August 24, 2005

Great panel discussion on tactical stuff for start-ups

There’s a great audiocast of an entrepreneur panel at The Churchill Club – moderated by Guy Kawasaki - that discusses tactical information for building a successful startup.

Example: Never use a headhunter for start-up hires. Hire only people you have worked with and if that’s not possible, people who have worked with people that you have worked with.

Just download and listen. Its both fun and useful.

August 23, 2005

Tips for getting a winning edge

Jason Caplain, a partner with Raleigh, NC (USA)-based Southern Capitol Ventures, shares a list of "exceptional strategies implemented by some of our portfolio companies and others in the market to give them an advantage over their competition":
1. Service your competitor's customers when they have problems

Are some of your prospects using the competition, but they struggle to get help when they need it most? Offer your assistance at this pivotal time. Furthermore, tell them to call you anytime. Eventually, they will bring their business to you as they realize that you are readily available and your competition is not.

7. Work with partners, not service providers

Think of all the people you work with: lawyers, accountants, bankers, etc. Are they thinking about just the tasks you give them or are they thinking about you and your company? There is a big difference. A lot of local firms with help make introductions to potential customers, employees, partners and venture capitalists. It helps when they are always thinking about how to grow your company and can offer that kind of assistance and commitment to your company.

August 20, 2005

Why "founder sales" are actually a good idea

Venture capitalists never like deals where their money is used to buy the shares owned by founders and other early investors. They like the money they bring in to go "into building the company" - ie, towards hiring people, building a product, etc. Unless, that is, they are desparate to get in on the deal.

Gary Rivlin of The New York Times reports that such "founder sales" deals are now becoming more common in the US. Companies like eHarmony, Webroot Software, Fastclick, etc., have witnessed the founders "using venture deals to cash out some of their equity without the bother of a public offering or an acquisition".

If the VCs are so hungry for the deal, why do the founders want to cash out early? Are they not as confident as the VCs about the success of their business and hence, a getting a much larger payoff at a later point?

The reason, Woodside Fund partner Thomas Shields explains, is since a founder is typically "stock rich but cash poor". Such a situation is actually not good for the company as a whole since such a founder "just might be overly conservative in his or her business decisions for fear of losing everything." "If you can give these guys a little bit of liquidity so they're comfortable taking more risk, but not so much that they're not hungry anymore, then it can be a very good thing."

What Shields says makes a lot of sense. So much so that I think it might be a good idea for VCs to actually insist on "limited founder sales" when they invest in a company. I think this will help reduce the all-too-famailiar clashes between founders and their VC backers post the initial honeymoon period. Letting the founders take "a little bit off the table" reduces their risk in doing what VCs what companies all their investee companies to do: grow faster.

August 12, 2005

"There's no risk in attempting or working for a start-up"

Sunil Goyal, who is with Gurgaon-based mobile content technology start-up Wirkle (where all employees blog!), has a great post on why he thinks more people in India can now afford to venture beyond wage slavery:
I think there is NO risk at all. And if any to the minimum. My perspective to this question is "What's the worst situation I can be in ?" May be I loose out on money, spent months on something which didn't work, may be at the end I don't have a job. I can't think of a more worse situation, if you can please do let me know..

On the other hand, any one who joins a startup will have steep learning curves both in technology and management, see how small startups need to work, how product has to be conceptualized, developed, deployed. Everyone in the team works for that. One enjoys the journey which might be bitter at times. Experience and the work that one learns, I think a corporate environment lacks that dynamism. So you can learn in 6 months what you will do in an year or even two within a big company.

So Where's the loss?

If startup worked, you would reach a prominent position. Will gain all the attention. Even if it didn't work, you will be more bold than before, will have more experience than others, will rise ahead from your peers. And getting job is never a problem, atleast the way current job market is moving in India.

I couldn't have said it better. In fact, this is what "The Startup Journey" is all about. Thanks Sunil.

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.