Bootstrapping – Boon or Bane for Product Startups?

On August 14th, 2014 iSPIRT, the industry enabler that is creating a vibrant eco-system for promoting, encouraging, supporting and enabling product companies out of India, organised a very useful online discussion on the concept of bootstrapping. Titled  ‘Bootstrapping – Boon or Bane’, the discussion explored various facets of bootstrapping, including its relevance, benefits, limitations, and challenges.

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Sharad Sharma, founder of iSPIRT kicked off the conversation with a very incisive observation that the startup community, largely driven by the media, tends to celebrate and showcase startups only when they receive angel or institutional funding. How true is that!!! There are a number of very successful and modestly successful startups, many of who are deserving of the praise and showcase, but they get reported about only when they close an investment round. (I am not sure if the media is to blame entirely. I suspect companies too reach out to media only after they have received an investment round, perhaps because they believe that funding makes the ‘story saleable’ for the media.).

Continue reading “Bootstrapping – Boon or Bane for Product Startups?”

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Converting an idea into a business

I often get asked this question: “I have an idea. But I just don’t know what to do next. How do I start implementing it?”

It is not unusual to get stuck with the idea without knowing how to take it forward. Often the fear of having to manage operations, finances and staff is what stops people from getting started on their idea.

Having an idea is a good starting point. The first thing to do is to let that idea rest for a few days. Think about it every day. But don’t act on it. Think through all the positives AND all the negatives. Think of how great it can be. And also think about what could go wrong and how worse can it get. You will start seeing different aspects about the idea. Not all will be good. And that’s OK.

Continue reading “Converting an idea into a business”

Leap of Faith

Many people have ideas for a business. Almost everyone thinks of some idea at some point in his or her lives. But only a few individuals actually take the first steps to convert those ideas into a business.

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To be an entrepreneur, one has to have the conviction and belief in the idea that one is pursuing. Unless you have that conviction, you are unlikely to take the first step required to convert that idea from a ‘thought in your head’ to a ‘venture in the real world’.

Once you have a thought or an idea about something that can become a good business venture, you have to think hard about the potential of that concept, assess the merits and challenges, and once you feel convinced enough, you have to be able to take that leap of faith to go and implement that idea in the marketplace.

Many aspiring entrepreneurs tend to test and research, and retest and re-research their idea or concept and depend only on the research findings to pursue or drop that idea. Often, research cannot give you the answer to whether an idea will work or not. Sometimes, entrepreneurs have to take that leap of faith and that gut-feel to make a concept work. Entrepreneurs however, should NOT be blind risk takers. Successful entrepreneurs understand the risks and take necessary steps to overcome those risks and challenges. Planning well is what helps them deal with the risks and challenges better. Others who give up often do not think hard enough about addressing those challenges. They get scared of the challenges because they do not think of solutions.

Entrepreneurship requires entrepreneurs to pursue their vision often in the face skepticism and negative feedback on their ideas and plans from many individuals. Often these individuals who are skeptical of the plans are well meaning and may give an honest feedback based on their own assessment of the risk-reward dynamics of that idea. But mostly, entrepreneurs are able to spot opportunities where others see problems.

Entrepreneurs see opportunities before others see them. Entrepreneurs catch the wave on the up…. That’s why successful companies often have the ‘first-mover advantage’. Others, who follow or are me-too copycats to successful first-mover concepts, often have a much harder road to success, if they do succeed. Entrepreneurial thinking and aptitude is about seeing the ‘signals’ where others see ‘noise’.

The ability to take that leap of faith AFTER assessing the potential and understanding the risks allows entrepreneurs to be confident and optimistic about the opportunity and potential of an idea. Optimism and confidence create positivity and enthusiasm, which infects others around them. It helps entrepreneurs build teams, get early adopters, and often, helps them get investments from investors. (It is not without reason that entrepreneurs who are successful are good presenters and can tell their story with conviction and passion.)

Go ahead. Think hard about the opportunity around that idea and what you need to do to make it work. Seek mentoring. Get guidance from those who have more experience in operationalizing a business venture. Plan well. Execute efficiently. Be confident.

You will never fail. Either you will win or you will learn. And this learning will help you prepare even better for the next journey of your life. Go ahead. Take that leap of faith in your idea.

This article was first published in the SheroesCommunity on the 6th of March 2014.

“I have a good business idea but am very confused how and where to start up?”

This post is my answer to a question on Quora

The idea/concept and the business around that idea are two different things. 

It appears to me that you have an idea that you are excited about. And that’s a good starting point. Now, it is important to think about how that idea translates into a product/service, how do you get users/customers, who is your user, who is your customer i.e. who pays, how much do they pay, how much money will you make out of what they pay i.e. what is your margin, what are the costs… and as a result of all this thinking through, you will get a sense of whether this makes sense for you commercially.

Once you have done that, start thinking in details about all the cost structures, the time gap between when your expenses start and when your revenues start coming in, and the gap between your costs and your WORST CASE estimates on revenues. That will give you an indication of the kind of monies you may require to get your concept into the market.

Then think of what the relevant funding sources for this concept are at this stage (and VCs are NOT the only option… often it could be alternates like getting advances from customers or a family & friends round, or a small loan from a bank, or plain bootstrapping).

Start talking to customers and other stakeholders – distributors, intermediaries, influencers, other founders (to get their perspective on your plans), media folks, vendors, etc. Conversations with different folks give you diverse perspectives on the BUSINESS dynamics around your concept.

Parallely, start thinking very, very hard about how you are going to implement it… for the first few quarters you should have a week-by-week plan on what the milestones and goals should be, and how you will go about meeting those. i.e. it is not very useful to say “we will have 5000 registered users by end of month 1″… it is important to nail it down to “To get 5000 customers registered by end of month 1, we will have to reach 500,000 potential users. We aim to do this by online marketing in Gurgaon area, and through posters in housing complexes.” (In fact, in your operating plan, it will be important to nail down the specific housing complexes that you will be approaching to get your posters on their notice boards). When you start planning to this granularity, you will notice that a lot of things become more apparent e.g. how many visits will you have to make to a housing colony before the poster gets on their wall, who will put it up, how much will it cost, how will you monitors, etc.

As you immerse yourself into the operational aspects, you will start understanding the complexity and the multi-dimensional aspect of business that founders need to think deeply about. And this is the fun and the challenging part, which gives entrepreneurs the adrenaline rush – in understanding the challenges, the clarity that one keeps on getting as you immerse yourself more into the domain, the tweaks that you make in your plan as you learn… and the decisions that you have to make based on whatever data you have.

As you start seeing the various dots that need to be connected, you start realizing that this is much bigger than what you had originally thought it to be… and that is fun. (Well, often scary too… but in a nice, ‘keeps you awake at night but gets you raring to start your day’ type of scary way.

Keep walking.

What are the qualities of an entrepreneur?

  • High aspiration: Clearly, unless aspiration to achieve is high, it is difficult to create something that is valuable. High does not necessarily mean high in revenues. It could be high in impact as well.
  • Optimism: An entrepreneur must be high on optimism. Simply because they need to believe in the mission, in order to convince others to join them in the journey. However, there is a fine line between optimism and arrogance. An entrepreneur needs to have the humility to test his/her optimism by cross-checking with others.
  • Confidence: Without confidence, all ideas will remain just that – ideas. Taking the first few critical steps, going ahead despite being aware of the challenges, and being wise about taking precautions against these challenges, are traits of successful entrepreneurs. Entrepreneurs however should NOT be blind risk takers. Successful entrepreneurs understand the risks and take necessary steps to mitigate those risks. Confidence in their approach is what helps them deal with the challenges and risks better.
  • Persistence and resilience: Plans will usually not go as you want them to. Hence, resilience (the ability to try again and again) and persistence in pursuing what you believe to be appropriate will help entrepreneurs sail through tough times.
  • Every entrepreneur has to understand ‘sales’: By sales we don’t mean just transactional sales. We mean the ability to convince others about the concept, the value proposition, the plan etc. An entrepreneur does not sell only to customers. He/she has to ‘sell the concept’ to investors, vendors, partners, early employees, parents, early customers etc.
  • Equally important is good communication skills. Unless you are able to explain and pitch the concept clearly to the various stake holders, it will be difficult for them to align themselves to your vision.
  • An entrepreneur has to be good at implementing ideas. Everyone has ideas. But the trick is to successfully implement those ideas into a thriving business. An entrepreneur must have a   deep understanding of the ‘business’ around that idea.

Also, I strongly believe that an entrepreneur must have the courage to face failure and challenges.

Happy entrepreneuring!!

What should new entrepreneurs be wary of when it comes to launching a new business?

Well, there are some lessons that I have learnt in my journey…. and as an entrepreneurship evangelist, have had the opportunity to observe many startups start up, and fail. Here are some observations:

  • Don’t underestimate the costs and time that you will require to meet your milestones – often entrepreneurs, enthused by their deep passion and conviction in the concept, expect things to happen sooner than it would, and they usually expect to achieve it in lower resources and costs than it would. Running out of cash is the single biggest horror that a startup or early stage company can face.
  • Plan for the worst-case situation… not the best case. Most entrepreneurs prepare business plan, which look at the most glorious of outcomes. While that is a possibility, it is prudent to think hard about what aspects could go wrong, and think of plan to mitigate those disasters. If the venture does well, enjoy the ride, be sharp and steer it towards success. However, if you have planned well for disasters, you will be able to manage the startup even during times of significant challenges.
  • Ensure that co-founders are aligned on the vision, the pain in the journey and each other’s views on key decision points in the journey (e.g. how would you react if you were to get an offer to sell of for $ 10ms… what will be your decision if the offer was $2mn?)
  • Talk to customers. Don’t plan on the basis of your enthusiasm and conviction. Test the concept with customers/consumers. Even before the product is ready, have conversations with potential customers/consumers to get their feedback and thoughts on what they would like to see in such a product.
  • Be very, very careful about whom you hire as your first employees. Make sure that they are in it with some level of conviction and passion for the concept. Pure commercially inclined employees will not have it in them to pull through the ups and downs, the course correction, and the challenges of the early stages of your journey.
  • Keep your costs low. Be frugal. Plan your cash flow and fund flow requirements well. Make sure you are well funded. Dont assume that you will be able to raise the balance amount as you proceed along in your journey.

Entrepreneurship – the time is now

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.

Enterprises have to be built around a concept that has a meaningful value proposition to your potential customers and around which you can build a strong, sustainable business model. 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.

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 and in order to manage your enterprise you need to be able to create a document using some framework that helps you think through the steps you need to take in your entrepreneurial journey.

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 – a set of assumptions. 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.

One of the most common observations of investors, both domestic and foreign, is that entrepreneurs in India are afraid of thinking big. They tend to think 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 creating a life-style concept, it will be important to provide a true picture 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.

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.

On the other hand, 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. It is therefore 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. 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.

Importantly, don’t be a lone ranger. Connect with other entrepreneurs. Seek guidance. Ask those ahead in the entrepreneurial journey to share their experiences. Organizations like TiE and NEN offer excellent opportunities to network and seek mentoring from accomplished and successful entrepreneurs.

To end, I would like to clarity 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 says ‘Its your life, make it large’.