March 31, 2007

Start-up cliches - By Sanjay Anandaram

Clichés involving the game of cricket are been repeated ad nauseum by commentators and given that the world cup is on, several clichés are being re-cycled over and over again (“glorious uncertainties”, “game is never over till its over” and so on…)

Inspired by the situation, I thought it would be instructive for all, more so for entrepreneurs, to keep a few non-cricketing ones in mind.

a) Genius is 1% inspiration, 99% perspiration: Initially described by Edison, the quintessential entrepreneur, this statement is still very applicable to all entrepreneurs. Many an entrepreneur will tell you that he has a terrific idea, an idea that will change the world and that VCs just don’t seem to want to invest. What the entrepreneur doesn’t realise is that investors don’t fund ideas, they fund businesses that have a real value proposition and are executed by a team that’s willing to invest not just 99% but 100+% of perspiration in making that idea deliver. The execution has to be relentless and continuous. Sixers hit once in a while are less useful than a run a ball played consistently. All of us have ideas. All of us have dreams. But without execution, an idea or a dream remains just an idea or a dream.

b) Don’t drink your own Kool-Aid: This is an American cliché. Just look at the hype and hyper-ventilating media and you would think that the world cup really never had any other destination but India. Unfortunately, the current statistics and data suggest that India are not serious contenders for the cup. The loss to Bangladesh only reinforced this view. When entrepreneurs start believing their own marketing hype, start internalizing messages put out by their own PR about how great they are, start blurring the lines between rhetoric and reality, they are drinking their own Kool-Aid. Many an entrepreneur has come tumbling down just because they couldn’t or didn’t want to look at reality in the face. The dream was more comfortable!

c) You only see the view when you are at the top. The company’s vision and direction can only be set from the top. Of course it is expected that the team at the top has the ability to see the view, to distinguish the forest for the trees, to communicate the vision to all below.
Incidentally, the flip version of this is also important to bear in mind: bottlenecks are usually at the top of bottles! In other words, the success or failure of a venture can almost always be traced to the performance of the team at the top.

d) When the going gets tough, the tough get going. Only when the chips are down do you know the worth of the entrepreneur. Does he/she give up easily? Does he/she believe passionately in the vision of the venture and is willing to sacrifice? Is the entrepreneur listening to signals from the market? Is the entrepreneur pulling out all the stops to make the venture successful?

e) A tortoise only makes progress when it sticks its head out of its shell. An entrepreneur cannot play safe and stay ensconced in a comfort zone. You have to take the risks, make the big bets, and step out into the outside world fearlessly. A comfortably placed corporate executive concerned about protecting his income isn’t quite entrepreneurial material.

f) A good sailor knows he cannot control the direction of the wind so he adjusts his sails to catch the wind. There’s no point complaining about things you cannot control. Focus on the stuff you can control and leverage them to your advantage. If customers aren’t buying your product what can you do to change or modify the product to make it interesting to customers?

g) If the chemistry isn’t right, the arithmetic never works. In other words, make sure that the team you work with, the investors you seek, the customers, partners and employees you interact with are people with whom you can share a bond. Relationships of all types driven entirely by the arithmetic of valuations without any other redeeming feature don’t stand the test of time. On the other hand, relationships built on trust, integrity and competence generate sustained value. Just look around at companies like Infosys.

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.

What other start-ups can learn from YouTube

Deepak Thomas and Vineet Buch have published a case study on YouTube.
YouTube essentially took a problem with a few pre-existing, albeit clumsy solutions, added some engineering ingenuity and lots of creativity to come up with the best working solution. Content suppliers, i.e. those uploading videos could now upload video effortlessly. They could tag uploaded videos with keywords. On the consumption side, by adopting a Macromedia Flash-based video player embedded on a web-page, which played the video almost instantaneously, YouTube eliminated the need for downloads and local media players. Users could now search for videos by keywords, share them by mailing links to the videos, and also rate and comment on these videos. Consequently, popular videos bubbled up to the top in an organic fashion. Notice how, besides the player, other features were essentially attributes of sites sharing pictures, Flicker for example. YouTube was able to adopt what worked in the world of picture-sharing to the world of video-sharing.

...Distributing popular and hard-to-find video clips was clearly a success factor. Clips of the popular, long-running television show, Saturday Night Live was a particularly significant example. A free-form platform that allowed users to upload content had to contend with copyright violations. While this is one of the oft-repeated complaints about YouTube, it should be remembered that the founders decided to go ahead with the idea despite the eventual failures of the likes of Napster and Kaaza. While the ethics of such a strategy would require a lengthier discussion in an of itself, the founders clearly took a chance with something that other entrepreneurs might have balked at.

...YouTube allowed users to easily embed any hosted videos on web pages or blogs. This turned out to be particularly popular with social-networking websites, especially MySpace. The inbound links from these ‘widgets’ also helped YouTube increase its page rank on Google, thereby driving traffic via natural search..

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.

The Temp Option

Economic Times has an article on how start-ups too can benefit by hiring temp workers instead of full-time employees.
Besides lowering costs, temping also helps entrepreneurs avoid being struck with a wrong hire. Mr Sabharwal points out that hiring decisions are critical for startups and says, "Recruiting the wrong people can be truly fatal for a start up unlike in an established company." For many startups the smarter alternative is to hire temps and if they then find people who they think can contribute in the long run to the organisation make those temps permanent. Like in the other companies where the temping staff is absorbed in the organisation, in startups too this is happening. Amit Jain of Cinesprite.com, an online DVD rental firm, says that this has worked well for them with the firm absorbing 20% of the temp staff that it has as full time employees depending on the need and the potential.

...There are some who believe that timing is critical when it comes to the temping decision. This set argues that it is unwise to opt for temping agencies in the very early stages of the business given that numerous sensitive issues are likely to crop up which only permanent employees should be exposed to.

Despite the rising phenomenon there are some who take a contrarian point of view like Deep Kalra, founder and CEO, MakeMyTrip.Com. Mr kalra believes it is better to hire people and keep them on your rolls. The contrarians believe that temps are unlikely to have the same commitment or passion level as those that permanent employees have. And commitment and passion they argue is the lifeblood of all start-ups .


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.

March 19, 2007

Entrepreneurs: Why Younger is Better - By Sanjay Anandaram

It seems like now is the best time to be an entrepreneur in India. It would seem only credible since India appears to be shining for wanna-be entrepreneurs. Capital is available by the double scoop. Yet the refrain from VCs seems to be that there aren’t enough experienced (translation: someone at least in the mid-30s if not more) entrepreneurs. Some commentators opine that VCs should actually encourage and coax experienced corporate executives into becoming entrepreneurs while providing them the supporting environment.

My own view is different. Let me explain.

Indians are extremely conscious not just of power but recognize that it needs to be demonstrated, as Pavan Varma in “Being Indian” so eloquently describes. Power for an Indian flows from caste, class, wealth, favour dispensing, social standing, and as some dual members of the political-mafia club demonstrate from time to time, also from the barrel of a gun. Thus the feudal behaviour that one witnesses all around. From the “sarkari” officials to bureaucrats to politicians. Witness how reverential and deferential the smartly dressed TV interviewer is when talking to someone “higher-up” in the social-wealth-class-power equation. Witness the behaviour of the smartly dressed corporate executive when the security guard refuses him entry into a building on account of not carrying a suitable ID. Witness the grand thrones on which political luminaries are made to sit on during some boring convention or another (while the rest of us have to make do on the plastic chairs!) with colossal garlands around their necks. Witness the mega-cutouts announcing the arrival of politicians and religious leaders into your city. In fact, there are thousands of incidents taking place all around us that such serve to highlight this display of feudal power equations.

Can entrepreneurship really flourish in such a pervasively feudal power environment? One of the key traits of entrepreneurs is confidence. Confidence in their abilities and knowledge, in their business idea and in their convictions. They are not beholden to traditional notions of power based feudal structures. They make their own rules. They are not prisoners of the trappings of corporate success. They are unwilling to be defined by the brand, logo and title displayed on their business cards. They want to carve out their own identity. An entrepreneur is one who undertakes the organization and management of an enterprise involving independence and risk as well as the opportunity for profit. A lot of our entrepreneurs are really businessmen who, notwithstanding their being awarded “Entrepreneur of the Year” awards, in fact passively manage large inherited empires

The experienced executive in today’s corporate India was born sometime in the early late 50s to the late sixties, perhaps even the very early 70s. This was the India that literally flourished on controls, opportunism, patronage, cronyism and corruption. Companies and executives were under no pressure to change or to reinvent themselves. Then in 1991 things changed. The second independence began, this time of the mind and spirit. It was therefore not surprising that the 1st real wave of entrepreneurship took place in the late 90s in India, albeit not very successfully, driven by young, middle class, and educated Indians inspired by the successes like Indiaworld, Infosys and of course from Silicon Valley. The lack of maturity of business models, of investors, of the eco-system all contributed to the less than average run. The second wave has begun now but with a set of differences: there’s a lot more capital available now, India has emerged as a market, there’s a lot more confidence now. Crucially, there are more entrepreneurs now with a lot more experience – 16 years of it - of working and interacting with the world on equal terms. Technology savvy, confident, knowledgeable, well exposed, well traveled, networked, unafraid to make mistakes, are some of the descriptive phrases that are applicable to these entrepreneurs. It is these entrepreneurs that will be the harbingers of true entrepreneurship in India. These entrepreneurs are also the ones that are not awestruck by hierarchical social structures.

In this scenario, VCs will be better off backing these entrepreneurs than coaxing comfortably settled corporate honchos to pursue entrepreneurship. The ability to work with such entrepreneurs and help provide them with adequate supervision will be the true test of VCs. Otherwise, the money raised will be invested not in entrepreneurial efforts that produce the big hits but rather in safer businesses. Certainly not something one needs classic VC funds for.

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.

March 18, 2007

New incubation program: dreamZhunt

Chennai-based IT services company SGS Technologie has launched a "business idea contest" called dreamZhunt.

"The contest is focussed at IT professionals who are looking to kick-start their first business," informs Manoj Kumar.G, one of the event's organizers and Business Manager with SGS Technologie. The event sponsors will provide seed-funding of up to $100,000 per selected company, he says.

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.

Podcasting with Kiruba

Kiruba Shankar interviewed me for a podcast. Check it out!

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.

March 02, 2007

"Change the world and create your fortune"

Knowledge@Wharton has an article based on the ever colorful Tim Draper's speech at the recent Wharton Private Equity and Venture Capital Conference.
Timothy Draper, founder and managing director of the venture capital firm Draper Fisher Jurvetson...urged entrepreneurs to "change the world. That's what it's all about. If you see something wrong, or a little unusual, or something that makes you mad, go change it. Then change it for everybody else. You'll become very wealthy and very successful."

Draper pointed to some of the problems that entrepreneurs should take on: Energy, security, health care, traffic, pollution, war, poverty, education, roads, prisons and airport development. He said politicians, at best, help bring these problems to light; at worst, they create problems.

"Who solves problems?" he asked. "It's business."

Business, he suggested, is better equipped to develop lasting solutions for society's problems than government because it is perpetual, not limited by elections, terms of office, or political boundaries. With advances in telecommunications, national borders are fading away. As a result, governments are now forced to compete with one another to attract capital and develop promising businesses to generate jobs and economic growth.

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.

Speaker list for Internet & Mobile Connect - Mumbai, March 15

Over 15 leading VC investors and top executives from Online Services and Mobile VAS companies will be speaking at the event. The speaker list includes:
Murugavel Janakiraman, Bharatmatrimony.com
Alok Mittal, Canaan Partners
Alok Kejriwal, Contests2win.com
Ashish Gupta, Helion VC
Manik Arora, IDG Ventures India
Anurag Dod, Guruji.com
Avnish Bajaj, Matrix Partners
Sanjay Swamy, mChek
Nitish Mittersain, Nazara Tech
Sandeep Singhal, Nexus India Capital
Arvind Rao, OnMobile
Probir Roy, Paymate
Rajesh Sawhney, Reliance Entertainment
Ravi Adusumalli, SAIF Partners
Mahesh Murthy, Seed Fund
Sandeep Murthy, Sherpalo Ventures
Ashwin Damera, Travelguru

For more information about the event, please visit http://ventureintelligence.in/ev150307.htm

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.

Should VCs buy out angels?

Interesting discussion at VentureWoods between Deepak Shenoy and Roshan D'Silva on this "perennial topic". Here are their first posts (in the comments section):


Deepak Shenoy said,

Alok, true - there is reason to think about why one wants to exit. As a stock market investor, I have made decisions to sell companies at (say) 400% profits, when the company went on towards 1000% of what I bought - yet, I wasn’t sulking in a corner. Because a) 400% is pretty nice and b) I’d reached that comfort level of profits.

Angels may not want to stay the distance, which could be much longer than their cash needs, and if the current valuation is attractive enough for them to exit. As individuals I would imagine that angel investors are the kinds that put in Rs. 10 lakhs to Rs. 50 lakhs in a business - and honestly, there are a number of such people who have this kind of cash lying idle in bank accounts (idle = they don’t need it right now). Such people can be angels, but they won’t be because VCs won’t let them book profits until the final exit, years away. Which again they have no control over because further rounds have diluted their stake too much.

The US has a huge background of such deal flow, but it’s absent in India. I was hoping a VC would take the lead and say that they would fund angel exits here (even partially so) and more angels would come out of the woodwork. We need those angels, if only to make more companies VC worthy…


Roshan D'Silva said,


Hi Deepak,

I think the angels you’re referring to are probably those that fall into one of the two categories:-
1. Purely financial a.k.a the family rich
2. People whose net worth does not afford them the luxury to ‘angel’ - (20k - 100k usd in the bank wanting to angel?? ;-) )

They typically make the usual mistakes - getting in at too low a valuation, adding no value, bickering, neglecting paperwork etc. etc. Category 2 usually in a few years realizes that they’re not in the ‘zone’ and go into other asset classes. For Category 1, it really does not matter.

The really good angels are very focussed on getting their portfolio companies funded and typically their angel rounds are done as debt convertible into equity at a discount to the subsequent round valuation. This also eliminates any negotiation between the angel and the founder and motivates them both to do ‘fair deals’.

For companies (trying to raise money) or VCs (wanting to invest in a company) who is stuck with angels of categories 1 &2 I would never suggest providing an exit to the angels. I would rather make the founder take on debt (which could come from the VC or a new ‘real’ angel) and let him/her negotiate to buy out these guys before the VC round. If the founder’s unwilling to do so, I would want to think along Alok’s lines.

Of course, I’m talking about ‘real’ VC’s investing in ‘real’ companies that can exit at 100mn+ numbers.

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.