Mr. Tewari: Right (age-old) Solution, But Wrong Problem

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An Article on one of the leading Business Newspapers of India reads as such:

“The Global Entrepreneurship and Development Index 2012 revealed that India, Asia’s third-largest economy, ranked 74th out of 79 countries, making it an unviable country to start a business. There is a growing nervousness among foreign investors putting their money in India.”

Conclusion: GEDI represents the reality of the ecosystem – the author also suggests policy changes that need to be done, and the statement suggests that GEDI is somehow driving fear and nervousness among investors, and depicts viability of a business.

Hint to my disagreement:

What is GEDI – It is an index of perspectives of how the west looks at different ecosystems. Nothing real, factual or based on stats. Lots to do with the lizard brain.

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To repeat myself  : “Stats can be extra-ordinarily skewed”. If you ever work with numbers, and as my good friends in Public Policy will tell you “averages” and composite numbers are a scary scary thing. According to an average, if you ask how rich a country of two – with one being extremely rich and one being extremely poor is, the number will represent someone who doesn’t exist. Averages skew pretty badly when the gulf is far and wide. India fits that scenario perfectly.

So when someone takes an index like GEDI (Global Entrepreneurship and Development index) and goes and write a Co-op post in the Newspaper – I am starting to lose respect for the author and for the paper that carries it. Because the article is a nice rant (based on a single number), and carries no solution. The advice given to the policy makers suggest, almost, like adopting canada’s habit of the masses and leaving everyone’s doors unlocked. Might work for them, doesn’t work for us. Get it?

Let me walk with you and before that, share something very crucial. GEDI if you look at the heading clearly says that its an index that manages “perspectives”.

When I see someone quote a stat that says India is on the 70 of 74, my first question as a entrepreneur and someone who goes nuts for numbers is, okay tell me the factors that influenced it so that I can work my way to the top. And hence I go dig into the report. I have a scary guess that the author never cared to read the report before he went and wrote that post – fundamentally what is wrong about this country in the first place. The supreme court bans films on glasses on knee jerk reactions, the entrepreneur writes an editorial wearing the hat of Chetan Bhagat. No different.

There was an interview in which Kamal Haasan was asked how come Indian films are yet to win the oscar. He mentioned that we need to be careful about a scale where the units are not defined by us (or worse democratically). The baseline for GEDI is the US (note how the Researchers claims that its only the US which isnt affected this year). That starts to raise a lot of questions by itself if you want to go down that rabbit hole, but we’ll pass on existential questions on globalism later. You do become what you measure (or measure against).

GEDI is an perspective index. Of how the west “feels” about India. It has nothing to do with reality. So while the author of the Op-ed has gone on and on about his own perils and in a subverse way writing about how the govt should bring down capital gains tax (to note that Inmobi is seeking an IPO anytime soon and I bet the investors are having tax heartburns already), the truth of the matter is, if you want to improve the GEDI index, you just have to do what incredible india has done for tourism, for entrepreneurship. Hire the same darn marketing team and run ads. Get IBEF to do its job right. Done. Zip. Moving on.

Here’s what GEDI is, in the own words of the researchers: “GEDI is not a simple count of, say, new firm registrations, nor is it an exercise in policy benchmarking. The index also does not focus exclusively on high-growth entrepreneurship, but it does consider the characteristics of productivity-enhancing entrepreneurship, which is innovative, market expanding, often (but not always) growth oriented, and has an international outlook. Because entrepreneurship can have both economic and social consequences for the individual and because the individual engenders entrepreneurship, the GEDI also captures attitudes and aspirations, as well as individual-level entrepreneurial activities.”

Remember what I said a few days ago on Stats ? Numbers, have some strange powers and marketers love to skew it for their own reality. This is a good example.

How do We change this? Well, Keep talking about how Entrepreneurship is great in India, and survives and runs in the veins of its people. Tweet more, Blog more, make powerful videos and talks about entrepreneurship thriving – weirdly the GEDI index will jump out of its place and run right at you. It has nothing to do with actual policies, my young padawan!

PS: I, in no way, disagree with what he is suggesting. But make no mistake, it has no correlation to the index so to speak. If you have an opportunity on a pedestal in such a newspaper and get a chance to influence things the right way, its key to get the facts right – especially when it anchors your opening statement.

On the Matter of: Business in the Veins

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You know how they say that for some people business runs in the blood? Its all bullshit. But there is a point though. Its not that business runs in their blood – its that the women in the family have business sense – and trust me, that makes all the difference in the world. If your mother, spouse – those immediate ones, understand how the world of business works, you can be 10 times more effective and stronger. Thats the real strength of the business community in India.

Let me quote you an example. I call my mom yesterday to wish her on Mother’s day. It wasn’t any different, I call her atleast once a day anyways. For those who dont know, I am a little over 30 now, and happily unmarried. That doesn’t sit well with my mom. Considering that she had all the home court advantage yesterday, and she had me on a call, she decided to give me the talk. So I asked her, “You do realize my life is rather hectic and unpredictable right? Why drag someone else into this”. She was silent for a while and said “Listen, I dont understand your business completely, but i know one thing. You run a business where you wont see money for a while and then you get a lump of it. Marry a girl who has a steady income (or job) so that you can run the family, and what you make can go into making investments, and to save, and on that luxuries that you dont do everyday”. That my friend, is the simplest definition of Cashflow, and my mom explained it in two sentences – for my whole life.

I dont know if I’ll take her advice, but it helps knowing, a mother knows – not just me as a person, but also what i do. This is what puts “business” in the supposed “veins”.

PS: My grandpa was a businessman, and my mom being the oldest managed the accounts and built up the family business. You can see how.

[Ask Vijay] What goes on inside a VC Firm?

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This is how fundraising works.

The Intro: You make a connect with the Investor group – say a forum like your well known conference, and they say “What you are doing seems interesting, why dont we catch up?”

Follow Up: A few weeks later a meeting is scheduled and you meet to discuss a bit more information on what you do.

The First level Document: The meet is followed with the Associate asking for some details on slides, and you sending it across and that goes to and fro for a month or two.

The Internal First-Sell: The Associate then has to go convince the principal that there is a lead and to check for conflicts of interest (it comes up on their usual monday meets) and with a go ahead, will take some feedback and then come back to you with a few things that probably need clarification.

Taking You to the Boss: Once that is cleared, you might meet with the Principal and in some cases, the MD of the fund – depending on how the fund is structured. At some point there has to be buy-in from one of the partners for the deal to go through – uh uh, not to be funded, but to be presented in their scheduled investment meets – most firms have one once in three months.

The Roundtable: If you are in, they’ll invite you to come and do a presentation to the entire firm and the partners – the partner who did bring you in will side with you and expect all the others to drill you down. No deal goes forward without an unanimous Yes from everyone.

The Scrutiny: Once there is a YES, the due diligence process follows and for tech startups its two things – evaluating the technology and in bringing a financial firm to audit your finances. If you are a first time entrepreneur, do expect some referral calls, and also some calls to a few of your customers – in cases, even to your competitor

Parallel (Legalwork) : Before they do that they will sign an LOI (Letter of Intent) and with that you cannot talk to any other funds – its called the No Shop clause. You better at that time, start praying that the tech expert and auditor dont take much time.

The Deal: After which term sheet is issued, and then a few to and fro will happen on clauses, and finally at some point, someone will give in and agree.

Timeline: If you think all this will happen within six months, you are smoking some really good stuff :)

Its a wish, and honestly every investor tries, but no deal is so good that they can skip a few steps. Angels and small funds can do a lot of things and for the sake of getting enough deals (and accelerators can by virtue of their function), they might go ahead and write cheques and keep the legalities low, but if you are a first time entrepreneur, your safe guess is keep a six month runway. A lot has to do with the fact that investors are infact, investing someone else’s money and if they dont play by the rules and they later realize that the technology was completely copy pasted from the web, some partner is getting axed and this is such a small world that they’d never find a job anywhere else. Better safe than sorry is the rule.

My suggestion for entrepreneurs heading down the funding route, befriend an Investor way before you go ask him for money. The trust factor cuts down time in scrutinizing and getting to know you from scratch and can save a lot of time. Ofcourse if there is credible third party validation – Social proof, or the media talking about you and evidential revenue, things will move very quickly as well. But I’d presume that might not be the case for every early stage startup.

Stats can’t tell you the future

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There are folks who like to take a swing at me stating that I am far more anecdotal and less on the stats. Well I have to be. I am an entrepreneur.

To me, statistics and big data have the same problem. They can give you phenomenal clarity on the past, but can tell you nothing much of the future. The tipping point could be today, and stats won’t tell you anything about it.

In order to know the future, you need two things – either an intersection of data points (very hard to get, relate to and corellate) and most of all, you have to follow your gut to take a punt on it. The only thing that could give you a peek into the future is intuition and gut. When it comes to consumer forecasting, you need two really crucial data points – their past behavior and their aspirational (the non-stat) to make a prediction on what they might do next. This is where majority of the big data promises are failing at, because while some of these aspirational data is available (on social networks) they aren’t open.

Coming back to me. Ecosystems are like that, and far more complex. I have done the futile exercise once on trying to map every known element in an ecosystem and trying to see what needs to change for things to get a leap of betterment. I did six years in Rural business development – at some point, such thoughts do cross one’s mind.

Not everything is explained away with numbers – not the stuff that matters anyways.

PS: Data is also extremely manipulative, depending on whether you zoom in or zoom out. You can make anything almost believable, as such its a marketer’s wet dream. Watch out for those.