First time entrepreneurs (FTEs) – Building businesses in India

Just read the couple of articles written by Paul Graham : Y Combinator (answers what exactly does YC do?  or  Seedcamp, Techstars, MVP etc ) and Equity (explains why should you give 5-6% equity to a program like YC)

The thoughts expressed got me thinking about how should First Time Entrepreneurs (FTEs) go about building businesses in India. While a lot is in common between the approaches of YC, SC and MVP there are a bunch of things unique to the Indian Ecosystem which FTEs should consider.

Uniqueness of India

First things first, only during the last 10 years India has started seeing bootstrapped or garage startups by talented, educated, experienced and passionate folks who dont have access to a lot of capital but have the skills, will to solve problems and the staying power. The number of successes out of these have been limited and have not been really publicized for folks to get inspired by or learn from.

The VC industry is just about 8-10 years old in India as compared to 50-60 years in US and Europe; among them majority of the funds in India are under 5 years old. VC being a long gestation industry we are a good 5-10 years away from seeing major VC success in India. Most of the firms are focusing on the existing pipeline deals in the market and there are quite of few of these available – companies by serial entrepreneurs, companies started by Executives (CXO, VPs) from large companies, some of FTE companies where the traction is fairly significant, also since PE sector has performed very well and the bigger funds are shifting time and money to PE  deals. Clearly all of the above are the right things to do for the Indian VC firms, since the firms need to perform for their investors. None of this directly supports the FTEs, which is where the gap that needs to be filled in.  We need to create new pipeline of deals that will become successful startups and will feed into the VC pipeline 1-2 years later. That’s the role folks like MVP, iAccelerator, Upstart.in and others are attempting to play.

Another dimension of difference is IT / internet. The penetration of Internet and PCs in India is quite limited (9 computer for every 1000 people, as compared to 700 for every 1000 in USA). On the other hand the awareness and usage of IT in companies, specially SMEs is limited as well. There are a lot of other fundamental needs to be fulfilled in India (remember we are a developing country).

FTEs in India: What to focus on ?

First thing to ensure is to build a cash flow positive business within the initial capital that you have managed to raise (self, friends, family, fools). Keep lowest possible costs and create early revenues. Expenses should ideally be below 50,000 INR and in no circumstances higher than 1,00,000 INR a month.

Dont think of funding as a validation for your venture. Be prepared to wait longer, to build your business to the 50-100 crore revenues in 7-10 years, with VC funding coming after 2-3 years of being in business or no VC funding at all. If this does not appeal – don’t do a startup.

Internet only business models targetting indian market are not going to viable for atleast 2 years ( or more). View internet as a cheap way to build products and get the initial users with zero marketing budgets. From day one build alternate channels : mobile, call center, SMS, kiosks , shops , sales team into your model. Use technology as a enabler to drive costs down and to drive quaity upwards, but do not depend on customers using it directly via internet.

If your idea only lends itself to internet, think about doing it for developed markets like US and Europe.  India still has lower costs and we are very bullish on build here – sell to the developed world model.

So while you take into consideration the universal wisdom of building businesses, paying attention to the uniqueness of India can make an big impact on the outcome of your venture.

Whats working, Whats not, Part 1- Extreme marketing

Its almost 7 months since the official launch of MVP and 13 months since MVP was started as a stealth initiative. Its been a great ride working (non-stop) with the passionate and extremely intelligent startup founders.  We have been working closely with the portfolio companies and at the same time have also had the privilege of spending time with 50-60 other startups, we call “Friends of Morpheus”.  With most of these startups we got to know the founders, understand the business model, approach of the team and saw very closely whats working and whats not. I thought it will be a good idea to do a series of posts called “Whats working, Whats not”.

This is  the first post in the series.

Extreme marketing

Now that you have built the most useful app for people to find their next holiday destination or the site with most amazing t-shirts designs or the healthiest organic drink. The next and “the most important” thing you need is people to come see your site/ product, so that some of them can start buying. That’s where ‘marketing’ comes in.  Startups almost never have any marketing budget, but does that mean they wont get anyone in to see / buy their product. Not at all.

Creative startups are coming up with amazing and zero expense ways to spread the word about the cool stuff which they have built. Thats called “extreme marketing” and its working

Examples:

  • Tringme’s guerilla marketing with source code on business cards
  • Lifemojo launched a GTalk buddy who can answer all your questions about calories  (about 300 people signed up in the first week itself)
  • mGinger’s viral MLM campaign (this was way before they got funded) promising 10 paise for every SMS ad you receive and a cut of money that your friends may be making
  • Sutra just today has launched Kaamsutra.info. Check here to see what is the twitter community saying and here for the coverage on pluggd.in
  • Picsquare’s tieup with Tata Indicom, which meant whenever a tata indicom subscriber connected to internet “Picsquare” was right in front.

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Takeaways

  • All of these campaigns have been executed on almost a “zero marketing budget” but on a mindset of exterme innovation and risk taking
  • Most of these have been done in less than a week’s effort.
  • Most of the ideas were shot down / ridiculed by the people who initially heard the idea
  • The teams had the courage to go out and do “extreme stuff”. They were ready to face the backfire as well
  • They play on basic natural needs of human’s from porn to free money to calorie consciousness and more
  • Successful campaigns have a inbuilt characteristic to spread from people to people (network effect) and they make it easy for people to spread it. Specially via twitter, blogs, social networks, mails, SMS.

Let us know comments about your views and the examples of extreme marketing that you have seen..

Read 50 pages a day

(Thanks to sumit, The Hiring Tool, for the tip)

Reading books is one of the most important (I would classify it as mandatory) activity an entrepreneur should invest his/her time into. And I am not talking audio books, I am talking actual real paper books (e books are also fine, but not as effective unless you have a Kindle).

Issac newton said “If I have seen further it is only by standing on the shoulders of Giants”. That is true for all entrepreneurs because essentially that’s what they are trying to do, look farther into the future, solve problems and be really fast at it. As the history tells us, the most successful ones are those who are able to look the most farther.

Reading allows you to “stand on the shoulders of giants”. It allows you to learn from what other folks have experienced, achieved, failed at, loved , suffered, everything A-Z. There is just a lot of concentrated, distilled knowledge in the books, that its almost a sin for an entrepreneur not to be reading, since upgrading of skills is a constant need for a startup founder.

To some of you, it may seem counter intuitive. Wouldn’t it be better for me to spend my time on real-time , real world problems at hand, instead going into the dreamy world of books? Isn’t my first and most important job to solve real problems?

Yes, that’s true. At a fundamental level the job of an entrepreneur is to solve problems.  But as we know the most effective way to approach / solve a problem is by looking at parallel scenarios and applying the learning to the problem at hand.  Isn’t it easy to solve a problem if you have already experienced a similar one before?

Books are one of best way to collect /come across /find / learn these problems which others have come across.  When you read “The Google story” and go thru the birth of google as an idea, as a young company and so forth, you are sure to learn a bunch of stuff that you can use while building your own company.

The book stores are full of these inspiring, real life stories of companies, people, which are biographies and autobiographies. Then there are authors like Seth Godin, Malcom Galdwell , Tom Peters and so many more. You just need to get started and you will discover a whole new world.

Its not tough at all, I carry a book almost everywhere. And a lot of my reading happens while traveling, waiting, just filling the small little time gaps and I finish almost a book a week.

Trying to read a whole fat book may seem difficult, but reading 50 pages is quite easy. So go ahead my friend and commit yourself to “Reading 50 pages a day”. It will not take more than 1-1.5 hrs, depending on your reading speed. Just keep at it and i promise it will be one of the most fruitful and enjoyable investments of your time.

Tell us in comments if you are planning to start 50 page a day reading journey and keep us updated on the progress…

We dont need no Education. Just give us the money.

Excellent post from Dave – HATS OFF.

Dave has done BIG FAVOR to the new / first time entrepreneurs by speaking naked truth. Many of them are doing a great job but at the same time they really need to be shaken up.

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Here is some of what I see / hear / encounter in the Indian Startup scene and some unwanted TIPS:

– Just give me money and I will take care of every thing else (TIP: guys come to back to reality, it takes a lot to build a business. You gotta build something really significant with out external money and prove yourself, before expecting someone else to write a check)

– I have been working hard and smart for 6 FULL MONTHS, how come customers and VCs are not falling at my feet (TIP: be prepared to rot for another 12-18 months, before people really start noticing you)

– I am doing every thing right but these damn customers , bloggers are not getting it, someone should throw water at them.  (TIP – look inside, review your strategy and execution)

– I have talked to 5 VCs but they dont seem to get my product because they are fools / have vested interests / are incompetent etc. I am sure the next one I talk to will have better sense and will write be a check. Please dont tell me that I need to fix / improve anything on my end (TIP: No comments)

– I got funding, therefore now I am successful. I can spend as much as I want and have all my management stay in 5 Stars and travel Business and blah blah

– I have been running this business for 2-3 years, about time some body comes along to buy my business or give me 5 Million dollar funding (TIP: hey guys, value of your business is not a function of how long you have been runnding. Value comes from : market share, customers, revenues, traction, branding etc etc)

I dont mean to disrespect entrepreneurs, infact those are the creatures I respect the most. But some reality check will surely improve things, would love to hear from you…

Startup Madness

(This article is jointly written by Sameer Guglani and Nandini Hirianniah)

In recent days, while working with the MVP portfolio companies and reflecting back on the days of madhouse, we have identified this phenomenon we are calling ‘startup madness’.

It’s visible and present from the time when you start thinking of your million dollar/world changing idea to the steady state point (personal satisfaction, acquisition, IPO or maybe shutdown). Things that you do, don’t make any sense to outsiders and they are like ‘This guy is crazy’ and even when you look back at that period you think “what was I thinking when I did this?”

Looking back at the time when we got the idea to start madhouse, we did not know anything about business, we were just two 27 year old kids (later three of us, with Ankur joining us). We had tried a variety of things in our lives and had managed to do reasonably well in whatever we put our hands into, may be that’s what gave us the stupid confidence. Very importantly we were quite ignorant about ‘real business’ and hence came up with our own take on every business problem we faced.

This streak of startup madness showed at various places:

  • We did not hear NO:  not from vendors, not from people we were trying to hire, not from investors, customers, no one. A NO just meant we had to come back with new ideas and try again.
  • We would never get tired of talking about madhouse and we could talk to any one about it. Most times the other guy did not give a damn :-(,  for him/her it was just a blabber
  • We just worked non-stop for three years , not even a day off (except when forced by illness)
  • Other than work everything else was just plain unimportant : sleeping, eating, meeting friends, attending social functions, family, watching TV, movies, newspaper – all of this had very little place in our lives. We just filled all our day with work with average working day of 16-18 hrs all thru.
  • We worked out of anywhere and everywhere.  Our tools were a Fujitsu laptop and a CDMA phone which could be used like a modem.  Restaurants, inside a car / train / auto rickshaw / bus, out on the road, in the park, bedroom, living room and the loo, locations stopped to matter, every place was work place.
  • We did not need a lot of money to live and we were happier than ever (no purchases of over 1000 for 3 years, eating at economical places, shamelessly staying with friends / relatives / acquaintances in cities we visited on work )
  • ‘The world impossible was missing” – we just did not believe that there was any problem that we could not solve or anything we could not do. Our minds were one track – focus hard, think hard, work hard and just do whatever it takes.
  • We had access to this inhuman energy that allowed us to just keep going – “never get tired” or “never run out of steam”.
  • Each time we met a new person, we were constantly thinking of how this person can help our venture, . Everywhere we went, we explored if there was something there that could benefit our startup. Frankly we were classical ‘opportunity hounds” and quite shamelessly so 🙂
  • We were basically “stuck” in our own world in which we could not fail. While we adapted like crazy, we sort of forced business to work the way we thought it should work, without caring a lot about the outside world.

This madness is the essence of start-ups; it signifies the purity of a startup. It makes the startup tick and makes it successful and enjoyable. The same madness makes you innovate, over perform, challenge your skill set, think out of the box or even out of the world, take 28 hrs out of a 24 hrs a day, it gets you to focus but does not let you  blindly focus!

Its also important to figure out how can you keep re-fueling the desire, the madness, so that it lasts forever, not just for days, weeks or months, start ups that click need to be at it for years. For an individual or team to succeed as a startup, having the startup madness is a must.

If you are an entrepreneur look inside you and make an honest assessment. Do you have the streak?

  • If yes, great.
  • If no. But you think you can build it – nice, go ahead and do it at the highest priority.
  • If you don’t have it and you can’t build it – I am not sure you should continue being an entrepreneur.

On that other hand, if you are not yet an entrepreneur you should also look inside you and make the same honest assessment. Do I have the mad streak?

  • If yes, you fool, leave your job right now – the world of ‘startup madness’ is calling
  • If no, it would best for you to avoid the path of entrepreneurship, until the ‘madness streak’ gets to you 🙂

Startup Essentials: Rockstar programmers

I recently answered a set of questions for Charu Bahri, for her column called eVoice in IT magazine (www.itmagz.com) published by EFY India. All these answers are in the context of early stage, young startups, not well funded, less than 1 year old, less than 10 people.

Is it tough for tech startups to find very skilled tech manpower? If so, why?

It can be tough or easy for a startup to get good tech guys depending on the approach of the founders. With the right approach it can be done fairly easily.

The way startups are done has changed these days, the most well known web products; ranging from Youtube, Facebook, Twitter have been built with small teams of few rock star programmers.

The best option is to have tech co-founders, who will develop the initial version of the product themselves and not depend upon hiring programmers. It’s essential for the founders to build the product and create initial traction around the product. Along side they need to continue to look for the rock star programmers, guys who will be truly interested in joining a startup and doing real meaty work and come on board for lesser money along with equity.

Places to look for are the startup conferences, thru references (spread the word), have your own blog and write about exciting work company is doing, write about the open positions, put job posts on popular startup blogs (for India: venturewoods, pluggd.in, startup dunia etc), also look at getting people form your college. Post to yahoo/google group mailing list from good colleges like IITs etc.

The conventional ways of hiring will not work because over there you will find folks who are looking for safety, salary and cushy jobs. Some of them may be curious about startups, but will back out at some point or the other. No point wasting your time.

What novel remuneration means may be offered to tech specialists?

For right people remuneration wont be the deciding factor, these are people who are passionate about working on exciting things, people who have a desire to learn and to “upwind”, who may themselves want to start a venture down the line.

Quoting form Paul graham, the founder of Y combinator

“In an essay I wrote for high school students, I said a good rule of thumb was to stay upwind– to work on things that maximize your future options. The principle applies for adults too, though perhaps it has to be modified to: stay upwind for as long as you can, then cash in the potential energy you’ve accumulated when you need to pay for kids.

I don’t think people consciously realize this, but one reason downwind jobs like churning out Java for a bank pay so well is precisely that they are downwind. The market price for that kind of work is higher because it gives you fewer options for the future. A job that lets you work on exciting new stuff will tend to pay less, because part of the compensation is in the form of the new skills you’ll learn.

Grad school is the other end of the spectrum from a coding job at a big company: the pay’s low but you spend most of your time working on new stuff. And of course, it’s called “school,” which makes that clear to everyone, though in fact all jobs are some percentage school.”

Is there a possibility of retaining tech specialists to work as and when needed, that is, paying only a retainership (and thus, avoid paying them a full salary)?

I have not come across programmers who are available on retainer-ship, only option is to use a Tech services company, which will surely be very expensive.

Another way to do this is to find folks who are available to work part time in the evenings and weekends. But this approach brings uncertainty into the project, because these programmers have high chance to treat part-time work as low priority in case there is an increase in working hours at their full time work place. Also this option may work for building prototypes and demos. The moment you have to build the real stuff you will need full time programmers.

What sources/routes could tech start-ups use to find the right manpower – job portals, executive search firms, campus interviews?

None of the above works for startups. See answer to the first question

I’d especially appreciate any example you can share with me that showcases how your company was able to recruit the right tech talent and the kind of remuneration agreement you proposed for the talented staff.

At madhouse, after approx 1 year of operations, we found a great tech co-founder (Ankur Agrawal), who single handedly build a lot of parts of the product and since he was a co-founder there was no salary to be paid, until we got funded.

There is another model which has worked for Instablogs (I am an advisor to Instablogs). Ankit (founder of Instablogs) developed the initial version of product, got the traction and later started hiring bright freshers from not so popular colleges. They created a very good training program using which they are able to create very good programmers out of the fresh engineers in record time. For pulling this off Instablogs had to move from Delhi to Shimla, where they were able to find good fresher engineers, who were eager to take a job, learn and do well.

A question relating to the Instablogs example you shared. There is a possibility of the fresh engineers moving off to greener pastures after being trained. What measures did Instablogs take to prevent
that?

I disagree with definition you have indicated for Greener pastures.

  • Green pastured != higher salaries.
  • A job = salary + learning + challenges + working at a place which gives you happyness.

That’s exactly what Instablogs has done, they provide the people with

  • Constant learning and fast growth in knowledge
  • Opportunity to work on cutting edge technologies
  • A place to work where they are allowed to make mistakes, have fun and enjoy life
  • Opportunity to create from scratch

These programmers obviously have friends who work in other tech companies on higher salaries etc, but they realize that their knowledge is far superior as compared to those guys who are getting paid more but are doing UNINTERESTING and NON GROWTH work. Basically at Instablogs people are upwinding and others are essentially downwinding.

There was a recent case of one guy who left for higher salary and came back with couple of weeks saying that he just did not enjoy working at his new job and this has become a live example of all other guys in the team.

Also read: Joining a pre-VC startup