November - 2000 - issue > Cover Feature

It’s a bustling Thursday night in Palo Alto’s trendy Il Fornaio restaurant. The scene looks like just another manifestation of the ever-trumpeted Indian phenomenon in Silicon Valley: A group of Indian entrepreneurs are gathered to chat about their busy entrepreneurial lives, casually cracking jokes and enjoying a few glasses of good Italian wine. But these guys are not exactly the traditional face of Indian entrepreneurship. All in attendance are CEOs and company presidents, and the average age at the table is a baby-faced 27. What’s more, they came to the Valley not because they wanted to tap into the land of opportunity, but because their parents did. These are the children of the Kanwal Rekhi generation, second-generation Indian-Americans — young, hungry, and assimilated.

Among those seated at this particular table are management from Andale, Aceva Technologies, Chipshot.com and Epinions. But these representatives are just a few of many second-generation entrepreneurs in the Valley. The success, potential, and growing visibility of second-generation companies suggests that these entrepreneurs are beginning to have an impact on Silicon Valley and beyond. And yet, aside from incidental coverage of their specific companies and achievements, not much has been said about them as a group. They’re successful, driven, “hip,” and half the age of their first generation mentors. They have gravitated to TiE, but also forged their own networks, and their companies are surprisingly diverse. On the surface, they dress and sound quite unlike their first generation mentors. So is this the next face of the Indian phenomenon, or have these gen X entrepreneurs emerged out of the Indian phenomenon enough to become, simply, individual pieces of the greater American puzzle?

Riding the Wave of Success

By “second-generation,” we loosely mean Indians who were either born in the US or who arrived at an early enough age to be fully assimilated into American culture. The truth is, the second generation has already formed a distinct identity. The recent creation and immediate success of “The Midnight Forum,” a social and networking group for young—predominantly second generation—South Asian entrepreneurs, is a testament to the growing number of young Indian entrepreneurs in the Valley today. Despite the difference in style that comes with youth, there is a clear link between the new generation and those that came before.

“We are standing on the shoulders of giants,” says Manish Vij, co-founder of The Midnight Forum, and many second-generation Indian entrepreneurs echo his sentiments. “We come from a position of strength…we’re not underdogs,” says Munjal Shah, CEO of Andale and co-founder of entrepreneurial group Round Zero. Sundeep Jain, CEO of Aceva Technologies, comments: “The first generation has set a very high bar for us, which makes us set an even higher bar for ourselves because we have some benefits that they didn’t have.” Amar Goel, president of Chipshot.com, sums it up when he quips, “If we don’t achieve more than first generation Indians, that’s pretty pitiful. They’ve achieved a great deal, but we have so many more advantages.”

Despite their own enormous success, the first-generation leaders tend to recognize the enviable position in which most second-generation Indian entrepreneurs find themselves. Versata and Xpede founder Naren Bakshi speaks of his son’s education at Berkeley and explains, “He learns public speaking—I had to learn that on my own.” Microsoft’s Vijay Vashee also highlights the second generation’s competitive advantages. He refers to the first generation’s assimilation into America as “a trained behavior — not something they grew up with, but something they had to learn.” Vashee expresses his opinion that “the second generation will go farther and achieve even more.”

But how different from their parents are these second generation entrepreneurs? “We’re hipper, trendier, and more in tune with people our age,” says Vij. “In my free time, I go snowboarding,” says Monis Rahman, Vij’s co-founder at The Midnight Forum. He adds, “In their free time, my parents like to go watch an Indian movie.” According to Vij, one of Rahman’s favorite activities involves driving his car backwards down San Francisco’s Lombard Street. Admittedly, few from either generation are likely to undertake this without taking out an extra life-insurance policy, but both Vij and Rahman agree that this sort of activity would be unheard of for pioneering members of the first generation. Vij does concede that, beyond simply the difference in culture and attitude, “It’s a generational thing.” He says of his first-generation mentors, “I’m sure these guys did these things at one time.”

Carried On

The Wings of Angel Investors

Beyond the generational difference, it seems clear that this second generation of CEOs, presidents, and founders moves to a very different beat than the first wave ever did—they skydive, follow baseball, know who “Puff Daddy” is, and more. But though they’ve moved closer to the American mainstream, they’ve done so only up to a certain point; it’s hard to argue that these second generation hotshots have severed their ties with India when it comes to business.

Indian angel investors remain the initial fuel for the overwhelming majority of second generation companies. Munjal Shah’s Andale, an online auction services provider, obtained angel funding from eGain president Gunjan Sinha. Says Sinha, “Because the socio-economic gap between the two generations is narrowing in the Internet era, there is greater collaboration between the two sets of entities.” What he is speaking of, in terms of the narrowing of the “socio-economic gap,” is at the heart of the second-generation phenomenon.

While gesturing at his table of fellow second generation entrepreneurs, Munjal Shah explains, “Look at the ages of the people at this table [which range from 24 to 30] — everybody’s funded by a top-tier VC, and if you look at the youngest CEOs funded by those top-tier VCs, a good percentage of them are Indian, so you have a really odd phenomenon.” After his peers quibble over his statistics, he specifies: “We were at the Accel event, and we were easily the youngest guys there. There was one other — who was Indian also.” After further debate, Sundeep Jain comes to his defense, saying, “Among the CEOs that are young, the majority of them are Indian.” The others at the table are still not convinced, but regardless of the validity of Shah’s statistics, one thing is clear: there is an impressively large number of twenty-something second generation Indian CEOs.

This is the standout feature of the new generation phenomenon. Besides Vinod Khosla, who founded Sun Microsystems at age 27, the first generation started companies much later on in life, usually after extensive careers at established companies. So what has enabled this sudden wealth of twenty-something, second generation Indian entrepreneurs to arrive on the scene? The new generation is starting companies at an age where the risks involved in going out on your own are not weighed as heavily against outside factors such as family and financial security. But, beyond these differences, it is the first generation angels that are propelling them into their unique position in the business world.

“You can be poor and hungry, or rich and fat,” suggests Vij. “We’re hungry and well off — there’s nothing more dangerous than someone who’s hungry and has resources.” This new generation is in a unique and advantageous position, therefore—not only when compared to their parents, but when compared to non-Indians of the same age group.

The Young and the Restless

And yet these young risk-takers are also building companies that are unlike those that made the first generation successful. They are moving from semiconductors, networking, systems and software into unconventional Internet-based plays such as B2C, Internet/e-commerce solutions, and so on. Snapfish CEO Raj Kapoor sees “a broader set of opportunities” for the second generation. Amar Goel admits that, “it’s hard for a guy straight out of college to start a B2B company.” Some might point out that none of these guys have a great deal of traditional domain experience. Yodlee co-founder and VP of business development Sukhinder Singh highlights the breakneck speed at which entrepreneurs are being forced to innovate in Silicon Valley today, and concedes that many second generation entrepreneurs “are relatively inexperienced managers running companies and being asked to create results in a much more stringent environment and an accelerated timeframe.” This would seem rather a shaky proposition in comparison with the first generation method of growing companies out of extensive experience and a more traditional career path.

But Vij throws the scenario into a different light when he explains, “They [those in the first generation] were formed by traditional companies; we were formed by Microsoft and Apple…dot-com strategies like “viral adoption” and “ad supported” are often very foreign to [the first generation] because of the companies where they were trained.” Jain comments that whereas the first generation was pushed towards engineering and medicine by their parents, the second generation has the option of going into business and marketing. According to Jain, that “makes a big difference.” It may be that, at the core, the second generation is bringing a new business mentality with it — and a new breed of entrepreneur. This new generation does not seem content to simply follow in their parents’ successful footsteps.

Building the Community

—in the US and Beyond.

“The fact of the matter is,” says Vijay Vashee, “When the Midnight Forum guys want money, they come to me” — he adds a qualifying phrase: “…for a while.” While speaking of the need to pass the torch, Vashee explains, “I’ve mentored over 700 people, and my only condition is that if I help them, they help ten other people — unconditionally.” This sense of community is another critical piece of the puzzle. Says Vij, “TiE is like the ‘mother’ of second generation Indian entrepreneurs in this country … one guy took me aside and said ‘don’t tell anybody this, but I do this for the brothers.’ It’s like something out of Roots — and it’s very touching.” Vashee explains, “The major reason I got engaged in TiE is so that my sons can have a major platform from which to spring from … otherwise, I’ve failed.” With these words, Vashee fundamentally links the second generation to the first. But will the second generation unconditionally accept this association?

Although the answer to that question depends largely on the individual, the second generation, though assimilated, is not severing itself from its Indian roots. “I actually think we are seeing a resurgence,” says Sukhinder Singh. “All of a sudden it’s cool to be cultural again.” American college campuses have seen the arrival of South Asian fraternal organizations, the first of which — Delta Phi Beta — was founded at Berkeley in 1992. Second generation South Asians are coming together, and this growing sense of community has its effect on the business world. Says Singh, “When I look at my business development team — I don’t know how it happened, but half of them are Indian.”

But does the second generation relate to India itself? “I would probably give to my local school [in the US],” says Raj Kapoor, who admits that “the bonds dilute over time.” But this is one issue on which there is little consensus. Vij and Rahman express deep ties to the Subcontinent. Says Rahman, “it all depends on how you were brought up and how often you go back.” From a business standpoint the second generation is clearly ready to explore India—and, more importantly, India’s vast pool of IT talent.

Matching Up to Giants

Although the community that Vashee speaks of creating for his sons shows no signs of disappearing, Sukinder Singh also adds that the “verdict is still out” on the business success of this highly anticipated second generation. She asks: “How many will be around three, four, or five startups later?” One nagging question is why the second generation has chosen to move away from pure tech. The fact that Juniper Networks’ market cap is still over five times that of eBay, and Cisco’s value still dwarfs the poster child for the Internet era — Yahoo — by a factor of six would suggest that companies spun out of creative business flare are, by and large, no match for those built on concrete technology. Can the new breed of young second generation CEOs, with all of their “advantages,” ever match the numbers put up by the likes of K.B. Chandrasekhar, Desh Deshpande, Raj Singh and Vinod Khosla? The answer right now is a tentative “no”— not, at least, with companies that they’ve formed up until now.

But is the sole goal to outdo the first generation on the basis of market cap? Perhaps not. Says Harsha Raghavan, another co-founder of The Midnight Forum, “I’m inclined to believe that the second generation of entrepreneurs is not particularly concerned by the successes and the numbers of the first generation … there continue to be significant opportunities to create companies with ‘only’ billion dollar valuations — this is where I believe most of the second generation entrepreneurs are focusing their energies.”

The Future

Indeed, the pioneers that created the Indian phenomenon that is now the stuff of mainstream news articles (albeit somewhat after the fact) are a very unusual group of individuals. They made it to the Valley because they were the very best engineers IIT and India had to offer. They came with skills that were timely and specific, ready to capitalize in a big way on the emerging IT revolution. They also had a drive that was unique to their upbringing. Amber Networks chairman Prakash Bhalerao suggests, “Being brought up in India is an entrepreneurial experience from day one, because you are negotiating for everything — buying vegetables, whatever. Given that there is a very high supply and very little demand, you are bred with a very aggressive and competitive spirit.”

This drive, at least, the second generation has inherited. But the situation and role of today’s second generation is very different. As assimilation inevitably takes its course, the importance of pure entrepreneurship and business is mitigated by the emergence of other goals. For example, not all second generation Indians are becoming entrepreneurs, or business people for that matter. Both Monis Rahman and Manish Vij reveal that they wanted to be journalists in college. Rahman jokes, “My Dad said, ‘you can be a doctor or an engineer.’” But attitudes are changing. Prakash Bhalerao concedes that people can “go into different fields and carve out a very good living.” A few second generation Indians are undoubtedly becoming writers and filmmakers, and the number is sure to increase as the generations succeed each other and assimilation takes its course. Says Vijay Vashee, “I want to see more Indian Americans in state and federal government. I want to see more Indian Americans in Theater. I want to see more Indian Americans working for nonprofit organizations. Because that’s a sign that we’ve joined mainstream America and we’re having an impact everywhere.”

Many of the second generation who choose a nonentrepreneurial path, however, may receive the parental pressure experienced by Monis Rahman. Vashee suggests that he will take a more liberal approach. When asked if he will push his kids to do anything in particular, he borrows the typically American expression, “you gotta do what you gotta do.” But Epinions founder Naval Ravikant highlights the value of a technical background and labels it “the good pressure from our parents.” Says Ravikant, “I know a lot of people who went to business schools and spent two years learning to bluff technology. It would be much easier to just get an engineering degree. That’s an enormous asset that we have and I’m worried that a third generation will lose it.” But his fellow second generation Indians are quick to argue with him. Amar Goel explains, “if my kid wants to be a musician—great.” However you view it, pure tech, or even business, for that matter, will have to share the stage with other critical endeavors. The most visible and important of these endeavors is probably politics.

Vij puts forward an interesting idea by suggesting that, “someday, the Bay area will turn into Manhattan — Palo Alto and San Francisco will merge in the middle.” The result, he explains, could be the “economic capital of the US.” Given the current state of the Bay Area, his idea seems plausible enough. With an ever-increasing flow of IIT graduates entering the US, and the second generation building on the successes of the first, Indians will undoubtedly take on an even more important role in the formation of that “economic capital” than they have in the formation of the Valley today. By this logic, Indians are sure to take on a new measure of power and influence in America. “Americans always respect entrepreneurs,” says Vij. “They respect Bill Gates for more or less whatever he does, but there will be a sense [with regards Indian entrepreneurs] that these people are ‘weird.’” This situation, if it plays out, will provide an interesting problem — what will America think of Indians running America’s economic capital and, by extension, America itself?

Regardless of how much of Vij’s vision comes true, Indians will be required to assimilate and enter into the political and social sphere while maintaining their own sense of community. It will be the new generations that will have to move beyond business and technology to shape the future of the Indian community in America. In the meantime many members of the second generation continue to pursue the entrepreneurial dream. Soon they will be investing in the companies of the future.