For the First Time Entrepreneur

Venture Capital. Don’t bet on it.

Posted by Vijay on September 3, 2006

One of the great questions that you will face as a first time startup is how to finance your operations. Choices are Self Funding, Friends, Family, Banks, Highway Robberies and then the Venture Capitalists in that order.

Don’t count on VC money to come to you in the beginning unless you have a track record (of previously raising and spending it). I read an interesting Business Week Online article (The Art of Doing it Yourself). Talks about how small businesses shouldn’t count on VC money and how VC money comes when you least need it.

I sat through an INSEAD presentation last week that stated that over 90% of startups are funded by the founder. This was followed by Family and Friends.

So when we started the business we were told, “Build a good team, Build Customers. Funding will follow. Trust us”. So we did just that. Stated with a motley crew of 8 people and built it way up to 100. Went out an got some customers as well . Oh yeah and revenue (Monthly Recurring Revenue). It took us 2 years to do this. Along the way we even finalized bank financing (we were later told that this was quite an achievement).

We then looked to a VC for funding and were told that we were asking for very little. So much for that.

The USA is the ONLY country where there is an ecosystem of VCs for startups. Most of the VC funds there are run by people who have been entrepreneurs in their past lives. In countries like India most VC funds are run by people who have a finance or a banking background and are very very very risk averse.

The best bet for someone starting out is some amount of self funding and a customer who is willing to bet on you by giving you business. I know it’s easier said than done but its possible and easier to do this that raising money from a VC.


Posted in Starting Up | 8 Comments »

Missing the Bus

Posted by Vijay on August 28, 2006

Are there things that I wished I had done? Of course. I have these “pangs” of regrets every single day. I had the idea to start an Indian software company that provided services to US clients way back in 1988. I had the advantage that I was based in the USA. Even the big boys were starting out then. But when it came to leaving the job I had, I balked. Of course I was only in my mid-twenties at the time.Of course I had the idea but other people did it and as I said in my previous post thats what counts.

My own “missing the bus” story is a biggie. In 1991, I decided to move out of the USA for personal reasons. I had 2 options, one was to move back to India and the other was to move to Singapore. One of my uncles called me up and asked me to talk to this “up and coming” company in Bangalore where his classmate was the CEO. They were looking for someone who had worked in the USA. I of course did not meet the said CEO since I felt Indian companies did not pay well. I preferred to move to Singapore. I cannot complain about my job in Singapore and my subsequent return to India working for a top notch company. But the Indian company that I did not talk to turned out to be INFOSYS (no two guesses as to who the CEO was). This was BEFORE their IPO. Talk about MISSING THE BUS… I think I probably take the gold medal here. Only wish I could turn back the clock…. sigh !!

So this time around when I got the “urge” to “do something” in 2003, I took the plunge not wanting to miss the bus this time around. So far things are working out great. The company is doing well and I don’t have the “What if I had done this?” question haunting me anymore.

Posted in Starting Up | 10 Comments »

“Advice” is the worst of all “vices”

Posted by Vijay on August 26, 2006

While you do need to get validation for your business plan, the biggest validation should come from you, the entrepreneur. I have known guys who spend so much time validating an idea that it passes them by and someone else does it. How often have you heard about a business and then thought to yourself “Hey I thought of doing something similar 2 years ago”. You might have thought about it 2 years ago, but someone else actually went out and did it and that’s what counts. There are no points for “thinking” about an idea.

There are two kinds of people that you meet when you have an idea, the first type I like to call the “Dr. No” types. These are people who start every sentence with “No but…”.  It’s easy to get discouraged by people like that. STAY AWAY from people like that. What you need is someone who will look at your idea for what it is worth and give you advise based on that and not from some bitter experience they have had. Yes, I like it when people advise me on caution but I usually stay away from people who make doomsday predictions about anything you have to say.

The other extreme is people who will effusively agree with whatever plans you might have. While this is very encouraging, you need to be careful not to get carried away.

My theory on starting a business is simple. You should never ask yourself the question “What if I had done that?”. Are there things I wish I had done?… YES!! Stay tuned.

Posted in Starting Up | 1 Comment »

Personal Life, Finances and a Startup

Posted by Vijay on August 19, 2006

If you are married and have a family to support, the one thing you should consider carefully is whether you can support your family and maintain your current lifestyle while you are busy with your startup. For most of us, starting a business meant going without salaries while at the same time ensuring that employees and bills are paid on time.

It is a tough call to make. Especially when you know that there are jobs out there that will pay good money. This is where the “passion” aspect comes into play.

1. Are you willing to compromise on your lifestyle? In my case, I went from a job that paid me a six figure salary to zero. My savings were the “saving grace” so to speak. I went from being able to spend $1000 on a whim to where I was doing a double take on spending $100.

2. Be absolutely frank with your family. Don’t do anything that involves personal finances without consulting your better half.

3. Make sure that you have enough money to last a year without any cash coming in (mortgages, school fees etc).

4. Try not to have any ongoing “big spend” while you start. In my case I was finishing up a house (and that takes money) while I started. BIG MISTAKE. I ended up compromising on the house.

5. Never underestimate the sacrifice your family has to make. Too often one gets caught up in the business and it’s easy to ignore the support the family is giving you.

Posted in Starting Up | 3 Comments »

Can’t stand the heat? Get out of the kitchen!!

Posted by Vijay on August 14, 2006

I say, “Can’t stand the heat? Turn on the AC.”

Wanting to start out on your own is easy but actually doing it is tough. It takes some amount of guts and a lot of foolishness to “do something”.

My inspiration was not Bill Gates, Steve Jobs, or Larry Ellison. It was someone from my part of the world, N.R. Narayana Murthy who founded Infosys and nurtured it from a startup to a global phenomenon.

So anyway, this urge to start something on my own has been something that had been in the back of my mind ever since I started on my first job in the USA in 1987. Of course what was never clear was WHAT “that something” was. There were several efforts but all of them on a part time basis. Needless to say, half hearted efforts met with no results whatsoever. It was always a chicken and egg thing.

One of the things I find with people wanting to start out on their own is that they want to do something while they are working full time, and then change over once the business stabilizes. Guess what? This never works. It’s only rarely that you hear of someone succeeding this way. For most of us, the road to “success” is the scenic route. Long and Winding. No short cuts.

If you are not prepared for sleepless nights, no salary, snubs from previous acquaintances then DONT EVEN START … unless you have a rich uncle who is ready to invest AND give you business on day one with no questions asked. If you have such an uncle, please let me know and I’ll put myself up for adoption.

Having said all the “negative” things about being an entrepreneur, it is perhaps the most exhilarating experience you can ever have (I’ve never tried drugs though 🙂 ). I’ll take the highs and the lows anytime now rather than working for somebody else.

Hopefully the lessons I have learnt over the last 3 years will make it easy for another entrepreneur. To make fewer mistakes. To be more successful.

Posted in Starting Up | 2 Comments »

Hello world!

Posted by Vijay on July 28, 2006

Starting a company is painful especially if you are a first timer. There are challenges and pitfalls galore and that doesnt include your business itself.

I have learnt a lot over the last 3 years and it can get pretty scary at times. Through this Blog, I want to attempt to share some of the challenges I have faced over the last few years.

The fact that I am writing this means I am still “alive and kicking” so we must have done something right.

Posted in Uncategorized | 4 Comments »