Category Archives: Management

Entrepreneurship, Funding, Management

Affirmative action (Qualifying by Quota) for startups does not engender success

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Ed: By now if you have been reading my blog for a while you will know that I tend to try and write controversial headings to generate some reaction from the greater community. My hope is that the heading draws you in and the body of the post actually makes you want to express your opinion (which I am perfectly ok with being different from mine).

I had a very difficult question to answer 3 friends and investors last week who questioned how and why we chose a specific company in our batch at the accelerator. The fault was entirely mine, so it was very challenging to “justify” my position. Any way you looked at the situation, I could not tell them with a straight face that I really believed that the company we chose, would do a great job and they deserved to be picked. If I did, then they would question my judgment, and if I did not they’d question my ethics. Not a great position to be in either way. I would rather be an ethical person with poor judgment than the other way around.

Here’s the situation and the analysis from my standpoint.

As with most companies, institutions and organizations, we really want to be inclusive and diverse in our selection of companies at the accelerator. I dont think anyone would argue that we need to include many more women, students with no experience or entrepreneurs from tier-2 and tier-3 cities in our startup ecosystem.

We do try to keep the bar extremely high and that ensures only the best (according to our criteria) get to participate with us.

The trouble is when we try to meet specific numbers and commitments prescribed by the MBO (Management by objectives) and metrics driven management culture that most of us use as a guiding principle.

While many other accelerators and investors will tell you that they are not compelled to do a single deal if they dont like it or dont believe it will succeed, they also will tell you that they are driven by the same metrics, judged by the same criteria and “scorecard-ed” by the same characteristics as the rest of us. Let me give you an example.

Yesterday I had a chance to talk to an investor from a relatively passive fund. He was bemoaning the fact that they are hardly known in the ecosystem and most entrepreneurs dont even know that they invest in the early stage. Well, the reason most entrepreneurs dont know their fund, is because in 5 years they have invested in 8 companies. Compare that to an active fund, that invests in about 20 over a 5 year period and you can easily understand why this fund is “unknown”. So he was being judged and scorecard-ed by entrepreneurs and the media, and relegated to being a “passive, niche fund”.

We dont want to be a passive, niche accelerator.

That can only mean, that we “compromise” and include companies that serve the diversity mix but end up with a sub optimal set and lower the bar for certain sets of entrepreneurs so we can comply with our affirmative action criteria.

Luckily we know (or at least I think this to be the case) that deserving companies are not being ignored or being cast-aside to make room for those to meet our affirmative action goals.

I have though come to the realization that the amount of work needed to get high quality startups that also moves the ball forward progressively on affirmative action does not generate the returns from those efforts.

The same effort towards helping all high quality companies, generates more if not better returns.

So the question is: should we care only about returns.

Unfortunately while that was not the case a few months ago, it is becoming increasingly the case going forward.

Its disappointing and not a great situation to be in.

I am pained when in a batch of 50+ companies shortlisted we see not a single person who is a woman, or a very young, inexperienced student or a person who has a significant disadvantage relative to entrepreneurs from large metros. I feel its my responsibility to make room for them so we can create a few successes which will motivate more of them to join our “religion”, but I am at loss to figure out how to ensure that the ones we chose dont feel a tinge of disappointment when in doing so we lower the bar somehow.

To be clear, not all companies that are founded by these groups are “lowering the bar”. My issue is that there’s very few of them. If there are more than a handful, I’d be thrilled.

Entrepreneurship, Management

How much traction is “enough” to get seed funded? or to get into an accelerator?

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I had an interesting conversation yesterday with an entrepreneur who had an initial product that was built over 3 months and they were looking to get “traction”. The product was aimed at prosumers (professional consumers) or small & mid-sized companies. He was looking to raise a seed round of $250K and was wondering how much “traction” will he need to show so he can get funded by a combination of individual angels and possibly a seed fund. He’s in the US, so this framework is valid for both India and US.

Here’s a framework for you to think through the traction for your startup. You need to get traction post your MVP. Your MVP should solve a real problem that a potential customer has.

Having been in 100 presentations over the last 4 weeks alone (our demo day at the Microsoft Accelerator, 50+ pitches for our new batch at the accelerator and 30+ pitches at the 500 startups demo day) I can say some patterns emerge.

This is rule of thumb alone. This is NOT a guarantee of funding. I had a chance to talk to about 50+ seed and venture investors, so I know I am in the ball park, but YMMV.

Take your best case scenario of peak # of customers at 36 months (2 rounds of funding out). If you are a B2B startup that might be 500 customers in 36 months for example or if you are a consumer product, that might be 20 million users in 36 months.

The 36 months is critical. Its 2 rounds of funding. Seed and Series A. Or series A and series B.

The “traction” that’s relevant for your current stage should be in the range of 0.1% to 0.5% of your projected 36 month customer base.

0.5% means you can command the top end of the valuation. 0.1% means you are likely to get a serious look.

To get to an accelerator such as Microsoft or 500, you will need 20% to 50% of that user base to get a serious look.

Some examples:

If you are expecting 10 Million users for your product (best case scenario) for your product in 3 years (36 months) then you better have between 10,000 to 50,000 users when you go to get seed funding. To get into an accelerator you will need to have 2000 to 25,000 users at least.

If you are a B2B startup and you are expecting 5000 paying customers, in 36 months, to get seed funding you need to have 5 to 10 customers for a seed round (more is better) and at least 2-5 customers to get into a seed program.

Please let me know if you think this makes sense (Or not).

Thanks to Pankaj Jain and Dave McClure for helping review this.

Management, Tips

Differentiate with a personal touch and taking time

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Given the huge number of applications we had for the accelerator, one choice we had to make was how do we let people know they did not make the cut.

Having been on the receiving end of many “rejection” emails, I hated the generic “We reviewed your application and did not think it was a fit”.

So I decided to send personal hand crafted, no cut and paste, emails to every founder we could not accept – either because of their traction, the market they chose, the incomplete team they had or the fact that there were 2-3 other applicants in the same space that were further along and had more to show.

Over the last 4 days I have reviewed hundreds of youtube videos, demos and password protected mockups and wireframes.

Its hard and takes a lot of time, but that’s how we chose to differentiate ourselves – With a personal touch and taking the time to be human.

Again, to all those that applied, many thanks.

Since you have my email address (and phone number) feel free to connect with me in a few weeks so we can find ways to help you in any way possible.

Learning, Management

Entrepreneurs keep you young – at heart and the mind

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Day after batch 1 finished their demo day resulted in some serious withdrawal symptoms for us at the Accelerator. It is not hard to imagine that having 45+ enthusiastic, energized and talented people will have a significant effect on your ability to stay young.

I learned from Rajesh and Prajwal at Amplyfy that everything can be hacked in under 12 hours. They’d scoff at the “develop it over the weekend” concept. “You don’t need an entire weekend” was their premise. Any idea I’d put forth would result in a 15 min “technical feasibility” discussion, which would result in a < 12 hour solution. It was done, not just discussed. Naresh would use every contact in his address book to get a meeting with any customer he desired. Keval just kept them all calm. While the others would hack, Keval would focus on the scale. Big things are destined for this team.

Melchi and Aditya from CloudInfra would start any project with a “lets solve the underlying problem” – usually that meant a mathematical formula which would have to be solved: to get anything from customer traction and SEO to lead generation and product roadmap. Aditya had the unique ability to also hack and make solutions for every problem we had. In fact he was the only one who helped us with a unique solution to our intermittent wifi issues. He actually put his own router in place.

Jiten from Ciphergraph was always on the move. Aggressive timelines were made even more aggressive with him. He has the unique ability to breakup a 1 hour meeting into a 11 minute product roadmap discussion, a 15 minute investor deck rant and a 19 minute sales pitch review.

Healthify taught me how I should build and hire awesome people and keep them engaged. They had the youngest team in the entire batch and still managed to get loads of stuff done right. They ate lunch every afternoon as a team, worked out together as a team and even sang as a team.

Prafull and Piplayan, founders of Hire Rabbit, are the masters of doing awesome with very little money. The ultimate bootstrappers, they got mentioned in all the top blogs and reviewed by many influencers with a shoestring budget and chutzpah. Most of their marketing was very high quality and I’d expect them to have paid significant sums of money for it, but they would end up telling me it cost them < Rs. 5000 by leveraging resources on Odesk.com

The NowFloats team were masters at execution with measured planning. Give them any system and they’d know how to work it. They used the customer and partner development effort and resources the best and had the best traction to prove it as well. They were best at figuring out how to get anything done in a system that prefers the status quo.

Nandan from Gameizon is the most patient and passionate person I worked with in this batch. He taught me more about how passion for solving a problem will help you focus on not giving up. Even though he had many hurdles ahead of him, the fact that he loved the game of cricket and wanted to solve a real problem that exists with gaming and cricket made him the most endearing.

Pratyush is the master of hustle. Having been through this problem before, PlusTxt was his second attempt to solve the problems that were prevalent with messaging the last time he did this. Thanks to his ability to strike up a conversation fairly easily with most people, he knows anyone and everyone in the ecosystem. Some days I’d get a sense that even if he did not have a product he’d get thousands of downloads based on his ability to hustle.

Deba and Kapil of Sparsha kept it simple. They are the best listeners of any of the folks I know. They taught me active listening, the ability to keep asking questions for which I rarely had good answers. They were also the most humble people I know. They had the most going for them of all the companies, but kept focusing on what they still needed to do.

Vinny and Devesh taught me that its always better to be in it to enjoy the game. Whiteshark faced more hurdles and opposition to their idea than anyone else did in the batch. They pivoted, changed, modified and kept going. They just loved the game that startups offered to founders. They’d be found in the accelerator until 5 pm DAILY brainstorming, talking, thinking and developing.

Bhaskar of World Without met taught me to take everything in my stride. Ever smiling, even when things were not peachy, he could be summarized in one sentence “this too shall pass”. Product has blocking bug, lets fix it by tomorrow, this too shall pass. Investor was more interested in B2B not B2C companies, no problems, lets talk to the next investor, this too shall pass.

I am more convinced that there is a serious need for awesome coworking space in India where such excellent teams could work together and make everyone around them younger.

Entrepreneurship, Focus, Learning, Management, Marketing

My discipline will beat your intellect

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I meet 4-5 new entrepreneurs every week as part of my office hours on Go-to-market help for young startups. Most are based in Bangalore, but surprisingly some are from other parts of the world (Chennai, Singapore and Estonia, even, via Skype).

I have an observation about work ethic that I wanted to highlight among startup entrepreneurs from various parts of the world.

Most every entrepreneur will tell you they work extremely long hours. That’s par for the course. Some “older” entrepreneurs (usually over 35 years of age) will share their ability to “strike a balance” between work and life. Practically speaking (I hate to break this to them) that does not exist in a startup. If you have that balance, you are not serious enough about your startup.

I understand they have families and kids, but I have come to the realization that both smart work and hard work are necessary (but not sufficient) to run a successful startup.

For purposes of this post lets define success as a company that’s growing significantly and rapidly, but does not have an exit yet.

The difference between a rapidly growing startup and one that’s growing “well” is productive (smart) hard work, not just long hours.

If you mistake activity (# of lines of code, # of code check-ins, # of customer discussions) with progress (shipping product, usable and must-have features, or # of active users) then you are just doing long hours.

If you mistake milestones (funding secured, new employee hired) for achievement (# of paying customers, churn rate of existing customers) then you are just doing smart hours.

What then makes smart and hard work such a potent combination? And what really is “smart work”? And how many hours make up “hard work”?

I define “smart work” as a combination of 3 things – asking the “right questions“, having a plan and maximizing the number of experiments in unit time.

I define “hard work” as the most amount of productive work time, with limited to no distractions and ability to do it consistently, for years (not bursts of weeks, not months and certainly not just for a few hours).

Lets look at both smart and hard in detail. Smart, first.

The smartest people I know have learned the art and science of asking the right questions. They usually start with asking a lot of questions, and having literally, no or very few answers. Each answer leads them to more questions. Asking the “right questions” is what they derive from experience.They have assumptions that need validation, hypothesis that need testing and results that need to be measured.

They are also willing to conduct a maximum of 2-3 experiments and have a DIY (Do it yourself) approach towards conducting those experiments to see if their assumptions and hypothesis were valid.

Finally they have a plan to approach their experiments. Not just a “lets try this and if not lets try that”. They rarely “wing it”.

Its very easy to spot smart teams. They have a sense and measurement of what “Continuous Visible Productivity” is. They come to me with a list of 2-3 questions that they want to address in a meeting. They dont just come to the meeting and pick up the whiteboard and start to “brainstorm”.

Now lets look at teams that work hard.

Hard working teams dont ever mention “how many hours they did put in last week or yesterday or that they hardly got “any sleep”. They realize and are aware of their physical limitations and are usually well within those limitations. Rarely do I hear from them “We work the hardest of all the teams” or “We have not slept for 2 days”. They keep looking for time they can cut away from unproductive work to do more questioning, experimenting and planning. In other words they dont brag about their long hours. They assume its a given.

Hardworking teams also tend to compartmentalize very well. Some people call this “bucketing” or “chunking”. Just because they work hard, does not mean they dont give their brains a rest and goof off for a while. Rather, they “compartmentalize” their goofing off or exercising to derive the benefits of a relaxed mind and body.

Finally hardworking teams are consistent. They show up day after day, week after week and go through questioning, experimenting and planning with rigor and consistency.

I realize a that being smart at work and working hard as I have laid out is extremely difficult. In fact its rare. That’s why successful startups are rare.

The combination is what I call startup discipline. Which is why I firmly believe one startups discipline will beat another’s pure intellect (given that hard work is assumed) any day.

Entrepreneurship, Management, Mentors

Startups and mentors: How to look for a great technology mentor? & A list of top tech mentors in India

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I am going to write a 3 part series on mentorship and technology startups. Rather than write about why you need a mentor or how to engage with a mentor (next series) I thought the first step for most entrepreneurs would be to seek out great mentors.

As an additional bonus, I thought I’d list some good mentors in India so there’s a starting point (not comprehensive). Please feel free to add people who deserve to be on this list via comments (you cannot add yourself, someone has to recommend you, preferably 2 people).

We will focus primarily on technology startup mentors, which are < 2 years old. I believe there are 3 types of mentors you need at this stage: Technology, Marketing & Industry specific ones – that’s it. Everyone else is a nice to have waste of time.

Why?

Early in your startup, you should be focused on solving a problem and building your product, while at the same time, talking to customers and understanding their pain points. So if you are spending time doing anything else, its a waste. Mentors should help you do these things alone.

So, if you are thinking of getting that CEO of a 3-4 year old company which is doing well, as a mentor, he should fit in one of these buckets, else he a) does not have enough time to give you or b) does not have enough practical knowledge to share.

This post is about technology mentors. The next two posts are on marketing and industry mentors.

Technology mentors should help you think about the solution architecture, build & recruit a great engineering team and understand how to solve complex engineering problems.

I define technology mentors as people who are engineering managers, UX designers, architects & hands-on senior technical staff members in their day jobs. No one else qualifies. I would not put ex-engineering manager (now consultants at large, etc.) on this list. The reason is simple:

If you are not practicing, in the trenches, you don’t know the specifics and tend to give “Gyan” at a high level.

ps. US folks, I am trying to introduce some cool Indian lingo into your vocabulary, so please click on that Wikipedia link about gyan. 🙂

So how do you look for a great technology mentor?

1. Social proof – GitHub, Hacker News, Hackerstreet.in, HackerRank and Stack Overflow are great places to start. Also seek out folks at offline events such as Startup Weekend, Yahoo Hack Day and other such developer events. Dont look for technology mentors at generic industry or startup events. You dont find good technology mentors there.

2. Look at some awesome product companies – Cleartrip, Flipkart, Komli Media, Yahoo, Google (Map Maker), Microsoft Surface, InMobi, Facebook, etc. Get to know who runs their engineering and technology teams. Find out who their good senior, hands-on, architects and engineering managers are.

3. Reach out through your technical network: E.g. I am trying to solve this complex engineering problem, and we have a few areas where we’re stuck and would love some help. Can you please recommend someone who is a <machine learning expert> who is working on this area at <company name>?

Most good technology mentors I know like to work on really hard engineering problems, so the harder & more unique your problem the more likely you are going to attract a great mentor. Its a self selecting list (which is good) so if someone believes the problem you are trying to solve is not in their interest area, you dont want them anyway.

So now, on to a short list (soon to get long thanks to you all).

<EM> This list is biased right now. These are people I know, like and admire. Please feel free to help other entrepreneurs by recommending good people I dont know to this list. </EM>

Some recommended Engineering manager mentors:

1. Sachin Desai (Ericsson)

2. Mekin Maheshwari (Flipkart)

3. Hari Shankaran (Interview Street)

4. Jayanth Vijayaraghavan (Yahoo)

4. Indus Khaitan (Bitzer)

5. Bharat Vijay (ex Yahoo, Amazon)

6. Amod Malviya (Flipkart)

7. Srinivasan Seshadri (ex Kosmix)

8. Amit Ranjan (SlideShare)

9. Arvind Jha (Movico)

1o. Pawan Goyal (Adobe)

11. Pankaj Rishbood (Walmart Labs)

12. Rajnish Kapur (MakeMytrip)

13. Aloke Bajpai (Ixigo)

Some recommended Architect / CTO mentors:

1. Dorai Thodla (iMorph)

2. Prateek Dayal (Support Bee)

3. Shivkumar Ganesan (Exotel)

4. Avlesh Singh (Webengage)

5. Paras Chopra (Wingify)

6. Lalitesh Katragadda (Google)

Some recommended Cloud (AWS, Google App Engine, Azure):

1. Ravi Pratap (MobStac)

2. Perrraju Bendapudi (Microsoft)

Some recommended design mentors:

1. Sunit Singh (Cleartrip)

2. Rahul Saini (VideoPind)

Entrepreneurship, Management

Do you really need a “board of directors” when your company is 6-12 months old?

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I had a few questions on “Board of directors” at a startup from Manish Taneja. This it a post on the first question – Do you really need a “Board of directors” when your company is 6-12 months old?

You always need a board of directors, even if its just one person. A board primarily is responsible to the shareholders and looks out for their interests.It also advises the management (mostly the CEO) on company direction.

A board of directors (BoD) is not the same as an advisory board. The BoD has a fiduciary responsibility, whereas the advisory board has none.

Obviously when you are single founder, you will be “the board”. Since you are the only shareholder. There are a few procedural (statutory?) items that need to be completed (annually or more frequently) which are performed by the board.

Now on to the larger question: When and how should you expand the Board to a larger set of people?

The simple answer is when you believe your company needs Operational discipline, Financial discipline and “Discipline in your strategy“.

That could happen in 3 months, 6 or even later.

The most important thing I have personally experienced with board meetings is the need for reporting & tracking your company’s key metrics. Hence the discipline that sets in.

The company’s key metrics may not be revenue, customers or any other metric in the first few months. It could be as simple as status of the product development effort, customer development status, etc.

What I have found is the simple act of having to report that on a frequent basis is a bias for action and progress.

This is the biggest advantage of having a board of directors (especially for those entrepreneurs who tend to be “loosey-goosey” about most things.

Initially it might be okay to add one more person to the BoD, who you trust, can bounce ideas off and someone who will give you honest feedback to help keep things on track.

Most institutional investors (VC’s and some advanced angels) will however request a board seat to protect their (as a shareholder’s) interests.

In the next set of posts, I will detail – how many board members should you have, how often should they meet, what are board committees, how to manage your board and other board questions. If you have a specific question about the board,, feel free to email me or leave a comment.