what are you seeing?

Many years ago two salesmen weresent by a British shoe manufacturerto Africa to investigate and reportback on market potential.The first salesman reported back,"There is no potential here - nobodywears shoes."The second salesman reported back,"There is massive potential here -nobody wears shoes."This simple short story provides oneof the best examples of how a singlesituation may be viewed in twoquite different ways - negatively orpositively.We could explain this also in termsof seeing a situation's problems anddisadvantages, instead of itsopportunities and benefits.When telling this story its impact isincreased by using exactly the sameform of words (e.g., "nobody wearsshoes") in each salesman's report.This emphasises that two quitedifferent interpretations are madeof a single situation.

stand your ground,they might not have your eyes.

you"ll like this.
The year is 2005. There are no smartphones, at least not by today’s standards. Carriers control not just what apps run on your phone - they try to curate search results on phones, pushing ringtones first and relevant results last.
At the same time, countless phones run various software versions, and what apps work on a Nokia phone often won’t work on Motorolas or Samsungs. Developers stay away from phones as if they were the devil. The few that feel obliged to write software for mobile are doing so on a per phone basis, literally writing separate code for dozens of phones, often for over 100.
The scent of change, however, is in the air. Engineer Andy Rubin had already started working on an operating system first designed for digital cameras, but changed his mind and evolved the project to fit phones. His career had started as a robotics engineer in Carl Zeiss, but later on he worked on an operating system for handhelds, and later on became well known for his Danger startup and the iconic T-Mobile Sidekick phone (remember that clicky slide-out keyboard?). He’s got the experience, and he’s got the support of a few more engineers. That’s why in October of 2003, he kicks off the Android project, but in just around a year, the start-up is starting to run out of money and out of people to lend from. There is no big company behind it, no owner to save it.
With a year worth of developed software, Rubin has to pitch the newly born Android to someone to get the money. What you might not have known, though, is that that first someone is not Google, the current owner of Android - it’s Samsung. The Android team, consisting of eight people back then, having flown out all the way to Seoul, Korea, has gotten a first meeting with one of the largest phone makers of the time, Samsung.
Encircled by 20 Samsung executives, Rubin pitches the Android idea relentlessly, but instead of enthusiasm and questions, the only response he gets is dead silence. Then, Samsung’s team of high-ranked executives voices what seemed obvious then:
  Indeed, in early 2005 Larry Page would agree to meet with Andy Rubin, and after hearing about his work on Android, he not just helps get the money - he decides that Google will acquire Android. The feeling that the mobile industry has had to change has already been irking Google's cofounders, and in Mountain View Larry Page and Sergey Brin had been looking for that change for a while, particularly concerned that it might be the then big giant Microsoft that will get there first. Luckily, Rubin came in at the right time.
Google bought Android for around $50 million and incentives at the time, and by the middle of 2005 the whole 8-person Android team was transferred in Mountain View. And the rest, as they say, is history…

Are you inspired.....Starts with an idea

Two Korean brothers have started what they deem the world's first smartphone battery sharing service, MycooN Corp. The premise is simple - you are running around the city, getting dangerously low on juice, with no time on your hands to wait for the charger to top it up, or no charger at all.   

Then you hit the latest push notification from the Manddang (meaning "fully charged" in Korean) app, and see which mobile dealers or carrier stores around carry fresh batteries for your phone, drop your exhausted juicer there, and pick up a fully charged one.  

The price is very appealing, say the brothers, at less than three bucks, and they only take original batteries, doing automatic voltage test on them beforehand, to make sure it's not some end-of-life unit they are passing on. Of course, if you need the battery delivered at a distance, that will cost you more.  

One of the brothers used to work on project for LG, where he got the idea from, and initially they started with only a few customers, while angel investors have now piled up close to $400 000 in the business.  

There's a huge market for such a service in Korea, say Choi Hyuk-jae and his younger brother Hyuk-jun, as there are currently more than 35 million smartphone users in Korea. Initially the Korean people felt uneasy to share their batteries with others, but "their preference for convenience overrides such concerns,” commented the older brother. They noticed huge demand for the the service at outdoor event like concerts and other gatherings, too. Naturally, you have to actually have a phone that allows its battery to be swapped, but given that's the land of Samsung and LG, that aspect of the trade is not something to worry about.  

start-ups that hit the jackpot with mobile phones' boom

Pardeep Jain's Karbonn  

In the mid-1990s, mobile phones were just beginning to make a foray in the country, so Pardeep Jain decided to make the most of it.  

In April 1996, he opened a small showroom at Kailash Colony and started dealing in mobile phones from top companies, such as Nokia and Samsung. Two years later, he went into an expansion mode by opting for national distributorship. By 2005, he had a team of 150 spread across the country and became the India distributors for players like HTC, LG and Motorola.  

Having a huge dealer network in place, he was able to keep track of the market pulse and this is how he realised that the time was ripe to introduce his own brand. He joined hands with Bangalore-based United Telecoms Limited (UTL) to launch his own brand of cell phones, Karbonn.  

Bipin Preet Singh's MobiKwik 

Bipin Preet Singh graduaed from IIT Delhi in 2002 in chemical engineering. When a plan to upgrade educational skills failed, Singh decided to take the entrepreneurial plunge.   

Like most Indians, Singh had a prepaid connection for his mobile phone and would often have to rush to recharge it. Basic research, revealed that 90% of all the mobile users in India were prepaid users. This is how MobiKwik.com, an online mobile recharge services provider, was born. To get started, Singh put together a seed capital of around Rs 8 lakh from his own pocket. Most of it went into setting up the infrastructure, including the website, payment options, and renting of the office space at Dwarka, Delhi.  

start-ups that hit the jackpot

The mobile phone and internet boom has provided the perfect platform for a plethora of Indian start-ups & entrepreneurships to flourish. From selling low-cost handsets to developing apps suited to Indian needs, many Indian start-ups have hit a jackpot in recent years.
The latest in news is Little Eye Labs which has been acquired by Facebook. We profile five start-ups that have benefited from the mobile phone boom: 



 

Ajjay Agarwal's Maxx Mobile 

When Agarwal was 15 years old, he dropped out of school to join his father's electronic trading business in Mumbai. He launched his own company in January 2002. 

Agarwal began with a seed capital of Rs 10 lakh(about US$22,000), which came from his savings. The first step was to have his proprietorship firm registered in the name of Max Mobiles and Phone Accessories; it was only in 2004 that he set up Maxx Mobile as a company. Initially, he would stamp my brand name on imported mobile phone batteries and sell them to dealers in Mumbai.  

At the beginning of 2004, he figured that he should set up his own manufacturing unit for mobile phone batteries. The next obvious move was to expand the operations. 

The next crucial year was 2008, when he started importing mobile phones and selling them under the brand name Maxx Mobile. In 2009, he signed on M S Dhoni as the brand ambassador and the advertising campaign during the T20 World Cup helped get eyeballs. Next on the cards is the manufacturing of Android mobile phones. 

VENTURE CAPITAL FUNDS

VC firms are like seed firms in that they're actual companies,but they invest other people's money,and much larger amounts of it.VC investments average several million dollars.So they tend to come later in the life of a startup,are harder to get,and come with tougher terms.
The word "venture capitalist" is sometimes used loosely for any venture investor, but there is a sharp difference between VCs and other investors: VC firms are organized as funds, much like hedge funds or mutual funds. The fund managers, who are called "general partners," get about 2% of the fund annually as a management fee, plus about 20% of the fund's gains. 

There is a very sharp dropoff in performance among VC firms, because in the VC business both success and failure are self-perpetuating. When an investment scores spectacularly, as Google did for Kleiner and Sequoia, it generates a lot of good publicity for the VCs. And many founders prefer to take money from successful VC firms, because of the legitimacy it confers. Hence a vicious (for the losers) cycle: VC firms that have been doing badly will only get the deals the bigger fish have rejected, causing them to continue to do badly. 

In a sense, the lower-tier VC firms are a bargain for founders. They may not be quite as smart or as well connected as the big-name firms, but they are much hungrier for deals. This means you should be able to get better terms from them. 

Better how? The most obvious is valuation: they'll take less of your company. But as well as money, there's power. I think founders will increasingly be able to stay on as CEO, and on terms that will make it fairly hard to fire them later. 

The most dramatic change, I predict, is that VCs will allow founders to cash out partially by selling some of their stock direct to the VC firm. VCs have traditionally resisted letting founders get anything before the ultimate "liquidity event." But they're also desperate for deals. And the rule against buying stock from founders is a stupid one, this is a natural place for things to give as venture funding becomes more and more a seller's market. 

The disadvantage of taking money from less known firms is that people will assume, correctly or not, that you were turned down by the more exalted ones. But, like where you went to college, the name of your VC stops mattering once you have some performance to measure. So the more confident you are, the less you need a brand-name VC.   
 Another danger of less known firms is that, like angels, they have less reputation to protect. I suspect it's the lower-tier firms that are responsible for most of the tricks that have given VCs such a bad reputation among hackers. They are doubly hosed: the general partners themselves are less able, and yet they have harder problems to solve, because the top VCs skim off all the best deals, leaving the lower-tier firms exactly the startups that are likely to blow up. 

For example, lower-tier firms are much more likely to pretend to want to do a deal with you just to lock you up while they decide if they really want to. One experienced CFO said: 

The better ones usually will not give a term sheet unless they really want to do a deal. The second or third tier firms have a much higher break rate—it could be as high as 50%.

It's obvious why: the lower-tier firms' biggest fear, when chance throws them a bone, is that one of the big dogs will notice and take it away. The big dogs don't have worry about that. 
  Not all the people who work at VC firms are partners. Most firms also have a handful of junior employees called something like associates or analysts. If you get a call from a VC firm, go to their web site and check whether the person you talked to is a partner. Odds are it will be a junior person; they scour the web looking for startups their bosses could invest in. The junior people will tend to seem very positive about your company. They're not pretending; they want to believe you're a hot prospect, because it would be a huge coup for them if their firm invested in a company they discovered. Don't be misled by this optimism. It's the partners who decide, and they view things with a colder eye. 

Like angels, VCs prefer to invest in deals that come to them through people they know. So while nearly all VC funds have some address you can send your business plan to, VCs privately admit the chance of getting funding by this route is near zero. One recently told me that he did not know a single startup that got funded this way. 

One of the most difficult problems for startup founders is deciding when to approach VCs. You really only get one chance, because they rely heavily on first impressions. And you can't approach some and save others for later, because (a) they ask who else you've talked to and when and (b) they talk among themselves. If you're talking to one VC and he finds out that you were rejected by another several months ago, you'll definitely seem shopworn. 

So when do you approach VCs? When you can convince them. If the founders have impressive resumes and the idea isn't hard to understand, you could approach VCs quite early. Whereas if the founders are unknown and the idea is very novel, you might have to launch the thing and show that users loved it before VCs would be convinced. 

It is, unfortunately, common for VCs to put terms in an agreement whose consequences surprise founders later, and also common for VCs to defend things they do by saying that they're standard in the industry. Standard, schmandard; the whole industry is only a few decades old, and rapidly evolving. The concept of "standard" is a useful one when you're operating on a small scale (Y Combinator uses identical terms for every deal because for tiny seed-stage investments it's not worth the overhead of negotiating individual deals), but it doesn't apply at the VC level. On that scale, every negotiation is unique. 

cheapness is power

The friends might have liked to have more money in this first phase, but being slightly underfunded teaches them an important lesson. For a startup, cheapness is power. The lower your costs, the more options you have—not just at this stage, but at every point till you're profitable. When you have a high "burn rate," you're always under time pressure, which means (a) you don't have time for your ideas to evolve, and (b) you're often forced to take deals you don't like. 
 

Every startup's rule should be: spend little, and work fast. 

After ten weeks' work the three friends have built a prototype that gives one a taste of what their product will do. It's not what they originally set out to do—in the process of writing it, they had some new ideas. And it only does a fraction of what the finished product will do, but that fraction includes stuff that no one else has done before. 

They've also written at least a skeleton business plan, addressing the five fundamental questions: what they're going to do, why users need it, how large the market is, how they'll make money, and who the competitors are and why this company is going to beat them. (That last has to be more specific than "they suck" or "we'll work really hard.") 

If you have to choose between spending time on the demo or the business plan, spend most on the demo. Software is not only more convincing, but a better way to explore ideas.

venture capital funds

VC firms are like seed firms in that they're actual companies, but they invest other people's money, and much larger amounts of it. VC investments average several million dollars. So they tend to come later in the life of a startup, are harder to get, and come with tougher terms. 

The word "venture capitalist" is sometimes used loosely for any venture investor, but there is a sharp difference between VCs and other investors: VC firms are organized as funds, much like hedge funds or mutual funds. The fund managers, who are called "general partners," get about 2% of the fund annually as a management fee, plus about 20% of the fund's gains. 

There is a very sharp dropoff in performance among VC firms, because in the VC business both success and failure are self-perpetuating. When an investment scores spectacularly, as Google did for Kleiner and Sequoia, it generates a lot of good publicity for the VCs. And many founders prefer to take money from successful VC firms, because of the legitimacy it confers. Hence a vicious (for the losers) cycle: VC firms that have been doing badly will only get the deals the bigger fish have rejected, causing them to continue to do badly. 

In a sense, the lower-tier VC firms are a bargain for founders. They may not be quite as smart or as well connected as the big-name firms, but they are much hungrier for deals. This means you should be able to get better terms from them. 

Better how? The most obvious is valuation: they'll take less of your company. But as well as money, there's power. I think founders will increasingly be able to stay on as CEO, and on terms that will make it fairly hard to fire them later. 

The most dramatic change, I predict, is that VCs will allow founders to cash out partially by selling some of their stock direct to the VC firm. VCs have traditionally resisted letting founders get anything before the ultimate "liquidity event." But they're also desperate for deals. And since I know from my own experience that the rule against buying stock from founders is a stupid one, this is a natural place for things to give as venture funding becomes more and more a seller's market. 

The disadvantage of taking money from less known firms is that people will assume, correctly or not, that you were turned down by the more exalted ones. But, like where you went to college, the name of your VC stops mattering once you have some performance to measure. So the more confident you are, the less you need a brand-name VC. 
 Another danger of less known firms is that, like angels, they have less reputation to protect. I suspect it's the lower-tier firms that are responsible for most of the tricks that have given VCs such a bad reputation among hackers. They are doubly hosed: the general partners themselves are less able, and yet they have harder problems to solve, because the top VCs skim off all the best deals, leaving the lower-tier firms exactly the startups that are likely to blow up. 

For example, lower-tier firms are much more likely to pretend to want to do a deal with you just to lock you up while they decide if they really want to. One experienced CFO said: 

The better ones usually will not give a term sheet unless they really want to do a deal. The second or third tier firms have a much higher break rate—it could be as high as 50%. 

  It's obvious why: the lower-tier firms' biggest fear, when chance throws them a bone, is that one of the big dogs will notice and take it away. The big dogs don't have worry about that. 
     



 to be continued...... 

How to fund a start up

There has never been a better time to start your own business. Here's a ready reckoner on where and how to find the money for your entrepreneurial dream
The signs are everywhere. Students, women, yuppies , the unemployed, those facing a mid-life crisis, and a whole lot of other categories have succumbed to the e-bug . Frankly, the environment has never been more conducive . Of course, the risks associated with start-ups remain, with more than 50% of all start-ups failing within the first five years. It's just that landing funds to fuel your venture is easier than ever before. search for angel networks,venture capital investors and incubators. 

Nonetheless, this is still the most preferred starting point for a majority of businesses. 

The trouble with bootstrapping is that it usually means scrimping on capital, which, in turn, curtails the start-up's flexibility and ability to grow. There is also a very real risk of fledgling entrepreneurs overleveraging themselves. 

A less risky way to raise seed capital is to pool resources with a group of people who have shared interests and work together to escalate a business idea to at least a prototype. However, if you are sure of the scalability of your venture and are not obsessive about retaining independent control, private funding could be the best option. This comes in various forms, each typically catering to different stages of a start-up, such as the seed stage, early stage and growth stage. Here are some of the options. 

ANGEL INVESTORS 

These are high net worth individuals , who invest in a start-up in return for a minority share in the business. They are usually serial entrepreneurs or heads of major multinational firms. They can also be a group of individuals who pool in funds to invest.  
  How angel investing works 

Angels typically come into the picture at a start-up's seed stage, when the business idea is just a concept. The business plan itself is very iffy. So what draws an angel's attention? Business ideas that have the potential to generate solid returns, as well as the person behind it, but they are basically in it for altruistic reasons. 

Benefits  

Angels are patient investors; they typically remain invested for 7-8 years. They review the progress regularly and are even willing to go back to the drawing board, if required .  Angel-backed companies tend to do better than the ones that directly approach venture capital investors. You can also expect quick access to funds. It can take anywhere between a day and three months to close a deal. 

Drawbacks 

The concept of angel funding is still at a nascent stage in most developing nations, so they are difficult to find. You need to boast the right contacts/professional network to bag such funding , besides having the right credentials . "Factors like the entrepreneur's reputation, integrity, clarity of mind and his response to feedback are important for me. He should also be a good listener."On the other hand, is more concerned with the capital efficiency of a business idea. This is why so many IT start-ups , typically both capital-efficient and easily scalable, find favour with angel investors. 

However, as Nishant Verman, associate, Canaan Partners, stresses , easy funding is still difficult to come by. "Most countries are no Silicon Valley , where a super angel like Mike Maples will invest in a product when it's no more than a blueprint sketched on a notepad, as in the case of Twitter," he warns. 

Hot sectors 

"Currently, angels are interested in funding education, mobile value-added services and apps, innovations in healthcare and rural entrepreneurship ," says N Muthuraman , director, RiverBridge Investment Advisors, a boutique financial advisory firm. 

venture capital is the next post

Questions to answer when looking for fund

At what point after you started the business did you start to look for funding? 

How did you raise the initial funds to get it off the ground? What did you use the money for?   

When did you realise you needed more money and for what?   

Were you ever worried about going over budget/how did you ensure the money you raised was used in a focussed manner?  

If you’re paying attention to what customers want, there comes a point when you find that spending a certain amount of money enables you to bring a certain number of customers on board. And if your business is able to do this, ie, spend less to acquire each customer than they pay you – then it starts to make sense to invest in trying to do more of it.

You can also start to make connections between improvements in the product and marketing and resulting improvements in customer acquisition rates and costs. So it makes sense to invest more in both of those areas too, to bring down next month’s acquisition costs. 

Smart investors know that no-one will ever have built a company exactly like yours. And the reality is most successful entrepreneurs are first-timers (as are even more unsuccessful ones!). That means you’re going to make a lot of mistakes – and that’s OK by the investor – but you need to make sure they’re not expensive ones.