The Startup Journey

# Unless your best friend in the world -- whom you happen to have embarrassing pictures of -- is a VC partner, please do not contact any VC. It makes no sense. # Passion, experience, real-world results are not qualifiers for introduction to VCs. An MBA from some elite school with 20 board members who know Jack Welch personally, with an extremely complicated idea that has never been built, are preferred. -- E-mail from a Dallas-based CEO to Jerry Colonna, a former VC with JPMorgan Chase, Flatiron Partners and CMG@Ventures. Here's an extract from Colona's response to the e-mail in his column for Inc.com: Yes, I'll admit, having compromising pictures of a VC may help get a meeting or even a term sheet, but the larger point speaks to the network effect. Implicit in his frustration is a question I often got when I was on the speaking circuit while an active investor: What's the best way to get the attention of a VC? Unfortunately he's right about the bus...

"Business plans should be the last thing you do, not the first. The common wisdom seems to go like this: 'I've got a great idea, so I guess I better write a business plan'. Wrong," says Jeff Cornwall, the Jack C. Massey Chair in Entrepreneurship at Belmont University in Nashville, Tennessee. According to him, entrepreneurs should get the following elements in place before sitting down to write the biz plan; Research the market to make sure that there is really a market. Try to figure out what a customer might pay for what you want to sell. And look carefully at all of the competition to see if that market is already being nicely taken care of. And by the way, there is always competition, no matter what you try to tell me to the contrary. If the market potential is marginal, go on to your next idea. Examine what it will cost to provide the service or make the product. Compare this cost to what you figured out you think you can charge in the previous step...

Some extracts from Joe Kraus, co-founder of search engine company Excite, recent 2-part blog post - here and here - on the importance of persistence gives a good idea about why Vinod Khosla of Kleiner Perkin's is concered "an entrepreneur's dream VC": While we were still in the garage (literally), we met with at least 15 different venture capital firms. The meetings we're all the same. We showed them our search technology, showed them "concept-based" search, and showed them targeted advertising. To a firm, the first question they asked was a very reasonable one: 'great stuff guys, but what's your business plan? how are you going to make money?' Of course, being 22 years old and fresh out of college we replied, 'we thought you could help us out with that.' Apparently, that's the wrong answer. Who knew? Rinse, lather, repeat. Then we met Vinod... By then, our deal had developed a certain "smell" -- smart...

While I knew the one line description "Vinod Khosla was the founding CEO of Sun Microsystems and was earlier part of the founding team at Daisy Systems", I hadn't come across a more detailed version of Khosla's pre-KPCB exploits before Joe Kraus talked about it on his blog . Here are some extracts from the Harvard Business School case study (by Dr. Amir Bhide) that I found interesting: How a Stanford secretary "linked up" SUN's co-founders: I'm probably more of a conceptual engineer, and I can draw block diagrams for almost anything I can think of, but I can almost never implement them. So I started looking for someone who had done this kind of stuff before. I heard of a project at Stanford called the Stanford University Network, or Sun.workstation project. I called the computer science department, and some secretary who did not want to bother a professor gave me the uame of a graduate student from Germany, Andy Bechtolsheim. Apparently,...

Joe Kraus, co-founder of search engine company Excite, has a very interesting 2-part blog post - here and here - on the importance of persistence for entrepreneurs. He provides examples from Excite's experience as well as that of its investor, Vinod Khosla of Kleiner Perkins (during his Sun Microsystems days). Do read.

"I always keep two things in mind when hiring, no matter how desperate I feel: 1. a bad employee does far more damage than no employee, no matter the issue, and 2. A players hire A players, B players hire C players, and C players hire losers," says Joe Kraus, a co-founder of Internet search engine firm Excite in his new blog . "Let your standards slip once and you're only two generations away from death," he adds. Quoting from the book How Would You Move Mt Fuji , Kraus points out how Microsoft "seeks to avoid hiring the wrong person, even if this occasionally means missing out on some good people." Google, the other great tech company of our times, has a similar hiring policy. The company's "hiring process is notoriously long and complicated". "A single no-vote of the hiring committee means you're not in. Why? Because they put the principle of 'no false positives' to work. They assume that there is a huge talent po...

In an article appearing in StartupJournal, Warren Schulz - who has started and sold two small businesses - provides strong counter points to the "great benefits of being your own boss". An extract from this must read article for all "aspiring entrepreneurs": Let me offer this reality check. If you're employed in corporate America, you've probably got a steady paycheck. If you get sick, your employer's health insurance plan probably will cover most of your doctor's bills. If you want a vacation, you're apt to have paid time off. For the most part, you can do your eight and hit the gate. You've got it made; you just don't know it. Running your own business is hard. But you think you're smart and can take an idea and make it happen. Odds are good that you'll lose half of your start-up cash by making mistakes. They may involve bad leases, employees, records, decisions, ideas or luck. The bottom line: You're bound to mak...

By Arun Natarajan I recently watched an interview with MphasiS-BFL's Chairman & CEO Jerry Rao television ( Udaya TV on February 20, 2004), when he said - quite firmly - that luck plays a huge role in any entrepreneur's success. He said a large part of his success was owed to the fact that he was "at the right place at the right time". Rao gave examples to prove his point about luck being so important. For instance, his highly successful career with Citibank had begun "willy nilly" - via a campus placement at IIM-A. And even his founding of Mphasis Corporation, a California-based software company that subsequently merged with BFL Software to form Mphasis-BFL, was sparked off by a chance meeting with MphasiS' future co-founder during a flight trip. Rao's remarkably candid and humble admission made me think about the role of luck in my own entrepreneurial endeavors as well as that of my friends. And sure enough, I could think of quite a f...

Extract from Infosys Technologies co-founder and CEO Nandan M Nilekani's interview to CIOL: Actually when Infosys was formed, all of us were working with Patni in Mumbai and Narayan Murthy was our boss there, heading the software group. The group strongly felt that there is a need to create a very professional company, one that was based on very strong ethics and values. We also wanted to create a company that really valued people. That is how we started. The fact of the matter is that there were many such companies that started at the same time during early '80s, however, what made us different was that we stuck it out-we realized that it was not a sprint but a marathon and we were long distance runners. We went through difficult times, but none of us digressed from the common vision. All of us believed that Infosys was bigger than any of us and we were willing to subordinate our egos and our desire to larger boats. I think that determination to create a world-class company...

From fighting VCs to funding Hindi films In a new column for BusinessWeek Online, Vivek Wadhwa, Founder, Chairman and former CEO of US-based enterprise software firm Relativity Technologies, talks about how he fought--and won--against his Venture Capital investors while recovering from a massive heart attack, and has now stepped back to do something "less stressful": produce Hindi films. "While still in the Critical Care Unit, I received a phone call saying that my investors felt the need to renegotiate the terms of the current financing. Two days later and still bandaged, I left the hospital and walked, uninvited, into a closed-door meeting, where investors were trying to convince my executive team to accept more money for a revised agreement that would give them majority ownership. I flatly refused, and ended the meeting," he says. "My investors sent me a letter demanding that I step aside and allow the younger brother of a partner in one of their firms...

Do and Don'ts of Networking "Networking is about serendipity...The more places and times you are meeting people, the more likely it is that you'll find what you're looking for," says Kevin Laws, a VC at US-based August Capital, in his posting at VentureBlog. "It's about making your interests and needs widely known (a new job, companies to invest in, people to hire, money to raise) and listening to the interests and needs of others. Because of the FOAF concept ("friend-of-a-friend"), you are likely to run across somebody who needs what somebody else you know is offering. Eventually, that person will be you," he adds Other extracts from this article will is full of useful "how to network" tips: Networking is a process, not a goal, and should be done constantly rather than only when you have a specific need. People at networking events are often there to meet others, plural, not just one person. They want to pay atten...

By Arun Natarajan Here is a posting (quoted verbatim) from the telecom focused India-GII forum at Yahoo Groups (dated Jan 13, 2004): Three months before, I got a connection from my cable operator who had takn a pipe from HTMT (in cable netowrk) Setup charges 3500, monthly Rs. 500 for 400 MB data transfer. When I mentioned it on this list the members advised me that it is not posible to offer such rats. I should have heeded their advice. last month suddenly my connection stopped working. When I enquired, I found that that I had used up my 250 MB limit. I was shocked, asked what is the matter and was given a new rate card of 250 MB for Rs. 500. No intimatin no warnings Just a simple blocking through their software. Reason HTMT has increased their rates. It was a simple marketing technique. Offer reduced rates, once I am hooked on to it, increase rates. Now I am stuck to their rates. They charge Rs. 1000 for single computer for unlimited access but I am not biting this ...

Nasscom proposes fund to help SMEs file patents The National Association of Software & Services Companies (Nasscom) has proposed a special fund, in association with the Indian government, to provide financial assistance to small and medium sized software products firms to file patents, Financial Express reports quoting Nasscom president Kiran Karnik. The quantum of the funds required for each company will be determined by a Nasscom-designated committee based on the importance of the product and the extent of handholding required. The funds will be provided initially as a loan. If the patent application is successful, the amount will be converted into a grant. Click Here to read the full news item.

Govt. announces Rs.10,000-Cr fund to provide soft loans for SMEs On January 09, the finance minister Jaswant Singh announced that the central government is to set up a Rs.10,000 crore fund for providing loans to small and medium enterprises (SMEs). The interest on loans from the new fund will be provided at 2% below the prime lending rate, the minister said. The fund is expected to be operational within four weeks and is to be structured by the the Small Industries Development Bank of India (SIDBI). Click Here to read the PTI news agency report on the announcement.

Be vary of VCs, say ex-Internet entrepreneurs "In 2002, we sold egurucool to NIIT for Rs.14 crore. But that was because we were forced by the venture capitalists (VCs) to do so. I didn’t want to," says Vivek Agrawal, co-founder of online education company egurucool, in a Business Standard article. "VCs are a double-edged sword," he adds in the article featuring interviews with former Internet entrepreneurs and executives. "Set up your venture without external investment," advises Rajiv Vij, co-founder of net2travel. Click Here to read the full article.

Prashanth Dhulipala, a California-based software engineer, writes in response to Arun Natarajan's article, "Where Money for Start-ups Really Comes From": Hi Arun, Just came across this interesting write up on the new avtaar of friends and family in the world of investing. It does make sense that tax concessions be offered to entrepreneurs who are just starting out, and who are being funded by friends and family. The question though is, what is the success rate of these startups? Probably too early to say, but it is too big a risk to wait out the results. While investing in "grey hairs" is probably tending to the extremes, I would not mind a government sponsored regulatory board that would assess the worthiness of such startups that would at least look for diluted forms of the "provens". Thanks Prashanth Dhulipala

Manish Sabharwal's interview to Knowledge@Wharton In a fascinating interview to Knowledge@Wharton, Manish Sabharwal, Founder & Managing Director of pioneering HR BPO firm India Life Hewitt, provides both solid and witty insights into a whole range of industry issues: how he started out, why he sold out, why he focused on India as a market, etc., etc. Some extracts: Business schools as venture incubators I think VCs who started incubators got it wrong; business schools like Wharton are the best incubators in the world. I milked the school's ecosystem. India Life was my final project in six classes. Many professors helped me think things through, and I had a group of first-year students do a field application project. I used the summer between the two years to travel to India and refine the plan, and then moved back to India straight after school. I guess it would make a better story if I said all my professors gave me bad grades for my business plan. But they di...

"Venture Capital is not available for start-ups" "Today, there are no true start-up VCs. Investments are happening in companies which have made cash profits and are looking for funds for the second phase of growth." says venture capitalist Vishal Nevatia of GW Capital in an interview to Economic Times. GW Capital is focussed on mid-sized companies in the media & entertainment, retailing, and BPO sectors. Around 60% of the fund's Rs.150 crore corpus has been invested in these sectors, Nevatia said. Click Here to read the full interview.

Why searching for The Next Big Thing is a waste of time What's going to be "The Next Big Thing" (or its variation the "next killer app")? Reams and reams of newsprint, web pages, conferences, and even oh-so-precious TV air time, is devoted to this topic--especially now that the "Internet wave" has subsided a bit (or rather, become more "mainstream"). Tim Oren, a Silicon Valley veteran (currently Managing Director of VC firm, Pacifica Fund ), has made a great post at his web log explaining why looking out--or listening to the "punditocracy"--for the NBT is a waste of time. "The Next Big Thing is a narrative we lay on top of the events after they happen..... (it generally) sneaks up from behind while you're trying to do your work, kicks your ass, walks over you, and either rifles your pockets or drops gold into your hands," Oren says. "Anyone tells you different, you're talking to a liar." Oren go...

Anurag Jain , Doctoral Student at IIM-Bangalore writes in response to Arun Natarajan's article, "Where Money for Start-ups Really Comes From": I do agree with GEM researchers in their recommendations. However, my reading is that for every 285.981 million booting up with the Fs' support, there are more than double/triple that figure (that exact number would be interesting to know, as that would be a proxy indicator of the potential of economy) who couldn't get off the track due to the non-availability of even basic capital (say 1700$ as mentioned in article). So, yes, we do need to take measures that will enhance the availabilty of financing, more so to enable the wanting to 'cross-over'.