Suspiciously Round Figures ?

While we were on vacation, Twitter raised a 100mill, supposedly at a #1Billion valuation!

As I read this, the nose twitched. What is it with the round figures ? I mean they sure do their due diligence, and Twitter probably did some work on how much cash they need. I can understand guys keeping it at back-of-the-envelope levels when doing seed stage, or even series A funding. But at this scale, for folks who're still trying to figure out monetization, sounds a little too strange. Why not 87 million (imagine how many startups you could fund for 13 mill!) and why not a valuation of 0.93 Billion ? Are these numbers arrived at through some kinda-shoulda-perhaps-maybe hand waviness ? Is there more ? Perhaps a contigency chest for an acquisition thats part of the deal but not really available unless... ?

Someone who knows the insides of these deals please throw some light. $100 million of a $1 billion valuation - it just reeks of laziness or fuzziness otherwise.

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. ]

Substitutes, Alternatives and Opportunity

Here's what an ISP is having to contend with, in South Africa.

This reminded me of something we read in our networks course - "Never underestimate the bandwidth of a truck full of tapes hurling down the highway" - Andrew S. Tanenbaum

Sure, this is a stunt by a really pained customer to highlight the pain point. But it brings alive an interesting fact - that you never know what corner the competition will come from. The obvious ones are never the only ones to worry about.

And when looking for opportunity, do not be discouraged merely by what seem like saturated markets served by existing players. Despite better-than-South-African-speeds, the above did get me to think if there is a logistics business to be built here in India around short distance high volume data transfers. Of course it needs more market research than I want to do around that - but nevertheless, the opportunity that pain points present are numerous. A better email service seems dumb, but who knows. Or a common kitchen in apartment complexes.

Out of the box is the only way, or at least a terrific one.

Update: Ashish discusses the same example here. Its a very strong example - and this opportunity is something we'd discussed over chai. Sure its a little crazy but hey, the message is - think hatke.

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

Hiring, Motivations, Pay Structures & Rewards

Attended the last Unpluggd where the topic revolved around signing up folks for startups.

And then saw this:



Amazingly, was also thinking (during a bus ride today) about why we do some things despite severe odds, or hindrances, or the need for effort and learning curves, and certain others never get done irrespective of how easy, or 'within our scope' they are.

What is this motivation thingy ?

As a result of all of the above, here's some word/phrase groups to consider:

Reward, risk, compensation, appraisal, objectives, measurement, schedule, 1x1, incentive, weekly status report, stress, problems, constraints, roles, job descriptions, job, prove merit.

Dream, buy-in, belief, desire, effort, solution, honesty, freedom, fail fast and free, lateral thinking, boundlessness.

Of course one's made to sound rosier than the other. But pause and examine which of the above are the truths caused to/by/around you.

We buy ideas, rewards, philosophies at a level we never execute those at - its the day to day efforts and battles that its about. Its like honesty - unless you really really buy it - not as a 'good to follow' truth but somethings that part of you bloodstream - you'll slip here or there in the day to day.

So the stock options stop having any connection with the product features.
And marketing to the guy who's doing the appraisal is the be all and end all.

Would you not rather have people who were paid adequately, and then did stuff purely because they either love to, or they think its necessary to do it ? Would you rather not people have the guts, freedom, desire and authority to, say, pull the plug on something even if its 90% done if they really really get convinced it's no good.

Of course, thats not to say that you need to let chaos reign - but if you have free, smart people, they will listen to reason. They will learn and you will learn from them. Thats an orthogonal problem to solve - but having people who're "into it" can only help even there.

The video proves what I've always believed - creative, fuzzy-result-oriented work needs free minds. Don't try and pressurize these flows - either through incentives or through disincentives. In fact, incentives usually imply measurement/observation, which implies expectations. And sometimes, things that "being discovered" need to be done without those disincentives weighing them down. If the people involved are good, and they're really into it for belief/faith/interest/passion, something useful will evolve.

You cannot buy passion. Or creativity. Or ownership. You will surely lose it if the attempt is to coerce it using fear, however subtle. Do not try corelating risk-reward, probation, appraisal cycles with work directly. People need money to live, spend on nice things, secure their future. Not to work. Do that for them.

Enagage, and focus, on the usefulness, and marketability, and goal-appropriateness of the work they're doing. Not on the carrots and the sticks that those will lead to - thats so last-century.

Product Identity Crisis ?

[ Cross posting from the SlicedBread blog ]

Ashish wrote a post about the importance of recognizing exactly what business you are in.

This cannot be over-emphasized during the early days of a product, or a startup. You cannot be nebulous about exactly what problem it is you’re solving, and for whom. The trick is to tackle this at as fine grained a level as you can (and not just at a we’ve-built-a-tool-let’s-see-how-its-used-level). If you cannot answer clearly enough for the first guy who asks this question to understand, its unlikely that users will see easily that its for them!

One trick I’ve found useful is to think in terms of nouns and verbs first when describing use cases, and avoiding the adjectives and adverbs. Also, pick verbs that can be acted out immediately – say – in a dumb charades or pictionary game. Or at least something multiple can clearly visualize as the same action or activity. “Evaluate”, “enhance”, “express” are some words that could be too ill-defined to capture or communicate a use case effectively. “Add as friend”, “read the shared content”, “rate the movie” are much clearer. As you start capturing it clearly, you will start debating the value each brings to your core idea more clearly as well.

And – this is my favourite take on all things computer science – its all about inputs and outputs. So given all those verbs and nouns, what does your product ask for, and what exactly does it give ?

Who are you ?

Update: One of my friends tweeted this morning (that I'd RTd) about FB's identity crisis. Quite relevant!

Ownership Issues. Founders too!?

At first, there's an idea. There's some debates that follow, some iterations that help refine the idea. Then there's often a co-founder, some hectic activity and a prototype! The job is bid adieu to, the servers bought/rented, expenses planned for and the passion-of-the-founder has soon given birth to another startup.

Pitches are readied and made, and if you're onto something or an investor thinks you are, you get funded! Nirvana!

A year later, there have been hiring issues (people are so tough to find, or too expensive otherwise), development issues (its never as easy or as complete as you'd imagined), and issues with selling the product that you pushed off to 'once the product's ready' right from the beginning. The traffic hasn't taken off, and you take shelter behind the "alpha" tags, and in any case, the "full, matured" version with some critical pieces that will make all the difference isn't done yet. That will fix everything.

Iteration 2, and 3 and more come and go. Things don't look that great. You tire a little. There may be telltale signs, from a diffused market strategy that tried to please all, to multiple major projects running simultaneously - one of which will hopefully do it for you. You engage with a designer to fix UI, a mentor for advice, a PR firm to try and fix it on the marketing front, and maybe even get some big names on board to shake things up.

Familiar story ?

Somewhere, the tiredness does bite, and the ownership starts to dim, and even entirely vanish. Why ? Its the same people who were madly optimistic about their idea at one stage, after all.

Carrot uncertain, stick missing ?

Human motivation has got a lot to do with either the pursuit of pleasure, or the avoidance of pain. In fact, more or less all actions could be linked to one of these. At first, the dream that the idea promised is big, possible and a huge motivator. But, especially during a turbulent phase that comes after multiple bad patches, the dream can, and does fade.

Unlike a home loan, though, there's nothing to pay back! So hardly any stick. Sometimes a little bit of a pressure does help to come up with smart solutions that make things work. Sometimes you do your best only when you come out fighting from a no-hoper. But there's little egging you to do that.

I'm hardly suggesting that VC funding be replaced by loans - but its also true that founding a startup, at least for some and at some stage, does become merely a sexier, and in fact more comfortable job. Sure there's more to do, but if you're looking for that sort of a thing, its a great, risk-free (once you get funded) opportunity to have a ball! Its not just the founders though - even potential employees often tend to look at startups at a no-loss-possible situation. Better salaries, cooler image, better work and responsibilities so why the hell not ? The "struggle" bit is more or less limited to the pre-funding stage. Once there, there's only an upside...

If I were a VC, I'd be working on models to change this. Or even if I were a founder working on a new idea. If nothing, to ensure that the wrong kind of motivations got weeded out.

Entrepreneur, share thy burden. The VC-Entrepreneur Story part II

After this post about the need for investors to get to, and continue to know their portfolio a little better, happened to have a chat with an investor on similar lines.

Apparently they sometimes run into what was described to me as a Chinese Wall, although the context was not potential insider trading, and for the purpose of this topic there is no conflict of interest. A few examples were shared that I obviously cannot talk about here, but boy, was that a revelation! I'd kinda assumed that being important stakeholders, and often with controlling stakes, they could breach any such walls that came up. But clearly, there are other dynamics at play, at least in some cases.

Some follow up thoughts:

• If/once, as an entrepreneur, you ask someone to invest (and its a whole new topic whether, and when, you should), their interests are are your interests and their interests are ... you get the idea. The more you share, the more likely it is that you may get an decent perspective of your business that you can miss/gloss over while involved in the day to day running of it.
  
• Tough questions are better asked early. If there are no tough questions, and no revenue, be worried. VCs can, and should play that role. And as an entrepreneur, it would do your business a lot of good to pester them for it. Your comfort zone is surely a bad place for your business to be in. The final call is still yours, and you need to treat the advice as an input, not a command, because even the best of VCs can miss aspects of the business that you may understand better. Yet, they do bring in a concerned outsider's viewpoint so seek it aggressively.
• Trust. Its key to all startup activities. Be it with employees, partners, customers, investors, vendors. And this is even more true in India, where a ton of business happens in good faith and 'carrying people along'. There's also no ownership sharing without trust.
• All the above is all great - but whether as an investor, or even as an entrepreneur, you'd still do well to have an "outsider" driven in-depth assessment of your business on a continuous basis. Not that you're sucking or that this will solve everything, but it brings in functional expertise with an unbiased viewpoint, and thats rarely a bad thing. Its also less dependent on maintaining relationships, worrying about appraisal cycles, and the like. In the finance world, auditors are almost always external, and I'm guessing they serve more than just a "external policing" role.

On a tangent, a question was asked about whether any business in India was VC fundable at all !?? Thats the topic of a future post, but at the outset, I'd wonder if the VC model is necessarily a static thing, or does it need to adapt to a different market, different set of rules, and success rates ? The endgame is to essentially provide a 25%+ return while promoting entrepreneurship, isnt' it ?

Online ? Who's online ? Get outa there....

... and be where the customers are!

Context : was pleasantly surprised to see this along with our morning newspaper a few days ago. And there was another one this morning.

Now everyone's been talking about hyperlocal, but guys like CommonFloor and Open2Save seem to be actually doing it.

I've believed for a while now that

• Hyperlocal is big
• The internet is a tool - it may not be the final consumer connect but can enable a lot of it

So its good to see both these players trying to connect online with existing channels, though not everything has been tried or figured out yet. Purely as an advertising play (some coupons are little more than plain ads) this serves a market which cannot afford and does not need city level visibility, but did not necessarily want to go with what was being offered by the guys who print and ditribute flyers on cheap paper. Given the "aggregation" of deals etc, there's also a better chance of the user being interested in one or more of the deals, and retaining the coupon, unlike single-business flyers.

There's a bunch of other ideas that can be tried in the web-as-a-tool for hyperlocal businesses space. But I'm pleasantly surprised to see efforts to look beyond the web and work with existing behavioural patterns and business flows to provide a better mousetrap within those. The changes can then be effected once some traction happens.

Who says its all about web 2.0 ?