Parag Naik, Co-Founder & CEO Saankhya Labs chats with Amit Somani, Managing Partner Prime Venture Partners.

Listen to the podcast to learn about

01:00 - Parag’s entrepreneurial journey in the semiconductor space

07:15 - Computer Science & the Goal of Hardware

13:00 - Dealing with Incumbents & Finding Opportunities

24:00 - Building the Semiconductor Ecosystem & Attracting Investors

32: 00 - How to Think About IP & Patents

Read the complete transcript below

Amit Somani 00:55

Welcome to the Prime Venture Partners Podcast. I am your host, Amit Somani and I am delighted to have with me today Parag Naik, co-founder and CEO of Saankhya Labs, attempting to be India’s first fabless semiconductor company. Welcome to the show, Parag.

Parag Naik 01:12

Thank you, Amit. It is a pleasure to be here, and thanks for inviting me.

Amit Somani 01:16

So Parag has been a veteran in the semiconductor industry. He was just mentioning that he started his career in the early days at Philips. He has been an entrepreneur, a serial entrepreneur, maybe a parallel one too. I do not know, we will find out into the conversation and most of his journey has been around the semiconductor space. I am really excited to learn a lot of new and interesting things from him. Parag, maybe you can give our listeners a quick background on your journey and a quick description of what Saankhya Labs does.

Parag Naik 01:45

Sure. Very quickly. I graduated in ’92 from one of the private colleges, we like to call ourselves the… We are not the pedigree dogs, we are all the country dogs. That messaging is very important because a lot of times people get hung up over degrees and flaunt those degrees. So somebody from a private college without cracking the GA or probably GATE can do this stuff. I think a lot of other kids can do better. I graduated in ’92. My first job was in Mumbai. I worked for Patni Computer Systems for about six months. Then I joined a small company in Bangalore that was working on the light fighter, what is now inducted as TEJAS into the Indian air force. I worked a lot there on embedded hardware and software and that is where I got my first experience with working in the hardware and in the software space.

Most of my career, I have been treading the line between hardware and software and by the way, now in this company, right now, we have pivoted so much that we are also doing mechanical and thermal stuff. If there is a problem to be solved, you solve a problem, you just do not get boxed yourself in one particular silo. Between 92 and 95, I worked with DRDO as a private contractor, building machine computer hardware and software for the TEJAS aircraft, which is now inducted into the Indian force. Then in 95, I joined Phillips research and Phillips was just starting off here in Bangalore and then I shuffled between Phillips Holland and Bangalore for about five years. Living about two years in Holland and about three years in Bangalore, going back and forth, and working with Phillips research with some of the top minds in Europe at that time.

It actually was really a great learning opportunity for me, thought processes, especially working with the Dutch guys, right? In India we think the Americans are very blunt and straight, but wait until you see a Dutch guy. In fact, a lot of Americans find us extremely direct and that is some of those traits that we picked up, mostly good I think in hindsight, and working with a lot of folks in Phillips research. We were exposed to a whole lot of problems there building operating systems, building chips and those days were the days when the digitization journey had just started. In fact, we worked first on the world’s first set-top box in ’95, ’96 timeframes. Set-top boxes those days used to cost about $1500 so it was… And DVD players so that was a big thing.

In ’99, or 2000 there is all this… Some of your audience might not remember those days, one of the first booms that we saw and the bust also that followed later. During those booms, practically, everybody was going IPO in India in ’99, 2000 timeframes and then we decided we had about seven, eight years of experience, I kind of plateud out in Phillips. With very little management background, me and my four co-founders were also my colleagues in Philips and some of my classmates started a company called Smart Yantra. In 2000, we started that company. We did not know what we are getting into.

In fact, one of our managers told us before you learn to jump from the fifth floor, learn to jump from the first floor. Those days being young, we were about 28, I think 27, 28, 29 being young and doing a startup was not fashionable. It has changed so much in the last 15, 20 years. In fact, it was a liability not an asset those days, but with some angel funding, we started Smart Yantra, not knowing what to do, frankly. In fact, I remember my first day when I actually had resigned from Phillips and we were starting Smart Yantra, we had got out and for a minute I was unnerved because 29 years of your life, you always had somebody to tell you what to do. Suddenly on one particular day, now it is freedom, right? But it is like a tiger out of the zoo.

It is freedom, but you have to hunt now for yourself so it was extremely unnerving. It took 10, 15 minutes to get over that feeling and I think since then we have never looked back. So Smart Yantra, we ran till 2004. In fact, in Smart Yantra, we built some very interesting technology that actually now passes off as screen casting so screen cast actually was invented in India by us but we did not know what we are sitting on. There is no concept of patenting. We did not know how to market these things those days but having said that, in fact, we are not as narcissistic as we are today. We do not even have a picture of those demos that we should have actually built in 2002.

Amit Somani 06:05

Yeah. A lot of follow on questions, apologies to interrupt here. I think one very interesting thing that you said is when you started out Yantra, your first company, you really were like, “Okay, so what are we going to do now?” Both in terms of philosophy and psychology, right? In terms of there is no boss, I am the boss or I need to control my own destiny. Second, I actually wanted to go through the course of this podcast, explore the anatomy of building a hardware or a deep tech startup which takes longer to longer gestation period. How did you not just there, but maybe you can just cite anecdotes from Yantra as well as Saankhya labs. How do you figure out what is the problem that you want to solve? That will be a meaningful, interesting, worthwhile pursuit. Commercially, not just at a research level.

Parag Naik 06:50

Some of us have been tinkerers, Amit. Sometimes maybe we have been accused a lot by the finance guys of not looking at finance as much as we should. A lot of times we do it because we do it for the sake of it. But having said that there was a general method to the madness, right? In ’99, 2000 timeframes, everything was going over IP, right? Now, something over IP, Voice over IP or audio over IP is very clear. Video or IP was something which is very new so we thought that we should play in that space and build some things around. That is what OTT is all about, video or IP. And we called it video over IP those days. That is the over all business stuff… but right from the beginning, right from the time when we were in Philips of my co founders, he got a PhD from a technical university, him and a few others in Philips, we are always worried, not worried I would say, always wondered why can’t we actually build a deep tech engineering ecosystem in India.

In fact, in the last 25 years of my career, I have seen… I call ourselves myth busters in a sense. Earlier they said in India, we could not do software. When we started, the European guys there said, you cannot do embedded software and they said, you cannot do the chip and we did the chip and all of that. The overarching idea was video over IP there. I will talk about how we came about with Saankhya a little later, but then the idea was to go build something out there and then sometimes you have to be actually brash and foolish also, I think. In fact, one of the popular VCs I cannot name on the show, we had gone to meet him at that time. I think he said, “You have to be either brave or foolish to do that.” I said, “We are both sometimes.”

For us it has always been a series of experiments. We started off Smart Yantra saying, okay, let us try this for three years and see what comes out of it and then take it from there and luckily for us, some of those experiments paid off, some of them did not pay off and like your VC investing, it is statistical. You do eight or 10 things and a couple of them actually take off and we have never stopped from the age of 25 to 50. We have never lost our curiosity and we have never lost our ability to tinker and we always get excited even at this age to play around with. That actually held us in good stead and in fact, what happens is when you are building, unlike business model innovations, when you are building something tech, you have to project sometime into the future and take a bet on what could potentially happen 10 years from now. In fact, at Smart Yantra we were too early, again, even at Saankhya we were early.

Saankhya we started off with the notion of building programmable architectures so if you look at the whole goal of computer science is to raise a level of abstraction. It is the corollary to Moore’s law. Every 18 months you get a doubling of computer power, but every five, six years you get a doubling of, or maybe increase in productivity in programmer productivity. Today, a lot of folks I know backend and front end and I do not know what all kinds of sobriquet they put on LinkedIn, especially on full stack and half stack and all of that, have come in because of programming abstraction. How do we take that programming abstraction? If you look at the evolution of programming languages, I just wrote a blog on LinkedIn where you can go and check. We have progressed from assembly to Pascal, C, C++, Java then right now, Python and all of this. These are all expressive languages, they are one step ahead.

Similarly, on the hardware side, the goal of hardware is to go away from hard wired stuff. We went from analog to digital architectures where a lot of compute power is there and even in compute power where there are hard wired architectures, which means you do fixed function hardware, like for example, you got an mpeg accelerator or a hardware graphics accelerator, where even that is programmable now, but generally they used to generate that, that gets profitable. We latched onto the fact that riding on the back of Moore’s law in Saankhya, we could actually build a programmable radio where you write your waveforms and protocols full in software.

It was called a software defined radio so that was too early at that time but now in the last couple of years in 5G deployments, everybody is talking about it because now you have enough compute to be able to do that. That is something that we looked at in Saankhya. These things actually take eight or 10 years because you are competing against an Intel or a Qualcomm. You have to compete against ideas and stuff that they are not looking at. I like to say the Shivaji and the Mughal army analogy that I like to give, you have to pull them onto the mountain. You cannot take the Mughal army on the planes, you will be squandered so if you play the game as per Qualcomm or Intel, you will be squandered because you are already starting way behind you do not have the resources so you have to find your niche out there. That is something that everybody continuously needs to do.

Amit Somani 11:35

Wonderful Parag. I think lots of interesting things you said one that really connects with me a lot is tinkering and one of the things I do not necessarily like about the Indian startup ecosystem is because we do not have a mega culture pedigree or not of grad school and PhD programs. The amount of tinkering time is much more limited. People just jump in, even the entrepreneurs, forget the VCs.

Just jump in and build it and start selling it and getting some market validation so forth. There are merits to that, but I think there is a lot to be said about tinkering and trying different ideas or technologies, which inherently need more gestation. I am really glad that you adopted that as a religion. The second thing I really love what you said is brave and foolish. I am going to use that. I think you need to be brave and foolish and if I may add smart, right? You have to have some method to the madness and your foolishness, right?

I really like that, so maybe you could talk a little bit about if there are hardware or semi-conductor or other kinds of entrepreneurs listening to the show. Given what you have learned in your journey, what are some tips or suggestions you would give in the early days of their journey? Imagine the first three, four years of Yantra.. Knowing what you know now, what would you recommend other people do differently?

Parag Naik 12:55

One thing that I would do is I always have realized this order period of seven, eight years or 10 years, I think it is about psychology and not technology. A lot of times, right? Where technology is a necessary condition. Psychology, the market psychology is very important but we actually started Santra, I think we started around the same time as Flipkart, I think 2007 or 2008, 2007, I think on that part and also another company called Vayavya which also builds compilers for drivers, which generates drivers on the fly. We were again up against the system. We have for too long, for too long and too far, we have gone up the system, right? Gone against the system against the grain and sometimes it is extremely demotivating and very frustrating.

I would sometimes say you play there a bit smart, now there you should not be foolish. You have to try and understand the behavioral psychology of the investor and the overall market sentiment and all of that. If we had probably started in the valley and then probably moved back to India, that would have been a better idea but now I think the ecosystem in India is slowly building up for tinkering and all of this, but still it is extremely nascent. I do not know if this movie called Golmaal, the original one Amol Palekar character first meets Uttpal Dutt and says “aapko kaise malum Bhawani Shankar buddha hai? Jiska naam Bhawani Shankar hota hai woh buddha hi hota hai(How do you know Bhawani Shankar is old? Only old people are named Bhawani Shankar.)” . Some of them are born oldies right? So what we are creating is a bunch of people… who are too bothered about success. When you are too worried about success and wanting to become a unicorn or wanting to get onto this, me too shows, which talk about me too business models so that is the problem.

That is where you lose your curiosity and you have to have a love for the subject. That trumps everything else and trumps everything else. We do not need external validation. If you love the work and I just read a quote and that is one of my favorite ones. In fact, I keep it in my office here. Two of them, actually, one of them is basically that it is neither the journey nor the destination, it is the company. If you are in the company of the right people, in fact, some of us have grown old from the age, at least eight or nine of us have been together from the ages of 26, 27.

Sometimes our wives say we spend more time with these guys than them, so over a period of time, you build that rapport with people that it does not matter what you do and how you do it because you are spending a lot of time with this and then the culture that you build around that and the second one that I often say that also I put outside my office, I think people in office call me Gabbar Singh for whatever reason it is but anyway, maybe I look like one. “Jo darr gay woh mar gaya(If you got scared you are done)” .So those are the two mantras that I think we need to live by.

Amit Somani 15:55

Yeah, wonderful. I love your quotes and your stories and of course I am a big Utpal Dutt fan and especially from that movie Golmal. I think his dialogue in that movie I am going to try to imitate him now. It was a classic movie.

I want to go back to your notion about psychology, not technology and as well as the Shivaji example saying, “You cannot play on the turf to the strength of the incumbents or the 800 pound gorillas.” So whether it is Intel or erstwhile Fairchild, semiconductor starting of some of the VC world. How do you figure out that those folks are not playing in it? How do you suss out? if you are an entrepreneur and you are trying to see… One is of course, like you said, be autotelic, do what you love, do not worry about unicorns, sooni corn, go build interesting stuff. If you want to go play at least in a space where you think is interesting, but there is not that much interest at the edge of the network. Pun intended. How do you figure that out?

Parag Naik 17:05

I think you just have to jump into it and with a curious mind, in fact, for us, I at least see, we play in a space in semiconductors, there are three basic major from a fabulous perspective, streams if you will. There is compute, there is communication and there is memory. Memory requires a lot of device physics and stuff like that so we could not play in memory. In communications, basically it is all about architecture. Semiconductors in some sense, VLSI side design is like a horizontal step like software. If you know VLSI so what. Similarly, if I know C++, so what, you know the domain. You have got to know the domain and in fact, we spent a lot of time inside the domain and worked with some of these companies and then we know exactly what these guys are looking for and what they are not looking for.

It is a combination of market intelligence, having a network, being in that for reasonable… That is why I think semiconductors is very rarely, unless you are doing a PhD, which means you already have a five, six year thing that you are doing some depth into it, you cannot start off attacking them. We already had eight or 10 years and then after Smart Yantra got acquired, for two years I was part of the CTO office in a NASDAQ company called Genesis microchips which is a world leader in building LCD TVs. There, we got an overview of what is happening, where the industry is headed.

With the tinker background, the mindset and with this market intelligence, we said, “Yeah, this is the time to do something in this particular area.” And it has to be sufficiently reasonably far off especially if you are operating in India, but I will tell you what, I also learned that ecosystem trumps technology India also, because in China, because you have an ecosystem of semiconductor company, just like once Infosys went public here in India, Everybody started a software services company and software services company are dime a dozen now and that is going to happen even in the SaaS world and other places. In China, you have an ecosystem that actually allows you to build these very specific points and you can, if your friend is building a product, so he will buy from you. In India, we do not have that ecosystem. We do not have a Samsung or a Oppo or a Vivo or whoever it is we can sell. And when you do not have that ecosystem, you have to still look out further up eight, 10 years, hence.

Amit Somani 19:25

Right. So help me understand. Let us say you are tinkering around for a couple of years. You are making some progress, you understood the ecosystem and a little bit of the market landscape, where are the big gorillas not playing, but they are interested. How do you go about validating whether you are onto the good path. Of course, there is a product and you are saying, oh I can do this 10x faster or 5x faster. I can see some OTT application running on something over IP, video over IP, audio over IP et cetera, how do you know… Okay now actually, eventually whether you like the finance guys or not, you have to go build a business .To make sure that you are creating some value. How does that process look like in a hardware startup?

Parag Naik 20:05

Most of the hardware startups, actually, if you look at least in the valley are started by guys who are working and say one of these companies, and then they go, it is called a spin out and they get acquired back.

Then that is a different thing so people know what the issue is. So the marketing product marketing is go out there and there. One of the other things that I would have done differently is get on a customer much earlier than we did at that time. We went back into our rabbit hole and said, we will build this technology then come out. That process is something that I would have done differently. Ideally it is good to get on an alpha customer and again, none of them are in India, unfortunately.

That is where the ecosystem is in China, Korea or in the valley and in some places in Europe. You go there, you have these networks. See, you talked about Fairchild. How did these fair children come about? Somebody thought, yes, I trust this guy. In fact, I raised my first rounds of money from our angel investors. In fact my angel investors are… I call them the NH 4 angels. The NH four is a road connecting Bangalore to Pune. I have all small towns from Hubli to Satara, people like that have put money on this right company. You would have expected one of our Sequoia, somebody else to come and put, none of them did. So these guys, okay, I like this idea.

I do not know where it is going to go, but here is some money, take this money. You have to find those guys wherever they are and of course, because earlier we had given a very good return in three years to our investors, these guys jumped up. Unless you have that, you do not know whether the idea is going to succeed or not, because there is no such thing as an MVP that I can build. It takes at least three years to actually build an MVP and then you do not know whether you are right or wrong about it and then one other thing you have to do is of course you have to be capitally frugal because the entry barrier itself is pretty high. The pools are expensive, engineering talent is extremely expensive. We did a lot of juggling around. In fact we probably have world record at that time for cheapest, fastest time and the least amount of money to build a chipod.

That was a combination of partnerships with companies like Toshiba customers and some very hard negotiations with 800 pound vendors also. All your vendors are very big TSMC and all these guys are $50 billion companies. Samsung is… You are a customer to Samsung, but Samsung is out vendor so it is very difficult to deal sometimes with them, but then get that customer and then again you are probably in a mathematical sense your least figure, you will never have a perfect fit least figure list, square figure you will have and then you should be able to modulate or pivot on it. In fact, we have pivoted at least two or three times before we finally found our real slope, so to speak, to take off so that is a process that somebody in the team has to continuously look at.

Amit Somani 23:05

Right. I love this phrase, NH four angels. I have heard highway 101 angels in the US. I have heard the Eastern corridor in Boston, New York, Connecticut, that area but NH four that is a new one for me. So building along obviously like you said, there is NH four angels that may not be enough if you are really getting into some deep tech stuff. how is capital raising and how do you convince institutional investors to come along for the journey? You have done the NH four round, you have some prototype, maybe one alpha customer two alpha customers, right? But now you need to go raise some meaningful amount of capital. It could be a few millions, I am not talking tens of millions of dollars, whatever. Right. Two, three, 5 million. How does that process work and any suggestions and learnings from that?

Parag Naik 23:55

I will tell you our story and then maybe you can, I think now it is a little bit easier if you have a sufficiently advanced enough technology, because right now there is so much focus back onto semiconductors in the last couple of years that everybody gets funded, practically now, so if you do some reasonable thing in semiconductor you will get funded now in the next couple of years, at least. When we started off, in fact, we practically right from 2000 after we got the angels to the time we got our first chipod, we were continuously looking for investors and all the financial investors, we did the round of all the top VCs in India, all of them said that you guys cannot do this, it is not a India story, it’s not a Bangalore story. It is a valley story, nobody was willing to take that leap of faith.

In fact, well, I cannot name this, another top houses here in India also came close to investing in us, but they chickened out because saying it is one of the first investments, they do not want it to be a failure. That is a problem with a lot of Indian entrepreneurs. For successful entrepreneurs, unlike say Musk or somebody in the US, we get trapped in our own success. People do not want to experiment. Everybody wants success every time so that is not going to happen even in, especially in the startup world and in sports, you never succeed all the time. On an average if you do well, you are fine enough. We used to go show these prototypes to Sony those days. When I first went to Sony in Japan, I think it was in 2009 or 2010. The guy in Sony was used to seeing brown skin guys pitching IT jobs saying, I will take care of your IT administration and I’ll automate your stuff and all that.

In Shinagawa, in the big suburban, there is this huge swanky building, I go there to the VP and then I ask him I am doing this stuff software defined radio, and I am going to automate this stuff and it is going to cost you so much lesser and it is going to be so much. That guy laughed at me and said, “I have 6,000 engineers below me and you think you are going to do this.” One year later we went back and showed him. Credit to him, he actually started taking interest because he knew that we are serious and then at that time we were really after Intel capital because we decided very early on after couple of years that there is no way we could raise money from a financial institution because we are playing up against something really difficult.

Intel capital, we were chasing them at that time and Intel was trying to get into this business at that time of set boxes and all of that. For one and a half years, we are chasing Intel, they said, “No, we do not want to invest. I do not think you guys can build it.” And the guy in Sony, I think this is my assessment, he said, these guys, if I wanted you go get a technology like that and that is how Intel came and invested in us first in 2000 and then we got general motors in, but having said that all the blame of not raising money, we did raise about $30 million, which is very good for a semiconductor company, still not enough. Everybody and nieces today are raising about 500 million, 600 millio at two billion and three billion.

Sometimes we wonder what we do and right now we are profitable. We have a very good, EBITDA margin and all of that. So we still are not able to raise that kind of money. That link between finance and technology, that is another lesson. It is also very important. The link between you and the customer and you and a financier. I realize, you can tell me from your experience at the end of the day, right? Sometimes you put money in because you trust the guy you say, “I do not know where this is headed, I just want to be a part of it. That trust is something that we had not built in the finance community. I think that also an important thing, because later on, I asked my board member who invested in happiest minds. I said services company man, you ask me all kinds of questions. Why are you doing this? He says he is Ashok Sutta. Who are you?I said I got your answer. So you want to build a brand for yourself and that you are trustworthy and you will deliver.

Amit Somani 27:40

Yes, you are absolutely right and I know we all come with deep product backgrounds. I used to be at IBM research before at the beginning of my career so I spent a lot of time actually dealing with folks in the computer science and the semiconductor research space. I think you are absolutely right. I often tell people that you need to build trust and reliability, not just that you are a smart person or you are motivated or you are driven, but you really care about building eventually a company around here, eventually a business around here eventually paying customers.I think the euphoria of I am going to do something and do not worry about it. That does not go very well. It could go very well for me individually as an angel because I think Parag is an amazing guy and maybe I will also become an NH four angel because he is doing amazing things.

But it will not work as an institutional investor because I am saying eventually, is there some light at the other tunnel. The light could be 10 years, hence 12 years, hence eight years hence, but it cannot be. So for that, I think you come back to the customer validation. Saying, and I do not know if you said this, but that is what I interpret, that the Sony guy giving a heads up winking to the Intel capital folks really made them more interested. Saying, okay, here is a large prospective customer. That says, this is for real and if it works, I am going to take it. That would go a long way. In my opinion.

Parag Naik 29:00

Yes. In fact, that is how we would get our money and then because of Intel, we got general motors. In fact, we had got marquee investors, we have general motors also as investors at some point.

Amit Somani 29:10

Correct. How did you overcome the challenge of not having an ecosystem? One is the general, there are not friends and brothers and sisters to hang out with. That is okay but in terms of getting your stuff manufactured in terms of dealing with supply chain, in terms of the go-to market, et cetera.I do not mean for you to cover everything, but any one or two things that you would do in today’s environment, not what it was say 15 years ago, that you would recommend saying, “Look, if you are doing a semiconductor or a hardware software company try these two, three things right away because these are now available that were not available like 10 years ago.”

Parag Naik 29:45

Yeah, right now there is something called a VCA when you want to talk to vendors. There is an aggregator, just like the aggregators everywhere. There are Silicon aggregators so if you want to build a chip, instead you are talking to TSMC directly, or the big guys directly, you go through these VCAs. They will put it through, so those models are available for doing chips now and then there is also, we have ensured that in the… As part of the ecosystem, we have created in fact, my co-founder, Hemant was one of the key contributors to founding of a semiconductor accelerator called Safal here in Bangalore. So tools are available. Those things are much easily available and again, like I said, there is a difference between an ecosystem and a bunch of engineers and we also realize there is a difference between a bunch of smart engineers and a company.

As technology, sometimes as tinkereres, we tend to focus too much on the technology aspects. In fact, one of my co-founders is full-time just does contracts because these contracts are far more complicated than building the product itself. You make one mistake in one of the contracts and your business can just vanish. So you have to have good lawyers. In fact, when we are writing patents, it is just too expensive for us to hire US lawyers so what we did was, in fact, we created this couple of local guys here in India, along with us and helped them write. In fact, now they write our patents and then in the US, we only get a couple of hours of the US lawyers so that our overall cost per patent comes down. Those are the things that you can do. Then on the sales and the marketing side is something that we should be constantly looking at.

In fact, the different pivots that we have done in the company is largely because I have always been thinking about where all my products will be actually used. Attending shows, networking with people and also all these things give you the go-to market. In fact, we had introduced a SaaS type of model already, and we got patent around it for some of our chips for software way back in 2012 or 2013. Those are the things that you constantly look at. I also think it is a process. There is not a cookbook recipe that this will work or that will work and by and large, you have to try a few things before you actually hit onto the right part but for us, luckily we chose a product line, which is not a point product. It is not really a point product but a platform.

It could be, it could serve a whole bunch of industries. Like for example, when we started, when we first built our first chip, we said we will never do satellite communications on the chip, but our first orders came on satellite communications because you sort of… We had a very deep partnership with ISRO so you do not know. You have to be able to change around as we move around in this thing and then the other thing is trying to build everything in house. Try and collaborate. In India we do not tend to collaborate. This is another problem that we have. We view everybody as competition and you can be friends and enemies. This is one good thing I see about Taiwan and other places is that they are frenemies. Their friends and enemies, they compete, but there is still an ecosystem.

That is something that I think we need to do, especially when it is a fledgling and nascent ecosystem. Everybody should be together in this and luckily now, finally, the government has realized after 12, 13 years that just selling underwear on the internet is not enough and mentioning those unicorns in parliament is not enough. You need the base to run all these things and that is where semiconductor and hardware comes in. In spite of all the issues that we have with China, we still have to pay them a hundred billion dollars. We have a trade deficit of a hundred billion dollars, the cost of import. At least now there is a awareness. It is a little bit easier than when we started off.

Amit Somani 33:20

Fantastic Parag. As we get close to wrapping up here, one last question from my side, which is on intellectual property and patents and typically in the kind of companies that we at Prime get involved in. There is a lot of call it trade secrets, call it sort of internal IP, et cetera but patenting is not that common yet. how are you dealing with that obviously because patenting is very important in your space and are you doing global patents? Are you doing India patents? Are you doing defensive disclosures? Just talk to us a little bit about some best practices on patents, where they work and how do you do it as an entrepreneur, especially at the early stage, but they are expensive.

Parag Naik 34:00

Yeah. Actually, you know what? We have been hit biggest because of not patenting in smart intra, if we had patented the screen casting technology, we would have been collecting money from practically every mobile phone vendor so that is the lesson. The problem with patents is, again, at the top level, then I will come to some of the best practices. You do not know which one is going to succeed. It is like art. It is like abstract art. You do not know there is going to be a Van Vogh when you make one. That is what we do as a principle, what we do when in doubt your patent, it costs you money, but it is worth it so what we have done, like I told you right earlier, we have a situation where we make most of the patent applications here in Bangalore in India. There are quite a few right now.

In fact, there are one or two when we started out. Now there are 10, 15 people who do it. A lot of people are getting there and then get some of the things done in US and as a principle, we file in India and US simultaneously because once you get in India, you also get in it in the US and then selectively based on our discussions with lawyer and our own assessment, we then go file in different countries, like for example, Japan and some countries in Europe and Korea and so on. Some of our patents are global. In fact, one of our patents is actually one of the most cited patterns. We have got about 124 citations on the patent so that is a global pattern. It is like a gaussian distribution for patents as well. There are some things one or two will really take off.

The rest of them are feathers in the cap, but you do not know which one of them so you have to continuously keep filing. In fact, in our company, we have incentives of filing patterns when they file a pattern, when they get a pattern and we have a rewarding system, also we are putting in place right now, recognize inventors and create that invention process there. And then when not to patent is also important. Sometimes you do not want to give away some of your secrets so that time you keep those trade secrets. There are a couple of them that we have not patented because we do not want anybody else to know what we are doing. There is a know why and then know how. Sometimes I know how to try to do it. Sometimes I know why you do not try and try and keep it as flexible.

Amit Somani 36:05

Just a quick word, Parag on what is the typical cost especially if you are doing either a defensive patent India only, or global, just for people’s benchmarking. What are the typical costs you can expect?

Parag Naik 36:15

I think in the US, if we do, typically, we can get a patent for under two and a half lacs which is not that bad.

Amit Somani 36:25

That is not that much. It used to be much more expensive 15 years ago.

Parag Naik 36:30

Exactly. Then both the Karnataka government, at least in Bangalore and the central government gives you reimbursement for some of those patents, but do not always rely on it because one of the patents that we wanted to get reimbursement for the committee in Delhi said that this is too innovative to be patented. I know why somebody, somebody else would have thought about it so that is the challenge you have when you are dealing with the government of India but US PTO did not think about that so they gave us the patent.

Amit Somani 36:55

Got it. Well, thank you so much Parag from movies to shivaji to interesting quotes on autotelic personalities, fantastic podcast and thanks so much for being on the show.

Parag Naik 37:05

Thanks Amit, it was a pleasure talking to you.

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