The Startup Journey

Rediff.com has an interview with R.Subramanian, an IIT and IIM grad who is the Founder & CEO of discount retail chain Subhiksha which is today India's largest organized retail chain with over 500 stores. We allocated a Rs 5 crore (Rs 50 million) corpus to it and entered the retail business. There was a lot of thought process behind it. We wanted to attract not the top end customer but the aam aadmi. From our research of three months, we found that consumers prefer buying groceries from closer home. So, we decided to set up 1,000 sq ft shops all across the city and not a 10,000 sq ft big store at one location in Chennai. The next question was why would he come to our store abandoning the existing store? It had to be the price, because ultimately there is no difference between the branded products like say Boost or Surf or such things. So, we decided to sell branded products at a lower price. Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider ...

Interesting discussion at TechCrunch on "drag along" and other rights that enabled an US firm to forcibly merge (according to TechCrunch) two of its portfolio companies. Hat tip Sramana Mitra Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.

India has been known for its spirituality, swamis and sadhus for as long as anyone can care to remember. Spirituality has been one of India’s most successful exports (Bollywood’s “soft power” notwithstanding). It would be most unusual to refer to the purveyors of spirituality as entrepreneurs but then that is what they, in a sense, are. They are on their own, they undertake their work with a great deal of passion and energy, and actually head organizations that generate serious revenues. Given the vast spirituality “market” it is not surprising to find a bewilderingly large array of spirited entrepreneurs of spirituality. Yet there are only a few that have acquired a pan-Indian or global following. The success of these few therefore offers many interesting marketing lessons to entrepreneurs from the temporal world. Lesson 1: Unique well defined customer segment Each guru has a well defined set of followers. There are hardly any overlaps and fewer instances of cannibalization where one...

Venture Intelligence, the leading provider of research and networking services to the Private Equity and Venture Capital ecosystem in India, is organizing Internet & Mobile Connect , a roundtable event on Venture Capital investing in the Internet-based Services and Mobile Value Added Services sectors. The event will be held on March 15 in Mumbai. The Online Services and Mobile VAS sectors have emerged as among the favorite sectors among Venture Capitalists, accounting for almost 50% of all VC investments in the IT & ITES industry. However, there are several significant challenges facing these sectors – including business models, valuations, quality of management, etc. In this context, leading VC investors and top executives from Online Services and Mobile VAS companies will come together at Venture Intelligence Internet & Mobile Connect to network, discuss and share best practices. The key themes to be addressed include “Internet Businesses: Is the boom for real this time?...

Will Price has a interesting post on how, when a company is behind plan, it is important to identify whether the problem is with the market or the company. If it is the market, there is little chance that more money or new management will change the outcome. If it is the company, additional resources (both capital and human) may indeed impact the outcome and be reasonable. I have seen some of the smartest people work the longest hours, code round the clock, make the most sales calls, and reap no reward. When the market does not care about your solution, or, worse yet, does not exist, no amount of management talent, hard work, or capital can remedy the situation. Price goes on to provide a list of key indicators that help identify market failure. Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsl...

Don't answer that question says Florida VC Dan Rua. And forget bringing it up yourself in a conversation with VCs. Don't say a dollar figure and don't say a percentage. I repeat, don't say a dollar figure and don't say a percentage. ..You'll probably get one of the following responses: a) That's great to hear, because we're all about partnering; or b) That's a load of crap, tell me the valuation you're really thinking. Even if you get response b), I'd suggest reiterating your primary goal is finding the right partners to build your world-changing company. If you can't leave investors happy with that answer, then, and only then, reference other specific company comparables (not "my friend got X") and how your research uncovered a range of attractive X to acceptable Y values (reiterating that it's about partnership first). ...If you give yourself and your investors time to learn each other a couple things happen. First, you g...

At an event last week, I learnt that Nokia produces about 25million cell phones in its factory in Sriperumbadur. This by itself was not amazing but the fact that Nokia went from receiving barren land to setting up a factory to creating a supporting network of suppliers and vendors to rolling out its first phones in 23 weeks i.e. in less than 6 months. Contrast this with the situation in many public projects where large sums of money are spent with nothing to show even after 23 years, let alone 23 weeks! For example, the Bangalore International Airport was first conceived in 1991, the MOU was signed in 1999, the construction work commenced in 2005 and the first phase is expected to be thrown open to the public (fingers crossed!) in April 2008, a good 17 years after project conception! Naturally, costs of constructing not just the airport but also related infrastructure like approach roads have escalated, technology has changed dramatically, and estimates of passenger traffic have had ...

VentureBeat has an invited article by Charles Moldow of Foundation Capital on why entrepreneurs should not be seeking VC financing unless they clearly want - and their product idea is big enough in scope - to aim for the "home run". HotFeature.com has 10 employees and the founders each own 35% of the company. They pitch me on the idea and I agree with their assessment that consumers want and need HotFeature.com. They have raised $1.5M in angel money to date and have given up 20% of the company to investors. They require another $10M to grow their audience and build brand. Here’s where things get interesting. I point out to the founders that they could probably sell the company today for $20-$30 million and that they would each make $7-10M which is not bad for a few years of work. If they take $10M from VCs at a $15M pre-money valuation and create an option pool for the next 30 employees (assume 15%), they each now own less than 20%. To make the same $10M, the co...

Bob Pritchett has a post that helps distinguish managers and entrepreneurs based on an experience of a business owner who deciced to sleep overnite at the office floor instead of paying a premium to get a locksmith repair the lock at a late hour. (Please note the entrepreneur was also resourceful enough to have his wife drop off a bed roll!) As you grow a business you learn to delegate. You give other people some of the chores you used to do yourself. You become a manager. But in times of crisis you can distinguish managers and entrepreneurs. Entrepreneurs will sleep on the floor. Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

That cricket is a religion in India is a cliché. That cricket exists as an “international” sport largely because of India is a fact. More people, perhaps, play cricket in Mumbai’s Shivaji Park than there are first class cricketers in Australia. Yet how is it that the country where its been played in for over 100 years, that has tens of millions playing cricket, many more fanatical millions following it, that generates billions of dollars, who’s media gets on hyper-drive when India plays, that provides relevance to sundry has-beens and wanna-bee experts, that has one of the world’s richest sports bodies “controlling” the sport, does not have a world dominating team like the Australian team? Especially when there are only 8 countries in the world really playing the sport! How is it that not one noteworthy innovation in cricket has emerged from India – be it in technology (e.g. stump-cams, hawk-eye, snickometers), team selections (e.g. separate teams for one-dayers and test matches), scor...

Knowledge@Wharton has an interview with Richard Fuld, CEO of Lehman Bros on how he transformed a sagging firm. First, leaders must understand their business. "Know how the pieces fit," he said. "Read. Network. Connect the dots. Anticipate. Try to limit the surprises; surprises kill you." Leaders who have done their homework make it safe for others to follow, he added. "Leaders earn the right to lead." ...Fuld noted he has been with many of the same top managers for 22 years and expects them to push back when they disagree with him. When he has to make a tough call he asks them: "Does anyone feel this decision would be disastrous to the firm?" Unlike Bobbie Lehman, Fuld never lets managers who disagree square off directly. The most dissension he will tolerate is an agreement to disagree. "What I need is peace in the family," he said. Finally, he noted, it is important to lead by example and to know when to give managers lower down in th...

“How many national scale, socially relevant, market oriented, impact making businesses can you name in India?” is a question that I asked at a recent gathering of friends. This is partly due to the fact that the only answer that springs to my mind is “Amul”, partly out of a certain confidence that the other person too cannot name any other business and partly out of a genuine desire to know. This question has intrigued me for some time now. Why haven’t there been many more Amuls in our country? God knows there are enough and more social problems to be solved! Amul was created by government initiative and by the passion of people like Dr Kurien. It wanted to bring out change in the way milk was produced and distributed on a massive scale. The vision was big, there was passion, there was capital (direct and indirect), there was terrific leadership, sustained and involved engagement with the grass-roots, and the formation of partnerships to create the impact via the business. If we are t...

VC Fred Wilson has a nice post on the topic of handing over to a professional CEO. ..there's a good way to do this and a bad way. The bad way is to do a search, find someone you don't know, immediately hand over the keys to the car, and step aside. The good way is to recruit one or more people to the company early on, spend time with them infusing them with your passion and vision, getting them familiar with the technology and culture, and gradually giving them the keys to the car. The handoff of power should be so incremental that nobody can point to a date at which it happened. There will always be an official date when someone takes the CEO title, but it should happen when its already a defacto title. Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

I remember reading an Akbar and Birbal tale many years ago. In this story, Akbar and Birbal wager on something. Akbar tells Birbal that if he (i.e. Akbar) loses, he could give Birbal as much gold as he wanted since he was the emperor, but what would Birbal give Akbar if he lost? Birbal said that if he lost, the first person who comes to the royal durbar the day after the loss would be asked to name the highest number he could think of. And Birbal would give Akbar as many gold coins as the number mentioned. Sure enough, Akbar wins and asks Birbal to prepare himself for the following day when he’d have to pay Akbar a huge sum in gold. The next morning, a beggar is the first person to come to the royal durbar and upon being asked to name a big number, says “100”. Birbal with a knowing smile promptly hands over a bag of 100 gold coins to Akbar. He later mentions to Akbar that for someone like a beggar who has to struggle for survival, the sum of 100 gold coins was an unimaginable amount an...

Brad Feld provides a framework (created by his friend Barry Culman) to explain the evolution of a company. Following is a quick summary of the stages according to Barry. Birth * Idea created * Product or service utilized to deliver idea * All energy on creation * Leader is the core driver of revenue * No process or structure * Project or products – not a business Teenager * Add overhead and infrastructure * Grow revenue base * Leader comes “in-house” * Cash is King * High energy * All executives involved in all parts of the business * Everyone feels like “I know what’s going on” Young Adult * Add process and structure * Profitability dips * Must determine “who we are” / what do I want to be when I grow up * Leader is an evangelist * Separation of duties * External funding * Loose budget * People issues being to appear Adult * Answer to board / investors * Tight budget controls * Consistent...

VC Brad Feld has a couple of posts on demo-ing here and here . (Read the interesting comments on his post as well.) I learned - early in my first company – that the first 15 minutes of a meeting will make it or break it. I learned how to do a great demo – even if it was simply my sales pitch on a white board or flip chart. This meeting reminded me how important it is for a young company (and a MatureCo) to be able to nail their demo and do it quickly. ...I much prefer “top down” demos – these are ones that approach the demo from a user / use case perspective. Show me what the software does and why I care, not how it does it. So, rather than start at the top left menu choice and go through each feature (usually starting with “creating a new account” which I never have to see again in my entire life), walk me through a use case that is relevant to me and is populated with a complete and interesting data set. Occasionally, I’ll have a “how” type question, but then it’ll be in the co...

Indipreneur column (No. 6) by Sanjay Anandaram in the Financial Express: Sell! Sell! Sell! In the competitive nature of the world we now live in, there's no running away from the sales function. And the chief salesman in a startup is the CEO. A recent conference brought together entrepreneurs and VCs from various places. What struck me the most was the total lack of a sales culture. Everyone was in their allotted booths or rooms and waited for people to walk in and ask questions about their product. Imagine the opportunity: about 750-1000 people present. And as CEO of a startup, there could be myriad opportunities for selling, striking alliances, partnerships etc for your company. Each and every such opportunity should converted into sales events. The CEO and other company executives should be busy meeting people and building relationships. Indians in general are hesitant to talk about themselves. We are hesitant to say "I created the business" or "I designed the sys...

Indipreneur column (No. 5) by Sanjay Anandaram in the Financial Express: Hocus-Focus?! Sometime ago, I sat in on a presentation by a startup venture that had implemented solution involving bluetooth technology. The CEO, in the course of the presentation, also said that his company had a group that developed application software for hotels and hospitals, undertakes hardware design, had a Java-Web services group, apart from claiming expertise in mobile solutions. The company had all of 40 people and revenues of about Rs 15 crores and had been around for a few years. Then, another company presentation I sat in on: this 100 employee company developed educational CD products, web-sites, and built software applications. They had some customers in the US and Europe. Revenues: Rs 50 million. Their immediate plans? to establish a presence in Japan, UAE, and Germany, some through joint ventures! A third company I met answered me thus when asked who their customers were: ISPs, ASPs, Corporates, ...

Canaan Partners has launched "Entrepreneurial Challenge", a value-added Business Plan contest, in partnership with TiE . "The objective is to identify entrepreneurs who have made a start and can now scale fast with a little bit of help," says Alok Mittal of Canaan. "It has been my experience that most business plan events end on the day the competition ends. By bringing the right partners in place, we will attempt to provide mentorship and capital support to businesses, and try and make the event finals a starting point rather than a culmination." Click Here for more information. Arun Natarajan is the Founder of Venture Intelligence, which tracks private equity and venture capital in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Paul Graham has an article on common mistakes that are often fatal to start-ups. Guess what's No. 1 on the list?: Having a Single Founder (Ouch!) What's wrong with having one founder? To start with, it's a vote of no confidence. It probably means the founder couldn't talk any of his friends into starting the company with him. That's pretty alarming, because his friends are the ones who know him best. But even if the founder's friends were all wrong and the company is a good bet, he's still at a disadvantage. Starting a startup is too hard for one person. Even if you could do all the work yourself, you need colleagues to brainstorm with, to talk you out of stupid decisions, and to cheer you up when things go wrong. The last one might be the most important. The low points in a startup are so low that few could bear them alone. When you have multiple founders, esprit de corps binds them together in a way that seems to violate conservation laws. Each thinks ...