Purani jeans aur guitar
Mohalle ki vo chhat
Aur mere yaar
Vo raaton ko jaagna
Subah ghar jaan
Kood ke deewar
Vo cigaretee peena
Gali mein jaake
Wo karna daanton ko
Ghadi ghadi saaf

A group of startup founders sang this college time favorite song during the starry, drunk, passionate and bindaas late night sessions, that went on till 0300 am every night, during Morpheus' Startup Gurukul. Gurukul was organized with the purpose of bringing together the gang of morpheus founders at one place for 4 days of immersive experience. Away from the normal world, away from their hectic day-to-day schedules - just to hang out, share learnings and to know each other. The sheer energy in the atmosphere was intoxicating.  People were - talking, dancing, asking questions, listening intently, showing demos, discussing stuff , giving/ taking feedbacks, taking pictures, fooling around, jumping into the pool. But with all this as a backdrop they were all starting lifelong friendships - with folks who are also weird like themselves, those who have chosen the uncertain path of entrepreneurship - leaving behind the certainty & security of jobs. Because nature has cursed (or gifted them) them with the "entrepreneurial gene". Be an Entrepreneur or Die - thats their calling. Just can't do anything else. Gurukul is a world in which everyone is an entrepreneur - everyone inspires you, everyone believes in your audacious vision and the non-believers are totally absent. I still remember the day we started the journey in Jan 2008 - 2.5 years back. Coming out of our 3 yrs as the founders of madhouse, we realized that this was badly needed in India and we had a kind of stupid confidence in our ability to figure this out. Most of the folks around said you guys can't do this / this cant be done in India or some variation of a negative comment. Like all entrepreneurs - every time someone said that it increased our determination to crack this. From the Starting point to the Startup Gurukul - the ride has been a lot of fun but at the same time quite rough, things have moved a very rapid pace, there was always so much to do, so much to figure out, so many moving pieces, we just kept working 12-14 hrs everyday.  I never got a chance to step back and look at the overall picture. So at the Gurukul when I saw, at one place, all portfolio companies, all founders, our investors - and I saw people from outside morpheus who came to spend time with us, said nice things about what they saw. I had this realization that we are on to something important, we are starting to have a small impact on Indian Startup Ecosystem, our efforts are paying off. This has given me a lot of energy to keep doing this for many more years to come. Thanks On behalf all partners @ Morpheus I would like to give a big Thank You to all the founders in the morpheus gang - for making us part of their teams, their dreams and their families. Thanks guys for believing in us - for taking the chance. Together we can and we will change many things in the world around us. Also a very big thanks to guys @ Sequoia Capital for supporting and sponsoring Startup Gurukul. Enjoy the gurukul pics

• How does/should one take call between growing without being profitable or being profitable and then growing (Ramen Profitable)?

At the minimum once every 2-3 months this question pops in the head of  a startup founder. Should we invest in growth or try to become/stay profitable? If one thinks long-term: investing in growth seems to be the call.  From short-term perspective becoming profitable seems important.  What is the right answer?

• Every startup's journey is made up of many "startup phases"
• Each "startup phase" is on an average 18-24 months long
  • Phase duration could be different for different startups
  • Different phases for the same startup could be of different duration
  • Typically initial phases are of smaller durations (9-12 months) and the phase duration grows longer with each phase and finally settles at 18-24 months

All phases will typically have 3 different parts to it and i've detailed them below:

• Part 1 (6-8 months)
  • You have certain amount of cash, certain goals  & growth targets that you want to achieve
  • The approach should be to invest in growth & towards achieving the planned goals
  • This is the non-profitable time that will include investing in
    • Development of the next (or first) version of the product
    • Team building
    • Building additional capacity
    • More office space (as required)
    • Customer acquisition efforts
    • New branches / New sales channels / Trying new revenue streams (not applicable for startups in the first phase )
    • And other similar activities
  • The startup will use 40-50% of the expense budget for this phase during Part 1
• Part 2 (6-8 months)
  • Focus on reducing the gap between monthly expenses and monthly revenues and move towards cash-flow positive
  • No more major investments and laser sharp focus on increasing revenues while keeping costs the same or lower
• Part 3 (6-8 months)
  • Somewhere in the beginning of Part 3 you should hit cash-flow positive state and become - Ramen Profitable - where your revenues are just above your expenses
  • Post that you need to continue to ensure that the gap between the two increases steadily and as a result start building some cash reserves
  • Couple of months after you hit cash-flow positive (for this phase) you can start considering fund raising options
  • To have high probability of raising funds you need both:
    • Significant growth in this phase
    • Cash-flow positive business operations
  • The above two are positives signs for the investor
    • It shows that you are capable of achieving growth as well as capable of managing your cash flow / profitability
    • Also it puts you in a position where you can continue to exist & grow organically without an dependency on any new investors
  • And every investor wants to invest in a team that can succeed without them
  • Once you raise funds or build adequate cash reserves from internal accruals you can start the next phase and repeat the same cycle

Life cycle of a "startup phase"

• Part 1:
  • Start the phase with certain cash reserves, growth targets & goals
  • Invest in growth
• Part 2:
  • Focus on building  revenues and reduce the burn rate
  • Start achieving the growth targets
• Part 3:
  • Become - Ramen profitable / Cash flow positive.
  • Build cash reserves / Raise capital
  • Move to next phase & repeat the cycle

• "Before you think of raising big money, make sure your customers trust you with their money" (from Indus's post : How much money do you need to get started?)
• Be humble, honest, friendly and upfront
• Speak the truth
• Be passionate / energetic about your business
• Listen Listen Listen
• Share examples and stories from real experiences
• Before the meeting - learn about the VC firm and the folks you are meeting via Google/twitter. E.g -  firm background, current portfolio, good investments, info about the guy you are going to meet
• VC's job is to punch holes on your business model / ask tough questions. Don't get offended, don't become defensive
• Appreciate and acknowledge good suggestions / good feedback.
• If you don't know answer to some questions - DONT BS - Just say "I don't know. I can get back to you on this"
• Let it go. Never get into back & forth arguments for proving your point - even if you are right.
• Show respect for other's time (a surprisingly big number of founders don't get it)
  • Note down all action items from the meeting and ensure that you get back on or before promised dates
  • Be on time for all calls & meetings. This is one of the biggest turn-offs
• Be you. Dress like yourself (but be clean), talk like yourself. Good folks want to meet the real you, so point being someone else to impr

• Have a set of questions that you would like to ask the VC.
• It will be great if  you can get in your questions first and garner some useful insight. If not make sure you get some time for you questions at the end
• Don't be afraid to ask questions that you will offend the VC.  Good guys will appreciate it  and those who dont even have enough respect for you to answer your questions don't deserve to fund you anyways
• What is the background of the firm?
• What is the background of folks who are meeting you?
• What investments have they made so far? Any in your geography domain?
• What is typical range in the size their investments?
• Which sectors do they normally invest in?
• At which stage do they normally invest in?
• What do they look for in a team / company?
• What value do they bring to the table?

• Don't rush through your intro, good folks want to know you and your story, so that  they can see inside you and get some key insights
• Don't start with talking about your venture - talk about u
• Start with where did you grow up, schooling, college, work-ex, how did to decide to do a startup, story so far, what makes you tick and all the interesting stories
• Focus on things, items, incidents, experiences, stories that directly / indirectly relate to you as entrepreneur and your startup. Dont spend time on other things
• Give timelines of your story. Eg: which year did you graduate in, from when to when you worked at MS
• Every founder should personally talk about themselves

• Take them on a journey with you, make them see your passion
• Share the story of how did you get this idea and how was it developed from an idea to a real solution.
• What do the customers want and how are you giving that
• Will always be compared to some companies - be prepared. How is Deskaway different than Basecamp? How can madhouse compete with Reliance? How will flipkart compete with Brick & Motar book stores?
• Respect the competition. Don't focus on telling why your product is better than competition or what competition is doing wrong.
• Focus on what you are doing. Tell them how your approach to the problem is well thought off and different as compared to the solutions available in market?
  • You are creating a blue ocean, instead of getting to a red ocean
  • You are going beyond the customer expectation and delivering over and above it
• Talk about your experience of making & selling the product
• How are people reacting to it? How are they using it?
• Talk about real customer stories - how your product is improving people's lives and giving them an amazing experience

• Share your understanding of the market both from from top down and from bottom up
• Top down:
  • Use some obvious data, facts, trends which are available in a public to establish the market size.
  • Share your sources of data
• Bottom up:
  • Share your supporting hypothesis,  base it on your experience with usage of product and selling the product
  • What will it take to reach annual revenues of 10 L, 1 Cr, 10 Cr?
    • No of customers
    • ARPU (avg rev per user)
    • No of employees
    • Amount of capital
    • Time required
    • No of markets
    • Market penetration level

• Talk about how are you currently building and delivering  (its ok if some of it is mannual / non-scalable today)
• Talk about about your road map for continuing to improve technology /  operations / processes / automation  at every stage of the company
• Talk about team which develops the product. What kind of team do you have? Are they competent enough to build the product?
• How do you find / recruit people?
• How do you measure / track operations / product usage?
• How do  you plan projects and track progress?
• What is your product development methodology? Eg: agile

• What is the current cost of serving a customer for each type?
• What is gross margin, expected net margin? (its ok if you are loosing money right now)
• What are important drivers of costs / margins? How well you know them?
• How will these costs move as you scale the business
• What are you doing to improve the economics?

• What are various marketing activities you do for generating good qulity leads?
• How do you validate leads?
• Also talk about some of the activities that you tried but they did not work out
• Talk about your sales process that works on converting that lead
• Talk about factors of how a customer makes buying decision
• What are qualities needed for someone to be a likely customer?
• Economics of your marketing channels (cost vs sales generated)
• Economics of your sales  channels (cost vs sales generated)
• Economics of a sales person (cost vs sales generated)

• Show that you are are cash flow positive and are generating enough cash to support our growth (this is also a requirement for doing fund raising)
• Your preference is continue to spend time building and growing the business, since normally fund raising is a very time consuming process
• If this meeting is not setup specifically for fund raising - tell them your are not looking to raise money and will probably look at raising 2-3 millions in 4-6 months time frame once you have hit so and so milestones as a business (fill in your timeline and numbers)
• If the meeting is about fund raising - talk about the amount your are looking how you can use it to really grow the product, expand sales, expand operation , build solid management team and essentially achieve the hockey stick growth
• How much total money will you need to raise during life of the venture?

• Share the revenue numbers for last 3 months, have numbers of previous months also handy
• Monthly growth in revenues
• Projected revenues for 3 months , 6 months , 12 months
• Projections beyond 12 months
  • If you dont have them say we haven't done those numbers but will be happy to get back and share them
  • If you have them handy, share them but point out that beyond 12 months its really difficult to make accurate predictions since things change quite rapidly for a startup

• Be honest about competition. Never try to show that you don't have competition - that's one of the worst things to say, competition validates what you are doing.
• How are people solving the same problem without our product?
• Who are our direct competitors? How well do we understand them?
• Who are our indirect competitors? How well do we understand them?
• Who are the potential competitors?

• Equity given to the investors =  Total money invested / Post-money valuation of the company
• Post money valuation = Pre-money valuation + Total money invested
• Pre-money valution = Valution of your company before taking the investment
• Example:
  • Pre-money valuation = 1 Cr
  • Money being invested = 15 L
  • Post-money valuation = 1Cr + 15 L = 1.15 Cr
  • Equity given to the investors = 15 L / 1.15 Cr = 13.04 %

• Startup valuations are essentially an art, end of the day valuation of a company  on which both the startup and the investor agree on
• I have based these numbers on my observations and understanding of the preferences of Indian startups and Indian investors operating at different stages
  • I have been directly / indirectly involved in a good number of funding deals  / discussions
  • Also there are deals in which I was not involved but i have the information about them
• I have a personal bias towards revenue generating / cash flow positive startups

Most founders start companies to achieve things like : financial freedom, creative freedom, change the world, make a difference, do something different, be the master of their own fate, be known for their work, be respected by friends & family, lead people, create jobs and the list goes on.

"Things don't happen automatically, u have to make them happen. You have to endure and enjoy the pain. Successful entrepreneurs know it instinctively & that's what makes them tick."

• Unless you plan to live with  your parents, be prepared to move out of your comfortable flat in Versova  with rent of 20k a month and  move to Dahisar to maintain the size of the flat but reduce the rental bill to 10k a month.
• Flights won't be the default mode of travel between cities (surely not kingfisher).  Every time you'll travel you will evaluate train vs flight, usually the trains win and mostly sleeper class fare.
• Cabs are no more allowed for travel within the cities. You gotta be using auto rickshaws,  ride buses / trains / metros or even hop on the shared cabs (yeah I have done that)
• No staying in hotels, not even budget hotels. Make a list of friends / relatives in all cities and starting piling on. Or checkout  www.couchsurfing.org
• Can not eat in any fancy restaurant - get a list of affordable but clean food joints - McD is a great option. Cooking at home is even better.
• No more drinking out in pubs. If you wanna drink bring it home.
• No movies in multiplexes. In fact no time to watch TV.
• No phone upgrades / No laptop upgrades. Manage with what ever you have.
• No bank will give you loan. Not even a credit card.
• When we were doing our first venture madhouse - did not buy new clothes for 3 years. Only bought when an investor asked me come to the next meeting in formals.
• There is nothing called a work-life balance in first 2 years of a startup. It's only work, work and more work. So get used to it and tell your family also.
• You are doing to work (or should I say slog) 18-20 hrs a day everyday for the whole 2 years. And in your 4-6 hrs sleep you will keep dreaming about work anyways
• And a lot of your work time will be spent doing small things, which are not exactly intellectually stimulating  - kinda stuff you always took for granted - cleaning the loo, mopping the floor, making tea, opening your office, buying food, going to banks, dealing with govt officials, starting the generator
• You won't have much time with family or friends. You will regularly face - angry parents, angry wife, angry kids and angry girlfriends/ boy friends.
• No going to family functions or weddings. Even if they drag you to the function - you will be sitting a corner on your laptop or iPhone and that would leave your relatives angry with you.
• No holidays. No weekends. And if you really want a vacation - Use Google earth to enjoy your imaginary vacations. Feel happy when google earth has higher resolution imagery for your vacation spots. They have recently added high imagery for Kashmir region, especially gulmarg and Amarnath.
• No time to take care of your health. Running, exercises, gyms - all go for a toss
• Don't expect any recognition for your efforts from friends and relatives - they wont get it - for them you are still a moron - who quit his fancy job with a big company and fat paycheck to do some thing as mundane as SELLING DVDS
• Be prepared to a lot negative talk - all most all people around you will keeping tell you how big a looser you are and many more things.
• Totally get used to failing. Infact failing is not bad - that's the way to make progress. If you are building anything from scratch - you have to fail 20-50-100 times before you get it right. That's how evolution works. That's what happens when you try to solve hard problems.
• Be ready, most people will reject you : customers, investors, employees you try to hire, organizers of startup showcases. You have to keep looking for the ones who will accept you.
• Employee retention will be a pain. You will spend a lot of time finding and training freshers to find they have been poached by biggies with just 1.5x or 2x the salary as soon as training is completed.
• Your girlfriend's / boyfriend's parents may tell you that they are not too keen to marry their son/ daughter to an entrepreneur
• And if you plan to close an arrange marriage deal you can forget about it. Entrepreneurs are a total flop in arranged marriage scenarios
• Your co-founder will chicken out and will create a bitter scene. People who seem super committed and ready to give their life for the cause would suddenly find out reality and bail on you.
• Be ready to max your cards / pledge your Personal Assets/Share certificates to give fuel to your Business.

• Be a free thinker
• Don't conform; create your own identity
• Suck out all the marrow of life
• View things from a different perspective
• Be loyal
• (Most important) Carpe diem - Seize the day

• Be a free thinker
• Don't conform; create your own identity
• Suck out all the marrow of life
• View things from a different perspective
• Be loyal
• and

Carpe Diem - Seize The Day

• Good proposal documents are like paintings
  • Writing a good proposal document is an art
  • It has to come from within, you need a deep understanding of "what does the proposal document stand for, what is it trying to accomplish, who is my audience, what do I need to communicate"
  • Once thats done just let your self loose and a good document will emerge
  • Review the document a couple of times to De-text and make it crisp and professional
  • Identify a few folks whose proposal reviewing skills are good and get them to give you critical feedback
  • Don't ignore the feedback or parts of the feedback. Work on each point meticulously
• Overall Goals
  • Clearly document the goals of the proposal
  • What are you trying to achieve via this proposal ?
    • Make sure every word & every sentence in the proposal contributes to that
    • Dont get carried away and write stuff which is not directly related to the goal
  • Example Goals
    • Convince Westside to do a pilot in mumbai
    • Pilot should start in next 1-2 months
    • Get Westside to purchase stock against advance payment
• Communication goals
  • Document what are you trying to communicate through the proposal and ensure that of it (and not more than that) is communicated
    • Example communication goals
      • Who are we
      • What do we make
      • What are we selling to the customer and why should the customer buy it
      • What is a simple initial pilot we can get started with (initially try to get into a pilot which is simple and easy to get started with for both sides, you can get into deeper more elaborate partnerships later)
      • What are the mechanics of the initial pilot
      • What are the commercials
      • Other terms & conditions
      • How can we get started
• Audience
  • Define who is the audience, who will read it?
  • Step into heads of your audience and think what do they want to see so that they will make decision that you want them to make
• Overall structure and format
  • Create a document structure to accomplish goals listed above with the stated audience in mind
  • Fill in the content in the structure
• De-text
  • De-texting means going through the written text and removing unnecessary words / sentences that don't all value to the content or don't contribute towards the goals of the document / section
  • De-texting is an art and it takes patience to do it but once you practice enough you will become good at it
• Have just enough
  • You should have "just enough" content in the document
  • Every word / sentence / section in the document competes for attention of the reader
  • Hence every extra sentence takes away attention from existing sentences
  • So be careful and sure about every word / sentence / section - that its required to complete the document
  • Removal of every unwanted less wanted section will increase the chances of rest of the document being understand better by the reader