In the startup arena, IT-dominated genres of biz hog headlines and VC calls. However, here in Pune, there is a culture that at its core, is all about building a product to solve a problem
Steamlok, founded in 2017
Manufactures steam engineering products
Founder: Narpendra Singh
Having worked in the steam engineering industry for 25 years Singh decided to get into business of manufacturing
Steamlok, by the numbers
Expenditure since launch- Rs 8 crore (35% of this on R&D)
Patents – 3, at cost of Rs 5 lakh, each.
Turnover – Rs 6 crore
Profitability – At break even
Number of employees – 40
Given my experience I had seen several companies that use a thermodynamic trap made of CA40 material. This was the practice for over 50 years, traps were necessarily made of CA40, which is prone to rusting and incapable of being opened, cleaned and maintained. As a result, about 30% of all traps in a plant are non-functional. The other thing I noticed was the problem with piston valves. These needed to be operated on hand-wheels because of the heat. I thought, wouldn’t it be much better if there was something we could do about the material used to build traps so that they can be easily maintained and be rust proof? And what could we do to about the heat in piston valves?
We had the task at hand of adressing all pain points steam users have been facing over the decades.
With our experience, and some ingenuity, we worked on building maintainable traps made of stainless steel. This took care of the rust problem. Then we designed a “ball float trap”, where we put a strainer before the trap to protect it and put a sight glass at the outlet with an interconnecting pipe, so that one can see physically if the trap was working or not. We integrated three products into one, that not only saved space, but prevented leakage and can be monitored ‘live’. Also, with we could make a zero leak ball float trap. With the piston valves we desgined heat resistant hand-wheels so that the operator could operate it easily without gloves and the product became user friendly.
To market, to market
We began with a different approach. We do not just sell a product, we offer solutions. We first study the customer’s plant, look at wastages, do audits and then advise them on how our products can help them reduce wastage, fuel bills and pollution to the environment. We have our own sales team as well as a distributor channel. Our sales is helped more by word-of-mouth publicity. Our first customer was the ITC group and they spoke about our prodcuts to their peers.
What now, what next
Our plan is to create 500 jobs in the next three years and do a business of Rs 100 crore.
Financial institutions could have been more helpful. They ask you for three-year audited balance sheet before they sanction a loan. I have invested in my prototype and need the money to set up the manufacturing unit. From where do I get audited balance sheets even before I have begun? Ninety per cent of startups fail in the frst three years. If after three years a startup is still operating it does not want money for setting up, it needs it for operations or expansion. Startups need a level playing field to begin with. Every step in establishing a manufacturing company is a torture. How to protect ourself legally was also one of the issues we had to deal with.
Ecoair, founded in 2012
Industrial cooling and ventilation
Founder: Sandeep Jaisinghani
An automobile engineer with 27 years experience
Ecoair, by the numbers
Investment at launch- Rs 1 crore
Patents – 2, patent pending
Turnover – Rs 27 crore
Profitability – Yes (not disclosing figure)
Number of employees – 60
Factories and commercial places need cooling and ventilation and it’s become more of a necessity than a luxury with global warming .
We realised that while large companies could afford to use cooling and ventilation systems in their plants, smaller entities could not afford to and had almost no provisions for controlling air quality on shop floors.
We saw an urgent need for energy efficient and “capex” (capitaal expenditure)- friendly industrial cooling and ventilation systems. The products available at that point of time in India required very high capex and opex. There were niche products available in some markets in the world that offered cooling and ventilation systems for industrial and commercial applications which had extremely low running cost and low investment. Ecoair then decided to design, manufacture and sell similar products in India.
On visit to a trade fair on automotive plastics I came across an Australian company that displayed modular cooling systems and we realised that the concept would be perfect for India. I had to bear in mind the cost. Early on, I understood how the China model worked. They achieve economies of scale on account of shared resources. So if say, I needed a 100 parts of X, then I won’t have to invest in machinery that can produce 10,000 such pieces. I can go to a person who has that machines and pay for using it to produce 100 pieces. This was key to bringing the cost down. We worked on the design and after several iterations, we developed our own testing and validation process benchmarking it to world class products. We invested in making the dyes, we did not invest in the machinery. The rest we decided would be outsourced as per our designs.
The design and development processes that we follow were adopted from the automotive industry and were extremely comprehensive with multiple sets of prototyping and trials. We listened very closely to our customers and understood their needs and adapted our design and product accordingly. This has ensured that Ecoair is a market leader in its product segments.
To market, to market:
We believe that a good product and good service are the most important elements to build a strong customer base. To that end we have established a network of dealers and have our own sales team as well. In the early days we approached big OEMs like Maruti and gave them a free trials for six months. After they were convinced and they were very thorough about their approvals process, they were a strong source for new leads that we followed up. Also, word-of-mouth publicity helped. Today our customers include among others Amazon, Aurobindo Pharma, Air Force, Bajaj Auto, and Cummins India, among others.
What now, what next
We believe that organic growth is better than exponential growth so we will continue to strive for operational excellence and keep building better products.
As we did not have acess to financial resources, we partnered with APPL industries, who invested in our business. They provided us with the resources and we set about manufacturing our cooling systems. With the dyes already made we outsourced the moulding process to Supreme Industries, who have huge capacities. Actually In India we have the issue of under-utilized capacities and I took advantage of it. The OEM Automotive Manufacturers in the Pune region, can, technically speaking, manufacture 5,000 cars a day. Hence, contract manufacturing is coming in which resources can be shared and which will save you huge investment.
I think the biggest hurdle for a manufacturing startup is investment in land and machinery. Startups should not invest in land. I understood this early on. They should focus on design and engineering. After we built our product, my major challenge was to find ways to manufacture it as economically as possible, and this we did.
Prashant Girbane, director-general, MCCIA
There are many small businesses, i.e. startups, in the manufacturing sector. What is missing is the number of such small businesses that come with innovation and efficiency over existing products. This reduces the scope of scaling up and integrating into global value chains.
Unlike startups in the IT domain, where services organisations require relatively little seed capital to start up to produce a ‘minimum viable product’ (MVP), the manufacturing startups require substantially larger seed capital; especially given costs attached to land and machinery.
Financing of capital is another obstacle. A tech startup receives institutional funding from investors on the basis of their intellectual property and they don’t need to service this capital with interest or mortgage any physical property. For manufacturing startups, there are no such facilities.
Why this happens is understandable though. Most investors are chasing startups that would not just survive, but would grow very fast and thereby deliver far better return on their investments; as against the lot more certain and sustainable, but far slower growth in the manufacturing sector.
The other major obstacle is inability to see growth prospects due to compliance burdens and difficulty in integrating with global value chains (GVCs).
Differentiated quality product (innovative and leveraging technology) and access to lower cost of capital are very important. In addition, government needs to further reduce compliance burden on small businesses and facilitate linkages with GVCs, by dealing with issues like standards harmonisation, quality certification, better logistics and improving ports infrastructure. We also have one of the highest energy costs (input costs) as compared to other competing economies. Allowing open access for use of renewable energy by MSMEs is very critical to achieve this parity of energy costs.
Apart from industrial policy (draft for new industrial policy at the centre is under discussion) and schemes for development of MSMEs, two of the much-needed key reforms are: i) land reform, and, b) labour reform. These reforms have the potential of not just bringing in significantly higher FDI, but also in further encouraging startups in the manufacturing domain.
Industry associations can play an important role. MCCIA has set up various clusters in recent past. A new such cluster for electronic manufacturers is on the anvil and is expected to take shape within a year.