The Startup Journey

On Monday (Dec 19), I attended the soft launch of Mentor Partners, a unique technology-focused seed fund, in Bangalore. The firm plans to initially invest $1 million each in 10 product-focused companies in the IT and telecom space: around $500,000 as seed investment or "bridge loan" and the remaining as part of the first round investment along with other Venture Capital firms. With two partners on the ground in Bangalore (Ravi Narayan who earlier co-founded Nextone Communications in the US and V.Prabhakar, a co-founder of Bangalore-based software testing services firm RelQ), Mentor Partners will help its investee companies get access to top companies in India, the US and other markets via its about 35 other members in its network. The network includes those who are either operating managers (like Vish Narayanan, Head of Telecom Operations at General Motors in Chicago) or "been there, done that" entrepreneurs (like Rosen Sharma who has founded several start-ups like ...

Jeff Bussgang recommends entrepreneurs "not be shy about holding their VCs accountable". Just as the board of directors evaluates the CEO/entrepreneur every year for their performance against results, the CEO/entrepreneur should have the license to evaluate their VCs for their performance. Who did they help recruit? What business development introductions did they make? Were they proactive in giving critical strategic advice? Were they available and responsive when needed for emergency issues? The article also points out how VCs apart from being answerable to investors in their funds (the "Limited Partners" or LPs), also have to answer to their partners. In a VC partnership, each VC is investing the money of their peers as well as theirs, and affecting the overall results of the fund. And so while an LP may not hold a VC accountable for periods shorter than 6-10 years (the period after which fund performance is well-known), VCs are accountable to their partn...

Bangalore-based incubator/early-stage fund Erasmic has decided it will not invest in any company which has just a single founder. Subrata Mitra, Founder & CTO of Erasmic said at a recent presentation at a TiE-Chennai event that this decision was driven by the founders' past experience with their own start-ups plus, given their small fund size ($3 million), Erasmic's ability to take risks was that much lower. Vineet Buch of BlueRun seconds this in his blog post: The best tech companies were founded by two people. Oracle, Cisco, Sun, Microsoft, Google, Yahoo ... the list goes on. One is usually not enough, three is acceptable, but having four founders can lead to committee-think - the antithesis of creativity. So, my entrepreneur friend, the first thing I recommend is finding a co-founder who has complementary skills and with whom you are comfortable spending your evenings and weekends. Munjal and I complemented each other perfectly while brainstorming on Ojos (a.k.a. ...

Businessworld has an article on ICICI Bank's "Sponsored Research and Development" (SPREAD) program that has "helped companies like Biocon, Shantha Biotech, Neuland Laboratories and Samtel lay their foundations". Now SPREAD loans are being used for innovative products and processes only a few companies in the world have developed or, in some cases, are now developing. For example, Strand Genomics in Bangalore is using the loan to develop new methods of predicting the toxicity of drugs. Proalgen Biotech in Chennai is using the loan to manufacture natural beta-carotene in very large quantities. Electronica Mechatronic Systems in Pune is developing very precise magnetic tapes for measurement. And so on. These companies would definitely sell their products in the Indian market, but their technology would be contemporary enough for them to sell in the global market too. It is not difficult to see the impact of these projects on t...

Jeff Cornwall has a nice post pointing out that Venture Capital gets much more attention that it deserves (from entrepreneurs seeking financing, that is): I often think that venture capitalists must have the best public relations machine in the world. Only a tiny fraction of a percent of entrepreneurial ventures ever get or need venture capital financing, and yet the two most common phrases that come out of most aspiring entrepreneurs mouths are "business plan" and "venture capital." It is as if the venture capitalists have done such a good job of branding that their product name has become common speech for financing a business (like Kleenex for tissues and Xerox for copying). 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.

David Cowan of Bessemer Venture Partners has some great advice on why Business Plans – at least those presented to VCs – should be in PowerPoint format. He also has some nice tips on what the slides should talk about. There is also a nice discussion happening in the comments section of the post where David critiques a BP submitted by one of the readers. 1. The cover slide should offer complete contact info, and a tagline if you've got it. One of the benefits of a powerpoint plan is that it forces you to perform the critical exercise of describing the business in very few words. 2. A mission statement is a good idea to present, unless it's rather obvious from the tagline (as in BlueNile.com: Education, Guidance, Diamonds and Fine Jewelry). Select a mission statement that is achievable, but not yet achieved.... A clear mission statement also includes a clear idea of what the startup will NOT do. Here are some nice ones... "Prolexic will create and dominate a new network ser...

Gaurav Bhatnagar has a great list of practical tips for hiring for a startup in India; especially hiring programmers. Hring in a hot market like India is especially hard. And for startups, even more so. My experience has been quite in contradiction with common wisdom. And my experiences are probably more relevant for startups and small companies which do not have an army of recruiters and which do not need to hire by the 100s (if not 1000s). 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.

With Internet-based services companies back in favor among US VC investors (a phenomenon aka "Web 2.0" or "Bubble 2.0"), can service providers and wannabee start-up executives be far behind? Scripps Howard News Service has an article on PeopleConnect, an exectuive search firm that actually has a branded program called "Employees Without Paychecks" that focuses on placing executives and tech professionals who are willing to work at start-ups without pay until the clients' VC funding comes through. PeopleConnect is the first search firm to market a program of recruiting employees who will work for equity. "A friend of mine calls them 'angel employees,'" (PeopleConnect CEO) Max Shapiro, said, comparing them to angel investors, who fund early-stage companies. ... Shapiro markets the Employees Without Paychecks program to early-stage companies that, like Commendo Software, are just a few months away from seeking venture funding. He selec...

Alok Mittal, the co-founder of JobsAhead.com (acquired by Monster.com in 2004) and now a venture capitalist with Barings India Private Equity, has launched a blog titled VentureWoods . In one of his early posts , Mittal talks about "Band of Angels India", a group of successful entrepreneurs and executives (of which he is a member) with a passion to invest in and mentor early stage businesses. The application process to BoA involves sending in an executive summary to any of the members (yes, investors themselves take decisions here, there are no “investment managers”) and convince them that what you have is a potentially successful business. The member than “sponsors” the proposal to the whole group. Members in the group make individual decisions on whether to invest in any particular opportunity — for example, 4 members may decide to fund a given venture. The members continue to be involved in the mentoring process. Typical deal size at BoA is less than Rs 2 crores. We expect...

Last week, I came across an interesting ad by the Ministry of Science and Technology in The Economic Times and The Hindu inviting proposals for the "Technopreneur Promotion Programme (TePP)" . The TePP aims to extend financial support to "individual innovators for converting their innovative ideas into working prototypes/models". Jointly operated by the Department of Scientific & Industrial research (DSIR) and Technology Information, Forecasting and Assessment Council (TIFAC) of the Department of Science & Technology (DST). Here are some extracts from the FAQ section of the DSIR web site # Who can apply? Any Indian Citizen with an original idea/invention/know-how to develop working prototype/processes can apply for TePP support. Even, the proposal from the owner of a ‘start-up’ company/industry may be considered for TePP support, if the annual turnover of the company / industry doesn’t exceed Rs. 30.00 lakh per annum. # How much support one can expect? Th...

TiE Silicon Valley has launched "TiE-Webstream Zone" showcasing videos of presentations by various speakers at its various forums. From Vinod Khosla and Tom Friedman keynoting at TiECon 2005 to the various interesting presentations at the monthly meetings, the selection is indeed wide. Entrepreneurs from around the world will definitely find quite a few vidoes well worth watching. Thanks TiE-SV for this great effort! 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.

The TiE Chennai Chapter , which hasn't been very active in the recent past, seems to have become vibrant again. The Chapter's latest "Success Close Up" event on 19th October - featuring Chandu Nair, Co Founder & Director of knowledge process outsourcing firm Scope e-Knowledge Center - was especially interesting and useful. The Success Close Up event is envisoned as a presentation "by a Successful Entrepreneur who...are willing to share with others candidly their life experiences in an informal setting". Chandu Nair delivered on all this and more in his very engrossing presentation and sincere and thoughtful answers in the subsequent Q&A session. The presentation and discussions covered how Scope was created (serendipty), challenges faced (one of the main being the need to let people go, ameliorated somewhat by active outplacement help), relationships between the founders (better be direct about issues rather than let them simmer), support from the en...

Bill Burnham of Celsius Capital has a great post on the lessons he learned from investing in Datapower, a company that was recently acquired by IBM. The entrepreneur "sometimes" knows his market better Just after Datapower had launched its first product, a performance oriented appliance, Eugene lobbied for the company to accelerate the launch a second security oriented product that had been planned for a quarter or two in the future. At the time, I remember cautioning Eugene on the potential distractions and costs of having two immature products in the market at the same time. Eugene lobbied hard to take the risk and thankfully he won the day. I say thankfully because not only did the company land a $300K order that quarter for the security product, but it was able to establish significant mindshare in the security space well ahead of its competitors. To this day the security space continues to have the most robust market demand and competitors that failed to quickly lau...

Bill Burnham of Celsius Capital has a great post. While it is a VC's angle, it has relevance to entrepreneurs as well. Given the importance of M&A to both VCs and start-ups, it’s important to realize that the seeds for M&A success or failure can actually be sown quite early in a start-up’s life and well before any potential deal materializes. With this in mind, I offer the following Top Ten M&A Commandments with the idea being that if a start-up follows these commandments it will be able to avoid some of the most common structural and financial issues that have the potential to blow-up a deal or dramatically reduce its value. These commandments include: # Thou Shall Not Give a Strategic Investor a Right of First Refusal, Right of First Offer or a Protective Provision that Enables Them to Block a Sale. If you must have a strategic investor in your company (and in general I recommend against it) by all means do not give them a Right of First Refusal, a Right of First O...

Business Week has a cute little quiz to help wannabe entrepreneurs find out if they have the stuff. 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.

Paul Kedrosky has an entertaining account of an "all too common" type of "value-add" from VCs that entrepreneurs can do without. Too many venture guys do virtually zero heavy-lifting when it comes to qualifying the people they toss at already stressed and over-worked portfolio company CEOs. “Here, talk to this guy, maybe you guys could have an alliance … here, talk, to this guy, he’s with a big company that I met recently.” It’s closer to spam than real added value. 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.

"Genuine VC" David Beisel has a list of "Seven Reasons To Become a Founding Entrepreneur", including Creation. The essence of a founder’s job is to create something where there was previously nothing. An idea becomes a plan; a plan produces a product; a product launches a company. To me, the notion of conceiving and building something both tangible and real is paramount. .. Variety. The title “Founder” is function-agnostic. Sure, someone may be a technical founder or a founder with expertise & a formal leadership role in another function (sales, marketing, etc.), but during those exciting early days everyone is wearing many different hats. The diversity in the tasks required of someone in this role necessitates that there is rarely a dull moment. Control. Many jobs leave the much of one’s destiny to the group he/she works in, the company he/she works for, etc. Obviously, there are extraneous unmalleable factors with everything in life, career paths are no exc...

Until 2004, Intel Capital was probably the sole active corporate VC investing in the Indian technology sector. As I have written earlier, Flextronics with its string of rapid acquisitions of telecom R&D companies in 2004 - quite a few of them, interestingly, with Intel Capital as an investor - has emerged as a significant new player. 2005 has seen the VC arms of Nokia, Cisco, IBM, TI and other hi-tech companies - begin to actively scan the Indian market for potential investments. Add to this, the active investments in by some of the Indian business groups - like the Godrej Group and more recently, Reliance Capital - it certainly seems as if corporate VCs are going to play an increasingly important role in the Indian technology landscape. In this context, it is important for Indian entrepreneurs to understand the factors that drive corporate VCs vis-a-vis pure financial investors. A recent Knowledge@Wharton article , quoting the work of Gary Dushnitsky from Wharton and Michael J. Le...

Allen Morgan of Mayfield, has some great suggestions on how entrepreneurs should go about creating their start-up team - especially selecting co-founders. He points out how VCs most often pass on interesting ideas because they don't like some of the co-founders. ..for a VC firm that is comfortable with early stage startups, an incomplete startup team is preferable to a team with the wrong team members. First, VC’s pride themselves (some are even good at it) on being good at helping their companies recruit. If a startup has an attractive couple of founders and a terrific business idea, a VC can imagine how additional, world-class team members could be recruited to fill out the team. ...Second,.. it’s always hard to transition the “wrong” co-founder out of the Company – it’s also economically unattractive to the remaining co-founders. Org-charts We’ve all seen a “standard” organization chart. It has (1) the CEO at the top, (2) Four to eight Vice-presidents below, each in charge of a...

Allen Morgan , quoting his friend John Kernan, has tips on conducting board meetings: 1. NEVER have the board meetng "at" the board meeting. ALWAYS call every director a few days before the meeting and run every important issue by them to get their input, Also update them on company performance, especially the bad news, and let them "beat you up" privately. That way, the meeting can focus in a constructive fashion on problem-solving and building the Company for the future. 2. Maximum Powerpoint show is four slides from any presenter, especially yourself. This should be the limit of director interest in detail. ..4. Have your key team members do almost all the presentations. It gives them exposure and allows you to make sage comments along with the rest of the board. A perfect board meeting is when 10% of the talking is done by the CEO, 60% by the team, and 30% by the directors. ..8. For VC directors, try to picture how they are describing your Company to their par...