Vijay Anand | The Startup Guy.

Posts Tagged ‘silicon+valley

When should you go meet an investor, say hello and buy him a cup of coffee? Anytime, and hopefully at a time when you arent bootstrapping a company.

An entrepreneur in residence today asked me how come most companies in the valley, and even a few companies here in India manage to raise millions of “dollars” in funding for their first round when I keep advocating on raising not more than what is required, raise valuation and then go for their second round.

Well, that advocacy and advice depends on a lot of things, the vertical you are in, and the nature of the business (some require huge upfront investments, while others could be grown organically, while others need to be grown on steroids).

Coming back to his question though, my answer was that, if you do a case study of all those entrepreneurs you will definitely find something in common with all of them. It is most probably a case that either they built a fabulous product (were the creators of Gmail or something on those likes), or were known to the investors much earlier than the time when they start knocking doors. There is also the case that being married to an investor works, but I suppose that would fall under the second category anyways!

I am sure you are giving me the evil eye right now asking, “If I am not looking for funding, why would I go waste time with an investor?”. Well, all things said and done, if someone has access to all those Gartner, McKensie and all the trend analysis, and spent countless hours of debate and discussions with some very smart people, its the venture capital firms. And as much as its taken to their negative persona on their number crunching skills, if you sit with them without an agenda of asking them money, you would be quite impressed with the depth that they possess – ofcourse I am talking about the ideal VC here (there are too many fake ones also roaming around dressed as Venture capitalists).

There is a very recent story floating around the web, that the founder of Disqus the weblog commenting system had known the investor for ages. He met him some very long time ago, and they shared a discussion about the investors blog and what all can be done to make somethings efficient. On signing off, they shared some urls, and had been in touch ever since. A few months ago, the founder bumped into the investor and gave him the link to disqus to try it out. When the investor came to know that they were trying to raise funds, he didnt spare much time to call them up and write a cheque. If the credibility is established towards deliverables and clarity, everything becomes much easier, and that is something that is only built over time.

So My advice. If you are thinking about starting a company, just retiring, or want to go catch a movie and want company, call up a VC and see what he is upto. The relationship with the right investor is one that is built over a period of time. This is a long term investment you will not regret.

Seems like we are not the only set of folks who are wanting to fix the problems we see around us and build a “sustainable” atmosphere around us. There is a post by Ryan who runs FOWA taking a stance against the Web Mission effort that is getting organized by the UK Government and quite a fair list of heavy weights, including Techcrunch. I think this post is important to observe for a couple of reasons.

The striking similarities that we hear from folks around us in:

1. Thinking that the Silicon valley for some reason offers more opportunities.

2. Europe just like India, in most cases, seems to think that you only get funded if you hit the valley. Atleast we aren’t that bad. We have much more easier access to capital.

3. There are folks like FOWA (Future of Web Apps) who are trying to build a vibrant community of users, developers and startups in Europe, very much like how we are working on the same – with arguments that they have “everything that they require right there”

4. There are also people, most of them, who seem to think that the UK companies should be looking into the valley for users and potential exit strategies.

I’ve been working on a post that shows a snapshot of interaction between startups, venture capitals and the markets from across the globe – the valley, Canada, Australia, Europe and India. You’d be surprised how similar most conversations are. Trust me, things are not so hard because we are in India, neither too easy because we are here. We are just facing the same harsh realities as anywhere else. Perhaps the world is flatterning. Huh! who thought I’d agree to that, so easily!

I’ll leave you with this comment by Phil Bradley in that post, which just gets the message home without any explanations:

“The equity gap between seed and series A that plagues the UK will not be resolved if we can’t demonstrate maturity and ability to build profitable businesses.”

Paul Graham has written a recent article where he is wailing and moaning on the same topic. And I think he lives in the heart of where the action lies.

To Quote Paul from his Article, “I used to think of VCs as piratical: bold but unscrupulous. On closer acquaintance they turn out to be more like bureaucrats. They’re more upstanding than I used to think (the good ones, at least), but less bold. Maybe the VC industry has changed. Maybe they used to be bolder. But I suspect it’s the startup world that has changed, not them. The low cost of starting a startup means the average good bet is a riskier one, but most existing VC firms still operate as if they were investing in hardware startups in 1985.”

That just eerily sounds like the issue we face here.

PS: I haven’t thought through this yet, but I believe this only applies to Internet/Media related startups.

The legendary duel between a technologist and a marketer is a well known one. Most would claim that they are the extremes and one that cannot be subdued. In every company, especially one that specializes in building products, everyone has a tough time balancing the interactions that go on between these two sets of people. How well you do the balancing act will have a lot to say about the processes that you have in place, the kind of openness and interactive atmosphere that you inculcate – which all bundled together does have say as to whether your product, and inevitably your company will make it past the trials of survival or not.

There is a third angle and element to it. The Designers. If you are even daring to whisper “As if life wasn’t already complicated enough”, you seriously don’t understand what lies ahead.

Let me take a few steps back and come again.

Every time I end up somewhere for a speaking engagement, the person who is introducing me has a moment where they somewhere or the other mention how there are very few people with a deadly mix of business and technology. Considering that I do have a backdrop in technology and can also dabble in business, entrepreneurship and trends, most consider that it must be quite something. But I seriously think that its the third mix that adds to the punch – and without that third mix you don’t amount to much.

Technology. Design. Business – These are the three crucial aspects of a product company. The process flow runs along the lines from left to right and right to left a few times before the specs of the product are frozen and approved. Without the design element in between, you usually end up with a very complex technology platform which solves everything for everyone, and nothing for anyone. I will tie up this loose end in a bit.

So as I said, it is not easy to tie in a technology and a business fella together and the usual genre who compose of both are product managers. One of the very rare assets that are yet to be found here in India. Product management is a skill, an art or perhaps the only true gem in a product based company. If they are a rare breed, everything in the indian ecosystem is pretty much self- explanatory, I’d say.

That said, it is still crucial to have the third element. Unfortunately, I havent been able to meet someone who is part of a firm where all three elements come from different places. There is probably a reason for that. I have a “design report” by an NID graduate lying on my desk for the past six months and I do swear that I make an attempt to interpret it whenever I find the time, and the guts to go through that process. I still can’t for heaven’s sake comprehend what it all means. I know that designers do bring in that dash of craziness, but this one was craziness absolute. And sometimes it is very hard to distinguish the uber creative ones, from the pseudo-ones.

So what really is the answer? I’d say that there are cases to prove that if there are two founders in a firm, and atleast one of them has two of the three qualities, then there is an interesting chance at success. There are cases for a mix of business and design, and there are cases for technology and design. The missing element is always something that is fairly easy to complement.

If you still don’t believe me that Steve jobs is obsessed with design, if that ever was an argument, think of this quote by Alan kay who worked with him: “Steve Jobs understands desire”. Anyone who has understood business will quote you the Maslow’s hierarchy of needs, and everyone who builds products would want to position their offering from that of a “need” (commodity) to that of “want” (Premium). The secret is in the hands of a designer.

The Relevance of Design:

Source: Josh Spear

So what really is this non-sense about design being crucial? Are we talking about the User-interface? If that is the case, doesn’t hiring the snazziest graphic designer, do the task? Probably, yes and maybe not. There is a recent article [PDF] that I was pointed to, and something that might help answer this question. Listen these few lines out.

Start with the idea that people shape technologies and technologies shape society.

Then get comfortable with the idea that social relations are also always material relations.

And finally, consider agency – or the ability to act – as something within the domain of both humans and non-humans.

Credit: Anne Galloway

That’s a sample as to how designers think. I have a friend of mine Mahesh Radhakrishnan, who is possibly one of the most creative guys I’ve met. I have met with him to discuss things, all the way from how to “brand” something (he has some pretty interesting ideas on how to alternatively create a brand), to how a cultural or community building exercise could possibly be drafted. Whenever I know that my thinking is getting a bit muddled or stale, I know that its time to meet a few designers to get my thinking right. And I know that that is something I’ve learnt right out of experience.

I’ll tell you why a designer is crucial. Designers are not the guys who build those boxes or choose the colors for your layout. They are actually the architects who define how an idea conceived as an object is interacted with. A product is never a piece of technology that just caters a solution – It is something that creates a connection to the solution and “interacts” with the user. To make it even simpler: A designer is the one who defines how a product is used. And unless you define how something could be used, and the only way how it could be used, there are going to be a million ways to use it and its going to end up turning into a sandbox or a platform, but never a product.

If you were to ask me, whats the difference between MacOS and the Linux Desktop, I couldn’t care less and let the whole world spear me to the wall if they want to, but one has had a designer at its helm who has defined what all it can do and what it cannot do, and the other one is open to just about everything, which is what makes it complicated, difficult to use and stands in the way of adoption.

To Quote Anne’s own words on the matter, “We [Designers] are engaged in creating possibilities and impossibilities”

Get me a team which can play all these three roles, build a product and still prove that it doesn’t fly. Going by trends, I’d say that’s an impossibility.

What makes the american economy enviable. Most folks who are entrepreneurs, technologists and venture capitalists seem to say “Its all about the silicon valley”. I think we are missing some very crucial elements there.

A conversation came up yesterday as to what inspired the valley to what it is today. Well, the truth of the matter is that, the valley is built on billions and billions of dollars of military research money. During the second world war and during the cold war with USSR, everything that was ever conceived and experimented on, was happening out of the bay area. The father of the silicon valley, if you ever get to hear about his name Fred Terman, was one who pretty much headed most of the defense initiatives for the US. [Steve Blank talks on the same Topic]

If you look at the technology s-curves of what has been the predominant business of the valley, it started off with Defense work, followed by semiconductors, followed by huge computational devices, followed by personal computers, followed by the internet. In each of these episodes, there were mammoth organizations that were created; Lockheed Martins and its ancestors, Intel, Dell, Microsoft, Yahoo and now Google. They fit the waveform, almost perfectly. There cant be another google, but there will be another wave and there will be another mammoth which will come out of that – if the US economy can sustain itself till then.

But think about it. All of this is sheer technology. Is technology, or techno-entrepreneurship as they call it, the only form of entrepreneurship? Actually, that’s the interesting part. Its not.

While the valley focused on technology and pushing it to the next level (essentially since more cycles meant more great companies and products and markets), technology alone doesnt fill all the gaps. What is often neglected are centres such as the east coast of the US, like NY which is not only the capital, but also the media giant for most of the english-speaking world. Newyork is as cash-rich as the valley in every aspect, and has more than its share of thriving entrepreneurs, just dressed differently. The fun part is that, unlike the short cycles of the technology-centric hubs where companies come and die before they get a chance to mature, because their time has run out, cycles are longer and more robust with economic and media centres.

Why is this important? It is crucial to understand this, because unless we do, we’ll constantly be talking about and dreaming about creating more engineers, Phds and smart businessmen. The world of media, economics, and markets will be opportunities lost for a thriving and growing market like India. It also comes down to the matter of allowing everyone to be participatory. I am realizing that because arts and science students & professionals think that they have fewer options (the best being working for call centres), they are much more daring and entrepreneurial than MBA graduates and engineering students. The truth is, we havent yet scratched the surface of the other sectors apart from IT. We get blamed for it, and I have to say that the naysayers aren’t all together wrong with their accusations.

If we are looking at a resilient economy, and looking at entrepreneurs and SMEs to be at the bottom and middle to strengthen and stabilize it, we need to be firing on all cylinders. And that will only happen if we focus on all key areas, that essentially forms the basis of what we call as modern civilization. As I said before, the valley and its model is just one part of the equation.

I had this fabulous discussion with Professor Veeravalli, who is a director at the Great Lakes Institute of Management yesterday on this topic. I wish I met more sharp folks like him, more often.

The first rule in entrepreneurship is to kill your heroes. Unless you stop being a fanatic follower and stop the whining on how things are better for everyone else, and they could do it, but not you, things are not going to change.

I am compiling a list of products that came out of the valley, and for the sake of giving a broader audience, lets focus on the web. It’s essentially the sector that churns out a new product every other minute, so it should make for an interesting list.

I am going to keep this interactive.

I start the list with “I am in like with you“. What were they thinking, mingling auction and friends in the same context? And after trying to fathom the beast that they have built, for almost a week, I have given up, deleted my account and am in the process of cleaning everything that ever touched it with dettol.

There are 24,000 companies and ideas that get funded every year by angel investors in the valley. I wonder how many of them would pass through without me uttering “Yuck!’. Everything from the valley is gold? I dont think so.

Go ahead, nominate what service blew your mind away! 🙂

A friend of mine and I, had this elaborate discussion on some of the advantages of actually being in the valley. Well, Thomas Fieldman is proving himself to be right with the globe turning more and more flat as the years pass by and I am quite positively sure that position holds not that much of a relevance and trumph card anymore.

As it is, I understand that most startup projects that are happening in the valley are being outsourced to companies here in India to be developed. The reason being cost and the availability of talent.

The fact that the dollar is dropping, added to the fact that the ruppee is appreciated is really not helping the case. In most cases, apart from the added headache of managing your team remotely, your cost also ends up being the same. What is even more empathetic is that most of these silicon valley companies end up handing their product developments to companies that probably aren’t the best of the breed when it comes to development – the biggest issue when it comes to outsourcing.

I am all for outsourcing service-related work. Management of networks, servers and mindless crunching of data and numbers seems to be a valid point, but would a startup want to outsource its most crucial asset – the product itself? Hmm… I am not sure if thats the right way to go.

So, what does a startup need anyways?

Access to the market, capital, human resources and the depth in a market to build a product that actually makes sense. An entrepreneur from the valley will always have his roots there, and does have the liberty to fly to and forth, along with taking advantage of the evolving business models of the east.

Being a global entrepreneur, might be the trend of the future to match up with the world becoming flat.

I question, Why don’t most of these silicon valley entrepreneurs move to India anyways? It might not be the way to go as the business scales up, but for being on bootstrapping mode and to get a product and team together, I strongly believe that India is the way to go. If you are the next Mark Zuckerburg trying to build the next big thing, India is very much the place to be.

An elaborate post on this, is soon to follow.