Category Archives: Entrepreneurship

Founding Principles for a Development Shop

A development shop can be broadly associated with service delivery (consultation and service at cost) or product delivery (product sold at cost).  I think the following principles could be applied to both:
  • Always try to Innovate
  • There are different ways of solving a problem. Try finding the best approach.
  • Have faith in your teams capability to deliver anything.
  • Have faith in yourself and believe that you have potential to change the world.
  • You need to have flexibility and the capability to move fast.
  • Always try to work in the team but also hold your identity.
  • Believe in sharing knowledge and tips.
  • Trust your colleagues.
  • Avoid bureaucracy and politics like plague.
  • Customer is the king. If a customer doesn’t know something be ready with a training session.
  • An absurd idea is not always a stupid idea. Be open and receptive.
The core belief is the willingness to innovate and allow customer to be the final judge.

Funding for an Entrepreneur

A few days back I got an opportunity to attend a meeting hosted by TiE. These guys are active players in funding market and have been doing some decent amount of venture funding as well as angel funding off late. I went here with a cautious attitude expecting more of a marketing campaign on the part of them. However I came back with a unique experience and some information which I would not have got in my regular schedule and circle. I am listing below some excerpt from the meeting for future reference as well as for anybody interested.

Points that an entrepreneur should know

  1. On a scale of 1 to 10 a business plan accounts for no more than 2 as success indicator.
  2. Ask yourself many times “Do you really need others money to succeed?”
  3. Get operation quickly
  4. Look for quick break even and cash generation
  5. Offer high value products
  6. Forget about crack team. Go ahead with whatever team you have got.
  7. Keep growth in check. Too much growth in short period might sometimes be suicidal.
  8. Focus on cash not profit, market share or anything.
  9. Cultivate banks before the business becomes credit worthy
  10. Bank credit is the cheapest source of financing.
  11. Banks are conservative as they operate on very thin margins (sometimes as low as 1.5%).
  12. Banks raise funds from depository and have hence have to be very much responsible about money.

The C’s of a Banker

  1. Character
  2. Capacity
  3. Capital Structure
  4. Collateral
  5. Coverage

Some facts about VC funding

  • It is a fact that only 1 in every 100 ventures who apply for funding are actually funded by a venture capitalist. More often than not a VC looks for letter of referral from someone who is well known.
  • It is more important to decide from whom you actually raise your capital rather than the terms of the funding.
  • If you are lucky to get funded then be ready to push the plan into action ASAP and please don’t expect Ferrari/Porsche to land in front of your door just because you got funded. Remember that the real job has ‘now’ begun.

While committing yourself into a new venture:

  1. Invest in industry where growth is high
  2. Create and protect value
  3. Making money is far more valuable skill than technical skill.

While making a business plan:

  1. Market Research.
    A proper market research should be done by doing an expert panel study. If you don’t know the exact numbers then estimate. Make sure you don’t burn your hard earned and scarce cash on purely market research. Always go for a cost effective approach.
  2. Do it yourself.
    An entrepreneur should always be involved in the business plan making process. Either the entrepreneur should make it himself or be very actively involved in every step of the business plan. Please remember that Intel’s plan was 1 page long, Sun Micro systems plan was 3 pages long. So the lesson is don’t cross 50 pages limit for a business plan and usually a 30-40 page business plan is quite sufficient. Remember that the VC might decide to omit your plan just be cause it is too bulky!
  3. Have a good cover and make it visually attractive.
    More often than not a business plan with a good cover and attractive design stands more chance of attracting a VC’s attention when he is having 100’s of business plan’s lying in front of him.
  4. Write the content in a way that reflects your passion and yes avoid heavy jargon.
    You have think of ways to really make the VC understand your point without boring him with a content that looks like a sermon.
  5. Don’t get lost in being a techie.
    There is nothing wrong in being a techie but don’t expect the other person to be techie.

While making a presentation:

  1. 10 minutes is an absolute deadline.
  2. Give a small introduction.
  3. Indicate growth.
  4. Be clear whether you are going for Product / Service.
  5. Indicate that you have a core set of management.
  6. Clearly outline the Financial projections.
  7. Give a proper conclusion.