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20150720a_014101004

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20150720a_014101004

  1. 1. How not to kill your start-upStartingyourownbusinessispureexcitement.Youareincommand,youdreamofchangingthemarketandrakingin profitsalongtheway.Butsoon,realitysetsin:akeymemberoftheteamwantstomoveout,cashisdryingupand thereisnonewmoneyinsight,customersarecheckingoutthesitebutthereislittleconversionandworse,oneofthe foundersisnotgettingalongwiththeinvestors.Ifyouareanentrepreneur,anyoralloftheseproblemscanhityou. AlokanandaChakrabortyspeakstofourfoundersabouttheproblemseverystart-upshouldanticipate. Thelesson:Beparanoid,butdon'tlettheseissuesimmobiliseyou There is a chance that in the initial exuberance you lose sight of market sentiments. As a business you have to keep a close watch on the market. Keep looking at not just what is working but also at the failures. A lot of times investors make investment decisions based on the market sentiment. So you havetomakeyourplans—planstoscale, plans to raise money, plans to expand yourbusiness—basedontheprevailing investor sentiment vis-a-vis the market. Keep a strategic outlook and pace your organisation accordingly. It is easy to close yourself to the idea of change. Don't get carried away by the initial success of an idea. You have to keep validating your ideas against the plan. You must be open to change, you must be ready to tweak or make a strate- gic shift, if the market demands that you do it. You might find thatyourideaisnotscalingupthatwell,gofigureoutwhy.You must have done a study or researched the market before launch and drawn the business plan accordingly. If things don't go according to plan, be ready for change —it is possible you are trying to move a needle which is not the right needle to start with. Be open to listening to the investor, listen to the other point of view, look at other geographies to see what works or what doesn't in your market. You have to anticipate changes in the market behaviour and move in that direction; otherwise someone else will. Don't let mediocrity set in. You must understand that the final output depends on the team. And the truth is the team's enthusiasm is not enough— they have to aim high. So the first thing you have to do is create a culture of account- ability, make it clear that mediocre work will not be accepted. Rememberyouhavetobuildthatculture—sobecriticalofpeo- ple,bedirectwithyourfeedback,makeeveryoneaccountable. You might be so busy building a product or a service that you end up ignoring corporate culture. All the things I have mentioned before ultimately tie in with the culture you have inculcated in the organisation. So establish a distinct culture right from the beginning. Make sure everyone you hire and take along imbibe that culture, subscribe to it. It becomes difficult to move the whole organ- isation in one direction if there is a clash of cultures. Organisation should have frugal mindset. There has to be a reason and someone should be accountable for every pen- ny that gets spent in the organisation. ASHUTOSH LAWANIA Co-founder, Myntra.com Keepaclosewatchonthemarket To figure out the reason for customer reticence, the team often ends up neglecting customer needs: After the initial high from having discovered a product or service related to an unful- filled need of the customer comes the plateau.Thebusinessdevelopmentteam maydiscoverthattheenthusiasmforthe product is not shared by the customer. It is important that every time the team faces failure or a lack of customer inter- est, it turns its focus on customer needs andhowtheproductcanbeimprovedto suit the needs. Don't focus on the cus- tomer reticence. You can't change the customer,youcanonlychangetheproduct,theteamneedsto be constantly reminded about this absolute truth. You might start small but you have to quickly start think- ing big: The users today are used to super-fast Google services, a super smooth WhatsApp and a lightning fast Twitter. Users expect a similar performance from every tech- nology product or service — matching that kind of user expe- rience is difficult as the tech biggies are backed by billions of dollarsandhavemillion-dollarengineers.Thebestthingwhen you start is to keep the initial offering to a minimum, not try tosolveeveryproblem,notoverloadtheservicewithtoomany features. This will enable the start-up to allocate scarce resources to key features and provide a great user experience. You might lose faith in your offering and grass on the oth- er side might start looking greener: As you struggle to show the proof of traction, there will be individuals, large customers,consultantsandadvisorswhowillaskyoutotweak the product or features. It is important to remember that any change will require allocation of time, money and human resource, the team will begin to slack off and wait for the new killer feature or tweak. It is important to keep listening to the customers and keep the product or service evolving. You might accord more importance to investor require- ments under pressure: Focus on your needs not investor requirements. The media is agog with start-up stories, huge numbers are being thrown around, success stories are hyped. In the age of hyperbole, it is easy to be deluded into thinking that if your start-up doesn't need a few million dollars your idea is not big enough. It is important to believe that your big idea may need small investment, you need only customer validation, investor interest is a byprod- uct not the goal. HARISH IYER Founder & CEO, Flinnt.com Don’tfocusoncustomerreticence Finances can go haywire: Cash flow management is critical to the survival ofasmallbusiness.Somebusinesscon- sumequiteamountofcash,sopreferably avoid putting your own family money in thegame.Managingthreetosixmonthof forward cash flow is critical to scaling up oftheventure.Raisingmoneytimelyfrom VC/PE is key as little or no money in the bankcanmeanyournegotiationpoweris weak. Also live frugal and build an envi- ronment of frugality till business can afford certain basics. Once a frugal cul- ture is developed, everyone understands the essence of money. Thefounders/oneofthefoundersmightwanttoexit:This is a very tricky matter. If you are a venture funded compa- ny, then there are clearly defined rules of the game in the document.Beforeyousignthem,pleaseensureyoucoveryour- selfwellenough.Yourfoundingequityinthecompanyshould notgoaway(likeyouhavetosellittothecompanyorinvestors atparvalue)ifyouarefiredwithoutreason.TypicallyallVC/PE are reasonable people but ensure such clauses are worded appropriately.Investorsexpectacertaincodeofconduct,which isnotdifficulttomaintain,thereforearrivingatmutuallyaccept- able terms should not be difficult. But you must read the SHA or the shareholder agreement, very carefully. Good investors may not be easy to impress: This is a very detailed topic. It varies from business model to entrepre- neur,thematurityofbusiness,opportunitysize,investor’s view point of how they are looking at the landscape. Typically, angel or Series A funding has no real rules of the game. First makesureyouhavearocksolidfoundingteam,amassivesize- able pain that you are trying to solve (market opportunity), verypassionateanddifferentiatedpathtosolvethepainifyou are raising Series A or angel round. Believe in yourself and negotiate hard. Better negotiation also communicates your confidenceintheidea.Donotgivemorethan25-30percentat SeriesAandthisdilutioncanhelpyouraiseanywherebetween $1to10milliondependingonthevariouspointsstatedhere.For a mature played out business model, valuation becomes more scientific with some tools like DCF or discounted cash flow modelsetc.Meetwithsomefellowexperiencedentrepreneurs, beforefundraisingtoguideyou.Attimes,itisevenwisetohire an investment banker. Do not send your presentation to all investorsinoneshot.Youhavetoensurethattheyfeelthatyou are a highly desired/scarce asset, then only you will get value else you will get poor grade investors. SUPAM MAHESHWARI CEO & founder, FirstCry.com Avoidputtingyourfamilymoney Make sure money does not dry up: As astart-upgrowsrapidlyitisdifficultto firmhandleontheinflowandoutflow ofcash.Butyouhavetodoit—usuallyin a growing business spending happens fast, and money inflow, whether as sales revenue or new business or new invest- ment, happens slowly. Also even if com- pany is making profits, there may not be much idle cash because in the growth phase you would be investing most of it backintothebusiness.Theseasonalsales, increasing operational cost and unpre- dictable expenses make smart cash flow management imperative and if it is not taken up as priority it would put a start-up in a self-invited perilous situation. Don’t get overwhelmed by changes in the industry: The whole online world is changing rapidly and so is the con- sumer.Thedevelopmentoftechnologyandinfrastructure will make things more challenging and will require one to reactfaster.Alsooneshouldhaveastrongproductteamwhich is capable of identifying the changing trends as early as pos- sible. That capability would give a start-up more time to react and develop better solutions. Don’t give talent a short shrift: Like every business of every size, getting the right talent at the right time, and then retaining them, is the biggest challenge for start- ups. It is very important for a start-up to not only ensure the right ecosystem for talent acquisition in place, but to see to it that they grow as professionals in their career. The workforce today is young and ambitious and it will be difficult to retain themifthereisamismatchbetweentheirprofessionalandper- sonal goals or between their own goals and the organisation- al goal. Drawing a career path for employees is a good way to retainthem.Theshort-termsolutionistofindouttheirexpec- tation from the job. If they are looking for a change in the job profile, you should be ready to cross-deploy them. While focusing on investors, don’t overlook the contri- bution of the mentor: A start-up deals with a lot of unpredictability regularly. One way to insulate your people for the vagaries of the market is to get the right men- tor. The investor will show the right direction and help remove roadblocks. A mentor, on the other hand, will help understand work ethics. His/her guidance help establish the right value system, the right attitude. A right mentor gives unbiased valuable inputs to the company and be harsh at times to show the reality before it’s too late. ADHIL SHETTY Founder & CEO, BankBazaar.com Gettherightmentor START-UP HURDLES

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