The Startup Guy

 Updates: (Still UNRESOLVED)

• Since the tweet went out  yesterday, we got a few calls from Airtel. They are looking into the issue. They promised a resolution in 24 hours. Wednesday 23/Nov 1:38pm.
• Thanks to the guys at MyAkosha who have been helping to atleast get the Collection agency calls to stop. A call an hour was driving me mad.
• Have sent an email to TRAI to the Director of Broadband Services, explaining the issue. Wednesday 24/Nov 2:24pm
• Nitin of Corp Comm calls and says its unfortunate that he has to say the “stereotypical answer” – That I will have to pay and the bill is valid. Reason: the plan was a 50GB plan and everything beyond that was billed, and its not an unlimited plan. I quite remember that thats not what the technician who came over to switch the plans said. They also cant prove that there has been heavy usage. Nov 23 3:00pm
• No updates at all on 24th November.
• Had a brief chat in a Radio Programme on Chennai Live in the Breakfast Show about this issue. Got a call from Someone in Airtel Chennai wanting to do a Sit down. Have suggested if they could solve this problem rather than getting into negotiation mode. Time is a bit of a constrain. She thanked for the time and hung up. Still waiting for a resolution. November 25th
• Still remains unresolved. I get a few calls from Collection agencies, I iterate the whole story, and never hear from them again. Feb 1, 2012

Hi. My Name is Vijay Anand and I run a small business which is a few months old. It essentially means everything is tied to budgets and we cannot afford to make lavish expenses. The rule is simple, if we go on that path, we won’t live to tell the tale about it.

When we setup the space, our first logical choice was  Airtel to power our broadband. Why? This is a company that we have been proud of. Ive been with IIT Madras for the past six years and when we talk to people about how amazingly well we do in terms of the telecom infrastructure, and how we can deliver world class infrastructure at prices people cannot imagine, the first brand to quote has been Airtel.  So Airtel it was. I am not going to say we had issues with the installation, all went fine. It took a bit of time, but it was up.

By default we were set on a 256kbps Plan, but upgraded it to the Airtel 8mbps, 50Gb plan. It would set us back by about 3K each month, 2999Rs Plus taxes and we were fine with it. I asked the technician, what would happen once we cross the 50GB. His answer was that it would drop to a 256kbps “fair-use” pipe, and there were no additional charges involved. All was good and I was so far, happy.

The first month goes off and I get an SMS towards the end of the month saying that the unbilled amount is somewhere around Rs.60,000. My heart almost stops for a second. No sooner I get a call  from a representative who says that my credit limit has been breached and we need to make payment immediately. I ask him what is my other option. He says we can wait for the bill to be generated. I am not sure why we are even having this conversation if the bill hasnt been generated so I take the option. Lo and behold, the billing cycle date arrives, and I get an SMS saying the total is some Rs. 3000 Rs. Apparently they have been monitoring and billing me on a per KB metric and then once the plan got slapped on it, it went back to the Plan.

This Shock and relief went on for Three months. We got the service in May, and June and July went on the same way but somehow mysteriously they would all align to the 3K that i had signed up for.Bills were settled. I realized that they had a rather weird way of going about this. When I spoke to customer care, their suggestion was to ask the credit limit team to increase my limit so that I wouldn’t get those calls. I wasn’t even sure why I was “owing” 60K when my plan clearly wasn’t supposed to go beyond 3K. I let that pass.

Why do I have to worry about how Airtel goes about dealing with Billing? Unfortunately I should have. (Someone else has a blog post on it here)

August arrives, and I get the same SMS. By this time I am thinking that I should ignore it. The credit limit team hasnt called me yet, which I thought was a surprise. But then the bill arrives, for 35K. I am shocked out of my life, but say to myself that the team forgot to slap the plan on this time and hence the issue. Even in the previous bills, I would get an attachment of “per KB usage” and billed to some atrocious amount and then reduced to 3K. I call customer care and let them know the issue. I am told that they upgraded a billing software and its causing havoc everywhere, but it will get fixed. I’ve never had an issue with Airtel never fixing their issues once brought to their notice, so I consider it as work done and carry on with my business (literally)

I get a bill the next month – I am wondering by now how they never bothered to try to get me to pay the amount. I remember a few calls coming in from collection agencies but I told them that there is a billing dispute and they hung up and never bothered to call back. So August passes by and September comes in. My billing cycle is on the 16th of every month. I get a bill saying 35K Outstanding, and another 30K something on top of it. That brings it to the awesome total of some 65K due. I call the customer care again and leave a ticket. (Ticket ID 4757836). After wading through the maze that the airtel customer care is, he laughs about the issue says its definitely an error and tells me it will get fixed by Oct 4th. Again I believe them.

I get a bill on the 18th of October stating that I have 67K + 38,599 pending to a sum total of 1,05,938 Rs. Just stop here for a second and think about how off we are. For a Plan that is priced at 3K, totalling to a business expense of 10K, we were being billed 10 times more.

Airtel Bill

And thats when I realized that the Nightmare had begun.

The interesting thing is that nothing has changed from our end. We are a business, so there is no massive downloads going on here, even though promptly airtel sends the Speed on Demand note a few days into our every DNS resolution. I’ll get to that in a minute. But you might be curious how life was before August right? Here’s a snapshot.

So that was our “Regular” signed up bill amount and payments made. What we couldnt explain was where it was before and what it jumped to, for no apparent reason. The biggest download that I know of that happened here was the OSX Lion Update and the iOS 5.0 update. I am sure there were a few other downloads, people download ISOs of various work environments as they setup AWS instances, but nothing that can substantiate us EVER crossing 50GB. Period.

The Big Analysis:

1. Technician during first call says there was a mistake because of the billing software upgrade. Did something happen there?

2. In one of the later calls, one of the technicians mentioned that they “accidentally” switched plans and that was the mistake.

3. I still am not sure how they could accidentally switch us from, to what. After the 50GB was over (lets just assume that Airtel DOES calculate it right, because I am hearing from several people that it starts showing that they have used up bandwidth way before the time and even in cases where people were not at home), it drops us into a 256kbps connection. Why would they charge us atrocious rates for that?

4. You will notice from the snapshot of bill below (this was one of the lowest) that there is a significant download beyond the 50GB. Is the claim that this was done on a 256kbps? Really?

For those of you who are interested in seeing the bill in its entirely. Here’s a link:

Note: You will realize that there are multiple instances of “sessions” there and it all adds up to a lot of hours in a day – sometimes way more than 24 hours? Assuming that they are timestamps, it still doesnt add up to the fact that on a 256kbps connection, past the 50GB (I am still assuming that it somehow magically happened) you can download so much in that timespan.

One or many of these things happened here:

1. Airtel seriously screwed up their billing system

2. They have no clue how to monitor usage. There are countless folks who are testifying to that affect.

3. They accidentally switched plans and put me from a capped plan to a per usage plan. But somehow we still got the “You have finished your quota, click on Speed on Demand” page, and had internet crawling at 256kbps

4. They sold the receivable to a collection agency who is calling, and despite technicians calling and agreeing that there has been an issue, not able to do anything.

5. Corp Comm (thats what they claim, though Mahesh Murthy says they are Customer Care) team claims that they close tickets even before they are resolved, right after they make the call. I’ve had more than a dozen calls with these people and with the struggle that it takes to get through customer care. Everytime its a matter of repeating the story over and over again.

6. There is no one there with logic in the team. I keep getting their answer that they are investigating. How does a 3K “fixed price plan” by any measure cross more than that amount. Whats there to investigate? No idea.

7. I really wish they could have told me whatever they are saying about fixed plans etc, in the first bill when I raised an issue. Customer Care blatantly told me its a billing issue and it will be resolved and three months went by, while they billed away atrociously. Why couldnt they tell me that this was a plan issue and i need to upgrade to a better plan then itself? And why did the guy who come to meet me and explain the plan, say with so much confidence – despite repeated asking – that it was an unlimited plan?

It takes sweat and blood to build a business in India. One request is that Airtel not add to that burden. It would greatly help.

There is a trend going on on twitter under the hashtag #airtel. Do join in if you’d like to understand more about this.

“Most Entrepreneurs are fake – or simply confused”, was the opening line to a talk that I gave at a recent event in Delhi to a room full of entrepreneurs. That could have been a recipe for disaster, saying such stuff to supposed entrepreneurs, and when the exit to the room was way past all of them. Darn.

The audience of 200 odd individuals, with aspirations and dreams bigger than the world could possibly contain, fell silent for a minute hoping for me to say that I was just joking. I wasn’t though. Let me explain:

My Good mentor had two things to say: One was the question that he haunted me with for almost a year. “Success in one in a million”, he would say. The question to follow was as to whether I would still want to be an entrepreneur. One could possibly win the lottery with such oddds, he would add.

In today’s world with such feel good movies and books on entrepreneurship, such questions sound at best, outdated, doesn’t it? He even managed to go find some out-of-print books, stating tales of entrepreneurs – extremely well skilled and the best of intentions, who still ended up broke[1]. That, was a wake up call. (For those interested, pick up a copy of Nevil Shute’s Slide Rule) [2]

The equally weighted statement that followed, and was often repeated was this: “There is only one rule with startups”, he would say; “Birds fly, Fishes Swim and startups die.” While I gasped for breathe hearing those words, he would utter the words that were wisdom crystalized: “It takes a miracle to build a startup, and to make it succeed”

“Its nothing short of a Miracle”

Think about it: A startup is everything against nature and the oddds. You are a team of two, if blessed one or two more – with nothing more than a brilliant idea (which, incidentally is not worth much). You have every possible resource under constraint and you have to take on the world. Miracle, might be too gracious of a word.

I believe the world has rather glorified the nature of an entrepreneur. Entrepreneurs are who they are, and even after knowing the stark and bleak reality before them still dare go out to change the world, because thats the only way they know how to live. To want to become an entrepreneur, is madness. If at some point in your life you realize that you are not an entrepreneur, my advice is that you look up to the stars, thank God for it, and go off to live your life. Entrepreneurship is not a lifestyle, its the way that you are wired, and the only way you know how to live. Jerome S. Engel of the Haas School of Business, at Berkeley put it as, “Entrepreneurship is the pursuit of opportunity beyond the resources you currently control”. I think he was being really nice and diplomatic there. There is lot of luck, hard work, timing and hustling involved – even beyond which at times, things fail. Honestly, they most probably will.

“Genius and Madness: Whats the difference?”

I’ve often come across amazing entrepreneurs, who at first sight, were mistaken for those with a loose screw in their head. Genius resembles insanity; and its extremely hard to differentiate the two at times. The saying goes that “Everyone is a crank till the idea succeeds” – It couldn’t be said better. I strongly believe that entrepreneurs and Artists are very much alike in their thought processes – both have the innate ability to create something out of nothing. What is stuck in their head most times is a reality that is only relevant and known to them and no one else quite gets it, till it can be seen functional in the realm of reality. I am surprised when Entrepreneurs are shocked that investors are not investing in “Ideas” – these supposed madness which only exists in their head. Seriously? You are?

If that is the truth, why do people willingly choose to become an entrepreneur? I doubt, this is something that can be taught. It can be imitated to some degree, but when push comes to shove, reality would reveal itself.

“Know your core”

Time and time again, I also see entrepreneurs get priorities all wrong: Everyone is waiting on that big idea. The entrepreneur, the substance he or she is made up of is what is the core of it all. What follows closely second is the insight into how things work. The product or idea is the secondary derivative of the first two. Get that right. Invest all the time and energy that you possibly can to strengthen that core.

“Stand where you are, Spin and create a vortex”

Entrepreneurs never crib as to where they are. Whether they live in New York, Silicon Valley, London, Estonia, Bangalore, Tokyo or in Shimla, real entrepreneurs find a way to make their mark. I’d even dare say that they are the only ones who are capable of making that mark. They carry that insight that no one else does, to make it work. The insight is what accelerates that product-market fit that everyone keeps talking about these days. Insight drives adoption, and forms the basis for your marketing strategies. Everything you can possibly think about in terms of execution and a clean cut one at that, is built on the insight of an industry and the problem. What do you know that no one else knows about? That’s where it all begins.

If you look at any successful entrepreneur, its rarely that they had the world handed to them in a platter. No matter where they were, if what one is working on is indeed novel, and is really looking to disrupt the way as we know it, it will demand that the whole world change itself – just a little bit – sit up and take notice. There is never going to be an “ecosystem” that is waiting for you to show up and do your magic. Real entrepreneurs,.. eh entrepreneurs, are capable of creating vortexes where they stand. They are the Archimedes of the present generation who, with a lever and a place to stand can move the world. Even when it looks like they are standing in the middle of a barren dessert, they can spin so fast, that they can attract like-minded people around them, challenge the norm, polarize people and make the world take notice. While they are at it, they’ll even manage to sell it to them.

“A skill mastered never goes to waste”

Most of these fabulous folks are also skilled. I’d never in my right mind bet on someone who is not an expert at atleast one thing. Great Entrepreneurs almost always have more than one skillset. They can code, they can design, they can sell, negotiate, speak, write, hustle – and its in various combinations of what’s known and unknown.

Step back for a minute here and think about it: To create something – not transform as what Newton talked about, but to create – from scratch, is almost an act of God. To bring into life something that never existed before; That doesn’t happen so easily. In the Indian mythology, all Gods have multiple hands, and it is supposed to signify the multiple facets of their personality, and character. There might be something of ancient wisdom in that to draw upon, and to learn that to create something, you almost can never have enough skills. If you are one of those kinds that flaunt that you can’t crunch numbers even if your life depended on it, you will very soon realize that entrepreneurship will hand you that opportunity. Be prepared.

“Bury what is dead and is past its time”.

A dead child in your hand is still going to start rotting away and stink. If its dead, the only question to ask is to find a way to bury it, and move on.

“Do we practice Shiva enough?”

A colleague once asked me that question. What caught me puzzled at first, led me to an ephiphany soon enough. Indian mythology states that there is the God of creation and the God of destruction (and there are plenty of Gods for just about everything under the sun – perhaps signifying everything has its place). Nothing ever gets created out of thin air, but in most cases is a better version of what existed before. If that is the case, without destroying something, what can you really create? In a recent TED talk,Economist Tim Harford talks about how we need to abandon our God complex and realize that the most elegant of our solutions arrive by trial and error. A wise man once said “if we are scared to experiment, then we must also admit that we aren’t open to innovating”. Its a rather abused word, and i’d avoid it if I can, but the statement couldn’t be more right. If you are running a startup and its been years and there is no light at the end of that tunnel, perhaps its time to admit that something is wrong and the Universe (or logically, the Market) is trying to say something. Learn something out of it by having a moment of introspection and rise up from those ashes. I am at times amazed as to how many different variations of that simple truth is expounded to us through all the various traditions – that death is the foundation of life, as long as it through its life had contributed for something better. In other words, Iterate, evolve and accelerate that cycle. If you do it right, and if you are a fast learner, it will look like what you unveil, came out of nowhere – and almost out of nothing.

“Evolve Holistically. Monster or Perfection”

While you are at all this, ensure that you evolve holistically. a well rounded entrepreneur has several things going on for them, and has to evolve in several fronts: The product, The business model, the team / company and in you as a person. Invest and focus in all of them – don’t start looking like that guy from Night Shyamalan’s movie “Lady in the Water”, evolving just one bit of your body and ignoring the rest.

“Everything in its time”

Take your company through the stages that it demands. You are not rambo, so don’t attempt to go in guns blazing. Anyone who looks at your business and day one and can’t see scale should be hit in the head with a paper, and greeted with a “DUH”. Models as I mentioned earlier, evolve over time, and startups have phases that they go through. Cross the stage of assumptions, to the stage of strengthening your value proposition, to the stage of modeling scale and then you’d face the challenges of ensuring that you can manage profitability and margins as you grow and then comes the function of non-linear scale. Each of this is a challenge at different timelines of an enterprise. To want to have answers for all of this on day -1, or expecting to, is just ridiculous. Sooner or later you will manipulate the excel sheet trying to do that – and since it can’t fight back with you on reality, you’ll dupe yourself into a vicious reality. Its even worse when you get funded on the basis of that. Don’t.

“You sure You Know the Product?”

“Remember at all times” said my mentor, “That the entrepreneur is the final product. Everything that you do, the skills that you possess, the skills that you groom, the products that you envision, the enterprises that you create, the networks you build, all are adding up to one final product – You.”

When put that way, you’ll realize that backing an entrepreneur who doesn’t have the necessary skills is like equipping a tool which doesn’t have the features to get the job done. Never shy away from learning a skill. It is the quirks and skills (at times not at all related to the task at hand) that fuel out-of-the world ideas. Ahti Heinla the founding architect of Skype, mentioned in a conversation that the reason why the quality of sound was a crucial element for the team, was because he was an audiophile. How do you ever factor that into a requirement document? Never. As an entrepreneur, it helps to fuel your eccentricities and nitpickings.

Before I forget, Yep I know that I started off with a controversial statement that most entrepreneurs are fake. I’d still stand by it. I believe most are misguided. There are raging discussions that I have come to witness where there are definitions for an “accidental” entrepreneur drafted, and businessmen and traders wanting to be part of the entrepreneurial club. Back off for a second and ask yourself one question: Have you ever created something out of nothing? Think long and hard. If you are honest with yourself, most of us will realize that that’s a question to answer over a life time, definitely not even over the experience of building one or two companies (Its Sheer luck, if you can). Someday when our time is near, and we reflect on that question, we just might be able to say yes – we took something that was just a radical idea stuck in our head, created an invisible vortex, and created something that didn’t exist before and when it came to life, it changed the world as we knew it. That’s the sign of a true entrepreneur. If you know anyone like that, I’d love to say hello.

- Vijay Anand

[1] Gutenberg, the man credited for changing the way we as a civilization share information, and inventor of the printing press, was quite an astounding failure as an entrepreneur and died broke.

[2] http://www.amazon.com/Slide-Rule-Nevil-Shute/dp/1842322915

Reposted from the Author’s Blog

Creativity and Entrepreneurship

If you are an entrepreneur, you have probably glanced through datasets, and reports to build a case for the problem you are trying to solve. There is a bit of a danger in it, if you do not get the context behind those numbers though.

1. Numbers have a tendency to Skew / Average reality.

Talk to two people who have very very different needs, and you do your usual analysis and do the average. Build a product and you will realize that neither of them want it now. It solves neither one’s problem in the right / perfect manner.

2. Without Context, Information is dangerous.

Our mind in a lot of ways loves to work backwards. We come up with a theory and then try to justify it with some statement made somewhere, and Google is the perfect friend to help make that case for you. You can most probably find a supporting statement for any positional stand on the web – if luck has it, even by some guy who lived in the 14th century.

3. Data can often can go both ways – sometimes meaning multiple things.

Let me quote an example. As part of my usual routine you login into facebook and you see a note by a good friend which says “ Live-In relationships decrease in economic prosperity and vice versa. The % of live in’s have jumped since 2008 with the economic slump.”

My mind jumps to the following conclusions, and rather quickly because the said friend is reputable and hence I dont even ask for the source of this data. Secondly, if you didnt hear about this similar context / conversation before, one would believe this to be true. Here how interpretation works:

Scenario 1: I believe that love is a concept of the stupor and people are always rational and moving towards financial efficiency, in which case, the above said statement strenghthens my case.

Scenario 2: If you talk to any matrimonial site owner, they’ll tell you that during times of economic slumps, people actually get more active on a site. More weddings happen, and ten months later, more babies are born. – Could it be that we are all getting more and more career driven (Gen Y tendency) and ignoring relationships, and a “economic slump” actually gives us the time and reality check to focus on relationships, build, and maybe live-ins and weddings are the much due response thats delayed and finally happening?

Truth is, we’d never know. And you also realize that this conclusion, as persuasive as it is, is also an “average” – a summary. There WILL be people who are doing it for love, people doing it for economical reasons, the darn luck ones doing it for both, and all sorts of variations in between.

Market analysis, isn’t as easy as it sounds does it. We need to acknowledge that there are strands of target groups, and if you are really targeting a specific population, dig deeper till you get the finest amount of detail, to understand motives, context and possible economic behavior. If you do, you might find some rather – unshocking, and predictable results, when you do do your pilot run, and most of all your depiction of ideal customer will actually be succinct with clarity.

If You are an Investor one thing you want to learn about really well is the principles of Accounting. If you are an entrepreneur, one thing you want to learn about as much as possible are the rules that you have to play with – the statutory compliance bit. The reason – it takes innovation right at that level to be able to build up and thrive as an enterprise in a transient landscape like India. So the textbook for reference for all who are serious about setting up a business – The Companies Act of 1956. If you are lazy and creative, one shortcut to that is to befriend someone who has graduated out of the Company Secretary Institute – Please note that Company Secretary is not the same thing as the Receptionist or what is widely known as the position of a Secretary – We certainly don’t want to hear news of Startup Entrepreneurs courting Secretaries now – not for this reason!

Here’s some information that might be helpful. Not all Shares are created Equal. Yep, thats a fact.

Most of you might be aware that there are two distinct classes of equity – the Common Stock and then there is the preferred Stock – which is what the investors usually go for – which means that in the case of a liquidity, the Investors get to take their money out (with some agreed multiple) before anyone else – including the founder get to touch the money. This is more or less common knowledge.

What is less known is that you can infact create multiple classes of shares within the company. There is this other kind of stock commonly referred to as Class B shares (at times also used to refer to Preferential Stock if they have higher voting rights) – in which case you can significantly drop the rights and priviledges that one can have in the company – such as board rights, or the right to interfere in management. Why is this important?

Imagine a situation where you are building a company and you have plenty of friends and family around you who are willing to give you money. One of the first things you do not want to do is give them equity shares (or Common Stock) – which basically gives them direct rights into the company and gives them a say in the management and board of the company. Apart from reasons that it might become a nightmare to manage their interests, its also important cause if everyone of your friends is sitting on the board – so to speak – and carries one vote each, no investor in their right mind is going to come onboard that company and represent himself in a board that closely resembles a circus than anything else.

So the option in such scenarios would be to create a different class of shares, with the least amount of managerial rights and priviledges and allocate as much of that as possible. You will also note that in such a scenario even if the founder holds 10,000 shares (for example) and the collective Class B share holding is more than thrice that, and even if one single holding is more than the holding of the founder, it still doesnt affect the control that the Founder has to run the company. So that’s quite helpful to preserve some sanity.

As in all things you also want to be fair to those who invest into your company. Class B shares usually have what is called Redemption periods – a set time period as to when the shareholders will make an exit, and also there is a pre-defined rate at which they will exit. In some cases the Class B share holders are also given dividends – at times accrued and given at the time of exit – a percentage from the profit margin (a rough number is usually less than 10%).

Overall, Its an interesting way to structure a company – when you are raising money from friends and family, there is a lot of uncertainty as to whether its charity, and when they would get their money back – these terms would define that in black and white and quite nicely. It becomes the collateral for the loan – in a shade of equity, without complicating it too much. Also you avoid the situation where one of them might come back and ask for the money back before its time – like they’d do with a fixed deposit. Such little things can create a lot of problems with the operations of the company and you would want to avoid that.

I would strongly recommend that you spend time on this before you leap off to setup a company. Assuming that the Venture Capital Industry is not yet ready, and less than 1% of the populace will actually get institutional funding, it helps to know alternatives and plan accordingly.

Note: For the Curious, as per the Corporate Act of India, You can have upto 50 investors/shareholders in a company.

There is a major gaga (No, no, nothing to do with the Lady with the name) going on as to whether Venture Capital is good or bad. Should you be a fat startup or a lean one; if Entrepreneurs are made or born and if exits at all are important and the fun behind lifestyle businesses. Phew, that pretty much summarizes all the noise out there.

There is a load of bullshit in all of that talk. I’ll tell you why.

At the end of the day, these are templates as to how to go about doing something. I believe Entrepreneurs are born not made, precisely for this reason. Entrepreneurs are original in thought and the one trait that will distinguish an entrepreneur from a businessman or a Trader is the fact that they are originals and will do what others, at times, are hesitant to do – and will almost always do it in their own way. This is where Artists and Entrepreneurs become very much alike – Someone who sings someone else’s song is called a Karaoke Artist – as Simon Cowell will gladly agree – Definitely not an Artist.

One of the fundamental things you will realize about business is that it revolves around the very simple notion of “Revenue – Cost = Profit”. The revenue is quite simple – anything that you receive as payments for your service – either through advertisements/cross subsidy or directly from the customer. The cost usually comprises of three elements – cost of acquisition of the customer (+ customer service), cost of delivery of the service and cost of creation of the service. In the case that you are a non-IT company and are in manufacturing, the cost of creation of the service is split into two – the cost of the infrastructure (read: Production Plant) and the cost of the product (think a shoe manufacturing plant and the actual cost the company incurs to make it)

Most businesses are innately margin businesses. What is also now widely called as Ramen profitabililty is none other than the company trying to balance that simple equation of R-C = something other than a number which is negative. And thats the starting point. Traditional businesses, and until phenomenon such as Cloud services, the scalability that Technology brings in etc, are all margin businesses. It might cost 2 Rs to build and deliver a service and you charge the customer 5 Rs, pay a tax or Re 1 and take the rest to your bank account.

Traders and Merchants (and that is what the infamous Marwari and Baniya communities do) are all in this businesses – and that is what a significant potion of India’s businesses really are. And there is absolutely nothing wrong with it. Truth be told, they personally make more money than most high-tech entrepreneurs in India today and I think thats a crucial thing you MUST at some point think about. There is no point running an NGO of sorts, being underpaid, if you are infact a high calibre individual (more on this towards the end)

A typical trading business does about a crore in revenues a month, and has about 15% in margins – since there is no investor, shareholding involved or the promise of an exit, the “entrepreneur” can take home most of it – if they are smart, they will set aside a portion of that profit to venture into new businesses or expand. Thats around 15 Lakhs a month for the mathematically challenged. Think about it.

If you ask me, this is the utopia of building and running a business. You get to set the pace at which you live your life, there is no one breathing down your throat, and you are truly your own boss. There is but one glitch. The initial capital.

Most of these lifestyle businesses are self-funded or by family money. Usually two generations ago, someone borrows a few thousands from someone, multiplies the money, returns the principle and uses the profits to grow it further. Two generations later it is grown into an empire and a lifestyle that the entire family enjoys.

The true value of Investors is that if you have the potential, someone might actually fasttrack this entire process for you. But you also are slightly stuck, because unlike the forefathers of the rich empires, you are also taking a lot of money which comes with a whole load of promises to deliver on – remember that everyone is used to managing the “margin” and expect atleast that out of you.

In order to do that, you start with the business, prove the model and bring it to a point where you can afford Ramen Noodles. And then comes the big bet of making the growth – especially the profit exponential. This will come quite naturally if its anything related to Intellectual property (think of a book written once – which means cost is incurred once – and sold multiple times without linear costing) – and this is the reason why most investors will ask what your Intellectual Property is – they couldnt care less about the patent filing you have which most probably will have no bearing, but intellectual property that really will make this exponential return happen. The other bit that could contribute towards this are the right set of processes, and the appropriate technology.

Go to an investor and ask for invesment towards buying technology – even if its infrastructure cost – that will start making your margin business into an exponentially profit making one, and you’ve hit the bullseye on what everyone is looking for.

So you see, it doesnt really matter if you are fat, obese, lean or darn sexy, what you need to have is the required amount of capital to go about your business in the best way possible and justify your investor with appropriate returns.

I know this all sounds a bit gloomy – it says that it takes time, effort and an extraordinary capability to actually make money fast – then again, who said it was easy? Smack anyone who tells you otherwise. Please!

PS: There is also the highway of building a business – for a vision much higher than just profits. Call it the Zoho way – in which case don’t dare go near investors.

You are quite screwed. Yep, you are. So much so that you’d realize that No is actually a great thing

In the process of trying to figure out the business model of a startup, the fundamental premise that you work on is that the market will tell you what they want, what they will pay for and what they want more of. Most often than not, thats actually a very optimistic approach to the situation. What most companies will not realize is that a customer saying “No” is infact the most generous act of kindness. To say No, is to give you a fresh lease on life and to get you to iterate. Infact “No” is at the heart of innovation when it comes to product building.

In the book “Getting to Plan B“, John mullins states how most business plans dont survive contact with the customer. The truth of the matter is, in most cases you will never be able to judge whether they love it or hate it – or worse, they are quite lukewarm about it.

In the book you will also notice that there is this notion of picking analogs and antilogs to see if there has been prior experimentation and proof that your business model might work. The phrase “hindsight is 20/20″ would be the way to talk about that. Pick any new business idea and coming up with Analogs and Antilogs would not be easy – but its definitely a great guesstimate tool. The thing to keep in mind is not to get stuck into that frame of reference. Great companies evolve because of that smart everyday decisions that they make. If Nokia a company that made rubber boots can change its business plan and get into Mobile phones – probably throwing every analog and antilog along the way – you can imagine what it’d take to stay in business.

But I digress from the topic.

The fundamental point to keep in mind is that most product companies build things that do not polarize. They are incremental luxuries for our everyday lifestyle – and the market can live with or without them. Thats the danger when building a startup and trying to evolve the model with the market.

So What are the options:

Measure, Measure, measure.

Define things beyond just sales figures. See how people use a product, see what they use in the product. Use every bit of the product – even if its a final product – as a prototype in the hands of the user to define the next product.

Build Products that do polarize.

If 5 people say your product is awesome, and another 10 people say it sucks, revel in that fact. See if you can find more of that 5 people, and if thats a sizeable market. if they really love it, and if it becomes a cult, it will turn into a revolution – heck look at facebook, whoever wanted to put their entire life online in the first place? If the “Cult” or as they call “True Fans” really loves your product, the rest will follow. Apple is a prime example of how to build products for true fans.

Innovation doesn’t come without some failing. Every awesome company out there usually has failed in their first product – despite the fact that they knew their market, had the vision, the money and knew how to design a product. This will require a few retries, so be ready for it. Its all about being open to iterate – maybe even from scratch.

… all said, there is still a fine chance that most probably the market will say “Maybe”. In which case, its time to cut down some features and upgrade a bit to get to your truly true fans.

Further Reading: The Concept of “Social Proof”

This Article was written and Appeared in Dare Magazine May 2010

Most people in India would argue today that the country’s sensation about entrepreneurship and business is a recent one. Many would also tell you that Indians generally have an affinity to taking risks. A lot many more, along with the Media might also tell you that unless you raise venture capital, you’d never be able to build an enterprise in India.

None of those statements are true.

Entrepreneurship has been a movement in India since the late 80s when the foundation of commerce and business in this country started taking shape. You will notice that most of the government initiatives in terms of entrepreneurship are as old as the day when this country received independence. In the mid 90s when policies were framed to make enterprises flourish, and taxation rules helped them grow, and IT as an industry was born and started to take roots, it felt as if entrepreneurship has reached out to the masses.

It only seems that way because apart from a few major successes, and especially the IT industry which thrives on the massive tax subsidies of the Govt, we havent seen that growth being an inclusive one. It is capitalistic at best.

Go back to the roots of how businesses have been traditionally been built in this country and you would see a rather different story. Reports suggest that there are close to 32 Million small and medium enterprises in India and as per the definition of the report, these are entities that are generation more than 2-3 Crores in annual revenue. And there are 32 million of them, they say. The average number of companies that get funded by the Venture Capital community today in a year is around 150 – where then did all these companies raise money from?

Here is a question that I have been lately asking entrepreneurs and I get some rather disturbing responses to: Which is more riskier and has a higher rate of interest on it – a bank loan or venture capital money? If you are like most people, you would claim that its a bank loan, but it is quite possible today that you can take a bank loan at around 10 – 15% Interest rate, and apart from the collateral (there also being collateral-free loans now) there is not much risk to it. Take money from a Venture Capital firm – which is no more than a specialized bank – and you are committing to a 400% interest rate in a time frame of five years and the power to appoint other officers, liquidate the company and a seat at the governing board for them.

Ofcourse it all makes sense to make that promise when you can justify the nature of the business you are in, the growth rate and the stage at which your company is it, and if you are one of those really really really rare companies which can outgrow that interest rate – most companies will never be able to do that.

Why then arent the Venture Capital Firms telling you that? Truth is, they themselves havent figured it out. The Venture Capital Industry has a record of never performing as it should anywhere out of the pincode of the Silicon Valley. Even in the valley where there are close to 1000+ venture funds (compared to the 154 funds in India – According to the IVCA membership list), not more than 25 of the funds are profitable and make money. Most companies that are successful and make it past the headlines to us are ones that are being fostered by a select few. When the same model does not even span out in the same Pincode, let alone the same continent, can we really expect it to work miles away in a continent and country which has its own flair as to how things work? I guess not.

The Venture capital industry is a key component of a healthy ecosystem – but it is also just one component, not THE component. And in this scenario, there is much that the industry as a whole has to experiment, before they can arrive at the framework which will make sense for India. Currently, in no way does it do that. In the past five years, close to 1.6 billion dollars have gone into investment in India as PE/Venture Capital and very few of that dollars have made returns.

On the other hand look at the companies that you will find in the manufacturing sectors, companies such as Shakti Masala (which processes,packages and retails masala powder) which are less than a decade old and garner a whopping 320crores in Turnover a year which was started with less than Rs.10,000 as initial capital, was built with loans, repaid and turned profitable – that it makes us doubt the heresy we have been hearing that Indians don’t have a risk taking appetite. We do. We have been, but we lately have been trying to offload that risk onto a vehicle named Venture Capital, which unfortunately is not ready for prime time yet.

Its time to go back to the basics of building businesses in India, lest you want to wait for the VC Industry to mature.

Experience would tell you – especially if you are/have been on the board of companies or have invested in companies, that Plan A just about rarely works. From Microsoft, to Google*, to Yahoo, to just about any successful company that you would come across, if you dig deeper you realize that these are not companies that executed their plans flawlessly, but companies that are perhaps in their Plan B and are constantly reinventing themselves in terms of their focus, strategy, positioning and even products.If all of these are meant to change, and it is said that just about “no business plan ever survives the first customer”, then what is the point and dogma about business plans? Thats the crux of a heated debate and discussion going on in venture circles these days.

The philosophy partly comes from Software Engineering. There were days when we had a rather lab-based model of building products. You come up with an idea, you come up with the specifications, you build it and then try to sell it. Customers didn’t not have a say it in. Its essentially the basis of the water-fall based development model – all requirements are collected and decided upfront and no change or modification happens anywhere in-between. Time, energy and a lot of wastage of both happened with that process, and companies died when they built something and nobody wanted it. Then came the Agile Methodology where the bare minimum – also called Minimum viable product – is built, and then released, and then customers define what is important and features are built on top. Products are released every week, or every six months iterating – which is where the concept of products always being in Beta stage comes in – because every product is undergoing testing and improvements continuously.

Does it apply for products which are non-web based? Absolutely. Even hardwares have firmwares, and Apple – even with their ipods – do this with new features being added to the firmware, and being upgraded rather than throw away the entire product and buy the next version. The base stations of the future will do this seamlessly with Software radio technologies maturing and going live; Cisco and Juniper are on a race to build a platform layer on which they can build all their router and network based products of the future which you can upgrade remotely. The key is to build the hardware with the flexibility to accept these new features. – The future, if not already is heading that way.

Coming back to the topic however, this same phenomenon is spilling over to business models. If you are a product company, its a no-brainer to say that the success of the company depends on the success of the product. We all realize that markets are fragile and change happens almost instantaneously killing companies and new products. If we are to survive that turmoil, it is inevitable for companies to be able to adapt – rather quickly, not only their products but their business models as well. This also helps from the perspective of effective management of cash – because rather than building a strategy and throwing money towards something that might never work, you now have the flexibility to be able to adapt, quickly iterate and to find your business model.The first question a lot of people are going to have is as to how one would know the difference between a “Lean Startup” and a “Confused Startup**“. If they are both being on their feet, and radically changing plans every other month, and experimenting, it almost looks like there is no difference between the two. One of the distinguishing feature will be the documentation process. Use an argument map at the very least to map the context and results. Its not a crime to fail, but it is a crime to fail and not learn anything from it. If you think about it, this way of building a business is rather quite scientific and experimental than you think. if we go back to our days of Chemistry experiments in high school, the process was more or less the same. Keep dripping the acid solution from the pipette till the solution turns colour or becomes transparent. We do this a few times and we can do the calculations backwards and figure out the patterns and have insights that we never did before. We are all just looking for patterns in markets and to evolve business models around it.

The Future of businesses and products are going to be not in terms of how cheap of a solution you can provide, but also in the clarity of the solution and how great of an experience you can provide the customer/end user. If that is going to happen in a consistent and sustainable manner, customer insights are crucial – almost to the point of being one of the most valuable assets of the company. You cannot continue to read macro trends from the likes of McKensize and Gartner and build solutions, but need to have our own understanding of how customers and markets will react, behave and adapt technologies and products. Iterative product development processes and consequently Business models will have to be put in place.This also means that this will be the death of business plans – apart for the excercise that we all need to have in terms of thinking through everything. A business plan is just a checklist to ensure that verbally and with numbers you have to justify your stance, but it has a track record of not surviving the test of time – not more than a few weeks in startups. The fun of working with startups is how you can never relax; the company that was on the high last month is in dire conditions this month. Hence milestone based funding scenarios will not work – and has been the reason for a lot of friction with early stage investors and founders because as plans change, the investors are not ready to adapt along with this change in strategy. and the way we track the growth of companies has to be beyond just the bottomline and turnovers. If you read more on Agile Methodologies, it offers ways to track a project to be on time and on budget even with changing requirements as part of the process – We would have to port those methodologies over to the business world soon enough for stakeholders to have their peace of mind.

We realized this at RTBI quite sometime back. We dont do quarterly reviews for startups, but we meet every month and for companies still in the ideation/market research phase we do it much more often. We also realized that measuring just cashflow can be detrimental – you push a child to start working before it has the time to grow up and become a valuable asset in the community, and he/she is going to end up as a drug dealer or worse. That said, growth has to be tracked. So for each of the companies we have defined metrics beyond just cash flow and numbers. We urge companies to track everything measurable, from the number of people who visit their site, the number of people they approach to become franchisees, the amount the franchisees earn, the satisfaction of their customers, the repeatability of customers, the adoption of new products, the growth of markets, new ideas launched, the success of ideas, why certain initiatives failed, what really are the dreams and aspirations of customers not just for today but for the future – everything you can lay your hands on, and most of all the lessons we learn through each of the experiments. Those things matter, and if a company does not show growth in revenue but can show growth in adoption, and other aspects, its a great sign that the company is indeed growing, making progress and learning a thing or two from the market – Yet our process is not complete. We are also learning and adapting quickly. But the results so far have been good – at-least for the entrepreneurs who are willing to go through this without looking at it as a tedious exercise.

The key is to accept that business models evolve – and when we are still in that process, the key is to experiment a lot and in as cheap a manner as possible. For one of our companies we believed that the future would be a voice portal where people will call in and ask for information. The cheapest way to experiment it – rather than building the entire solution and then know, was to advertise the solution (cost of less than 1000 Rs), and put a live person on the other side of the call to take the queries and respond. We got a rather abysmal response. We tweaked the marketing a bit more to ensure that we were not doing anything less on the advertising front. The results did not improve by much. It was time to drop that idea and move on. The total cost for the entire experiment: two weeks of man power and 2K in advertising. And it probably saved us a lot of time and money in the process. The one thing that we are blest with today is in the sheer amount of tools and means to rapid prototype something without infusing or committing an entire business to it.

The concept of plans still has its place – as a tool to stability and as the guidebook for executive MBAs to follow in cases where there is a need to manage chaos within a flood of a workforce in a service organisation like setting. But almost never do business plans seem to hold in organizations that are constantly building high impact products – But need a rather iterative business model approach. Its my strong belief that asking a startup to write a business plan and follow it to the word is detrimental – it can be rather restrictive**. Keep your eye on the problem you are trying to solve. How you get there – I hope you are capable of making some changes in route to get there. This might not be a luxury, but a requirement to build companies as capital becomes scarce as well. The writing is on the wall “Evolve, or become extinct as the dodo did.”

*[Just as an example and not to quote them as the only company. That company has its own flaws as well]

**[In some cases rigid Execution Plans have its place when the founders do have serious focus/clarity issues. In such cases and to know the difference, define experiments with certain time period and resources so that they get it over with and get back on track]

If you are interested to read more on this:
1. [Book] Business Model Generation
2. [Book] Four Steps to Epiphany
3. [Book] Getting to Plan B
4. Agile Software Development
5. Lean Startup
6. Minimum Viable Product
7. Argument Map
8. Plan HQ – Came across this web based tool that allows for dynamic evolution of a Plan and still keep everyone up-to-date.

Article Written for India Today, dated April 2010.