February 24, 2007

The Subhiksha Story

Rediff.com has an interview with R.Subramanian, an IIT and IIM grad who is the Founder & CEO of discount retail chain Subhiksha which is today India's largest organized retail chain with over 500 stores.
We allocated a Rs 5 crore (Rs 50 million) corpus to it and entered the retail business. There was a lot of thought process behind it. We wanted to attract not the top end customer but the aam aadmi.

From our research of three months, we found that consumers prefer buying groceries from closer home. So, we decided to set up 1,000 sq ft shops all across the city and not a 10,000 sq ft big store at one location in Chennai.

The next question was why would he come to our store abandoning the existing store? It had to be the price, because ultimately there is no difference between the branded products like say Boost or Surf or such things. So, we decided to sell branded products at a lower price.

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.

February 20, 2007

Discussion on a VC's "betrayal" of a start-up

Interesting discussion at TechCrunch on "drag along" and other rights that enabled an US firm to forcibly merge (according to TechCrunch) two of its portfolio companies.

Hat tip Sramana Mitra

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.

Marketing Lessons from the Spiritual World - By Sanjay Anandaram

India has been known for its spirituality, swamis and sadhus for as long as anyone can care to remember. Spirituality has been one of India’s most successful exports (Bollywood’s “soft power” notwithstanding). It would be most unusual to refer to the purveyors of spirituality as entrepreneurs but then that is what they, in a sense, are. They are on their own, they undertake their work with a great deal of passion and energy, and actually head organizations that generate serious revenues. Given the vast spirituality “market” it is not surprising to find a bewilderingly large array of spirited entrepreneurs of spirituality. Yet there are only a few that have acquired a pan-Indian or global following. The success of these few therefore offers many interesting marketing lessons to entrepreneurs from the temporal world.

Lesson 1: Unique well defined customer segment
Each guru has a well defined set of followers. There are hardly any overlaps and fewer instances of cannibalization where one guru weans away followers from another. For example, one would be hard-pressed to find, say, a follower of both Sri Sri Ravishankar and Osho. Or of a Baba Ramdev and Mata Amritanandamayi. Each segment is uniquely defined.

Lesson 2: Unique Motifs
Each guru has a unique motif that defines his/her message or persona. For example, Sri Sri Ravishankar has his Sudarshan kriya, Baba Ramdev has his Yoga, Swami Prabhupada had his Krishna Consciousness, Maharshi Mahesh Yogi had Transcendental Meditation, Osho had Dynamic Meditation (most significantly), Mata Amritanandamayi has her unique hugs.

Each guru also has a unique pre-fix or suffix that defines them. “Sri Sri”, “Baba”, “Swami”, “Acharya”, “Mata”, “Bhagwan”, “Ma”, “Maharshi”, “Amma”, and so on.

Some perform “miracles”; Others talk in “holistic” terms integrating everything from Christianity to Zen; Others advocate a back to basics or back to nature approach. But each is unique in its appeal to a target audience!

Lesson 3: Laser sharp initial focus, Growth in concentric circles later

Each guru initially just had a focused simple spiritual message usually of enlightenment, how to live a stress free life, deal with personal angst and so on. Later, as the number of followers grew, the messaging reach spread up and down and across different customer groups. For example, Baba Ramdev, primarily a Yoga guru, now holds forth on AIDS, role of MNCs and fast-food; The Art of Living movement offers spiritual solace to Defence personnel and to prisoners; Deepak Chopra from mind-body medicine to “Seven Spiritual Laws of Success” and “Kama Sutra”. Swami Sukhbodhananda has corporate training programmes.

Almost all gurus today predominantly perform social service reaching out to many tens of thousands of people every day. They have established disciplined and sophisticated structures for co-ordination, command, and control of operations.

Lesson 4: Communication, Branding and Positioning
The communication techniques are interesting as well. For example, some adopt the time-tested formula of having celebrities endorse them (politicians, film-stars, sports personalities). Others use the well-known MLM (multi-level marketing) model where each follower organizes local gatherings (usually a home) where the uninitiated are invited and so on down the hierarchy. Yet others use mass media (e.g. TV) for reaching out to large numbers at a time. Mega events such as meditation camps, international meets on spirituality and consciousness with several national and international dignitaries in attendance. Aggressive pamphleteering, noisy processions and colourful banners proclaiming the arrival or presence of the gurus are employed usually catering to the mass audience.

The creation of the personality cult via the addition of adulatory prefixes and suffixes. For example, a recent banner in a city proclaimed the arrival of “His Holiness Shree Shree Param Pujya (insert guru’s name) ji Maharaj”! Clearly, some organized group of people is bestowing these honorifics and popularizing them.

Usage of modern communication tools such as TV, Events, Audio, Web-sites call for a sophisticated understanding of the role of these tools and the target audiences for each of these media vehicles.

Sample this from the web-site of a spiritual leader with a reasonable name-recall:

“Times of India in their recent poll on “who talks the best” places Swamiji as the one, who tops the list on all counts as the best speaker; The Week magazine acclaims Swamiji as one among the top five best exponent of spiritual knowledge (sic); His other English books are marching best sellers; Swamiji was invited as a dignitary in five different panels at the World Economic Forum in Davos, Switzerland and was a special invitee to the United Nation World Millenium Summit of spiritual Leaders”

Clearly, gaining recognition abroad is an important element is gaining acceptance at home. Indians love things “phoren” and spirituality is no different. Most gurus started out at home, acquired celebrity Indian followers and then acquired foreign followers, which helped increase the following in India; Some like Swami Yogananda and Swami Prabhupada (ISKCON founder), and Maharshi Mahesh Yogi emigrated to the US; However, with India’s rising self-confidence (thanks to the attention in the international arena and recognition by the global press!), gurus like Baba Ramdev have gained immense following in India even with a negligible international following with their simple earthy communication bolstered by savvy TV based messaging.

Well, what do you think of these four lessons?

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.

February 18, 2007

Event on VC investing in Internet-based Services and Mobile VAS

Venture Intelligence, the leading provider of research and networking services to the Private Equity and Venture Capital ecosystem in India, is organizing Internet & Mobile Connect, a roundtable event on Venture Capital investing in the Internet-based Services and Mobile Value Added Services sectors. The event will be held on March 15 in Mumbai.

The Online Services and Mobile VAS sectors have emerged as among the favorite sectors among Venture Capitalists, accounting for almost 50% of all VC investments in the IT & ITES industry. However, there are several significant challenges facing these sectors – including business models, valuations, quality of management, etc. In this context, leading VC investors and top executives from Online Services and Mobile VAS companies will come together at Venture Intelligence Internet & Mobile Connect to network, discuss and share best practices.

The key themes to be addressed include “Internet Businesses: Is the boom for real this time?”, “Mobile VAS: Time to look beyond Ring Tones and Wallpapers?” and “Raising & Leveraging Venture Capital”.

The panels at Internet & Mobile Connect feature discussions between investing and operating executives on the following issues:

• How are these sectors going to shape in the next few years?
• What are the business models that have worked in other markets? Will they work in India?
• What are some of the India-specific opportunities?
• How can investors differentiate the winners from the crowd?
• What are the challenges for investors in these sectors?
• Where are the exit opportunities?

The first panel consisting of experienced investors and entrepreneurs – including Alok Kejriwal of Contests2win.com, Ashish Gupta of Helion VC, Anurag Dod of Guruji.com and Avnish Bajaj of Matrix Partners - will discuss the opportunities and challenges before the Internet-based businesses in India. The second panel – including Sanjay Swamy of mChek, Sandeep Singhal of Nexus India Capital, Arvind Rao of OnMobile and Rajesh Sawhney of Reliance Entertainment - will discuss what the future holds for the Mobile VAS sector with a special focus on new business models. The final panel – including speakers like Nitish Mittersain of Nazara Tech, Probir Roy of Paymate and Ravi Adusumalli of SAIF Partners - will throw light on what VC investors are looking for from Internet-based Services and Mobile VAS companies and what it takes to be a VC-backed company in these sectors.

The event is targeted at executives from Venture Capital funds, Internet-based Services and Mobile VAS companies planning to raise VC financing, and related service providers. For more information about this event, Click Here or email info@ventureintelligence.in

February 17, 2007

Is the market ready - or does it exist - for your product?

Will Price has a interesting post on how, when a company is behind plan, it is important to identify whether the problem is with the market or the company.
If it is the market, there is little chance that more money or new management will change the outcome. If it is the company, additional resources (both capital and human) may indeed impact the outcome and be reasonable.

I have seen some of the smartest people work the longest hours, code round the clock, make the most sales calls, and reap no reward. When the market does not care about your solution, or, worse yet, does not exist, no amount of management talent, hard work, or capital can remedy the situation.

Price goes on to provide a list of key indicators that help identify market failure.

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.

"What valuation do you expect?"

Don't answer that question says Florida VC Dan Rua. And forget bringing it up yourself in a conversation with VCs.
Don't say a dollar figure and don't say a percentage. I repeat, don't say a dollar figure and don't say a percentage.

..You'll probably get one of the following responses:
a) That's great to hear, because we're all about partnering; or
b) That's a load of crap, tell me the valuation you're really thinking.

Even if you get response b), I'd suggest reiterating your primary goal is finding the right partners to build your world-changing company. If you can't leave investors happy with that answer, then, and only then, reference other specific company comparables (not "my friend got X") and how your research uncovered a range of attractive X to acceptable Y values (reiterating that it's about partnership first).

...If you give yourself and your investors time to learn each other a couple things happen. First, you get a better feel for who you're partnering with, and great partners could lower valuation requirements that could have killed you earlier. Second, investors spend more cycles learning you and researching your business. You'd prefer valuation conversations to happen after investors have grown their excitement and vested their time/energy into you. That is the better time to discuss numbers that could work for all parties.

...Because valuation is a relationship and market concept, your biggest levers for affecting valuation are interpersonal and termsheets. Getting VCs to like you first or getting multiple termsheets will reap better results than demanding $20M valuation in the first meeting. If you can resist the temptation to blurt a number, you will be way ahead in building the strongest funding partnership for your company.

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.