The Startup Journey

Will Price reports from Microsoft's VC Summit in Mountain View on what MSFT - according to its CEO Steve Ballmer - looks for when it considers acquiring a company: * technical innovation with impact * protected IP (patent portfolio) * market understanding * engineering excellence * alignment with sales capacity (can you sell it?, do you know how to sell it?) * timing and tenaciousness * understanding of value chain and how to partner to win Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Jeff Cornwall points out quite rightly that "in the rush of meeting orders and collecting enough cash for payroll, many entrepreneurs don't take enough time to celebrate accomplishments." But why is celebrating important? Celebrating on-going accomplishments is a way of building a positive, growth-oriented, and hopefully 'fun' culture within your business. Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Advice from a recent panel discussion organized by IBD Network on prepating your company for M&A: * Don't... o ... run your company without contemplation of a sale o ... sell from weakness, not from strength o ... be piggy: don't expect to double the initial bid o ... tip your toes in the M&A pond: be in or be out * Issues that make buyers walk away from a deal: the buyer's lack of comfort that may not stem from anything as dramatic as fraud or misrepresentation, but from a feeling that the seller's processes are not solid * Valuation o Sellers tend to use public market comparables or deal comparables: they are easily obtained and tend to increase the valuation o Buyers prefer to use multi-year discounted cash flow (DCF) analyses * Structuring deals o Buyers do small deals for cash, not for shares; if they want IP or a team, they will structure the deal as an asset purchase ...

Wonder why VCs place more emphasis "on the secondary stuff" - like what you and your other team members have done before - rather than your actual product or service? Kevin Laws has an interesting explanation and analogy - to the mating behavior of peackocks!: Are you really worth $2 million more the day your first two customers write $10,000 checks? No, you’re worth $20,000 more. However, both a bad company and a good company can claim that they will sign up two paying customers in the next month. Only the good company can actually show you the checks a month later. Before you had the check, you were facing the “uncertainty discount” – you might be a bad company (or more likely, a well intended but overconfident company). That’s why VCs pattern match on credibility factors when deciding to spend more time with a company rather than diving directly into the details. When having such a wide selection of available mates, sorting out the good from the bad can be a matter of loo...

Business Week has a nice article explaining how a sales person can refuse to pay the bribe - and still make the sale. Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

There's an interesting debate on this topic at the alarm:clock blog . Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

VCs ask entrepreneurs a ton of questions - including proof - about their business before cutting a cheque. Jeff Bussgang provides entrepreneurs a list of things that they need to find out about a VC firm before taking money. Obviously, entrepreneurs who are about to miss payroll a couple of months down the line cannot afford this luxury. It pays to follow the rule: raise VC money only when you don't really need the money. So, if you find yourself pitching a VC firm and wondering how they'll make their decision, there are a few important questions to get answers to while you're fundraising: 1) Who is the partner who would serve as the deal champion? Associates and Principals don't typically have carry, so they can't make investment decisions without a partner's support. Junior partners with small slivers of carry may need senior partners to closely oversee the diligence and decision-making process. 2) How long has that partner been with the VC firm? Are they ...

Business Standard has an interesting article on the above topic based on a survey conducted by Subodh Bhat and Richard McCline of San Francisco State University: The respondent entrepreneurs were motivated primarily by the desire to create something new, the desire for autonomy, wealth and financial independence, the achievement of personal objectives and the propensity for action ('doing'). The excitement of entrepreneurship was another major motivator -- this was nicely captured by one comment: "We are not sure what's coming down the curve but it is a thrill." Importantly, most entrepreneurs stressed that the objective was never money for its own sake. They wanted to leave a legacy in the form of a profitable long-lasting business. Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Paul Allen points to a great resource page on the US NVCA's (National Venture Capital Association) web site hosting a set of public domain model legal documents including a model Term Sheet, Stock Purchase Agreement, Certificate of Incorporation, Investor Rights Agreement, Voting Agreement, Right of First Refusal and Co-Sale Agreement, Management Rights Letter, Model Opinion Letter, and Model Indemnification Agreement. Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

According to BusinessWeek's Deal Flow blog, Michael Moritz, a general partner at VC firm Sequoia Capital and an early investor in Google, Yahoo! and Cisco, while speaking at the VentureOne conference in San Francisco told a story about Google that demonstrated why VCs always say they invest in entrepreneurs or ideas--and not business plans. As you might know, Google started out thinking it would sell its technology to corporations for internal use. After a year or two, that plan clearly wasn’t working. So the entrepreneurs started casting around for another strategy. "There is nothing like a declining cash balance to focus the mind," Mortiz quipped. Google's founders noticed the success of GoTo (later renamed Overture and bought by Yahoo) and set out to improve on its paid-search model. The rest is history--and so is Google's original business plan, which, to the founders' credit, they never formalized. When evaluating a nascent startup, Moritz doesn't lo...

Jason Calacanis has a great post on the three things that entrepreneurs need to succeed: The older I get the more I realize that business is about three very basic things: 1. Hustle 2. Passion 3. Resiliency You have those things it really doesn’t matter what the idea is… you can change your ideas all day long, in fact evolving is what you’re supposed to do in business. However, you can’t substitute hustle, passion, or resiliency. Aside: I absolutely agree on Passion and Resiliency. But, I didn't fully understand what Jason meant by "Hustle" and hence bunged it into Dictionary.com to get the following results: 1. To jostle and push. 2. To work or move energetically and rapidly: We hustled to get dinner ready on time. 3. To act aggressively, especially in business dealings. 4. Slang. 1. To obtain something by deceitful or illicit means; practice theft or swindling. 2. To solicit customers. Used of a pimp or prostitute. 3. To misrepres...

I got the following unsolicited email today: I hope this finds you well, as you may already know, we specialize in assisting companies in Going Public. We also assist with Private Placement preparation. The President of our company is a very experienced securities and corporate law attorney. Many people are not aware that any company can go public. Please go to see our site to receive our Advantages of Going Public Report and our Go Public Report. We would like to propose a joint venture with you. If you or an associate of yours is interested in taking a company public, please let us know. We are happy for you to be very generously compensated for any referrals. I wish I could convey, all the many benefits of going public in a letter. I'm not sure if you can imagine how valuable and powerful a public company can be in achieving your goals and objectives. We look forward to developing a long term business relationship. Sincerely, Shaun Anthony http://www.hipub.net/ #CSDGI-MW We als...

Quite a few VC bloggers have responded to Paul Graham's essay on "The Unified Theory of VC Suckage". "I do not aspire to defend VC's. Like everything else, there are good people and bad people, good Germans and bad Germans, and good VC's and bad VC's," says Globespan Capital's Venky Ganesan "I won’t even try to defend my VC brethern since Paul’s theory is sound in many ways. He admits that he’s met a few VC’s that he likes, so there must be something messed up in the universe somewhere," offers Mobius VC's Brad Feld . Fred Wilson of Union Square Ventures refers to Feld's days as an entrepreneur, when his mantra was that all companies sucked in servicing their customers at some level and the goal for his company was to suck less. Entrepreneurs are always going to think that VCs suck at some level. But clearly some VCs suck more than others. If you must fund your company with VC money, it pays to do your homework and find the...

Karen E. Klein, a BusinessWeek columist offers sound advice to a question from a wannabe entrepreneur who wants to start a 3-D animation and visual-effects company: Most would-be entrepreneurs..,are experts in their craft and have good educational backgrounds, but they know little or nothing about accounting, pricing, making cost-projections, marketing, strategic planning, or employee management -- all crucial to business success. The article points to the US government's Small Business Administration Web site which includes a survey that will help size an individual's suitability to entrepreneurship, a guide to writing a business plan, and tips about financing. Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Tom Evslin has a great 4-part series under the above title. An Extract from Part 3 , "Managing product development projects": Everyone knows about the “killer features” which propel software products or websites to stardom. Much more common are the unneeded features which destroy schedules and kill development projects. Evslin’s Law #1 is that the time required to complete software is proportional to the square of the number of features. Law #2 is that schedule predictability decreases in proportion to the square of the length of the project. Quite literally, a project with too many features will never be completed. To get software projects done with a modicum of predictability, make three lists: * Priority One are those features without which the product couldn’t possibly ship – printing for a word processor is a good example. * Priority Two are highly desirable features. * Priority Three are nice-to-haves... If you are managing version 1.0 of something, it is...

While the incubation programs at several of the country's business schools are figuring out their model, NirmaLabs , located in the Ahmedabad, Gujarat based Nirma University campus, has come up with an unique model that actively seeks out and markets itself aggressively to entrepreneurs. NirmaLabs is taking out prominent advertisements campaign in leading business magazines as part of its efforts to seek out "individuals (and) groom them to be a global player in select high tech fields, and incubate them to create viable high tech ventures by providing a nurturing environment and needed support." More from the NirmaLabs web site : NirmaLabs is a not-for-profit Section 25 Company set up by Nirma Education and Research Foundation (NERF). NirmaLabs has been established with an objective to nurture talented individuals in their pursuit of high-tech, knowledge-based wealth generation. NirmaLabs has a corpus of over Rs. 5 crores earmarked to incubate promising individuals and ...

Paul Graham , co-founder of ViaWeb (acquired by Yahoo for $50 million), has figured out why (most) VCs are jerks. The problem with VC funds is that they're funds. Like the managers of mutual funds or hedge funds, VCs get paid a percentage of the money they manage. Usually about 2% a year. So they want the fund to be huge: hundreds of millions of dollars, if possible. But that means each partner ends up being responsible for investing a lot of money. And since one person can only manage so many deals, each deal has to be for multiple millions of dollars. This turns out to explain nearly all the characteristics of VCs that founders hate. It explains why VCs take so agonizingly long to make up their minds, and why their due diligence feels like a body cavity search. With so much at stake, they have to be paranoid. It explains why they steal your ideas. Every founder knows that VCs will tell your secrets to your competitors if they end up investing in them. It's not unheard of for ...

A must see presentation from the famous KPCB partner behind Amazon.com and Google. Just one extract: Entrepreneurs do more than anyone thought possible with less than anyone thought possible UPDATE: The fact that Doerr celebrates entrepreneurs as the real heroes (and does not behave like a celebrity himself), earns him respect from even those folks who hate the VC breed in general. "I've met a few VCs I like. Mike Moritz seems a good guy. He even has a sense of humor, which is almost unheard of among VCs. From what I've read about John Doerr, he sounds like a good guy too, almost a hacker," allows Paul Graham , co-founder of ViaWeb (sold to Yahoo for $50 million), in his recent article attacking VCs titled "A Unified Theory of VC Suckage". Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Paul Graham , co-founder of ViaWeb (acquired by Yahoo), has a nice article on starting a start-up. Some Extracts: On Ideas An idea for a startup, however, is only a beginning. A lot of would-be startup founders think the key to the whole process is the initial idea, and from that point all you have to do is execute. Venture capitalists know better. If you go to VC firms with a brilliant idea that you'll tell them about if they sign a nondisclosure agreement, most will tell you to get lost. That shows how much a mere idea is worth. The market price is less than the inconvenience of signing an NDA. Another sign of how little the initial idea is worth is the number of startups that change their plan en route. Microsoft's original plan was to make money selling programming languages, of all things. Their current business model didn't occur to them until IBM dropped it in their lap five years later. Ideas for startups are worth something, certainly, but the trouble is, they'...

Joe Kraus , co-founder of search-engine firm Excite, has a nice post advising entrepreneurs to pay heed to The Long Tail phenomenon and "think about how to serve millions of markets of dozens instead of dozens of markets of millions". "The most interesting, transformative businesses that have been built over the last decade and that will be built over the next one are going to operate in and make money from the long tail. Google, eBay, Amazon, Rhapsody, Netflix, iTunes. What do they all have in common? They all work the long tail and they’re all radically changing the dynamics of their more traditional businesses." Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.