Archive for the ‘Execution’ Category

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!

 

 

can customer feedback alone drive innovation?

March 22, 2008

Good friend S.Swaminathan, CEO of Cequity Solutions draws attention to some takeaways from Gartner2008 CRM summit.  As Swami puts it, nothing earth shaking or new in there.  Analyst firms have always been predictable.

I’ve my comments under that post – particularly on (customer) feedback induced innovation processes – and explained why “enterprise insiders” have a larger role to play than customers in improving customer experience.  I had cited the Nokia example – its early customers have been pretty much content with the mobility feature offered by the wireless handset and had never asked for images, videos or data streams that were volunteered by the enterprise.  Had they tweaked the handsets on the basis of customer feedback, we would still be holding phones that looked more like a female sex toy (with its sprouty antenna) than the sexy multi-utility device that it is today.

Innovation has to be based on original and utilitarian insights that saturate a given or potential market need.  So the bets cannot be merely on customer (feedback) data because they have limitations.  They also suffer from weak sample sizes and visionary limitations of the customer.

A better metric I think has to come from a blend of customer and insider insight.  The enterprise insider (management, employees, suppliers, service providers besides customers) has the maximum touch points with the product/service than the customer.  While the insider looks up to the enterprise for his livelihood, the customer has wider options.  Humans do not mess with their livelihood and keep thinking about it a lot more than a customer would.  That deep and lasting connection and always-on thought process puts the insider in a position of significant advantage to draw insights.  Unfortunately insiders (other than R&D, Process or Marketing) have no canvas to jot it down, much less to get heard.

Don’t lose’em. Build your Business Intelligence around customer as well as enterprise insider.  You never know whose idea will fly !!!

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The Art of the End

November 11, 2007

The end game in a startup is as important as starting up itself.  Yet very few have mastered the craft.  Here’s some tips… 

Build a good database :  Get every piece of information about how other startups fared while evaluating, say,  a buyout proposal, stake dilution, time to exit etc.  This is one instance where the adage “let’s cross the bridge when we come to it” is falsified.  You can’t go tracking history after the suitor/competition has shown up.  Keep it handy, review it periodically and absorb the trend.

Avoid big talk(ers):  While you recruit a banker to advise you, hire the one that can walk with you, keeping your interests in mind.  The first guy to avoid is the one who talks more on big valuation numbers than on the immediate value maximizing steps, say, getting more bidders, due diligence, protection of minority interests etc. Big talkers normally have little to lose and often are bad negotiators.  Their focus will be on how their name gets flashed in the media “XYZ was the banker for ABC Inc. on $_000,000,000 deal”.  I’ve seen their stubbornness wreck many a good deal for startups.  In a way, they will be a little like Bill Clinton in white house if Hillary were to become president – I mean if a guy’s banging interns under his desk when he’s the president, what do you think is gonna happen when he’s got no stake at all?

Eye on profit: Most founders, especially if they happen to be techies are often great preachers.  Too much of academic Kool-Aid drowns them, making them look better on the pulpit than in a startup garage.  They dwell in detail on the intricacy of the technology but mostly have little to say on how it is going to make money in the end.  They mistake “execution” for translation of a theoretical ingenuity into a real time functionality blissfully neglecting the first move that sets the stage for a perfect end game – making profit. If you don’t know how to lead your business to profit, don’t waste time and effort.  Volunteer for the Red Cross. 

Just be wary, don’t fear competition :  Many startups fear an early go to market fearing formidable competition.  They delay it expecting the competition to wear out. Many founders quiver the moment you mention competition.  Remember, when we hate our enemies, we are giving them power over us: power over our sleep, our appetites, our blood pressure, our health, and our happiness. Our enemies would dance with joy if only they knew how they were worrying us, lacerating us, and getting even with us!  And they love winding the guy up and driving him nuts. Our hate is not hurting them at all, but our hate is turning our own days and nights into a hellish turmoil. Hit them where it hurts, by outthinking and outselling them at the market place. The valuation math depends to a large extent on sales numbers. 

Have you been part of a well executed startup end game…?   What other steps you think are important…? 

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Letting go and moving on with life

March 9, 2007

Eugene Herrigel, the German Philosopher who introduced Zen to Europe found that out the hard way.

Herrigel was learning Kyudo, a form of Japanese archery from a highly skilled but slightly eccentric master by name Awa Kenzo.  At first he was baffled by what he was taught – that art must become artless, that the archer must aim at himself – yet gradually he began to glimpse the depth of wisdom concealed in such paradoxes.

One day Kenzo was explaining when to let go the drawstring of his bow, to gain maximum effect for the shot.  After weeks of trying when Herrigel couldn’t get it right, the teacher sat down to explain it.

“Consider a toddler sitting in the middle of several colorful toys.  Her attention is drawn to one of them, plays with her hands, licks and bites it – her focus is totally on that toy and nothing else.  At that moment, all else is irrelevant and unimportant to her.  After a while her attention is drawn by another toy and that’s when the one she was obsessed with so far becomes history.  That’s how you let go off something – with total finality.  You may come back to it later, but for NOW, it’s all gone.

Herrigel was so much impressed by that lesson that he chronicled it elaborately in his book “Zen in the Art of Archery”.  Whether it’s an arrow heading towards the target, taking a life altering decision, quitting a bad habit, chucking a job or doing something for a greater good, do it with the flavor of finality.  Right NOW, it’s just that on top of your mind and let go off all else. ( Hat Tip : Mukul Sharma )

Arjuna was an outstanding and diligent student, learning everything that his Guru Dronacharya could teach him, and early attaining the status of “Maharathi” or outstanding warrior. Guru Dronacharya once decided to test his students. He hung a wooden bird from the branch of a tree and then summoned his students. One by one, he asked his students to aim for the eye of the wooden bird and be ready to shoot; then, when they were ready, he would ask the student to describe all that he was able to see. The students generally described the garden, the tree, flowers, the branch from which the bird was suspended and the bird itself. Guru Dronacharya then asked them to step aside. When asked what he could see, Arjuna told his Guru that he could only see the bird’s eye. Another fable is that Arjuna, while eating in the dark, realized that if he could practice archery in the dark he would become vastly more proficient.

The archer ceases to be conscious of himself as the one who is engaged in hitting the bull’s-eye which confronts him. This state of unconscious is realized only when, completely empty and rid of the self, he becomes one with the perfecting of his technical skill, though there is in it something of a quite different order which cannot be attained by any progressive study of the art.  That’s how you achieve what you’d set out in life for.

At what level of confidence do you let go off something ?

Doing it !

March 6, 2007

Building a performance culture is never as easy as it sounds. Looking back a few years, I try to recall a few of those companies that hogged great media attention and had a grand strategic vision. Many of them failed. And many of them will fail again and again, because the heroes are strategic visionaries that never bothered to deal with the issue of execution; continually and personally making sure that things were actually done. You know, when all is said and done, usually more is said than done…

“Execution” is about getting things done, being persistent and realistic, as well as managing the 3 core processes; strategy (why? and what?), operations (how?) and people (who?).  It is the missing link between aspirations and results and making it happen is the business leader’s most important job.

For a business, I believe it’s paramount to make sure that you have a well-balanced team on all levels in the hierarchy. This also includes having enough executives with execution traits. Don’t assume you have it, go test it!

Overcoming fear

In my experience, the single biggest enemy of effective execution is fear of failure. You fail, but you survive. Usually. Sadder, maybe. Smarter, maybe.  More adult and more human, certainly.

To create is to fail – if only by revising plans, revisiting strategies and tying up loose ends that seemed a good idea during the months they took to draw.  Eventually the sign of a good execution strategy should be such that the quality of the company and the character of its management leap off the page.

We all fall down in our lives at one point or another. Some stay down; others get back up.   

Since failure is painful, it’s impolite to dwell on it. You don’t shake Maria Sharapova’s hand and say, “Nice to meet you, lady. That last set of yours sure was a botch job.” 

We can cringe in embarrassment at our failures or wear them proudly as noble scars, as the evidence of struggle that they certainly are.

Standing out

Disciplines like strategy, leadership development, and innovation are the sexier aspects of being at the helm of a successful business; actually getting things done never seems quite as glamorous. The ultimate difference between a company and its competitor is, in fact, the ability to execute.

Making the transition from good to great doesn’t require a high-profile CEO, the latest technology, innovative change management, or even a fine-tuned business strategy. At the heart of those rare and truly great companies was a corporate culture that rigorously found and promoted disciplined people to think and act in a disciplined manner.

How would you like to improve the execution skills of your team ?