December 27, 2015

Do You Know The "Speed" Type of Each Team Member?

D. Shivakumar of Pepsico India has a nice presentation type summary in Founding Fuel from the book "Move Your Bus" by Ron Clark. The book classifies team members into high performers ("Runners" - who consistently go above and beyond what is required.), the dependables ("Joggers" who do their jobs well without pushing themselves), average workers ("Walkers" who just get pulled along) and deadweights ("Riders" - who put their feet up and slow down the whole enterprise).

Here from the slides are the characteristics of "Runners"...
Runners bring positive energy 
Runners carry the load and provide momentum. They come early to work, never complain and bring a positive energy. 
Runners go for excellence
Runners are driven by the goal of professional excellence and take pride in contributing to an entity that wants to be top notch. Their impetus to work hard isn’t led by personal accomplishments, but is more about the good of the organization as a whole.
and what Leaders need to do keep them inspired - because "Having a runner maintain speed is far more important for an organization than trying to get a rider to walk":
Allow runners to shine and hold the spotlight for them...
Keep a runner’s spirit high As a leader, don’t break the runner’s spirit. Let him be even when you see some slippages—he will bounce back. But challenge him. Runners need coaching in terms of working with slower colleagues and that frustrates them. 
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

November 24, 2015

Debt as a Funding Option for Indian Startups

From an article on the IIM-A CIIE blog based on the experience of Flick2know and Revive, two incubatee companies of CIIE which have recently raised debt fund for their ventures (both from SIDBI):
Typical private debt funders provide loans in the range of Rs.5-25 crore per transaction at an interest rate of 15-17%, while govt. and govt. supported institutions provide as low as Rs 1 crore per transaction with interest rates starting from 9% for startups...Siddharth, for example, recounts from his recent experience of raising debt from SIDBI. Initially, they were hesitant about considering Revive, given the non-generic business model even though they had a revenue model in place. Revive took almost 1.5 years to raise debt from SIDBI under a scheme which is co-supported by DST for MSMEs with an interest rate of 5% per annum, although earlier they were considering to go with the Credit Guarantee Scheme.
As far as the criteria of selection is concerned, Divir mentions that unlike equity funders which look for startups with high growth trajectory, debt funders often seek a business that has minimum risk and proven financial performance. Siddharth adds, “debt-fund providers tend to prefer the ones with considerable market traction.” At the very least, there will be intensive scrutiny of last the three years financials, fine detailing of the projected financial model, and statutory compliance checks...“Patience is the key,” says Divir. One has to be clear why the fund is being raised with a clear utilization plan, and once the process commences, one has to patiently cooperate with the funding agency through the long-drawn process that debt funding entails. One also has to be ready for the extensive documentation and reporting that must be done during the life of the debt fund raised. “Lastly, a startup should only raise what it requires in debt, not a penny more, not a penny less,” he concludes.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

October 21, 2015

"Treat Complaints as Free Market Research"

From the summary of a "10 Tips for Entrepreneurs" speech by AirAsia co-founder Tony Fernandes in Digital News Asia:

Don’t be scared of complaints
Complaints are actually free market research. Someone took the effort to write to you to tell you where things went wrong and how they should be improved. These are things that companies pay a lot of money for consultants to tell them that same thing.

So we treat every email preciously.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

October 19, 2015

All About Acquisitions

Cross posted from the Entrevista blog:


Jeff Seibert, a techie who founded one company while still a student at Stanford and sold it to Box and then founded and sold another company to Twitter (where he still works), describes - in this returning to campus talk (at Stanford eCorner)  - "what went well and what didn't during the acquisition of his earlier startups by big-name technology companies, stressing the importance of culture fit, maintaining your team's trust throughout, and continued investment in growth after being acquired. Seibert also explains how an acquisition isn't always the best exit strategy for a promising startup.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

September 28, 2015

Sridhar Vembu on Competing with Companies Raising "Series QE" Funding

From the article by the Zoho founder in Economic Times:
Another day , another hot tech company raises $500 million (or is it a billion?) in Series D, Series E -I propose we just call all of it Series QE, because that is where all the money comes from anyway , right? 
..If you are in one of those hot companies burning cash, enjoy the ride as long as it lasts--and make sure you have a safety net if, heaven forbid, something bad happens. But what about companies that cannot or don't want to raise that kind of money?
...In the world of business and finance, following fashion is the path to the poorhouse. Avoiding the fashionable location, the fashionable field and, dare I say , fashionable employees, may be the best way to survive a bubble.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

September 21, 2015

Investment Banking Terms

Extracts from Mukund Mohan's post titled "What to negotiate on your investment banking advisory engagement letter":

Most bankers typically charge between 2% (highly unlikely, but possible if you are a hot company, with a high probability of sale at a large price) to 7% (smaller transaction, < $5 Million). 
...Term of the agreement: Since most M&A transactions take 3-6 months, these agreements will last at least for that duration. Most agreements also specify that if your company gets sold for 6-12 months after the start of the engagement, the investment bank will likely get a portion of the sale, even if they did not make the introduction or help negotiate the final sale. While many will claim it is standard to have a 12 month clause, there is no “standard” – it is all negotiable. 
The engagement fee or retainer: To help prepare your documents, pitch deck and start to position your company, the company will ask for a retainer fee between 10% and 20% of the expected final sale price (or about $25K to $100K) – whichever is lower. This fee is purely for them putting the time and energy to get your documents together and is independent of whether they final sale happens. If your company is “hot” many will waive this fee. If you are looking to sell, expect to pay this amount – 50% before they start and 50% after 3 months of the final completion of the agreement whichever is earlier. 
...Other considerations. If the buyer directly does not approach you, then in a lot of cases, you will find them to want some protection clauses, such as 3 year commitment for the founders to stay at the company etc. To ensure this happens, they will have an “earn out” amount associated with the sale. That is usually counted as part of the acquisition price, but is paid over time. An investment banker, typically will not have the patience to wait for that period of time or control over the longer term outcome, so they will want their “fee” to be paid in full for the net amount. That’ s something you can negotiate as well.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

September 01, 2015

When Bootstrapping Goes Out of Fashion


Source: NextBigWhat. Also read the related post on Bootstrapping by Ashish of NBW

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

July 29, 2015

Why a VC Pitch Should be like a James Bond Movie

From a blog post by Aaref Hilaly of Sequoia Capital titled "How to Present to Investors":
Everyone who watches Bond loves the opening sequence, before the titles come on. There’s suspense, action, and unbelievable stunts – in essence, those first 5 minutes bring home why you love Bond, and that keeps you going through the next 2 hours of nonsensical plot twists. 
In the same way, you need to convey the main reasons why an investor should love your business in the first 5 minutes. We found the best way to do that is to open with 3 slides:  
1.What’s changed? Explain what’s the discontinuous shift, break-through, or innovation that opens the window to create a substantial new company. 
2.What you do: A one-sentence explanation of what your company provides to capitalize on that big change. It still surprises me how often we can get 20 minutes into a meeting without a clear picture of exactly what a company does. 
3.Fast facts: Lay out the key metrics for your business: when were you founded? How many employees? What stage of development / market traction? What are you looking to raise? This helps the investor put the rest of the presentation in context.
Related: Another post on the Sequoia blog titled Writing a Business Plan.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

May 08, 2015

A Day In The Life of An "Aam Entrepreneur"

From an article in Economic Times by Anuvab Pal:
Judging all Indian businessmen by the top 15 billionaires is like judging every website as if it were Facebook. The bulk of India’s businessmen and entrepreneurs are people you’ve never heard of, are not politically connected, and no one puts them on any magazine cover. They struggle daily just to keep their enterprise open, make about the same as a middle-class employee of a corporation, and often fail. After bank loans, overheads, legal costs and employee salaries, they are often more common than the common man protesting outside his or her office.

Doing business in India is insane. Ask any entrepreneur and they’ll tell you it’s like fighting a small war every day. And that’s just to manage things nothing to do with the business: flip-flopping regulations, needling competitors, litigations, some infrastructure collapse. And then, at some point in the day, maybe the evening, they get to the actual business with its own crises: absent employees, irate customers, some online review with false accusations, stolen money, stolen inventory.

...A small businessman who runs three restaurants explained to me, “Forget a Swiss bank account. I can’t even open an HDFC Bank account. I don’t know who the media thinks we are when they say businessmen are making millions and looting the country. Just today, I had to pay three bribes, solve three internal fights, two cooks resigned, deal with a Neft issue that blocked delivery from our supplier. And it’s just 7:00 am.”

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

April 25, 2015

Declaration of Independents: A New Venture Funding Model Without the Exit Pressure

Indie.vc is a new experiment (in the US) that provides equity like capital to founders in return for cash distributions from profits instead of needing to sell out or taking their company public.

The philosophy:
There’s a mythology that entrepreneurs need to take VC money to hit the big time. While it’s true that some companies really do need outside capital, there are many examples of great companies that have reached revenues of hundreds of millions of dollars, or even gone public, without ever taking in capital, or taking it in only at a late stage, when they’d already created a high valuation by bootstrapping the company.
...Like cement, the cultural foundation for new projects and companies sets early. Those who focus on raising outside capital and achieving fundable milestones have a very difficult time getting off that VC treadmill. Those who focus on creating value for customers and generating positive cash flow from the very beginning are able to make their own decisions independent of competing outside interests.
Can companies today who plan to stay independent and bootstrap their business be competitive in a world awash with Silicon Valley startups and Sand Hill Road cash? Can we build a new kind of startup community that values independence and a DIY work ethic?
The Methodology:
Traditionally, technology investors only get their money out when you sell out (another term for this is a “Liquidity Event”). An investment from IdVC doesn’t preclude you from selling, but in the event you stay independent, our investment will get paid out as distributions from cashflow over time.  
...Initially, we will get 80% of those distributions while the founders take 20% until our initial investment has been returned 2x. At 2x the model flips to 80% to founders, 20% to inde.vc until we’ve received 5x our investment. Distributions to indie.vc are capped at 5x. 
Only if and when you choose to raise more money from traditional investors or sell out do we become shareholders in your company.
More detailed summary of the terms are spelt out here. A model for how the cash distribution will work is here.

More about the "Declaration of Independents" by Bryce Robeters here.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

March 02, 2015

Under Promising & Over delivering is for Amateurs?!

Clearly, our entrepreneurial ethos and role models are going through a massive generation change. The quotes from Infosys founder N.R. Narayana Murthy that entrepreneurs in the 1990s took to heart included:

``Under promise and over deliver. Investors respect this.'' (On why Infosys gets the kind of valuations it does) 

"Revenue is vanity; profit is sanity; cash is reality"

and

"PSPD: Predictable, Sustainable, Profitable and De-risked"

Cut to 2015. Mukund Mohan, Head of Microsoft Ventures, writes:
Amateurs under promise and over deliver. They are the ones I hear always complain about valuations. They fail to realize that the “professional” entrepreneur friend they have is growing at an insane rate, but they choose to only compare “valuations” and dilution.
And what do the "Professionals" do to make "investors chase them"?
Professionals over commit and outperform. They are the ones that get the best valuations and are diluting very little. They push their entire team to crush already high expectations. They dont heed the “research” that says that it does not pay to over deliver. They crush their metrics on all accounts and deliver growth that’s off the charts.
The times are indeed changing. What do you make of this?

 Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.

January 18, 2015

The Science and Art of Finding a Co-Founder

Extract from INSEAD Prof. Vissa Bala's article in the Economic Times:
While complementary skills and social capital matter, it is good to remind ourselves that the entrepreneurial journey is fraught with uncertainty. When times are tough and there is no light at the end of the tunnel, the founding teams that persist and press on regardless are the ones with shared values. So it is critical that your co-founders are as passionate as you are about the opportunity or dream that you are pursuing; that your co-founders share with you the same convictions about what your venture stands for and how you build it.

...Shared values make it much more likely that the founding team builds chemistry and trust; these elusive qualities are essential so the team can handle the pressure cooker environment of a start-up. You have to ask yourself: Can I survive being in the same room together with this person for 72 hours at a stretch to handle a crisis, without biting his or her head off? Because if there is one thing we know for sure about building a growth venture, a crisis that will require long hours at work may be lurking around the corner, just when you least expect it.

...Given that it is difficult to find a co-founder who is a perfect match on every criterion, it is often better to run with a 'good enough' match and execute a founders' agreement or a shareholders' agreement to govern the principles of the relationship.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.