Archive for the ‘bootstraps’ Category

This is real stay put

March 23, 2010

Where else, from The Onion

“In the summer of 1980, MIT graduates Donald Faber and Peter Haberle moved into an empty two-car garage and started work building their first ever personal home computer. Almost 30 years later, what began as a humble two-man operation has since grown into an even more humble, even more cramped computer company, based out of an even smaller single-car garage.”

That’s what you call staying put, really 🙂

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Why investors don’t trash deals I drive

April 5, 2008

One reason why VC firms earnestly look at deals that I drive is not just their faith in my level of competence, scrupulousness and fussy due diligence initiatives; they come with “I-know-the-entrepreneur” stamp.  Ho-Hum, how does that matter?  Read this.

Some of my favorite principles in screening deals –

a.   Premium on experience – I avoid teams that has just youthful enthusiasm.  I would any day place a premium on experience.  A venture backed by a mature team that has deep domain skills and expertise is always, always better than a bunch of upstarts with hollow passion.  The youthful team may certainly have some `cool’ quotient about it, but I would settle for teams that have a higher chance of hitting big time.  Youth loses its cheer after first few setbacks that can’t be wished away; experience is more resilient. “It’s my investors’ money on the line; that’s as good as my own.”

b.   Fee Filter – “Can’t afford $2500?  Don’t suck up.” That’s pretty much in-the-face, right?  I wouldn’t have it any other way. Teams that start up with scanty bootstrap will not survive to see beta, is what I think. No point in wasting precious time with teams that want `FREE’ consulting; “brainsuckers” as I call them.  So I quote my engagement fee upfront that gets rid of a lot of milk babies and some nags. Most beavers don’t ping back (and serious teams do sign up).  Seldom do they get far in their venture if they can’t engage a $2500 independent professional to scan their faint idea, vet up the opportunity, run viability checks, beef up with industry survey, forge out a sound business plan after several rounds of brainstorming and vouch for the team before connecting them with an investor that has a fair grip over the domain.  All of this costs money, pal. So, call me only when you’re ready.”

c.   Technology that sells – Most founders begin with a big fuss over their technology.  Scratch the surface and you’ll find that it is the 25th idea with the same theme.  I tell them openly it’s of no use unless their business model screams customers. Keep your tech to yourself; give the customer a sexy application that rids him of worries, costs and complexities. “Does your tech do something of the kind?  Then let’s get talking.”

d.   No investor bets on vaccum – Technology business is not loaded with physical assets to salvage sunk capital. No large swathes of land, building or fixed assets as in a standard manufacturing operation. The big bet is on the juicy idea and execution skills of the team.  If your project is meaty on these lines, you’re sure to get funded as well. I don’t mince words. I advise them to save up, start something small and then pitch for the next big thing.  Do yourself a favor; stick with that sucky job.”

e.  Track record – “How many deals have you closed?”  This question makes me smirk.  You don’t close startup deals with investors as fast as you do large Private Equity deals.  PE deals are closed faster because it is done with listed companies that have a track record. To that extent, the risk is limited. Investors get to control a real business. They can replace the sloppy CEO with the best-of-breed that can turn fortunes around. But startups are concept bets. They take time to mature, undergo cycles of refinement that makes the diligence process tighter and hence, tardier. I don’t let them pitch unless I am satisfied of their pitch worthiness. Then investors come up with their own set of observations that make them go back to the drawing board.  It’s an iterative process.  It’s gotta’ be, because in the end somebody is gonna’ put his money on the line.  “Remember, your parents refused to bet their farm!”

f.    People traits – I co-habit with the founding team for quite a while when I prepare them for the pitch.  It helps me in getting to know them personally upclose.  That awareness is essential since it yields early clues into their lifestyles, habits and attitudes which are equally important to an investor as are their domain strengths.  “Can I trust this team with my capital?  I realize it would’ve been yielding fair returns elsewhere and I’d better give them a good reason to take it out and invest in a startup. If you move closely with the team and influenze them positively as much as I do, you most likely will get the answer – “Trust them with the best you’ve got.

So now you know why investors don’t trash the deals I drive; why fewer deals qualify!

 

 

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…!