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.