Verdure

Frown costs, Smile rewards

2012-02-06T00:46:00.001-08:00

“Who doesn’t know that?”

If that is your reaction at the blog title, you would be surprised to know about those entrepreneurs who haven’t still learnt the basic lesson.

One evening, I chanced to enter a new restaurant in Bangalore with an interesting ambience (I choose not to mention the name). After observing a couple of things there, I thought proposing our services to the management team for their future growth needs.

As I waited for my tea, I saw the entrepreneur heading the outlet sit with another visitor on the table beside mine. The visitor seemed like a young news writer collecting stories on entrepreneurship for her newsletter.

I could not help hearing the words that exchanged between them. The writer offered to cover and feature the story of the café for which I heard the guy snub in reply, “I don’t believe in newsletters and coverage. You guys approach us only when you have nothing else to cover….” I shifted to the other side of the table to avoid overhearing any embarrassing conversation. In a matter of some moments I saw the news writer leave the place.

No guesses about my decision to meet him. Of course I left after my tea, with an idea of never visiting the place again in future.

Clearly the entrepreneur did not know the value of a news coverage. It’s a strange thing that he did not. I was reminded of a certain article in Livemint. The article covers short biographies of those MBAs from the Ivy league institutions who took the plunge to startup on their own. Though the article did not speak very highly of these entrepreneurs, it was instrumental in spreading that word which brought in business.

Usha Krishnan, our founder, CEO says that this article played a key role in bringing Savaari.com to our esteemed and successful client list. It also won us a tie up with CII, which again meant an exposure to many business prospects.

Explaining further, the growth of an enterprise, though primarily steered by the founding team, has many drivers from the eco system. While customers and investors have a direct bearing, bloggers, news writers, PR professionals, consultants and mentors are the key enablers who connect both the ends. A wise entrepreneur recognizes the value of all the players and shuns arrogance which only distances him from his benefactors.

It is also understood well that an entrepreneur needs to assert his/her priorities and use his/her judgment in the end. Assertion can well be accompanied by personable behavior and a warm smile. Humility determines the truth of one’s greatness.

Education may have a cost problem, not a quality problem - By Avichal Garg

2012-02-03T21:19:00.001-08:00

Excellent blog with deep insight by Avichal Garg
http://avichal.wordpress.com/2011/10/07/why-education-startups-do-not-succeed/

Venture Capital Outlook for 2012 from ETNow

2012-01-19T21:50:00.000-08:00

Hi all

In the first month of 2012, its probably time that we saw what happened out in the Early stage investing scenario last year. Dont miss this piece by ETNow on what was the year 2011

http://www.youtube.com/watch?v=SiPY2JOpKHs&feature=player_embedded

The highlights to pick up were:

Venture Capital Investment touched 998 MUSD in 2011, an increase of 354 MUSD over 2010
IT/ITES claims a dominant position with an investment of 476 MUSD, followed by Energy (125 MUSD), BFSI (93 MUSD) Healthcare (78 MUSD) and Education (38 MUSD)
The growth in VC investment in 2011 was riding on a belief that internet is right and that e commerce is the way forward
Niche as well as generic players are going to flourish before consolidation takes place
There is also a belief that the growth is driven by the factors Other than business fundamentals, with some of the basic assumptions of the model yet to be proven

DO watch the whole video for more exciting insights!

The below video talks about the outlook for 2012

http://www.youtube.com/watch?v=NQJ6L6-fzWA&feature=player_embedded

Venture Outlook for India in 2012

1) Remains largely Positive
2) Bigger ticket deals in the existing companies
3) Internet to become broader and growth capital to become discerning.
4) 2012 to be a big year for exits

Going forward, the VCs expect the ecommerce companies to turn profit positive by cautiously building loyalties, differentiators
Healthcare, education and rural services have a large market untapped by the investors

TiE Entrepreneurial Summit 2011 – Day2

2012-01-06T01:56:00.000-08:00

You read about the Day 1 of TES 2011 in my last post.

The second day was relatively relaxed and I could spend more time on networking and getting to meet active stakeholders of the startup ecosystem in India. I also got to visit the stalls which surprisingly had more enabling organizations than startups themselves.

I also attended the workshop on pitching to a VC by Canaan partners. The content was pretty much inclusive and was sufficient to give a theoretical perspective to any new entrepreneur about the process of fund raising and outlook of Venture Capitalists. Being in the field, I can say that I knew most of it. The workshop moved on pretty well save when it came to the topic ‘term sheet’. The presenter went on to say something like, “Term Sheets, very few of you would be lucky enough to get these from a VC, but still let me explain….”

I was left confused over the attitude behind the remark. I do give a full benefit of doubt that the speaker would not have meant to flaunt the tall attitude. It is also accepted that out of many many enterprises, few get to match with the preferences of the investors at a particular stage. But I vehemently reject the view that the investors are some sort of celestial beings who shower their ‘benedictions’ on the ‘chosen’ few startups. An investor of any kind is as much on the look out for a suitable portfolio as much or more than a startup would need his/her money. This view of mine was echoed by Aravind of Artimaan Ventures the previous day. Different investing entities do have different outlooks. At the risk of being preachy, I can say that a venture is rewarding to the investor as well as an investee when both parties share mutual respect sans tall attitudes.

Following lunch, was a refreshing ‘guru talk’ by none other than Kanwal Rekhi, the inspiration for a techie, an entrepreneur and an investor. He highlighted an important quality of a startup – the resilience to continue despite hostile investing environments, citing examples of his experience on bootstrapping. The talk as I expect would have motivated the whole lot of enthusiasts to hit back with renewed vigour.

I also chanced to have a one to one talk with Darapaneni Naidu, CEO of Meraevents who, the previous day had featured in “Startup phoenixes”. I was impressed by their Event specific Social Networking tool called ‘moozup’ (give URL) which was debuted at TES 2011. Moozup allowed delegates to create their profile and network with other delegates. I found it very useful in meeting everyone, whom I would have liked to meet during the event, but did not have the time or opportunity to, because the subscription to the portal lasts for a whole year.

On the whole TiE deserves a pat on its back for such a productive networking session. They could still improve on their management of events for I could see a number of delegates highly confused over the multi track sessions as the agenda sheets were not distributed in the beginning. When they really came up with some help, it was an A5 or smaller sheet with the agenda micro printed (I had to help a couple of senior gentlemen who found it difficult to read them) A nice freebie also would have helped to retain the good memories of the session longer :).

TiE Entrepreneurial Summit 2011

2011-12-22T02:31:00.000-08:00

We were at TES 2011, arguably the largest entrepreneurial event in Bangalore. The venue, Lalit Ashok was bursting at its seams with entrepreneurs and enthusiasts.

The day kicked off with inaugural talks by eminent entrepreneurs like NS Raghavan, who spoke about how crucial the role of entrepreneurship is in determining the macro economic scenario of a country. He also highlighted various realistic instances an entrepreneur, big or small could face different kinds of challenges.

There were multiple tracks of sessions and I wished that I had the powers to duplicate myself so that I could attend all the sessions. I was forced to optimize and I chose to attend events related to investing in the hope that gyan from various investors would help me serve our clients better.

“How to date a VC” by MJ Aravind of Artimaan Ventures, was the most interesting. Aravind emphasized on how much a VC needs to invest in a start up as much as a Startup needs his funds. Aravind also talked about the advantages of engaging I-Bankers & Venture Consultants and the value they add to the tedious task of fund raising. He also gave out a checklist for entrepreneurs to help them improve their funding hit ratio.

Networking in-between and post sessions was a great opportunity to meet some very interesting startups like Alethea Communications, storybrew.com, Kiranawalla.com, Cherish Life products, Dreamnotion Innovations, etc

The session on innovations at grassroot level, was an eye-opener. Annasaheb, a farmer from Belgaum, spoke at the event about his invention, A raingun - a giant sprinkler which could water fields with meagre power supply provided to farmers in his area. The second speaker was a weaver from Tamilnadu, who had invented efficient weaving techniques which consumed less labour, helping him earn better and send his kids to school instead of having them work with him. What humbled and awed the entrepreneurial audience was the open attitude of these large hearted villagers who dint care about licensing or patenting their inventions. They were more than happy to educate others about their inventions for greater benefit.

The highlight of the day was “Phoenix talk”, a moderated session by Shraddha Sharma with three dynamic entrepreneurs who turned around their enterprises through trying times; Soumil Mazumder of Edu sports; Naidu D of meraevents; Mukund Mohan of Jivity. Real world examples about how these three ‘phoenixes’ pulled amazing recoveries from the brink were very encouraging and inspiring to other entrepreneurs.

Read more about our Day of TES 2011 in our next blog post!

Now Jeff Bezos is Steve Jobs. Great article

2011-11-16T20:52:00.001-08:00

http://www.forbes.com/sites/ericjackson/2011/11/16/6-things-jeff-bezos-knew-back-in-1997-that-made-amazon-a-gorilla/

There are so many investment opportunities here

2011-11-15T19:51:00.001-08:00

http://www.storyofstuff.org/

Entrepreneurship and Mahabharata

2011-10-30T22:18:00.000-07:00

Pandavas, the skilled and talented startup guys set up Indraprastha Inc,for which they got a raw grant by the Dhritarashtra, the government. The grant was a jungle land unfit for human habitation and infested with wild animals. The team of five, not to be discouraged are backed by their strategic investor, Krishna who with his expert counsel showed them the right direction in need. He also engineered their kick start by empowering them to win national wide challenge (Draupadi Swayamwara) and secure an angel investor in Drupada.

With these initial inputs, the team set about establishing their empire and with their sound implementation, emerged as promising global leaders. Yudhishtira, the Founder cum CEO decided to assert their global leadership and the remaining team went on a spree of acquisitions all over the land of Aryavarta. Their pursuits paid off and the five brothers were acknowledged the Global leaders. Pandavas commemorated this success and acknowledged their benefactors in a grand celebration (Rajasuya Yagnya) which caught the jealous eyes of their rivals, the Kaurava Inc, headed by Duryodhana.

The Kaurava Inc was mentored by Shakuni, whose control over the borders (Gandhara) made him very influential with the Government, Dhritarashtra. In a moment of weakness, the government bypassed the council consisting of the wise Vidura, the great Bhishma and the learned Drona and convened a hostile takeover of the Indraprastha Inc through some twisted routes. The over confident Duryodhana also insulted Draupadi, the board member representing Drupada’s investment.

Taking the advice of strategic mentor Krishna, the five brothers set upon a turnaround journey. Arjuna, VP Supply chain travelled northward in search of product differentiators (Missiles). Academic stalwarts like Shiva and Indra favored him with the much needed knowledge differentiators and trade secrets. Nakula and Sahadeva, the duo heading corporate planning and strategic unit engineered newer turnaround strategies while Bhima, the VP, HR kept the morale high through the trying period.

The team proved their readiness to be on ground by taking up temporary jobs in Virata Inc and succeeded in getting a Series B investment with Arjuna championing an impressive product demo that strengthened the borders of Virata (Uttaragograhana). Yudhishtira earlier had also proved his ethical stance by rescuing the leadership team of Kaurava Inc when the latter were personally assaulted by the leader of a foreign agency (Gandharvas).

These boosted the moral image of the Pandava team and investments poured from admiring Venture capitalists like Kekaya Inc, Chedi Inc and Magadha Inc and their valuations soared. Pandavas also wisely preferred the continued strategic investments of Krishna to his alternatively proposed Capital investment.

The five Pandavas once again proved their impeccable implementation abilities in another Government approved motion and got back their Company, now double the value due the earlier merger with the Kaurava Inc. Draupadi was made the Managing Director for her continued support, a reward Drupada Inc got for their early stage interest.

Innovation in the Indian travel & hospitality industry

2011-10-22T23:27:00.000-07:00

We have all met the 'cab driver from hell' at one time or the other. There are so many types of cab drivers who can ruin your cab journey - the one who drives badly, the one who talks on his mobile while he drives, the one who suffocates you with body odor and so on.

For me, the most novel unsettling cabbie experience was in Malaysia. We took a cab from Melacca to Kuala Lumpur. The cabbie politely asked us if he could bring his wife along since he wanted her to see Kuala Lumpur. We said 'sure' since there was just me and my wife in the back and the front seat was empty. As soon as his wife got into the car, he took her hand in his left hand while his right hand was on the steering wheel. It was a stick-shift car. When he had to change gears, he let go of the steering wheel, changed gear and then brought back his right hand to the steering, while his left hand continued to hold his wife's hand. I watched this for a few minutes. I did not want to interrupt what seemed to be a romantic moment for both of them. But when I realized, he planned to do this for the entire 3 hour drive, I said - 'Excuse me, can you please drive with both hands, we are getting nervous'. It took a moment for him to understand what I meant after which he brought both hands to the steering wheel.

I came across two interesting companies which want to address the 'cab driver from hell' problem.

Savaari which offers cabs and good quality drivers across 60 cities in India with a web-based booking system which offers the convenience of booking a cab from anywhere in the world (available at savaari.com). This solves the last-mile problem - till recently you could book airline ticket/hotel through the web but not a cab. It also creates a branded cab service where quality of service is assured.

GlobalThen which offers training solutions to the travel and hospitality industry. You can read about the company at globalthen.com and specifically about the cab driver training at

globalthen.com/baburaokikahani

If these companies can pull it off, it will help substantially in the Government's 'Atithi Devo Bhavah' Program

The Strategic Value of Big Data - by Sumit Banerjee

2011-10-22T22:07:00.000-07:00

We believe that using the enormous amounts of data captured by companies will be the strategic differentiator for companies in the future. Mr Sumit Banerjee of Accenture has captured this idea excellently in this article. This could be very relevant to the rising stars of Indian e-commerce.

Article is available at
http://www.accenture.com/us-en/outlook/Pages/outlook-journal-2011-how-big-data-fuels-bigger-growth.aspx

Startup Funding scenario in India - All 3 parts in a slideshow

2011-10-14T00:05:00.001-07:00

Hi All,

We had summarized the content of the three parts of our study on "Startup funding scenario in India." We are happy to inform you that the slideshow shared on slideshare got over 2000+ views there. Sharing the same with our verdure blog readers.

Below is the link :
http://www.slideshare.net/saiswaroopa/startup-funding-scenario-in-india-entrepreneur-survey

Hope the insights gathered prove useful for you all. Do wait for a similar slidepack on the Investor survey as well

Startup Funding Scenario – Investor Study

2011-10-12T05:14:00.000-07:00

Continuing the study of the startup funding scenario in India, Verdure venture consulting conducted a study among investors who invest into early stage ventures. Our findings are summarized here

Investor Profile

· T The respondents were largely Venture Capitalists (43%) or Angel Investors (40%). Serial Entrepreneurs and others constituted the remaining

70% of all respondents have invested in early stage ventures in the past
52% of the respondents expressed readiness to invest over INR 1 crore a year into early stage ventures while 16% expressed interest in investing between INR 25 Lakh and 1 Crore.

Investment Preferences

IT Products and services (including Internet ventures) was to most preferred sector at 34%
Cleantech and Agro sectors were second on the list with at 12% each
Retail and IP intensive ventures were preferred by 10% of respondents each
Pharma/Healthcare, Social enterprises, etc were indicated as preferred sectors by a few

· 56% of the respondents prefer to co-invest with other investors into startups while 26% expressed interest to be the first and sole investor. The remaining respondents stated a preference to invest in later stages

Startup evaluation

Investors indicated the following as the most important aspect of a startup that they are looking for

Quality of founding teams - 26%
Market size and potential - 22%
Business model/Innovation - 20%
Differentiability/entry barriers - 18%

Decision Making and accessibility to startups

· 48% of the respondents stated that interactions with the founding team had a large bearing with their decision making. 24% of respondents indicated that projected financials of the startup and ratings by experts in the field would help them make the decision making while another 20% stated that interest shown by other investors helps them in decision making

Out of the investors who had invested in startups in past (70% of total)

o 37% of investors stated that in house due diligence influenced their past decisions

o Referrals from their network and opinions of experts influenced 31% of the respondents

o Personal rapport with the founding team influenced 27% of their decisions

When asked about their preferred way of receiving leads to startups,

o 42% preferred leads from their personal/professional networks

o 34% preferred getting leads from websites and networks

o Only 21% preferred finding leads through funding related events

50% of the investors stated that they never had to exit earlier than agreed
16% stated they had to exit early due to deviation from agreed objectives by the founding team
Portfolio shifts and startups opting for alternate sources of funds were cited as reasons for early exit by 5% of investors each

Startup Funding Scenario Part 3 : Challenges in Fundraising and Expectations

2011-08-30T20:52:00.000-07:00

Concluding Verdure Venture Consulting’s three part study on Startup Funding environment in India, this part focuses on the challenges faced by entrepreneurs while trying to raise capital for their startups.

Quantum of funding:

54% of the startups were looking for funding below Rs. 1 Crore
21% responded to be looking for a funding between Rs. 1 and 2 Crores
25% mentioned that their funding requirement was above Rs. 2 Crores

When asked about the challenges faced by entrepreneurs in fundraising:

46% responded that getting investors interested in the Venture was their greatest challenge
23% mentioned that it was most difficult to get a fair valuation for their startup while
15% mentioned that access to investors was the major roadblock

When asked about since when the startups had been looking to raise funds

86% were looking for funding for less than 6 months
7% were looking for funding for over 9 months
While 6% were looking for funding for over a year’s time

These time frames are much higher that the global average time taken for startup fundraising. Here is some insight on what causes the delay.

When asked about the factors that were delaying the fundraising process

27% responded that they lack the time and resources to focus on fund raising activities
23% mentioned that lack of access to investors was delaying their fundraising
21% mentioned that sector preferences of investors was a challenge to their capital raising process

· The remaining mentioned various other reasons like Valuation and transparency related issues

At Verdure Venture Consulting, we undertook this study to understand the startup funding environment in India better and to effectively address various challenges faced by startups in fund raising. We also analyzed the startup’s expectation from fundraising, so we can provide fundraising services that are well tailored to address all the problems faced by entrepreneurs.

Our ultimate goal is to create a level playing field for startups and investors to play in as we believe that currently the odds are stacked up against a startup because of a single factor of excess demand for funding against a small supply of investors.

Verdure intends to even out the market by providing expert advice to startups and access to suitable investors. Verdure provides assistance to startups before, through and post the fund raising process as a trusted partner in growth.

Watch this space for insights from our Investors study on Startup fundraising in India soon.

Startup Funding Study: Part 2 – Valuation, Negotiation & Due Diligence

2011-08-24T01:57:00.000-07:00

Verdure Venture Consulting did a comprehensive study of the startup funding landscape in India. In the part one of this three part report, we had found out that only 15% of the respondents had successfully raised funding. In this part, we explore aspects of fund raising like negotiations, valuations & cycle time for closing funding deals.

Negotiations:

85% of deals took less than 6 rounds of discussions to agree upon the final valuation and receive the term sheet
The remaining 15% took up to 10 rounds of discussions with the investors
59% of respondents said further negotiations were required after initial agreement on terms. Further negotiations were to discuss specific clauses, arbitrations between previous & new investors
5% of respondents said they had to re-negotiate investment terms after agreeing to them earlier

Valuation:

80% of startups say that they were happy with the valuation of their company that they received while 20% thought that they could have done better
30% of respondents said that valuation was based stock dilution preferences on both sides
23% said valuation was based on the performance projection
A whopping 40% said that valuation was based on other factors such as business synergies & arbitrary haggling between parties

Due Diligence:

We tried to capture the average time required for the due diligence process and legal paperwork. We have defined it as the duration between signing the term sheet and receiving the money in the bank account

Due diligence took less than a month in 53% of cases. While the process took between 1-3 months in 22% of cases
23% of startups responded that the process took over 3 months time
In 72% of cases studied, startups paid for legal paperwork and due diligence process, while the investor bore the cost in only 9% of the cases. The costs were split equally between the two parties in 18% of the cases

It is heartening to find that a majority of entrepreneurs we surveyed were happy with the valuations they received during funding, as we often hear a lot of rumor, myth & wild speculation about valuations.

Through this study we have tried to dispel some myths and capture right data in order to provide some perspective to startup founders on what to expect while going for fundraising.

In part 3 of our report, we will attempt to give more detail on what challenges entrepreneurs face while fund raising.

The Enterprising Attitude and quotes from Indian Philosophers

2011-08-22T23:41:00.000-07:00

Often in many an occasion you happen to hear this question “What makes an entrepreneur?” or “How do you know if you are ready to take off?” or “What defines a true entrepreneur?” The answers are ample depending upon what the person thinks an entrepreneur is. And as many tricky questions, this does not have the one right answer. But sufficient light can be thrown on what is the attitude an entrepreneur needs to possess.

Perseverance

There is a sanskrit poem written by an ancient poet cum philosopher Bhartrihari. It is about three types of men who walk on this earth. Bhartrihari defines a Neecha Manava or a lowly person as the one who lacks the courage to take initiatives due to the fear of facing hurdles. A Madhyama is a mediocre who dares to start an initiative but abandons it mid-way when bogged down by various roadblocks. A Dheera is the person according to the great poet, who is unafraid of obstacles as he is empowered by a strong will coupled by a superior form of enthusiasm (superior due to his commitment and passion). A Dheera never hesitates at the thought or existence or occurrence of an obstacle as he is endowed with a treasury of capabilities.

I request the non entrepreneurs not to take offense while I make a comparison between a true entrepreneur and Bhartrihari’s Dheera. The true entrepreneur has the same forces driving his perseverance to his passion as a Dheera has

Courage which arises due to his
superior enthusiasm, the superiority which has been earned due to his
passion and possession of a
treasury of capabilities

A true entrepreneur is required to be a dheera to face the million obstacles that challenge him and emerge stronger at the end of each struggle. His evolution determines the success and sustenance of his enterprise. His ability to face the changes and adapt to them, his ability to continuously learn, his ability to innovate at the face of adversity and not the least, not lose his courage and quit.

Seeking fulfillment

Another poem by the same poet deals with the qualities of a kArya sAdhaka or the one who is focused on fulfilling a task. A kArya sAdhaka gets to sleep on a hard floor one day and on a soothing bed of flowers the other day. He gets to eat only raw roots and fruits at times and gets to partake a sumptuous meal made of the best variety of rice in other occasions. He might have to dress in rags at times or might get to wear a series of royal silk fabric. In all these ups and downs, he is unaffected as his focus is on the task he set out to accomplish.

The modern day entrepreneurs face a capital crunch at crucial times and suddenly find their door knocked by a queue of investors. They would have to struggle to find their first customers before having a rush of enthusiastic buyers. He might have to sweep his own office clean and work out his own numbers before a number of enthusiastic employees team up with him. A true entrepreneur is a fulfillment seeker, who does not lose his head over the crests and troughs of his entrepreneurial journey. Enjoying a cup of home made coffee while your ‘employee’ friends party at High end eat outs or being content with stuff brought from a discount store or foot path while others leisurely browse through branded stores are some of those which life demands from an entrepreneur in the making. The one who takes all this with a smile is a true entrepreneur as his eye are fixed on his task, his idea, his mission and nothing else.

These two components form the crux of and entrepreneurial attitude and hold him in place during high a low. Those who consciously strive to develop this attitude would really find success and fulfillment and would steer their passion to where world values them.

True Entrepreneurship - the story of the Manipal Pais

2011-08-17T01:08:00.000-07:00

This article in Business World about the Manipal Pais captures the spirit of entrepreneurship and the opportunities in education in India. It is heartening to see a business family that has gone through the trials and tribulations of family feud to emerge extremely successful at the end of it. The transformation of Manipal - a once sleepy village is background to the story.

http://www.businessworld.in/businessworld/businessworld/content/Education-Barons-Manipal.html

Startup Funding Environment in India

2011-08-15T22:26:00.000-07:00

Got rejected at an investor pitch? Don’t be disheartened, you are not alone. A recent study by Verdure Venture Consulting, gathered inputs from entrepreneurs in India has thrown up some interesting observations.

The respondents to the study were a mix of current entrepreneurs with running firms, successful entrepreneurs, wannabe entrepreneurs who wanted to startup and others startup enthusiasts linked to the startup environment.

Here are some of the key findings

Only 15% of the total respondents had successfully raised funding for their startups. This is still a higher number considering the small sample size. According to Sramana Mitra, founder of IM by 1M, the global rejection rate of 99%. Check here for details
The average amount of funding raised in Round 1 was between INR 25 Lakhs & 50 Lakhs. While this is lesser than the global average, we think this is the reason for the higher success rate
The largest Round 1 investors were either Angels or Friends & Family
The average time it took to raise Round 1 funding was between 3 months to 6 months
The average amount of funding raised in round 2 was between INR 1 Crore & 2 Crores
One surprising find was that the largest Round 2 investors were Angels & Angel groups (around 50%) and most of these companies had received Round 1 funding from friends & family
Round 2 fund raising typically took longer than Round 1, between 3 months & 9 months, with almost a quarter taking up to a year
A majority of startups (80%) were happy with the valuation they got, with 13% saying that they got a great valuation
Startups had to pitch to an average of 5-10 investors before they got invested, with 67% of them saying that many rounds of pitching helped improve their business model and improved their success rate with investors

Although, some of the findings were both interesting and surprising, most of the findings of the study were in line with our reading of the market. We hope these finding will be useful for you in your fundraising efforts.

Watch this space for more insights into fund raising in India.

Five myths about entrepreneurs

2011-08-01T01:37:00.000-07:00

I came across an interesting column by Vivek Wadhwa on the Washington Post. It would be a good idea to share with you all, the 5 myths about entrepreneurship he seeks to bust. The myths mentioned in the post IMHO could be exaggerated generalizations by one and all of popular media headlines in the entrepreneur world. They range right from the myths personal and educational background of entrepreneurs to those about the funding bodies, Venture capitalists, etc.

Age of Entrepreneurs - to the popular myth that the bulk of entrepreneurship comes from the 20s something youth, Wadhwa proceeds to share some data about the firms founded by 40s something successful entrepreneurs
About the myth of needing a familial legacy to be a successful entrepreneur, Mr. Wadhwa shares some interesting revealations about successful first gen entrepreneurs who have made it big with only their spirit, ideas and commitment rather than backgrounds
Another hollywood centric myth that college drop outs make better entrepreneurs is countered with reasons as to how a college degree from a reputed college makes a difference in the startup environment
The feminists over there are in for a good news. Statistics point out that the success factors are more or less gender independent and women entrepreneurs have shown impressive performance as against the belief that women are discouraged in this field and face greater difficulties to succeed.
A stunning revelation about the crucial nature of Venture Funding is that less than 5% of Venture Capital amount goes into early stage companies. Vivek also points out that a minor % of those successful firms have actually raised Venture Capital.

I urge you all to go through this complete article here.

http://www.washingtonpost.com/opinions/five-myths-about-entrepreneurs/2011/06/29/gIQALtCBhI_story.html

Hope that breaks some ice in all those wanna be entrepreneurs. So hope to meet you there on the field at the earliest!

Pricing Checklist for start ups

2011-06-29T03:38:00.000-07:00

Select the right pricing model

For the product start ups, it works in tandem with the right positioning of your product. The positioning if backed by robust market research findings, could lead to better pricing of the product. When it comes to services sector, the traditional pricing models have been Fixed price, Time and Material (T&M) and related mix models. A recent engagement model which has gained ground is the revenue sharing model. Start ups need to do their home work on which model suits them better. More importantly, they need to know the role of their service in the client’s business operations. For example, a one time automation implementation which is a business enabler for the client could fit the best into the traditional models. If the start up has a clear idea about the time and resources it has to spend to deliver the service, it could estimate a fixed price. If the requirements are variable, it could work out a variable pricing model (T&M). But if the service has a directly proportional effect on the business of the client, it is worth negotiating a revenue sharing model. Each model has its own peaks and pit falls. Hence the start ups need to prioritize their objectives time and again to come to the most suitable pricing model that satisfies the priorities

The price to value match

The pricing of your product of your service must match with the perceived value of the same by the target market. If the market’s perception of the delivered value is lower than your price, it endangers the sales and the other way round, it raises questions on your quality and standards. It is recommended that the exercise of arriving at the right price is done after a thorough research on this market perception. The process could include from simple online surveys to detailed personal interviews where you could analyse the market’s perception of the value delivered through your product or service. The pain or problem solved, the additional services, the utility, frequency of usage, experience of usage, expectation match of the deliverable are some of the important parameters to take into consideration.

Covering Costs – Is everything passed on?

Start ups do work on low overheads. But many of the younger ones do not consider all the relevant costs into their pricing. I worked with this start up with a young management team. They passed out of a premier B School, gave up handsome pay packages and embarked on this journey to shape their dreams. The pitfall in their pricing was that they never accounted their services and resources on a market rate. Taking a lower package in order to accelerate the growth of an enterprise is appreciable. But if the low overheads feature in the billing, no analyst would believe in the profits they show, because they are artificial. The value of a resource does not warrant a discount.

Low Price Startups - Guard against price war

Lower overheads also facilitate Start ups to price their products/ servces lower than competitors. Though it could earn a couple of customers in your early days, price prevails as your differential aspect only till a financially stronger competitor launches a price war against you. The limited cashflows of early stage enterprises do not permit them to prevail through these price tussles and they end up losing the market share eventually.

Milestones – Manage the cash flow

A long term engagement could span to months and sometimes to years. A start up needs to take care of their working capital by means of mile stones. Breaking a project into deliverable modules and assigning a price to each module can reduce the risk of payment to a large extent. Start ups need to take precautions that their efforts yield results in time and negotiate a favourable milestone structure for each of the projects.

At the end of the day, your price should reflect your true value. Happy pricing!

Crowdsourcing by Jeff Howe

2011-06-29T03:18:00.000-07:00

Jeff Howe explains the new phenomenon of crowdsourcing in this video. A community can make a difference through shared interest or shared passion. Be it a hobby or a craft. He cites the examples of Wikipedia, a knowledge revolution through crowd contribution, and iStock photo. The meaningful participation by the crowd in fashion industry through critiques and rating is highlighted. Jeff drives the point that the contributions are driven from the people who are the customers or the audience.

'The power of crowd drives the future of Business!"

Watch the video here

http://www.youtube.com/watch?v=F0-UtNg3ots&feature=player_embedded

Working out of the office

2010-03-15T07:45:00.001-07:00

Here are some tips and experiences on distributed workspaces shared by people who have successfully managed to work away from the cubicle.

http://fileit.in/p/40

At Verdure we have a distributed office and we love working the way we do!

Working from home and or with other people working from their locations can be a great idea for startups that allow entrepreneurs to save costs while cultivating to think out-of-the-box (read cubicle) culture

How to start a business with no money!

2010-03-06T00:09:00.000-08:00

Very useful blog with a very simple and relevant message. I have followed some of these tips myself and I can tell you that what Zeke say's here is 100% true and doable:

http://www.theoutsourcingcompany.com/blog/entrepreneurship/how-to-start-a-business-with-no-money/

A couple of more tools that web startups can use to minimize costs:

1. Use Cloud Computing to reduce hardware cost

2. Leveraging existing platforms such as facebook and twitter, to try out and perfect their startup ideas

3. Perform market research and survey the needs of their target customers using online tools such as surveys, targeted marketing campaigns using social networking platforms.

4. Get others to Promote and Evangelize your products or services by incentivising influencers on social networking platforms.

Technium Challenge - Incubator

2010-01-25T06:27:00.000-08:00

Free European Headquarters on offer for Indian Entrepreneurs

Indian entrepreneurs can gain a major foothold into the lucrative European market by entering the third annual Technium Challenge, a unique tech incubator competition supported by the Welsh Assembly Government and European Convergence Funding.

The winner of this year’s global competition will be given a passport to open a free European headquarters within one of Wales’s 12 world-class incubation centres for a year, which is part of an impressive business support package worth £30,000.

The Technium Challenge, established in 2003, has become a worldwide high profile business planning competition, which identifies and supports innovative businesses with high growth potential. This year, the Technium Challenge is on the lookout for Indian technology or knowledge-based early stage businesses that can demonstrate a patentable idea with a strong R&D element and ambitious team to drive forward its venture in Europe.

The first step for companies interested is to complete a brief application form that can be found at www.technium.co.uk/challenge.

2008-2009 winners from the U.S, Roomlinx, went through the same process and are currently on course to setting up its European base at Technium Springboard, just outside of Newport, South Wales with initially at least 10 jobs.

The winners of the third annual competition will also have the opportunity to establish relationships with the Welsh universities in the region, Technium’s service providers and public sector/government networks to further accelerate their growth.

Submissions for the competition will be open till mid March 2010. Applicants who qualify will receive help in developing an international business plan, which will need to be submitted by Thursday 29th April. The Indian finalists will then make their way to Cardiff in mid June for their ‘Learning Journey to Wales’ and to compete against the other country finalists in the final leg of the competition.

The Learning Journey includes:

§ Complimentary return business class flights for one representative from each winning company to Wales.

§ Introductions to Welsh businesses within your industry sector and other industry networks of interest.

§ Meetings with Technium resident companies and a tour of some of the Technium centres.

§ Introductions to local University representatives to review specialist research & development expertise available and opportunities for staff recruitment.

§ Introductions to ‘Team Wales’ contacts i.e. for advice on funding, technical and general business support available.

§ One-to-one advice clinics with a range of business professional firms.

§ Cultural/sight-seeing tour of Wales.

§ Short presentation of your business concept to the Technium Challenge International judging panel.

§ Attendance at the prestigious Technium Challenge black tie awards dinner where the overall winner will be announced.

§ PR coverage within Wales/UK media.

For information on this year’s competition (09/10) and details of how to enter, please visit www.technium.co.uk/challengeinternational

Kapil Sibal's 100 day action plan

2010-01-25T06:03:00.000-08:00

Came across this document containing Kapil Sibal's 100 day action plan for the department of higher education recently. It was originally published in June 2009

http://www.docstoc.com/docs/23330573/Kapil-Sibals-100-day-plan

Although I was very impressed, with the intent of the document, I was skeptical about how much of it will be achieved within 100 days and also because we are all used to many such action plans and 5 year plans that never materialize. I thought to myself that I'd be happy even if 50% of the plan materialized.

After a bit of googling, I found some surprising results such as this article http://www.business-standard.com/india/news/kapil-sibal-meets-100-day-targets/369776/

I'm very happy to find that the action plan had been followed through and has been implemented with 100% success...

More power to you Kapil Sibal! We need more people like you to run this country!

Was Dubai Debt really a shocker?

2009-12-21T01:48:00.000-08:00

Nearly a month after the so called "Dubai Shocker" Debt, the markets are still reeling with the cascading exposures to Dubai becoming evident. A lot of people in responsible positions still say it is too early to assess the impact. Why is that so? Isn't it simple common sense for a responsible investor to learn about what the company or fund he invests into is exposed to? Shouldn't these people who manage funds have completely visibility to where exactly their investments are going? Isn't that what they are paid to do? How can they claim ignorance, especially after having seen the impact of the credit crisis? In this age of information, it is simply unacceptable for a fund manager to claim that he had no way of knowing, what the company he invested in, was investing in and that fund or company was ultimately invested in Dubai. One can find this information by spending 15 minutes on the internet.

Let us examine some precedents to the Dubai Debt Shocker:

From Dec 2008 to April 2009, a lot of articles in various publications, widely predicted and reported that construction in Dubai would decline. By April some had reported that construction on various projects had come to a virtual stand still. Scheduled openings of malls and other buildings were delayed many times and some cancelled. Dubai construction market fell an estimated 85% during this time. The value of construction contracts delayed or cancelled in the UAE was estimated at US $75 billion (AED275 billion) according to a report released by HSBC Global Research in Feb 2009. The credit crisis was cited as the reason and the construction companies could not find the financing required to complete their projects.

We read reports of expats in Dubai unable to pay their debts, abandoning their cars in the airport and fleeing Dubai. Around 3000 cars were left thus unclaimed by fleeing expats.

Touted to be the world’s largest mall, the dubai mall’s opening was delayed twice during 2008. Even after the late opening, the promoters could not find enough retailers coming forward to take up the 12 Million sq. ft. of space.

There were enough signs for even a lay person to figure out that Dubai was in trouble. Given all these signs, how could Dubai World’s inability to pay its debt be called a shocker?? If I were managing my own money, I would have cashed in all my exposure to companies in Dubai and exporting to Dubai as soon as possible. Why did the so called expert investment bankers and fund managers not do this?

Is it that investment bankers didnt know or didnt want to tell us. In my personal investment in India, when the market kept falling from 21000 levels to 8000 levels there was not a single wealth manager or banker who said - move your money to cash and hold it there because stocks are not the right investment now. Had anyone said this, several investors would have been better off. But then why would someone whose salary depend on saying the stock market is doing great ever say that the stock market is not doing well?

Lack of funding for innovation in India

2009-12-17T02:41:00.001-08:00

An interesting and concise article by the New York Times about why India is lagging behind in Innovation and how the future is likely to be different.

http://www.nytimes.com/2009/12/09/business/global/09innovate.html

A fantastic article on Georges Doriot

2009-12-10T23:48:00.000-08:00

I found this wonderful article on Georges Doriot, the father of Venture Capitalism.

http://www.alumni.hbs.edu/bulletin/2008/june/prophet.html

I first looked up about Georges Doriot, when I read the engraving at the INSEAD library entrance that read ''without action, the world would still be an idea''. I wanted to look up the person who made such a simple yet profound statement and I stumbled upon the father of Venture Capitalism. A fantastic personality by all accounts, I felt proud to get the opportunity to study at the institution conceived by such a great personality.

The founding team

2009-09-03T00:34:00.000-07:00

The success of a startup lies in finding the right founding team of a startup. This has been discussed by others in great length in every forum and every entrepreneur knows this. So just how do you form that winning team? The answer is not simple. Here are few points to be considered when choosing your business partners

First and foremost, make sure every founder believes in your business idea and has not joined up just because you asked him to or because he did not have anything better to do at that moment
Although it makes sense to choose people with complementary skill sets for different roles, it is very important to partner with people you are very comfortable with even if it means your skill sets are redundant. As I had said in an earlier blog, being a successful entrepreneur is all about learning the skills required to the job
Choose your roles, discuss them, debate them and understand each of your roles and that of the others at the time of starting up. Although your roles can evolve as your startup grows, it is very important for each person to have chosen their role and to understand their roles at the beginning
Each founder should think of the founding team as one entity and function to the benefit of the entire entity and not the individuals that form the entity, regardless of the shareholding arrangement within the entity
When starting up with a friend or relative, the relationship dynamic becomes more complex. The best way is to try and explicitly agree of the working arrangement, shareholding, hierarchy, etc. before hand and not allow for any assumptions or grey areas. This is a difficult exercise, but if there are issues, you are likely to detect them at this time rather than later when it can lead to the startup failing and the relationship also failing. Here is an interesting blog on starting up with a friend
It is better to have founders with different perspectives. They will bring in much needed variation in perspective to your business. So as long as your partner is good at his job, you trust each other and you can get along with him/her, don’t worry too much about you both not having similar view points
Startups that have multiple founders are favored by investors because the risk of investing in the business is lesser
Always communicate openly with other founders. Make sure all of you are on the same page with regard to important issues. Do not try to hide bad news from your partners, even if you are responsible for it
Provide for enough opportunities and avenues for discussing each others roles and how each of you likes your respective roles, what are the challenges and how you can help each other
Startups that have more than 2 founders have a better chance of making it big. When there are more than 2 people, when there is a problem between two founder, the third or the rest can intervene and sort the issue out before it damages the company

Sales Teams in Startups

2009-08-07T00:03:00.000-07:00

Came Across this great Blog article on Building Startup Sales Teams by Dharmesh Shah

http://onstartups.com/tabid/3339/bid/10155/Building-Startup-Sales-Teams-Tips-For-Founders.aspx

The article is Simple, Interesting, Relevant and Very Useful for any startup.

The executive summary

2009-07-29T07:23:00.000-07:00

I have asked a lot of people throughout my career about the purpose of writing a resume and 9 out of 10 people have got it wrong. The purpose of the resume is not to give the reader an entire history of your education, background and experience in less than 2 pages. Some people get it completely wrong and spend a lot of time preparing 5 to 6 page resumes. The real purpose of the resume is to get you an interview. You need to provide just enough information that will make your resume qualify (like education, work ex in years, companies, etc.) and provide only brief synopses of your work experience, brief enough to interest the interviewer, but don’t give out all the information, so that they will call you for the interview where you can explain your work more fully.

The executive summary is like the resume of a company. The purpose of this document is also to get you’re a meeting (an interview of sorts) with the investor. Here are some pointers as to what information it should contain

Introduction of the business idea in 2-3 sentences. The introduction should be crisp and yet should get the message across
What the need is and how the business fulfils the need. Highlight any significant differentiating factors. Indicate if the product or service has some IP that can be patented and/or licensed
Revenue model
Projected revenues for 3 years. Keep this as conservative and realistic as possible.
How much funding is sought and for what purpose. Be concise without being abstract.
Brief about the founder(s). Include educational background, relevant experience and roles in the startup if already known.
Mention names of key clients if they have already been acquired.
Include graphs and charts to illustrate, but don’t overdo it.
Include enough information to entice an investor to call you for a face-to-face meeting, without going into to too much implementation details
There is no specific order of presenting information, but the order in which I have mentioned aspects is logical for most businesses.
Just like you would do with a resume, have a couple of people who don’t know your business yet read it to see if they get what is being said by the document.

Common mistakes that startups make:

Long (above 2 pages) executive summaries disinterest the reader, and he/she never gets to the important part of the document
Do not beef up your numbers to look good. Be as realistic as possible. If you inflate numbers, you are likely to annoy investors who otherwise might have been interested
Do not mention ideal valuation or promise multiples or IRR on exit. The founder has to understand that the Valuation depends on a number of variables, which cannot possibly be known before getting to the negotiating table. It is also not sensible to “expect” a minimum valuation for your business
Do not include irrelevant details about the business, the founders or team of advisers at this stage
Spell Check, Spell Check again and then do it once more. Spelling or grammatical errors in an executive summary can come across as a lack of communication skills, lack of interest in doing a good job or just plain unprofessional to the reader

What makes an entrepreneur?

2009-03-16T23:16:00.001-07:00

I was recently at Proto.in where during a session, the host asked when do you know you are ready to start on your own. The question got me thinking, and I decided to sum my thoughts up in this blog.

1. The immediate answer that came to my mind was: You just know! When you communicate with your thoughts and are clear about what your goals and ambitions are, the desire to start on your own comes to you automatically. And when you are ready, the desire to start off is so overwhelming, that you do it even if you feel that you are not prepared enough. There comes a point in your preparation to start off on your own, when you feel that you cannot judge certain things without actually doing the job, that’s when you decide to actually jump in and tackle your business. It’s like a divine calling that you have to answer!

2. I’m usually a very organized person and like to plan out everything well ahead of time. So a lot of people around me were surprised when I told them that I’m going to start off on my own. There is no type of personality that can become an entrepreneur. Anyone who has the urge to do more that what they are currently doing is a potential entrepreneur. Those few who decide to do something about the urge, realize their potential.

3. Everyone should become an entrepreneur, it is the best way to discover yourself and understand your strengths and weakness. I discovered skills that I didn’t know I had before I started off. Bloging is one such skill J When I had a regular job, I often used to wonder how some people can go on and on doing their job without taking any breaks or vacations. I now understand how. If you enjoy what you are doing and are in control of what you are doing, everyday is an adventure. Now I cannot wait to return to work when I sign off every night. It took me eight years in the IT industry to understand almost everything that goes on. I had eight months to learn all that about the Venture Capital industry and I can confidently say that I know more about the VC industry than IT. Being on your own opens up so many options that everyday you struggle to find out which interesting option to choose from rather than wondering when you will get some interesting work.

4. A lot of people say that to be a successful entrepreneur, one has to be a good networker, a good salesman, a good manager, leader, etc all rolled into one. I beg to differ. All these skills are obtainable and a successful entrepreneur is simply one that has acquired these skills as and when required. The most important thing is to believe in your idea/product/service and to do it to the best of your abilities. When an entrepreneur is driven, she will acquire all the skills needed to run her business as and when required. So don’t let you lack of networking skills or sales experience bother you. When you jump in the well, you will learn to swim. If you drown (metaphorically), you will at least know what not to do the next time

Protecting your Idea: Do you need to?

2009-03-16T23:15:00.000-07:00

A lot of startups are paranoid about sharing their idea and what they do, but my view is that they don’t need to be. Although there is a risk of creating competition in the market, an entrepreneur should freely share his core idea but not implementation details of his business model. It is very important for a startup to get feedback about their idea, because feedback is what makes their product or service better. Although you should not share your idea with the whole world, it is normally not a bad idea to share it with as many people in the entrepreneurial ecosystem as possible.

A lot of startups want VCs and Angels to sign non-disclosure agreements before they will showcase their business model. I find this absurd. Such conditions are usually likely to make the investor prejudiced against the startup even before they have seen the details. A VC or Angel is not going to quit his job and try and start a company with your Idea, and they are usually ethical about not sharing your ideas with other people, so startups should be more practical.

The reason I say share your idea is because, as the cliché goes, the proof of the pudding is in the execution. The success of your business will depend on how well or poorly you execute the idea. There are numerous examples for this. Why is google so successful in search services, though a dozen other search engines were in the market when they began? Why was the apple ipod so successful through their interface was modeled after the creative mp3 player? To quote a local example, why was IPL more successful than ICL? The answer is Execution. It does not help if you just have the next billion dollar idea, you will also need to execute it right. No patent or copyright is going to hold back a competitor who is better at serving the need.

Sharing your idea with more and more relevant people can help in determining and serving the need better. Sharing the idea can also help you validate the idea and establish its business value. If you have identified the need and your idea is born out of it, you will most likely be the best person in executing your business to fulfill the need. So even if you do generate competition by sharing your idea, you would probably expand the market and create more room for your own company. Remember Coca-cola wouldn’t have become so big had it not been for Pepsi.

Proto.in – Not a networking event

2009-03-16T23:14:00.002-07:00

I happened to attend Proto.in 2009 on Jan 23 & 24 and the reason I was there is to spot potential startups that would be attractive to investors. First thing that struck me was the organization of the event was not conducive to networking and none of the participants in the event were even interested in networking.

Although the event had a very casual arrangement with speakers sitting on bean bags, the atmosphere did not provide for attendees to mingle and get to know each other. The events were very interesting and it was nice to see a lot of energetic entrepreneurs presenting innovative startups through the various events, but their follow through with appropriately networking with the people around them was dismal. Although the startups which presented their ideas in the showcase were allotted some space to setup stalls and promote/network with the people attending the event, they either manned the stalls with people who couldn’t give complete information or just abandoned their stalls. The event organizers also did not place a lot of emphasis on the networking bit.

There were the odd few that were running behind the identified VCs who had been invited to speak at the event, but even there I didn’t see the enthusiasm and tenacity that I usually in other events like TES or Headstart.

The organizers and many of the participants also seemed like one tight community which had its own private jokes, referred to each others blogs and websites without clueing the others in attendance on to the blog or website URLs and a lot of booing and cheering at their own presentations which left the others wondering if they walked into some kind of college fest.
All in all it seemed like an event where techno geeks get together to celebrate their geekiness and they were simply not interested in the others who attended the event.

Entrepreneurship during a recession – Part 3: Companies started during a recession

2009-03-16T23:14:00.001-07:00

Further to the 2 blog articles on the same topic, I decided to also compile a list of companies that were started during a recession. I’m sure this list will convince you that a recession is a good time for entrepreneurship.

GE was started in 1876 by Thomas Alva Edison himself. In the middle of a six-year recession of the 1870’s, Edison created invention the light bulb, one of the most important inventions of our time. Today GE is the third largest company in the world in terms of market cap.
Disney started right at the beginning of the Great Depression in 1923 and survived through it. Today, it has become one of the biggest Hollywood studios, and owner and licensor of eleven theme parks and several television networks, including ABC and ESPN.
HP (Hewlett-Packard) was started during the Great Depression in 1935 in a Garage in Palo Alto. Started with an investment of USD 538, now has revenues of over a USD 100 billion.
Sports Illustrated the largest selling sports magazine in the world started in 1954, at the end of a recession. The magazine benefited from fortunate timing as a boom in professional sports exploded soon after its founding. Sports Illustrated now sells about 3 million copies in the U.S. each week.
Burger King was started in 1954 in Miami. During another recession in 1957, the company introduced its most successful signature burger - the Whopper. Today, the company operates in more than 11,100 locations in 65 countries.
Hyatt Corp started during the recession of 1957 & 1958. The uber-luxury hotel chain now has 365 hotels in 25 countries.
IHOP started in 1958 in California. Today, there are more than 1,300 locations across the U.S.
FedEx started in 1973 as Federal Express the company that delivered 186 packages to 25 cities on its first night of operations now manages more than 7.5 million shipments everyday worldwide.
Microsoft, arguably the most successful technology company, was started in 1975 in the middle of a recession. Today, the company is estimated to earn more than $60 billion in revenue per year.
CNN started in 1980 as a little-known station called The Cable Network News. It revolutionized how people received information when it premiered as the first 24-hour all-news channel. Today, 1.5 billion people across the globe watch CNN.
MTV brought something new and different to the music scene when it debuted in the economic slump of 1981. Intended to be an all-music-video channel, MTV used VJs (video jockeys) to host programs and facilitate transitions between videos. Today, MTV is a global brand with dozens of shows, music-related and not.
Wikipedia was born during the recent post-9/11 recession. Established in January 2001, the online encyclopedia had more than 100,000 entries by 2003. Today it is home to more than 2.5 million articles and continues to grow. (Wikipedia also helped me compose this list)

Entrepreneurship during a recession – Part 2

2009-03-16T23:13:00.000-07:00

After my first blog on this topic, I researched further and found a lot of interesting facts about entrepreneurship during a recession.

Innovation does not take a vacation in a bad economy. Entrepreneurs begin their companies and innovators innovate not because they want to time the market, but because they see an opportunity and they see the solution or their calling. Entrepreneurs are driven by their desire to do something about problems they see around them. A recession is not going to stop them from filling the need that they see.

Many companies will be forced to innovate because of the tough times they face. They will try to minimize costs through innovation because they cannot raise capital. New technology will be born to reduce costs. New marketing ideas will be born to sell products in a bad market.

Recession = Purging & Renewal: It is my personal opinion that a recession is a natural way to get rid of excesses in the market. Fat companies with old ideas will die. Newer leaner companies will take their place. Better and Cheaper products will emerge to replace Costlier ones. The GMs and the Fords of the world are examples of this phenomenon. If they manage to shape-up, they will survive the recession, if they don’t, they will die. Recessions are a way to purge the unwanted from the market. Companies can no longer sell what they have to customers; they have to sell what the customer wants.

Entrepreneurship is never easy; entrepreneurs don’t expect their journey to be smooth and are willing to wrangle with problems and find solutions rather than throwing their hands up and walking away. This is why entrepreneurs view a recession as an opportunity to innovate.

Here are a bunch of interesting articles/posts, I found related to this topic:

http://furrier.org/2009/01/21/recession-startups-great-post-on-innovation-and-entrepreneurship-no-vacation-for-entrepreneurs/

http://discussionleader.hbsp.com/gergen-vanourek/2008/08/why-entrepreneurs-love-a-downt.html

http://news-info.wustl.edu/tips/page/normal/13058.html

http://www.thestandard.com/news/2008/03/20/five-reasons-why-recession-good-time-start-company

http://blogbusinessworld.blogspot.com/2007/04/business-ideas-recession.html

Entrepreneurship during a recession

2009-03-16T23:12:00.000-07:00

Everywhere I go people ask me how the recent economic crisis and recession have affected my business and the entrepreneurial ecosystem as such. Since this seems to be such a hot topic I thought of summarizing me observations.

The most predictable of observations would be that capital has dried up due to the liquidity crunch. Many angel investors I know do not have the cash to look at new investments and even those who are sitting pretty with good investments, are unable to liquidate even when they see other good opportunities. So it is a trying time for companies trying to raise funds, but it is not altogether impossible.

We have seen PE & VC funds focused on India raising record amounts from LPs for investment in India, in spite of the global financial crisis. There could be several reasons for this phenomenon. The fact that the Indian market experienced the highest falls and is expected to recover the quickest is one reason. Historically, Emerging economies have shown quicker recoveries than mature economies, and having seen the sensex’s golden run in 06 & 07, it is no surprise that people want to bet on India.

As far as the entrepreneur is concerned, I see a lot of them willing to take the plunge more readily because their so-called stable jobs are not so stable anymore. So for anyone who had been contemplating taking the plunge, uncertainty in the job market coupled with lower salaries and pay hikes is actually giving people the push they’ve been waiting for. Even freshers entering the job market are willing to work in startups given the uncertainty in regular jobs.

Startups are also finding it much easier and cheaper to attract good talent in today’s market. Since employees are willing to experiment they consider going to startups and roughing it out as they have a good chance of making it big. Real estate rentals have fallen and many other costs are likely to fall in the near future. The situation is ideal for startups to function with low burn rates.

Of course, there are downsides to the story as well. It is much harder for any business to acquire and maintain customers, but with all the other benefits, if they manage to do enough business to survive, they can strategize, plan ahead and build resources for boom time. When boom time arrives they will be poised to do well. What doesn’t kill them will only make them stronger.