I once used to have the question in my head as to why cant we create a product and brand like the Mercedez in India. And then we got the Nano. Not at all the same thing, is it?

I cant stop by sit back and think what would be the scenario if we had indeed launched a car that ranks shoulder to shoulder, or even beats the quality of a Mercedez. Why Benz, lets make it beat a Bugatti Veyron, if our fancies need to fly a little. I am not so sure we would have succeeded. Am sure the first question and comparison that would come out, is the price. And India has been so successfully been marketed as a low-cost Utopia that even if we make a Mercedez, we would have to make it cheaper than the Benz.

Now is that technically feasible? Yes it is. And that is our End game in a lot of ways. But where do we start? We start at low-cost.

A lot of people get very upset and turned-off at the notion that we were, and in a lot of ways still the low-cost destination. And so should I - if that is the end game. But it isnt. Let me give you examples.

HCL once used to be nothing more than a pure outsourcing arm for Cisco in the telecom division. Today they have moved up the value chain to establish a joint-venture with Cisco (Setting up HCL-Cisco) that they co-own, and in some cases license patents and IP to Cisco. And trust me, that doesnt happen overnight or by chance. It takes leadership, strategy and direction to make that happen. Which is why I am hoping that entrepreneurs, especially startup entrepreneurs will get to hear this, cause you have to start thinking that way to get there.

So look at the Nano. Tata owns Jaguar, and Tata owns the Nano. Amazing, I must say, and it all makes sense. In order to make the Mercedez, you first have to make the Nano.

Why? Because building a brand takes time, and enroute to that, you have a brand to break - the brand that India is low-cost. And how do you do that? Thats what “Disruptive” technology stands for - by definition. Anything that can Disrupt people’s normal, everyday thoughts in terms of a breakthrough in technology, thats capable of breaking business models as well - thats also more or less the reason why technology entrepreneurship is so glamorous. Because it can bring down prices, do sexy things, grab attention and make people take notice.

So seriously, whats the link from a Nano to a Benz? The Nano is important, because its a crucial step to get to the Benz, and the crucial step and mindset breaks when you get people to say the first Wow. And the Tata Motors Company, has successfully managed to do that. Get the world to say a Wow. And that is the first leap for any of our companies, be it whatever domain to do. The wow could be quality measures, cost, design, Interaction mechanism, or the simple science behind it. But it has to begin with the Wow. Get that in, into your product somehow.

The second bit is the value engineering. How do you mass manufacture something, and still manage price points and quality. If you think this is a mechanical engineer’s curse, think again. Most web companies will bleed and die because of their “cloud” bills. That silly recursive function that takes that extra compute cycle, will come to bite you in the wrong place, if you dont fix it. This is where specialists kick in. This is where experience comes in, and this is where price point remains still. This is definitely India’s second move. And I’m already starting to see plenty of companies do this.

The Third move will be in Feature Engineering. Whatever you did in the first bit, you want to do the reverse of that, with the supervision of the second phase engineers. You want to put stuff in, but not the old stuff, make a leap and bring in the next generation of things that make it easier on the user, the manufacturer and everyone who comes near a ten foot radius of it. And this is where the next generation of Benz, Jaguar, and Bugatti’s are born.

The interesting point will be that, without step one, we would never have step three, because the evolution of talent, processes, and engineering will simply not be there. And If we try to jump directly to step three, what we will end up will be a fake imitation of a luxury product, twice priced, and having to fight the mindset of it being in the wrong place (it should be low-cost instead).

I remember standing on the stage at Proto.in in 2007 asking where are our companies that can make a Merc and Ipods. The Answer - They are coming, and the first generations of them are just born. To be in India, to be in the products space, and to thrive in it, it helps to keep this in mind. It took me a while to get this, but thats also cause I see this trend happening around me - Playing out in real life.

I can imagine the look that you have on your faces reading this. Where is our market then? Isnt the US the most wealthiest market to go tap into? Am sure you have that look on your face, judging me for that. You might want to sit down for this. I think there is a strong misconception. While the western “developed” markets might be the richest, the emerging markets are the biggest - they make for 5/6th the world, and make up in large numbers. It’s almost the long-tail in the truest sense of the word and according to the definition of Pareto distribution (Economic divide on the 20-80 rule). And listen, if it works in India, it will work in most of the emerging markets. And fortunately for us, the high cost of innovation, the inability to grasp emerging markets and the masses, all play against the research labs of the far west.

If anyone can make it happen, and playing with the advantages that we have in terms of the ability to communicate better with the rest of the world, the collaborations we have with abroad, the support that we can garner from the govt (alright alright, we can improve on this bit) and most importantly, our inherent need to innovate, we are probably the best suited for it. And if we are bold enough to take that first step, our journey has finally begun - well hurry up, cause there are already folks getting a headstart on that - Mark my words, the Nano will lead the way to the next generation of Jaguars!

There is also an assumption that if someone is online also means they are available. Lets not talk about all those embarassing moments, when we forgot to go “offline” on chat, and had some very personal messages displayed on the projector in the middle of a meeting. Oh, am I the only person to whom this happened? Oh boy!

But coming back to the topic, the point is that even though Instant Messaging is supposed to be “always on”, it still might be common courtesy to follow some rules, especially in this day and age where everything and anything seems to be demanding attention, and the option to avoid will go a long way to ensure that your relationship doesnt snap.

This is a simple rule that I follow, and those around me by now have come to know. Whenever I do see someone online and do want to talk to them, I send them a simple “?”. If they are in the middle of something, they either say so, or just ignore, and I assume that they are unavailable. If they respond back, then we chat. If they arent there, they always get back when they see the ominous question mark waiting for them.

Simple, but you have no idea how easy it makes life sometimes. The option to opt-out and not have to pay attention in real-time, is a luxury and anyone you can give this option to, will eventually thank you for it.

I am absolutely with the camp that believes that if there are quality companies, then capital will find its way. But we also know as part of most of our risk mitigation strategies, making a leap into a market with no safety net or partners makes it a really serious gamble - even for some of the most well-versed entrepreneur to tread in. I strongly believe that unless we enable some capital to flow, we are not going to see much of a difference in the number of quality startups that spring up, and inevitably the number of startups that get funded/get recognized, and the number that make an exit. This cycle, as you know is recursive.

So What have I been obcessing about? I’m focusing on three aspects and I think all three aspects are crucial.

1. The mechanisms for loans from banks to become accessible for startups/SMEs
2. An effort to bring together the Angel Investment Community, educate them and help them engage in an effective manner
3. An effort to fix the “broken VC Model”

The First and Second are fairly straightforward and I promise to come back to you with some better news soon. But this is primarily about the third one.

I think the third one warrants a closer look for a simple reason. People have been claiming as long as for the better part of the decade that the VC model is broken and there seems to be no heed to that warning. Whats worse is that given that India couldnt be farther away from whats happening in the Silicon Valley in terms of similarities, the model is a force-fit one (There are some better models in Israel, Singapore etc). If you’d understand how a VC firm works, its primarily a specialized bank which runs on a management fee and bonus paid with the return on the investment. The overheads of running such a team is so high, that the only viable way for most firms to operate is to increase the fund size, which sets the ball rolling on them getting into a soup not able to invest in early stage no more, and the next thing you know they are either full-fledged in growth stage, or are in growth stage and are disillusioned about being an early stage investment firm. Suddenly working for a VC firm or being one doesnt seem so glamorous, does it?

What we need in India is essentially a firm which is capable of dispensing funds as low as 50 Lakhs to a crore (I am consciously keeping figures in INR to make it a point that we arent in dollar land and the rules and requirements are different here) - which can operate at lower costs, and can also manage a sizeable portfolio.

• Problem #1: Cost of Manpower.

Manpower seems to be the highest cost in a VC firm. if you want to make your investment sizes smaller and invest in a reasonable size of companies, the issue usually is the fact that you are put in a loop of having to hire more resources, which pushes the envelope further to want to raise a bigger round to cover the increase in operational cost.

Solution: The right leads to manage the firm, the right risk management frameworks and rating mechanisms, and with a process management team, will make this work. More on this later on.

• Problem #2: Monitoring.

Every investment is usually tied with a board member, mostly to ensure that the investment is safe. A fund investing in 100 companies, becomes a nightmare for most of the partners to manage the number of boards they are in, and even the number of companies that they can constructively help build.

Solution: If this space has to become active, those who have had experience building a company or two cannot afford to stay in the sidelines. There is a need to build a portal which will enlist potential Advisors who can be engaged on a token fee +minority equity model should solve this problem.

• Problem #3: Investment cycles:

Most companies in India simply take longer time to mature. 5 year cycles are bit of pressure on the firm and the companies to perform. You are lucky if you get the fund raised towards the earlier part of the cycle. The latter, the worse it gets.

Solution: Becomes easier if the funds are raised within India.

• Problem #4: Vishal Gondal’s ABCDs

Building Indian companies needs the experience of Indian entrepreneurs who have built companies here in India to take calls. Fortunately there are a handful of such VCs in India and they clearly stand out.

Solution: Get hands on with a company or two. The rest will work itself out.

• Problem #5: Hand in the Cookie Jar.

The VC industry isnt spared by the issue that most of the banks in the US are being accused of - the management teams making payments before the returns come home. Most of the compensations are primarily out of the management fee, in addition to the career interest generated from the returns on investment.

Solution: If the overheads have to go down, obviously the baseline salaries have to go down and the pendulum has to shift towards creating value and taking a pie out of that.

Is Micro-Finance Leading the way?

As I am understanding these issues better, there is a starking constrast to the operations of banks that becomes more vivid. Banks traditionally have the same problem. They cant issue small ticket loans because monitoring and recovery becomes an issue and logistics of the loan management are a night mare. Hence the the reason banks lend to Microfinance companies to handle this arduous task. Now most microfinance agencies have insights into the “individual equity” of a loaner to know the risk involved with lending with that individual and mitigate risks accordingly. We need a similar system like that.

Microfunds might very well be the trend to come. Why? There are 32 million SMEs in the country and the traditional way of investing is not going to work. They do not require huge quantities of money, and most of all there is a requirement for capital for expansion.

So How does this process scale? I came across a risk profiling tool built by an insurance company a few weeks ago, that allows field agents in rural areas to calculate the risk factors of an individual and household based on various parameters that they can understand from the individual. The tool is well built to the point that it can be used by an agent who doesnt have to qualified more than a 10th pass, and even better they are rolling out their next set of tools to enable these 10th pass graduates to manage the wealth of people in rural India.

Same criteria, same issues, but they’ve found a solution to it and are making money. That’s possibly a step that the funding models in India will have to take a look at and learn from. Its taken for granted that everything in India is grand - from railway stations to public toilets we have an issue of models having to scale up and dying by the lack of it. Funds are not going to be an exception to that rule. The right processes, definitely will play a crucial factor.

Ofcourse this is my understanding. Am counting on the wisdom of the audience here to continue this discussion - Whatever it takes to improve on things that already exist, but dont quite satisfy.

There is common perception that startups are entities who are low on resources, are always constrained by talent and time, and have none of the perks that bigger companies enjoy. That statement couldn’t be more wrong. Startups are infact by definition, entities that are extremely good at what they do, can deliver the next generation of quality and experience at half the cost. If your startup doesnt live up to that promise, its a sure sign that something is seriously wrong.

Lets think about the Logic of this whole matter for a minute. There are bigger companies with loads of cash and resources, and the network to go after the same market that you are aiming for. The only standing chance that a startup has is if you are amazingly good at what you do.

Thats exactly where Malcolm’s theory comes in. Every business has certain crucial aspects. If its a technology company, you are going to need someone who has great R&D background, one who has solid understanding of business and the markets and someone who can manage finances and play complementary roles. You Have to be the absolute best in what you are. When starting up, its worth asking yourself that question, as the destiny of the company you start very much depends on it. If you dont have a skill, its time to sharpen it. 10,000 hours to go!

But we are not nearly where we’d like to be.

Lets also have a bit of background here. We must humbly acknowledge that certain things existed even before we all arrived at the scene. There is nothing new under the sun says Solomon who was apparently one of the wisest man to roam the earth and he possibly could have been true. A report by the committee on National Enterprises clocks the number of Small and Medium enterprises in India at 32 Million. Yep, you read that right, its 32 million! 40% of the gross manufacturing GDP is a contribution of this sector of the industry. One of every ten Indian is employed by an SME. If you thought startups became fashionable in the past three years, we would be very misguided. That said, there is a sudden trend and confidence emerging that India too can build world-class companies. That sentiment is a recent one.

Though it was the camp at Proto.in, that initiated some of the key initiatives to drive this change, its no doubt that today there are several entities - all very key elements who have started to play a role in shaping this landscape. The purpose of this series is hopefully to point out some of the obvious things that we are going to have to work towards - so that we dont contend ourselves thinking that we’ve arrived.

I’ve thought about it, mulled it, discussed, debated and fought over it, but simplistically it comes down to this. Startups need two very crucial elements that we need to build in order to nurture them.

a) Media Focus
b) Capital

I’d also add a third component of Mentorship/Networks, but I am going to presume for a second that that onus can be laid upon the entrepreneur as there are several means and ways to compensate for that (linkedin, included) for now.

Media Focus:
Let me be very very honest here. There are several attempts by everyone involved in this space trying to get some coverage in the media, but there is a serious issue with the focus here. ET’s Ideas competition included, the focus somehow seems very much on the initiative than on the entrepreneurs. This goes for the Proto.in camp as well - while sometimes its nice to rest on our laurels, we have to constantly remind ourselves that we are just a mere platform and our success is when the companies we help succeed. We have got to do better in this. I know we can.

There are shows on television which as of now seem to be doing a better job at this than what most of the “showcase” events have managed to do, and its quite sad that thats the level of comparison we are at. Rest assured that there are also going to be equally enough efforts from the media to want to sensationalize it, and even make an emotional outcry out of entrepreneurs, dreams, hopes and dreams smashed, and its sooner or later meant to happen, but one of the things seriously lacking is the media network and lack of focus for startups.

Things we ought to do in this space:

a) There is a serious need for a authoritative blog that covers startups, and the emerging verticals.

b) There is also a need for a firm to start analysing the emerging market, as the value chains shift, and to help companies position themselves based on that. Such a company could almost become “the” means to start categorizing and analysing, comparing startups systematically.

c) We need more journalists who could write about entrepreneurship and startups with a solid understanding. There are very few right now (like Snigdha Sengupta) who can do such analysis as of now.

d) Everyone has this question. Every platform, Bplan Competition, Entrepreneurship summit seems to showcase 10-15 companies. What really happens to these companies after that? Do they get funded, attract clients, sign on anyone significant, strike any key alliances? There is space for a “Startup Tracker” to be in place. This will be crucial for the Media to start reporting indepth stories, and also for raising funds in the future (More on that in the upcoming series)

e) Events such as TiECon, Proto.in, Headstart have to put their heads together and figure out how to a) Get the startups coverage on national media b) Get coverage on overseas media - For Example. When PlasticLogic launched at DEMO, The Hindu Chennai edition had a coverage of what they presented the next day. Needless to say that company received enough backorders for their product, including bagging the order from Amazon and Sony within the next three months. If these native platforms are not able to offer that level of coverage, make no mistake, DEMO/TC50 will make its way to India to deliver that value.

There are projected plans to bring the employment rate in India to below 2%. In a global economy where countries are struggling to stabilize their unemployment rates, we are actually talking about almost making it disappear. SMEs will piay a significant part in it, and since Employment is a key value proposition of any government and referring to my previous article on who really owns a company, You can rest assured that the government will get involved and play its part to help. But the initial organizing of this sector has to be driven by all those who are claiming credits already. And clearly there is lots of work to do. Its time to get to work - and not stop at empty promises.

There are two things that trouble me lately, and it connects to the subject of this post. Size.

We are in a rat race, and unfortunately so are most entrepreneurs. Working with entrepreneurs, the common chorus sung these days is to build a company, get it funded, scale, scale globally, make tons of money, go IPO or get acquired, and settle down. And this usually a 15-20 year plan (Anyone who does it in time less than that is either a genius or in sheer luck). The problem with this picture is that everyone thinks this is the de-facto route to go. But not everyone seems to be built for that.

Instead of getting into all the gory details, here’s the question: What’s really wrong about running a Sole Proprietorship firm, making perhaps about 3-5 crores in revenues, and being stable at that?

I met an audience of around 300 such entrepreneurs a month back, and the pace they live their lives by, not hazzled by competition, globalization, board pressure, missing out on family time etc seems almost non-existent - One even mentioned that its a better tax plan as well.

The reason I write this to this audience is cause, one of the biggest things that we worry about, especially with rural enterprises is scale. And at times you notice, sometimes with RTBI, and often outside that not every entrepreneur and entity is built for this. Small can be beautiful, if you know thats what your capability is, and can with content deliver on that consistently.

The second aspect of whats bothering me is something directly related to the first.

I am possibly fairly young, but even I miss the days when you call a company for customer service and you got someone that you spoke to the last time - makes for such a pleasant experience. I have an issue with my Airtel connection and I have called them 17 times so far over the past 18 months trying to get it fixed - so far no solution yet and I have given up on their system and started hoping for Number Portability to arrive.

One of the other side effects that I am lately noticing is the sheer amount of bills and receipts that I am hogging. You make a broadband payment, settle something here, there and you want to keep a copy of it all, because you really dont know when one of these companies will send you a note saying you owe them something and you have to make a case for yourself - and there is no one in the entity who can show you a friendly face.

Its almost unfortunate that with scale, customer experience has gone out of the window. Its said that when we were still bound by the day and age when we werent globally connected, most local businesses and entrepreneurs eventually “ran out” of a market to target, and their way of keeping themselves busy was to constantly improve upon what they offered to keep their customers engaged, happy, and conversing with them. Those days are really gone, arent they?

I think small is, was, and will always be beautiful. The sphere of success and what we really want - whether it be the size of the enterprise we are building, the mode of operation, or the values we want to be known for (even if its darn good customer support) are decisions we make. If anyone can make a decision agains the tide, its entrepreneurs. And with this day and age when trust is nowhere to be seen, and transaction costs inevitably will rise, small can be really beautiful - with a pleasant experience and happy customer.

Thats the nightmare of everyone in the creative class.

So the bottomline is that we have to strive to be better than the best, and in most times, we are our own enemies - as we try to overdo what we have accomplished in the past. The bigger nightmare is to build one great success followed up with a disaster and have people talking about the second one, more than the first.

With this as a background, one of the biggest dilemmas that entrepreneurs have to deal with, over and over again, is as to how to deal with people. Every one of us, if we have a tint of visionary streak in what we are trying to do, will come across a point when some of those who work alongside with us, dont see us eye-to-eye on what we are trying to accomplish. When that point in time arrives, is it going to be the people, or the cause that you are going to align yourself with? Thats the question.

I have wrecked my head over this dilemma. Most achievements are a matter of the team coming together right? In which case, shouldnt the vision be easy to compromise to accomodate those who have stood by us? Yet, it is also deceiving that if the vision can accomodate the team, then there also is scope for loads of mediocrity to creep in - and thats not one that a visionary can afford to have.

One could argue both ways on this, but I’ve come to the conclusion as such: For most of us, its not the glory in the act, nor the money, but the satisfaction of getting something done that was once deemed impossible - atleast for me it is. So the question to ask, when you are placed in the bridge of having to make a choice between taking that investment money or going bootstrap mode, or letting go of the partner or team lead, or even having to ask a close friend to step down are all a factor of what you really want to accomplish and where your passion lies. If your passion is in making a difference, then dont settle for us - whatever the cost. Because without it, and the vision that is birthed by it, we are just ghosts with no life nor grip on existence.

Whoever sold you the romanticism that being an entrepreneur meant being your own boss, was clearly lying. You really never escape the chain of command and reporting structure so easily - not in a civilized society. So Its no wonder that things don’t span out as they say. As an employee you might be accountable to your boss, but as an entrepreneur you are accountable to all of your clients, stakeholders and employees. And every one of them holds you responsible to have the answers and do your best - that’s no different from being an employee times ten. Think about it.

So here’s two things you must know. It is crucial to understand this because this sets the context to understand a whole lot of things that happen through the course of the company.

1. The day you incorporate your company, you no longer own it. You want to own something, keep it a proprietory firm or under a partnership (wouldn’t recommend it, as the stats are as high as 99% of partnerships ending in breakups). It might not be a bad idea to keep it as a family business, but there as well its joint ownership.

2. The Day you agreed on a termsheet and took money from your investors, you made up your mind that you were going to sell your company for a good price someday. Investors invest looking for returns and that returns are never going to happen without an exit; And an exit means a sale. Read that line a few times, it helps to get it into your head. You have in all means sold your company when you take investment. Period.

So the obvious question arises. Why on earth would anyone want to be an entrepreneur despite all these gory truths. Well, a couple of reasons. a) You still do have the capacity and capability to build something from scratch, scale it and make money in the process - You are still one of the major stakeholders in the firm. and b) What you want to do to create this value (be it money or impact or fame) is all left to you - atleast in the beginning.

The intent for writing this article is for one thing. I see and come across enough entrepreneurs who want to own more than 50% of the company. Thats almost the sure way to kill the company and strangle some relationships, because it shows that you haven’t gotten the first thing about a corporation right - you cant own it. And the only way to scale it is to give up control, bring in the right people, and yet have enough of a leeway to make a decent exit - note how the stake you hold is towards a better return, rather than control.

And in all this does the obvious question remain. Who does own a corporate? They say it becomes an entity of its own, can own assets, can incur liabilities, can attract investments and is a being of its own shielding its board and management from most liabilities. Who then owns it? The answer to that is probably the most shocking. The Government. The Government is what owns a corporate - actually every corporate. The rules of the land, enable and provide the space for passionate, enthusiastic and enterprising individuals to spot an opportunity, exploit it, create jobs, add value, attract investment, grow the company, expand, create a board to make their own decisions and directions for the entity, make an exit, or even take it public. But at the end of the day, when and if it does shut down and incurs a loss, the losses go away with the fading memory of the company. And thats the shield that a government provides towards the entrepreneur - probably the best of freedom for an individual to create wealth and value the fast track way.

As far as the govt is concerned, creating jobs is one of its prime mandates. And corporations are instruments towards that cause.

In the light of that, look at the bailouts. You might see a slightly different picture.

And thats where you usually make the mistake. You take them for a friend, or even worse as a coach.

Do you know the difference between a mentor and a coach? A coach usually brings out the best in you, helps find answers within yourself and more often than not is that silent reinforcer to help you believe in yourself. If you are short on active imagination, remember every movie that you know of where the “Coach” is giving that inspirational talk before a big game as to why they can do it.

A mentor doesnt do that.

A Mentor is usually never there to guide you when you are down with your personal issues. Thats exactly where a mentor is better than a coach, because that mentor of yours in most cases is also someone who has walked the path you are walking, and knows that to become strong, you MUST fight your demons yourself. That’s the only way you’ll succeed, and can face a client, customer or worse yet, an Investor. And the mentor is not going to be there to get you on your high horse everytime you enter a board meeting saying “You can make it”.

Mentors at best are like eagles, who will sit with you, make elaborate plans, know your full potential and then once your wings are out and ready to fly, will break the nest and throw you off the cliff. if you die, you die trying, but if you would just flutter your wings, you’ll be what it takes to be.

So here’s a lesson. If you have a mentor, and I presume you had your reasons for picking that person to mentor/advise you? Well, remember those reasons over and over again. You’ll love him at first, and then will hate him and call him names. But the one that truly cares, will push you to better heights and make you the entrepreneur that the world is ready for. And the only way you’ll notice this type is when you see the quality that resonates with you. Sheer passion, and there is never a moment of indifference.

Dont make the mistake of wanting a Coach, where you actually need a mentor.