The Startup Journey

Sara Tavel compares "Good" employees with "Rock Star" employees (whom she calls as the Mitochondria of the company) 1. Both are good at their jobs 2. The difference being in the  scale of adding value.  For good employees, it is is linear (more pay or higher the hierarchy = more value), while rockstar employees - "they add value to the company beyond their job description and responsibilities. They ask and do what is best for the company" The  "founder’s job (is) to attract and retain mitochondria through all stages of a company. At the early stages, this rare group of individuals is the core of the company. As your startup scales, they are your leaders." How do you spot them? - Do Value Interviews "Don't just hire for competence, interview for values" Typically the founding team should check if the candidate is going to be a match with the core values of the company. If you had a chart for that you'd want someon...

Derek Sivers has a great step-by-step guide: Go to the following sites to open an account at each: upwork.com, guru.com, freelancer.com ...You'll get many offers, but if they don't have your magic phrase at the top (“I AM REAL” or whatever), delete them. This is very hard to do, since you'll feel thrilled that so many people are offering to help, saying things like, “We have looked at your project and would be glad to complete it immediately,” but trust me and delete those. If they didn't read something marked as VERY IMPORTANT already, you don't want to work with them. ...Here's the real reason why you're stopping at a simple milestone: you're going to hire at least two different people to do this first step, expecting that one will go bad, one will be so-so, and one will be great. Yes it means you're paying multiple times for this first milestone, but it's worth it to find a good one. Arun Natarajan is the Founder & CEO of Venture ...

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 abou...

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 equ...

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.

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 Entrepren...

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 ...

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 t...

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.

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...

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...

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 decisio...

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 ...

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...

Extracts from the brilliant article by Dr. Ajay Shah : Let us start with short-sightedness. The best firms in India are able to borrow five--year money at around 13%. At 13%, a rupee five years from now is worth 54 paisa today. A rupee ten years out is worth 29 paisa today, and a rupee twenty years out is worth 9 paisa today. In contrast, a rupee next year is worth 88 paisa today. With this kind of discounting, it is not surprising that projects that yield returns next year (i.e. 88 paisa today for each rupee of profit) are very attractive when compared with projects that yield returns 10 years from now (i.e. 29 paisa today for each rupee of profit). This difference -- between 88 and 29 paisa -- is striking. In a world with high interest rates, being short-sighted is rational. ...What about risk, and the willingness to undertake risky projects? Modern finance teaches us that when firms are able to issue equity into liquid and efficient capital markets, the risk premium that they ...

From Charles Assisi's column in Mint : ...why is it a stewardess on Jet Airways greets each passenger who gets on board with a smile? For that matter, why is it if a guest asks for directions at any Ritz-Carlton property, they aren’t directed, but led to where they want to go? Everybody, from the bellboy to the hotel manager, follows the rule.  The stewardess at Jet Airways told Kamath’s colleague their research on passenger behaviour indicated that when greeted with a smile, people lower their guard. For instance, if a flight is delayed or the meal they expect is not on board, as a thumb rule, most people take it in their stride. In the absence of a smile, even minor deficiencies are viewed as offensive, people get boorish, and their behaviour permeates to others on the flight, making it a harrowing experience for the crew. At Ritz-Carlton, the key Kamath observed is empowerment. A bellboy is empowered to take time off from whatever it is he has been assigned to do if a guest...

If you are an entrepreneur who would not have the patience for snooty waiters and difficult to translate/interpret menu cards, you might have some interesting takeaways from this article by Paddy Padmanabhan in Swarajya based on an analysis of the ratings of Bangalore restaurants. Extracts: Peter Thiel, billionaire founder of PayPal and the first ever outside investor in Facebook, talks about this in his new book Zero to One, and offers some interesting theories. He talks specifically about the spectacular boom-bust of the alternative energy industry in the US, especially solar, which was decimated in the 2009-2010 period by cheap Chinese products that were subsidized heavily by the Chinese government. He proposes that the solar industry’s woes were brought on by CEOs who were sales guys in suits who had no idea about the technology and even less about the hard questions that needed answering for the business to be viable over the long term. He clinches his point with an interest...

If increasing pay doesn't work to motivate and retain your best people, what will? Try paying them less advises Atul Jain, CEO of US-based analytics firm Teoco. Extracts from the Business Line article by Teoco country head Srinivas Bhogle: The gratitude that you think you’ve earned after giving a hike or a bonus fizzles out very quickly. Within a matter of weeks the employee begins to take his ‘new’ compensation or incentive for granted. ...instead of slightly over-compensating our employees, we slightly under-compensate them. If this sounds crazy, hear how Teoco’s CEO Atul Jain explains why it might work. He says, “Assume that I’m the CEO, and let’s see it from my perspective. I see the under-compensated employee as offering me more value. I’m therefore always a little more cognisant of his concerns and requirements; and my sense of fair play forces me to offer him the more challenging or lucrative projects. So he usually ends up getting much better projects and learning th...

NEN's Srikrishna has provides a simple rule to nip flame wars conducted over email in the bud (emphasis mine) : Most back-and-forth email stinkers or flame wars are preventable and many times seem downright silly or petty. Yet they seem to pop up all over the place with near-despairing regularity. Flame wars, particularly between colleagues, is a huge emotional sink, sapping productivity and motivation. This is even truer when the parties involved are in the same office. It is to overcome these that we’ve formulated a simple rule – yep 1 single rule to prevent email flame wars. The No 3rd email rule Simply put this rule states, if one person has sent an email (#1) and a second person has responded (#2) and it’s clear that they are not agreeing, or not happy – there should be no 3rd email sent. Instead the two parties should talk in person (sometimes this only requires swivelling in one’s chair) or pick up the phone, if not in the same office. Think about it – most email flam...

From the wow post by Srikrishna of NEN ... Quadrant 4 – Don’t have the right attitude but are effective This is the hardest group to deal with. The obnoxious sales person my friend had to deal with, the supercilious technologist or rude finance guy we met all fall into this quadrant. Two things make it difficult to effect change with these folks - - they are deemed successful and have been rewarded in the past, despite their interpersonal shortcomings. - they are often positions deemed critical, that make change not just unpalatable but downright scary. “What’ll happen to my sales, if this guy leaves?” or “Will I find another trusthworthy finance guy?” ...Organizations suffer the most, because most of us don’t know how best to handle Quadrant 4 folks. The first step is to recognize not only the existence of these four quadrants but that people can move within the quadrants.  ...I’ve found talking about the four quadrants and even mutually agreeing with your ...