March 29, 2011

"Forget biz plans & the competition"

From the Inc.com article titled "How Great Entrepreneurs Think" based on a in-depth survey of 45 US-based conducted by Saras Sarasvathy, a professor at the University of Virginia's Darden School of Business. The article also contrasts the entrepreneur way of thinking versus the corporate executive way of thinking.

Doing & Course Correcting
Brilliant improvisers, the entrepreneurs don't start out with concrete goals. Instead, they constantly assess how to use their personal strengths and whatever resources they have at hand to develop goals on the fly, while creatively reacting to contingencies....That is not to say entrepreneurs don't have goals, only that those goals are broad and—like luggage—may shift during flight. Rather than meticulously segment customers according to potential return, they itch to get to market as quickly and cheaply as possible, a principle Sarasvathy calls affordable loss. Repeatedly, the entrepreneurs in her study expressed impatience with anything that smacked of extensive planning, particularly traditional market research.

..."I always live by the motto of 'Ready, fire, aim.' I think if you spend too much time doing 'Ready, aim, aim, aim,' you're never going to see all the good things that would happen if you actually started doing it. I think business plans are interesting, but they have no real meaning, because you can't put in all the positive things that will occur...If you know intrinsically that this is possible, you just have to find out how to make it possible, which you can't do ahead of time."

...Sarasvathy says expert entrepreneurs have learned the hard way that "having even one real customer on board with you is better than knowing in a hands-off way 10 things about a thousand customers."
"Forget the Competition"
...the study subjects generally expressed little concern about the competition at launch. "Your competition is a secondary factor. I think you are putting the cart before the horse...Analyze whether you think you can be successful or not before you worry about the competitors."

Hat tip: Alok Mittal @ Venturewoods


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. Click Here to learn about Venture Intelligence products that help entrepreneurs reach out effectively to the investing community.

March 22, 2011

"Leveraging Relationships for Hiring and More" - Article by Sanjay Anandaram

This article originally appeared in the Financial Express. Reporoduced with permission from the author.

The young first time CEO looked and sounded pleased. He’d just made an offer to a candidate for his head of Human Resources and the candidate had accepted. After almost a year of searching for the appropriate candidate and after making do with sub-optimal stop gap solutions, it appeared that that search would come to an end. It had happened out of the blue.

The CEO had been contemplating restructuring of his company for a while. This restructuring had been necessitated by the company’s rapid expansion into new geographies, addition of several new lines of business and increased complexity of a rapidly growing business. To help him understand and accomplish this, he wanted to take the advice and guidance of experienced industry professionals. He approached his board of directors and was accordingly introduced to several senior executives. Over the course of the past 18 months, he had met many of them. They all shared their experiences and offered their suggestions. The CEO invited many of them to his company to talk to his young staff about various aspects of company building, of managing business and their learning. All the while, he was grappling with the ever intensifying problem of not having an experienced individual to run his HR function.

He had realized the complexities involved in establishing a top class HR function. One that ensured that his company had an abiding culture and stayed true to its values. It meant hiring someone who shared the vision of his company and who understood that recruitment was but a tiny part of the job of company building. Training, motivating, developing, counseling, performance management, assessments, job rotations, structuring job descriptions, setting monitoring payment and evaluation criteria, employee satisfaction and the like were becoming crucial requirements. The company had far outgrown its initial small core team. New hires, many of them very experienced, were coming on board and the CEO was clear that the culture and values of the company had to be retained and nurtured.

In the course of his conversations with the various senior industry experts, the CEO realized that the current organizational structure and reporting relationships had to change. Decision making had to become more decentralized to ensure flexibility and speed, while retaining some central control to ensure consistency. He engaged with these and other experts in understanding different kinds of organization structures, the pros and cons of these, the kind of maturity and management processes required to make such a structure work. He, most importantly, appreciated the fact that the structure of the company had to fit its strategy and not the other way around. Given his ambitious growth strategy for the company, it soon became abundantly clear that the structure had to change to support this strategy.

The contours of the new structure began to take shape. But to run this new structure would require senior managers who would, in effect be mini-CEOs, responsible for the business in their regions. Where would he hire these people from? Who would in turn help him manage them? The CEO asked for help and suggestions from the industry experts. He was given various leads and suggestions. Some worked, some didn’t. He also realized that the time had come for a structured HR system to be in place run by an experienced HR professional. But where would such a person be found? One who was sufficiently experienced and motivated enough to consider joining a young company by taking stock in lieu of only cash as compensation.

The CEO kept in touch with these industry experts over the course of the many interactions. He also kept in touch with the additional contacts each of these experts in turn provided. And then one day, out of the blue, he received an email from one of the first persons he had been introduced to, almost a year ago. This person being very busy had not had the time to meet with our CEO as frequently as the others. But he had been the recipient of many emails from him and had been updated on the company’s progress or lack thereof. This person, via this email, had strongly recommended and referred a candidate for the position of head of HR to our CEO. The resume looked too good to be true. The CEO wasted no time in reaching out to this individual and before long, an offer was made and an acceptance received.

Going out, meeting and staying in touch with people, leveraging relationships to build new ones, and then aggressively following up to seek advice are what helped our CEO. Doing business is about relationships. Develop them.

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.

"Values, Ownership and Management" - Article by Sanjay Anandaram

“Five years before we took in venture capital in our family owned company, we’d decided that ownership and management had to be kept separate. The chairman of the company was the well known retired Chairman of a very well known publicly listed company. We had independent Board members and the CEO, a family member, was evaluated by the Board regularly and his compensation decided by an independent sub-committee of the Board. There were no other family members employed in the company which was run by competent professionals. This ensured that sticky situations involving reporting relationships, performance appraisals and the like were avoided.

Other family members ran their own companies which had to bid for and secure business from this company as any other company would. All things being equal, we gave preference to our family company. But the operative term is “all things being equal”

These were the words of the scion of a well known family owned company in India. But then how many companies in India can genuinely claim to separate ownership from management? There’s nothing wrong in family members running a company provided they’re competent and there are institutionalized processes (especially in functions like human resources, purchase, finance) that ensure that all decisions are taken in the best interests of the company only however detrimental they may be to individual family members. Decisions that are taken in the best interest of the company are always good for the family as shareholders. However, decisions that are in the interest of the family-owners need not be good for the company – a cursory look at say, lax governance norms for example as they relate to family led decisions in some companies tells the tale. How does one do an honest performance appraisal of another family member? How does the CEO “manage/direct” a family member who reports to him when the family member happens to be also a board member with a hefty ownership of the company? Who will succeed the CEO – is it automatically going to be a member of the next generation or someone who’s the most qualified (which could well be a member of the next generation!). It is jocularly said that in countries like India, ownership of a company is sexually transmitted! Are tax free dividends paid out to owner-family members rather than having profits being reinvested for the growth of the company? What about soft loans to family members from the company? What about asset purchases especially of real estate? Is the favourite brother-in-law coincidentally the CEO of a company that is a major supplier?

These and several other questions that relate to issues of governance need to be tackled head-on by entrepreneurs as they begin to scale their companies. To be sure, some of these issues are not unique to family owned enterprises but are rather symptomatic of companies with lax governance. However, companies with blurred ownership and management roles and responsibilities tend to be also innocent of good norms of governance.

As the Indian economy grows and increasingly integrates with the rest of the world, companies that wish to take advantage of the opportunities will need infusion of large amounts of capital. These large amounts of capital will be provided by private equity funds which are almost all international funds, India being a capital starved country. The experience worldwide has been that the presence of professional investment in companies tends to force high governance standards. In addition, international best practices of governance will be forced upon Indian companies as Indian companies start doing business globally and foreign companies start doing more business in India. Companies seeking to list on stock markets or be bought will also have to ensure that their governance practices are in internationally acceptable.

In such a scenario, it is imperative that even startup CEOs focus on building their companies with the highest standards. Creating value for an entrepreneur should mean more than just financial results. It should mean creating “values” as well.

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, 2011

Mushrooming of Mentors

Deepak Srinath of Viedea has an interesting post on the subject:
...the trend that has left me partly amused and partly concerned is the rapidly growing breed of entrepreneurs who are in the “business of mentoring and incubation”. I have interacted with many such “mentors” over the last few months and barring a few exceptions most have left me with the feeling that they do not have adequate experience or skills to mentor a startup. Some of them are barely out of college themselves and many of them claim to be serial entrepreneur s (on closer inspection, it’s more like ‘serial company starters’, none of which have managed to last beyond a year). It’s extremely worrisome that young entrepreneurs with smart ideas could be signing up such mentors, giving them equity and wasting a lot of time in the bargain.

A good mentor is a critical part of an entrepreneur’s journey. A few tips for entrepreneurs from my own experience –

... 2. You may need multiple mentors on your entrepreneurial journey, for different stages of your venture or for different domain skills. It is likely that you will outgrow a mentor as your business evolves and takes different shapes. Make sure your relationship with the mentor is flexible and not joined at the hip.
3. Decision making should never be delegated to the mentor. The mentor’s role should be to give you perspective and advice, not to make decisions on your behalf.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. Click Here to learn about Venture Intelligence products that help entrepreneurs reach out effectively to the investing community.