Archive for August, 2009

Is Micro-Funding a New Trend to Come?

A lot of folks seem to be very curious as to what I am working on, since my stepping back from Proto.in. Well, quite a bit actually and on some rather serious stuff. Serious as cash, infact. One of the major concerns that has been on my mind is the scarcity of capital in this market.

I am absolutely with the camp that believes that if there are quality companies, then capital will find its way. But we also know as part of most of our risk mitigation strategies, making a leap into a market with no safety net or partners makes it a really serious gamble – even for some of the most well-versed entrepreneur to tread in. I strongly believe that unless we enable some capital to flow, we are not going to see much of a difference in the number of quality startups that spring up, and inevitably the number of startups that get funded/get recognized, and the number that make an exit. This cycle, as you know is recursive.

So What have I been obcessing about? I’m focusin on three aspects and I think all three aspects are crucial.

  1. The mechanisms for loans from banks to become accessible for startups/SMEs
  2. An effort to bring together the Angel Investment Community, educate them and help them engage in an effective manner
  3. An effort to fix the “broken VC Model”

The First and Second are fairly straightforward and I promise to come back to you with some better news soon. But this is primarily about the third one.

I think the third one warrants a closer look for a simple reason. People have been claiming as long as for the better part of the decade that the VC model is broken and there seems to be no heed to that warning. Whats worse is that given that India couldnt be farther away from whats happening in the Silicon Valley in terms of similarities, the model is a force-fit one (There are some better models in Israel, Singapore etc). If you’d understand how a VC firm works, its primarily a specialized bank which runs on a management fee and bonus paid with the return on the investment. The overheads of running such a team is so high, that the only viable way for most firms to operate is to increase the fund size, which sets the ball rolling on them getting into a soup not able to invest in early stage no more, and the next thing you know they are either full-fledged in growth stage, or are in growth stage and are disillusioned about being an early stage investment firm. Suddenly working for a VC firm or being one doesnt seem so glamorous, does it? :)

What we need in India is essentially a firm which is capable of dispensing funds as low as 50 Lakhs to a crore (I am consciously keeping figures in INR to make it a point that we arent in dollar land and the rules and requirements are different here) – which can operate at lower costs, and can also manage a sizeable portfolio.
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TiECon Delhi – Registrations open

TiECon Delhi is being held on Sep 18th and 19th. The theme this year is “Smart Entrepreneurship in Challenging Times”. The emphasis is on highlighting winning tactics in a market where many businesses have faced uncertainty and slowdown, and external financing has become harder to raise.

Registrations are open – you may register here. Looks like TiE has gotten smarter on the registration packages – looks good value for money!

“Standard term sheet” suggestions

TheFunded has published what it believes should be a standard termsheet in venture financings. Their argument is that the following balances the rights and incentives of investors and founders well, and the negotiation should be limited to valuation and amount being raised. Interesting point of view.

FFI Plain Preferred Term Sheet

Chris Dixon has earlier proposed his (similar) “standard” termsheet here.

These are all commendable efforts and in my view, in the right direction. The issue arises when certain provisions are more valuable to one party than other (due to differential view on the business, different degrees of experience etc) – so in some cases, founders may be optimistic to not care about participation, but may want higher valuation. Or, the VCs may perceive certain additional risks and may want protection against those. Such deal-specific characteristics encourage “trade-offs” amongst terms – a la “if I have to offer a higher valuation to be competitive in the deal, let me add more participation”. A negotiation process in the end is about trading off what is less valuable to oneself for something that might be less valuable to others.

Would love to get thoughts from the readers on where they tend to fall on this debate.

Twittering for a cause – Help build a library

Do children have a right to books, toys and the freedom to read, learn and imagine?

I am not sure if the constitution guarantees it but working as an entrepreneur in the Indian Education sector that is something I found missing. While we talk of revolutionizing education by the use of technology, millions wait for their first book.

Our World Our Stories (OWOS) is an initiative to do something about this. OWOS will create children books and the means to take book to all children, especially the ones usually left behind.

As a first step, please help us in building a library for the kids at Project Why – an 8 year old NGO. All you have to do is follow @owos on Twitter – http://twitter.com/owos. When the number of supporters reaches 100000, Grolier International (the Indian subsidiary of Scholastic Inc.) will donate a library to Project Why. It’s that simple!

You can also support the project on Facebook at http://www.facebook.com/pages/Our-World-Our-Stories/119586777619 and learn more about it at http://ourworldourstories.com

Hope you would not let the moment pass without showing your support. Thank you and please pass on the word!

Winners Of The Entrepreneur Journeys Book Promotion

Hello readers, here are the winners of the Entrepreneur Journeys book review promotion:

Entrepreneur Journeys (Volume One)

Virat Singh Khutal

Manav Ahuja

Bipin Preet Singh

Manjula Sridhar

Suarabh Garg

::

Entrepreneur Journeys (Volume Two): Bootstrapping, Doing More With Less 

Sreekanth Balakrishnan

Varun Gupta

Vineesh Kumar

Roopesh Nair

Shashank Mohan

Winners, you will hear from Maureen Kelly with logistics of how to receive your books, and how to submit your reviews for publication. I will look forward to the reviews.

Thanks to everyone for your interest and continued support!

Special Offer for VentureWoods Readers

Indian entrepreneurs and readers, Alok Mittal suggested a special offer for VentureWoods readers. I’m always interested in your perspective and am curious to hear some of your thoughts after reading my Entrepreneur Journeys and Bootstrapping books. I will gladly have a copy of either book sent to the first 10 people who are interested in writing a review of either book for VentureWoods.  If you would like to participate, please write Venture Woods Reviewer in the subject line and send your best mailing address to Maureen Kelly.  We look forward to hearing from you.

MVP – Announcing Batch 3 – New startups & new gang members

The Morpheus Venture Partners (MVP) gang just got bigger with the addition of 10 new startups and 20 new founders, taking the total to 20 companies and 40 founders. Read the official media release.

Personally I am very excited with this new batch, already been learning a lot of stuff. Would love to know what do you guys think of them.

* How are high-quality designers t-shirts made? Starting right from the thread (Scopial)
* How do you help a second hand car buyer make his decision? (veriCAR)
* Insider’s view on how do doctors manage their clinics (Naabo)
* How to create measurable out of home media? (AdScoot)
* How can you apply the Easy Cab model to the real estate industry? (EasySquareFeet)
* How good is the “customer experience” at Food & Grocery departmental stores with special focus on juices section? (Retail Vector)
* Is India going to see a Robotics Revolution? How hip are the girls of NID (Robots Alive – they are incubated @ National Institute of Design. We visited them last month)
* What do final year students need to prepare well for campus interviews? (InterviewStreet)
* The only reason Small business Owners in India file tax returns is to get bank loans. (ReachTax)

Who is an entrepreneur?

 

Do not stare at this picture for too long! Just out of a really late night discussion with a colleague at One Billion Minds.

What is your word?

Bootstrapping: Doing More With Less

Some of you may have followed a recent discussion on my blog, 18,000 People On The Bench At Infosys.

I have to say, I am continuously frustrated by aspiring entrepreneurs telling me that they cannot move forward because seed funding is not available in India. My message has always been, bootstrap the beginning, and then you can raise funding after your business thesis has been validated. That way, you preserve equity, and have the option also to not raise money at all. In my book, Bootstrapping: Doing More With Less, which comes out in India in September, I have discussed this topic at length. Even in Entrepreneur Journeys (Volume One), I opened the book addressing the issue of bootstrapping. This book has been available in India for a few months now.

Indian entrepreneurs, you must learn to bootstrap. Here’re some short video interview clips that Dwevesh Divedi of Breaking the 9 to 5 Jail produced where I have discussed the topic further. If you have a 9-5 job, you are in a perfect position to bootstrap a venture on the side. Hundreds and thousands of aspiring Indian entrepreneurs in corporate jobs: your seed capital is coming to you in form of a pay check. Use it, my friends.

Sunil Mittal’s Forbes Interview

I know its all over the web by now, but couldn’t help linking it here – great perspectives on conviction, persuasion, partnerships and organizational transitions.