At the Lets Ignite event last week in Bangalore, I had an opportunity to meet a few entrepreneurs who have all recently raised between $90K to $250K (50L to 1.5 CR) in India over the last year.

The biggest change from 2+ years ago when I wrote about how to hack your seed round in India, is that the number of angel investors in India, has risen from about 300 to over 1000. Over 30% of these are active in any given year (meaning that they have made at least 1 investment in the calendar year in a startup).

Where did all these investors come from? According to the new investors who I spoke with:

1. Many are the first few employees at large successful startups such as InMobi, Flipkart, Myntra, Manthan etc. At least 3 startups I know of were exclusively funded by current Flipkart employees alone. They formed a syndicate of 10L each to put over 50L in one company alone. I have heard of InMobi employees taking to angel investing (small amounts of < INR 10L) as well.

2. Thanks to the 2 pages of daily startup coverage in the Economic times which has gone from 2 full time employees covering startups to over 13, many businessmen and women from other industries (retail in particular) have started to ask to get in on the action. Many of these folks come from older industries and are keen to diversify, invest and make some money as well. This was something I predicted 3 years ago as well – non technology investors are a key part of the tech angel investment community.

3. Finally a few (much smaller in number than the 2 other categories) of the early employees at Infosys and Wipro, etc. have finally started to get engaged with the technology startup ecosystem in India, creating opportunities for entrepreneurs to raise small early checks.

Of these 3 categories, I am most excited about the first category. This pool is the “smart money” which can offer help (though not necessarily desired advice) and connections to the entrepreneurs in India.

Which makes the advice a lot of investors give students these days, graduating from the top colleges in India more sense – Join an early stage startup, get some wins, then go on to create your own startup.

This advice helps you make a little money (hopefully), and build some relevant connections into the startup – which if successful only helps your raise your seed round.

I think the opportunities this creates for Indian entrepreneurs is awesome. Many of these investors are “off the radar” and tend to only invest in early stage entrepreneurs they know and trust. They also create a forcing function for investors who used to take their time to invest and string entrepreneurs along to move quicker.

Funding, Management

The one question you need to ask VC’s in #India to understand how quickly they will move to fund your #startup?

April 24, 2015 Mukund Mohan

I was in Bangalore for 3 days, meeting about 30 entrepreneurs on day 2 and about 50 earlier stage in-the-process-of-starting-a-company entrepreneurs. The first thing that strikes you is how amazingly vibrant the ecosystem in Bangalore is. I met with over 100 investors (angel as well as a few VC’s) as well at the Lets Venture event and they while many were complaining that “valuations are higher” and “entrepreneurs are pushing them to make decisions quicker”, they were very upbeat about the opportunity in the Bangalore ecosystem.

The entrepreneurs are also much more savvy than folks were even about a year ago (I know that I spoke with a curated list, but previous curated lists were provided as well and this cohort of entrepreneurs were far ahead of those a few years ago).

The most interesting part that I noticed was that there was a bigger focus on “traction“.

I can confidently say that having been to 23 cities in the last 6 months including New York, Beijing, San Francisco and other cities in the US, Bangalore has a clear shot at being in the elite “top 5” entrepreneur ecosystems (Of course it will be Silicon Valley (Snow White) which will be #1 by a wide margin, but the other cities (the 7 dwarfs) are doing well relatively. I look at ecosystems for entrepreneurs around cities more than countries.

That optimism also bears itself out in the numbers. From look at IVCA funding and other locations, Bangalore is trending stronger than other cities such as Seattle, New York or Austin.

There were many observations I had in my 3-5 indepth discussions with Venture Capital investors in India. One of them was their necessity to now “compete” to get entrepreneurs’s attention.

Which in itself indicates a strong and vibrant startup funding ecosystem.

The most important takeaway for you as an entrepreneur, that I have learned is this –

If a venture firm has spent any time forming an “investment thesis” in a particular market or segment, then they will move much quicker than other firms who have not.

So that’s the million dollar question you can ask to determine if a VC will move quickly in India. I know this is the case in other locations as well, but the funding frenzy has been more acute in Bangalore than I have seen before.

I would ask a variation of the question – “What is your investment thesis in XYZ market”? Or “Do you have an investment thesis on “my XYZ” market”?

if they do, then your job is only to convince them that you are the best team, company and startup with the right traction to invest in.

If not, they will take weeks to understand the lay of the land, look at competitors and then form an opinion on your market.

Let me know if this works.

Entrepreneurship, Funding, Learning

10 things I have learned from running 10 demo days about #startup pitches

April 22, 2015 Mukund Mohan 1 Comment

Ahh, the demo day. The arbitrary day the accelerator decides it is time to throw its babies to the world of investors. The number of accelerator directors I have asked the question “why is your program 3 or 4 months” is probably in the 50’s and the number of times I have not heard a thoughtful response is 100%. It is almost as if “that’s what everyone else does”.

This post though is not about being cynical, but more about what I have learned over the years and on what entrepreneurs can gain from my experiences of managing and running 12 demo days and helping close to 150 companies pitch, position and excite audiences.

First, it is important to set context. I am assuming you have a mix of investors and some non investors as well at your demo day. You have been through a 3-4 month program and have been practicing your “pitch” for a few months once or twice a month at least. I am also assuming that your pitch is about 3-5 minutes and your goal is to get investors interested enough to setup a follow on meeting to understand your company in more detail to express interest in investing.

I know that YC demo days have people in a frenzy with some investors texting they are “in” a round, even before the entrepreneur finishes their pitch, but for most parts I am going to assume that’s a rarity. For the rest of us, mere mortals, the pitch is an opportunity to prevent the audience from going to their smartphones distracted or otherwise bored by listening to pitch after pitch.

Here are the 10 things I have learned, in no particular order.

1. Show energy and passion – always be selling

You are in the spotlight, so if you dont wear your passion on your sleeve, you will likely get no attention. Even if you are a mellow person and tend not get excited much, find a way to show as much excitement you can about your company, the market and the opportunity. Investors are judging you and if “you dont seem excited about the opportunity”, they dont believe they should be either. You have been given an opportunity to sell your vision and this is one of the biggest opportunities you can get.
2. Visuals are only a prop – You should be able to tell your story without slides as well

Things have gone wrong with the deck or the projector only 2 times during the entire demo day for the 10 times we have done them, but those 2 times resulted in a meltdown for our founders. They were among the best in the cohort, but they forgot their pitch, got distracted and flustered when their slides went “blank”. Investors went believing that if they were to react this way if their pitch went dark, how would they react when sh*t hits the fan at their startup. Be cool. Use the Pitch deck as a prop alone.
3. Your goal is to a) get people’s interest to have a follow on discussion and b) to prevent them from getting distracted by their smart phones and c) ensure you are memorable enough for them to “tweet” about it, or make a note to email you for a follow up meeting

Dont imagine that someone will walk up after the pitch and give you a check. That would set you up for a high bar in terms of goal for your demo day pitch. You only goal should be to be memorable enough to get a follow on meeting.

4. Show traction – quickly after the problem and solution

Traction trumps all evils in a startup. Not a complete team, but have great traction – the investors think they can help you build the management team. Market sizing is still relatively small – the investors will try and help you expand to adjacent markets. But no traction? You cannot manufacture that.

5. Be specific about the total market, and addressable market

Most entrepreneurs have the time to only show the largest number possible and hope investors bite. Be more thoughtful than that. Over 60% of the folks that “went one level deeper” about addressable market, I have found, got a follow on meeting. The ones that showed a large gazillion dollar market, found investors ignored that number largely.

6. Tell stories that your day in the life has shown you, avoiding using phrases like – big problem, painful, etc.

If you generically use statements like “the problem is massive” for our customers, without being specific about the pain points, you are likely going to be dismissed. I’d highly recommend you use your “day in the life” scenarios to showcase what your user actually goes through as problems and how they are handling this right now.

7. Answer the question – why are you the best team to execute this problem

Many investors will tell you they invested only because they felt this was a great team and nothing else. That’s a lie. A big lie, but nonetheless, the team is one of the most critical aspects of any software opportunity. Just telling the audience who is in your team and letting them make the inferences as to why the team is uniquely suited to execute this problem is poor judgement on your part. Ensure that you let them know about your experiences, the fact that you have worked together, or that you have each unique learning that together helps build a great company.

8. Be clear about why and how you are different

In the absence of having something different to say, most customers (and investors) assume you dont have anything different, so you will compete on price. Competing on price is okay, but that usually signals a race to the bottom. The important thing I have learned about differentiation is that you have do something different in all aspects of your pitch – why is your team different, why is your product different, why is the market you are targeting different, why is your go-to-market different etc.

9. Your positioning forces people to figure out quickly if they are interested – get it right.

The first single line positioning is the thing almost everyone will listen to, which should be 5-15 seconds, when they are deciding if your pitch is worth listening to. Get it right and do it by A/B testing your startup’s positioning over time. Tweet-ready positioning is the best way to get some attention from the audience online.
10. Work your audience – Focus, 10 sec pause, Connect, Sweep 2 sec, Repeat. Make eye contact with as many people as possible. Engage your audience with a rhetorical question if you can.

These are tips for the folks that want to be a better public speaker. If your accelerator offers an opportunity to avail the services of a pitch coach, use it. As often as you can. While it wont make or break your company, the best public speakers generate more interest (not necessarily better, but more) for their companies than the ones who “show up and throw up”.

Learning, Tips

How to showcase the “problem you are trying to solve” in your overview deck #startups

April 21, 2015 Mukund Mohan 6 Comments

This is a series of posts with a focus on your overview deck to investors, presenting your market opportunity, the team and traction your startup has had so far.

Customers, investors and partners want different levels of depth from your problem statement.

Investors want to understand the fundamental underlying trends of the market in the context of the problem you are trying to solve.

Customers want to understand the “day in the life” pain points that you help address.

Partners want to understand the contours of the problem in terms of the challenges that customers face.

You have to articulate the problem extremely well to get a buy in from all of the above audiences. Doing that solves more than 1/2 the challenges you have with getting buy in. The reason is because all of them believe that the person who articulates the problem best is the one who has likely the best solution.

Since you know the problem so well, you have thought about the solution as much is the assumption they make.

The best way to showcase the problem slide is to outline the trend that you are seeing in the industry first.

For e.g. Cloud computing is rapidly taking over enterprise deployments of new applications. Or, there is a dramatic rise in number of developers also performing the role of operations and this trend will continue until 2020. Or, there is a new role in companies which are progressively seeking to differentiate with great customer insight and the person in charge of it is called the Customer Experience Officer.

Now, it is important that you dont show that in the slide, but also provide your view of the impact that the trend has on your problem.

The reason this is important is that most every investor, and many early adopter customers will have access to these trends and will likely know about these trends already. For many of your late adopters, this might be news, but investors tend to be on top of trends for most parts, with some exceptions, especially if the are not deep in a specific category or industry.

So rather than say the generic statement, cloud is changing everything I’d offer a view on the way it is changing that affects the portion of the problem you are solving.

For e.g. Cloud deployments are increasing by 150% every year and that rise has caused a 220% increase in number of new Developer Operations roles, and these roles dont have the tools to be successful since the developer tools are available only to debug code issues, and the operations tools are focused on monitoring production instead of trouble shooting.

There are 3 tips I have learned to use when you share the overall trend part of your problem.

a) The trend needs to be something most people can relate to easily

b) the trend is best explained by using percentage numbers to showcase the growth (trend is your friend) and

c) the trend needs to have a disruptive nature to it, if you are playing in market with large incumbents.

The pain point part (2nd slide likely) is best explained when you have a day in the life of the person who is the user. What do they go through on a daily basis which causes them angst. What do they have to go though, which prevents them from being successful or causes them to waste time, or causes them to be inefficient in their job, or costs them more money than doing it with your proposed solution.

Any or all of these day in the life scenarios is usually explained best when you showcase what your user has to endure and how with your solution these go away. So in some ways, your user pain point should directly correlate to the solution you are trying offer that will solve these problems.

For example, the PR associate at a mid to small agency spends 3-5 hours going over google news and putting news articles into word, curating the influencers into an Excel spreadsheet and finally putting a report together that will share the key media coverage in a PowerPoint slide. This associate spends 3-4 hours every week doing this and we can do these things for them in less than 15 min.

There are 3 important tips I have see that work best to showcase your user pain:

1. The persona of your user and the “day in their life” has to focus on the top 3 pain points they have, daily. If your pain points are not the things that are high on their priority list, they will likely dismiss your solution as “nice to have”.

2. The best pain points expressed are in 3 specific things, not more. If you have one, then you will find your presentations to customers to be hit or miss, so you are better off, having 3 so the total surface area of the customer’s pain points are well covered.

3. The more “real” your pain point and the more they go through it daily, the better are your chances of getting customers to buy into the fact that you can empathize with them. The best way to test this is to ask questions of them to seek engagement. For e.g. “Raise your hand if you find yourself struggling to quickly understand which emails are important and which ones are not, after a quick 15 second glance on your email client”.

Let me know if these tips work.

Entrepreneurship

How to showcase your team slide on your overview deck #startup

April 20, 2015 Mukund Mohan 4 Comments

The most important question you are trying to address on your “Team” slide is

“Why is this the best team in the world to execute this opportunity?”

Most investors get pitched multiple times by different teams with the same / similar idea or different approaches to the same problem in the same market. It is not unusual as well for investors to start to look at other companies in the space if they get a chance to see your company.

In the absence of having lots of traction or a large market (which is a non starter if you do), this is one of the most crucial slides of your overview deck.

This helps them understand the space better, and also lets them determine the merits and differences between the approaches.

While it is no unusual to hear the term “Rock star team“, most investors only tend to believe what the founders tell them about themselves and the investors are able to double check via references.

If I were to simplify the definition of a rock star team, I’d say –

A team that’s worked together and solved the same type of problem a startup would face at their current stage before in their career.

In many cases the problem has never been solved before, or the team is new and young, while approaching it differently from others in the past. In that case, a rock star team

Complements each other, works very well together and is able to trust each other to execute independently well and collectively be better than the sum of parts.

Now, to present your combined knowledge and experience on how your team is uniquely positioned to execute this opportunity, you will have to present the team slide by focusing on the top 3 things you will need to get right before your next stage of growth.

In your team slide it is not uncommon to present the founders alone. In many cases I have also seen folks include their advisory board members and sometimes legal partners in their presentation.

The ideal team slide has a key takeaway – here are the 3 most important things we need to get right and here are the 2-3 best people in world who can help us do this uniquely.

Lets say for example you are looking for a seed stage investment and have 2 co founders and 2 other employees in the company. You have an MVP and possibly a couple of early customers and users.

The next most important things you have to prove is that you can get distribution at scale and technology at scale.

Then you should focus on why the two members in the founding team are the best to figure out how to scale distribution and technology. It is really that simple.

For the specific type of users you have, the proprietary business model you have chosen and the unique technology stack you possess, there would be very few people in the world who understand what you know about the market that others dont.

You are trying to show in your team slide that this team can successfully ensure that the risk involved for an investor is minimal, since you are one of a few set of people in the world who can do this.

I would put the key 3 items that make your team different on the slide title. For example: Team has SEO domain expertise and has been named AWS scalability experts by Amazon. This assumes you need SEO expertise uniquely to gain customers at scale and your technology critical success factor is scaling using AWS.

Many folks use logos of key previous companies to show pedigree (some also put the logos of their school affiliations), while that’s good for the overview deck, for your operating plan I’d be more detailed about how long you have worked together and in what circumstances.

Entrepreneurship

How to present your traction slide in your overview deck, with 7 samples

April 20, 2015 Mukund Mohan 10 Comments

“If you got it, flaunt it”, would be the best way to talk about the traction slide on your overview. In fact, show it early, often since in the absence of other stronger parts of your business, traction trumps theory.

Progressively, % growth is the easiest to show if you have small numbers or have numbers other than revenue. The next best is to show the revenue curve (up and to the right hopefully) followed by revenue with some key snapshot metrics.

The thing you are trying to do with the traction slide is to prove that you have validation in the market. Hence, showing traction in the short term with users, or longer term in terms of growth is a good start, but traction with revenue and key metrics is the best place to be. See the slide example below.

If your model shows # of advertising revenue spend on your site (for e.g. media property, blog, etc.) then, ad spend on your site with key metrics about user engagement, etc. make sense.

For most SaaS businesses, though, showing revenue over a decent period of time (1 year preferably) or at least since the time you started getting revenue along with growth rates helps.

I am not a fan of using snapshot based traction, since it tends to obfuscate the growth and also does not help the investor figure out the lines from the dots. You want them to get a sense that your business has been growing for a good period of time. In the absence of having strong growth metrics, I’d still use some numbers.

Absolute revenue graphs are good as well, but I’d advice most folks to show % growth and keep the numbers private to be shared during your operating plan discussion. You dont want to give any of your competitors or investors in your competitors, any knowledge of the strength of your business.

The graph above has the revenue and mentions growth rate, but I prefer to show them next to each other as MatterMark has done before.

Sometimes when your business is fairly recent, and your product depends on user growth initially, not revenue, you could use either the monthly signup graph or bar chart.Above all I’d say the #1 tip for your traction slide is to focus on the headline, once your decide which metric to show. The title of your slide show tell the user about exciting development in your business from a traction standpoint.

So, instead of using words like traction, revenue, signups, etc. I’d say

1. 40% growth in user MoM, for 8 months

2. 212% growth in revenue YoY, at $500K

3. $150K revenue, 97% Margins, 40% growth in users MoM

That way, even if the audience is glancing back to their smart phone, they got the key takeaway that you were trying to convey.

Entrepreneurship, Funding

How to present the market slide on your Overview presentation at demo day?

April 19, 2015 Mukund Mohan 5 Comments

Most investors and others who attend the demo day dismiss the “our market is very large Gazillion dollars” hype that startups state in their size of market slide. Since the size of market is part of the 3 step process to raise capital from institutional investors, spending enough time on documenting the assumptions you have made are important, as well as having a believable set of numbers to back up your claims.

In their quest to ensure that they are excited about how large it is, most entrepreneurs only do a top-down market analysis and usually mistake total market size with addressable market. For example, if your app helps teenagers communicate with each other using only animal pictures, then technically all teenagers are your target market. Realistically, if you factor in the # of teenagers who have cell phones with good camera, who have reliable Internet connection and then those that like animals it is likely to be much smaller.

If you market is small, it is small. No amount of you trying to make it big is going to make you look credible.

There are 2 types of audiences you are trying to convey to and 3 most important things you need to articulate about your market.

The audience that knows the market and instinctively knows it is big. These are the “insiders” who have been following many other startups in the same market and understand either unmet needs or displacement opportunities.

The second audience (the larger set) that does not know the market at all and needs to see a clear breakdown of total market size, immediate opportunity and complete potential.

The market slides you put together in your overview deck, is aimed more at the 2nd audience than the first one. The insiders only need to know that you have thought through the size of market.

For the uninitiated, you need to keep in mind.

1. You have credibly broken down the “large” market into addressable chunks and have a credible process by which you came up with the market size.

2. Walk your audience through your thinking process on how you came up with the size of your market to gain their appreciation for your understanding of the space.

3. Cite as many good dependable sources in your market slide to show that you have done a good landscape map of your market.

I would highly recommend you do both a top down, as well as a bottoms-up analysis to come to your market size.

Here are 3 market slides from companies I have seen. The first one from Tealet is pretty poor, the one from Mattermark is better, but the one from Square is the best.

Tealet Market Slide

If you were presenting in front of a large audience, I would use the Mattermark slide – large size fonts. If you are making a market size slide for the operating plan deck, I’d use the Square format. If you were looking to put a slide on Angel.co for your profile, I’d use the Tealet approach.

Funding, Tips

Why you need 3 presentations (with increasing depth) to land investment post your seed round

April 18, 2015 Mukund Mohan 5 Comments

The 3 step process to raising money post your seed has

a) an overview step – usually at a demo day (3-5 min presentation) or via a warm introduction followed by

b) a first meeting (30 – 60 min) where your pitch deck showcases your company and business and finally

c) a follow on second meeting (60-90 min) with partners at the firm where you outline your operating plan

Your overview presentations’ goal is to pique interest in 5-7 slides and generate enough excitement to warrant a follow on meeting

The pitch deck’s purpose in 12-15 slides is to give enough visibility into your business to help potential investors understand it.

The operating plan’s purpose in 15-25 slides is to share the details of how you plan to invest the raised capital to get to the milestones that will make your company succeed.

Over the next few days I will take each slide deck and share some of my experiences with examples.

Let us first take the overview deck. This is typically given at your demo day or when you have 3-5 minutes alone to pitch, instead of 30 minutes (when you will need your pitch deck)

Your should cover 5-7 key areas and here is what I recommend:

1. Your single line positioning, company name, founder’s email and angel.co profile address.

E.g.

1. Get Magic Now – Text this number to get what you want with no hassles

2. Seed.co – Modern business banking without branches

3. Get Meadow – Buy medical marijuana for delivery today.

The positioning is different from your tag line, which focuses more on being memorable and different about how you do something as opposed to what you do.

Here is how I think about positioning: Try to address in one word who your customer is, another word for what you do for them and third word for how you do it differently

2. The problem you solve (and focus on the customer specifically) – be as specific as possible, and show how customers are currently solving that problem. Here are some tips on presenting your problem slide.

3. Your solution & how is it different – use screen shots to show your product if you wish

4. Size of your market – total and addressable market size is preferred. Here are some tips on presenting your market slide.

5. Traction – be as specific as possible either in terms of users, revenue, or other metric you are tracking. # of meetings with customers or discussions with prospects is not traction. Here are some tips on presenting the traction slide.

6. Team – answer why you are uniquely positioned to execute this opportunity

7. Call to action – Dont say we invite you to talk to us. Ask for folks to download, or ask them to tweet for early access, etc.

Over the next few days I will outline each of these slides with examples.

Sales

How to use “forcing function” events to buy time on your side as a sales person

April 17, 2015 Mukund Mohan

Some VC’s are known to ask the question “Why is now the best time for your idea / startup / venture to succeed”?

That question is indicative of the key underlying themes of successful venture funded companies – they have to grow extremely fast in a very short period of time (3-5 years), unlike other businesses which take 7-10 years. That helps drive valuations of early stage startups higher quickly and soon.

The question also forces you to think about why a customer would buy or pay or use your product now, versus stall and not have a large reason to buy.

This is what most of us in sales call a “compelling event“. A compelling event is a forcing function that has a hard date for your customer to buy by.

If your customer does not buy from you by that day, really bad things happen – for example Sarbanes Oxley law required you to report certain items of your company or you would face stiff fines. Or your customer has an upcoming product launch within the next 2 months and they need to get a logo, website and social presences up and running.

There are some natural forcing functions, such as year end, quarter end, new product launches, regulatory deadlines, obsolescence of an existing solution or their current vendor withdrawing support for their current product.

In many cases, customers dont have forcing functions. They may not have them because the problem you are trying to solve is not a visible pain for them. It may be latent, so they dont even know that if they solve this problem they will benefit otherwise.

So, if your customer does not have a compelling event, or forcing function, can one be created?

Here are 3 techniques that I have used to create a forcing function:

1. Create competition by the date: This works best when you are trying to raise money, sell your startup or when you have something to sell that is produced in limited quantities. For example, if you have an event space or a training event and there are limited seats, you can let your customer know that their competitors might get the product which leaves them behind.

When does it backfire? When you truly have no competitors lined up, and claim to have them, and your customer calls your buff, you are left without a deal and an artificial deadline that passed. You leave the opportunity with no deal and also a customer who knows you are now possibly desperate.

2. Show the paucity of resources: This works best when you are selling consulting or services. If a client is taking too long to let you know if they can start a services engagement, some sales people let them know that the resources they want will no longer be available if the customer does not make a decision by a certain date.

When does it backfire? When the customer believes that resources and people are “replaceable” and so they can make do with any resource not just the person they want on the project.

3. Offer time-bound discounts: This is the most used and abused technique by software sales people. Offering a discount by end of the month or quarter (or any other time they are measured) helps the customer understand that if they dont sign up by that period, the offer is no longer valid and the negotiation process and sales process begins again.

When does it backfire? In most cases. Truly. This is what happens, when most sales people try to set discounts by their defined time schedule. The deadline passes, the customer does not buy and the sales person sets a new artificial deadline. Meaning, the discount is now valid for the next quarter, month or week.

Forcing functions or compelling events are rare. So if you have one at your disposal, use them to the fullest. Else, find another way to get time on your side, since the customer has the money.

Learning, Management, Tips

How to be a more innovative startup by changing just 2 words in your meetings daily

April 16, 2015 Mukund Mohan 1 Comment

Most every startup wants to be innovative. That’s the essence of being in a startup. To be innovative, most entrepreneurs realize they have to get their culture right. An innovative culture fosters and innovative workplace which builds an innovative company.

So, now the question is how do you build an innovative culture?

To build an innovative culture, I believe you have to encourage experimentation. Lots of it. Most people learn only by experimenting, not by sitting in classrooms and being taught. While it is important to sit and learn the first principles, most everything else needs to be learned by doing. You will have to let people try lots of things and learn what works for your company, your industry, your market and your customers.

The trouble with experimentation is that it breeds failure. Lots of failure. If everyone of your experiments were successful, then you are not taking enough risk, which means the company wont be as innovative. In fact, the leading indicator for innovation in most companies is the number of failures they have. Which means they are taking more, but managed risk. A good metric to measure, is the # of experiments your startup conducts in a unit of time and what the failure rate is.

The best way to do this is to practice the art of disciplined experimentation. Which is why I am a fan of the phrase “My discipline will beat your intellect“.

So, if you do conduct a lot of experiments, you will fail. How do you understand, organize and learn from your failure?

Most companies conduct an audit of their experiments, the hypothesis, the initial learning and the final results. That’s where the the biggest problem is to be found.

Most managers and executives are trained to ask the question –

“Who to blame”?

That’s the question that most meetings post experiments start with? What happened? Why did it happen? Who is to blame?

I propose a small change instead, which will get your people less defensive, more open to taking risks and experimenting.

The right question to ask is –

“What to blame”?

Focusing on the process, steps, methodology and systems brings out the best answers to the question “how do we get better”?

Surprisingly you learn more about people, their strengths, limitations, weaknesses and biases if you focus on the process that was broken instead of assuming that the people messed it up.

For most founding entrepreneur CEO’s this is one approach that works best to foster a culture of innovation and risk taking.

Do you have a manager who has followed this principle? I’d love to understand what you have learned from them. Drop me a note on Twitter. (I do respond to all @ replies BTW).

Mukund Mohan

The rise of the new angel investors in Bangalore, thanks to #successful #startups