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Showing posts from May, 2008

Hiring for Start-ups: Does an IIT/IIM degree matter?

US-based entrepreneur-turned-angel investor Paul Graham has an essay emphasizing why "it does not matter all that much where you go to college".
A recruiter at a big company is in much the same position as someone buying technology for one. If someone went to Stanford and is not obviously insane, they're probably a safe bet. And a safe bet is enough. No one ever measures recruiters by the later performance of people they turn down.

...Back in the days when people might spend their whole career at one big company, these qualities must have been very valuable. Graduates of elite colleges would have been capable, yet amenable to authority. And since individual performance is so hard to measure in large organizations, their own confidence would have been the starting point for their reputation. Things are very different in the new world of startups. We couldn't save someone from the market's judgement even if we wanted to. And being charming and confident counts for no…

Doing Due Diligence on VCs

These days, there is a lot of good advice online – see examples here and here – on raising Venture Capital in the Indian context.

A lot of knowledgeable persons advice entrepreneurs to do due diligence on a VC firm before accepting their money. For instance, here’s US-based investor Bill Burnham on his blog: One of the more unfair aspects of VC fundraising process is that VCs are allowed to take months probing every orifice of your company, but entrepreneurs are expected to make one of the most important decisions of their life in a week or two and often with little or no information. There’s no good reason for this and all entrepreneurs would be well served by taking some time to do some basic due diligence on any investor who has offered them a term sheet.

I suggest, at a minimum, talking to at least two entrepreneurs that the VC has funded and then talking through with the VC (about) A) all the deals they have done and what happened to them (and) B) the current status of their fun…

"Get competing term sheets"

So, you have managed to convince a VC to issue a term sheet? What next? Is it time to celebrate? Not according to VC-turned-hedge fund manager Bill Burnham, who has a post on "4 Things to Do After You Get Your First Term Sheet".

Here's item 1 (emphasis mine):Get a second term sheet: It may sound flip, but this is the single most important thing you should do upon getting your 1st term sheet. Nothing loosens up a VC’s purse strings or makes them more flexible on a particular term than the threat of competition. Without competition (real or perceived) you have very little leverage against a VC. Now getting one term sheet, let alone two, is tough enough, but getting two must be your goal and you must not waiver in pursuit of that goal even after you get the 1st one.

The biggest problem most entrepreneurs have executing on this strategy is that they have mismanaged the sequencing of their fundraising. Many entrepreneurs make the mistake of pursuing an “in order” fundraising…

THE BUSINESS PLAN – PART I - By Sanjay Anandaram

I’m writing this piece from Singapore where I’m on a teaching assignment of a course called Business Plan Workshop at the INSEAD business school. And given the last Indipreneur column, I thought it would be good to also talk in some detail in this and the next columns about one of the more important documents an entrepreneur will deal with (outside of dealing with investment documents and a last will!), namely, the business plan. A business plan gives birth to the start-up. It enables the entrepreneur and the team to envision and plan how the business will be run and how funds will be raised. The business plan addresses the needs of both the investors and the entrepreneurs because both have a similar objective – creating a successful business.

Writing a business plan is easy. Writing a clear, concise and fundable plan is not. Investors are not likely to be impressed by gimmicks or by flashy and flaky presentations. If they are, you probably don’t want such investors.

Clarity of thought,…

Operating Plan or Business Plan? - By Sanjay Anandaram

Often times I meet entrepreneurs who submit a great looking business plan with all kinds of fancy colour pie-charts and trend lines. It is evident that a great deal of time and energy has been spent in creating the plan. The plan contains enormous amount of secondary data about the market, the performance of Indian and U.S. companies in the similar/allied space, their valuations and the like. But precious little in the business plan about the business that’s currently seeking funding!

On the other hand, I also meet entrepreneurs who submit a non-colour 10 page stapled-together document without any fancy pie-charts and trend lines. Even more of them simply send in a presentation which essentially talks in simple language of the following:
•What is the problem that is being solved and who is experiencing it
•How is the problem being currently solved and the problems with the current solutions
•How will the company deliver a strong competitive solution and why will it win
•How will the busi…