The talk I gave as part of Global Entrepreneurship Week (at IIIT-Hyderabad)

Was tasked with speaking about "the things a start-up founder should do" and to speak a bit about mentors and incubation.

Thought I would transcribe and post the hand-written notes of my "speaking points".

Preamble

a) Given that for reasons of brevity (this is going to be a long post anyway) I am not explaining or using the examples I used while speaking, there may be some loss in translation.
b) To set the stage, a significant part was in the form of questions, with prizes for correct answers being the sweets that I love and that I pick up at the Abbey in Piona, Italy.
c) The speaker before me, a board member of TiE Hyderabad, and a much-accomplished man had argued that Entrepreneurship was an art and a science. When I started I used that to make the point that I was going to disagree, that disagreeing had nothing to do with disrespect, and that the point to underline for entrepreneurs was that they had to get used to hearing different views and deciding for themselves.
d) Most of what I spoke about was based on my experience. The only thing that was not, was the part on Incubation.

Ok so lets get to the speaking points.

1) Will ask questions. Sweets for what I think is the right answer.

2) Will speak about universal skills - those that can be applied in any situation.

3) Why is it that a person who does not know theoretical physics cannot talk on theoretical physics to theoretical physicists but a non-entrepreneur can talk about entrepreneurship to entrepreneurs?
Answer: Its an art, not a science.
While I am not an entrepreneur it is true that I have been mentoring them for about a year and have done a fair bit of research on the subject so in a way I was not being entirely honest.
Also make point that entrepreneur (E) needs to be a bag of contradictions. Example have a massive ego while also not having one. Think big and think small.
(As an aside, the earlier speaker had said an E should not have an ego, but I stated that to execute on something that others do not believe can be done, or believe you cannot do, you do need a healthy ego.)

4) 3 statements. Question is who said them? Hint - if you have been watching TV in India you will recognise theme.
a) "Chase your dreams, but make sure you do not take short cuts."
b) "Path may be difficult but don't give up."
c) "Be a nice human being."
Sachin Tendulkar, a much-loved and accomplished Indian cricketer had stated the above in his farewell speech at the Wankhede stadium and had said that this was the advice his father had given him. I thought it particularly appropriate for entrepreneurs.

5) Which one of the 3 quotes is not necessarily good advice?
Answer: the second one. Speak about knowing when to quit and move on.

6) What do most E's need? Money
What do most mentors not have? Time
Time is money. As an E whether selling your product, pitching to investors etc. the Q you have to ask yourself and solve is: "How do I get the money out of that pocket into mine?"
Same approach for mentors. "How do I get them to give me their time?"

7) Situation = you are unfamiliar and scared of dogs (we have many of them "on the loose" in India). Who should adapt, you or the dog?Who should change their behaviour to suit the situation?
If you are clever you will realise that humans, yes it is true (!), are smarter than dogs. Yet we just stay scared and do not try to study dogs and understand what to do. We expect the dogs to change. Not us.
Kind of similar when dealing with investors and mentors. Not to compare them to dogs, the dog example is incidental. Point is it is incumbent on us to state our case so the investors and mentors understand it. The burden is not on them. It is on us.
Real case in point. A friend had (has) a product and lamented the fact that the investors just did not "get it" i.e. they could not see the uses (and resulting value) he could see. My point to him was to break it down into parts they could understand and call the rest as "future development" and introduce it and depending on their reaction, stop there. I told him that in my opinion most of us are driven by egos and have a hard time saying "I do not get it, please explain" and that an investor would more likely than not have the same frailty. Rather than try to understand they are likely to react by finding a reason why the idea will not succeed.  We therefore have to talk in their language. We adapt.

8) Be selective in choosing a mentor and even more selective in choosing an investor.

9) Do not accept mediocrity and more importantly do not accept that "it is the Indian way".
Question: Is your competition in the next 10kms, 100kms or 1000kms?
Answer: it is global. If you do not believe me, the next time you are stationary in traffic observe that an out-of-state economic migrant is selling you goods made in China. Some 20 years ago there were some 600 products on the so-called Reserve list. Today there are about 25. So your competition is global and you cannot compete globally by accepting mediocrity.

10) Social Capital (saw the below on the internet but did not note down source - apologies).
Question. Is a small business nothing but a small version of a big business?
Answer. No. A big business like Dow or J.P. Morgan is not a person. A small business is you. Your value systems and your biases.

11) Question. Which would you rate higher: Jugaad (Indian word that translates into improvisation) or Innovation?
Answer. Innovation. Jugaad is improvisation and has its place but is a band-aid (give example). Innovation is more long-lasting and better-value (give example).

12) Circle of Opportunity. Check out Gary Sinek's TED talk. Why, What, How. Always in that sequence whether you are building or selling your product/service.

13) Question. "I must know how to create an excellent business plan to be a successful entrepreneur." True or False?
False. while a tool that has its uses its link to performance is tenuous at best and to me unproven.
As an aside, it is a good means of evaluating the person who is presenting it. Have wild assumptions in there and you lose credibility instantly.

14) How do you get your first client(s) (in general, approach is product/service, market, and customer type dependent). As an aside, believe I got the first and sixth from some scholarly article, but do not remember which. Apologies to the author!
i) Be credible: before starting your firm (you are likely to sell to folks in your circle); during; and after (i.e. after-sales).
ii) know your offering well
iii) Solve a problem
iv) demonstrate value
v) Social capital - i.e. network, go to where your customers are either online or off.
vi) Find 'leverage customers" the type that will lead you to or influence more customers
vii) Give it for free - careful though .... only if it makes sense

15) INCUBATION
(Source for this section: “On the structure and internal mechanisms of business incubator: A comparative case study” Ali Ahmad. Note: I did a decent amount of research on the subject and found this paper to be particularly good.)

Incubation is primarily relational in nature.
3 key relationships Incubation Manager (IM), Client (C) and Third Party.
Quality of incubation is dependent on "incubation clicks".

Positive incubation clicks
- shared awareness of gaps in knowledge, competencies and resources
- mutual willingness to engage in incubation activities
- recognise that IM can fill gap
- capacity of IM to commit sufficient time to implementing a breadth of activities and achieve the level of intensity needed for impact

Negative incubation clicks
- client's (over) confidence in personal activities
- view that IM is incompetent
- uncertainty as to type of business problems to bring to IM's attention

Ground rules help
- subscribe to community spirit
- adhere to standards of housekeeping
- adhere to standards for conducting business affairs
- consider the incubation centre a true stakeholder (not just a shareholder agreement).

Thank you.

Stay well. Stay true.

Driving Enterprise Growth Part 3

I have received more private comments on the notion that changing road use behavior can lead to changed attitudes that translate to better behavior in general and better work place behavior. Behavior, I feel, is necessary if we want to make quality products and provide world class service. Behavior, I think, that is necessary for us to have pride in our handiwork and a belief that we can make our future bright. The past, however glorious, (this is not heritage I am talking of, which is also important - but rather a finger pointed at our habit of extolling past achievements that we do not truly value but only speak of) is past. We can no longer depend on that. We must make our future.

A key thread in those comments I received is that; for good behavior there must be an expectation and a threat. This is logical since as a friend pointed out, the same person that for example, drives badly behaves better in the work place. Reason is that he/she is expected to and knows that there will be consequences of considerable magnitude.
Whilst this is correct, it cannot explain the poor work attitude that is commonplace (think not only of the starched shirt that relies on sycophancy to get ahead; but also of the carpenter who leaves a mess because cleaning up is not his job; and everything in between). In most firms it should be possible to reinforce and flood peoples minds with what is expected. This seems to work better if the leadership practices what it preaches. Also, as pointed out by a person that handles training in the work place, changed behavior lasts longer if it is properly introduced and reinforced early in the career.


So should the argument be turned on its head - reinforce better practices at work and expect them to become better road users? Perhaps, and I would like to hear your views.

For one, the solutions that can address better road use are deeper (should address more than what a company addresses). Two, they can be broader (in terms of range of people impacted - unemployed and employed). Three, they are more universal (they are transferable across job and "extra-curricular" functions and processes).

As an aside, this seems to work well even before a career starts. Get school kids to pick up rubbish as a mandatory course requirement and they are unlikely to throw their rubbish around. This experiment was tried in a small way at the University of Hyderabad and seems to work. One solution therefore is a mandatory course on good use of roads that is taught in every grade from kindergarten to the end of school with the course covering every aspect of road use - from behavior specifics to attitude to the environment and most importantly why each aspect is so important and it should include practical work as well.

This in turn raises a new argument. Should we simply focus most of the effort on school children and those that have not been able to go to school but are at the age where they use roads? Perhaps.

There is yet another argument. This has to do with my view that people in cities behave more badly than people in villages because in a city (or any crowded environment) one has to compete for resources (from bus seats to movie tickets to pavements and jobs). So if we were to provide more resources would the behavior change. For example, if we had more and better busses and roads?

An academic suggested that the problem may be because we are a collectivistic society. If I understood him right, we are expected to be responsible for not just ourselves but our families, servants etc. This could make us more aggressive in our behavior especially when it comes to "being first" for resources - be those resources movie tickets or blood banks!

For this theory, while one cannot ask people to not look after the people they are responsible for, over time we could make it easier for people to not HAVE to look after all those people. If they WANT to, fine.

My learning from the above is what I had suspected at first. There is no one solution. We should identify as many reasons / arguments as possible and then craft solutions for each. They need not be coordinated but they must be wide and sustained. Flood and flood repeatedly. There must however be only one objective: of getting us to naturally take pride in what we do and how we do it.

Look forward to your ideas. Am glad more folks are reading this and would be most appreciative if you got the message out and the comments in.

My best wishes to all, Vishnu.

Testimony of Kauffman Foundation Senior Scholar before the U.S. Subcommittee on Technology and Innovation

http://www.kauffman.org/newsroom/testimony-of-brink-lindsey-before-the-subcommittee-on-technology-and-innovation-house-committee-on-science-space-and-technology.aspx

While this has to do with the U.S., and while Entrepreneurship has been growing in India, the solutions presented by Brian Lindsey would not be out of place in India. India has in my opinion, benefited from a latency (pent up demand for entrepreneurship caused by regulation) that has encouraged entrepreneurs despite obstacles thrown at them. If this latency is viewed as sufficiency of reform, that would be complacency and lead to a situation that the U.S. is in now.

Vishnu.

Driving enterprise growth

In what follows, I could give numerous examples but the post would not end and the main purpose not served. Arguments noted are meant to support the notion that "bad behaviour is representative of bad attitude, it can be changed, it must be changed if we are to drive enterprise growth." I may add more to this post later. This is just a streaming thought kind of post.

Almost every day, and definitely every day that I am on the road, I see drivers and pedestrians that make me want to hurt them. Badly.
My reaction is not atypical of many others. Some of whom also drive badly.
My reaction is also not typical of many others.

1) People on our (indian) roads take their life into their hands. They are not even seeking divine intervention when they do that. They just seem to think they can get away with it.

Those who talk of that much-lauded Indian quality of creating something with meager resources or of achieving something in the face of daunting obstacles (often red-tape) may even view this risk-taking on the road as a positive thing. The dead or maimed person on the road being merely the object of speculation as to how they might have got hurt or died - a symbol of failed risk. After all, is not the natural order of things? Take a risk and not always succeed.

There is another dimension. The sense that "I can get away with it". Like many who indulge in a forbidden activity, getting away with a misdemeanor is a thrill. One gets a high from it. A thrill. Natural then to try one more. Pretty soon its standard practice. This is not specific to any particular socio-economic strata. This attitude is widely-accepted in India. Perhaps not when it is at one's expense but generally so.

This is the only one of the 4 aspects that can have some remotely possible positive quality - if one can call it that.

2) People on our roads are very quick to blame the other person even when the mistake was obviously theirs.

3) People on our roads are selfish. Give way to someone even when it makes perfect sense to do so and at zero cost? Of course not. Enter a road aggressively and then slow down in the middle of it so no once can safely overtake? Why of course!

4) People on our roads are slovenly. They meander, talk on their phones, think nothing of spoiling it.

There are more aspects but many fall broadly into the above categories.

Lately I have got to thinking that this is a reflection of the general attitude of the person. I cannot imagine such a person going into work and giving his/her best. Of being a good team player. Of being interested in really serving the customer. Of doing their job because it is needed to be done and done well as opposed to doing their job simply to impress someone higher up so they can move up in life. Of paying attention to detail - even when no when is watching!

Cannot resist one example. A person (not saying at which of the organizations I am/have been associated with since it is not important for this purpose) said that Google gave their staff dried fruits, fresh fruits, etc. and added that some staff misused this practice by stuffing their bags with fruit to take home to family and friends. A "senior" member of the group stated to this more "junior" person that there was nothing wrong with that. "When I give my maid left-over food I do not mind whether she eats it right then or takes it home". "Moreover, one person may eat ten apples. So why cannot one person take home 10 apples?". I was gobsmacked by what I had heard to say the least. That the "senior" could not see what was wrong with the argument was chilling. I can only hope that such logic is rare but I am afraid I am wrong.

Here is my recommendation and my challenge to people. Question my recommendation below, but also  be honest, and if you agree then rather than say "its been tried and failed" or "good theory, won't work"; apply your mind to the solution - be bold, be creative. Its far less risky than driving on our roads!! Lets start somewhere!

RECOMMENDATION
We should change peoples attitudes and behaviour at work by getting them to drive better. Get vehicle dealerships to require that every customer must see a well-made video on road etiquette; graphic images of the horrors of poor use of our roads; heavily punitive fines for over-loading, driving on the wrong side of the road etc.; mandatory inspection of vehicles more than 5 years old; muezzin, priests, god-men to sermonize on the importance of proper road usage and etiquette; frequent radio and TV shows (will beat some of the inane debates we see hosted in the name of intelligent activity). Get the picture. Flood the minds with good road use and etiquette.
My suspicion is that bad behaviour will be unlearnt, good behaviour will be practiced, people's attitudes will change (see how much they have changed towards caste or towards being rich in just the past 2 decades - so yes, beliefs and attitudes can change); they will start taking more pride in their work; and they will get to work faster and in a better mood.

If you believe this, +1 it, add to it, twitter it - go and spread the word. India will then truly be both incredible and rising! We would have, together literally driven better enterprise.

Best wishes, Vishnu.

Comments on SEBI's concept paper on Alternative Investment Funds

This is my first ever blog. My apologies in advance for mistakes made as I learn to use this tool

AUGUST 11, 2011

SEBI recently released their “Concept paper on proposed alternative investment funds regulation for public comments” (http://www.sebi.gov.in/commreport/alternativeinvestment.pdf).

Directionally SEBI appears to be proposing some very positive steps. Even though costs may increase as a result of increased regulation, proper regulation and properly regulated market mechanisms are valuable. That said, I have some comments and suggestions that I feel: could be considered by SEBI and; are in line with SEBI’s original purpose of fostering the funding of entrepreneurs’ early stage investments.

Disclaimer:  these are my views and not necessarily the views of the institution I work for; and my inputs are biased given my interest in making more funds available to a broader range of entrepreneurs.

The comments/suggestions below also assume, for reasons of brevity that the reader is familiar with the contents of the “Concept Paper”.  Finally, the comments and suggestions are not based on any intricate knowledge of all the regulations pertaining to funds investment in the country and are meant not as a criticism of SEBI. They are meant only as food for thought and while it is accepted that the “devil is in the details” it is also recognized that “where there is a will, there is a way”.

1)      While the concept paper is directly related to funds, perhaps there should be a section on what’s being done in the area of Alternative Investment Activity. For example, there may be entities outside India that do not want to create funds in India – but solely to invest in India. In such cases it is more their activities, rather than their fund-raising that becomes relevant. In such cases too, there ought to be regulations that will protect both investors and investees without hampering growth. In this aspect, I am excluding Private Equity Funds as I suspect that those would be covered more by FDI regulations. I am referring more to funds created abroad for the express purpose of say, SME investing or social investing.

2)      The concept paper suggests that the minimum floor for an investor in a given fund should be INR one crore ostensibly to prevent the subject funds from becoming retail based.  In the case of AIF’s constituted as Company or LLP the units would not exceed INR ten lakhs and the number of partners not exceed fifty.

Given the inherent risks in early stage investing, and SEBI’s goal is to encourage early stage investing, it may well be worthwhile developing ring fencing mechanisms that prevent the “retail-ization” of funds while allowing for smaller size investments.

3)      Directly tied with the idea above is the notion that the concept paper’s definition of Social Venture Funds be amended to also include very-early-stage SME funds. Doing so will encourage the aggregation of investment capital that is more concerned with social returns than absolute economic returns and which does not mind that their funds are being used to create entrepreneurs rather than to fund entrepreneurs who have already achieved a modicum of success.  If SEBI was also to require that the funds could only invest in registered entrepreneurs (i.e. registered firms) it would also help make a dent in the very large component of total funding for entrepreneurs – that of informal financing of entrepreneurs. For all of this to happen, it must be possible to invest smaller amounts as doing so allows the investor to lower his/her perceived risk or spread that risk by investing the same 25 crores in 2 or 3 funds as opposed to a single fund.

4)      It may also be useful for the concept paper to address the issue of governance of the fund managers more substantially. I believe that in the case of SME funds and SVF’s the funds must limit the number of investments that any one fund (or within a fund, a portfolio manager) manager can oversee. The managers must also be reasonably qualified and this qualification ought to be reviewed and all managers of portfolios approved by a regulatory body. After all, the stated advantage of having formal investors in early-stage funds is the industry focus and hand-holding that they bring to their investments.

5)      Similarly, to encourage a broad based investment approach and encourage more early stage funding, it may be worthwhile to limit the maximum investment in any one firm to 10% rather than 25%. It may be possible to have different limits for different kinds of funds.

6)      The concept paper notes that MFI (Micro Finance Institutions) could be funded by SVF’s (Social Venture Funds). In my view, the MFI’s are often an aggregator and distributor of funds and therefore present an additional layer or link – and therefore often additional cost – in the chain that flows from the source of the funds to the user of the funds. MFI’s should be judged by their ability to lower funding costs to entrepreneurs. So if SVF’s that expect lower returns are used to fund MFI’s, it should logically flow that the MFI’s must demonstrate that they are not costlier for consumers than at best, bank price of funds (assuming the unbanked got prices similar to the lower end of the banked segment – that is high spreads to cover risk) or at worst not costlier than prices arrived at after MFI’s are funded by alternate sources of equity.

7)      Equity funding appears to be the thrust of the paper despite the references to the possibility of investing in convertible debt. Based on the concept paper, my view is that Debt funding of early stage companies is largely ignored. For example the “Conditions for Debt Funds” are unlikely to ever cause the debt funding of early stage firms.  The creation of securitized debt assumes a revenue stream to allow the repayment of the debt (or in the case of collateralized debt the presence of assets that would cover the default). Early stage companies may not have that luxury as they could well be in a pre-revenue stage. On the other hand they may prefer to have debt rather than equity based on the nature of their business. In both cases, early debt and early equity, the investor could insist on close monitoring of the firm and involvement in the management of the firm and if needed convertible debt.

I would welcome feedback on these comments and suggestions and furthermore, on any ideas, suggestions and solutions related to how funds can be made more easily available to entrepreneurs.