Archive for May, 2006

Insanity

I see plans where there is no company, a one man army. There are obviously no customers and no revenues. There is a spreadsheet which shows an exit valuation of $50MM. The entrepreneur wants to raise $1.4 MM and is prepared to invest the princely sum of $10,000 including money from friends and family. Obviously this is the first company that the entrepreneur is doing and there is no lawyer that the entrepreneur has and no advisors.

Another plan was trying to raise debt from angels at 9% because that is higher than the fixed deposit rate ?

Would you invest as an angel? If you would there is a bridge in Brooklyn I want to sell to you.

Please do not send me plans like this. You are wasting my time and yours.

Distance Education

Professor Mehta a member of the Knowledge Commission resigned in protest on quotas/reservations in educational institutions. His open letter to the Prime Minister is circulating on email and I read it on a Yahoo Group for my batch from IIM Ahmedabad. My response to that mail is quoted below as some of you may find it interesting as it shows the opportunities for innovation and entrepreneurship while addressing national priorities.

“I guess it is one of the amazing contradictions in India that it continues to back artificial shortages and a paternalistic form of government even though the benefits of removing shortages is clear in areas like telecom.
With distance education technology the opportunity for quality education could be made available to the masses. IIM – Ahmedabad course content could be available for a small fee to a person in Monghyr and an IIM – FPM guy could run an open classroom that used this content for a lot more students than can be physically present at IIM- A. Shortage of education is artificial and there is no need for quotas. I hope the media/ agitators take this up and demand innovation to remove artificial shortages. ”

TieCon Silicon Valley – Videos

Silicon Valley had its TieCon couple of weeks back. Wahindia brings its coverage on the event.

Would particularly recommend Shashi Thuroor’s one-on-one interview where he talks about the winds of globalization and its influence on cultures around the world.

Web 2.0 Lists

Incredible number of companies funded in the web 2.0 space. See this link

Kathy Sierra’s Take on Techies

SoDoKu
It is humorous, and educative. Check it out. Other posts are also worth a read. I love the tactful useage black and white images from yore.

Instep Gartner Trends

Alok talked of out of step entrepreneurs. It is easy sitting in India to be instep. Towards that some technology trends mentioned by Gartner

1. Commoditization & consumerisation – makes tech more affordable
2. Virtualization & Tera Architechtures – Granular components that find each other and self assemble into a computing resource
3. Software Delivery Models & Development styles – Do not own but rent, Buy solutions and capabilities not applications & features
4. Communities & collaborations – Web 2.0, SOA( Service Oriented Architechtures)

I am not a technologist but even if some of this is possible then things are changing so that means opportunity for Indian entrepreneurs in India and globally who are instep and can capitalize on global trends.

Out of step entrepreneurs

Have been spending a lot of time here in bay area of late, and have been seeing a fair bit of startups here. One thing that strikes me is how naturally the “market knowledge” comes to the whole community, including the founders and investors. Some of the plans I see within India are out of step with global competition. Especially in technology oriented businesses, the competition is global, and it becomes very important to be aware of whatever is happening on that front globally.

Of course, the other route is to pursue local opportunities (either consumer driven, or technology which is driven by local environment, etc) where I would expect local entrepreneurs to have the same natural awareness of whatever’s happening around.

Next Big Thing/Bubble ?

In Silicon Valley there are some that believe that 1998 is back and worry again about a bubble building up. They point to a large number of startups being funded pursuing the same ideas. Oopen source etc. reduce barriers to entry . Their argument is that it is a bad time to start a company because it is highly likely to fail.

On the other hand executives like Steve Ballmer ( Microsoft) and Peter Chernin ( News Corp) are personally spending time trying to acquire promising startups (another 1998 trend).

Good time or bad time in Silicon Valley ?

What about India ?

Company Board

Running/Leading a Board is a big challenge which often becomes worse when a VC joins the board. Entrepreneurs should put in the disciplines ahead of time

Some tips from “Venturing Forward”

1. Successful board meetings are ones with no surprises – making decisions not trading information
2. Fiduciary responsibility is paramount
3. Controlled meeting
4. Board book, Agendas, Minutes

Link on Board of Directors

Term Sheets

The biggest negotiation is the Term sheet
1. Abbreviated v/s Industry Standard
2. Used to negotiate full deal structure with legal advice
3. Question of exclusivity
4. Key terms to negotiate (besides price)
a. Participating preferred
b. Full ratchet anti dilution
c. Large liquidation preference
d. Veto/controls

Some links to industry standard term sheets

NVCA
BVCA
EBAN

Some blogs on term sheets

Tim
Feld