While most entrepreneurs think of VC funding as the most obvious way of funding their startups, there are actually many different ways in which you can fund your startup.
Getting Risk Capital I.E. Angel Investors Or Venture Capitalist – VCs
Angel investors or VCs are investors who give you capital in exchange of equity in the company.
Continue reading “Angel investors, VCs and other funding options for startups”
Investors will be interested because you have a plan to address an opportunity well, not just because you have identified an opportunity that is interesting. That’s why, while having a good idea is certainly a good starting point, it is not enough for investors to invest.
Most entrepreneurs make the mistake of detailing out their product or service or concept. What most investors are looking for is your plan for building a strong, profitable, scalable, defensible business around that product or concept.
The success of an entrepreneurial venture depends entirely on the quality of execution. Many companies fail to implement their ideas well. Hence what investors seek in the plans they review is evidence that this team will be able to execute well on a concept that appears to address a potentially large market.
Continue reading “11 components that make up a good business plan”
In my view, easier availability of early-stage capital than ever before, public celebration & adulation of entrepreneurial heroes, a well-deserved respect for entrepreneurism and also society’s willingness to accept failures in entrepreneurial ventures make it easier for younger people to consider entrepreneurship as a career.
I share below some observations that will hopefully provide some food for thought before you embark on your entrepreneurial journey.
A great idea of concept is not the same thing as a great business. Once you identify aconcept that has a meaningful value proposition to your potential customers, you have to think of how you can build a strong, sustainable business around that concept. Think hard about concepts like revenue streams, business model, go-to-market strategy, resource requirements, etc.
Don’t ignore challenges. Think hard about all possible challenges and then find a way to mitigate them. Entrepreneurs tend to overlook the challenges when they are driven either by a desire to be an entrepreneur or when a concept stokes their interest.
Write a business plan. It is YOUR plan for YOUR business. Often, entrepreneurs assume that a business plan is to be written only when you seek venture capital or debt. However, a business plan is nothing but your plan for your business. Create a document that will help you think through the steps you need to take in your entrepreneurial journey. And that’s your business plan.
Do not bother about teamplates. A business plan is not about templates or formats. It is an articulation of your story about how you plan to go from point A to point B and then onward to points C and D in your journey. And as you think through various aspects, including costs and revenues, the plan will start getting more robust.
Don’t focus on the excel sheet. Focus on the business model. A 5-year excel sheet projection is just that – an excel sheet exercise. It is neither a reflection of the potential nor a reflection of your ability to meet that milestone. However, an excel sheet exercise provides you a reference point to consider different possibilities of scale and help you plan the intermediate steps in reaching those milestones. I.e. it is not important to detail the calculation for a Rs.98.74 cr revenue by 2012 as it is important to be able to state “We believe we can be around a Rs.75 cr to a Rs.100 cr. enterprise by the 3rd year of operation and here is how we plan to go towards those milestones”.
It is ideal to gain experience about building and managing businesses before you create your own enterprise. Most successful entrepreneurs have built businesses after gaining significant experience across functions in different organizations. Though often celebrated, entrepreneurial successes of people with no prior work experience are a rarity.
Think big if the opprtunity exists. Your ability to scale should be restricted only by your aspiration and not by capital. In today’s environment, it is far easier to raise early-stage capital than ever before. If your concept is right, if the market potential is large and if you have the capacity and capabilities to deliver on that potential, you will find the capital to fund your dream.
One of the most common observations of investors, both domestic and foreign, is that entrepreneurs (especially in India) are afraid of thinking big. Entrepreneurs tend to think that it is prudent to be very conservative in your projections, especially if you have no past record to prove your scaling-up capabilities. However, unless you are keen on creating a business that is small, it will be important to provide a view of the potential and your aspirations, especially if you are seeking venture capital. Of course, the aspiration to scale has to be based on a validated assessment of the potential and backed by a strong, sustainable plan to deliver on that potential.
Make your own decisions but listen to what more experienced voices have to say. If a number of investors reject your proposal, it should be a signal for you to consider what aspects of the model seem to worry investors – relevance of value proposition, market potential, business model or your ability to deliver on the potential. Once you have identified the issue or issues, you need to revisit that in your plan and see what changes you may want to make in order to address any flaws in your plan.
Just because you do not get funded does not mean it is a bad idea or your plan is wrong. Often, especially with new concept, it is difficult for investors to take a bold step. Often entreprenerus are able to create new markets based on their insights and conviction about the opportunity. Others may not be able to see the vision as the entrepreneur is imaging it. Hence, just because others reject your idea does not necessarily mean that this is not worth pursuing. But do also consider the points of skepticism as it will only help you iron out issues that you may not have thought about.
If you still do not get funded and do believe it is a concept worth fighting for, you need to find innovative ways of building a proof of concept.
Find mentors and investors with belief in your concept. It is also important for you to find investors who have a strong belief in the domain that you wish to be in and convince them about your ability to deliver on that potential.
Importantly, don’t be a lone ranger. Connect with other entrepreneurs. Seek guidance. Ask those ahead in the entrepreneurial journey to share their experiences. Network and seek mentoring from accomplished and successful entrepreneurs.
To end, I would like to clarify that entrepreneurship to my mind is not just about starting or owning an enterprise. It is about an entrepreneurial spirit that inspires individuals to take ownership of an assignment of area of responsibility. It does not matter whether it is in your own enterprise or whether in an organization where you work or whether the organization is a commercial enterprise or a not-for-profit entity. Do well in whatever you choose to do. Do it diligently, honestly, ethically and with enthusiasm and commitment.
And THINK BIG.
As the advertisement of a spirits brand said ‘Its your life, make it large’.
This article was originally published in Inc42. Read the article here.
I have often heard senior professionals tell entrepreneurs that they wish they had the guts to leave their jobs and startup on their own. But I have yet to hear an entrepreneur, irrespective of whether their venture is doing well or struggling, tell any professional,
I wish I had your job.
The reason is easy to understand. Entrepreneurs start ventures largely in their areas of interest or passion or competence. It’s always a great feeling when your work is also what you love to do. A job may or may not provide that option. Entrepreneurship does.
But just doing what you are passionate about is not the only reason why entrepreneurs are generally more excited about their work. In some cases, rare though, you may get to do what you really are passionate about in a job too. The big difference however is that while in a job you are living either someone else’s dream or a company’s objectives, in your own startup, you are driving your own vision, goals, dreams and aspirations. Every small step in an entrepreneurial journey feels like an accomplishment and gives you the satisfaction of having reached a new milestone.
Note: Before I begin, I would like to clarify the difference between market potential and revenue estimate. I have often seen entrepreneurs use the two terms interchangeably.
Market Potential
Market Potential is about estimating the size of the overall market opportunity. It is a sum total of the potential revenues of all players who are addressing that opportunity, if all the potential customers were to buy. I.e. If you were selling ‘affordable’ golf kits for first-time golfers, then you could estimate market potential as follows (all numbers are indicative for illustration and do not represent actual market) :
Revenue Estimate
Continue reading “The Entrepreneur’s Guide To Estimating Market Size For It’s Startup”
17th century philosopher Rene Descartes said – ‘I think therefore I am’. With all due respect to him, I am inclined to revise this for the 21st century as – ‘I initiate therefore I am’.
For me the world is truly binary, people who take initiatives and people who don’t and that pretty much decides who survives the marathon and who doesn’t. Don’t get me wrong here. I don’t want to discount the value of thought because the very act of doing has its roots in a thought. However, in the modern world, taking the initiative to execute matters much more than just penning a thought on – is what needs to be done.
Before we delve deeper, let’s be clear on the definition of initiative. If you look on the net, you will find many interpretations, but for this write-up, I define initiative as not accepting status-quo and exploring ways to make things better. People who take an initiative are always working for the betterment of their own self, their family, their organization and the society at large. People who don’t are on the receiving end and perpetually complaining about the state of affairs.
Continue reading “Guest Post – I initiate… therefore I am !!”
A lot has been written about core competency in innumerable management books. But what does it really mean? Its only when companies understand the real meaning of core competency in today’s context, can they truly work on building a ‘differentiator’ that gives them an edge over others in the market.
A dynamic concept
The notion of core competency has evolved with changing times and market dynamics will continue to do so. For instance, in the times of Sony Walkman, the term ‘core competency’ was associated with deep technical innovation, and at other times,with just the sheer size of assets and deep pockets of a company, since they were crucial in the formation of a large conglomerate.
So what can be the core competency of an organization in today’s digital economy, where it only takes a handful of smart guys with minimal funds to bring the next disruptive innovation and consumers adopt it in millions, thanks to the internet?
Can it be the capability of your R&D labs and patents you own? Yes, in some sectors like pharma, patents go a long way in demonstrating a company’s prowess, but not in the industry a general. They can be used to protect the product and manage market leadership only until the next innovation comes around. At the same time, it is not the patent that can be your core competence, as customers buy products, NOT patents.
Continue reading “Guest Article – What can be your core competency in today’s world?”
