Article: Stop Living on Instant Noodles.
I’m convinced that we are doing something wrong.
During a conversation with someone who has experience beyond my age, on how the product landscape in India is evolving, he smiled, took the time to coin his words (into something more politically correct) and said, “Nobody is really changing the rules of the game. Everyone is looking to make a quick buck”. When I met Subho Roy of IAMAI a few weeks back, he pretty much resonated with that and almost let out the frustration saying “This is all turning into a valuation game. Where are the days of building solid businesses?” Is there something wrong with that? Thats what I am hoping we can discuss, argue and debate about here.
It’s that time of the year for Proto.in – got barely a month to go and usually this is the time when we are finalizing all the companies and lining up the speakers for the Fastrack Sessions. We are talking about… How to sell, as a Startup? Not how to sell-out, more like how to sell your products and make revenue. There is much that seems to be obscure in the land of the startup community with so much millions and trillions discussed about – especially the size of the VC firm’s wallet.
I have been touching base with a fair slew of guys who have natively built and sold products here in India. Tally is one such company that I got in touch with and the response I got really got me thinking – because it resonates with what Mr. Experienced told me before. He wasn’t sure if he could make it to the event since he has travel plans, but left with a note saying “I wonder if people are ready to hear the heartache of building a business over 18 years. It might even depress a startup.”
Lets not make a mistake here saying that Tally just didn’t hit it right. Do you know how long it took for Bose to become a double digit million dollar making company? More than a decade. There is a joke within circles that Bose would be a bad company in a VC’s portfolio. Infosys took 25 years to attain maturity and go public. Look at Wipro. Look at Microsoft. Read More>>
This is an excerpt of a post from the Author’s Blog, The Startup Guy. The views of the author are that of the individual.
Rahul Dewan
on June 19th, 2008 at 5:41 pm Said:
There seems to be a contradiction in the key message of your post.
Most “solid businesses” are almost not ones which “radically change rules of the game”. On the contrary they actually build on from what is already there, use improved technology, and improved services, to deliver solutions which help the customer’s of the product do their business better than before.
At the same time, certainly there are “game changing” solutions, but almost always they do not get funded by VCs in India who always seek “precedence”. This is unlike in the USA where there is a lot of risk money available – even small amounts is good – for investments in ‘ideas’ and ‘people’. This is unfortunate. Maybe proto.in offers a different set of people. Hope to experience that during this July event.
Thanks,
Rahul
–
Srijan Technologies, New Delhi
Vijay
on June 19th, 2008 at 5:44 pm Said:
Rahul, There is no Indian Vs. Silicon Valley VC. They are both the same. Thats where the issue comes in, because all of a sudden the Indian Entrepreneur is competing with the global entrepreneur for the same funds and opportunities.
Unless you understand that, you are going to be disappointed.
George
on June 20th, 2008 at 6:55 pm Said:
Nice – thoughts – particularly valid for B2B products for non global markets
a) If the product is B2C (social networking, online sales etc.) or a B2B product that needs global scale you need valuation/ funding and you need to scale up if your idea is great
b) For a B2B product in India alone, valuations/ VC’s remain unreal since the market is smaller. Debt/ Bootstrapping/ build long term seems better
George Vettath
Kallos Solutions
http://www.K-Serve.net
Rosen Sharma
on June 21st, 2008 at 3:36 pm Said:
I agree with Vijay. The following excerpt may be relevant here:
Professor David Birch, formerly at MIT, classified companies into three categories: elephants, mice and gazelles. Fortune 500 companies like General Electric are the elephants. The large number of small enterprises (6.5 Million in the US alone), which include restaurants, book shops, retail outlets, are the mice. The third category, which is of the most interest to us, is the gazelles. Gazelles start small and grow extremely rapidly through innovation. More often than not, they create huge new industries on their way to success.
The startups we wish to create are the gazelles described by Professor Birch. Not just any gazelles, but gazelles which grow into elephants; which on the way create a large number of high-quality jobs, satisfied customers, value in the overall economy, and enormous wealth for the shareholders.
Because of their very nature, starting small and then going through very rapid expansion, the “gazelles” require relatively large infusions of capital at an early stage to realize their full potential. The traditional way to bootstrap companies was to take some parts of the profit and invest them back into the company. This strategy does not work if the company is growing exponentially or if the upfront investment of capital before cash flow breakeven is large. Thus, the need arises for external sources of capital. Enter the venture capitalists.
The problem lies in the fact that people raise funding before they know whether they are really gazelles. Or as with a lot of companies, people are just trying to build a mice and flip it as a gazelle.
Venture capitalists are the gatekeepers and providers of the capital required by the “gazelles”. In addition to being the gatekeepers of capital, venture capitalists play an important role in acting as a filtering mechanism or bouncing boards to weed out the mice from the gazelles, or to shape some mice which have the potential to become gazelles with the infusion of the right DNA and capital.
Entrepreneurs find it difficult to deal with this aspect of venture capital; and to be honest, some of the venture capitalists do not have the history or institutional memory to act as good filters. But, on the whole, this filtering mechanism is a great asset and is one of the reasons, we believe, why Silicon Valley has been a hotbed for gazelle breeding.
Sumeet Anand
on June 22nd, 2008 at 1:53 pm Said:
I am sure there are many gazelles around…but how many will survive to realise their full potential and tell the story?
if we look at where VC money in india has gone till date…we hardly see any gazelles…all me2 stories…
We dont need me2 but we2 stories…if west can do it so can we…We can also produce a corporate brand like google, MS, IBM, etc etc
May be we need some innovation and rethinking on the VC and angel financing models.