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.

June 10, 2007

Marc Andreessen on hiring and firing

Netscape founder Marc Andreessen has a great post on his new blog on hiring and firing at start-ups. Here are his three top ("DCE") criteria for hiring:
I think you can see drive in a candidate's eyes, and in a candidate's background. For the background part, I like to see what someone has done. Not been involved in, or been part of, or watched happen, or was hanging around when it happened. I look for something you've done, either in a job or (often better yet) outside of a job. The business you started and ran in high school. The nonprofit you started and ran in college. If you're a programmer: the open source project to which you've made major contributions. Something. I also like specifically looking for someone who comes from some kind of challenging background -- a difficult family situation, say, or someone who had to work his/her way through school -- who is nevertheless on par with his/her more fortunate peers in skills and knowledge.

Curiosity is a proxy for, do you love what you do? Anyone who loves what they do is inherently intensely curious about their field, their profession, their craft. They read about it, study it, talk to other people about it... immerse themselves in it, continuously. And work like hell to stay current in it. Not because they have to. But because they love to.

Ethics are hard to test for. But watch for any whiff of less than stellar ethics in any candidate's background or references. And avoid, avoid, avoid. Pick a topic you know intimately and ask the candidate increasingly esoteric questions until they don't know the answer. They'll either say they don't know, or they'll try to bullshit you. Guess what. If they bullshit you during the hiring process, they'll bullshit you once they're onboard. A candidate who is confident in his own capabilities and ethical -- the kind you want -- will say "I don't know" because they know that the rest of the interview will demonstrate their knowledge, and they know that you won't react well to being bullshitted -- because they wouldn't react well either.

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.

June 09, 2007

Book on entrepreneurs: How Innovators Connect

I recently received a book titled How Innovators Connect by techTribe Founder & CEO Rohit Agarwal and journalist Patricia Brown, which is based on interviews with 40 successful entrepreneurs and top hi-tech industry executives.

The best chapter in the book, I felt, was the one on how entrepreneurs can learn from their failures. The advise in this chapter from Desh Deshpande (Sycamore) and Umang Gupta (Keynote) was really inspiring and useful.

Other sections that I liked were the ones featuring Phaneesh Murthy of Quintant/iGate (on how he innovated to differentiate the company's service offerings), Emmet Keefee of iRise (on networking and nurturing relationships), Jerry Kennelly of Riverbed Technology (on the advantages of starting a company during a downcycle) and Joe Kraus of Jotspot (on being a trend-spotter than a trendsetter or how "being too early is the same as being wrong").

Given the huge number of books featuring US-based entrepreneurs (including those of Indian origin), I thought it would have been much better if the authors had chosen more India-based entrepreneurs to interview. The book could also have been edited better; a few sections (esepcially the one on the eBay Developers Program) seemed to be a direct cut-n-paste job from corporate brochures.

More information about the book is here. Kiruba Shankar has a podcast about the book with Rohit Agarwal 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 free samples of Venture Intelligence newsletters and reports.

June 08, 2007

Timing the Fund Raising - by Sanjay Anandaram

Timing is everything. In a startup situation, it is sometimes the only thing! Given that all else is equal (ceteris paribus as the economists like to say in Latin), timing is what makes the big difference. There are two aspects to this. One has to do with “speed of execution” while the other has to do with “executing to schedule”.

Raising money from venture capitalists can take anywhere from 2 to 6 months. It is therefore important to have timing down to a pat. A lot of things can go wrong and they usually will! A few things to keep in mind:

• Don’t raise money when you are down to your last paisa. Start the fund raising process when you have 6 months money in the back and when you don’t really need it
• Plan the fund-raising process and have an answer to the question “when are you closing the round?” VCs will want to know when you plan on closing the fund raising. This is an important question and tells VCs whether you have thought through the process. And if the closing date slips, it tells VCs that you are not on schedule. This can increase pressure during negotiations.
• Make sure that you are making progress on the business front while fund-raising. You must have positive news about the business every time you meet VCs during the fund-raising process. E.g. “we signed two more customers”, “we hired a top class VP Sales”, “we’re launching a mobile marketing campaign next week”.

Research the market and the VCs to make sure that the ones you are talking to have an interest in the space your company is in, can invest the amount of money you are seeking, are comfortable investing in companies that are in the stage you are in and so on. Make sure that you are in regular (not constant!) touch with the VCs you want as investors. It takes time for them to get comfortable enough to invest in your company and the more you can do to facilitate the process, the better. In addition, VCs have their preferences for co-investing and would like to bring in other VCs they are comfortable with. Creation of consortia and syndicates of choice takes time and patience.

If you are on your first startup, don’t waste time on excessive analysis and negotiating to death. It is better to get going with your funding and on building your company than on worrying about a few percentage points. The reason is simple. The longer discussions drag on, the greater the risk. Markets change, priorities change. The investment area may become crowded and the VCs may lose interest in your venture. For example, other similar ventures could get funded by other VCs while you are in discussions. This may reduce the attractiveness of funding your venture. Or, the VCs you are in discussions with may find other more interesting opportunities and therefore lose interest. Or, travel schedules and ill-health can upset plans.

If however discussions keep dragging on and on, you should start worrying and looking around for other VCs. Or, start implementing a plan B.

Therefore, you should develop the ability to move in quickly and close a deal. While it is all very well to deal with amorphousness and ambiguity and a startup offers enormous opportunities to deal with both such situations, there needs to be a clear laser like focus on achieving milestones. You should be the person controlling the pace of the negotiations and discussions and for that you need to have a very good understanding of timing. Timing of when you need the money, what you should have achieved and will achieve over the fund-raising cycle, timing regarding when you want the money in the bank.

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.