Revival of Startups: The New Trend

Do you have a startup that never made it off the ground? What happened?

Did you not have all the technical components that you needed? Was your scope too broad? Were your sales and marketing strategies too weak?

Did a key individual become distracted by issues in his or her personal life? Did you simply lack the development resources to put together a working product — or at least a vertical prototype? Or was it all of the above?

Startup Revival Trend

There is a new trend, the startup revival trend. This is not just a trend to be observed passively. This is a trend that you can be part of.

The Englishman Noel Thurlow put his banking software startup on deep hold for all the reasons listed above. Two years ago he revived it. We begin with Thurlow’s story, and then describe how it could be your story, too.

In 1994, Thurlow’s startup appeared revolutionary. After 12 years moving up the ranks at Bankers Trust, he was fed up with the status quo, with the expensive legacy software systems that banks used to manage their financial transactions.

Incumbent banking software systems often cost US$100 million to license and install. Existing software packages are not well integrated, are not good at communicating smoothly or directly; right from the retail front-end of a bank (at the teller’s station), through the commercial banking arena and on through to the treasury.

Legacy banking software often has substantial amounts of business logic hard coded into it so that changes in a bank’s policies require complicated and often clumsy software workarounds.

Thurlow took a job as a temp at Mitsubishi Bank. After six months, he was named head of operations and head of IT. Later he would also head their risk management office.

At Mitsubishi, Thurlow introduced straight through processing (STP) and made Mitsubishi the first fully automated bank. Thurlow’s experience at Mitsubishi and Bankers Trust convinced him that new banking software could be developed that would radically improve bank operations and risk management. In 1995 Thurlow left Mitsubishi and in 1996 he joined a banking software firm called Quest.

First Startup Failed

Thurlow put a great deal of his own money and two years of his time into Quest before realizing that it was not going to achieve escape velocity. The fat-client technology choices were not right, the management team he was working with was not right, and it was just going to be too expensive to complete the project.

Thurlow left Quest in 1998 and subsequently bought the rights to Quest’s development banking software system. He sat on it for a few years, doing consulting work and wondering where to turn.

In London in 2002, Thurlow met up with a banker who had seen the development whilst he was working for Citibank and who was originally from India. This Indian banker suggested that Thurlow take his banking software to South Asia and have it developed there, and told Thurlow about a software products firm called NetSol Technologies, listed on NASDAQ as NTWK. NetSol was involved in the automobile leasing vertical and might be interested in expanding into the banking vertical, Thurlow was told. And by the way, NetSol’s development center is in Lahore, Pakistan.

Thurlow had never been to Pakistan before, did not know anything about Lahore, but he jumped on an airplane and promptly negotiated a deal. Why had he negotiated away the rights to his software startup? Thurlow said that it is because 30 percent of something is better than 100 percent of nothing. And because of the pride associated with finally making his software startup a success.

Offshore Cultural Transition

Reviving a Western software startup offshore involves transitions for everyone. Thurlow asked for (and received) the rights to run his startup inside NetSol in an incubator environment, under a separate corporate culture from the larger firm.

For his 14-person staff in Lahore, Thurlow imported Western ideas of flextime, personal empowerment, and open discussion. First he taught his staff to challenge him, to ask questions, and to criticize — all concepts that might be considered disrespectful or inappropriate outside of the West.

Staff are fined US$2 if they speak in a language other than English. He fines himself $10 if he uses bad language. Fine monies are used to take everyone out to dinner occasionally.

When the staff go out on the road, they all stay in the same hotel, rather than the top person staying in a luxury hotel — and the staff crowding into cheap lodgings.

To encourage his staff to challenge him, he will occasionally give them incorrect guidance or directions. His QA (quality assurance) person is located in the same office as the developers, to encourage collaboration.

Although Lahore (and Pakistan as a whole) has great software developers, developers do not initially know how banks operate in the West. For the first eight months, Thurlow taught his staff how to be bankers. Then they got to work rebuilding his banking software.

Technology Changes

The original banking system that had been developed at Quest was thick client software. The graphical user interfaces and features of the original banking software were retained, but NetSol rebuilt it as a thin client ASP system that would run entire banking groups and be completely paperless.

The Quest version was used as a teaching tool and graphical user interface (GUI) model for a new version built from the ground up in Lahore. It was renamed inBanking.

The preferred back-end database that inBanking uses is Oracle, because Oracle is highly scalable. For the middle tier, Microsoft’s BizTalk Server and .NET technologies are employed because of their scalability and because they can run in a distributed environment around the globe.

Interbank financial transactions and funds clearing systems are conducted with message protocols developed by a financial-industry-owned cooperative called SWIFT. Each bank branch has its own SWIFT ID. There are also SWIFT protocols for how banks communicate with each other electronically.

Microsoft put a lot of effort into making BizTalk compatible with a wide range of e-commerce transaction systems, including SWIFT. By adopting BizTalk, NetSol saved itself from having to independently develop and test its own transaction and financial messaging system. Buying BizTalk meant buying compatibility.

Avoiding Legacy Traps

Banks need to be able to set up and change their operating procedures, credit policies and the levels within their organization where different types of decisions can be made. Policies and procedures often differ from branch to branch, country to country, and might change within a single branch overnight. Modern e-commerce software needs to be able to support those changes quickly and reliably.

The inBanking software is set up by methodically defining each bank policy. Definitions include the types of credit that can be extended, credit limits for different types of loans, currency holdings, locations for loans, credit ratings, interest rates, depository policies, securities holdings, and trading.

Whereas legacy systems often hard code their e-commerce logic and mix it in with data storage logic and presentation logic, inBanking’s e-commerce logic is defined in a series of increasingly sophisticated menu options, options that can be added to or reduced in real time. For example, if a bank begins handling a new currency, that currency can be added as a menu option.

Going through inBanking’s setup menus is an education in how banks operate, what policies and procedures are available to them, and how different transactions and services can be performed.

The Pilot

According to Salim Ghauri, president of NetSol, software product firms need four ingredients for success:

  • Capitalization.
  • Domain expertise.
  • Technology.
  • A pilot project.

Capitalization for buying the assets that became inBanking was provided via an allocation of NetSol shares. Domain expertise was provided by Thurlow. Technology was provided by NetSol, its vendors and its developers.

The last ingredient is a pilot to hone the software and demonstrate its capabilities. NetSol is currently seeking a pilot site to run inBanking.

The Third Wave

NetSol’s acquisition and launch of inBanking represents the third wave of startups in Pakistan. The first wave was launched by people like NetSol’s Salim Ghauri, who grew up in Pakistan, worked in the West, and then returned to Pakistan to start his software firm.

The second wave is represented by Karachi-based e-commerce infrastructure firms Etilize and InfiniLogic, whose founders have family connections in Pakistan that made the move from the U.S. or UK easy and understandable.

The third wave, represented by people like Noel Thurlow and are those with no prior connections to Pakistan — but who were convinced to make the move on the basis of business advantages.

For people in the third wave, or considering it, the biggest challenge is finding a development center in Pakistan that will support their project and will provide both the technical and marketing resources needed to make the project a success. Thurlow’s lucky break came in meeting a former colleague who referred him to NetSol. Not everyone can count on such luck.

OPEN Forum 2005

For those of you looking for ways to revive your startup or to complete a delayed in-house project, there is an upcoming forum in Silicon Valley where representatives of IT firms from South Asia will be meeting with U.S. entrepreneurs. It provides a rare opportunity for promoters of technology development projects to compare different development options without having to travel half way around the world.

Personal compatibility is a key element in the success of any offshore development project. You should be able to pick the people you want to work with, using not only technical considerations but personal factors. Meeting in person is the best way to begin that process.

Most of the IT firms represented at this event are not from India, but from Pakistan, and they have the Avis “we try harder” approach. They are also about 20 to 30 percent cheaper than Indian firms (without sacrificing quality) and boast lower turnover. Pakistan has a business environment that is more open, stable and has less government interference than anywhere else in South Asia. If you have never been to Pakistan before, this event provides an opportunity for your preconceptions about Pakistan’s IT resources and its people to be challenged.

You don’t need to attend for the purpose of doing business. It is worth attending just to meet people such as Jehan Ara, president of the Pakistan Software Houses Association.

The OPEN Forum will be held on Saturday, May 21, from 8:30 a.m. until 6:30 p.m. at the SAP Campus, 3410 Hillview Ave., Palo Alto, Calif. For additional information, go to

Although the event is being organized by IT professionals of South Asian origin, it is open to everyone. It features workshops on practical business skills needed for startups, including how to structure venture capital investments. I will be making a presentation with Awais Leghari, the IT minister of Pakistan. If you have not figured out which development centers might be appropriate for your project, you can approach me and I will introduce you.

Keynote speakers include the CEO of Red Herring, Alex Serge Vieux; the chairman of Cisco Systems, John Morgridge; and Forest Baskett of the early stage investment firm New Enterprise Associates.

Anthony Mitchell , an E-Commerce Times columnist, has beeninvolved with the Indian IT industry since 1987, specializing through in offshore process migration, call center program management, turnkey software development and help desk management.

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