December 24, 2007

Interview with Kreeda Games' Quentin Staes-Polet

Kamla Bhatt has a two part audio interview with Quentin Staes-Polet, the Belgian CEO of Kreeda Games, the Bombay-based online multiplayer gaming start-up funded by IDG Ventures India and SoftBank.

Quentin has some interesting points on why the firm chose not to disclose the amount of funding it raised, interplay between social networking and gaming, experience of an "foreigner" starting a business in India, etc.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

Lassi Making Machines

Businessworld has a profile of a Delhi-based company that makes Lassi making machines.
...an enterprising young man called Sultan did the next best thing. He perfected a lassi-churning device. He sold his first machines to the numerous lassi shops and restaurants in the crowded lanes around Delhi’s Jama Masjid area. The devices ran on electricity, worked for hours on end, needed little maintenance and almost never broke down. That was the 1950s.

Fifteen years after starting out, Sultan passed away. His son Mohammed Usman, barely 20 then, took over. Usman decided to name the devices ‘Sultan’ in memory of his father. He moved the workshop to Daryaganj in 1992 and also set up a factory in Wazirabad, which employs 25 workers and engineers, to meet the growing demand for his father’s machines. He called the business Raja & Co. — a nickname given to him by friends and loyal customers.

Usman’s sons have helped add a modern touch to the 50-year-old family business. Orders from outside Delhi frequently come in via e-mail. This has taken Sultan machines to lassi shops in faraway cities such as Meerut, Ranchi, Patna and Lucknow. “The final machine depends entirely on what the customer wants,” says Arish. He pulls out brochures and photographs and begins to explain all the options.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

December 11, 2007

The Restauranter from Chennai

While I was reading a profile of M. Mahadevan of Oriental Cuisines in The Hindu, I realized that he seemed to own almost every restaurant that I'd enjoyed eating at in Chennai. (And, I had always associated his name mainly with "Hot Breads" - which I don't frequent at all!)

The gentleman indeed seems to be a very fascinating entrepreneur - one that is sure to be besieged by offers from Private Equity firms.

Along the way, Mahadevan, the restless man that he is, launched a whole slew of fast food and restaurant brands for every segment of consumers – Benjarong, the Thai restaurant, Wang’s Kitchen and Noodle House for Chinese, Don Pepe for Mexican, Zara, the Spanish Tavern and the byword in food courts – PlanetYumm.

Not being content with India operations, Mahadevan ventured into foreign shores – he took Hot Breads to France and Italy, tied up with Saravana Bhavan to take the brand to US and opened a string of bakeries in the Gulf region. “But India is still my exploring territory and Chennai especially is my favourite city. I have been toying around with a chocolate idea for sometime now. And, I wanted to take the bread experience a step further,” says Mahadevan. So, out came The French Loaf and Maple Leaf.

...With 11 brands in his Indian operations and 4 in the International markets, Mahadevan manages a large work force – almost 1400 people in India and about 1000 in the International markets where he is present. Mahadevan is presently on an expansion spree with plans to open outlets in Bombay and Delhi. “Benjarong and Zara are the two brands I am taking to these cities. Thai food and Spanish Tapas will quite be the rage when the outlets open,” says Mahadevan. The art of retailing food is what he has mastered over the years, catering to the constantly changing food habits of new generation and old in different market situations. Mahadevan sure has a finger in every pie as much as he has a finger on the pulse of the food market.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

December 03, 2007

WHO DO I HIRE? by Sanjay Anandaram

The young founder-CEO of a young but profitable Rs 30 crore company believed it should capitalize on what it saw as immense market opportunity. He believed his company should and could grow by tem times to Rs 300 crore over the next 5 years. He wanted his company to be recognized as the number one player in its area by far on various parameters. Finance wasn’t a constraint as the company was generating sufficient cash flows with external funding being a viable option as well. The issue lay in getting management talent into a largely unknown company and in motivating them to enough to help generate and manage the incredible growth envisaged by the CEO. The company was now run by young but very bright and talented people.

Would it be able to attract and manage executives that would be senior to them in age and experience? What kind of a person should the CEO hire and what should be offered to such a person? Should an external recruiter be hired to find the talent or should personal connections and networks be leveraged to the maximum extent?

Lots of young and startup companies face these and sundry other challenges relating to recruitment as they have to deal with growth. While there’s no general formula that fits all, it is useful to keep the following in mind:

a) No one can communicate the vision and goal of the company better than the founders. It is their passion, desire, goals and commitment to the business, and its culture and value systems that need communication. Outsourcing this crucial activity to an external agency is a poor substitute. The top hires in all young companies that have gone on to become great companies have been personally recruited by the founders. Usage of personal networks also acts as a natural filter for appropriate candidates to emerge.

b) People who have spent “too much” time in a large corporation are generally “spoiled” from the standpoint of a startup. Functions are clearly defined, roles are unambiguous, budgets are clearly allocated, and processes are defined. The system is designed to ensure high predictability. On the other hand, a startup has none of these. Usually, the founders have built the business largely through common-sense management, entrepreneurial zeal and seat-of-the-pants decision making. But the kind of senior executive who will shine in a startup is one who can straddle both the worlds of entrepreneurial chaos and organizational structure. One who’s comfortable with ambiguity and impromptu decision making but who’s also a catalyst for the needed change towards structure and planning. Someone who will make things happen without being told; Who will forge a road ahead where there’s no clear path. Who will not be dependent on armies of support staff. Someone who believes in the potential of the company and more importantly in his own ability to create value. Someone who’s confident enough to deal with any downside risk that’s inherent in any young company. Not a bureaucrat but someone with an entrepreneurial mindset.

c) Executives who have entrepreneurial mindsets are motivated by the challenge to create their own legacy. To be compensated by a mix of short term and long term pay-offs by way of say, stock price appreciation through the creation of a valuable business. They are not excited by brandishing their company provided credit cards at the local club while sitting on company provided furniture while vacationing on company’s expense. They are people who wish to earn the right to enjoying all this via the sheer thrill of being part of a team. They are not people who enjoy all this through a sense of entitlement.

d) How does the young founder manage older and more experienced executives? Herein lies the mettle of the founder. The ability to let go of certain decisions, of being professional, of not micro-managing, of giving freedom to the executive, of being aware that the organization will change, of managing aspirations of other employees, of using the opportunity to learn while being clear about the non-negotiables such as ethics and customer service. Clear communication and expectations from both parties are critical.

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

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November 19, 2007

Startup Communication - by Sanjay Anandaram

An irate customer sends an email to a startup company “….am disgusted with the quality of your service. I was referred to your company by my friend and I’ve just had the most unhappy time ……” The customer support department does not forward the mail (& others like it) to the executive leadership.

Response to the board of directors from a CEO of a VC backed startup “…we’re doing fine. I’m confident we’ll hit and perhaps even exceed this month’s targets…..” Of course, the board didn’t know that the two top customers of the startup were pulling out of contracts with the startup. The CEO knew but was scared to tell the board.

Board member writes a letter to the CEO of the company “….you seem to be stressed out lately. Why don’t you get more senior executive help around you to help reduce the pressure?” The CEO replies “…Thanks for your concern. Am doing fine actually. Am wondering if you had any other objective in suggesting that I surround myself with senior executive help?” The CEO was wondering whether the board was considering replacing him.

There’s great unhappiness & confusion in the company. 4 of the 10 call centre agents have been asked to go due to non-performance in the last 2 months. They do not know the reasons for their firing. They do not know what is the performance expected of them & consequently what constituted “non-performance”!

CEO to Board: “I really do not know what you want. A long term goal for the company or a short term plan on achieving break-even in the next 6 months. I am confused!”

The above scenarios are not fictional. They are all actual instances taken from different startups. There are of course many more cases involving communication between peers and across levels and layers. But these cases illustrate the critical importance of communication. Especially in the chaotic and ever changing environment of a startup. Communication that’s timely, appropriate, clear and direct. As in most cases, the culture of open & honest communication starts from the top. If the Board of Directors does not set clear expectations from the CEO, if the CEO does not share important company information with the Board and employees, if the functional heads do not share news with the executive leadership, it is quite easy to visualize the rapid collapse of such a company. A company that hides from itself, one that is afraid of confronting the reality of the situation and one that takes refuge in lies and half-truths cannot be expected to generate trust and goodwill among all stakeholders.

The first step in creating a culture of open, frank, free and candid communication is to encourage people (including employees, customers and partners) to speak out. And to not punish people who have views that are not sugar coated. To have clear and frequent meetings where people can voice opinions, suggestions, criticisms, arguments and the like. And to respond to these concerns and views of employees, customers, partners, and investors. . If there’s bad news, share it with the stakeholders. Don’t hide or gloss over it. Ask for help and suggestions rather than pretend that you have all the answers. If you are lost, stop and ask for directions. People value open and honest communication. Companies around the world and across different industries have had to deal with severe and expensive consequences resulting from no or poor communication. They’ve had to deal with terrible loss of image, product recalls, fall in stock price, and public firing of senior executives just because everyone pretended that a problem didn’t exist and that the problem would go away if ignored long enough.

Well, in today’s day and age, you cannot hide all your problems from all the concerned people for all time. Isn’t it therefore better to have the “people” on your side when things go wrong as they inevitably will?

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

November 04, 2007

Entrepreneurial Self Esteem - by Sanjay Anandaram

Social anthropologists have determined that the impact of a dominant culture on a constrained (either self-imposed or externally imposed or a combination) culture is such that over time the dominant culture so subsumes the other culture leaving it as a poor carbon copy version of itself. Indian culture too has been constrained and inhibited for several generations for reasons of history and bad policy. In the India of the 21st century, there’s rapidly growing self-esteem and great opportunity ahead- critical ingredients for original thinking and innovation.

One of the most critical attributes of an entrepreneur’s personality is self-esteem. The desire to achieve, the ambition, confidence, and drive all flow from this core personality trait. People with a manic desire to prove to themselves and to the world that they “can do it” are the ones who can weather storms, deal with crises and plug away at making their aspirations come alive. All great entrepreneurs are people with high self-esteem. They have found redemption through their world-class achievements. So strong is this need for redemption that they go into overdrive to make their own road to their own destiny and are unafraid of experimentation. They are not followers but learn quickly from others to create their own unique spaces. Cavin Kare (shampoo satchets), Nirma (low cost detergent), T-Series (remixes), and Air Deccan are some examples of entrepreneurial energy being unleashed by the desire to create a new product/market category where none existed. If these entrepreneurs had remained inhibited or just imitated others, they wouldn’t have achieved what they did.

On the other hand, people with self-esteem not as high want to seek approval and acceptance by being part of the general crowd. They want to belong to “success” and seek self-affirmation by adorning the trinkets and superficialities of “success”. They adopt the model, mannerisms, language, practices, and so on of the successful. In short, they copy. They imitate. They don’t innovate.

A couple of seemingly trivial examples from Indian media that betray this constrained mindset: Indian news channels keep referring to the Mumbai blasts of July 11th 2006 as the “7-11” blasts as if by emulating the usage of the American “9-11” (where the calendar month precedes the day), the news somehow becomes of international quality. Never mind the shoddy reporting and lack of attention to facts! A popular business paper recently wrote about how south Mumbai “zip codes” had a higher per square foot cost. Zip-code is an American term whereas we use the term “pin code”. Nothing wrong with “zip code” as a term but what’s wrong a “pin-code”? As if usage of the term “zip code” suddenly renders the news with a different halo. Never mind that a large majority wouldn’t know what a “zip code” means! Never mind the facts in the story!

Contrast this with say, American football which has dramatically innovated the traditional English game of rugby and made it all their own. So much so that they’re now exporting their version of “football” around the world.

But the way of the entrepreneur with high self-esteem is not blind copying of superficial issues but innovation around core issues of business models, customer insight, product creation, delivery and support.

I recently heard Kishore Biyani of Pantaloon say in effect: “We don’t believe that global retail models will work in India. We don’t think B-school case studies from the west will work in India. We believe that the Indian retail consumer & market is unique and therefore focused tailored solutions are the way forward in India. There’s no blueprint to learn from so we want to be the ones to create one. We want to learn by doing. We keep our eyes and ears open, listen and watch customers in our stores, and move quickly to execute. We are quick to adapt as new insights come in.” A classic case of a high class entrepreneurial self-esteem and confidence driving everything else.

India today offers unprecedented opportunities for entrepreneurs to grab with both hands. In almost cases, there are no ready made blue-prints and formulae. These have to be created as the journey is made. And those with self-confidence and self-esteem will be the ones who’ll win in the end.

Let me end with this apocryphal tale:

American tourist to the bell-boy in a London hotel: “I hope you have fast elevators in this hotel”. Bell-boy: “Yes sir, the lifts are quite fast”. American tourist: “They are called elevators not lifts. Y’know, they were invented in America”. Bell-boy: “But the language was invented here!”


What do you think?

____________________________________________________________________________________
Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.
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November 02, 2007

The Onsite catering opportunity

The Outlook Business edition dated September 20th, 2007 had a coverage on the emerging Onsite catering opportunity and the experience of those already in the game. Some excerpts:

Says Vohra (Gurpreet Vohra, CEO of Tulip Caterers): "I serve 20,000 meals a day and the cost of each varies between Rs. 25 and Rs. 50. It is very important to check the price and quality of the raw materials each day. This business is all about high volumes and low margins.


Says Asitava Sen, Senior Vice President at Technopak Advisors, a global management consulting firm: "Onsite catering has now become an attractive business proposition. The draws are captive customers, young employees in the payroll, scope for up-gradation of traditional canteen facilities and better economies of scale."


Says Sunil Nayak, Radhakrishna Hospitality Services: "It makes sense to invest in onsite business. We make an initial investment of between Rs. 60 Lakh to Rs. 1 Crore and serve a meal for Rs. 50-Rs. 75. We have recovered the initial investment costs in under 18 months." The onsite model works better for caterers in contrast to its offshore variant where high cost of logistics becomes a hampering factor. Storage of freshly cooked food is also a deterrent. Usually in a catering contract, water, electricity and garbage clearance are taken care of by the company. The meal is subsidised.


Reveals Manit Gokhale, Proprietor of Lambodar Caterers, a Mumbai-based company that serves companies like VSNL, Crompton Greaves and Goldman Sachs: "This business works on high volume. Let's say, if I serve 5000 meals at a site on a day and the average cost is Rs. 50 then I get Rs. 2,50,000. However, if I do 100 meals, the investment costs in manpower and food is not recovered. So, in the first case, one can earn 15-20% margin."


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

October 15, 2007

VC Interview: Bob Kondamoori of Sandalwood Partners

N. Sriram interviewed Bob Kondamoori, Founding Managing Director of Sandalwood Partners for the US-IVCA/Venture Intelligence quarterly report. Some extracts:

What differentiates Sandalwood Partners from other VCs?
We are focusing on early stage investments. Most of the VCs we see here are doing later stage investments where valuations are very rich and competition fierce. We are looking at investing in companies at product development stage so that we can help them tune the product to the world market. Secondly, we are also more product-centric than service-centric. We are not going after IT Services companies or BPOs.

Are you looking at India and China together as one block for investments?
We are really India-centric. But since we are product-centric company and one of our partners is in China, we look at China for support in manufacturing, until Indian manufacturing takes off.

What are the revenue requirements for a company to seek support from you?
Out first investment was based on just a PowerPoint presentation. We committed $10 million and in two years, the company had $40 million in revenues. If you look at the track record of our partners, we have invested in concept-stage companies and taken them through the growth curve till acquisition or IPO stage.

Are you open to investing in any sector?
We invest in areas where we can add value. So we are very specific about our sectors. Our partners and advisors should have deep domain knowledge of the sectors in which we are investing. Right now we are focusing on two sectors: technology and alternative energy.

You have chosen to invest in semiconductors segment, which doesn’t seem to be a hot among too many VCs. What drives you to invest there?
If you look at the track record of our partners, we have invested in more than 40 semiconductor design companies and returned more than $20 billion. So we are very comfortable in that space.

When you go into semiconductors, the key thing is you have to be very technology savvy. You cannot be only an investment banker to identify companies in that segment. Our backgrounds lend us the advantage of being comfortable in this niche market. And we know India’s strengths in this area. For example, the microchip that runs Apple iPod was made in India.

There is very little tolerance for flops in this segment. At the board meeting level, we go into excruciating details about the product. You should have been a designer to be an investor here. The company is looking for your inputs on selection of tools, design, etc.

You also seem to have got involved in policy making in semiconductors segment. Does that give you an advantage?
We are early market players and understand the market. It helps to understand the government’s views about the business segment, to work with the government and build relationships there. It also gives a certain advantage to our portfolio companies.

Have you made any investments in alternative energy yet?
We have not made any investments yet. But we are definitely evaluating companies in that space.

What is your outlook on the Indian VC market for the next 3-5 years?
The market is incredibly hot. The people are very entrepreneurial, very talented and sharp. I wouldn’t be surprised if in the next ten years, the next Google or Microsoft is born out of India.

How did you get into the VC business?
I was born in India, went to the US to study, stayed and then joined the workforce. From 1995 onwards, my luck changed. I acquired a sort of Midas touch. Every company I was associated with, did extremely well. The first company went public notching up $300 million in market cap.

Then I invested in two companies, each was acquired by Intel for cash. So one after the other, the luck continued to be good, people were taking notice. Since the VC world is a ‘by invitation only’ business, I got invited to join a fund which was a seed investor in Ramp Networks, a company promoted by me. After several interviews, I decided that it was something that I wanted to try out and hence joined them in 2000. I was a partner with Charter Venture Capital, a $ 400 million fund, for nearly five years. I was involved in more than 150 investments across four funds, and about 60 of them have been gone for IPOs.

Do you have any role model in business?
Not really. I am from the school of Hard Knocks. I had founded a handful of companies which were all successful. So entrepreneurship runs in the blood. But I wish I had a role model. It would have perhaps made my life much easier.

Having said that, I have tremendous respect for anyone who is an entrepreneur. I admire Narayana Murthy, a tremendous person.

What according to you is a perfect investment?
You don’t invest in business plans and companies. You invest in people and their ability to execute and deliver. Perfect investment is nothing but a perfect team, the right gene pool. At the early stage, we have a board meeting every 30 days. If the team commits itself to doing something in the meeting, they have to get it done. It is all about saying and doing it.

Typically, when we invest in a company, it is a company that does not need investment. The entrepreneurs involved have it all in them to build the company. All they are looking for is a catalyst and a little mentorship.

If someone comes to us only for money, we usually don’t invest. The team should have deep experience and knowledge. If a first time entrepreneur insists on being the CEO, we back out, unless we are convinced that he has the experience.

We are also keen that the entrepreneur acquire our expertise and our networks to grow the business because we are confident that he will not embarrass us. That is the true value that we bring in. The entrepreneur also sees the point that our dollar is equal to five of someone else’s dollar.

What are the key lessons you have learnt in the time you have spent in this business?
When I was in Charter Capital, I used to see about 5,000-7,000 business plans a year. I would filter them by 10X based on the sectors that we wanted to invest in. So after the first filtering, the number would stand at 500 or so. It would be reduced by another 10X based on the gene pool, the team, etc. That would bring the number to about 40 of which we will invest in about 8 companies.

What is the lesson that I learnt in that kind of universe? Entrepreneurs have incredible passion. The first reaction when they see a model that is working, be it a search engine or a chip design, is that ‘I can do it better’. They dissect an existing model in thousand ways and we get a hundred business plans on how they will be able to beat Google. They are also fantastic salesmen. It is easy to get carried away. But I have to remain pragmatic and very, very objective when it is very difficult not to get swayed.

If I invest in a concept that is unlikely to succeed, then the entrepreneur is going to chase a dream for five years of his life and he could completely fail. What we lose is some money, but he loses something vastly precious – years of his life. Saying ‘no’ to a passionate entrepreneur is very, very difficult but we have to do it, if we think it is in their own good. Not to get sold to passion is the biggest lesson I have learnt as a VC.

October 06, 2007

Why VCs DO NOT need to own 20%+ in your company

Fred Wilson has an obviously popular post arguing why it is it’s "rubbish" for VCs to put forth the usual argument that "in order to compensate a venture firm for all the time and energy they are going to put into a particular investment, they need to own at least 20% of the company and ideally 30%".
I have made vastly more money on companies where our firm owned 15% than on companies where our firm owned 20% or more.

To some extent the desire to own large chunks of companies is related to the size of the funds that many venture firms manage. A $120 million position in a recently IPO'd company might not be that interesting to a fund that is managing billions of dollars of investor's capital. But it sure is interesting to me.

One of the things we are doing in the venture capital business by raising ever larger fund sizes and amassing larger pools of capital under management is creating problems and then making them the entrepreneur's problem.

And so we tell the entrepreneur that we need 20% of his or her company to solve our problem. I don't think that's right. I've said this before and I am going to say it again. The scarce resource in the venture capital business is great entrepreneurs with cutting edge ideas willing to work 100 hour weeks turning the ideas into businesses. The scarce resource is not capital and yet we are optimizing our businesses to be able to manage ever larger sums of capital.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

September 19, 2007

The bane of the buzz - by Sanjay Anandaram

A friend narrated this to me this morning. He was on a business trip to Taiwan and bumped into a colleague from a much larger division of the same company at Taipei airport. After exchanging some chit-chat, the colleague told my friend that he was likely to be now based out of Taipei as it was an important part of the division’s “China strategy”. On further enquiry it transpired that instead of long distance phone calls and faxes and emails to Taiwanese vendors and partners from Bangalore, he would now be able to visit them and make local phone calls and send local faxes and email! Ostensibly, this would result in enhanced relationships leading to furtherance of the division’s “China strategy”.

One of the banes of our times has been the gross trivialization of word meanings. Words like “innovation” and “strategy” have been almost trivialized into banality - almost every trivial act of improvement or approach is either an innovation or a strategy. There’s this almost manic desire to being “buzzword compliant” in speech. It’s almost a ritual that one feels one has to go through to be accepted as an inner member of some exalted club. Entrepreneurs too easily fall prey to the usage of buzzwords. Sample these lines from some business plans I’ve received:


1. We See this as a Unique Opportunity to Build a Service Model that Boxes ‘IBM’, SAP, ‘McKinsey’ & ‘Silicon Valley’ to Serve Healthcare Players in India & the USA-EU, Specially the SME
2. Our Financial Managed Services Leverage 3 Innovations that Enable Business Technology Services to be Delivered on Internet (Virtualization, Software-as-a-Service, IP Telecom) Media & Economics. We Inject Financial Domain Best Practices & Models into the Services
3. We Will Offer a Range of Multi-Channel Service Chain Offerings to Both Supply & Demand Chain Customers Combining Customized Products/Services for Profit-Making in the Aftermarket
4. Our Innovative Organizational Initiatives that include (i) a hard-to-find engineering team with experience of integrated dual-shore software engineering and (b) Atypical sales, patent management and HR initiatives tailored to effectively leverage tools, solutions and high-end engineers


I, for one, am not sure what to make of such language. At an event recently a budding entrepreneur asked me “Will VCs fund incremental innovation or quantum innovation?” I had to tell him that VCs only fund businesses that they believe make money!

The point I’m driving towards is that presentations and business plans need to be written in simple straightforward language that drive home the point that the team, market opportunity, the offering of the company, the business & revenue model, all support the creation of a valuable business. Given the short attention spans of most people (especially VCs!), it is important to grasp the attention of the reader in the shortest possible time without having the reader reach out to a buzzword dictionary to decipher the language. It is also a testament to how well the entrepreneur and the team have understood the business and the value to customers. Only when something is very well understood can it be explained in very simple terms that even a lay person can make sense of. If customers, investors, employees and others cannot understand what the value proposition of your company is how likely are they to buy the product, invest or join your company?

One of the tests that VCs use is to ask the question: “What’s your elevator pitch” i.e. explain your business to me in a few short sentences (in the time it takes the lift/elevator to travel to the desired floor) in under a minute or so. If one has to draw maps and figures and language to explain the offering, there’s a problem. It is said that Einstein explained his Theory of Relativity to a lay person thus: If you are sitting for an hour on a park bench with someone you love, it seems like a minute; If you are sitting for a minute with someone you hate, it seems like an hour! My theory explains this phenomenon.

Now, can you describe your business in simple terms? What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

September 04, 2007

Following up good PR - by Sanjay Anandaram

Last week I had two very different experiences while visiting two well known global companies. Experiences that made an impact on me and experiences that every startup company can learn from.

I arrived at the fist company a little before my 10am appointment and walked into the reception area. There was pandemonium there with a large number of visitors huddled around the reception desk. The long desk in turn was “manned” by about 6 or 7 smartly dressed men and women and had 3-4 computers on it. I mentioned the name of the person I’d come to visit to one of these persons and I received a blank stare. I repeated the name and was asked if I had the extension number of the person. I did not. I repeated the name again as well as the designation of the person. Finally, the name and a mobile number was located. The mobile number turned out to be an old one. The staff were running around without any clue as to who my host was. The cell phone number I had for the person didn’t work either. I was then asked to go to another reception area. Same result and I was asked to return to the earlier reception area. Getting impatient, I walked out of the building and into another building where I was told the relevant department, that this person headed I had come to see, was based. There was no one at the reception area. I walked into the lift and went up to the 4th floor (I asked some employees where this department was based). I was met by a guard on this floor who asked me to return to the reception area I’d come from which I promptly did. It was now 10.35am. A vehicle pulled up at the building just as I was about to leave and the person I was supposed to meet jumped out. The cell phone battery had run out, traffic, how rapid growth had put enormous pressure on the administration and the system…..….I finally had to fill in a form, get my photo taken, have the ID card pinned to my shirt before I walked into the same building I was escorted out of by a guard. I was annoyed and irritated and angry. This in a company that F500 companies lean on for management and IT systems know-how!

Later on the same day, I visited another company. There was just one security guard behind the desk. The desk had a flat screen monitor displaying the company logo with a keyboard to enter my and my company name. My name and company name were then printed out on rectangular sheet of paper with a sticky peel-off back cover. While waiting, I noticed a screen on a wall in the reception area that had a list of phrases and words scrolling on it. I asked the security guard what those were and he smiled and said that those were some of the phrases and words that the world was searching for on this company’s system! I stuck the printed ID paper tag on my shirt and was let inside the building inside 5 minutes. Completing my meeting, I noticed a football made entirely of these paper name tags taken off earlier visitors lying on the reception desk. I too stuck my tag to the football on my way out with a smile.

The importance of creating the right impression doesn’t just end with fancy copy and glitzy media work. In fact, creating the right impression is a matter of company culture. The humble security guard (no smart jacket for him) knew more about the company he was working for than the team of smartly dressed men and women behind the desk. There, activity was confused with output and efficiency. The importance of creating the right impression on employees, customers, partners, vendors and others cannot be over-emphasised and it always starts and shows up in “moments of truth” when the company meets its stakeholders. Every entrepreneur and startup therefore needs to inculcate the importance of creating the right culture right from the get-go.

Remember the old saying, you rarely get a second chance to make a first impression?

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

September 01, 2007

An Exit Strategy Before I even Enter?! - by Sanjay Anandaram

It is often said that in India, as in some other Asian countries, entrepreneurs tend to be extremely control oriented, tend to be very focused on retaining generational ownership of the company, and view investors as necessary evils and not as partners in creating value. Investors usually tend to be viewed as lenders or project financiers and generally receive the same callous treatment as did banks of yore. However, as more and more private equity capital (including venture capital) flows into companies to satisfy the entrepreneurial aspirations of globalization, scale, and market value, the realization that good governance, transparency, investing in business growth and professional management lead to value creation has gained strong currency.

For startups therefore it is important to appreciate the role of investors as stakeholders and partners in the creation of a successful and valuable business. And part of the appreciation should manifest itself in the realization that investors should get liquidity on their investment within a reasonable time period, usually within 5 years. Just as the management of a public company is responsible to shareholders for delivering returns, the management of a startup too is responsible to its VC investors. Unlike investors in a public company who can sell their shares at any time on the stock exchanges (usually happens when they believe that the company’s future prospects are not very bright), a VC investor cannot do so since there’s no stock exchange market for selling his shares. Thus, the shares of the VC investor are illiquid for a period of time. In return, the VC investor gets certain rights. And it is the obligation of the management to provide an “exit” to the investor after a certain minimum period of time, hopefully profitably. Entrepreneurs who understand the role played by investors try very hard to find an exit for their investors. It is important to also understand the time horizon of the investors; entrepreneurs may want to go on and on with their business but need to understand that the investor has to generate a return on their investment within a specific period of time. Great entrepreneurs appreciate the role played by their investors and work in tandem with them to provide an exit.

An exit is a very important and critical element of a business strategy. In as much as entering a market/company has much to do with timing, exiting a market/company has more to do with it. An exit is an event that allows investors and founders of the startup to "exit" or cash-out of their respective investments (i.e. cash from the investors and usually “sweat” from the founders), hopefully with substantial profits. Exit events typically are of 2 types: an IPO (Initial Public Offering) and M & A (merger with another company or acquisition by a larger company). Exits have to be planned, thought through and executed with as much finesse as executing operations. And both have a lot to do with timing. A great product offering with great execution and delivered by a great management team but released at the wrong time could kill a company. On the other hand, not exiting a company at the right time can cost a company, investors and management very dearly indeed.

When VCs and others consider business plans for investment they factor in the possibilities and likelihoods of an exit and the types of acquirers. Now, not all companies go public, so most investments have to generate returns through a M & A or a strategic sale. It is therefore important for the entrepreneur and the management team along with the investors to think through the various exit scenarios at different times in the company’s evolution and take decisions based on the prospects of the business at that time. Investors will want to cash out or exit if they’ve reached the end of their typical waiting period or if they believe that the company has achieved all that it could and there’s nothing more to be gained by waiting or holding on to the investment. That’s the cold and fair logic of the investor-entrepreneur relationship.

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

August 20, 2007

Why are VCs arrogant?

In a posting on the rising popularity of VC Rating site thefunded.com, Jeff Bussgang explains why.
Why are VCs often arrogant? Is that what they teach us at VC breeding schools? I think some of it is just the nature of the business. As I mentioned in my post “Dr. Seuss and The Land of No”, VCs have the job of saying “no” hundreds of times for every “yes” that they fund. To be efficient, they are trained to say “no” quickly and not waste time on projects they simply don’t like or don’t believe in. Whether you believe in a project or not is such a subjective standard, that it can always be open for debate and argument. But VCs can’t afford to have debates and arguments about projects they don’t like, they must quickly, unemotionally move on to the next one.

Entrepreneurs, on the other hand, are emotionally attached to their projects and wired to believe that what they are working on is the absolute best thing going on – after all, they chose to work on it at the expense of every other new start-up or job they could have pursued. Thus, it is hard for them to contain their natural enthusiasm over why what they’re doing absolutely deserves to get funded. And nothing is more frustrating for a “walk through walls” entrepreneur than to be dismissed by a VC, no matter how graciously.


His solution?
The trick, therefore, is for VCs to simply treat entrepreneurs with R-E-S-P-E-C-T. That’s all entrepreneurs are askin’ for. Just because a VC may not like the idea, or even the person hawking the idea, doesn’t mean they shouldn’t treat them with decency and respect. On the flip side, the entrepreneurs should remember that it’s the VCs job to sift through hundreds of opportunities and spend time only on very few. If it’s not a good fit for them, move on. That’s why TheFunded has struck a chord.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

August 18, 2007

TiE-ISB Business Plan competition

Extracts from the press release:

TiE-ISB Connect is back with its highly successful business plan competition. Entrepreneurs are invited to submit a maximum of 5 page abstract of their business idea to TiE-ISB Connect Committee to qualify for an elevator pitch with leading Venture Capitalists in November. Applications for the 2007 business plan competition are available at www.tie-isbconnect.com. The last date for submission of Business Plans is 31st August 2007.

The competition is designed to encourage entrepreneurs in the creation, start-up and early-growth stages of businesses. Participants have a chance to win face to face interaction with leading VCs and Business Leaders for finding capital and strike business alliances that will help them launch and grow their businesses. The TiE-ISB Connect '07 conference, organized by the TiE-Hyderabad Chapter and the Wadhwani Centre for Entrepreneurship Development at ISB, will be held at the ISB Campus on November 14-16, 2007.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

August 13, 2007

Interview with One97's Vijay Shekhar Sharma

Venture Intelligence featured an interview with Vijay Shekhar Sharma, Founder & Managing Director of One97 Communications as part of the July issue of the US-IVCA / Venture Intelligence India VC report. One97 is one of the pioneering start-ups in the Indian Mobile VAS space and recently raised its first round of funding led by SAIF Partners.

Some extracts from the interview:

VI: How were you funding the company until now?

VSS: We were the first company to put a revenue sharing model in place with operators. That gave us recurring revenue and made the company cash positive.

VI: What were your challenges in fund raising?
VSS: Two challenges: first, deciding on the network the fund could provide and second, the kind of size commitment they can make for future investments. A third factor was the comfort with the VC: what kind of team it was, the chemistry between team members, the kind of person who will come onto our board. The VC on the board becomes your everyday business partner.

VI: How does One97 compare with VAS providers in advanced markets?
VSS: The good part about being in India is that we are at curve of extreme innovation. There are all ranges of audience to serve - very high tech users to ultra low tech users. So our organisational DNA is built around serving such extreme requirements.

I am sure – similar to IT services – the “skilled Indian manpower” story applies to the VAS / mobile applications as well. Applications with high R&D and high efficiency requirement applications are definitely going to come out of India. Given (SAIF’s) support and general business guidance, we can come out with universal applications from India too.

VI: Can you talk about your expansion into China?
VSS: The mobile customer base in China is significantly large - four times more than what we have here (in India) today. We will be able to do long tail services…and we can have a scalable model. This along with our partner’s (SAIF) networks and capabilities, make China a preferred destination for us.

VI: How would you differentiate your firm vis-à-vis your competitors?
VSS: In the short to medium term, our investment in technology is our differentiating advantage. In the long term, our strength will be operational efficiency and lead-time/new use cases of technology and features in our application development.

VI: What do you think will be the key drivers impacting your sector over the next 3-5 years?
VSS: Right now, entertainment seems to be the primary area of VAS. In the future, utility services and every day applications will be the key drivers. SMS is already an integral part of life. This in turn opens up possibilities for applications in areas like microfinance and other parts of the value chain. Customer growth will be a driver too.

VI: When do you anticipate your next funding event?
VSS: There are two parts to it. One, we are specifically looking at taking over a small to medium sized firm for growth. That can happen tomorrow or next month, but whenever that happens that would call for a round of funding. Secondly, for funding our linear scalable growth.

VI: How did you become an entrepreneur?
VSS: In 1997, while still at college, we raised funding from a VC in the US for an India-focused search site Indiasite.net. It was ranked number one in 1996-97 at various places on web. We later sold the site to India Today and the company to Lotus Management LLC.

I then turned to telecom because the Internet was already being perceived as a “bubble” and was getting crowded. Also, there was money in telecom even for three lines of content, while in the Internet space, there was a monetization gap.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

August 11, 2007

Give your start-up the gift of time

Fred Wilson has a nice post, based on his experience with three of his investee companies, on how start-ups often take several years to fulfil their potential.

Time works for you if you have the patience to stay focused on the opportunity in front of you, if you have the tenacity to work through the inevitable hurdles you’ll face, and if you have the right kind of financial backers. Time allows you to recover from misteps, to build a team, to generate revenues, and even earnings. And when you've done all that, you'll have the wearwithal to choose when and how you want to exit from the business because you'll be selling a business instead of a team or a product or a feature.

So, if you are starting a company, prepare for a marathon, not a sprint. Take a deep breath. Commit yourself to the long haul. Let time work for you.



Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

August 10, 2007

Alternatives to Venture Capital

Businessfund.com has a post on the "Top 25 Alternatives To Venture Capital".
Venture capital is not for everybody. For starters, venture capitalists tend to be very picky about where they invest. They are looking for something to dump a lot of money into (usually no less than $1 million) that will pour even more money right back at them in a short amount of time (typically 3-7 years). You may be planning for a steady growth rate as opposed to the booming, overnight success that venture capitalists tend to gravitate toward. You may not be able to turn around as large of a profit as they are looking for in quick enough time. You may not need the amount of money that they offer or your business may simply not be big enough.

Simply put, venture capital is not the right fit for your business and there are plenty of other options available when it comes to finding capital.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

August 01, 2007

Starting a private limited company

Deepak Shenoy has put up a very useful post on the process of starting a private limited company in India - with a specific focus on creating a company that plans to have external investors.

He also links to a World Bank resource - doingbusiness.org - that summarizes the procedures and costs associated with setting up a business in various parts of the world. Here are the Bangalore and Chennai pages.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

July 30, 2007

MBAs who has made the start

The 23rd July edition of Business World has a piece by Rashmi Bansal that showcases the various startups that MBAs of top B-schools of India are promoting. A few excerpts:

....Prakash Mundhra is enjoying giving them a high. His company, Sacred Moments, makes ‘puja kits’ for Diwali, an idea he conceived as a student at Symbiosis Centre for Management and Human Resource Development (SCMHRD) in Pune. “My marketing professor, Shivram Apte, rejected the idea totally,” says Mundhra. “We had long arguments — he didn’t think there was a market for it.” Prof. Apte was wrong. In its first Diwali season — October 2006 — Sacred Moments sold more than 10,000 puja kits and achieved a turnover of Rs 35 lakh. “I took a risk,” grins Prakash. “But it has worked out.”

.......

Yet, he was in a dilemma. He went through the placement process and accepted an offer from ICICI Prudential. “In the meantime, I entered six business plan contests and won five,” he says. “I became more and more convinced about my idea — which was now a ‘puja kit’ — and four days before I was to join my new job, I sent the HR head an e-mail declining the offer.” Thus, Sacred Moments was born. The Rs 50,000 cash award from Zee helped in the initial research and formulation stage of the product. “I calculated that another Rs 3-4 lakh would be enough to start off.” He already had half the amount in hand — prize money from business plan contests. The balance, he raised from family and friends.


....A one crore salary be damned, the buzz is about the guys who opted out of placement, because secretly, almost everyone craves to be in control of their own destiny — to be an entrepreneurial rock star.

But, like the proverbial struggling artist, you may need a ‘day job’ to support yourself. Anoop Radhakrishnan, Zerin Rahiman, Shivakumar R, Abhisar Gupta and Sandeep Ramesh all graduated from IIM Lucknow in 2006. They formed UniAxess Healthcare, which focused on the relatively unorganised field of medical tourism. However, in its first nine months, UniAxess had no revenues. “We decided to go a little slow and analyse the market,” says Ramesh. “No one has really cracked this business yet, and we wanted to avoid pitfalls.”

Meanwhile, the bread was buttered by taking on consulting projects through another company they had formed called IndigoEdge. “Solvency is the key to survival,” says Ramesh. “Do anything that will pay the bills (for the first year at least).”


...Meanwhile, if consulting assignments are coming in from unexpected quarters, no one’s complaining. IndigoEdge or UniAxess, the team is willing to play chameleon if it makes sound business sense.

That’s a sentiment Mansur Nazimuddin certainly identifies with. The 28-year old IIM-A graduate (class of 2006) made headlines when he spurned a $100,000 pre-placement offer from Deutsche Bank to start a mobile gaming company. Tigertail Studios remains Nazimuddin’s merry muse and his daring dream. But for now, he’s poured his energies into a different kind of proposition — ‘Brewhaha’ — a real-world hangout that marries the fun of playing board games with the flavour of excellent food. Situated in the Koramangala area of Bangalore, Brewhaha is a joint venture with Mansur bringing in his love for games and Sreeram Vaidyanathan (IIMA batch of 2005) providing the passion for food.


“Entrepreneurship is about postponing short-term gains for a long-term bonanza,” grins Sreeram. A home and family support in the city means basics are taken care of, thankfully. “We’ve really enjoyed the process of creating something that users are so passionate about. It is a labour of love. But at a fundamental level Brewhaha fulfils the need to ‘do something’, which is potentially a very big business.”


The bottom line is, entrepreneurship is all about dealing with surprises. Bowing to the winds of change, yet standing tall and proud through the storm. You might hit a boundary with your first shot. Or stand at the crease with your eye on the ball and determination in your heart. You might return to the pavilion, but return in style in a second innings.


Check out the full article here.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

July 27, 2007

What’s the DNA of your company? - By Sanjay Anandaram

Early last year, I met a startup team that was building the next great mobile application. They had built a system that could offer mobile social networking to end consumers. The team had great technologists including a few successful entrepreneurs among them. They were convinced that their system would be the next great thing for consumers; they were supremely confident (bordering on overconfidence) about the uniqueness of their offering. This company was trying to build a company focused on the end-consumer as their customer. This meant that they had to build a brand, build a system that would be ridiculously easy for consumers to use, have a mechanism that would keep attracting people back to them, and figure out a way to make money. Of course, companies like Google and MySpace were their role models. The team had enormous expertise in building and running systems for businesses, selling and marketing to businesses and supporting business customers. They however had no experience in developing consumer facing businesses, no experience of creating and running a brand, and no experience of the mobile world. And most importantly, they were targeting a consumer segment (namely, youth) that was far removed from the world the team inhabited – for example, the team was comprised of technology people in their late thirties to early forties who didn’t blog, didn’t socially network and essentially didn’t do the social things that their customers were involved with. Given that they were great technologists, they quickly figured out the nuances of mobile technology. But solving the other issues required a different mind-set, a different set of experiences, a different set of expertise and involvement. In short, it required a different organizational DNA.

Every organization has a certain DNA. It is critical to realise this, understand it, and then leverage it for developing maximum benefit. In some cases, the realization and understanding of it results in needing to reconfigure the company’s plan and making changes (additions or subtractions) to the team. Does the team have the right background, does it understand the market space and its customers, does it have the experience of working in the same space ie, the relationships to form partnerships and to hire people, experience of the operating realities, the ability to market and sell to the target segment are issues of paramount importance. The fact that investors seek well rounded high quality teams only buttresses this point. All too often, people confuse years of experience with having the “right” experience – right for the job on hand. For example, having 20 years experience on the shop floor at say, Tata Motors isn’t of quite relevant to the launching of a new hair oil at say, Marico. Young companies, very especially, cannot afford the luxury of getting the entire organization up the learning curve, more so in markets that are competitive. While the people may be smart, energetic, and hard working, the changing of mind-sets and the unlearning of past experiences takes a lot more. Many a time therefore, having no experience can be a bigger asset than having a lot of experience that might not be relevant or appropriate to the job on hand.

Understanding your organization’s DNA – the sum total of its experiences, culture, mind-set, approach, abilities and competencies - is therefore very important for young companies to appreciate. This appreciation leads to the creation of first, the right team and thereby a strategy and approach that’s more relevant and real to the market context of the company. Given the organization’s DNA, it is appropriate for a company to drive maximum benefit by the leveraging of it. It is this DNA that gives a company insight and the ability to navigate the openings in the market that others with a different DNA cannot.

I met the mobile startup company again a few weeks ago. They were far more down to earth. The arrogance of ignorance (of the market, competition, selling and marketing challenges) had gone. Instead, they seemed reassured and focused and had got their first customer: a small and medium business! They were no longer focused on the young consumer but instead were focused on helping small businesses use their mobile system to reach out to the youth. The value proposition, business model, sales, marketing and customer support mechanism had been reconfigured to meet the needs of businesses. The business knew how and what to sell to its young customers. This company knew how to work its technology and sell to businesses. It was therefore now playing to the strengths and experiences of its team. In short, it was now building the company in line with their DNA. And a few investors were now actively circling the company believing that the team now had a distinct chance of succeeding compared to its earlier avatar.

What is your organizational DNA?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

The king of Land titles about being the next Google.

Today's Economic Times profiled Sanjay Kanth, founder & CEO of ESS Solutions. ESS Solutions offers an array of services right from loan processing to loan funding, including legal work to the multi billion dollar US title industry. A few excerpts:

Large players like FirstAmerican Title Insurance, Fidelity Title Insurance have also set up their own captive centres in India. Even banks like HSBC, Citi have started processing some of their uninsured work from their centres in India. But ESS claims to be the first company to offer complete services right from an order request to disbursement and recording of the financial instruments.


Co founded with his brother, Sujay Kanth, who is now the C00 of ESS, Sanjay says about their first break,
"Initially, we had no clue of what was going on and it was very hard to grasp. We took it as a challenge and Sujay got trained in their office for about 40 days after which we started the transition to my India office from 2004,"


" It's been a very satisfying journey but, with its highs and lows. High attrition has been a constant challenge and even more challenging is to keep my clients happy. I am going to become a fatehr soon and I think the birth and growth of ESS has prepared me for fatherhood."


Click here to download the full article.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

IT formulae for the Biotech industry

Thursday's (26th July) Economic Times, under Southern Compass carried a profile of Anuradha Acharya, the CEO of Ocimum Biosolutions. A few excerpts:

.. With support from her husband and some funding from friends and family, she founded a bio-solutions IT company in 2000. In a year's time Ocimum was on a roll, providing some of the best software in the industry for Library Information management Systems(LIMS) and bio-informatics. Its two blockbuster products - Genchek and Biotracker - made Ocimum Bio a landmark company in this segment.


"There is a gradual shift in the market from servicing scientific researchers and academicians to offering solutions to some big-ticket pharma players and we are constantly developing capacity and capability in this direction," Ms Acharya said.


Click here to download the full article.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

July 23, 2007

Eggsploiting the bottom-of-the-pyramid opportunity

The Outlook Business dated 20th July '07 features(not available online)Vinod Kapur, the Chairman of the KeggFarms group. The company has bred a poultry variety, the Kuroiler, that is at par with modern industrial hens in terms of growth and egg laying, but as hardy as the desi chicken and survives on scavenging. It is remarkable to note how it helped tap in on the bottom of the pyramid opportunity, besides providing rural households an income generation opportunity.


More than the fawning and backslapping, it was the sudden turn in perceptions that surprised Kapur. His bankers, who derided him, now bend over backwards to lend. The quaint company that talked about empowering rural women is now a star bank account and some even want to feature him in their annual reports.



KeggFarms' base of the economic pyramid (BOP) business model, that helps pull households out of the spiral of poverty, by supplementing their income from village poultry, took years of tweaking. It has now come into its own. The company started making money just about three years ago.

The BOP market is estimated at four billion people, with purchasing power of $5 trillion. The largets chunk is in Asia: 2.86 billion people.



...Kuroiler was finally commercialised in 1999. KeggFarms' coloured bird has the attributes of a desi chicken - it is hardy and survives on scavenging. But it grows and lays eggs on par with the modern industrial hen (around 180 to 200 eggs in a cycle against 40 eggs by a desi bird.) The breed also attains a market-ready weight, of around 1.5 Kg, in 90 days.



Kapur knew, as reforms progressed, he would have to face intense competition from giants in poultry, within and without. ......
.... However, it also struck him that industrial poultry had done little for the rural Indian Hinterland - an absolutely sterile, but a large potential market. It wouldn't be of much interest to the big poultry players. .... "It was sheer survival instincts at play. I was forced to look at alternatives." he confides.

The transition from industrial to rural poultry was, therefore, ordained. The figures were also in his favour. .... The challenge now was to develop a unique bird that would fit the harsh rural environs and also foster a robust supply chain to deliver chicks to the very last person - the village household, strewn across remote areas.



....A below the poverty line family can earn around Rs. 300 to Rs. 500 a month from the sale of two or three birds (chicks bought for Rs. 21) of over two kgs each, which is a good income in resouce poor rural settings.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

July 19, 2007

Navas Meeran: a tale of a second generation Entrepreneur

Southern Compass of The Economic Times(19th July '07) carried the profile of Navas Meeran who took over at the helm of Eastern Condiments and Spices from his father.
A second generation entrepreneur, he saw how his father built the business to become a prominent distributor of leading brands in Central Kerala besides building the Eastern Curry Powder Brand.

When after his studies, Mr. Navas Meeran joined the business in 1994, the turnover of the company was in the range of Rs. 10 crore. It did not take long for Navas Meeran to rework the business model and prepare for long-term growth. And, at heart of his business model, was the core competency they had built up - an efficient distribution system. Eastern Curry Powder did not remain in the league of the 'small player' for long.


The company touched a turnover of Rs. 208 crore by 2006-07, and his dream is to touch a turnover of Rs. 2500 crores for the Eastern group, which also is into readymade garments, tread rubber and packaged water.

He attributes the success of Eastern to "ordinary people doing extraordinary work".

Eastern is currently the largest exporter of curry powder. Recently, the Eastern brand emerged as the largest selling curry powder displacing a Pakistani brand.

Click here to download the full article.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

July 15, 2007

Podcast with Subroto Bagchi

Knowledge Wharton has an interesting audio interview with Subroto Bagchi, Co-founder & COO of Bangalore-based IT services firm MindTree Consulting. and author of the book The High Performance Entrepreneur.

Bagchi makes several interesting points including that:

* Start-up companies should "pretend to be big" by putting in place proper processes (which he compares to plumbing/infrastructure for a large building) and governance right from the beginning.

* How MindTree's large founding team was a source of strength ("blessed with bandwidth" versus "too much overhead") since whenever one founder has some domestic issues to deal with there was someone else to take the slack. This helped the company become resilient.

* Not focusing overly on the idea versus the need to enjoy building a long-term business.

* Focusing on the "emotional infrastructure" in addition to the physical and intellectual infrastructures. The need to build all three is an ongoing exercise. It was MindTree's attention to the emotional infrastructure that helped it survive the economic downturn.

* Three legged stool approach with customers, employees and investors. Do not try and favor any one leg at the cost of another.

* If you are in your 20s, get some experience - especially some sales experience - by working for someone else before trying to create a organization that will change the world. The world will wait.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

July 14, 2007

Knowing when - and how - to grow - by Sanjay Anandaram

“I don’t think if we’ll be able to attract him to our company as he has to take a pay-cut” is what I heard the founder and CEO of a startup say last week. He was referring to a candidate’s resume that had been sent across by a friend. The profile was terrific and seemed like the startup could certainly benefit enormously from having the candidate on board. The CEO though was troubled by the apprehension that the candidate would be unaffordable. Being cost conscious and frugal was a practiced way with this CEO and his founding team. So what is the CEO to do when he now needs experienced and specialized talent to help the organization grow?

In the period from the late 90s to the early 2000s, excess seemed to be the name of the game at startups. Fancy offices resembling space age fashion show venues, sky high salaries, perks like on-site cappuccino machines were quite common place as investors poured money into next generation internet businesses. Then the bottom fell out and everyone started talking of the virtues of being frugal and cost conscious. It is extremely hard to find a company that collapsed because it cut too much cost too fast! But a lot of investors and entrepreneurs emerging from the bust took cost consciousness and frugality to another extreme – resulting in the creation of anorexic companies. Let me explain.


Every business needs a certain threshold level of investment to first establish itself (these could including building technology, acquiring facilities & infrastructure, acquiring customer, a certain market presence and so on) and then another injection of investment to grow and scale. The initial threshold level required by a company is a function of the market, competition and the quality of the initial team. To establish the initial value proposition in the market, the company has to be careful with its money and smart about how to deploy it. It must be frugal and leverage its relationships and resources to the maximum extent possible. As the company establishes its value proposition, the technology and infrastructure need revamping to handle growth, additions have to be made to the management team, marketing spends increase and so on.

It is at this stage that the mind-set of the CEO has to adjust to the changed circumstances of his/her company. “Do I continue with the frugal approach and work my resources to the bone or do I spend money on aspects of my business that affect growth?” “Do I spend money and make that business trip to meet customers and business partners or do I stay with email?” “Do I spend money on hiring the best or do I make do with the less than satisfactory senior management?” “Do I spend money on a marketing campaign or do I hope for “viral” messaging to take place?” Investors do not invest in a company so that you can return their money unspent after 2 years. Investors invest because they want to extract value out of the company they’ve invested in. Value is created through value generating activities. Value generating activities include first and foremost, profitable sales and an increasing number of such sales. Whatever is necessary to achieve this end result must be invested in.

For example, investing in creating a top notch sales team but being smart in their incentives is certainly a good idea. Being generous with stock options coupled with operational freedom and involvement in company decision making can help attract a class of executives. In some cases, top class talent can be lured by the vision of creating (without interference) the next great company; The CEO’s passion, ability and vision to get the best for his company is put to test in such cases. The famous example of John Sculley of Pepsi being lured to the unknown Apple by Steve Jobs is worth noting here. Sometimes, it becomes imperative to pay the individual higher than market rates. In such cases, there are trade-offs to be considered. What would be the incremental gain to the company by having such individuals on board? What would be the downside of not having heavy hitting talent on your side? What is gained by way of sales, market presence, ability to hire others, time and so on?

If the incremental gains are more than incremental costs, then the decision must be taken in favour of investing. Mistakes will happen but the decision making process must not change. There are far more examples of companies, especially in India, that have under-invested themselves to oblivion than there are of companies that have splurged.

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

July 08, 2007

Update: IT Services & BPO Connect; July 12, Bangalore

Highly successful entrepreneurs and angel investors including N. S. Raghavan of Nadathur Holdings (and co-founder of Infosys), Dr. Prakash Mutalik of RelQ (which was acquired recently by EDS), Rajiv Mody of Sasken (a successful publicly-listed company) and K. Ganesh of TutorVista (who earlier co-founded BPO firm CustomerAsset and angel invested in KPO firm Marketics) share their Entrepreneurial Experiences and their Perspectives on the Future of the IT Services and BPO sectors

Other speakers include top executives from Applabs, Aspire Systems, Canaan Partners, Ernst & Young, IDG Ventures India, KPIT Cummins, KPMG, Langham Capital, Microland, MindTree, Nipuna, PharmARC, QuEST, Scope eKnowledge and Veda Corporate Advisors.

Network with successful entrepreneurs and top investors at this unique conference and get answers to key questions like:

Is scale all important?
How can SMEs survive and thrive in these sectors?
Can KPOs ever IPO?
Where are the new opportunities in IT Services?
What are investors looking for?


Click Here for more details.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

July 06, 2007

Profile of Career Forum founder

The Starship Enterprise column in The Economic Times (not available online), featured Sujata Khanna of entrance exam training institute, Career Forum. The company, which started with just seven students in Pune, now covers over 39 cities reaching over 15,000 students.

...The most important milestone I think was in 1995 when we decided to incorporate Career Forum into a Company. This brought in a lot of professionalism and we also went for expansion.

...Strong technical network is our unique selling proposition. We have a strong ERP system running across all centres in all areas of business from distribution to logistics...


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

July 05, 2007

Translating VC Speak - by Sanjay Anandaram

All too often hopeful entrepreneurs approach venture capitalists (VCs) and then keep approaching them with the same set of slides. After a while, disappointment sets in. ‘VCs in India are risk averse’, ‘They do not understand my business plan’, ‘None of them have operating backgrounds so they cannot appreciate the position’ are some of the common refrains. It is, therefore, worth understanding the language used by VCs during the meetings.

“Interesting but…..”

The word ‘interesting’ has many meanings but almost certainly never means that the VC is excited. The meaning of the word varies from ‘OK, nice’ to ‘intriguing’. It is also used as a place-holder or a punctuation mark. The ‘but’ that follows is dangerous. Means the VC is not positively inclined.

“Who else have you talked to?”

This is not a general innocent question. This is a way for the VC to know who else is looking at the deal and therefore, how he or she should pace the decision-making process. If a lot of VCs have been approached without much progress, the red flag goes up since VCs do compare notes about the deal among themselves.

Usually, VCs work in syndicates and want to know if the other VCs being approached are people they would like to work with on the deal in question. In some cases, it can mean that the deal is getting hot and therefore, they need to move fast.

“You are too early for us.”

This means please raise money from somewhere else, build out a team, acquire customers and revenues and then come back to us.

“How many customers have you spoken to?”

We do not think you’ve done adequate market and customer validation. Please do your home-work and come back.

“How much cash are you raising?”

This is an interesting question or rather a set of questions. VCs want to know whether you have thought through your financing plan and what the objectives of raising the cash are. They want to know what specifically will be achieved with the cash and over what time-period. Whether the company will be in a position to raise additional capital at the end of the time period based on expected achievements and at what valuation? Does it make sense therefore to have a co-investor participate in the current round of financing?

“Who’s the domain expert? Who’ll do sales and marketing’’

There are multiple variation to this. This means that the current team does not inspire confidence. Interest yes, but not confidence that it can pull it off. Additional members have to perhaps be brought in to strengthen the team.

“What’s the cap structure/current ownership of the company like?”

This question is used to find out how the shareholding is distributed and therefore, reflective of the mind-set of the promoter team. This in turn signals the kinds of issues likely to come up in the course of the investment cycle. Many a time, VCs insist on having an Esop plan either implemented or significantly enhanced before they invest. This implies that the pre-investment shareholders would get additionally diluted to the extent of the Esop plan.

Persistence is a valued trait to have. But there’s a thin line between persistence and obdurate obstinacy. Learning to read the signals and understanding the import of the questions being asked is a critical requirement. This should translate into the presentation or the pitch being modified appropriately with better preparation. Remember, VCs are trained to be skeptical and are quick to pick up signals. VCs rarely, if ever, say no to a deal. They engage with entrepreneurs and then disengage because they would have lost interest in the deal or some other deal has caught their fancy. The only thing then that spurs them to action is competition and or customer traction.

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

June 18, 2007

Why it's strongly advisable to have advisors - by Sanjay Anandaram

Over the past several weeks, I’ve met several entrepreneurs. Some young and others experienced. Some have boot-strapped their ventures, others have secured some financing from friends and angel investors. All of them have a dream and the desire to succeed but only very few will. Usually, those that don’t succeed realise that they’ve been chasing the wrong opportunity with the wrong business model and wrong team much much later in the game, if at all. What if they had been made aware of the pitfalls and dangers early on and been prepared to deal with them? What if they had had the benefit of experienced counsel from mentors and advisors? While having mentors and advisors is in itself no guarantee of success, having the right mentors can often times reduce the agony of late unhappy realizations of the state of the business.

What was interesting to me about the entrepreneurial teams I met was the absence of any advisors/mentors who were either directly or indirectly involved. If one looks at entrepreneurs say, in the US, more often than not, entrepreneurial teams have advisors and mentors working closely with them. In many cases, angel investors double up as advisors.

Why are Indian entrepreneurs shy about involving advisors? While the entrepreneurial eco-system here is not as mature as in the US and the culture of mentoring isn’t as widely prevalent, the fact remains that most entrepreneurs are hesitant to have advisors. Some of the hesitation can be attributed to lack of awareness and shyness. The larger reason and more serious reason is due to fear, anxiety, and arrogance. Fear about losing control and influence. Fear of sharing company information with a “third party”. Fear of having to share the pie. Arrogance about knowing it all.

While no man is an island it is even more true that no startup can be built in isolation. The importance of building bridges and relationships cannot be over-stated. The importance of sounding out business strategies, feedback on technology direction, dealing with issues relating to employees, sales & marketing, customers introductions, partnerships and so on with someone who’s experienced can be critical. It is worth considering the setting up of an advisory board consisting of people who bring a diverse set of complementary competencies to the table and who can provide credibility and legitimacy to the fledgling company. There are two types of advisors worth considering: (a) a big name brand individual with an acknowledged set of achievements & expertise and (b) an executive who might not be personally well known but by virture of his/her position in the corporate world can positively impact the startup. Advisory boards are also usually compensated in stock or a combination of cash and stock. These advisors can help you tremendously; so spend quality time in creating the advisory board. Engaging with your advisors and mentors on a regular basis, providing updates, seeking and receiving feedback can prove to be invaluable. Having a shoulder to cry and lean on in times of trouble can be uplifting. Being spoken to directly about the dangers ahead can be critical for success. For this to happen, inhibitions need to be shed; fear and anxiety need to be replaced by confidence, humility and a willingness to learn.

Of late, industry, entrepreneurial and academic groups (including Nasscom and TiE) have started mentoring programmes for entrepreneurs. These programmes are becoming popular but still have a way to go before they become mainstream and become acceptable to all entrepreneurs. In addition, there is a growing number of successful entrepreneurs and corporate executives who can be tapped as mentors and advisors. The benefits of such associations can be enormous and can take the company on another trajectory altogether. While there are issues of the tactical “here and now” that need resolution, it is very important to also build the foundations for what could be a big company. At the same time, being aware of the risks and issues of pursuing one path over another can save many sleepless nights.

Paraphrasing a line from an ad for a popular chewing gum, “Mento(r)s dimaag ki batti jala de!”.

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

June 13, 2007

Network with Top IT Services & BPO Entrepreneurs, Investors @ IB Connect - July 12, Bangalore

IT Services and BPO companies have traditionally been a favorite among investors in India. However, with the rapid maturing and consolidation in these sectors, start-ups and mid-tier firms alike are facing significant challenges. In this context, leading investors and top executives from IT Services and BPO companies will come together at Venture Intelligence IT Services & BPO Connect to network, discuss and share best practices.

Speakers at IB Connect include:
Sashi Reddi, AppLabs

Deepak Kamra and Alok Mittal, Canaan Partners

Sunil Wadhwani, iGate Corporation

Ravi Pandit, KPIT Cummins

Pradip Kar, Microland

N.Krishnakumar, MindTree

Venkatesh Roddam, Nipuna Services

Siraj Dhanani, PharmARC

Rajiv Mody, Sasken

Chandu Nair, Scope eKnowledge

K. Ganesh, TutorVista.com

Hiren Kulkarni, Zensar

Raman Roy, Quatrro*

Dr. Anand Deshpande, Persistent Systems*

Rohit Kapoor, EXL Service*

* To be confirmed


The panels at IB Connect feature discussions between entrepreneurs, operating executives and investors on the following issues:

• How are these sectors going to shape in the next few years?
• Is focus on verticals and niches the way to go for SMEs?
• How can investors differentiate the winners from the crowd?
• What are the challenges for investors in these sectors?

The conference will also provide significant time and structured opportunities for speakers and participants to meet and interact with each other.

Click Here to view more information about this event and register online.