Archive for November, 2006

Bootstrap India

November 29, 2006

Of course we are amazed the way teenage students in the US use their credit cards / pocket money to bootstrap their fledgeling businesses.    Quite often we say  “well,  but then that’s in the US – where they have an excellent support system by way of Social Security and state sponsored NGO network.  They won’t be out in the streets if they go bust.  Out here,  you’d be left to starve…”

It’s a fact that in India,  you have none of these.  You pay taxes if you make money.  If you are in a bad shape,  you’ve to fend for yourself.  No matter how many millions you’ve paid as taxes earlier,  you’ll not be cared for if you have some bad years later.   It’s this scenario which makes us risk averse and makes us great savers….but bad investors all the while.

It’s very difficult hence for our youngsters to bootstrap their way to the top.  They live on the edge always ( even most of their parents too ) and it’s almost inconceivable for our youngsters to save up enough to bootstrap a venture.  But then should we not have a plan B…?

I gave it some thought and here’s my two paise on how to bootstrap in India….

Pool capital is the way to go.   Form a core team of  not more than 3 people who are pretty much clued in as far as Web 2.0 tech goes ( it costs less to start an online web business )  so that they can work on a nice and simple idea.   Each of these members,  go get at least 5 people from amongst their relatives / friends who are willing to spare any sum between Rs.100 k – Rs.300 k.  If you are enterprising enough to accomplish so much,  I’ll pitch in with my mite to join you as one of the founder investors and shall invest similar sums too.   That’s it. 

Now when you’ve managed so much so well,  we are ready to get started.  Just post a comment to this post leaving your e-mail ID.  I’ll organize the rest. 

As regards structuring your business,  creating a business plan,  execution of investor agreements,  designing stock options,  go-to-market strategies,  arranging VC participation and liquidity planning thro clear exit roadmaps….well that’s something at which I am good at and don’t lose sleep over that.   

Regarding the business model,  a few tips…. 

a)    It should address a simple and straight need for a community of users who will be quiet responsive and eager. 

b)     The user’s need to be addressed in not more than 30 seconds flat or in about a couple of clicks. 

c)      Give her a user experience so good that she should be viralling it at the 31st second. 

Get the hang of it….?  What are you waiting for….get the hell outta’ here and come back with the good news….!

Good Luck…!

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Strategy – What it means for startups…!

November 11, 2006

Too much has been written about how to build a startup from conceptualization to monetization. I’ve never heard entrepreneurs grumbling about lack of material on usable startup strategies. Perhaps “strategy” is considered not so `relevant’ by early stage entrepreneurs. They are kinda’ certain that it is not an immediate priority and something to be addressed later in the day.  Or they just oversimplify it by saying  “ let’s build some features into our product to counter `existing’ competition – that should stand us apart ”. 

Well, it’s not that simple.  At least the VCs with whom I’ve interacted don’t think that way.  This is one of the  foremost  reasons  behind  their  refrain ,  “ we don’t get many investible business plans from  [ startups in ] India”.  This  is  also  the  reason why many seed stage VCs from the Valley after a few weeks of coming to India, transform themselves into late stage investors as these are clearly de-risked, mature businesses.  That way they don’t let their funds idle away at least. 

But remember,  nothing is more lucrative or appealing to a VC than a well founded seed stage startup which carries a lot of promise.  Investments at early stages have the potential to deliver explosive returns to VCs as they get them a bigger slice of business at a lower valuation.  So it’s an entrepreneur’s imperative to square his plan fundamentally, technically and also strategically so that he gets `momentum’ money from VC at the right time. 

Dos and Don’ts. 

  • By Strategy,  you mean what will make you unique.   Period.

  • Define the right industry and right business. Bad strategy often flows from bad definition of business and its end-customers.  For eg. If you have a global target audience but develop a product on the basis of  local preferences,  you got it wrong.

  • Don’t try to compete `head-on’ with other companies.  No one wins that kind of struggle.  Develop something around your unique USP in the targeted niche.

  • There’s no one `best’ company or one `best’ process.  Theoretically, it limits your initiatives since you ease up when you think you’re better than the `Best’.  Best – is always subjective and a matter of perception.  You have to strive to continuously improve no matter what you think of yourself and others.

  • Never compete with others on the same things.  It leads to escalation, leading to lower prices or higher costs unless the competitor is inept.

  • Strategic goal is only one.  To deliver superior return on invested capital.  It means don’t waste too much time on development,  achieve a faster go-to-market,  grab the earliest revenues to breakeven fast.  You can add to features later on.  Earn-while-you-learn.

  • Don’t bother too much on valuations early on. Focus on superior operating performance. When you deliver consistent growth, it would reflect in robust financial results and shore up the bottomline. Better bottomlines mean higher stock price which would automatically fetch you optimal valuation.

  • Keep tweaking your strategy with ground realities if it has to stay meaningfully on course.  Continuity is critical to strategy.

  • Let your strategy be known to all your stakeholders – so that they can align everything that they do with that strategy everyday.

  • It’s good for a competitor to know what your strategy is.  Chances are better that he will find something else to be unique at,  instead of creating zero sum competition.