Other

How Indian entrepreneurs can really disrupt American markets

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I am very impressed by the ingenuity and resourcefulness of Indian entrepreneurs. Having invested in 20+ companies in Silicon Valley and 7 here, I believe great entrepreneurs exist in both locations. Notwithstanding all the inherent challenges (smaller markets, lots of red-tape, insufficient infrastructure, etc.) of the Indian ecosystem, the founders in India go through a ton of “useless time-wasting nonsense” to build their ventures.

Let me first mention this post is not about Indian entrepreneurs VS. American ones. Its about how Indian entrepreneurs can create as lasting institutions as American entrepreneurs have done targeting American markets.

There are 3 things that cause startup success according to Marc Andreessen:

three core elements of each startup — team, product, and market.

Most entrepreneurial teams in India are arguably (I believe you can debate this, but both sides of the argument will be valid) of equal caliber to those in America.

Product to me is a function of ideas and insights that meet a market need or problem. Which I think Indian entrepreneurs can do better, but are pretty good at. Notice the number of US startups that have either built parts or all of their product with Indian talent.

There’s one thing inherently missing that Indian entrepreneurs lack that hurts them more than anything else.

Lack of market knowledge.

What is market knowledge? In my own terms it comprises of 3 things:

1. Information about size, landscape, key players (existing vendors, customers, partners, etc.) and the inherent workings of any market.

2. Relationships with key landscape players that will help obtain more “inside working information” – not illegal information, just the inner workings which anyone who’s been in an industry or market knows more than outsiders.

3. Problems or inherent issues with that market. Customers of that industry or market know what works and what does not. Any company that wants to disrupt that market, needs to understand the problems of existing solutions and envision what a future solution might look like.

These 3 items of the American market (or any other market other than India) are largely unavailable to Indian entrepreneurs.

Which is why I keep seeing good ideas to very small problems (lets fix auto rickshaw meters with a GPS enabled smart phone, or we want to sell provide certification training to vocational education trainers) within the Indian market.

If Indian entrepreneurs had knowledge and information about world markets as well as they did about Indian ones, they have both the talent (team, caliber) and product development knowledge to disrupt external economies. I am sure the argument holds true even for other entrepreneurs in other countries. If they did have the knowledge they can come up with ideas to solve those problems.

So what’s the solution?

Curated Market Knowledge.

The solution is not a series of whitepapers, books, PPT presentations or blog posts.

The information part alone can be shared by Indian entrepreneurs learning from Indians in America. Lets pick about 10 vertical industries we wish to participate in (Besides IT outsourcing, which we are disrupting with cost arbitrage alone) and have as many people in those markets share their inner workings with us.

Of the 3 items I mentioned about the market earlier, relationships are the hardest. That problem though, exists even for American entrepreneurs. The average young American entrepreneur has no more or less relationships in American than the average Indian entrepreneur in those markets. So we are on a level playing field.

The problems part of the market requires both knowledge and time / patience to understand. We in India call this “a mindset issue”. We are willing and able to live with small “jugaad” or the “lets adjust” mindset to many problems. We should not.

If you are a young entrepreneur I urge you to seek out your friends who have moved to America and keep talking about the market they are in, what the landscape looks like and how you can innovate or make a new product to fit the market need.

The key advantage we do have is our relative cost structure. Its still 2-3 times less expensive to build a prototype or version 1 product here in India than in America. Be willing to experiment, fail and go back to experimenting again.

I also think there’s a big need for a community event, exchange of ideas and an ongoing series of discussions with Indian Americans and Indian entrepreneurs, who can help learn and teach this market knowledge.

The government of India has a Pravasi Bharati Divas which connects Indian diaspora with India. I dont think its the government’s responsibility to teach market knowledge to entrepreneurs, but a day or two after that day could be a great time to start.

Why?

The Indian diaspora is already in India and I am sure we can convince them to stay for a few days more to help the Indian entrepreneur ecosystem.

Entrepreneurship, India

The startup ecosystem in India is schizopherenic

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Okay now that I have your attention with that ridiculous headline, let me define a few things first.

Schizophrenia is a complex mental disorder that makes it difficult to:

  • Tell the difference between real and unreal experiences
  • Think logically
  • Have normal emotional responses,
  • Behave normally in social situations

Lets try and list all the players in this ecosystem. I have provided this list sorted by the importance of the player to the ecosystem (obviously this is my opinion and hence biased).

1. Entrepreneurs – the heart and soul of the ecosystem

2. Talent for the entrepreneurs (meaning people to hire)

3. The early adopters (Both consumer and businesses)

4. Investors – Angels and Venture Capitalists

5. Incubators and Accelerators

6. Universities & research institutions

7.  Advisors, mentors, coaches

8. Startup communities, media and events organizations

9. Service providers – lawyers, accountants, etc.

10. Larger companies for partnerships, distribution and marketing

11. (Dare I say) Government – yes for things such as incorporation, taxes, etc.

12. Cheerleaders and poster girls (or pinup guys if you like).

13. Successful startups and successful / failed entrepreneurs

14. Associations, government liaisons and trade organizations

15. Interested public

Do I have an exhaustive list? Probably not, but this is a good enough start.

Every player has something unique they bring to the table and has a perspective on what’s good and bad about our Indian startup ecosystem.

Even if we mostly stick to the technology space, we say one thing and do the exact opposite.

No wonder most entrepreneurs get confused.

1. We want more innovative product companies but we end up funding mostly me-too eCommerce companies.

2. We want to build the next facebook and Google and yet most entrepreneurs have a “consulting / services” company on the side to make money.

3. We want to work on cutting-edge technologies, but end up picking yesterday’s tech stack since “there’s a lack of talent’.

4. We want to encourage the government to participate, but end up bad-mouthing them at every event (One panel member even suggested they were out to kill startups).

5. We want to have a clean incorporation, but still choose the cheapest service provider to incorporate the company (a lawyer even told me yesterday, he has to turn down 2 companies a week who want his services for free).

6. We want to be first to try a new piece of technology but are unwilling to pay to be an early adopter.

7. We want to encourage more entrepreneurs to participate in an incubator, but keep ridiculous anti-dilution clauses to maximize upside.

I could go on, but you get my point.

Is this an India thing alone? No, I have seen many of the same in Silicon Valley as well.

But at the center of the valley is an entrepreneur with an idea who wants to change something and everyone else is rooting for her.

In India I dont believe we quite know who’s at the center. We make rock stars of our VC’s, large company CEO’s and Government officials.

So if you are part of this ecosystem I would request you to please keep only one question in mind when you have to make choices:

” Will this help more entrepreneurs get excited about starting a company in India?”.

Then please do the right thing and don’t just say the right thing.

Angel investing, Entrepreneurship

The default option for entrepreneurs should be to not raise money

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There’s a very interesting piece by Felix Salmon on Wired that has some very interesting nuggets and takeaways for entrepreneurs. I am highlighting the most important parts, but the entire article is worth a read.

This goes back to my original thesis that the entrepreneurs should bootstrap as much as possible because only 16% of companies in the Inc. 500 list from 1997 – 2007 actually raised VC money (read the Wired piece). Rest were self funded. Out side of technology that number is lower.

Going public might be good for a company’s investors and employees, but it is usually bad for the company itself. It forces CEOs to focus on short-term stock fluctuations at the expense of long-term growth. It wrests control from the founders and gives it to thousands of faceless shareholders.

To put it another way, the VC model is based on creating wealth for investors, not on building successful businesses.

(2011) Last year 429 VC-backed companies were acquired, while 52 went public

In 2009 Paul Kedrosky, a Kauffman Foundation senior fellow and venture capitalist, looked at the Inc. 500 list of the fastest-growing companies in the US for every year between 1997 and 2007—a period that includes the VC boom of 1999-2000. He found about 900 companies in all, of which only 16 percent had VC backing.

 

Marketing

The hacker, the hustler and the hipster. A modern day startup fable

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And they all lived happily ever after.

“Why would you begin the story with the end” asked my daughter. “That’s because, that’s how all stories begin – with an end in mind”, I replied, very seriously.

From the corner of her eye, Shawna glanced at the nondescript clock, at Rosie’s coffee shop. Whipping out her most trusted friend from her clutch, she knew the buzzing sound either meant, “mom calling” (again) or her appointment was late (again). It was neither. “Dont these guys value time? Or do they think of themselves as gods?” she wondered. It had been nearly 4 weeks of “looking for the right cofounder”. She had faithfully attended multiple hackathons, a meetup on big data and the “perfect one” was still elusive.

InvalidURIError; URI,split

Time to hit StackExchange again, was Jake’s thinking. 2 and a half hours wasted, he thought. Not sure if its a OAuth problem or a path error. Who ever said Ruby on Rails is simple, has a pretty sick sense of humor. He’d spent all afternoon trying to get a OAuth working on rails 3. Not much luck. ‘A lesser mortal’ (just a programmer, not a real hacker) was how he felt after the failed interview at a hot San Francisco startup. The rejection was reason enough to spend time implementing a new “idea” he had from last week. “When it gets big, they will regret not hiring me”.

Where’s the RGB color chart when you need it? What the code for Ceil Blue and what’s the difference between that and Cerulean Blue? Why is my client asking for the 14th version of the logo when their requirements were “Cool. Youth brand. Innovative”. Seriously, who gives requirements like that to design a logo, thought Trip. Being a much sought-after UI designers has its perks I guess, with the endless work that I can charge a premium for, but the downside is expectation of “Rockstar” that comes with it.

Trip, Jake and Shawna met at Google I/O and I guess you can say they hit off well.

——-

I was bored last night and thought there’s really no good fiction fable that’s been written about the modern day (read Ramen noodles, Red Bull and Social, Local and Mobile) startup. Except if you consider “The social network”. So I thought I’d start to write on. Its a fable, not a book. I am also trying my hand on this crowd sourcing bit, so I’ll only write if there’s interest.

Please drop me a comment if you think this fable’s worth pursuing.

Entrepreneurship, Tips

The counter intuitive approach to achieving your goals (AKA Opposite of Zynga)

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I have an confession. I really did care a lot about the number of comments on my blog, the number of my twitter followers, facebook friends etc. I say I did because a year ago I gave that all up. I even dont review the google analytics dashboard for my blog any more.

Why?

I found that when I did that they went nowhere. Meaning I would target 1500 views per post and found I was consistently below 1000. It was frustrating.

So I gave up (meaning admitted failure) and found out that it was the most liberating thing that I could even have done.

I changed my outlook for a self defined “happiness index” for myself. If I was / am happy writing a post then I am satisfied. No longer was I looking to get multiple comments, get it RT on twitter etc.

That’s very counter intuitive to the Zynga approach. They measure everything and no decisions are made unless there’s data to back it up.

I wonder if that’s the way to run a company? I know that the Amazon long term approach is widely criticized, but it seems like it works for a certain set of people. I am sure they measure everything as well since “if you cant measure it, you cant manage it”.

I am not talking about the chase excellence vs. chasing success approach.

I am talking about liberating yourself from the daily metrics that are “head fake”. They tell you go one way, but you’re not really sure if after you keep doing what they tell you, the position you end up at is the right place for you.

Try it, and see if it works. First, you’ll probably stress a lot less. Second, you’ll be happy (which is different from being successful) and finally you might end up overachieving anyway.

Other

Have you praised an entrepreneur lately?

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Merchant of Venice

Act I. Scene III.

Shylock: …

Still have I borne it with a patient shrug,

For sufferance is the badge of all our tribe…

I am pretty sure Shylock was referring to the “entrepreneurs” tribe. 

We all suffer daily cuts, wounds, bruises and nicks.

We go on for long and short periods being misunderstood.

Every entrepreneur suffers those bouts of self doubt, lack of self belief and emotional distress.

So remind yourself this:

Have you praised an entrepreneur lately?

If not, pick up the phone and do it. Dont email.

Just call her and ask her out for a coffee to chat about other stuff like books, movies, sports, music. 

She (and all of us) go through ups and downs daily.

Entrepreneurship, Sales, Tips

Dig your well before you are thirsty

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I was introduced to this book by Mark Tonneson, my first manager at Cisco. Fresh out of college, I was an eager whip-snapper who would soak up any piece of advice on “getting ahead”. I didn’t read the book, although  Mark bought it for me. It still is in my ‘library”. But the phrase “Dig your well before you are thirsty” has been with me since that day.

Most of us tend to ask for help when needed. Its the “on Demand” way of doing work. I’ll learn something when I need it, until that point of time, learning it is useless. I agree with that principle for knowledge.

For relationships, though, I have always tried to build them way before I’d ever need them. In fact building relationships without the intent of ever using them is a sport of mine. It comes from being interested in people and wanting to know as many people as possible.

As an entrepreneur that principle has helped me more than anything else I have done.

This however, is a story of how I acquired my first customer at my first company. It began 3 years before the customer signed up though. So effectively my sales cycle was “3 years”.

Circa 1995, Rational was hosting an event on Object oriented modelling. It was a free event, sufficient enough excuse for me to show up. The event was to start at 830 am and was scheduled for 2 hours. The venue was the Double Tree hotel in San Jose. I showed up at 815, and was negotiating with the automatic gate (which I felt was unreasonably placed in a position which required you to get down from the car to reach for the button that would give you a printed ticket), which would trigger the proximity sensor to open the gate.

I had to get down. Damm, I hate these poorly designed machines, which don’t really help serve the purpose that they were intended for.

It took me a few minutes to park and make my way back to the entrance. In the meanwhile a few other cars were backed up at the gate, facing the same problem. I was not  “smartly dressed”,  and had on a t-shirt and slacks. I noticed a few more folks struggling with the sensor gate, so I made my way across to that gate, and helped push the button and get the ticket for the first car. The gentleman in the car was in a beige suit and seemed preoccupied with something on his dashboard. He did though, look at me and murmured “thanks”. I was just about to make my way to the entrance when I stopped and realized every one of the cars in the queue would have the same problem.

For the next 3 minutes I pushed the button for 5 or 6 cars and diligently gave them the ticket so the drivers did not have to get down from the car. Noticing it was 825, I decided to make my way to the registration.

The “beige suit” was just behind me at the registration desk. He did a quick double take and asked me if this was the Rational rose event.

I replied in the affirmative and said it was and I was registered for the same event. He introduced himself as Steve and said “I really have to say thanks again, since I did not realize you were helping me even though it was not really your job”. I realized then that he thought I was an attendant whose job it was to “push the button and give the ticket”.

I laughed pretty hard for the next few minutes and we both got talking about my job at Cisco and his. We agreed to keep in touch after the event and “catch up over lunch sometime”. Over the next few months, I would email Steve off and on, sharing some articles and such, and we’d have some email “debates”, that but never really met him for lunch.

3 years later, I left Cisco to start my first company. Steve emailed me a few months earlier saying he had joined Netscape (Actra).

I sent an email to my contact list 2 months after my beta product release, letting them know our product was available for companies to install and try.

The first email response I got back was from Steve. He asked me to come by and give his team a demo.

A month later we started working with the Actra team (Netscape) as part of BuyerXpert product.

You can call it luck. I also call it luck.

I am actually known to be the luckiest guy on this planet.

The only thing I do to get lucky is dig my well before I am thirsty.

Other

What the websites of 145 Ycombinator companies told me about their marketing approaches

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As part of my research on website design and marketing approaches by yCombinator companies to come up with best practices, I looked at over 145 companies that have been funded by them. Of that list, 53 were B2B companies and rest were B2C (consumer Internet).

My goal was to understand the approaches they took, what they highlighted (navigation, call to action) and what their strategy towards building their website was. I fundamentally believe your website is the #1 marketing investment you can make, so I judge most companies by how good / bad their web presence is.

<Background>

According to Wikipedia (through AMA)

Marketing is used to identify the customer, satisfy the customer, and keep the customer.

Lets drill down on the “identify” part of the definition and understand that after you segment and target your customer, you will have to offer them something they want.

Lets make an assumption for this post that this definition is slightly dated and “satisfied” customers are insufficient, and you need to “delight” them.

Finally if you delight the customer consistently, then “keeping” them is less of a challenge.

The best sales people (in my book) are those that understand the buying process well and do everything to fit into that process.

The best marketing people do the same. They understand what really motivates the “heart, mind and the wallet” – emotion & logic and position their products in that context.

</Background>

On the web (with inbound marketing included), marketing emotion and passion is hard. Its not impossible, but hard.

Any number of focus group studies and A/B testing of your website and SaaS offering will only appeal to the customer’s wallet and mind.

Appealing to their heart is an altogether different beast.

Which is why in the list of yCombinator companies, most have 3 top pages – pricing (wallet), features / product tour (mind) and sign up (call to action).

The “heart” part of these websites is filled with

a) customer testimonials (people like you buy from us!),

b) demo videos (its really easy!)

c) funky about us pages (we’re regular guys like you or we are rockstars so please buy!)

d) blog (hear from us!) and

e) contact (since our website can’t sell as well as we can, please call us!).

I am not sure how well these companies are doing, so I cannot comment on their conversion ratios, their incoming traffic etc. but I can gather that they are looking to A/B test that.

Here are the top 3 things I learned.

1. Stick to 1 call to action per page. Except 4 companies, all the others had only one call to action (A bright colored “Sign up”.

2. More than 3-5 navigation links on the top makes people think you are a “corporate” and not a “startup”. Use the fact that you are a “startup” to your advantage.

3. Use your interactions with customers (phone, face-to-face meetings) to really understand how to appeal to your customer’s heart, since I fundamentally believe you cannot A/B test it.

Marketing, Sales

“Professionally friendly” – a trend I am noticing in Indian startup entrepreneurs

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I used to think this was a great tactic followed only by young women (read: single, good looking, and smart) in India, but Indian entrepreneurs are now catching on to this new form of relationship. So my fellow entrepreneurs, if you want to be successful selling in India, talk to your good looking women classmates from college and learn how to be “professionally friendly”.

“Professionally friendly” to me is a business relationship with a person who you want to do business with, but realize that you might have to build trust with to get it done. If you get too friendly they will take advantage of the relationship (like friends do, but you like your friends not business acquaintances) and if you are too professional, they will negotiate very hard and likely delay your deal.

Let me tell you a story first:

I have a good “friend” who’s an entrepreneur. He sells end-to-end software and solutions (his words) to hotels, restaurants and spas to manage their bookings and inventory. His company has been around for nearly 2 years with some decent traction (over 100+ customers). He’s built his business mostly through word-of-mouth.

Initially he found that most of his customers were taking too long to evaluate his product (30 day trials went to 90 or 120 days) and were negotiating very hard to reduce his already thin margins. He realized that his 2 initial customers were friend who were more than willing to pay fair price.

So he changed his sales process: Step 1) Cold call and get appointment. Step 2) Initial meeting and demo. Step 3) Invite prospect to Bangalore Club for a lunch / tennis, etc. – essentially grease the skids.

He found that it reduced sales cycle’s dramatically but obviously all that eating at Bangalore club did a number on his waistline (actually it made a dent in his wallet, but he raised his prices to cover the cost of the meal obviously). Second, this lunch thing clearly did not scale.

So he tried selling 2.0 – now he’ invite 3-4 people together for a double’s tennis match or a group networking lunch and figured they’d meet each other and talk. Worked better in terms of scaling up.

Meanwhile, his first few customers became good friends. Two of them were late on payments and asked for a 3-4 month extension (we are good friends, so please help) since they were “having to fight fires” or were renovating their spa or had some issues at their Chinese restaurant. The 3 month non-payment turned into 6, 2 free licenses turned into 5 and outstanding receivables were slowly approaching 72 days.

He’s found it very difficult to confront “friends” for overdue payments. They invite his family for lunch during weekend (Had their wives call my friend’s wife and told her about the new “diet” version of American chopsuey, which she had to try at the restaurant).

Bottom line – his “lets be friends first and then business partners” is not exactly going on track.

So how can you maintain a “professionally friendly” relationship? <Please> first stop laughing, since I did that for close to 50 seconds, when he told me this story.

I had 3 suggestions for him and I’d love your feedback:

1. Go prepaid – payments need to be made upfront for usage of software, services.

2. Separate selling function from payment collection so you can always say – “I am the nice guy but my finance person asked me to switch off the service till payments were received”.

3. Ensure business contacts are not involved with family – removes the “emotional atyachar” factor.

Entrepreneurship, Sales, Tips

The 3 biggest causes of stress for entrepreneurs and how to deal with them

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An entrepreneur’s life is fairly stressful. Most of it (in my perspective) is self induced, so the best advice I have ever received is “take a deep breath”. That said the first step to reduce stress is to pinpoint the sources of stress.

1. The stress of “expectations”. This causes serious heartburn and is the biggest cause of all stress. Most entrepreneurs believe they can be successful in their own right and when their own “expectations” of self defined success dont match with the progress of their startup, they tend to go into a vicious circle of blame, guilt and introspection.

Expectations from family – parents thought you’d be making good money by now, as opposed to eating Ramen noodles (they fed you much better) and guzzling oodles of Red Bull (drink milk instead).

Expectations from friends – many of whom got a good job at a larger company with a steady paycheck, (mostly) defined hours of work, a “life” after work and health insurance, while you sleep on the bean bag under your desk.

The expectations from friends and family can mostly can be ignored.

The expectations that you set for yourself, comparing your progress to Airbnb for e.g., either in terms of your product, traction, funding or hiring will cause you more sleepless nights. I have seen many folks couch this under the category of “benchmark against the best”, but its hugely unproductive.

“There will be people much better than you and those that will be much worse than you. Deal with it”.

2. The stress of “competition”. I worked at Mercury Interactive (bought by HP) for the longest stint of my professional career in one company (side note, my dad worked at two companies for 20+ years and he claims I worked at 20+ companies in two years). At Mercury, I got to work with an immensely talented bunch of engineers based in Israel. After their mandatory 2 years at the armed forces, they were so “battle hardened” that they LOVED competition. They (David Reichman & Boaz Chalamish) taught me how to really compete in hugely competitive markets. Here is the secret of their teachings condensed in 1 line. You ought to pay me for this in gold, BTW (Feel free to send me a beta invite to your product instead).

Rule #1 – Dont care what they do. Rule #2 – There are no other rules. Rule #3 – What? Are you still looking for more rules? Go back and read Rule #1.

My suggestion, the stress from what competitors could do, would do, will do, should be the least of your worries. I am not suggesting you ignore competition – just dont get stressed about them, because you can largely not control what they do. You can only control your own actions, strategy and plan. Focus on that.

3. The stress of “closure”. We have all been in this position. You email that certain angel investor, advisor, customer, potential key hire, then call them, drop them a voice mail, send them a LinkedIn invite, stalk them on twittter, only to get largely ignored. I send so many emails and get so few responses that if I had a penny for every email sent and 2 pennies taken away for every email I received back, I’d still be super rich.

The best way to counter this stress is to keep going. Develop “Temporary Forgetfulness” – which my wife can attest I am awesome at.

Most of all – “take a deep breath”.

The personal blog of Mukund Mohan