Archive for December, 2010

Cash,Visa,mobile or prepaid who will win

With reference to the growth of e-com in India ,now digital money is growing at the cost of liquid cash.This digital money could be a credit card (if it is credit card ,than all chances of it being visa) or a mobile cash.But even mobile transcactions are taking place thru credit cards.In India we do not see real mobile cash like the one prevalent in kenya.In Kenya there is enough transaction thru mobile as opposed to India where RBI is a tough regulator.

Till now one can book tickets and transact through a mobile using a credit card but come January 2011 ,everybody can also use their debit cards for mobile transaction.

Another thing in market is prepaid cards .

Advantages for companies building a business model around a prepaid card is that it helps them save on commissions which otherwise would go to VISA .

But the challenges for prepaid card would be

1) to build and scale IT infra and bring the product in line with electronic payment standards.I doubt whether prepaid cards prevalent in India will be easily used from semi-closed (or semi-open) can be reloaded and used as open-loop (when ever RBI allows in future).It seems difficult in given scenario but if it happens, it will be another chapter in the business model of the companies apart from being just an e-com player.

2) the cost of acquisition of customer is more as marketing spend is more. 

A lot is at stake travel, books and gadgets .It is how you build your business and your ecosystem.

Summing up , shall one build a business model on visa or prepaid cards.(Though US experience may be a guidance but India may be different.

Everybody’s opinion please.

1M/1M Strategy Roundtable: Top 10 Tech Trends To Watch

We started this week’s roundtable with a discussion of the top 10 tech trends to watch for the upcoming decade. The trends include Cloud Computing, Outsourcing, Social Web, Vertical and Local Web, Smartphones and Tablets, Online Advertising, Online Video, Online Gaming, eBooks, and Bootstrapped Entrepreneurship. You can find details in the blog post on http://www.sramanamitra.com. 

As for the entrepreneur pitches, first up today was Bhupendra Kanal with InRev, a social CRM analytics company. Bhupendra has built a product and has started engaging a few customers. He is, however, playing in an extremely, extremely crowded space. Bhupendra’s questions were largely around competition. My key advice to him was to focus on acquiring customers, and getting a thorough positioning exercise done based on segmentation, competitive analysis, and market sizing to identify a segment where competition is less active, and the product is particularly effective.  

Next Deborah Walliser with Solsustech discussed GotProduce. Today, the company produces low carbon footprint fruits and vegetables and sells to distributors in California, Nevada and Arizona. However, Deborah is looking for ways to sell her low carbon footprint green house technology to producers, and is in conversation with producers in Senegal and India. I asked her to stop wasting her time on producers in countries that do not have any focus on carbon footprint optimization, and instead look for countries and states with governments that have incentives and programs to encourage producers to optimize their carbon footprint. Hard ROI is essential to get dollars flowing. 

Then Jimmy Hendricks presented DealCurrent.com, a white label platform for media companies to manage daily deal advertising on behalf of brands. Jimmy already has about 65 customers and about a million dollars in annual revenue. The company is profitable and has so far raised only $400k in friends and family and angel financing. The top two competitors are both venture funded to the tune of $5 million each, and have about the same or lower customer traction. Jimmy asked if he should be raising money at this point. 

My advice was to not raise money if he didn’t need to. Jimmy has already managed the most complex part of the bootstrapping phase with very little outside investment. At this point, he can grow organically, and leverage channel partners and other creative modes of non-equity financing, and preserve equity as much as possible. This also makes it much more lucrative for him in the event that an acquisition happens in the medium term. More investment would make it more difficult to get a lucrative exit that creates sizable returns for everybody. 

It is clear to me, after doing these coaching sessions for over two years, that entrepreneurs need a lot more training on positioning and go-to-market. As such, I have created video lecture modules with case studies in the 1M/1M premium lounge on these topics with very specific guidance on what analysis to perform and how. The easiest way for me to teach a large number of entrepreneurs some of these basics is to have you spend 30-40 hours on the curriculum I have created, and THEN have you come work with me on refining your strategies and positioning.   

I have thought a lot about how to make entrepreneurship education and eco-system scalable and accessible to a vastly larger number of people. The answer to that question, I believe, is the 1M/1M Premium Lounge. Over the upcoming months, the program will become much, much richer. But for the moment, we can get you started and give you a significant jump-start.    

You can listen to the recording of today’s roundtable here. Recordings of previous roundtables are all available here. You can register for the next roundtable here. 

TiE Entrepreneurial Summit – Call to register

The largest entrepreneurship symposiums in Asia in its fifth year – TiE Entrepreneurial Summit (TES) 2010: “Enterprising India – Changing the Nation, Leading the World”, a 3 day mega event scheduled in Delhi from 21st – 23rd Dec 2010 that would focus on entrepreneurial opportunities in a wide range of domains; world renowned selection of speakers and gurus and an amazing networking & business development platform.

Enterprising India would aim to showcase, celebrate & encourage, Diverse, Dynamic and Distinct examples of Enterprising Indians.

For details, visit www.tiesummit.org or contact 9971766455/9818477719

1M/1M Strategy Roundtable: Where Should You Raise Money?

During this week’s roundtable we had a group of entrepreneurs from the Pune Open Coffee Club gather at the offices of Persistent Systems to participate in the roundtable together. It is a very good format for entrepreneur groups around the world to get together and network around the roundtable programming which happens every week, religiously. 

First up today was Jacqueline Floro-Pierre with ShopTranslated from China. ShopTranslated is a mass market online retailer of plus sized women’s clothing, with merchandise in the $59-$99 range. Jacqueline and her partner Cortney are designing and manufacturing the line out of China and selling in the US. They are still very small, but have some validation. And we already know that this is a very large market from working with La Grande Dame.  

Jacqueline asked an important question: how do you mitigate your working capital challenges in an e-commerce company at the very early stages without raising financing? 

Well, there are multiple nuances to the answer. First, there are two primary aspects that have to be managed: inventory financing and customer acquisition costs. In 1M/1M, we are working with inventory financing companies and for our premium members, we do help you connect with the inventory financing sources.

And of course, we are not advising you not to raise this kind of financing. In fact, I just did a case study on Coastal Contacts, a $150 million e-commerce company that sells contact lenses online, and has built itself up largely by using inventory financing as opposed to venture capital / equity financing. 

At the same time, we also have seen several examples of entrepreneurs who have successfully bootstrapped their e-commerce companies without any external financing until much later in the game. Some examples include Flipkart and Redbus in India, and Freshdiet in the US. So it can be done, but you have to be really scrappy, creative and resourceful. 

Next Vin Lim presented Qyzzy.com, which can be succinctly summarized as the Yelp of Malaysia. Vin proposes to build a restaurant search, reviews and ratings site for the Malaysian market catering both to tourists and locals. I asked him about his customer acquisition strategy and heard the word “advertising” a lot. Facebook advertising. Google Adwords advertising. Well, all that costs money, I would like to see a more cost-effective customer acquisition strategy.  

One thing Vin said that I liked a lot is that the Malaysian government is spending heavily on tourism development campaigns, and Qyzzy may be able to become a part of that campaign. That sounds great. 

In terms of monetization, Vin expects the ad networks to supply ads to his site by selling ads to local restaurants. I am not sure if Google AdSense, for instance, has a network of advertisers in Malaysia that includes restaurants. If not, then Vin will have to sell his own local ads. May also be expensive to do. 

Overall, the business needs further research and validation and the assumptions need to be checked much more extensively before launching. 

Then Suresh Sambandam with OrangeScape came on to discuss a specific issue of where should entrepreneurs try to raise money? Should those entrepreneurs who have built their business elsewhere move to Silicon Valley to raise money? Suresh is a 1M/1M premium member. I invited him to this public roundtable to discuss this topic because I know that many entrepreneurs are dealing with this issue. Since 1M/1M is a global program, we have many entrepreneurs in various parts of the world who are building interesting businesses, and trying to determine how best to interface with the eco-system that exists in Silicon Valley. 

Let me summarize some of the highlights of the discussion. You can listen to the rest in the recording. 

First, if you are building a business catering to the local market (e.g. Malaysia, India, China, Italy, Argentina, wherever …), you are better off raising money locally. The likelihood of your being able to attract Silicon Valley / US money for an early stage venture catering to a foreign market is abysmally low. 

If, however, as in Suresh’s case, the game plan is to go after a global market, the scenario changes quite a bit. Suresh has an Application Platform-as-a-Service (APaas) business that already has a number of multinational customers, albeit all acquired in India. OrangeScape has received substantial coverage in India, and I wrote about them in Forbes. OrangeScape is a Gartner Top 10 company in their space. Among Indian VCs, there is quite a bit of interest in investing in them. 

The question is, should Suresh take money from Indian VCs, or go for a Silicon Valley VC who is savvy in investing in real tech companies. There is no question that it would be easier for Suresh to attract the Indian VCs. But he may also be able to attract the Valley VCs, except, they would require the Biz Dev / Sales HQ for the company be moved to the Valley. It is also true that the Valley VCs see a lot more high quality deals, so the bar is higher to raise money. 

One option, which many entrepreneurs will end up taking, is raise a round in the local geography, line up the ducks, build up a solid customer portfolio, including US customers, and then raise the next round in the Valley. 

Or, bootstrap longer.  

It is clear to me, after doing these coaching sessions for over two years, that entrepreneurs need a lot more training on positioning and go-to-market. As such, I have created video lecture modules with case studies in the 1M/1M premium lounge on these topics with very specific guidance on what analysis to perform and how. The easiest way for me to teach a large number of entrepreneurs some of these basics is to have you spend 30-40 hours on the curriculum I have created, and THEN have you come work with me on refining your strategies and positioning.   

I have thought a lot about how to make entrepreneurship education and eco-system scalable and accessible to a vastly larger number of people. The answer to that question, I believe, is the 1M/1M Premium Lounge. Over the upcoming months, the program will become much, much richer. But for the moment, we can get you started and give you a significant jump-start.    

You can listen to the recording of today’s roundtable here. Recordings of previous roundtables are all available here. You can register for the next roundtable here. 

1M/1M Strategy Roundtable: Niche Marketplace Businesses Can Be Interesting

During this week’s roundtable, one of the questions that I answered was about the One Million by One Million program’s plans around supporting social enterprises. Well, 1M/1M is focused on helping businesses generate $1M in annual revenue, whatever be the nature of the business. We see a lot of businesses that can be characterized as social enterprises, ranging from education to rural development businesses. But our goal is to make sure that these businesses are sustainable, have customers, revenues, and profits. We do not and will not have any particular focus on non-profits that are dependent upon funding from charities. While there may be initial grants that launch businesses and get them off the ground, philosophically, we believe that a model of self-sustaining development is the key to a stable global economic system. 

Now, as for today’s entrepreneurs, first up today was Hardika Shah presenting Mesoloan, a small enterprise loan program for Indian entrepreneurs in the $2,000-$20,000 loan size bracket. This is a segment that is well beyond traditional micro-finance, but also somewhat below the scope of the regular financial institutions. Hardika intends to build a financial institution focused on this segment with financing from social entrepreneurship oriented venture funds like Unitus. 

It turns out that in my Vision India 2020 book, I have a similar project called FDBI. My personal analysis is that to make a financial institution successful by catering to the said segment will require a tight control of the types of businesses that are financed. This is why I have focused on micro-franchise oriented businesses where a tightly controlled structure is replicated across a large number of small businesses. My recommendation to Hardika is to study the FDBI project. 

Next Annette McClellan presented DaisyClip, a non-surgical contraception device for women that she is in the process of syndicating a $1.8 million financing round for. Her market penetration plan is to start with India, and she wanted to know what kinds of options / connections we could provide. Well, there are some Government and NGO contacts that I have in mind for her to explore. However, she will, of course, need to clear the clinical trials and get the proper regulatory approvals. 

Our next presenter was David Ciccarelli discussing Voices.com, an interesting niche marketplace for freelance voice talent used by businesses and entertainment companies. David has 25,000 freelancers of which about 20% are paying subscribers (a very good number). He also has 120,000 companies using the talent from his marketplace. 

David asked how to convert more of his users to paying users. I pointed him to the oDesk case study in which I have discussed the strategy for a marketplace in great detail. David is also struggling with the notion of his community taking the transactions offline. Well, eLance has experienced similar problems, and I asked David to concentrate on communicating to his user base of service providers the value of building a reputation through references and reviews / customer feedback. Taking the transaction offline would mean the service provider would not get any feedback from the transaction. Nor will (s)he get any assistance with dispute resolution, for example. Overall, I felt that making the reputation building features available only to the premium members would be a good way to convert more free users to paying customers.  

Then Tarini Kinkar discussed a media concept for marketing green products and services to Indian consumers. The business idea was not very well fleshed out, and needs a lot of work still. One of my key concerns is that the level of awareness about green / environmentally conscious issues is very, very low in India. Also, the business model for the business is unclear.  

Last up Alicia Butler Pierre pitched Klonos, a consulting service focused on small companies with 2 – 10 employees and at least $250k in revenue. Alicia wants to help align the tasks and staffing, goal setting, and objective management of these companies and charge $15-20k per company. She is also considering developing software to address these issues. I advised her to become a value added reseller of SuccessFactors, a company that I have an in-depth case study about on my blog. SuccessFactors is a talent management platform that has built-in functionality for task and objective management for making workforces operate successfully. I do not see any point in Alicia reinventing this wheel.  

It is clear to me, after doing these coaching sessions for over two years, that entrepreneurs need a lot more training on positioning and go-to-market. As such, I have created video lecture modules with case studies in the 1M/1M premium lounge on these topics with very specific guidance on what analysis to perform and how. The easiest way for me to teach a large number of entrepreneurs some of these basics is to have you spend 30-40 hours on the curriculum I have created, and THEN have you come work with me on refining your strategies and positioning.   

I have thought a lot about how to make entrepreneurship education and eco-system scalable and accessible to a vastly larger number of people. The answer to that question, I believe, is the 1M/1M Premium Lounge. Over the upcoming months, the program will become much, much richer. But for the moment, we can get you started and give you a significant jump-start.    

You can listen to the recording of today’s roundtable here. Recordings of previous roundtables are all available here. You can register for the next roundtable here.