All posts by Mukund Mohan

My discipline will beat your intellect
Entrepreneurship, Hiring, Management, Tips

Tip on being a good manager – Saying the same thing differently #startup #entrepreneur

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One of the things I have figured out that I am not good at is being a great manager. I am largely bad at managing people. People that work for me like “hanging out with me” as a friend or a colleague, or even working on projects with me. Most people like working with me, but working for me as a direct report is a pain. I go between the two extremes of being a micro-manager to completely hands-off.

This is an extension of my personality. I am a known control freak, I prefer to be direct and am less of a consensus builder. I really value high intellect and have little patience (that’s is the biggest drawback in India as a manager) for people that dont articulate well or speak up. I do listen, (I am told) but I rarely acknowledge that I have listened.

This works in specific situations (running a sales team) or being a product manager (when the engineers report to another person), but works very little elsewhere.

I realize that most entrepreneurs with a technical and product background face a fairly similar situation. Not have too much experience in being a “manager” hurts your in retaining good people. Here is a rule of thumb if you will that I was taught early in my career at Cisco and then at HP, that have shaped my management “style” Ed. It is a joke I call it management style, when there’s no real style at all.

You have to adapt your communication style to the different people in your team. This was the biggest problem for me. I dont like the effort it takes to change my communication style. I am very direct, brutally honest and dont mince words. That does not work for most people. You cant change as a person much (I think) so you have to work hard at communicating the same thing differently to different people in your team. Let me give you an example.

In 2009, after 4 months of working on our product and getting feedback from customers that the product was not quite there, we knew we had to pivot. Communicating that pivot to the team was a bigger challenge.

One of the folks in my team is very numbers driven and a “give me the facts, so I can form my own opinions” . For her, I had to give the basic facts of our user engagement and customer feedback before I could convince her to pivot.

The tech lead was a young developer (with about 3+ years of experience) and had worked on the product from the start. He was a lot more emotional about the product being “his baby”. Giving him the facts only made him defensive. So the approach I had to take with him was to get him on a trip to meet 13 customers in 5 days to listen to the feedback for himself. More expensive, but worth it.

There was yet another person on our team who tended to be the group’s excitement barometer. When she was in a good mood, everyone’s spirits lifted and when she was cross, most people wont answer even the most basic of questions. It was pretty surprising given that she had no one reporting to her, but she was the team mascot. With her we had to make her feel “involved” with the process and the decision.

For her I had to take a dramatically different approach. I knew if we communicated the pivot incorrectly, there would be a week of unproductive nonsense at the office. Done right, I knew we could get a superhuman effort from the team.

To involve her, we put her in charge gathering feedback from all our customers. She had to put together the survey, let customers know, collate the responses and then come up with her recommendations to communicate to the team. Worked like a charm. She suggested that we “pivot” but did not use that word.

As an entrepreneur, one of the big challenges you will face is hiring people. The next big challenge is to keep them motivated and focused.

Communicating differently to each of your direct reports is one way to do that effectively.

Angel investing, Entrepreneurship, Funding, India

Are there too few seed/angel investors in India or is too much money chasing too few great companies?

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This is a debate that I keep having with entrepreneurs and investors alike. When you talk to entrepreneurs they correctly point out the # of angel and seed deals done in India are very few. If you remove accelerators, the number of angel funded tech companies in India is about 60 (2013) and the number of Venture deals, which are about 50. Add the accelerators, which add another 60 companies and we have about 150 startups getting funded each year.

Given the number of entities that get started is about 1000 (2013), that seems like a small number. Entrepreneurs also point out the very investor friendly terms (drag along, liquidation preferences) that are given by angels in India and the fact that most angel funded companies give between 20 and 30% of their equity at the seed / angel round, which are common among technology startups.

On the other side, Venture and angel investors point out the relatively few exits (fewer than 10 in the technology sector) and the amount of time it takes to grow companies in India (over 10 years). They believe there is enough money for the right opportunities. I can point to 2 examples of companies we are trying to fund which have 3 competing term sheets at the angel investment stage to confirm that it happens, but is rare.

Which brings me to accelerators such as ours. There are about 30+ accelerators in India, but I am going to focus on the top 5. In discussions with other accelerators, the constant theme I get from most folks is the intense focus on the part of entrepreneurs to “get funded”. First the angel round, then the sapling round and then the series A. I know in our own case that is true.

So let me talk about our case in particular, although I have mentioned it before. We dont want to focus on funding. If that’s the biggest need of entrepreneurs then they should go elsewhere.

Unlike other accelerators which are not a corporate program, the key value to Microsoft from our program is startup engagement. We take pride in engaging with the startups and are extremely happy if they are successful, but the financial return from our investment is going to be largely negligible to us. Even if 1 of the 11 startups “makes it big” and we owned 6-10% of the company when it went IPO or got acquired, it would not be a significant dent to Microsoft by any means.

We had a chance to review about 800+ applicants this batch 4 for our accelerator. There were many great entrepreneurs and companies, but we could only support 10 – 15. If we were running a fund, similar to a venture investor, we would only select 2 or maybe 3. That’s consistent with our previous batches.

That we believe is a great disservice to the entrepreneur ecosystem. Many more companies could be small, non angel / VC funded businesses, and still do well. I do not like the term “lifestyle” businesses, but these companies do not warrant the money required by rapid growth, quick to scale companies.

So we do not put a lot of emphasis on our companies getting funded. We do help them get connected with angel investors and venture capitalists, but that’s it. In many cases we have worked behind the scenes to push investors we know to get deals done faster and at better terms, but that’s largely behind the scene. Our emphasis is to open doors and opportunities that help them get in front of other entrepreneurs, potential customers and partners and help them understand the discipline that it takes to be a great entrepreneur.

A few of our previous company entrepreneurs dont like that, and we don’t have a problem with that. Our goal is to help the ecosystem grow and allow more entrepreneurs to experience the journey. If they only wish to focus on funding, they are better off going elsewhere.

So, back to the question: Are is there too little risk capital in technology or too much money chasing too few deals?

Unfortunately the answer is clear only from the perspective that you are coming from. Neither entrepreneurs nor investors will be able to see the challenges the other side faces very easily so it is a question that quite possibly has no clear answer.

The best is to keep at the problem and have different parts of the puzzle try and fit themselves as they progress instead of force fitting more funding into companies or the other way around.

The other part of the question comes from the seed fund that we have as part of Microsoft Ventures. We have not invested in any company, in India, so far, but we have 2 in the pipeline. We get questions on why we dont fund all the companies from the accelerator.

The answer is fairly straightforward but very hard for entrepreneurs to swallow in India.

Microsoft Ventures fund is global. Which means we look at opportunities in the US, Israel, China and other locations. We have some fairly standard criteria for our funding – including, but not limited to the following:

1. We only have the authority to put money in a US or UK entity.

2. We can only use a convertible note instrument.

3. We need to have the company’s product’s well aligned with internal Microsoft teams / products and goals.

The accelerator, however, does not have the strict guidelines associated with these 3 criteria.

Finally since we fund all companies globally, the investment committee looks at all companies across multiple geographies and “looks” for traction, differentiation and other metrics and our companies are just not as strong as those in Israel or the US. They seem to need a lot more time, same amount of money, with potentially smaller exits. While that’s the nature of the maturity of our startups in India, that’s not a bad thing overall. We will get there eventually is my perspective.

Until then we have to fight battles on why we should fund a company from India, when the comparable company in the US is much further along.

The argument for China is simple – a US company just does not do as well in China as a Chinese company.

The arguments for a Israeli company are great as well – most of their companies are Delaware entities, have extremely strong technology (which is aided by government) and they have at least 100% more traction (customers, revenue) than comparable Indian companies.

What do you think? I’d love your perspective on what I am missing.

India, Personal

The future of all education is hyper-personalized

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As part of my looking ahead series, I will publish a few blog posts on what I see as the future of certain areas that I am really passionate about. These pieces may also appear in other media, so I will let you know if they are cross-posted.

Across the world, nearly 4.9% of our GDP is spent on education. In countries such as USA and UK, the % is much higher and in countries such as ours, much lower. As we look into the future to get our citizens more educated and informed, we find that the biggest change will be the end of the “one size fits all model”. The future of education will be hyper-personalized, catering to individual students needs and focused on learning outcomes that enable one to do something meaningful with their learning.

At the heart & center of the education, we tend to sometimes forget, is the student.

What would be the ideal learning environment for the student? From Kindergarten to 12th grade, higher education through graduate programs and finally ongoing learning for skills refreshment, what helps the student learn better?

If you ask a student, they’d like to a) be inspired to learn, by having the subject brought to life with examples and experiences, b) learn at their own pace and enjoy the subject and c) learn so they can apply it towards a task they want to perform.

Teaching can be broken into 3 elements – “instruction”, “application” and “review”.

“Instruction” is the explanation of the theory and concept with a few examples. Most of the sciences & math are taught this way already. The social sciences are largely taught this way as well, but the examples are replaced by stories in history, locations in geography and local government examples in civics. For languages the theory is replaced with a large dose of rules. Most are arcane and require rote memorization. Teachers, tend to force students to learn every concept at the same time, regardless of the student’s ability to learn. Inexpensive tablets and applications on those will replace the blackboard based teaching in the next 10 years. Currently instruction is also done in a linear fashion and uses the same tools and techniques for everyone. I know in my own personal case this is meaningless. My son, a 9 year old, prefers if I explain it to him using stories, but my daughter wants to watch videos about history.

“Application” is currently performed by repetition and practice. Instead of applying the learning concepts to a project (in some private schools they are given projects), students are asked to do the same “problems” and answer the same questions multiple times. The expectation is that repetition will ensure you will remember it. The future of application will be based on science kits, drama renditions of historical facts and real-world recreation of circumstances where you would use math. The student is more likely to remember a drama they participated in about the Mughal Empire than the multiple chapters devoted to them in the history textbook. This will also help counter the folks who claim that computing is making students “insular”. The fact that you are doing a project (or a drama) requires teamwork and cooperation.

Finally, “Review” is done by tedious and stress-inducing exams, with emphasis on how well you learned to “learn”, instead of learned to “apply the learning”.  Computing is already replacing the paper-based exams in the higher classes, and they will continue to do so even in the lower grades. Reviews might also get replaced by multiple “demo days” at the end of a semester – with the emphasis on “show me what you learned”.

The future, will feature personalized applications based on experiences with inexpensive tablets and mobile phones replacing the text and images of the 2D text book with voice, video, interaction and text.

While teachers won’t be replaced, the tablet will enhance the teacher’s ability to be a facilitator instead of setting the pace. While some favor setting the pace approach, research has proven that most students are motivated to learn certain subjects faster than others.

The teacher’s role will change to be a curator of great material and a person that understands the unique needs of each student. This obviously means, that not all students in a class will be at the same “level” during the class. Some might surge ahead in Math, others in Literature and still others in Art. Which is a good thing. It will help the students excel in “something”, rather than be ordinary at “everything”.

The future of all student education will be hyper-personalized. From Kindergarten to elementary, middle school to high and from undergraduate programs to post graduate and beyond, each student will focus on having their “own” teacher, their “own” curriculum and their “own” books.

Lastly I want to highlight the differences between hyper-personalized, customized and individualized. They are not the same.

Customized means take a curriculum, tweak it somewhat to the local “needs” of the school and then teach all students the same thing. This is followed by most of the private schools in India. They follow ICSE or IGCSE and “custom” tailor the curriculum for the entire class.

Individualized is what home-schooling is. The focus is on what the tutor (in most cases the parent) feels is best for the child. Individualized programs will work for kids with special-needs in the future, and those with learning disabilities. It requires in many cases, a therapist or instructor who understands how the child learns and only focuses on teaching that material in that particular way. In most cases they use the same curriculum as the mainstream programs, but tend to use the same techniques over and over again.

Other

The lack of diversity in the Indian investor ecosystem is leading to groupthink

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There are 2 women in over 200 General partners at 49 Venture Capital firms in India. (Vani Kola – Kalaari and Bharati Jacob – Seed Fund).

That’s it. 2 out of 200+.

Everyone else is male, between 30 and 50, with a technical education at the undergraduate level (53% are from IIT) and likely a MBA from a top program.

There are 7 women among 400+ associates, vice presidents and investment professionals.

So, why are we surprised that every VC invested in eCommerce companies in 2010?

Why are we shocked that less than 2% of tech entrepreneurs are women?

Why do we not hold ourselves to a higher standard?

This causes GroupThink.

We have a serious problem folks. We need to address this or we will keep rejecting folks or marginalizing those that are more deserving.

It hurts entrepreneurs in the short term. It hurts us as investors in the medium term. It hurts the entire ecosytem in the long term.

Now, I dont think the solution is to just hire a bunch of women as associates to window dress.

We have to find a way to support women & marginalized sections of our community, to be investors, and help raise a fund and participate.

Else we will all lose.

Entrepreneurship, Funding, India

The toughest choice for an entrepreneur – Slow and committed vs. Fast and apathetic

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Another day, another debate. This time it was Ravi Gururaj, Raj Chinai and Rajan Anandan vs. yours truly.

Lets have a twitter debate copying @rajananandan and @ravigururaj as well on your thoughts.

The debate is about the type of investors that entrepreneurs need now. I believe in the last 18 months, the Indian entrepreneur has changed dramatically. They now prefer a slow, but committed investor as opposed to a fast but apathetic investor. If they could have the best of both worlds, they’d like a fast and committed investor, but that’s as rare as a blue moon. Ravi is of the opinion that speed is the need of the hour.

Here’s the background:

Startups that are getting funded by accelerators are largely (there are exceptions) getting a better shot at getting funded that those that are not. Coming out of an accelerator, most startups get a few angel investor to put anywhere between 50L (or $100K) to 2 CR (or about $400K). This is their seed round. In the US, nearly 27% of companies raise the series A after this angel round of funding. That ends up being a $2 Million to $5 Million round. In India for 2013 that is < 5%

In India, because customer acquisition is slow and laborious, the next round after a seed round, is actually a sapling round (or bridge round) during which the entrepreneur raises anywhere from $500K to $1.5 Million. After this round is when most startups raise their series A in India.

So compared to the US startup, Indian startups have given up 7% on average to the accelerator, 25% to seed investors and another 30% to sapling round investors. In the US most startups go from 7% for the accelerator and 20% for seed investors before their series A.

The “sapling round” is very critical. The reason is that VC’s look for market, team, traction, space and competition before they invest in the series A. Most companies (over 90%) in India are clearly not ready after their seed round, with a complete management team, enough traction (aka revenue) and sufficient product differentiation to support a $2 Million round at a valuation of $4-$5 Million.

Say you are an entrepreneur and you want to raise a seed round and are given 2 choices:

1. An investor willing to move quickly and give you 50L in less than 6 weeks, but not commit to helping you fund the next round, either because they assume you will have enough to raise a series A, or because their investment thesis only allows them to put 50L per company and not more.

2. An investor wanting to take 2-3 months to make a decision (to get to know you, or because they are busy, or because of any number of useless reasons) but committing to give you 50L now and earmarking another 1 Cr to 2 Cr for 20% of the companies they invest in for a future sapling round.

Which one would you prefer?

Most entrepreneurs 18 months ago believed that a fast investor was better than a slow one. But I believe that’s changed now.

Why?

The time to raise a round is increasing, not decreasing. Most entrepreneurs are hearing stories of how some Venture investors are taking over 6 months before making a decision since they have enough good quality deals to pursue. They are also seeing their peers raise a bridge round of financing 12 months after their seed funding raise and realizing that a committed investor is better than one that is apathetic to a 50L investment.

I wish there were fast and committed investors, but that is just not possible.

Why?

The time taken to make an investment increases with the amount of capital involved. It is that simple.

For a Venture investor, $250K investments are quick, but $5 Million take more time. Similarly for an angel investor, $100K investments are quick, but $500K take more time, because you better be sure.

The reason for the $500K is that they will put $100K first, then commit to putting another $200K to $400K as needed in 12-18 months. They are committed to seeing you through a series A if they believe in your company.

Angel investors in India are realizing as well, that most (over 90%) of their investments need more money than they put in at the seed stage before they are ready for a series A. Given that 30-50% of their portfolios will fail, close or shut-down, due to any number of reasons, it is important to let the winners “win”. So they need to support their “winners” with more cash.

I’d love your opinion on this topic. Please let us a comment or lets debate on twitter. I am @mukund. Copy @ravigururaj and @rajananandan as well.

Entrepreneurship

Yahoo’s Marissa Mayer is redefining the future of tech careers: #startups #entrepreneurs

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I think of careers as a set of 3 phases of 12-15 years each. From 21 to 36 you are in the rapid learning phase, from 36 to 51 you are directing and from 51 to 66 you are guiding. These are broad brushstrokes. I am going to focus on the first “trimester” of your career in this post.

Why 12-15 years? Generally speaking, it takes most people 2 years to get a handle on anything meaningful (build a network, understand how things work), then two years to master it, and a year to start being in “the zone”. Boredom hits usually at the end of the “zone” when the juices just dont flow doing the same thing for 5 years. I am going to call this 5 year period as “doing a (one) job”.

Then most people tweak their role or go for a dramatic change in their “job” after 5 years. During the younger years most people I know are eager to learn, discover and grow their knowledge. So, they go through 3 sets of 5 year periods or “jobs”.

For most people the age of 35 (or in other cases 40) typically becomes a “mid-life crisis” point. 15 years of working can do this to anyone. That’s when a “career” change is explored.

I get about 5-7 emails and requests for calls / discussions with mid-career executives each week who want to brainstorm and get my thoughts on their career.

After the obligatory, landscape review, many realize there are few options for those who have achieved a lot by 35 – they are VP’s, Directors, Managing directors and suddenly they realize it is going to be one long haul after this.

Most folks fall into 3 buckets at this point.

1. Some decide they like “mentoring” younger people and continue to find a challenge to help others within their company grow and thrive. These folks have made enough money but not enough to leave the luxuries that their position offers.

2. Others decide they need a hobby (or want to follow their “true passion”) that will keep them occupied because work tends to be on cruise control. Many take up teaching as a side profession since they believe they have learned enough to share.

3. Still others want to venture out on their own. Having heard about entrepreneurship and always having a “bug” to startup, they usually come to seek my help on the choices and get some advice on their idea.

This is when the fun part starts.

When I present the stark reality of entrepreneurship (it is very hard, they will likely fail, though they will enjoy the ride and to build something awesome will take them over 5 years), there are 2 reactions.

The first person had not thought about it in this context and ends up understanding that they are not ready to take the risk and goes back to one of the two previous options before. They will usually say “I always wanted to start, but I kept pushing it out, since I was getting promotions, got married, had kids, school, mortgage, etc. Now it looks like it is too late”.

The second person realizes this, and understands that it is “now or never”.  The overwhelming dissatisfaction with their job pushes them to leave their high-paying, easy job to the unpredictable world of entrepreneurship. They end up taking a LOT more risk later in their career, which they can ill afford it, than when they are younger.

If you are an Indian or have many Indian friends, you will know a term that parents use (typically after they graduate) – “Settle down”.

I absolutely loathe that term.

“Settle down”.

What does that even mean? Actually I know what that means, but I guess I detest it so much, that when folks mention it, I get upset and “forget” the meaning.

Settling down is for ground coffee. You ask hyperactive kids, who have had a candy binge to, “settle down”.

Settle down to a 21-30 year old strikes me as the worst advice you can give.

[Side note: To my american friends, settle down means, get a steady job, buy a house, get married, have kids immediately, buy a car and go for Art of Living classes – all within the span of 10 years].

Why would anyone wish that on their children?

Here is what I think will happen in the next few decades.

Thanks to rapid “softwareization of work”, most people wont get a simple “middle class job” which pays well enough to “get married, buy a house and a car and have kids” all within 10 years.

Instead I think parents will have to start telling their college grads to take risks early. Jump into entrepreneurship right after college.

Why?

Simple.  Most roles at large companies will start to resemble small entrepreneurial team roles. We are already starting to see that in larger software companies and I think the pioneer of that model is –

Yahoo!

Yes, Yahoo!

That’s the future of careers and hiring. Check out their buying binge since Ms, Mayer has been the CEO.

I am positive that the impact Marissa Mayer will have is more on careers, hiring and the future of entrepreneurship than on advertising technology which is Yahoo’s business,

To all the CEO’s sitting on piles of cash and need to hire awesome teams – here is the playbook.

[Ed. That they have not produced any meaningful new products at Yahoo is not lost on me. Give them time. Innovation is never linear.]

So what does this have to do with careers?

Most parents for the next 10 years are better off telling their kids to start a company, be an entrepreneur and get acquired by someone like Yahoo. Here’s why:

Option 1: Be awesome at school, take on a $30K -$50K student loan when you graduate, then get a job – at Yahoo! – to get paid $60K / year as a starting salary.

Option 2: Start a company. If you succeed, sell it to a Yahoo-like company for $ Millions. If you fail, get acqui-hired by someone like Yahoo for $hundreds of thousands. If you fail miserably, get hired for at least 25% more than your peers who took option 1 straight out of school. Voila! You are ahead anyway.

Either way, option 2 is worth the risk.

Tell your kids to be an entrepreneur.

Settling down is for old geezers. By that time – the risk is clearly not worth it.

India, Learning

A most poignant story of why the world is round and not flat

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This story made me cry. Not tears of sorrow, but tears of goodness. There is a lot of that in this world.

I want to tell this story, because I want more people to know about the way the world works and why you have to pay it forward. I have asked all 3 of the folks who are part of this story to see if I could share their real names and organizations. Have not heard back yet.

A few years ago, a young man, about 21-22 years of age, from the not-so-upscale, Tenderloin neighborhood of San Francisco, wanted to do something. Not anything in particular, but something. Inspired by a story he read online about the lack of education resources for the poorest of the poor, in India, he thought about making a trip here to find out how he could help.

His sister (older, married) and family were understandably apprehensive. India is not the most comfortable place for a young person. Still, they supported his trip to India to “find out what’s going on”.

Upon his arrival, the young man met lots of people, hung out at the not-so-desirable parts of Delhi and learned first-hand, about the children of migrant workers, day laborers & the underemployed and their inability to have a basic education. Knowing how poorly staffed government school were, these parents chose to have their kids with them during the day. Most of the kids ended up “helping” the parents at work.

He decided to start a low-cost school to educate them.

Think about that. A low-cost school in Delhi taught and run by a young man from San Francisco.

Fast-forward a couple of years, the school’s running, growing, albeit slowly and our young man matures into a school administrator, and runs his non-profit in India, making few trips to San Francisco during holidays and life moments. During this time, our young man, has grown a staff of 12, trained a few local teachers and helped make a difference in over 200 children’s lives.

One of the teachers, a rather exceptional young woman herself, after a year and a half of being at the school, leaves after she’s married and our protagonist does not end up keeping in touch with her after that.

Last year, his sister’s daughter was diagnosed with Autism.

Autism is a disorder of neural development characterized by impaired social interaction and verbal and non-verbal communication, and by restricted, repetitive or stereotyped.

Autistic kids are expensive to educate in the US. They need a personal trainer, coach and therapist (or one of them) to help grow the child’s confidence.

Our young man’s sister was unable to afford the resources to put her daughter in therapy, but US laws for learning disabilities (I dont know the details, but have been told this) ensure that if your child has a disability and wants help to learn, a good amount of money will be provided to help the child do so.

Unable to afford a therapist, she apparently put an ad on craigslist seeking help. She gets no response for weeks. Our protagonist meets her and the family on one of his trips to San Francisco and posts his anguish on a social networking site.

After 3 days, the young woman he helped, become a teacher in Delhi, calls him (after 3+ years of not being in touch at all) in San Francisco. She offers to meet him for coffee and suggests she could find a way to help. She also just “wanted to catch up” and explain the mysterious lack of communication.

Turns out this young woman, married wrong, went through a divorce and was picking up the pieces. She had a job to keep food on the table, but that was it.

She offered to tutor and be the child’s therapist – for free. She has been doing that for 6 months now.

So there you have it. A young man, from San Francisco, making a difference in Delhi. And a young woman from Delhi, making a difference in San Francisco.

I met the young man at an entrepreneur event a few weeks ago and then upon his insistence, met the woman in San Francisco a few weeks ago as well.

They are both normal, young, 23-25 year old kids. They are though, a lot wiser and more awesome than I will ever be.

The world is round. It is not flat, Mr. Friedman. What goes around, comes around, twice as much and twice as fast.

Among the Indian elite (and I am as much a part of of the elite), the world remains full of opportunities thanks to “globalization”. The rest of the world depends on these two and other such young minds to uplift us.

The world is round, Mr. Friedman. It is round.

Entrepreneurship, India

The never ending debate about quality vs. quantity among #startups

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Yesterday we had a debate at the Microsoft Ventures Accelerator Demo day about whether the ecosystem needed to provide more support for existing startups or get more new entrepreneurs into the fold.

On one hand there was Sharad Sharma of iSpirt who made a very cogent analysis of where engineering education is in India currently (vs. 5 years ago). His point was in 5 years we have increased the # of engineering graduates by 10-fold and that has resulted in many disillusioned parents and students, who have paid lots of money to engineering colleges to get a degree, but find that there are not as many jobs as they thought there would be. This has resulted in social unrest in a couple of states. There is even a state considering a student loan waiver (similar to farm loan waivers in India).

His analogy was: if we get too many early stage entrepreneurs and not enough capital to help them or policy related changes to support them, there will be too many failures and a backlash against entrepreneurship.

His suggestion is to help support our existing entrepreneurs with the intent to make them successful.

Ravi Gururaj and I, on the other side, were of the opinion that we should focus on quantity given the maturity of our ecosystem. India is a largely nascent technology startup community and what works in Israel, China or US does not work here given where we are.

That does not mean we dont support our existing entrepreneurs, but a call to focus only on existing entrepreneurs does not help our cause. The best is we can do both, but if we had to prioritize one, I’d advocate quantity right now over quality. When the ecosystem gets large enough (we will know when it is too large based on lagging indicators, not leading), then the focus on quality alone *might* help.

I am going to outline my case for why this is the better approach based on data that I currently have. I’d love to have you debate this with us. I dont speak for Ravi, so please review the below as my opinion alone.

To set context, there are over 60K (30K product) tech companies that get started in the US annually. The comparable number in Israel is about 400 and India is about 500 (Over a 1000 ideas and entities get started every year in India, but a large number end up not becoming companies).

Of these in the US over 30K (About 3K get VS funding) get some form of funding, about 50% of starts in Israel and 25% starts in India get some money (friends and family, angels, VC’s, etc.)

The bottom line is that we are a very nascent ecosystem. There is largely insufficient data to make meaningful predictions on our successful startups yet.

The second set of data points (read the larger Kauffman foundation report later) are on shutdowns and “failures”.  If you classify success as an exit (which is bizarre, but humor me for a bit) then 97% of startups fail. If you broaden success to those companies that are profitable / operating then 75% of tech startups fail and if you further broaden the definition to those that have not “shutdown” then that means over 61% of startups fail.

Note that these are all US numbers and we dont have significant, meaningful or valuable information for India, but we can largely assume that the failure rates are similar if not worse.

So we are a very nascent startup nation and we have lots of failures.

That would lead many to advocate that you should focus on creating winners. Like there’s a formula for that.

Here’s the thing – there’s NO formula for a startups “success”, except great founders, solving a large problem, which has large market and of course – LUCK.

I dont understand why people dont give a great importance to luck as a significant aspect of any startup’s success. Maybe it is in our psyche to discount the intangible. Anyway, that’s a whole another discussion.

Anyone that claims we can “engineer startups to win” has not realized that it is impossible to pick the winners. Even the best “pickers” average 30% or less “winners”.

So the best you can do is really to get more people to believe in the “religion” and thus turn into more converts.

As a nation we still have many folks who are not entrepreneurs directly who influence our entrepreneurs. We need them to believers as well.

The “get a safe job” instead of a risky startup parent of an engineering grad needs to be converted.

The “I wont let you marry my son /daughter” because you dont really have a “job” father-in-law needs to be converted.

The “I need to maintain our lifestyle so lets buy a imported car instead of your Alto, so dont give up your (ed: dead-end boring) job to start a company” husband needs to be converted. P.S. This is a true story of a women entrepreneur whose husband said these exact words. Sad really.

The argument that they will see many failures and hence will be disillusioned is going to be invalid, since there are few other options.

Let me segue to Sharad’s argument and the comparison to engineering education for a bit.

To those parents who, after asking their kids to get an engineering degree, are now finding them without a job, I ask “What was your option”? Arts? Law? Commerce? Medicine?

While they are all equally good options, none of them are guaranteeing your children a “job” either. And the jobs they deliver are likely going to pay a lot less.

In fact going through an engineering education at a “not-top-tier” college is probably as good for children as going through a top arts college in India.

Why?

Simple. Even the arts are being “scienced”.

Back to our regular programming.

So the 3 main arguments I make for continuing to focus on quantity are:

1. Our ecosystem is too nascent and we have too few data points to focus on quality alone.

Why? Do a lot of experiments, figure out which ones work, rinse, repeat, hope for the best. We cant be Steve Jobs and assume we know a winner when we see one. We are better at being a Jeff Bezos and trying a lot of things, willing to be misunderstood for long periods of time and finally making a few dents.

2. You cannot guarantee quality.

Why? We dont know how to pick winners. We dont know which startups will succeed and which will fail. So, it is best to support all, and the winners will rise to the top.

3. We need more converts to the religion and the failure rate should not be a deterrent.

Why? The options are not many. If you are graduating now and expect to get a “job” at a large tech company, the chances are getting slimmer and the likelihood of you liking your job in a few years are slim.

That’s my argument. Your turn.

Other

The coming 20+ year disruption in Higher Education

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This is a post on the problems & solutions in higher education from someone clearly not qualified to make those observations. The only information I have is the 79 pitches from entrepreneurs large and small who are all trying to disrupt Higher Education from around the world. Besides that over 500+ articles, blog posts & discussions with several professors at the top colleges in the world.

The Higher Education market is largely a US dominated one. With over 4500 private, public and semi-public colleges and universities, this market is over $475 Billion. Over 9% of US GDP and close to $1.3 Trillion (pdf) is spent on education overall. While there is more spent on K-12 education, the higher ed market has more spend per student.

Most of the money spent by students in on tuition. Over 57% of the higher ed spend is on tuition. This goes towards educators, libraries, textbooks, facilities, etc.

The average 4 year college cost is reaching $30K+ per year for private colleges. Given that over 70% of US students end up with over $30K in debt after college, this clearly unsustainable.

With the advent of MOOC (Massive Online Open Courses) I personally believe it is only a matter of time before many of the 4500 colleges shut down. I personally think 50% of colleges in the US will close down in 10+ years. Similar for Indian colleges – over 50% of colleges in India will shut down in 20 years.

Most private colleges make money from endowments, grants, and then from tuition – in that order. Most of the moneyed institutions have “rich” students who then become alumni and donate to the college, many of the smaller colleges dont.

The average private college takes 2000+ students and charges about $30K per student. Lets say that is $60 Million per year.

Now imagine that the private college wants to take 20,000 students (online) instead. [They could also take 100,000 students, since nothing is going to stop them from doing that]. All things being equal and factoring in inflation, and the cost to run the university being largely the same, they would be able to charge $3K per student per year and still do well.

It is not a dream. It is going to happen. In 10-20 years, or likely sooner, but it is going to happen.

Would you rather get a degree from MIT and be taught by the top professor at MIT or a local college professor who may not have the level of depth and knowledge about the subject as the MIT professor?

You can do this from Saudi Arabia, Australia and India. That’s because even the folks in Newton, Mass, who live <100 Miles from MIT will be doing the same.

Most learning is going online. In a massive way. Higher education is as well.

Now, I understand the concerns.

A) The Internet do not replace the interaction you get in a face-to-face setting.

B) How can you build relationships with your students and network with them – which is the biggest value of a college 10 years hence? and

C) Online learning is still largely unproven.

All that will get itself sorted out with other offerings to supplement the MOOC.

In the future you will have interactions (office hours) remotely managed by professors.

In the future you will learn from your peers together as much as you will from the professor – which will build the relationships.

In the future you will have more teaching aids and tools to help you sort, identify and collate your learning better than textbooks.

That future is less than 10 years away.

I am going to shift gears and now try to talk to future parents.

What should you do? What are the things you can do to make sure your kids are going to be successful? This is primarily if your kids are between 0-10 years old.

First and (I cannot understate this) let your kids find their way.

If you can make the investment, buy them a tablet and let them learn stuff using the machine.

If you can get them to follow structure courses online (for older kids), I’d recommend Khan academy and other sites like those.

We dont have Television at home, but I am not convinced that’s the right approach for everyone. If you can get rid of the television, do it. I’d highly recommend it.

Kids will play more games than use the tablet for useful stuff initially but that novelty wears off in a few years. The % of core gamers and those that are addicted to gaming is still small. I am not saying ignore it, but be less worried about that than no exposure to games at all.

I dont think most parents will give up the school environment all together, since they need the kids to be “someplace” other than home when they head to work, but I would focus a lot less on grades at school.

In fact, grades will become irrelevant in 15 years, increasingly replaced by “show me what you did” instead of “how did you learn”. Why?

If you are MIT or Stanford and you want 20K students to take your course, you are likely to get less picky a decade from now. 

[Side note: Similar to startups these days, when being evaluated by investors, the focus is on product & traction, not on idea, grades tell me how you studied, not what you learnt].

The goal of these colleges will go away from “exclusivity for some” to “knowledge for all” very soon. That’s the direction they are all heading. Will MIT as an institution or the lecture halls go away? – not likely. They will be the purview of the few rich kids who can spend $100K per year to be housed in 5 star luxury comforts. For the rest of us, a computer and an internet connection will suffice.

This next paragraph is going to unsettle a few folks, but hear my argument.

Focus on spending money *now* to help your kids, than saving money for the future. Most parents I know end up trying to save for education – by putting money in 529 plans, education savings plans and the like. I would use as much money you plan to save for the future into their education right now. Give them any edge they can get now and you will end up spending 1/3rd of what you originally planned for later.

That’s because the cost of higher education is going to drop dramatically for most students.

So who will hurt from these disruptions?

1. University deans, college presidents and the endowment chairs, who make over $1 Million per year.

2. Smaller unknown colleges who will see their enrollments drop dramatically and will likely have to shut down.

3. 529 plan administrators.

For the rest of us, quality higher education is going to be highly accessible.

Other

The “design” problem among Indian startups

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This is going to be a very long post on design and startups in India and in particular the questions we have about design as a important discipline in India.

Speak to any investor and mentor / advisor in India and you will constantly hear the refrain “Indian companies need to get better at design” or “We dont design our applications very well and that’s the reason we dont have world-beating companies”.

Speak to an entrepreneur in India and they will state that “getting designers in India is very hard” and “hiring a design firm in India is very expensive”.

Over the last 1.5 years, we have been trying to solve the “design” problem for startups at the Microsoft accelerator and met with limited to no success.

The first part is to frame the “problem” correctly. Let us focus on the stages a startup goes through and look for opportunities and the needs for a designer. Then we will try to outline the solutions we offered and why (I think) they failed.

We’d love some advice on where we are going wrong and what we can do to solve this problem first for us in a small scale and then largely for the community in general.

In the very early stages the entrepreneur has an “idea” and they want to solve a problem. At this stage, they end up “napkin-ing” a solution and then trying to find ways to build a solution. Most entrepreneurs in India already believe they have a solution, so they do think they would be best at “designing” a solution as well. So the designers role is largely relegated to “give me some good color options” or “make me a kick-ass logo”, or “build a sexy website”. Most of this work is either done by friends or colleagues who moonlight and help the entrepreneur by offering a design.

In most hackathons  (over the last year I have judged and attended over 30 of them), the designer is the only role that is very hard to find in teams. You will get 20+ hack teams and only 4 designers. The teams that have convinced the designers that their idea will “win” the hackathon have designers. The rest of the teams end up largely having engineers perform “minimal” design.

The next stage is when the company is beyond the wireframe stage and actually building an application – mobile or web. At this stage, most folks would like to “hire” a designer, but complain that design talent at $8000 – $10,000 per year (4L to 6L INR) is too expensive. The entrepreneur believes the role of the designer at this stage is to take the “wireframes” they have designed and put together psd files, do a few revisions and then create the HTML and CSS files. Most entrepreneurs use inexpensive agencies or freelance consultants at this stage since they can’t afford to hire a full time designer. They also believe that hiring a full time designer is not something they can afford, since once the design is “complete”, they dont think there’s any work left for the designer. They’d rather hire a developer full time to keep adding features.

The stage beyond this is when they get some customer feedback and actually have users who are working with their application. This results in feedback that entrepreneurs are surprised with – things like – “It is not easy to use your application” or “I dont think the application is very nicely designed”. The other indirect way they get this feedback is when they tell me “I am not able to charge a premium for my product even though it has the same features as a US clone because my customers know that my app is designed in India”. At this point they do take design somewhat seriously and try to hire a designer. If they have gotten to this stage it is very likely that they have some funding so they can afford the designer who charges $10K per year we mentioned before.

Finally when a company is growing and scaling, new products, new features and new capabilities force them to think about design more seriously and they do end up hiring a design team – think of companies like Zomato, Cleartrip etc.

That is the background of the problem we encountered, which we have tried to solve in different ways.

Version 1 of our solution was to hire a seasoned design firm to do a 2 day (shortened from 5 days) workshop on design for entrepreneurs. While very well received initially, most entrepreneurs felt they liked the content, but they needed a person to implement the learning from the workshop. In other words – do it for me, don’t just tell me.

Our version 2 of the solution was to offer a design mentor for each of our startups who would spend 1/2 day or 4 hours each month helping the company with design. These mentors were seasoned practitioners at other companies who took time to help startups. The feedback we received after 3 months was there was too much “advice – gyan in India” and too little “action”. The entrepreneurs felt that the design mentors were able to point out issues that needed fixing but they were not willing (or more likely did not have time, since they were in a full time role already) actually implement the changes. Given that most entrepreneur teams did not have a full time design person on staff, the “advice” was useful and obvious, but they could not be implemented.

Version 3 of the solution was to hire a full time design staff of 4 resources (including a project manager) who will work with the companies to help them with the user experience, design and development of their application. These resources were available to all our companies, and they could very easily sign up to use these services, by just speaking to the project manager and outlining their design requirements, which could be as small as a new logo to as involved as a new website design or as complicated as redesigning a new application user experience.

After 4 months we abandoned the program, for 3 reasons. First, the resource utilization was less than 25% by our startups. Second, the design firm came to the conclusion that requirements from several teams were too vague and simple and third, many companies did not value the design team enough to give them quick turnaround (i.e they took 4 weeks to respond to the designer) on their design which they requested in the first place be done “in a week”.

Now we are back to the drawing board. While the high level problem “Indian startups need design help” gets visceral reactions including furious head-nodding and shaking of the head from investors, entrepreneurs and others, we still dont know what the solution to this problem is.

If you are an Indian entrepreneur who is in one of these stages, I’d love some advice and comments on what would be the ideal way to help you solve the “design” problem.

Or just let me know if I am barking up the wrong tree and let me know if there’s really no problem.

Afterword:

This post touched a nerve with over 20+ comments in the first hour of posting. There are a few clarifications to make. The design firm we used was excellent, because the same team is used by our accelerator at Israel and they LOVE working with the team. Second, I am looking for some suggestions on what do you think we should do to help, instead of just comments like “Founders should do design”. They don’t help us understand what we should do to help our founders.