bit about yourself?
AGK: Yeah, certainly. Let's talk about roller coaster for a moment. As entrepreneurs, all of us go through the roller coaster. I really enjoyed. Even yesterday I was talking to somebody about our experience at the Ferrari World. So, I'd love to ride it together. Maybe some other roller coaster with you, but front seat, I love it.
Having said that I'm a serial entrepreneur, and I was fortunate to come to this country, so I was an intrapreneur turned entrepreneur. But I will start from what I'm doing right now, which is, I'm the co-founder, and CEO of MulticoreWare, which is a software company that's involved in image processing and video processing, and deep learning AI for two vertical markets. One is autonomous vehicles and automotive. Another one is media broadcast and video analytics. That's the company that I'm running right now. I would call it the third company that I'm involved with, in that sense, I'm a serial entrepreneur.
But I'm also involved with India Impact Investment Partnership, we call it 3i Partners, I’m one of the managing partners and the director of that organization. The idea is to support impactful enterprises in India started by young and vibrant entrepreneurs to solve some of the sustainable development goal problems that we see related to education technology, healthcare technology, agriculture technology, as well as livelihood technology. So, everything that has got a tech impact with which we can solve some of India's deep problems, that's that organization's goal.
And then I'm also involved with a lot of startups that either I personally invest, or advise, or through our own company. So, we have this idea of creating satellite companies. So, those are some of my, what I call for-profit roles.
And then I'm also involved a lot with non-profits. I'm the President of TiE Silicon Valley, and that's almost a full-time job. But with an engaged board and support, we are able to manage it well. But I'm also involved with Pratham. I serve on their Bay Area chapter's board of directors. And again, I support a lot of non-profit enterprises, either as a donor, and then of course advise them. So, if you really take a look at it's really a third, and a third, and a third. A third of my time running my company. Third of my time with a bunch of startups through 3i Partners, as well as my own direct involvement, or our company's involvement. And then the third one is involved very actively with non-for-profit organizations. So, that's, how I'm dividing up my time. I've been doing this for close to 10 years right now, this third, and a third, and a third philosophy.
AB:So, that's great segue. So I'm going to ask you on the first third of that third, third, and third. So, you started MulticoreWare back in 2009 if I'm not mistaken. Your company has since won the Fastest-Growing Private Company Award. Is it true that you started your company without raising capital?
AGK:Yeah, absolutely. I can tell a story. I've been fortunate to have built companies without raising money. My previous company also, it was the same way. Sometimes companies can be built without raising money, and for some businesses, you do need to raise capital. I learned it very quickly, back in the mid-90s, when I was going to do my previous company GDA Technologies, when I went and spoke to investors, they all said, "Hey, what you're trying to do, it won't work. Intellectual property cannot be developed in India. People will not part away with their IP. It's a wrong model, and everything." But I didn't want to wait to get venture money. So, as soon as we found the customer, we launched the company, we started growing.
And then, of course, prudent reinvestment allowed me to grow. And then we grew the company very well. And later on, once you crossed $10 million in revenue, and all that stuff, investors wanting to invest in that company. But it so happened that we continued to grow, and we exited the business without venture capital money. When I was thinking about starting this company, when I was discussing with my potential co-founder, Curtis Davis, one of the comment he made was, "AGK, you've done this company without raising money." And he as an entrepreneur has raised a lot of money from his previous startups. He said, "Hey, I will join hand with you provided we are doing this again without raising venture capital money." And for me the times were different, but I kind of knew the recipe. And I said, "I will do it. Yes." Now, this company is more than 10 years old, and we have not raised money.
And again going back to my point, not all businesses require a capital infusion on day one. Sometimes you can find customers who would pay. And in the case of MulticoreWare, for example, we got money from customer. Our first customer was a large airplane manufacturer. And then we also got money from the Department of Energy using their SBIR funding. Then we also worked with universities, and got their grant funding. And all of this gave enough money for us to put together a good team. And then while we ended up in a very large semiconductor company who ended up giving us several million dollars, IP development opportunity, and then rest is history. So, what I'm saying is if you approach starting a company only with getting venture money and then only you'll get started sometimes you make a mistake. In my opinion, you need to understand the type of business, and then realize whether you need capital or not. You should never say no to capital, but you should not be hung up on raising capital.
AB: That's a music to ears to a lot of our listeners, because I think the general belief, I think to do anything big you need a lot of venture capital PE support. But this is great. So following up on your question, I'm going to ask you, you seem to be doing a lot with machine learning AI and video. Can you tell us more about running MulticoreWare, and why you are interested in these leading-edge technologies?
AGK:Yeah. Let's take a look at the name MulticoreWare. For those of us in the software business understand microprocessors on which the software run have become multi-core. Today when you buy your computer, you always look for does it have four cores, eight cores, and things like that. But writing software to leverage all the cores is not an easy problem. It's a very, very complex problem, because people used to think software development as a sequential activity. But when you have multiple cores, you need to start thinking parallel. So, that's why we gave it the name MulticoreWare. Our idea was to write software on highly parallel architecture, therefore, taking on complex problems. That was one reason that we went on this direction.
But also, it's all about culture, right? I mean, we want to provide a continuous learning environment to everyone in the company, including myself. And we wanted to write the tech curve and we all talk about roller coasters earlier in the talk. Writing the tech curve, or tech wave is very, very important for all of us to stay intellectually stimulated. And then we also wanted to work on these complex technologies, especially involving video processing, image processing, machine learning, and AI, because there's a lot of customer stickiness to it. And last but not the least AIML is like electricity. It's everywhere. So, once you understand the core technology nuances associated with AIML, it's applicable to multiple applications, and therefore we can move around. You're not stuck in one domain, especially when you're not venture capital funded, you need to go where your customers are funding or buying. So, that's the impetus for us to look at these things.
End of the day, the video is everywhere, right? Today if you take a look at it, more than 60% of the internet content is video, and what kind of video processing that you can do on it video compression, decompression, image analysis, all of that stuff is possible using AI technologies. And that's what our company is doing on like autonomous vehicle and automotive. Today you have driver-assistance systems so that you can do cruise control, you can do emergency braking. All of that stuff is possible by doing deep video analysis. So, that's what our company is working on. And every day is a new learning.
AB:Well, roller coaster indeed it is. So, with that, I'm going to shift gears a little bit. I'm going to focus on the second of the third impact investment. So, in addition to running a successful company as successful as MulticoreWare, you're also helping to fuel India's impact entrepreneurs through your role with 3i Partners, which I believe is Impact India Investment Partners. Why is Impact Investment important to you?
AGK:For that, I've been involved with non-profit as I told you for over 10 years in a small way in the mid-'90s as well. But what we realize is if it's a two NGO, where a non-profit organization is always looking for donations, and they get the money, they spend it and of course, they're making impact, and there is no sustainability in them. The sustainability comes from the beneficiaries will go do something bigger and better. That's the sustainability of a true non-profit organization. But we realize that for you to be making impact, and to sustain you need to fund entities, or enterprises that are focused on solving important problems on the ground in India. And then, how do we capitalize them, apply your entrepreneurial wisdom? And then also, if you create enough momentum value, and ultimately I call it economics, it needs to grow in whatever metrics that you're trying to solve. Then there's a possibility to get subsequent money and eventually grow.
So in India, for example, the Microfinance Industry did that very, very well. But with technology, you could do it in multiple other areas. So we said, "Hey, we need to look at him." And Kumar Ganapathy and I started doing that. He and I know each other very well. And we said, "Hey, I've been trying to create such impact order to enterprises one at a time. I tried to do two ideas myself." And he said, "Instead of doing that why don't we bring a bunch of people together, and then help entrepreneurs in India?" So, that way we are de-risking our own capital across all of these ideas. And then also a team effort is a lot better than an individual effort. So that's why I embarked on this with Kumar. My idea is that, instead of donation, can you create sustainable impactful businesses, right? So, that's one. And then, can we provide our tech insights to solving the problem in India? I'll give you a couple of examples. We've invested in multiple companies, but I'll give two examples.
One is a company called Haqdarshak, which is a company that's enabling. There are a lot of government schemes, and these underprivileged people do not even know the existence of that scheme. And so these people provided a tech-based combination of call centers, an app, and all of that stuff to avail these schemes using the thing the government provides. So basically that way even the government has budgeted something it ultimately reaches a beneficiary, it's enabled through this product, and a service combination called Haqdarshak.
Another one is a company called CENTA, where improving the livelihood of teachers. I mean, teaching is a noble profession, but sometimes teachers are ignored. They're not given the right ongoing training and they're not kept up to date. So CENTA is almost like you're in the finance business, or accounting business. So, CENTA provides an accreditation, or a center score for teachers. And based on the score, the teachers get through their own continuous learning, and improvement. They get subsequent raises, or promotions, or even new job opportunities. So, these are the two things. Ideally, if you improve the livelihood of the teacher, you improve the students who he or she is teaching. So these kind of impactful businesses, and that can disproportionately scale.
So, we wanted to provide that kind of nurturing, those kind of entrepreneurs sitting in the valley because we have been fortunate to live in the hot bed of entrepreneurs and technology, and how do we impart some of this knowledge and fuel the economy in India? So, bottom line is we need the beneficiaries in India - their average income has to improve. And then the livelihood should scale also. So, that's the purpose behind 3i Partners, and enjoying every bit of it. We have a core team of five people, and then close to 20 investors, and all of us come together and select these entrepreneurs as they present to us, and then we support them by investing in providing mentor capital.
AB: Well, I can definitely vouch for that, AGK. Whenever I have conversations with you, I think impact investing is right in the forefront on your mind. Let's now talk a little bit about your third of the third, giving back today. And I think you've told me, "It's never too early to give back." Where does that philosophy come from, and how does it influence how you spend your time today?
AGK:It started when I was young. I've seen my father giving back to the community in whatever little way that he can, and I've seen him. That aside, sometimes you forget once you are on your own, and you are trying to make a career for yourself. But things changed when my daughter was five years old and she wanted to play soccer, and I live in Saratoga. So, I said, "Hey, let me go and look at American New Soccer Association Organization," sorry, AYSO. And they said, "Hey, you know what, if you want your child to be part of this league, you want to volunteer." I said, "Volunteer what? Time is the most valuable commodity, do you want me to give the time?" He said, "Hey if you want your child to be enjoying this, you need to come in give your time."
That's when I realized that, wow, when it comes to giving back, people have to look at three things. Giving your time, giving your money, of course. Many people give money, and many people ask for non-profits. And then the third category is you give time and money, and not giving is not an option, is what I realized early on. And I call my approach to giving as active giving because if you give money, and you give time then the organization, or the costs associated with that organization flourishes in my opinion. So, that's how it started for me. I started with AYSO, and then around the same time I started getting involved with Pratham, India Literacy Project, Foundation For Excellence. These are all educational related causes, as you can see trying to intervene at different levels in India.
And then, of course, I became a charter member of TiE also around in 2000 timeframe, and then started giving back to TiE also. And there, I mean you get spades in return, right? Because there's positive benefits of giving and especially in the case of, I mean, I can share in each of the nonprofit; other than feeling extremely good when you give, all good chemicals coming to your system, and you start feeling good and feeling healthy, and all of that stuff. That aside, you make new connections, you learn every day. Because I believe that a person should learn every day.
And then each person reads, or learns differently. They learn by reading a book or watching a show. In my case, it's always experiential learning by working with people.
And then, as you see developing others, like for example, TiE, when you support an entrepreneur, and that entrepreneur gets funding, and scales the company, either exits or take the company public, and all that stuff, that impact is phenomenal. Me personally, I've been a beneficiary of TiE myself, but being able to volunteer for TiE, run TiEcon, it's like running a company back in 2015. I did the TiEcon as a conference, as a co-convener. And then of course, in the last couple of years I've served on the board, one year as president-elect, and now last two years, I mean last year, and this year as president. You cannot measure, value it because it comes in spades for you if you give your time and money to an organization. So, that's been my experience giving back to the community, and I'm living it every day. And I think I got to know you through that otherwise I would not have known you so.
AB:So, active giving I think that's a great phase. And frankly speaking, I think your third, third and third philosophy seems great. We can sit here, I can keep talking to it about forever. I will. But because this is a podcast, this is a great, great segue into my last question that I'm going to ask you. As I mentioned to you very early in this episode, conversations are at the root of entrepreneurship. It wouldn't be a TechTalk podcast if I don't ask you, what's one conversation that you have had that continues to influence you even today?
AGK: I mean, again mid-90s, I remember I was in Taiwan, and I was with the well-wisher and he was asking, "AGK, what's your next plan?" I said, "I'm going to be an entrepreneur." And then he turned around and asked me, "AGK, what is the more than money reason for starting your company?" And that made me think, wow, I never thought about it that way. I thought I'm going to make money, building a company, which is everybody's wish, of course. Wealth creation is one of the tenet of being an entrepreneur, financial freedom and everything. But the purpose is very, very important. That's the part of that particular conversation. I realized that the purpose, or if you had that question very, very clearly the more than money reason clear, then as you hit the entrepreneurial laws as I call it, it'll certainly help.
There's a Japanese thing called Ikigai, they're also like what's the meaning, what's the purpose of whatever you're trying to do? And if you ask that in everything that you do, it'll be great. It'll help you. But most importantly, if you're an entrepreneur, if you ask that question, and you have that answer as a ready reckoner in your mind, you'll deal with all the challenges of being an entrepreneur. And nowadays I ask that question to everybody who entrepreneur.
AB: Wow. More than money reason. I think I like it. I'm going to carry that with me forever. AGK, thank you for taking time to have conversations with me today, and thanks to our listeners for tuning into TechTalk. Subscribe to EisnerAmper podcast whenever you want to listen to us, or join us for our next episode. In the meantime, visit eisneramper.com for more tech news you can use. Thank you.
Transcribed by Rev.com