The Startup Journey

Prashanth Dhulipala, a California-based software engineer, writes in response to Arun Natarajan's article, "Where Money for Start-ups Really Comes From": Hi Arun, Just came across this interesting write up on the new avtaar of friends and family in the world of investing. It does make sense that tax concessions be offered to entrepreneurs who are just starting out, and who are being funded by friends and family. The question though is, what is the success rate of these startups? Probably too early to say, but it is too big a risk to wait out the results. While investing in "grey hairs" is probably tending to the extremes, I would not mind a government sponsored regulatory board that would assess the worthiness of such startups that would at least look for diluted forms of the "provens". Thanks Prashanth Dhulipala

Manish Sabharwal's interview to Knowledge@Wharton In a fascinating interview to Knowledge@Wharton, Manish Sabharwal, Founder & Managing Director of pioneering HR BPO firm India Life Hewitt, provides both solid and witty insights into a whole range of industry issues: how he started out, why he sold out, why he focused on India as a market, etc., etc. Some extracts: Business schools as venture incubators I think VCs who started incubators got it wrong; business schools like Wharton are the best incubators in the world. I milked the school's ecosystem. India Life was my final project in six classes. Many professors helped me think things through, and I had a group of first-year students do a field application project. I used the summer between the two years to travel to India and refine the plan, and then moved back to India straight after school. I guess it would make a better story if I said all my professors gave me bad grades for my business plan. But they di...

"Venture Capital is not available for start-ups" "Today, there are no true start-up VCs. Investments are happening in companies which have made cash profits and are looking for funds for the second phase of growth." says venture capitalist Vishal Nevatia of GW Capital in an interview to Economic Times. GW Capital is focussed on mid-sized companies in the media & entertainment, retailing, and BPO sectors. Around 60% of the fund's Rs.150 crore corpus has been invested in these sectors, Nevatia said. Click Here to read the full interview.

Why searching for The Next Big Thing is a waste of time What's going to be "The Next Big Thing" (or its variation the "next killer app")? Reams and reams of newsprint, web pages, conferences, and even oh-so-precious TV air time, is devoted to this topic--especially now that the "Internet wave" has subsided a bit (or rather, become more "mainstream"). Tim Oren, a Silicon Valley veteran (currently Managing Director of VC firm, Pacifica Fund ), has made a great post at his web log explaining why looking out--or listening to the "punditocracy"--for the NBT is a waste of time. "The Next Big Thing is a narrative we lay on top of the events after they happen..... (it generally) sneaks up from behind while you're trying to do your work, kicks your ass, walks over you, and either rifles your pockets or drops gold into your hands," Oren says. "Anyone tells you different, you're talking to a liar." Oren go...

Anurag Jain , Doctoral Student at IIM-Bangalore writes in response to Arun Natarajan's article, "Where Money for Start-ups Really Comes From": I do agree with GEM researchers in their recommendations. However, my reading is that for every 285.981 million booting up with the Fs' support, there are more than double/triple that figure (that exact number would be interesting to know, as that would be a proxy indicator of the potential of economy) who couldn't get off the track due to the non-availability of even basic capital (say 1700$ as mentioned in article). So, yes, we do need to take measures that will enhance the availabilty of financing, more so to enable the wanting to 'cross-over'.

Where Money for Start-ups Really Comes From By Arun Natarajan Here's what the irrepressible Guy Kawasaki--former Apple executive and CEO of Silicon Valley investment bank Garage.com--says in his Forbes.com column in answer to the question "What are Venture Capitalists (VCs) doing these days?": "Mostly VCs are looking for companies with three "provens": Proven teams, proven technology and proven sales. Ideally, they'd like a team that's sold a company to Cisco for $7 billion, won a Nobel Prize with its technology, and is profitably selling $12 million worth of stuff a year. That's an early-stage deal. Unfortunately, using these parameters, no VC would invest in anything. Oops, there goes the next Yahoo!, Google, eBay, Netscape, Apple, or Cisco... In any case, it's tough to get an investment these days." The situation in India is not too different. "Investors like grey hairs now," says a recent Businessworld artic...

Raman Roy on the evolution of India's BPO industry--and his baby, Spectramind In this 2-part interview to Knowledge@Wharton, Ramon Roy, Founder & CEO of pioneering third-party BPO firm Spectramind, talks about the evolution of India's BPO industry. Especially interesting are his thoughts on why third-party BPO firms can succeed in the face of the trend among MNCs to set up captive centers. Here's just one extract from this fascinating interview: K@W : What was the principal objective with which you started Spectramind, and to what extent has this been satisfied? Roy : We had very clear objectives in setting up Spectramind. We wanted to demonstrate what could be done out of India. We were all big believers in the capability of the Indian workforce. I wanted to be able to tell my grandchildren, “Your grandfather played a role in creating this company.” I’m not trying to say we weren’t trying to make money—that was a driver as well. But that was not the main dri...

What VCs look for during "due diligence" According to David Hornik, a partner at August Capital, if a VC is engaged in due diligence on a company, it means that the VC finds something sufficiently compelling about the business proposition that he or she views it as "worthy of further investigation". While the specific business being investigated will dictate where a VC puts emphasis in the diligence process, the information reviewed is generally the same stuff across businesses and among investors, he says in his posting at VentureBlog and goes on describe the typical categories that VCs investigate. Click Here to read the full posting.

Guy Kawasaki's Q&A column in Forbes Guy Kawasaki, the irrepressible founder of technology investment bank Garage.com , now answers start-up related questions in his Forbes column. Couple of Q&A extracts from his latest column: Which comes first, product or market? Should I find a product and then devise a way of selling it. Or should I look for an unexploited market and then find a product to fill it? Call me old fashioned, but you should create the product first. It could be because you want one yourself. Or because the bozo company you work for won't do it. Or because, simply, you can build it, so what the hell (sometimes if you build it, they really will come). My belief is that to be successful, you have to love what you do. I don't care how big and untapped a market is, if you don't love it, forget it. Life is too short to do something you hate. Go with your heart. The money will follow. Even if you fail, at least you failed doing somethin...

Taking the bulldog spirit to the next level A recent Mercury News article provided inspiring profiles of two Silicon Valley entrepreneurs who fought personal adversity to keep their start-ups going. Here's a short description+extract from one of the profiles: In February 2002, when San Francisco-based enterprise software firm Determine Software , was in the process of raising its next round of venture funding, its CEO, Scott Martin, was diagnosed with leukemia. Doctors gave him a 14 percent chance to survive. (Extracts:) But Martin stayed focused. He worked his laptop and phones from his hospital bed as he received treatment... In October, Buck French of JP Morgan Partners went to visit Martin, who was then undergoing chemotherapy to prepare for a bone-marrow transplant. With Martin's immune system compromised, French was forced to put on a mask, a gown and gloves before he could negotiate terms with the sick patient.... French says Martin's passion imp...

Interviews with Engineer Entrepreneurs (The following is an adaptation of a recent blog post by K.Satyanarayan ) In a thought-provoking series of interviews with engineer entrepreneurs , Jonathan Rentzsch provides a fascinating insight into the mind of the software creators who turn entrepreneurs and establish businesses to sell their products. The interview with Peter Sichel , founder of Sustainable Softworks , is particularly interesting. Here are some of the thoughts shared by Sichel: Sustainable Softworks has a very low overhead and responsive software business model that supports a few of us to make a decent living. We sell directly to customers and encourage them to participate in improving our products. As we learn from experience the model will adapt, but our purpose is to serve customers and build mutually beneficial relationships, not to grow for its own sake or maximize shareholder value. I think my most important lesson is don't be afraid to try livin...

A VC revisits dot-com land Bill Gurley of Benchmark Capital took a little time off recently to examine what had happened to the world of "dot-coms"--a category treated as the ultimate pariah by VCs everywhere for the last 3 years. Here's what Gurley says he found in his latest column : "Amazon's market capitalization has climbed 79 percent in the past year to $9.7 billion. Yahoo, over the same time period, has climbed 63 percent to reach a corporate value of $15 billion. And eBay, the cream of the crop, is up 61 percent to reach a whopping $28.4 billion. Cumulatively, that is more than $50 billion in value for the top three players in this newbie industry, which seemed very un-business as we crashed to earth in late 2000...... Other public Internet companies are seeing a resurgence, or at least are holding their ground. WebMD, Verisign, TMP Worldwide (Monster.com), and DoubleClick all sport market capitalizations north of a billion dollars. Add...

Why (and how) Silicon Valley needs to change Here are some extracts that I found interesting from an article in siliconindia.com by Naren Gupta , Vice Chairman of Silicon Valley-based Wind River Systems . * Entrepreneurs need to pursue only those areas where they have unique expertise and those they are passionate about. I see too many mercenaries--masquerading as entrepreneurs--floating around Silicon Valley, looking to jump on to the next flavor of the month. * In the last few years, VCs have assumed too much power and founders have been forced to cater to the whims of the VCs rather than follow their own instincts. I have uniformly seen that great VCs, like Bill Draper, Bill Davidow, and others treat founders with immense respect and receive great admiration in return. They become trusted advisors, not taskmasters, to the founders. * The expression "serial entrepreneur" needs to disappear from the technology lingo. To me this is an oxymoron. A serial ent...

Selling software as a service "In the past few weeks I have had a number of conversations with my friends in the venture capital community that have convinced me that consumers really want to purchase software as a service and not a shrink-wrapped CD offering." So says US Venture Capital executive Charles Hudson in his web log He goes on to add: "I am fairly convinced that consumers do not want to manage complex applications or worry about the impact that a new application will have on his/her desktop computing environment. In a world where big businesses seem to have had their fill of enterprise software, enterprising entrepreneurs might want to take a hard look at services that customers would be willing to pay money to use." Andrew Anker of August Capital adds in response : "The services or ASP model is unfairly maligned because of a number of unsuccessful attempts at it during the late 90's. Those failures had more to do with t...

To talk or not to talk tech with a VC Naval Ravikant of August Capital talks about the problem of entrepreneurs reluctant to reveal details about their company's technology when pitching their companies to Venture Capitalists. He also presents some potential solutions. Click Here to read the full article

PR lessons from my barber I've lost count of the number of times I've seen hi-tech CEOs attempting to get the press excited about their "exclusive" tie-up to distribute some foreign company's software product in India, or their "significant achievement" in landing a SEI-Level 3 certification, etc. etc.. In most cases, after a lot of time, effort and money is spent, the end result is a one-para mention in "the briefs" section of most papers--if at all! Don't get me wrong. It is natural--and laudable--for entrepreneurs and CEOs to be proud of each and every baby step that their start-ups make. And feel eager to tell the world about it. However, whenever we are trying to market something (in this case, a message) it makes sense to look at things from the side of the consumers (in this case, journalists). This is something that the co-owner of the latest "men's hair style" shop in my neighbourhood knows pretty wel...

Chit funds chip in where banks fail The latest issue of Outlook Money has an article that explains how chit funds work including how, entrepreneurs and small businesses--who are often unable to get banks to lend to them--can use this financing tool. Click Here to read the full article.

Interesting interview with Phaneesh Murthy In a wide ranging interview to Business Line , Phaneesh Murthy speaks about some of the sales and marketing techniques he used as marketing head of Infosys Technologies, how he sees the BPO opportunity evolving and other related topics. Here are extracts from the interview that I found particularly interesting: On his pitch to global clients: Today most large companies have their cost structures in developed countries but have the bulk of their growth markets in developing countries. I am saying I am going to try and change the cost structure to a developing country so that you can compete more effectively in the growth markets that you have. If you build that story, if you can educate the board on that story, they are unlikely to go to somebody else just because they are offering at $2 less. On why software companies can't be into both products and services: Except for IBM, there is no other company, which has got successfu...

Rediff's Ajit Balakrishnan dismisses the competition Ajit Balakrishnan, Founder & CEO of Indian Internet portal, rediff.com, has made some pretty blunt remarks about the company's competition in his latest interview to Business Standard . Here's what he has to say about: indiainfo.com & 123india "indiainfo.com overspent without having the capital. 123india which did not have enough internal management strengths. Everything for them was bought out. They didn’t have enough internal resources to craft products. Plus they didn’t have any legitimate funding--they were funded by Bombay stock brokers who are not known for far-sighted investments." IndiaWorld & Sify "Indiaworld was the original portal but Rajesh Jain sold out. Sify has a killer, but they’ve been schizophrenic about whether they want to be-- in the services business or the consumer business. So they lurched from one end to the other. At this moment they seem to be go...

Are small and medium sized software cos. doomed? The Indian software industry is set to take shape of "hour glass". At the top of the hourglass will be heavyweights (like TCS, Infosys, Wipro, etc.), at the bottom there would be focussed specialists (like Sasken, iflex, Polaris and RelQ). In the middle there will be none. This is the conclusion of an interesting article in BusinessWorld on the future of small and medium sized (SME) software companies which contributed a third of India's software export revenues (of Rs.24,000 crores) last year. ("Grow up - or get out"; BW issue dated March 3, 2003) Here, in short, is what the article had to say: Last year, the top 20 software companies accounted for 63% of the total export pie. Also, the biggies (like TCS, Wipro and Infosys) grew at double the rate as the rest of the industry. Even though, US companies are taking to offshore software development in a big way, there is also a "fl...

How to sell tech to the US govt. We keep reading about how, in the current economic climate in the US, the federal government is a better customer for tech companies than the private industry. According to recent reports , the US federal government spent more than $24.3 billion on IT outsourcing last year. But how does a tech company (American or otherwise) sell to the feds? A recent article in Business 2.0 provides an excellent starting point. This "cheat sheet" article includes stats, tips and profiles of the CIOs of key federal departments. Click Here to read the full Business 2.0 article

Common problems of Indian SOHO entrepreneurs Outlook Money (formerly Intelligent Investor ) frequently comes up with articles about entrepreneurs and small as part of its "enterprise" section. The best part about these articles is that they aren't just gyan and opinion from the magazine's journalists or interviews with some "experts". The articles are based on interviews with real entrepreneurs who are "out in the field". In its latest issue, Outlook Money profiles some of the typical problems faced by SOHO entrepreneurs in India. Click Here to read the article.

A couple of articles I read recently that would be useful/interesting to entrepreneurs anywhere: Grist: Don't Read the Business Pages Newspaper business pages are a waste of time for entrepreneurs, says Adam Hanft, president of an advertising and marketing firm in a Inc magazine article. Hanft feels most of the news in the busines pages is either stock-market focused or "a daily knee-jerk reaction to the story of the moment". And as for "news" pertaining to your industry, most of the time, you know all about it long before it hits the papers! So, is Hanft recommending that entrepreneurs stop reading newspapers altogether? No. In fact, he recommends that they diligently scan all pages other than the business pages! "The rest of the paper is a rich resource, a trend trove that can tell you more about the economy and your business than you might imagine," he says. Click Here to read the full article and find out why. An Indecently Hast...

More on Red Herring's death (and possible re-birth) Lawrence Aragon, a former Red Herring staffer reports in his Private Equity Week column that Chris Alden, co-founder and onetime CEO of Red Herring and former Editor-in-Chief Tony Perkins are among the bidders for Red Herring's assets. Also, according to Aragon this is what actually killed Red Herring : Red Herring has been struggling for several years, after living large during the dot-com boom. At its peak in 2000, it employed more than 300 people and ran three businesses: the print magazine, a Web site with a staff in excess of 30 people, and an events department. To accommodate such a large staff, it leased two offices in San Francisco and one in New York. The pricey leases proved to be its undoing: When the bubble burst, the magazine cut its staff several times, but it still had to make large lease payments. Finally, last October, the company went through a reorganization known as an ABC (assignment for the b...

Today, I deleted www.redherring.com from the "favorites" list on my web browser and simultaneously inaugurated this web log (?!) In case you haven't heard : Red Herring magazine closes down The technology business magazine, which placed special focus on start-ups and venture capital, closed it doors after a 10-year run reports Reuters . "We were looking for a strategic partner to join our existing investors, Broadview Capital , to keep funding the company through the advertising downturn. Unfortunately, in spite of the interest of several parties, no one would commit in the timeframe Broadview required, and our only option was to cease publication to buy time to sort out our options," said Tony Perkins, former Editor-in-Chief of the magazine in his Always On-Network column.