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.