Vijay Anand | The Startup Guy.

Posts Tagged ‘venture+capital

Even as the current economic situation hasnt seem to have harmed the Early Stage Investment scene by much, there is some major misunderstanding by First Time Entrepreneurs, starting off in India, who are looking to raise funds. This series hopes to shine some light on some of them

LESSON: MAKE THAT SACRIFICE. GROW WITH THE ORGANIZATION

Scenario: In the last three business plans that I have had the priviledge to look at and to give feedbacks on, it seems that the average entrepreneur wants a salary of around 2 Lakhs a month, seems to be hiring an office attendant or a secretary in the first year, is travelling extensively, starts a marketing budget even before the product is ready, claims a steady income stream, is absolutely immune to market changes, and can solidly break even in 3 years. And oh, they give a 4x return in the fourth year.

You cannot demand a salary that runs in the lakhs. You cant because If I were investing, I wouldn’t know if there is even an incentive for the entrepreneur to slog to make this company succeed anymore. Given the current employment situation, I would even have a slight doubt as to whether the guy lost his job and is getting self-employed with a raise. But I do understand if you would want to live comfortably. This is what I would suggest.

Take a pay cut in the first two years – till your product development is ready. Just so you get a number, You get paid at the same level as your Indian Lead Software Engineer (I have to specific about the indian part, since some folks also have high paid outsourced engineers). That should put you at around 40K a month. Once that is set, and once your product development is done, and your marketing and sales efforts start, align your salary so that a base of 40K and a incentive component from the sales defines what your take home package is. That will assure me as an investor that you are willing to take a paycut to keep costs low and burn things slowly to get through the initial phases and even as the company makes money you arent raising costs, but defining your salary from what is coming in. If you are a company that sells products that sells in the millions, or have several product packages, it would be wise to even define slabs, that define the percentage.

You do that, and all of a sudden I see a real entrepreneur, who could really use with some financial support, and the halo over the head glows and a lot more people just might be willing to seriously consider your financial proposition.

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I often wonder to myself what is the hardest part in running a startup. I think back at my own days, and even at the present, analyzing the market, building the product, doing the test, finding a few initial trial clients, getting a mentor, finding one or two folks to help out, and even getting funded is fairly do-able. One of the hardest aspects of running a startup is in the art of selling. When you are a startup, when no one has ever heard let alone know you, and you are fighting every inch of compelling reason as to why you shouldnt just start customizing your products to everyone’s wits and whim and eventually become a service organization, it eventually does get to you.

Perhaps thats the reason most startups feel compelled to go after funding. You get funded, and you have a high chance of getting profiled on Contentsutra, covered by the other usual suspects like VC Circle and Venture Intelligence, which might lead to an article or two on the economic times – and heck, you might even be techcrunched.

Perhaps all this visibility, gives that illusion of discovery. And raises the hopes that selling will become easier.

It actually doesnt, by much actually. At times it even makes it worse by putting too much pressure and expectations on the founders.

Here are a couple of tips to get your started:

1. Building a Brand, and especially a following is a continuous excercise. Not a one time one.

2. Engage with your audience, and use a tone of familiarity and respect.

3. Ensure that responding back to queries is in the highest order of things, even if its not a relevant query.

4. Frame a message that is easy to convey. Dont confuse your audience with complicated novels as to what is it that you do, build or sell.

5. Keep your communication channels Personal. Not Info@blah.com. Use Name@company.com instead. Accesibility is an attraction in this layered, complicated world.

6. If you haven’t already, start a blog. Now!

7. There are a gazillion social media tools available to build a brand, a community, and the referral network to create impressions. Use and exploit them.

8. When the time is right, hire a PR Professional.

9. Attend Local barcamps, MoMos, and entrepreneur meets, as well as tech meets, and if given a chance do leap at the opportunity to share.

10. Visit universities and colleges, and the entrepreneurship cells. It’s a fabulous way to build a group of influencers for your brand.

11. Have an active social life. When your company is small, you are your company’s brand ambassador. No one wants to use anything that a dead-zombie-walking, has to offer.

12. Read, and comment on blogs, not just within your circle, but expand to what and where things are not the same old. Different does not mean wrong – could actually mean insights.

13. Keep a close eye on campaigns that youth organizations launch. Replicate such things on a smaller scale to grow visibility.

14. Once a year make it to a trade conference. Pick which one that is going to be. Start a six month campaign beforehand, get to know who all are going to be there, and build relationships towards that. Next year, focus on a region where there would be a fresh set of guys.

15. Leverage your mentors and their contacts.

16. Be nice to folks from the media, and bloggers. Not fake nice, but respect.

17. If you are selling to enterprise customers, run in circles where you can grow your influence. NASSCOM, TiE are sample corridors to be in.

18. Don’t sell, but create an awareness. It takes almost six pitches before someone actually makes a decision to buy. Pitch, without pitching. In this nagging world where everyone is almost a salesguy, be the marketer for once, and create your differentiation. Let them come to you and ask, if they could setup a meeting sometime to discuss.

19. Following up on 19. If you have been a salesguy all your life, people are going to avoid you like that insurance selling cousin of yours. Thats when you know you should stop doing what you are doing.

20. Promise and Deliver. Satisfaction = reality – expectations. Set the expectations right, and always over-deliver on what you promise. In this world of hype, people will stand up and notice you for your deliverables.

21. Constantly ensure that you listen to the feedbacks that you receive, do analyze them, validate them, set your pricing strategies updated and evolve in time. Keep this as an active process.

More to Follow.

I figure that in an ecosystem, there are three types of corporations – according to scale. There are the startups, there are the SMEs and then there are the Multi-National Corporations. There are also the government bodies, but let’s stick to the private sector and these are the three categories we have. Each of them are categorized into their respective slot because of their size, their headcount, the revenue they generate and the size of the market they possess.

It’s quite important to remember the revenue and market size, because technically a product-centric company is much smaller in size compared to its service-centric counterpart. I’d guesstimate the headcount to be roughly 1/10th of a service-focused company (although initially the core team would more or less be the same), and the revenue and the market they possess will be what will propel them into the big league (graduating them to the next step). Case in Point: Skype was a less than 30 people team (27 if I am correct) till they had 6 million users and a year before they were acquired. Another example would be the team behind Craigslist. I have written about this before, so will stay away from it for now.

Coming back to the question, this is my dilemma. I have someone who is a two member team, bootstrapping and whipping out a prototype and calling themselves a startup. Then I have a seven year old company with 24 clients, about 250,000$ in annual revenue and about 30 employees calling themselves a startup. Do you see the problem here?

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Not Me. Not yet 🙂

It was nice to catch up with some of my old contacts in Winterland Canada and what they were upto. I think I kinda hit the realization as to how many serial entrepreneurs there are out there (especially since a close friend who is 46 is starting off on his fifth new venture), and here in India for some reason after the first breakthrough, most entrepreneurs are retiring towards investments and turning into venture capitalists.

Not that any of it is a bad thing, but I was just wondering on the stark difference.