Vivek Mansingh Managing Director, India Operations, Ishoni Networks SECOND-ROUND FUNDING $25 million* EMPLOYEES 160 The downturn set back Ishoni by a year. But despite weak broadband markets in the U.S. for its novel "gateway-on-a-chip", and a period of cutbacks, it is adding staff and expects revenues by end 2002. *Rs 120 crore

A carpet of coconut palms sprawls out to the horizon from the roof of 'Broadband Hub', a three-storey concrete-and-glass building interrupting the lush skyline of the conservative neighbourhood of Basavanagudi. On most evenings, the bold, crimson slashes of a Bangalore sunset light up the sky above. It is a place where you cannot lose sight of the big picture.

No one is more aware of the big picture than Vivek Mansingh, PhD, holder of four patents and author of ''hundreds of papers''. As Managing Director (India Operations) of Ishoni Networks-a once-celebrated start-up spread across Bangalore and Santa Clara, California-Mansingh, 45, knows Ishoni hasn't made any money in its four-year life. He knows that despite slashing burn rates, layoff, and cutting travel budgets, the crippling tech downturn set Ishoni's break-even back by a year. He knows Ishoni's target broadband market in the US is in the doldrums.

But Mansingh also knows that Ishoni has just got a new tranche of investment, a cool $25 million (Rs 120 crore), from the Dutch multinational, Royal Philips Electronics. Ishoni's novel gateway (inscribed on a chip, coded into software, then packed into a box only slightly larger than a video cassette) automatically routes voice, video, and data coming into the house or into small businesses over the last mile. One day, his investors believe, the last-mile problem will be solved. ''Ishoni has developed industry-leading voice over broadband and secure gateway solutions for home or office,'' says Phil Pollok, Senior Vice President, Philips Semiconductors.

So the big picture. ''Wireless gaming, streaming video, seamless supply chains, evolution of B-to-B, C-to-C, everyone to everyone,'' exclaims Mansingh, "all this has yet to happen.''

Gambles, Perils, And Promises

Hyped technologies. Wasted money. Failed ideas. Today's world of technology seems a lot like the jumbled mosaic of a crazed painter. But, hello, here's a picture-perfect fact. In 2001, the worst year that technology has ever seen, Internet traffic actually quadrupled over 2000, the year of technology's biggest hype-and bust. The American technologist George Gilder proclaimed that today's wired world is at the same point in history at America's late 19th century rutted roads, which carried the first model Ts but were really made for horses. Investors are slowly emerging from their shell to place bets on myriad bits of Gilder's vision, a world where communications will be universal and unlimited in capacity, a world of infinite bandwidth.

Some companies design chips, some write software applications, some design new products-for individual users, and for the giant telecom companies building the new wired world. BT identified a slew of such Indian outfits that received multimillion-dollar fundings after last year's nadir, 9/11. They include tech start-ups, India development centres of tech multinationals, even a converted dotcom survivor.

''I think it's a very, very good time to invest,'' says Intel Capital Vice President Claude Leglise, recently in Bangalore. ''The entrepreneurs we see today are more committed, more ready to make the personal sacrifices that it will take to be successful.'' Indian companies (30 of them) presently claim a third of the $500 million (Rs 2,400 crore) that Intel Capital, chipmaker Intel's investment arm, has invested in Asia. The company intends to invest nearly $400 million (Rs 1,920 crore) this year, despite the tough market.

The new investments are no longer about the Internet we know, of PCs and web pages as an interface. This is about the convergence of telecom, the web, and broadcasting; of wireless and wire-based networks. They call it the Supranet, the Evernet, the Meganet, or simply, Internet II. About three years away from coherence, the Evernet's earliest forms are evident in Japan, and the countries of Scandinavia, where large parts of society browse information and make purchases over their mobile phones.

The backbone of the next-generation net is already being laid through the massive terabit undersea fibre-optic cables-95 per cent of their capacity is unused today-through the fibre being laid under excavated streets, through third-generation wireless networks poised to stream in over our mobile phones. The Evernet won't burst into overnight prominence: it is a merging of technologies, one layer over another. So don't expect a magic wand to wave away the downturn.

There's pretty much an emerging global consensus on the roadmap. Slow growth this year and the next. The end of 2003 might see the mass adoption of new technologies. After growing an estimated 3 per cent in 2002 and 6 per cent in 2003, technology's topline could very well rise 10-plus per cent in 2004.

''The action is happening again, people are returning,'' says K. Ganapathy Subramanian, principal of Jumpstartup Fund Advisors, a $45 million (Rs 216 crore) early-stage VC fund based in Bangalore. Jumpstartup has done two deals post 9/11, one in Bangalore, one in Silicon Valley. ''That doesn't mean,'' Subramanian adds quickly, ''that things are back to normal.'' This is indeed true, but analysts do expect venture investments to stabilise in the keystone market, the US, in 2002 after a steep drop in 2001 to $36.5 billion (Rs 1,75,200 crore), down 63 per cent from a record $ 99.6 billion (Rs 4,78,080 crore) in 2000.

The question is whether India can really look beyond sweathouse coding in the coming years. Software exports are still motoring along at an annual growth rate of 25 per cent, but that's fallen from more than 100 per cent barely a year ago. A rebound is likely, say experts, but real growth can only come from doing new things, not the same, old things cheaply or more efficiently.

So is India ready to create products for the Evernet? ''The honest answer is no, we don't see a product opportunity in Bangalore,'' says Subramanian. ''If a good product company emerges, we would package it as a US company.'' That's so they are close to their main market. That's also where companies shooting for the big time can find high-quality VCs capable of investing $15-20 million (Rs 72-96 crore). This is clear in the windfalls coming to companies run by India's tech diaspora in Silicon Valley (See The Importance Of Innovation).

Rajat Gupta Managing Director, Cypress Semiconductors NEW INVESTMENTS $15 million* EMPLOYEES 100 Despite a worldwide loss in Q4, Cypress will triple staff in Bangalore to design logic and memorychips for use in emerging data communications networks. *Rs 72 crore

Riders Of The Storm

''Our loss is simply a reflection of the market slowdown,'' says Rajat Gupta, Managing Director of US chipmaker Cypress Semiconductors' India operations, as he walks into a room stuffed with cutting-edge machines that will test new data communications chips being designed in Bangalore. Cypress' is tripling staff and investing $15 million in its Bangalore centre, despite making a worldwide fourth quarter loss.

One machine that Gupta, 37, points to heats and cools chips, from -40C to 125C, an indication of the requirement of rugged, emerging markets. Such checks are crucial, says Gupta, ''when the customer sticks it into a board that gets into a system that is in a telephone exchange in the Thar desert or in Leh''. So Cypress, whose main focus is to make logic and memory chips for telecom and network gear makers, believes there is no way out but to push the frontiers.

''Traditionally, recovery from downturns has happened in the semiconductor industry by way of a killer application,'' argues Gupta. ''I do not believe this downturn is very different. We believe the Internet is the backbone around which the next set of killer applications will emerge.'' What those killer apps might be is not exactly clear, but as Gupta says, ''what we are betting on is being first off the block.''

Others think similarly. Analog Devices, a U.S. company specialising in chip technologies blending analog signals with digital signals, also intends to boost staff and spending at its 150-person Bangalore centre. Analog's niche: allowing ageing analog networks to gain some digital attributes. Chinese company, Huawei Technologies, whose India centre is booming by catering to Asia's unbridled telecom growth, will invest $30 million (Rs 144 crore) and add 300 staff this year in Bangalore. It develops handsets capable of video-conferencing and other next-gen gizmos. ''These products will change the whole networking system,'' says coo Jack Lu Ke.

Indian VCs are focusing on mature companies that could build the cogs of the new wired world. It could be a chip, a new acceleration software, a new product in the wireless space. They must however, contend with serious perils that, currently, obscure much of the promise.

Vinay Chhajlani CEO, Webdunia NEW INVESTMENTS $3 million* EMPLOYEES 100 Chhajlani had a survival plan: slash staff by two-thirds, create positive cash flows. Now, as India's new telcos want his regional-language digitisation expertise, he's delayed break-even to end 2002. *Rs 14.4 crore

Over the last two years, old-economy giants have quietly seeded fibre all across India, some 100,000 km. But at the end of 2001, there were just around 25,000 broadband customers across India, according to an IDC report. The telcos realise the tech is uncertain, the last mile seems infinite, and the math just isn't good enough-for now.

Yet, India's biggest names are pushing ahead. ''Reliance is investing several billion dollars to build an information and communications infrastructure for India,'' Mukesh Ambani, Managing Director of India's largest conglomerate, told BT recently. ''Associated with this would be a whole range of services-local and long-distance telephony, international gateways, data centres, call centres to computing.'' The promise, explains Ambani, 44, is the reduction of transactions costs of business in every sector of a globalising economy.

Niches In The Great, New Game

Vinay Chhajlani got $2.8 million (Rs 13.44 crore) in first-round funding but the manner in which he got it is glaringly different from the $3-million tranche (Rs 14 crore) that was approved in February. How was it this time? ''Long, extra long-and very tough negotiations,'' says Chhajlani, 39. ''Last time it took us two meetings, one month to sign the term sheet, three months to closure. This time it's taken one-and-a-half years.''

Webdunia's focus was originally on developing digital content, deploying it, and providing community services, for anyone who wanted it but primarily for their portal. The portal is on the backburner now as Chhajlani-based in Indore where his family publishes the leading Hindi paper Nai Dunia-is tapping a slew of old-economy giants who need his regional-language digital expertise in building the networks for tomorrow's India.

There are 490 towns and cities in India with a population between two and six lakh. That's more than 200 million people. In maybe two years, they will have full Net access, not necessarily through PCs. Cell phones-ownership has already surpassed Internet subscriptions-are one possibility. Crucially, new cell phone users are not from the hyped middle-class that drew consumer multinationals in the 1990s. This is a much broader profile-small-time businessmen, traders, shopkeepers, even mechanics. The critical point is that local languages-Hindi, Tamil, Gujarati, Telugu, Kannada, Bengali, and Malayalam are languages where Webdunia has gained considerable expertise in software development and digitisation-will be the lingua franca of expanding telecom carriers like Reliance, the Tatas, and Bharti. Though Chhajalani will not confirm it, Webdunia with its multilingual digital expertise honed during the dotcom years, has been contracted for deployment in Reliance's massive pan-Indian terabit-capable communication network currently under construction.

To make the infocom revolution truly spectacular and profitable, Reliance Infocom has to reach the mass markets of small-town India. Reliance hopes to make videoconferencing in India as cheap as a phone call. Rs 30 for an hour, they hope will let someone in Rajahmundry reach out and touch someone in Rajkot. Reliance plans souped-up cybercafes sitting astride their humungous fibre backbone that could provide a 2 MB connectivity to each desktop.

So expect Chhajlani's forte, helping telcos send content on any kind of device in regional languages, to be in demand as communication becomes ubiquitous. Chhajlani has never made profits since Webdunia began in March 2000, but he's managed never to deploy his survival strategy of slashing staff to achieve a positive cash flow. The big picture tells him it's worth extending break-even instead, to the end of 2002.

Sanjay Nayak CEO, Tejas Networks SECOND-ROUND FUNDING $6.6 million* EMPLOYEES 95 With its cuting-edge optical products deployed in one major Indian network, and a Chinese customer lined up, Tejas is adding staff for marketing to Asia and hopes for a break even by next fiscal.. *Rs 32 crore

Faster, Better-And Cheaper

If all goes according to plan, India will have enough backbone running on fibre. Distributing it is another matter. Sanjay Nayak's two-year-old company, Tejas Networks, creates one of the cutting-edge cogs that simplify the great wired wheel.

Tejas functions in a sector that was rattled badly: optical networking, technology that uses beams of light to direct and reroute voice, data, and video signals. As telcos in the US transformed the core of the old copper-based networks to fibre, a raft of companies emerged with products that would grant the attributes of light to the vexed network edges, still often running on old-world copper. That's what Tejas does. A number of optical companies burned to the ground after tech stocks crashed in March and 9/11 stomped over what was left.

''The markets have tanked in the US, but India, China, and other emerging markets are very healthy,'' explains Nayak, 37. ''We are bang in the middle of it here, in today's hotspot.'' Tejas' optical networking boxes-a complex jumble of chips, lasers, optical fibres and circuits, in all 400 components-are intelligent devices that sense the data roaming through them. They sit at every 80 km on trunk lines (five to 10 km in metro networks), each aware of the other's presence as they route signals, manage bandwidth, and trace faults.

Right now they are deployed on India's first countrywide intelligent optical network, being built at a cost of Rs 300 crore by the country's largest electricity company, the Tata Power Company. Tata Power intends to be a 'Carrier of Carriers', providing a backbone for bulk Internet, data and voice traffic of various providers. It needs almost perfect reliability (an uptime of 99.99 per cent), superfast connections and the ability to release bandwidth on demand. Tejas' boxes-each can service 63 leased lines-will allow Tata Power to, say, release a few gigabits for an hour-long videoconference. More customers will mean economies of scale, sorely needed to recover the huge investments made. Innovation in telecom must now focus on cost reductions, as it once did on capacity improvements.

With that mantra built into its tech, Tejas firmed up its second round. Plus, its burn rate is a tenth of a similar US start-up. ''We are particularly impressed by the focus of the company on early revenue generation and profitability, factors critical to success in current market conditions,'' says Muneesh Chawla, chief investment officer of IL&Fs corporation, one of Tejas' investors. When Tejas closes its financial year, revenues should be nearly $2.5 million (Rs 12 crore).

Foreign markets are a big struggle though. Tejas has a distribution partner in China, where one customer is close to signing up. But their start-up status doesn't help. And Indian tech is still looked on with disdain. ''We say we are going to give a latest-generation box from India, and people raise eyebrows,'' confesses Nayak. ''If it's a mission-critical deployment, people will think twice.'' The longer it takes to remove these old smudges, the big picture will remain obscured to India.