Great vs Profitable Business

Purely based on a few stray examples,

Is it that for building a really profitable business you usually have to build for common denominators and base desires? Great businesses aren't always immediately wildly profitable. The common denominators are easier to find.

Thus Far

I started writing code in grade 7, and in the 8th (in 1988!), had stitched up a desktop app (we called them "projects" back then) that presented visual + text questions - with some level of animated graphics painstakingly coded one motion at a time - to test people's knowledge of road rules and best practices. I saw a very similar - tho of course more advanced - piece of software when I took my driving license test at the DMV in Beaverton, OR.

College was one massive waste of time, except a couple of interesting "projects" we did - from a fundamental growth of knowledge point of view. Sure we picked up a lot of stuff, but didn't really connect to lots of it till much later, as we stumbled upon concept after beautiful concept.

My first job was in operating systems - initially in the command layer and later - nirvana - inside the kernel itself - of a very cutting edge OS for parallel architectures. I learnt new stuff every single day.

The next job came because of a huge jump in salary - and got boring as hell in a few weeks. We were porting massive amounts of code with very little clue to the underlying architectures, designs or even concepts. Personally, that turned out to be a good place because I couldn't bear to stay in front of the screen doing diffs on logs - so automated bits and pieces and improved my scripting skills a lot. Laziness, boredom are indeed drivers of innovation :)

An unexpected switch to an "R&D" group brought much needed activity to the brain - we were trying to solve the problem of base platform developers who needed to fix bugs reported on platforms that the code had been ported on to. Did my first major design work for this - and got to a stage where basic core dumps from one platform could be captured and migrated to the base platform, with context intact, for debugging. Filed a few patents, and this would've had a major impact if it were used for reduced triaging effort and manpower.

The next bit of "R&D" involved mapping pieces of database logic - across constructs and languages - to a common format, looking for opportunity for recommended practices, improvements and optimizations as documented in a huge number of "expert" level books and cross-compiling into an appropriate target language. Awesome work again, and we got to present this and interact with end users for whom this could be potentially very very useful. But, as is the fitrat of R&D projects, that, was that. Of course, with a coupld of more patent applications filed.

Yahoo was a huge opportunity and next step in "impact". I got into the fascinating realm of machine learning, information retrieval and text mining that I had no formal training in, yet took to - more pragmatically than most with formal training - instantly. We did a great job of our project - coming with lots of innovative ideas, techniques and solutions than solved more than just our immediate problem. It was a joyride and even had impact as it got rolled out as a new property for Yahoo India. Of course, where that went then became a question.

Another zoom-out followed as yet another R&D effort where we were trying to model visualize and deal with messages, chats, mails, blogs etc as one : conversations - with social authority and impact used for ranking. This was way before buzz/facebook etc had made an appearance. Good work again. R&D project again :)

Then Ziva happened. An amazing exciting journey that started with ideas, design, implementations, customer interfacing - but took me way beyond code. The scale of problems and impact assessment grew to envelope the software/development bit of it as one part of the solution, not the whole of it. Not that we succeeded in doing all we started to - but the neurons were pushed hard everyday, and the breadth of skills and ability to deal with fuzziness grew tremendously.

So much so that I became what I refer to as a "Product Manager". This is a much abused term and means a lot many things to a lot many people. To me its the guy who's got the 360 around a product in his head, and driving his life. Needs people to build, sell, hire etc etc - but the one who's marrying the strategic to the tactical, and keeping track of the story.

Linger is an effort at product management too. The code-writing is very different. But fundamentally, the ideas are the same. A product needs to be designed, created, tweaked continuously. The team has expanded, and the vision has grown.

What I've realized is that each plateau, there's been an urge to see if the problem solving effort made any real difference - and the next level was subconsciously desired, and found. Its not the coding, or the designs, or the rollouts that mattered. The question about what they became - or led to - eventually cropped up. Managing to score on somebody else's report card did not satisfy at all.

Is entrepreneurship the culmination of this ? Is this freedom to think, create, follow a path the ultimate path to satisfaction ? Dunno, but so far, its better, and I have found in me an urge to keep doing this despite its not insignificant costs. Amazingly, all the old rules of "hard work" (as measured), killer instinct, dog-eat-dog etc seem to not apply. Yes it still takes work and getting around a lot of procrastination - but those are by-products of a bigger desire, not drivers.

As always - "lets see how this goes".

When Starting Out

Do not burden yourself with Scale upfront.

It comes when it does, and will match the level of your ambition and effort. Do not make the success of your idea contingent on huge scale, and an eventual, delayed payout. Of course, some ideas will need that. But do not get discouraged if it appears that it'll never be a Google. Even old-world, seemingly unscalable brick and mortar ideas have been grown. They don't all have to grow the same way. Linear growth is just fine too. And paths, ideas and opportunities will emerge as you deep dive into something that you really care about.

Don't worry about having to share it.

Its cliched, but a small part of a large pie is better than all of nothing at all. Sharing is not just about "attracting talent" but about truly transferring ownership, authority and demonstrating trust. Its a tough one, but one very important if you want to be part of a team that can help create something much larger than what you might, individually.

Keep thinking of revenue.

This means a bunch of things. For one, you're not thinking of investors but of customers, and paying ones at that. No business is "too small right now" to be making revenues. Ever. Every Rs.10/- is validation. And it also keeps you alive to the business model, and tests the assumptions and hypotheses you started out with.

At the same time, don't obsess about revenue.

There is usually a larger picture and story than your current sales flow, or even product offering, might suggest. You might have thought of it upfront (but hopefully, aren't building/creating that all at one go), or it might present itself as you start assembling the idea and product and market together. So while revenue is important, its ok if its not as high as you expected. Do not let it take up ALL your time for sure. A CEO must do some amount of sales, but one who becomes focused only on that is very very dangerous in the not-short term.

Keep Values Intact, and commincate clearly.

Be it to partners, co-founders, vendors, employees. Its easy for motivations, aspirations and desires to diverge as business grows, and creates pushes and pulls in different directions. If its all built on the platform of some core values, which are then never compromised for immediate gains, then you stand a better chance of these pulls being reconciled into a single vision. Else you lose time, trust, people.

Network, connect, get out of the door

Yeah that website can be improved. And code optimized. Or delivery made more efficient. Or whatever. But as your business grows, your eyes and ears need to be out there. Personally, while you're small. You need to learn how to keep fishing for opportunity, great people, customers; you need to know what they think/feel; you need to know it way before the sh*t hits the fan.

Of course, be flexible

Its not like you might be wrong about many things. Its more like you surely will be! Its about persisting with the idea, moving from plan A to B, experiment X to Y and backing yourself to try things out even as you're unsure. Of course, you need a very decent eye on personal cash flows, expense patterns as you do this if you do not want to find yourself in a pressure cooker all of a sudden.

Go ahead, entrepreneurize!

Linger Leisure is live!

What started as a one-off experiment last year is a bigger now.

Linger Leisure is live, with 2 locations, and the hope of many more to come. And Vijay is part of the Linger team now.

Its not just about adding places and rooms and accommodation, but experiences - as local and authentic as we find them. Its about exploring these ourselves. Its about learning, being surprised, the unfamiliar and unknown - these are what make travelling worth it.

We're looking out for more pretty places, different experiences, and even folks who're keen to do this sort of a thing.

Money, Governance, Entrepreneurship. What's Your Metric ?

The Government is beginning to talk more and more in terms of user fees, revenue targets, cash positions, etc. Even the citizenry takes comfort and pride in the fact that, say, the BMTC runs at a profit. Its surely a good thing - fiscal responsibility is key to sustainable development.

Yet, these targets, numbers, metrics are not the end for governance - merely a means. Its critical to ensure those numbers are healthy, but its even more critical to measure the change that is sought to be made using the money. It has little merit, otherwise. The goal of a state is not to get rich directly, but indirectly. That it needs to be in very healthy financial situation is a side effect.

Is the same true for a lot of entrepreneurs ? Money is a good metric, but isn't what you started out to do more important as a goal ? As in, would you rather let the effort try hard and die or would you be ok completely changing the nature of the effort so cash flows look better ? Don't think of a state of crisis, but of a steady, decent revenue state doing what you started out trying to do versus a much better cash cow if you switched to something that was not really close to your heart or part of the vision.

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New Idea : A Chicken and Tech Problem

I have a new idea that I totally think has potential, is worth pursuing, and building technology around.

The urge, as an engineer, is to first build the site + functionality, and then "roll it out". But after years of being in tech, and having seen many never get out of their comfort zone and, as a result, having built too much in isolation, its an urge I need to resist.

So the first tasks ? Go sign up the stakeholders. Create enough functionality and documentation to sign them up. then go find other stakeholders as users - give them just enough so they can appreciate the core value of the offering.

Then think of the code.

Earning It

Been about 4 months since Linger went operationally live - including some test runs.

Its been a major journey - entrepreneurship wise.

• First up - its a very different feeling when you create something someone likes enough to pay for, and gives positive feedback later. I think this defines entrepreneurship, in a sense.
• Next, an entrepreneur's main challenge is to live with, and manage uncertainty almost all the time. Doubt too, often, though one might not admit the same.
• You will make mistakes, despite your best efforts. And there will be some goof ups that you did not plan for, and cannot control. There is little time for regrets, introspection. Get over it, fix what you can and get on with it.
• Your venture is often you! It takes your personality, and what you like and do not like, how you do things starts showing up everywhere. So figure out early if you're in a business where your interests and personality resonate with the business success parameters.
• Its rewarding! Only, for an entrepreneur, the reward is rarely monetary alone. In fact, that bit may not happen for a while as your spreadsheets start making less and less sense :)
• Honesty works. With customers, employees, your own self. Don't pretend to be what you're not.
• Defensive pricing is a bad signal. And you do not want to attract the wrong customer or keep the right one away. Even if its slower, build the brand/attributes right.
• The expenses are always more than they seem to be :)

I've also learned I enjoy the hospitality part of it a lot! I love it when people tell me they read a book, or spotted a bird, or were surprised by the stars in the sky. I appreciate it when they appreciate the raw, warm but with-no-formally-training service provided by the staff.

Its a tough journey, but it seems totally worth doing.

Tech, Non-Tech and All That

By and large, in the startup space and media, startups, VC funding, and the entire ecosystem is more or less is assumed to be about technology, software products, code, platforms, etc.

In real life, entrepreneurship is all about businesses, deals, real needs.

VCs go right ahead and fund companies based on a product seen (despite what they claim) and more or less hope the team will learn about the actual business they are engaged in serving. A travel portal is more about travel and the food chain in the industry, and less about the technology powering it. Very few software businesses are about usage of the software itself - BaseCamp etc come to mind.

However, when funding non-IT businesses, a question about the team's lack of experience will promptly raised! How's a bunch of guys who can write code to create a site tracking brand reviews more equipped to understand branding, brand management budgets, advertising, than, say, a geek starting a restaurant is to having a good knowledge of how that space works ? Yet, the ecosystem does look at both differently!

I am hardly suggesting that people start doling out cash to geeks starting restaurants, or getting into hospitality randomly, but quite the opposite. When we stitch up teams to create businesses, and write up plans and models, and invest in these companies, we consider the business cases, needs, and think of the software as infrastructure that is needed for the execution of that business. The search engine that managed to then grow an advertising business just happened, and chasing that as a model is fraught with dangers.

First, figure out the business first. Next, whether its interesting enough for you through its ups and downs, and does running it have by-products that make it worth it for you?

And if you understand and relate to the above it, does not matter whether you want to code it or not, or build the house, or cook the food. Those are details. Details which can make or break the business, and must be executed right, for sure. But they come after you've figured out the business, and your passion for it. Technology itself - the love of it, or the need to create it freely - cannot be a healthy, sustainable enough basis for entrepreneurship for a large percentage of cases.

Startup, Salaries, Risk, Entrepreneurship, Payoffs

No, those aren't tags for the post, but the cluster of words that should go together, but often do not.

Entrepreneurship implies risk and the possibility of a payoff.
A startup, as we know it, is one for of entrepreneurship.

In this context, the concept of market salaries has no meaning at all!

More and more and more startups I see, hear, read about are trying to behave like larger, more structured organizations. The worst part is that they model "compensation" (oh, how I hate that word - its what accident victims get, not motivated people working towards a dream) and other "HR practices" on how-its-done-at-big-co-X. Where is the innovation there, people ?

Here's some ideas and thoughts that are worth remembering/attempting

• Market salaries : this is an absurd phrase for anyone in even a partly decision-making position in a startup.
• You need empowerment, ownership, flexibility way more than you need processes
• Try this : Keep a very small 'retainer' component, and then a percentage of profits, not equity stake etc. Sure, do that as well for the early ones, but since you're small and all, nothing like direct participation in profits, and nothing quite like that to keep folks 'real' and focused on the bottomline. It'll build a business like nobody's business :)

Don't ape the last big company you work at. You never know whats going to work, so at the least give it a shot! And just because you need people, do not "attract" those who're in it just because ots cool to be seen as 'taking risk' without actually wanting to take any.

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The Great Indian Ecosystem

Some gems I heard over the last two days (All paraphrased. Non italicized bits are mine):

• Indians don't take risks. Yeah, right.
• Indians are immature. We should read more books. Whoa, there!
• Indians don't know how to sell :)

So, more or less, "Me = All Indian" seems to be a strong foundation of the ecosystem. Add to that the repetition of the sentiment. And again. And expertise is thus born!

So the hordes selling Tally, and of course making it, and the numerous loads who set up Potels, and the Tata Nano and the risk associated with buying a JLR or a Corus, the buying and selling of Glaceau - I guess no Indians in any of those pictures, eh ?

Ok, sorry about the sarcasm etc. I will confess it did get my goat and this was not a mature reaction. Should probably go read a book to figure that one out :D

Seriously. Guys, please. There are numerous other Indians who take risks, sell awesomely, and while they might not read books, their business maturity will be the content of many. Hordes of them. We're the nation who's everywhere - amongst the largest trading, immigrating, innovating populations. (Its not, repeat not, repeat not about patents and lab research alone. Please get over that inferiority complex of yours. Please.) Yes, I personally suck at a lot of these attributes, and would love to learn how to deal with this gap. So do a lot many from the technology space, and this is surely a gap we need to bridge (probably through partnering).

So lets please find those Indians, learn from them. The sweeping generalizations will not help. A pets.com, amongst a gazillion similar examples, sucked as much, so the nationality tag doesn't help at all!

If we all become a little more straightforward, show a little more honesty and humility, and focus on the solutions, we might yet create an ecosystem. Judgmental generalizations, though, will probably not be part of that...

Why Kawasaki at Nasscom ?

Bangalore played host to the Nasscom Product Conclave over the last couple of days, and it was a brilliantly organized event. The best part of it, imo, was the cross section of participants the event was able to pull in. Such major industry events usually get a little intimidating for the smaller, just starting out guys - but this conclave easily avoided that. The sessions were useful, deeper than usual, and because of these reasons, packed. The networking was very very active, and I pretty much caught up with everyone I've met and come across over the last four years!

Amidst the relevance, interactivity and focus of the event, Guy Kawasaki - as a keynote speaker and twitter specialist :) - added the superstar draw for many folks. Guy's a great speaker with ready wit and humour, and very, very approachable. He's also a persistent marketer.

However, I do think he wasn't the best choice for the keynote. Also, the session he conducted was as much a distraction from the theme of the event as it was an attraction for many. Why do I think so?

Guy Kawasaki @ Nasscom 2009 , Bangalore

View more presentations from bloggersrikanth.

• The keynote presentation above was not the most relevant to the ground reality in India. At all.
• We do NOT get people for free here - not that much of a resession after all.
  
• We also are awesome "value" creators and it often makes sense for a large chunk of startups (especially as they learn about business) to start in the lower right quadrant - a small chunk of startups can shoot for uniqueness, and especially building a business around it. Execution, value hold they key to getting a shot at stage 2.
• Twitter as a marketing tool in India ? Hmmm. I'd almost say a large chunk of active Tweeters were actually in that room :) I exaggerate, but you get the idea.
  
• We need a couple of home-grown superstars who, like Guy, are great speakers and approachable, and are less jargon-laden than anyone who gets to some level of success has a tendency to become. Entrepreneurs building products need stellar examples they can relate to, as well as understand!
• The Twitter 101 was a little too basic for a lot of the crowd. Some of the ideas shared both in the keynote as well as the sessions would be very very useful in a college, or what-do-I-need-to-know before I start out crowd, but a lot many attendees have progressed beyond that. We needed Marketing 102, or Sales 102, etc. more than this.
  
• I'm completely guessing - but it must've been expensive :)
• The Indian product space needs a little more grunt and grassroots and less superstardom-aspirations - and getting a major star like Guy can reinforce the wrong message. Too many folks already confuse the superstar dreams for passion.

Apart from this, though, I had a terrific time at the event. Made connections, and started out on my journey to understand the fascinating world of real world marketing and sales (I'm still in Kindergarten wrt those, especially sales). The CIO session was very useful (wow, people who really spend money on software :D) though one always would love more direct, straightforward and precise ideas about how the real world operates (no discussions on size difference related issues, kickback-demand handling, etc)

Nasscom has taken a very conscious step towards supporting product creation out of India. And from the evidence at hand, its at most an iteration or two before the geeks really connect with the biz folks, and magic happens.

Execution : What Use Is An Imaginary Business Plan ?

We covered this a lot in the recent PM Workshop we did.

Now, as part of a business I'm trying to setup (and am very very new to), there's a bunch of numbers on a spreadsheet which are what is popularly known as the business plan, and what I would rather think of as a rough draft :D

Investment ? How much ? When ?

There's a certain amount of seed capital, obviously, as the idea starts taking shape. What I'm doing is a little capital-dependent, so the initial 'sunk cost' is key. [ Notice I called it sunk cost since I do not want it weighing down the operation with numerical pressure just yet. ] Of course, in the sheets, and in life, there's more that can be done for greater returns. Its very very alluring to try and start just a little bit larger so it can start paying for itself soon.

But wait, do I trust that sheet ?

There are a bunch of revenue-side numbers in that spreadsheet that are key. Tweak them around a bit, and the end results change dramatically! And a lot of tse have been based on certain assumptions that produce a wide enough range of outcomes from hardly managing to break even to unbelievable levels of profitability. Obviously, the numbers are somewhere in between.

(Pic Credit)

Re-examine your assumptions as you go along.

Then there are costs. And hidden costs accounted for as a percentage factor. Assumptions, and assumptions about assumptions :) The whole model is one big fairy tale, or so it seems.

So why build a model at all ?

• Getting familiar with the assumptions. Play around with the sheet a bit, and you'll start getting the hang of the assumptions you're making in there. Make a note - at least a mental one - of the bits you're tweaking a lot to understand outcomes. I would not be surprised if over half your real-world numbers are what you might consider wild guesses :) Its important to know what you do not know.
  
• Getting comfortable with the worst case, and then some. Taking risk is a major part of being an entrepreneur. Understanding these risks is even more so. Learning how to manage the risks, eventually, could help you become a successful one! The spreadsheet does help understand risks better.
• It helps to have a reference as you execute. Since you're testing a bunch of hypotheses, you need to be measuring against something - perhaps ranges if not precise numbers. And its not just the numbers you might get wrong - but the assumptions about the bits and pieces that define your model itself - this needs to be validated before you start taking your numbers too seriously! Say, your business is a quick turnaround, low margin one - if you leave out - for lack of effort or knowledge or change in business scenarios - one variable that jacks up your costs by, say, 4% for every cycle, you've had it! Having this reference will help you understand how much you still need to figure out before you try and mesmerize the world with words like "scale" and "growth" and sink in a gazillion into this.

So there, this is coming from my experience-as-I-experience it. Will keep this blog updated with the aftermath, and how effective the fairy tale was in making my dreams possible.

Chamak washes dirty linen in public. Execution, Execution!

Just yesterday, we had been discussing what else hyper/local play could do to expand business and create differentiators, and I'd mentioned to Indus that ironing services inside apartment complexes have always been a major point.

This morning, went downstairs to drop the kids to the school bus, and what do I see ?

Chamak - Neighborhood Washing & Ironing Services

Each kg of clothes is 40/- and they even SMS you once its done!

Quite obviously, its intended to be a big chain over time - a la Ferns And Petals for flowers. They seem to have about 10 locations in Bangalore itself. Someone obvioulsy heard the chatter about the pain points with the existing vendors etc and decided to give this a shot. I'm not yet debating about it being a great idea etc, but its and opportunity, and its heartening to see someone take a crack at it.

On digging just a little, here's what I found - introducing the Village Laundry Service funded by Innosight Ventures, and promotes individual entrepreneurs to run their rigs.

One's heard often that 10 other people have exactly the same idea at the same time as you have it (or even earlier), and it boils down to execution, but it was still a very wow moment to come across a real world example of one such.

To Re-Iterate!

Had come across this long read - but its totally full of great points which are nevertheless tough to internalize!

Here's one about agility:

26. Ready, aim, fire. Back when Beowulf was a lad, he used his trusty old slingshot to attack his enemies, kill squirrels and impress the maidens. Chances are he didn’t aim all that much. What he did was just let ‘er fly. If the rock fell short, he adjusted so the next time he got closer, and closer the next time. Same thing in a new startup. The situation favors action over planning. It really should be ready-fire-adjust. One of my favorite cartoons is the one with the two buzzards sitting in the tree waiting for the man to die from thirst…”Patience, hell,” says one to the other, “I want to eat something.”

Action over planning is a great one to follow. Especially given that gut feel is often all you got unless you really want to believe internet driven 'research', your business-plan spreadsheets, and other related conjecture.

And some follow up:

91. Trust instincts, but drop bad ideas fast. The subtitle of this blog perfectly describes this entrepreneur: “frequently wrong, never in doubt.” That was intended to be somewhat funny, but the people who work around me would probably say it is so so so so true. Hey! If I don’t believe in my own ideas strongly, how will we actually find the RIGHT one? I don’t care if I am a universe of one, I trust myself more than some un-engaged focus group. And so should you. And, I never guaranteed that I would have only good ideas anyway.

...

94. Understanding of the Law of Requisite Variety. This is a law described by cybernetician Ross Ashby which perfectly describes the creative entrepreneur. Basically, the law says that in any system (company, department, a meeting) all things being equal, the individual with the widest range of responses (the most ideas) will control the system. To me this means that the gift or trick is in promoting plenty of ideas, fast and furiously. The process is quantity first, then quality. Lots of people can sift and sort ideas, criticizing and developing. Your job is to get the most ideas on the table, from you or others.

[ Plug: this and related stuff will be covered here. I think the date's likely to change, given Dussera. ]

Customer Focus : Why the online travel space is not with it, mostly

This post is NOT a rant, but something that highlighted how difficult it is to really understand the business you're in, and serve the needs of the customer, not what you think you should be selling!

A short story, to start with (Mine)

I've recently gotten involved with The Tour of Nilgiris as a volunteer to help organize the 09 edition. This year, one major focus area is to up the level of accommodation provided to the riders and support team, as compared to the previous edition. Being a little connected to the startup world, I thought it might be a good opportunity to provide some startups an opportunity to showcase themselves, and the difference they can make.

The target audience, in this particular instance, is just perfect : upwardly mobile, made-it-in-life audience willing to pay for convenience, travels, is adventurous, and usually, invariably online (which is otherwise a big pain point for Indian startups trying to get to the right TG).

So, I dashed out a couple of mails to startups I thought might be interested and able to help out with the request.

The brief : we're 90 ppl and need to book acco for each day of the tour (7 nights). Promised to provide publicity for both the hotel as well as the hotel-partner (TFNs gotten a huge number of enthusiasts and media support, and thats growing all the time) and need very competitive pricing (provided rates we'd and a end-to-end solution in return.

Guess what ?

Startup 1: Got lost in the "response" process! :) Auto genearted mail, with a ticket number and everything, and a couple of SMSes confirming that someone was looking at the same! No real responses though - at all!

Startup 2: Personal email to a couple of the guys running the show. Got responses. In a couple of days, mails with rates that were actually worse than what we managed ourselves. Re-emphasized that we wanted an end to end solution, and that with a certain %age of costs shaved they'd be the hospitality partners - included in all communication. The response was astounding - I was given some soundbytes on how, instead of the usual 10%, we were being charged only 5% by the startup over the hotel's rates. That, as you can imagine, was that!

Thr trouble is, the users are looking to travel for a purpose, and the journey/hotel is one piece of the whole experience. They want to be assured of a certain quality and wants a no-hassle experience. And all thats on offer is inventory, with some lip gloss on top by way of an interface, and possibly sorted by this or that.

What about the guy who want to fly to Delhi from Madurai and may be open to combination of either a bus+flight or a train+flight ? From either Chennai or Bangalore. What about the NRI-in-India-for-a-month traveling to 3-4 destinations who'd hire a car, a cell, take a couple of domestic flights, perhaps a holiday to some destination while here, maybe even love to have a data card ?

Your users are looking for very different things. Playing "agent" for a ticket trasaction, or a hotel reservation, is hardly what I'd call sticky, or a customer delight strategy. What is the value that you're creating ? For OTAs - and there are almost as many as airlines - its even fuzzier these days without a deal or discount. Not long term at all, I'd imagine.

And please do not talk to me about the reduction in your cut as a benefit - I really could not care less about that!

Forced Entrepreneurship ?

Amongst the elites of the blogosphere, this is a phrase used often, and usually somewhat condescendingly, to discount the efforts of those who run mom and pop stores and businesses, only, as the argument goes, because the they did not have a choice.


Yet one sees a whole bunch of of these "forced entrepreneurs" flourish, learn better than most "choice" entrepreneurs about managing cash flows, hiring, marketing, CRM, and even scaling. Sure - its not usually about 10x scale (though a few do turn out that way) but thats a very VC driven attribute, and entrepreneurship is defined by so much else.

A plumber whose service my wife employs for certain rainwater harvesting and water management projects they undertake is one example I've seen. The guy now has a bunch of other guys he's trained, manages, finds work for, supervises. He takes bottomline responsibility for the team, has printed business cards and invested into a van for transporting his team and material more efficiently. He's been known to go ahead and market the idea amongst potential customers. He's managed growth - both of his business and of his role. Sure, he was probably forced into this - but that has hardly stopped him from embracing entrepreneurship.

There's a couple of legendary tales of paan-wallahs who've built business empires from their vantage points, while continuing to humbly assemble the daily dose for customers. There are small grocers who've adopted the aisle format and setup chains without losing their USPs of delivery, cash on delivery and the personal touch they had when operating a single small store. They've obviously managed hiring very closely since that was key to the whole experience.

Darshinis which grew into large catering businesses. Tailors who now own brands. Local courier companies which now manage logistics for corporates across the country - there's just tons of examples.

In some sense, aren't techies who're "forced" into entrepreneurship because of circumstances - perhaps a stream of bad bosses and workplaces, or the peer pressure of everyone else around them striking out on their own - also "forced" into entrepreneurship ?

The point of this huge rant ? Its not important how you got there. What you did, learned and what you managed to make of it afterwards is. So next time you use "forced entrepreneur" dismissively, think again if there are lessons there that you could instead gain from.

Some references to "forced entrepreneurship":

http://www.swaroopch.com/blog/my-benchmark-for-entrepreneurship/#comment-130025
http://www.venturewoods.org/index.php/2009/01/21/state-of-innovation-perspectives/

And, from a different perspective (and continent) ...

http://steadyblogging.blogspot.com/2009/03/nyt-on-forced-entrepreneurship.html

VC, Know Thy Fundee

The Venture Capital industry in the US has given extremely poor returns in recent times, and some consider it broken. I'm not sure what the India numbers are, but the focus, modus operandi and problems facing the space are similar, and in some senses, less effective. The huge factors in their favour are the relative stability and ever growing domestic markets (of course, for those focused on India, and more so for those primarily into the PE story), and of course tremendous cost tractability vis-a-vis the Valley, for instance.

Now, imagine:

Don Corleone invests in a million bucks into a "business" run by a fledgling caporegime in a territory with lots of promise. A few months down the road, the monthly meeting is in a dark room full of cigar haze with tough questions flying across the table, and the Godfather surprising the capo with info gathered from the street that the capo might be trying to hide, or gloss over. It could either end in the capo getting a thumbs up for establishing firm control, or a "Its strictly business" list of to-dos to strictly be followed for ensuring the family gets there profitably.

Or, a traditional business family in India pitches in to get a young chap striking out on his own in a new town/business/opportunity afresh. They obviously need to buy in to the idea, and measure progress often enough. They also dig up every source to keep tabs on where the markets headed, what the guy's reputation, image and credibility is as he engages with the market, and offer both advice and tips, as well as harsh feedback on specifics that is passed on immediately and well - transparently.

Thats how businesses get built, sustained, nurtured.

The Venture Capital industry plays an important role in discovering and nurturing new market opportunities. In fact, the businesses they try to help build are usually much larger than what an average capo or a family businessman would attempt at creating. These businesses need even more nurturing, and inputs. Theoretically, at least, the VC not only brings capital to the table, but also helps keep the ship on course, plugging the gaps as they're spotted. They can help engineer the right contacts, aid the best executive hiring, enable appropriate mentoring amongst others.

But then, there's a gap when it comes to those value adds, at least in the Indian context. Unlike Don Corleone, or the average business guy on the streets, venture investors often fail to connect with their startups' work - operationally, technically and sometimes even from a consumer/customer point of view.

The best understanding of the businesses investors have today depend on "other-investors'-opinions" and on their own take on it. Generation, technology gaps, lack of empathy with the target market, and an uncertain understanding of what's really getting built ensure that the meetings are once-a-month "updates" affairs, and the data collection is usually limited to what their protégées tell them. Sure there's some cross questioning, and the numbers sometimes start communicating the true story (often too late in the game).

But to be able to really relate to whats happening, whats right and whats not, and most importantly, what the options are from thereon, VCs would benefit from a deeper, independent assessment of the businesses they're banking on. And of course, the technologies, products and target markets those businesses are banking on!

There is a need for a role which can better understand the domain or technology that the startup is built around. This is truer for technology startups than the others, but there's usually something technical/domain specific about every startup (at least the better ones) that differentiates it. Most investors are generalists and connectors, because of which they bring together a wide array of skills, perspectives and contacts! Obviously, their understanding of what's happening inside of their portfolio companies, and what course corrections could and should be made, is limited to the level of a higher level business scenarios that can only make uncertain assumptions about the finer, and often crucial, details of the product or domain. And we do hear a lot that execution is everything!

So, how do investors get to know better ? Call in the experts!

To someone in the know, the red-flags show up all over the place as you dig a little! One hears of huge investments in companies build around technologies (sometimes mere features) that could be build primarily around commodity stuff that might even be free to download off the web. Other startups build vanity-features that are unlikely to see much usage amongst their target audience. And a whole lot of startups do not even figure out who this "audience" is, and at the same time worry about the numerous textures the product could have.

Then there are obviously numerous "high technology" stories where the potential is enormous, but the success is extremely dependent on both the core as well as the packaging and positioning of the product. A lot many might potentially succeed in one of many avatars, and would benefit from rapid experimentation enabled by flexible product design.

Clearly, VCs would benefit a lot if they got dope on some of the above, early and regularly. This obviously needs a continuously updated understanding, and measurement, of what their companies are doing. Every decision around the product feature and roadmap, its architecture, and even the robustness of the process through which these are arrived at, makes a huge difference to the product's chances in the market. These cannot be gauged easily from a short monthly interaction with the CEO. You need a sharper focus on the goals, and ongoing engagement at various operational levels to ensure those are being worked towards.

Goals

What are the companies goals ? Are the same goals visible to all functions across the organization ? Are those the ones driving value for users/customers ? For instance, you're trying to create a service that delivers content over SMS along with contextual advertising, and a product loophole that allows people to essentially send free SMSes to friends could be the one driving traffic!

Roadmap

Is the Product Roadmap in line with the goals ? Often, beyond the first release, nimble startups get into a reaction mode where every little piece of feedback from users, VCs, the media and other assorted sources is incorporated, and every little idea that comes from competing sites, or merely sounds cool, gets implemented. You end up with a host of features and functions that are no longer coherent or cogent to your primary USP, which was .... ? Obviously, even the metrics gathered start reflecting this, and there's confusion both externally and internally about what the product or service really is ? Crispness is key.

Team, Hiring, and its first cousin - the Burn Rate!

Funded startups are usually at risk! There's money, and folks now have the luxury of pursuing the various ideas that have not been able to get attention so far! Add to this the ability to right away target multiple groups of customers and consumers, do branding, create pitches and soon, you're lost in infinite activity thats gong nowhere. There's a need to link all spending, right from the size of the team, the skills needed, the necessity of doing certain things all together, to the goals and the roadmap.

Keeping the burn rate down not only helps focus, and it gives the startup get operationally viable sooner, and provides both the founders and the investor a lot of buffer!

Obvious Benefits

The returns on getting onboard an operationally focused team are quite apparent. An investor would do well to have help at hand for regular, clear understanding of what's happening in the portfolio companies. This would ideally be a team which brings in both technology and product management experience from a in-the-trenches perspective. The startup would get better help, better focus and probably leaner.

Quite obviously, whats better for the startup is better for the investor!

Enterpreneurial Enterprises ?

"What can we do to make our employees more entrepreneurial?"

Thats been asked often enough - a couple of times even to me personally - inside larger, less nimble organizations. Over the last couple of weeks, I've had a few discussions in various contexts that have highlighted this need.

Fact:

Large organizations need processes and systems that can be followed to replicate, predictably, certain outcomes. These need discipline, conformity and some sort of a hierarchy to get executed smoothly. This is true across functions of the organization - production, sales, HR, procurement, you-name-it. Product innovation and R&D is about the only one which has some leeway on this, but there's a tonne of effort to put measurability and processes around that, as well.

Fact:

Businesses and their needs are dynamic! You get into new products, manage new regulations, expand into new geographies. Old models do not always work in these situations. You might need to package differently, market differently, or price differently. You may not get the product, or positioning right at the first go. You want to be agile, nimble and ready to experiment with more than one approach around the core idea, while measuring constantly to figure out what works and what does not. And you want to keep your costs down, while you figure things out. Be frugal.

Who's good at these fuzzy situations ? Entrepreneurs!

So obviously, there needs to be an element within large enterprises which is entrepreneurial in nature, from a risk taking and nimbless viewpoint, not bogged down by heavy processes and relatively comfortable with lack of resources and clarity. And within this space, folks need a free hand.

Once the core problem is solved, the corporate machinery can - nay - should - move in. Beyond the establishing of the models, processes are needed to ensure scale, consistency, reliability, profitability over a sustained period of time.

But when you gotta go-in-there-and-get-things-done, having a few "mavericks" (from the pov of established orgs) is a huge help.

And the other side

Entrepreneurs often know certain aspects of the business well. Many are engineers who know the product real well, and haven't a clue about other areas. There's often a disconnect from the real user out there, or about pricing models, or undertaking market research and the like.

This is where a stint within a large consumer facing organization will help! The ITCs, HLLs and Tatas of the world have sales folks who've been amongst users across the country, and have insights like nobody's got them. A successful marketing head who's sold gensets in a particular territory will provide important clues about consumer behaviour that will be pretty much impossible to find for a small startup. The pricing and distribution models for entry level mobile phones have a lot to teach entrepreneurs about aspirations, and managing them. And there's no better teacher than been-there, done-that.

Is there a symbiotic relationship here ? At least a limited, short term one ? Perhaps an "internship" or "guest worker" like program, where both benefit from each other and work towards cross pollination of specific skills and attitudes. Who could take the lead on this and do the connects, walk the program through its paces ? Thoughts, ideas welcome in comments.

The "small SMEs" space : Marketing and Sales

I think thats a huge market, and could start driving local software business over the next few years.

If the idea of selling to them appeals to you, and you're open to the idea of managing your own brand, drop me a line. You would, of course, know how to sell to this market and have some decent connects into it already. This is not a job offer by any means :)

More Resources for (Bangalore) Startups

[These are a completely different kind!]

You're a startup. Whether or not funded, you're better off not blowing up money. But then, you pretty likely do not have a conference room at office, and want to meet people at Coffee Days, Baristas, and the likes.

That Cappuccino is a 50, dude! And let's not even get into the Lavazzas etc.

So here's a few tips to stay frugal while you're trying to not stay hungry in the literal sense.

The Cafe @ FabIndia, Koramangala

This is in Madivala - on the Ring Road just before it meets the Hosur Road. Nice Chai for 12/-, decent sandwiches for 25/- and the setting's very pretty too. I've started preferring this to the coffee places not just because of the price.

2/3 Cafe @ HSR Layout

Kinda opposite the BDA Layout. Nice balcony, good filter coffee for 20/- and short eats at an ok price. Not particularly cheap, but way better than the CCDs of the world.

BMTC - Ride the Bus

Do the environment, your stress levels and your wallet a favour. Take a bus. Indus has been taking Volvos all over town for meetings, and manages to catch up on calls, save fuel, and understand a little more of Bangalore. It does take a little more time, but once you get the hang of it, its not that much more. All important routes have decent frequencies. I personally travel junta class on the 30/- day pass since I travel off-peak hours - and the Gold Pass is 75/-. It really frees you up from a lot of hassles, helps reduce a serious amount of your carbon footprint and saves some moolah as well.

The Sagars

Quick catch-ups and 20 minute meetings are perfectly do-able at a Shanthi Sagar or suchlike if its more for networking than a serious brainstorm or discussion. Their coffee is usually better than what CCD can come up with.

I'm sure there are many more such options all across town - do leave your favourite ones in the comments.