The Startup Journey

April 24, 2013

ESOPs vs Sweat Equity vs Equity for Services

The folks at NovoJuris have an

article on the tax impact (salary and capital gains) and the implementation of each of these. Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

April 22, 2013

"Don't Delay Layoffs; but go the extra mile with outplacement help"

Mukund Mohan of Microsoft Accelerator (emphasis mine):

There may be tons of reasons, which are all very valid and humane, for you not to take any painful measures. Your first commitment should be towards your people – so do what it takes to help them land on their feet someplace else, but take the necessary actions to ensure that your business will live to fight another day. You owe it to your dream, your passion and your family to give your startup a fighting chance and keep it surviving as long as you can.

...I have been in this situation two times just in the past 3 years. At both times, revenues from a customer suddenly were in jeopardy and I had to take corrective action very quickly. The day we got to know about it, we had to let go of 4 folks in a very close knit team of 7 and the second time let go of 3 people in a smaller team of 6 people.

I had to be ruthless about the business since I wanted the company to survive. Without those cuts, the business would have folded and the folks would have been out of a job in 3-6 months anyway. I thought it would be more appropriate to be proactive. I also had to be compassionate as a leader so I took great pains to call at least 50+ friends to find a position that paid better and was more stable for most of my colleagues.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

April 17, 2013

Getting the Balance Right Between Bramha, Vishnu & Shiva/Mahesh in Business

Uday Kotak in Outlook Business (emphasis mine):

In my 25 years of building this business, I have learnt that embracing change is about creative death. In every organisation you need Brahma, Vishnu and Mahesh - the creator, preserver and destroyer. Most of the time when you start getting successful there are too many Vishnu’s and you will not find as many Mahesh’s. But to continue to be successful in a changing world you need all three. Getting this combination right is crucial and also contextual. At a particular time, you may need more of Mahesh, at another time you may need more of Brahma and some other time, more of Vishnu. It is not one fixed formula, but that is what management and leadership is about. For example, we had an investment in a company called Matrix that was a fascinating idea, but it came to a point where it was not working. We decided to exit, took the pain and moved on. As a firm grows and becomes more successful, exiting becomes more difficult; however, if you don’t cannibalise your own products, someone else will.

April 02, 2013

A VC is a boss you hire; but can't fire

From an Inc. summary of panel discussion involving women entrepreneurs:

Eight weeks after emerging from the Tech Stars accelerator, Fitton's company, OneForty, closed a $2 million venture round. It happened fast--too fast, said Fitton. The company wasn't ready for it. "Our burn rate went way up and we became much more expensive," she said.

That happened before OneForty had quite settled on a direction. Taking venture capital means "hiring a boss you can't fire," she added.

Ferraro's venture investors insisted she relinquish several projects that mattered to her, including work in the community, and with the homeless. "I had to do it under the radar and behind their backs," Ferraro said. She advised attendees to consider debt first and "keep your equity in your pocket."

March 19, 2013

You are an entrepreneur if...

Tom Evslin has ten ways to identify whether you are an entrepreneur. Here are some of them:

10. You can’t bring yourself to call anyone “boss”.

8. Instead of saying “there oughtta be a law”, you say “there could be a business…”

5. Some of your favorite people are VCs (condition applies only after obtaining at least one round of VC funding).

4. Some of your least favorite people are VCs (condition applies only after ATTEMPTING to obtain at least one round of VC funding).

3. You are most likely to start a new business immediately after thinking in the shower.

2. You have to take two zeros OFF the numbers in your business plan or no one will believe it.

March 18, 2013

Right Age for Entrepreneurship?

"Entrepreneurship is living a few years of your life like most people won't so that you can spend the rest of your life like most people can't."

But, which 'few years' of your life?

I have a theory that, given the Indian social and economic context (despite early stage funding options getting better in recent years), it would be good for folks in India to turn entrepreneur at either of the following two stages of their lives:

1. Straight out of bachelor's education - or maybe with 1-2 years of work experience. Especially a good idea if the idea/opportunity you are going after cannot wait (i.e., someone else will end up executing on it to your lifelong regret). Also, at this stage of life, you have nothing very significant to lose by giving it a shot - say for two years. Getting back into the job market before you turn 27 or 28, isn't difficult at all in today's context.

2. After you have saved up enough to put your kids through school/college (Think MindTree). This option has the added advantage of the founder(s) having seen an industry from within; identified gaps and key pain points; and networked with enough folks to be able choose the right co-founders and early employees (again think MindTree).

While there will no doubt be lots of exceptions - of folks who start-up in their late 20s/early 30s - and still pull it off, a recent post in YourStory - by Talvinder Singh, Founder, Tushky.com and also the other young entrepreneurs who have chimed in on the comments - has served to reinforce my theory.

Update: There now a trending post on The Rodinhoods from another young entrepreneur naming EMI, Matrimony and (of course) Aunty as the Enemies of entrepreneurship.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

February 27, 2013

If you HAVE TO outsource product development...

Nilesh Bhojani has some advise on the best practices in Yourstory:

Plan to spend at least a couple of hours on product development every day – answering queries from the development team on detailed requirements, reviewing and testing progress, thinking about the next set of items to be built, reviewing and testing what has been done so far, and so on. If the product to be built is complex and the development team is bigger than 2-3 members, you might have to spend even more time. If you can’t commit that kind of that time, you must hire someone who understands the domain and someone you can trust – this person can be a bridge between you and the development team. If the development team is remote, this person should be local to you and he/she needs to have the authority to make day-to-day product decisions.

...Also, the development team working on the project usually notices a number of things that can be done different or better and this could be valuable feedback for you. But if it’s a fixed-bid contract, their focus is on “delivery”, not on “development”. You should go for an engagement-based contract if you want to build a good product and want to use the experience of development team you are paying for. Go for a fixed-bid contract if short-term cost savings is your main goal.

...Every company has a few star performers: the rest are just good or average. In a bid to win a deal they might make you believe all their best people will work on your project, but that’s unlikely to happen in practice. Make sure you get a realistic team of good dedicated developers.