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Showing posts from 2004

Is it important for you to own a 51% stake in your company?

Here's what Guy Kawasaki, CEO of Garage Technology Ventures, has to say in his column:

The party that owns 51% of a company does not control it, other than on paper--and, maybe, in their minds. The moment you take $1 from outside investors, you are working for them. At the end of the day, your dream should be to hold 5% to 7% of a huge company, not 51% of a trivial one. To build a huge company, you do what you have to do, including bringing in investors who can help you. These investors will require a larger ownership than your, individual one.

Entrepreneurs who excercise do better at business

A survey of 336 entrepreneurs by Ball State University found those who regularly run reported better personal satisfaction, independence and autonomy than their non-excercising counterparts. The study also found that companies managed by runners report better sales results than firms directed by non-runners.

"Good physical condition should contribute to entrepreneur’s success in reaching their personal and financial goals as well," said Mike Goldsby, a Ball State entrepreneurship professor. Entrepreneurs who only weight train should add running to their workouts to increase their effectiveness, Goldsby adds.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Why segmented pricing not such a good idea

Pricing a product is often a very difficult task: there are simply too many variables out there. Joel Spolsky of Fog Creek Software has written a great article on the subject.

Spolsky first illustrates how segmentation - separating your customers into different groups according to how much they are willing to pay - maximes profitability. Theoretically.

He then argues why segmentation does not prove to be such a good idea in the real world:

It pisses the heck off of people. People want to feel they're paying a fair price. They don't want to think they're paying extra just because they're not clever enough to find the magic coupon code. The airline industry got really, really good at segmenting and ended up charging literally a different price to every single person on the plane. As a result most people felt they weren't getting the best deal, and they didn't like the airlines. When a new alternative arose in the form of low cost carriers (Southwest, jetBlue, etc…

Why 2 week vacations should be mandatory even for entrepreneurs

As an bootstrapping entrepreneur - and until recently, an one-man show - vacations have been a luxury that I can not afford to even think about.

This blog posting by Terry Gold, Founder, CEO, and President of Gold Systems, has however made me think differently about the need for vacations. It seems as if they are not something meant for "spoilt, no-care-in-the-world employee types" only.

An extract:

If you only take a week at a time, I think you're only getting the mental benefit of about one day off. Think about it - the first three days you're still thinking about work. You get one good day and then spend the next three days thinking about going back to work. I think it takes two weeks at least, consecutive, with little or no thoughts of work to really recharge.

Your employees could probably use the break too, and they get to prove that they can run the business without you. If you must think about work, keep the thoughts big and bring back a good idea or two.

Getting VC funding without a MBA

# Unless your best friend in the world -- whom you happen to have embarrassing pictures of -- is a VC partner, please do not contact any VC. It makes no sense.

# Passion, experience, real-world results are not qualifiers for introduction to VCs. An MBA from some elite school with 20 board members who know Jack Welch personally, with an extremely complicated idea that has never been built, are preferred.

-- E-mail from a Dallas-based CEO to Jerry Colonna, a former VC with JPMorgan Chase, Flatiron Partners and CMG@Ventures.

Here's an extract from Colona's response to the e-mail in his column for

Yes, I'll admit, having compromising pictures of a VC may help get a meeting or even a term sheet, but the larger point speaks to the network effect. Implicit in his frustration is a question I often got when I was on the speaking circuit while an active investor: What's the best way to get the attention of a VC?

Unfortunately he's right about the business school ma…

When do you need to write the business plan?

"Business plans should be the last thing you do, not the first. The common wisdom seems to go like this: 'I've got a great idea, so I guess I better write a business plan'. Wrong," says Jeff Cornwall, the Jack C. Massey Chair in Entrepreneurship at Belmont University in Nashville, Tennessee.

According to him, entrepreneurs should get the following elements in place before sitting down to write the biz plan;

Research the market to make sure that there is really a market. Try to figure out what a customer might pay for what you want to sell. And look carefully at all of the competition to see if that market is already being nicely taken care of. And by the way, there is always competition, no matter what you try to tell me to the contrary. If the market potential is marginal, go on to your next idea.

Examine what it will cost to provide the service or make the product. Compare this cost to what you figured out you think you can charge in the previous step. If there…

The Vinod Khosla difference

Some extracts from Joe Kraus, co-founder of search engine company Excite, recent 2-part blog post -
here and
here - on the importance of persistence gives a good idea about why Vinod Khosla of Kleiner Perkin's is concered "an entrepreneur's dream VC":

While we were still in the garage (literally), we met with at least 15 different venture capital firms. The meetings we're all the same. We showed them our search technology, showed them "concept-based" search, and showed them targeted advertising. To a firm, the first question they asked was a very reasonable one: 'great stuff guys, but what's your business plan? how are you going to make money?' Of course, being 22 years old and fresh out of college we replied, 'we thought you could help us out with that.' Apparently, that's the wrong answer. Who knew?

Rinse, lather, repeat.

Then we met Vinod...

By then, our deal had developed a certain "smell" -- smart guys with inte…

How Vinod Khosla created Sun Microsystems

While I knew the one line description "Vinod Khosla was the founding CEO of Sun Microsystems and was earlier part of the founding team at Daisy Systems", I hadn't come across a more detailed version of Khosla's pre-KPCB exploits before Joe Kraus talked about it on his blog.

Here are some extracts from the Harvard Business School case study (by Dr. Amir Bhide) that I found interesting:

How a Stanford secretary "linked up" SUN's co-founders:

I'm probably more of a conceptual engineer, and I can draw block diagrams for almost anything I can think of, but I can almost never implement them. So I started looking for someone who had done this kind of stuff before. I heard of a project at Stanford called the Stanford University Network, or Sun.workstation project. I called the computer science department, and some secretary who did not want to bother a professor gave me the uame of a graduate student from Germany, Andy Bechtolsheim.

Apparently, Andy, who w…

The importance of persistence

Joe Kraus, co-founder of search engine company Excite, has a very interesting 2-part blog post -
here and
here - on the importance of persistence for entrepreneurs.

He provides examples from Excite's experience as well as that of its investor, Vinod Khosla of Kleiner Perkins (during his Sun Microsystems days).

Do read.

"Bad employees do more damage than no employee"

"I always keep two things in mind when hiring, no matter how desperate I feel: 1. a bad employee does far more damage than no employee, no matter the issue, and 2. A players hire A players, B players hire C players, and C players hire losers," says Joe Kraus, a co-founder of Internet search engine firm Excite in his new blog. "Let your standards slip once and you're only two generations away from death," he adds.

Quoting from the book How Would You Move Mt Fuji, Kraus points out how Microsoft "seeks to avoid hiring the wrong person, even if this occasionally means missing out on some good people."

Google, the other great tech company of our times, has a similar hiring policy. The company's "hiring process is notoriously long and complicated". "A single no-vote of the hiring committee means you're not in. Why? Because they put the principle of 'no false positives' to work. They assume that there is a huge talent pool of g…

Advice against starting up

In an article appearing in StartupJournal, Warren Schulz - who has started and sold two small businesses - provides strong counter points to the "great benefits of being your own boss".

An extract from this must read article for all "aspiring entrepreneurs":

Let me offer this reality check. If you're employed in corporate America, you've probably got a steady paycheck. If you get sick, your employer's health insurance plan probably will cover most of your doctor's bills. If you want a vacation, you're apt to have paid time off. For the most part, you can do your eight and hit the gate. You've got it made; you just don't know it.

Running your own business is hard. But you think you're smart and can take an idea and make it happen. Odds are good that you'll lose half of your start-up cash by making mistakes. They may involve bad leases, employees, records, decisions, ideas or luck. The bottom line: You're bound to make mistake…

Are you ready to get lucky?

By Arun Natarajan

I recently watched an interview with MphasiS-BFL's Chairman & CEO Jerry Rao television ( Udaya TV on February 20, 2004), when he said - quite firmly - that luck plays a huge role in any entrepreneur's success. He said a large part of his success was owed to the fact that he was "at the right place at the right time".

Rao gave examples to prove his point about luck being so important. For instance, his highly successful career with Citibank had begun "willy nilly" - via a campus placement at IIM-A. And even his founding of Mphasis Corporation, a California-based software company that subsequently merged with BFL Software to form Mphasis-BFL, was sparked off by a chance meeting with MphasiS' future co-founder during a flight trip.

Rao's remarkably candid and humble admission made me think about the role of luck in my own entrepreneurial endeavors as well as that of my friends. And sure enough, I could think of quite a few instanc…

What makes Infosys tick?

Extract from Infosys Technologies co-founder and CEO Nandan M Nilekani's interview to CIOL:

Actually when Infosys was formed, all of us were working with Patni in Mumbai and Narayan Murthy was our boss there, heading the software group. The group strongly felt that there is a need to create a very professional company, one that was based on very strong ethics and values. We also wanted to create a company that really valued people. That is how we started. The fact of the matter is that there were many such companies that started at the same time during early '80s, however, what made us different was that we stuck it out-we realized that it was not a sprint but a marathon and we were long distance runners. We went through difficult times, but none of us digressed from the common vision. All of us believed that Infosys was bigger than any of us and we were willing to subordinate our egos and our desire to larger boats. I think that determination to create a world-class company, …
From fighting VCs to funding Hindi films
In a new column for BusinessWeek Online, Vivek Wadhwa, Founder, Chairman and former CEO of US-based enterprise software firm Relativity Technologies, talks about how he fought--and won--against his Venture Capital investors while recovering from a massive heart attack, and has now stepped back to do something "less stressful": produce Hindi films.

"While still in the Critical Care Unit, I received a phone call saying that my investors felt the need to renegotiate the terms of the current financing. Two days later and still bandaged, I left the hospital and walked, uninvited, into a closed-door meeting, where investors were trying to convince my executive team to accept more money for a revised agreement that would give them majority ownership. I flatly refused, and ended the meeting," he says. "My investors sent me a letter demanding that I step aside and allow the younger brother of a partner in one of their firms to t…
Do and Don'ts of Networking
"Networking is about serendipity...The more places and times you are meeting people, the more likely it is that you'll find what you're looking for," says Kevin Laws, a VC at US-based August Capital, in his posting at VentureBlog.

"It's about making your interests and needs widely known (a new job, companies to invest in, people to hire, money to raise) and listening to the interests and needs of others. Because of the FOAF concept ("friend-of-a-friend"), you are likely to run across somebody who needs what somebody else you know is offering. Eventually, that person will be you," he adds

Other extracts from this article will is full of useful "how to network" tips:

Networking is a process, not a goal, and should be done constantly rather than only when you have a specific need.

People at networking events are often there to meet others, plural, not just one person. They want to pay attention to you br…

Marketing tips from my Cable TV Operator

By Arun Natarajan

Here is a posting (quoted verbatim) from the telecom focused India-GII forum at Yahoo Groups (dated Jan 13, 2004):

Three months before, I got a connection from my cable operator who had
takn a pipe from HTMT (in cable netowrk) Setup charges 3500, monthly
Rs. 500 for 400 MB data transfer. When I mentioned it on this list the
members advised me that it is not posible to offer such rats. I should
have heeded their advice. last month suddenly my connection stopped
working. When I enquired, I found that that I had used up my 250 MB
limit. I was shocked, asked what is the matter and was given a new
rate card of 250 MB for Rs. 500. No intimatin no warnings Just a
simple blocking through their software. Reason HTMT has increased
their rates. It was a simple marketing technique. Offer reduced rates,
once I am hooked on to it, increase rates. Now I am stuck to their
rates. They charge Rs. 1000 for single computer for unlimited access
but I am not biting this time. best regds ba…
Nasscom proposes fund to help SMEs file patents
The National Association of Software & Services Companies (Nasscom) has proposed a special fund, in association with the Indian government, to provide financial assistance to small and medium sized software products firms to file patents, Financial Express reports quoting Nasscom president Kiran Karnik.

The quantum of the funds required for each company will be determined by a Nasscom-designated committee based on the importance of the product and the extent of handholding required. The funds will be provided initially as a loan. If the patent application is successful, the amount will be converted into a grant.

Click Here to read the full news item.

Govt. announces Rs.10,000-Cr fund to provide soft loans for SMEs
On January 09, the finance minister Jaswant Singh announced that the central government is to set up a Rs.10,000 crore fund for providing loans to small and medium enterprises (SMEs). The interest on loans from the new fund will be provided at 2% below the prime lending rate, the minister said. The fund is expected to be operational within four weeks and is to be structured by the the Small Industries Development Bank of India (SIDBI).

Click Here to read the PTI news agency report on the announcement.

Be vary of VCs, say ex-Internet entrepreneurs
"In 2002, we sold egurucool to NIIT for Rs.14 crore. But that was because we were forced by the venture capitalists (VCs) to do so. I didn’t want to," says Vivek Agrawal, co-founder of online education company egurucool, in a Business Standard article. "VCs are a double-edged sword," he adds in the article featuring interviews with former Internet entrepreneurs and executives.

"Set up your venture without external investment," advises Rajiv Vij, co-founder of net2travel.

Click Here to read the full article.