Timothy Gonsalves, Ashok Jhunjhunwala and Bhaskar Ramamoorthy (L to R): Bringing together the best of academic and entrepreneurial talent

Six years after Shirish Purohit and Rene Abraham took the "rash" decision of launching their own project consultancy company instead of heading to the US for a ms like their other classmates from IIT Madras, turning entrepreneurs seemed a bad idea. Their three-member project consultancy firm Texel, which handled industrial automation in the automobile sector, was going nowhere. It was time to do something else. But what?

The answer came a few months later over a plate of fried rice at Ashok Jhunjhunwala's modest two-bedroom house on the IIT Madras campus. A professor of telecommunications who had also taught the floundering duo, Jhunjhunwala and two of his colleagues-Bhaskar Ramamoorthy and Timothy Gonsalves-had set up a group of students and professors called TeNet in 1989 to identify and develop new, India-centric technology in telecom and networking. And on the fateful day when Purohit and Abraham came over for dinner, Jhunjhunwala had put everything together for the launch of a relatively cheap wireless technology named corDect. All it needed was a bunch of engineers to do the design and take it commercial. Would the two want to give it a shot?

Of course, they did. TeNet set them up on the campus with a mini-office and thus Midas Communications was born. Recalls Purohit: "I remember telling myself 'My God, here it is'." Pooling together whatever little money they had-it amounted to Rs 5 lakh-the two and five others (Sanjay Gupta, Prakash Khawas, Deepak Khanchandani, A. Jawahar, P. Murugesh) got down to work. The first six months were spent finalising the design of the corDect WLL. By 1995, a prototype was in place. Advance licences were sold to Hindustan Futuristic Communications Ltd, Shyam Telelink, Crompton Greaves, and Electronics Corporation of India Ltd for Rs 4 crore. If TeNet needed proof that there was market for indigenous telecom technology, it couldn't have asked for anything better. Today, it sells in countries abroad and has Rs 1,000 crore worth of orders on hand.

Labour of Love

Since Midas, TeNet has gone on to incubate five more companies, but all in the area of networking and telecom. Banyan Networks, founded in 1995, has developed a digital subscriber line system that enables telecom companies to provide wireline internet services. Its largest customers today are MTNL and BSNL. Another TeNet company, n-Logue, founded by Gonsalves (investment held in family name), is working on low-cost rural internet and telecom connectivity solutions. The companies they incubated may be worth more than Rs 400 crore today (See TeNet's Brood), but the professors themselves have no stake in any of them. Part of the reason is technical. Unlike in the universities in the US, IIT professors are not allowed to set up their own firms. The other bigger reason, however, is that none of the TeNet professors are into it for the money. Says Jhunjhunwala: "The idea (behind TeNet) was to work as a team with a commitment to make a difference to telecom and networking."

The TeNet model itself was born out of Jhunjhunwala's efforts at building telecom devices that small companies could use instead of the more expensive imported ones. To do that, Jhunjhunwala would enlist the help of his students. By the mid-80s, when c-dot was also separately trying to develop indigenous telecom technology, Jhunjhunwala's lab in IIT was capable of building small industrial systems. It didn't take much to figure out that if the development work could be done on a more organised basis, the new technology could eventually be sold to customers. Thus, the process of incubation began.

To this day, the professors will incubate concepts relating only to telecom and networking. Even here, the technology should be relevant to India, but scalable to developing countries elsewhere. The key promoter-engineers who are picked to work on the technologies are usually from within IIT Madras, but the others may be hired from anywhere else. The TeNet group has set up two outfits within the institute to train external hires. One offers training on telecom technologies and the other on semi-conductor designs.

K.V. Nair of Banyan Networks, Shirish B. Purohit of Midas Communications, and P.G. Ponappa of n-Logue (L to R): What these men make in their small companies has big impact on telephony in relatively poor markets

What role do the professors play? They act as mentors, hand-holding the young entrepreneurs. They not only make the institute's resources available to them, but actually go out and hardsell the concept to venture capitalists, customers, and government agencies. Banyan Networks, for instance, has investment from Ray Stata, Chairman of Analog Devices, and one of the first global supporters of Jhunjhunwala's home-grown corDect technology. Other investors in the TeNet companies include Intel, Sycamore Ventures, Arun Jain of Polaris Software, and a few state-owned venture funds. Says Purohit: "We made Prof. Jhunjhunwala our public face because we knew bureaucracy would respond better to an IIT professor than us."

While Jhunjhunwala and Co. actively hand-hold, they rarely interfere in day-to-day operations. In fact, as the companies grow, the advice usually given is to rope in professional managers who can put in place the processes needed to run a for-profit organisation. Therefore, an ex-ITI Chairman, S.S. Motilal, has been brought in as Executive Chairman at Midas. Reason? Earlier the company had only small orders to manage. But this year alone (2003), there will be Rs 1,000 crore worth of CorDect lines that will be sold in places like Brazil, Egypt and Kenya.

Similarly, Banyan Networks has brought on board K.V. Nair as the new coo and acting CEO to stabilise operations. Here, the problem was not of rapid growth, but a marketing model gone awry. Although Banyan had a promising technology, it made the mistake of adopting Midas' "advanced" licence model. Banyan assumed that its licencees would take care of procedural formalities such as Telecom Engineering Centre approvals. That did not happen, and its DSL technology could be deployed on a limited scale.

When closure seemed imminent, Banyan was saved by a second round funding of Rs 3.7 crore from Ventureast TeNet Fund. Nair also joined, and within eight months, he had obtained the TEC approval. Today, the company is profitable and is working on building its marketing channels. Its ambition is to be known as the "Cisco of India". Says Nair: "I want to make Banyan a Rs 100-crore-a-year company in another three years. Otherwise I wouldn't be satisfied with my work."

Despite TeNet's passion for telecom, there's no fixation to one technology or concept. Therefore, whenever it is necessary for any of its companies to change its business strategy, they do. Banyan, for instance, did not plan to do its own manufacturing, but now that doing so seems key to its survival, it will. Says Sarath Naru, Manager, Ventureast Fund Advisors, and an IIT Madras alum: "Unlike most academics, Prof. Jhunjhunwala has a good commercial sense."

TeNet's original group of three professors has now expanded to include 12 more. One of the newer members is Hema A Murthy, who is TeNet's only woman engineer with work experience at Stanford Research Institute and Tata Institute of Fundamental Research. There are others from outside the IIT system who want to join. The professors' response: the more the merrier. Says Gonsalves: "Today, we have about 500 engineers (125 from IITM) in TeNet and it is difficult for just three people to guide all of them."

Does that mean there will be more Banyans and Midases in the making soon? The professors aren't setting any targets, but are open to incubating more concepts if they spot relevant opportunities. At the moment, their focus is on their existing brood, all of whose are at different but exciting stages of growth.

As for IITM, it has raked in Rs 12 crore in royalties from the TeNet companies. In another few years, it may earn another Rs 70 crore. That's 12 per cent of IITM's annual grant from the government of India. Quips Ramamoorthy: "We aimed for the stars no doubt, but never thought we would become so successful." Surely, that's a lesson the TeNet professors have taken to heart.