Venture Capital Elevator Pitches

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Venture Capital Elevator Pitches

I left my job at a venture capital (VC) firm in 2010. After freelancing for a bit I then worked with a high-technology company in the robotics space. I then started my own strategy consulting practice, which over the years has matured into an interesting blend of design thinking, management strategy and human behaviour. Three fields I am keenly interested in, and which I use to help companies. I help them understand their customers and customer needs better. I also help companies tackle complex problems or pursue opportunities and grow.

VC funding, business plans and elevator pitches however, are areas a lot of clients associate me with. My initial list of consulting services didn’t even factor business plans or elevator pitches. However, along the way, by heavy demand, it became a prominent service. I continue to get a lot of inquiries for elevator pitches. There probably will never be a shortage of companies aspiring to get their entrepreneurial dreams equity funded.

However, I have observed one common aspect across a lot of clients and prospective clients. It is in their view of what an elevator pitch is. Or should be. Given the overly enthusiastic, almost orgasmic effect that venture capitalists have on a lot of business folk and new entrepreneurs, they tend to assume that that’s what an elevator pitch is about too. That the brief time the pitch gets in front of the investor, with or without the entrepreneur actually being present, should blow their mind. And to achieve this, they start thinking like advertisers. They think loud. Or blingy. Or just outright abstract.

They assume the pitch needs to be all glitsy and filled with high quality images, video, and graphs! That’s it! And on occasion, it has been tough convincing them otherwise. Reasoning with them that having been an investor, I might probably have a better sense of what might bring out the core essence of a venture. And what might be outright distracting, or worse, confusing. But it doesn’t work often. They are so enamoured by a faceless and nameless investor who probably frequents their dreams, to reason.

Sometime last year, someone made Uber’s first elevator pitch public. For those working on their elevator pitches to seek investment, and if you haven’t seen this already, UberCab – Dec 2008. How many captivating images do you see? They seem to me like just random pictures pulled off a Google search. A few phones, a few cars. No plot, no sub-plot, no theme, nothing. Just a vision and a compelling business proposition and a plan on how to make it happen! Nothing else matters.

I have been quite blunt with clients when it comes to delivering a no-nonsense pitch. However, I have had my pitches go to design folk, artists, and even sent to experts in digital and web design to give them a ‘makeover’. And I’ve had others turn my pitches upside down to present what they believe is a better way to ‘pitch’. Only to then come back and use one previously made by me.

The reason being, at the end of the day, even if some people don’t agree, venture capitalists are humans too. They have similar attention spans. They aren’t fools not to spot a great opportunity, even if it is scribbled clearly on a restaurant napkin. And they certainly aren’t fools to accept a mediocre vision or action plan just because it was in a ‘beautified pitch’.

This is the third of a series I’ve written regarding entrepreneurs and VCs. In case you missed the first two, they’re here: 1. What’s Your Profession and 2. The Entrepreneur in a Venture Capital World

Hope you found these useful.

My attempt at sketching a puzzled investor.

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The Entrepreneur in a Venture Capital World

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The Entrepreneur in a Venture Capital World

Imagine a food connoisseur has a vision of opening a restaurant. Selling a carefully crafted list of delicacies, whose preparation has taken years to refine. This aficionado has thought of everything. The cutlery that would highlight the preparations, what the entrance to the restaurant would be like, the kind of chefs he or should would need. Everything.

Now imagine, you, as a customer, visit that restaurant. No guarantees you’ll like the food there. Or you might have preferred a better selection on the food menu. Now let’s say you, and your friends or family who have accompanied you, get to have a say in what the menu should be. Just because you’ll be paying the bill. Or simply because a local bank or relative bankrolled the entrepreneur’s dreams, they want to have a say in what food should be served.

Isn’t this the case with the venture capital investment ecosystem? They take a seemingly great idea, imagined by a dreamer. And after some funding, in an urge to “scale” it, they put it on steroids. Often at the cost of the original dream and vision. And with the VC community, their return timelines are shrinking, so their portfolio mutation is growing rapidly. They don’t care about profits. As long as there is sufficient sales and buzz, they’re on track. As opposed to keeping fund and investment choices a little more practical. So as to build a more, bottom-heavy business. On a steady foundation.

In a way, it would compare with a risk in the investment ecosystem called Maturity Mismatch Risk. This is a capital management situation that can disrupt business cash flows. It’s seen when assets held to meet future liabilities are not well aligned from a maturity time point of view. Short term assets should deployed for projects with quick returns. Otherwise, they could cause a financial crunch in the short term. ‘Entrepreneur-Investor’ relationship could be looked at in a similar way. Where an investor who is only there for a few years, sometimes changes the entrepreneurs long term strategy to suit their investment goals.

Now this might seem to contradict my VC related post from earlier this week. One where I said that the VC space seems to have more left-brained, finance, cold-numbers people, and less right-brained, creative ones who would appreciate a good, world-changing vision and back it up in a way that it really changes the world permanently. However, they are two sides of the same coin. Business models do take the world forward. But that doesn’t mean every other potential idea must first blow up with over-funding and investor control, and then explode! And all the while, the disinterested, minority stake-holding promoter is busy with other startups he or she has invested in.

Imagine a great idea and promoter being backed by an investor who actually sees the impact of the idea from the promoter’s perspective. That means, not just scaling an idea, but rather, letting it grow to have the impact it was intended to. Then maybe some of the great entrepreneurs wouldn’t actively shun investors and patiently bootstrap their way to world-change.

It isn’t just about the idea. The entrepreneur’s vision of how the idea pans out matters just as much.

I happened to see this post on LinkedIn when I was writing this post. While decisions like come on one end of the world-change spectrum, a lot of venture funded companies aspire to be on the other. In that they would like to achieve a strong global presence with the least marketing spend. And most importantly, make astronomical stakeholder returns. For the VC community, the ideal place lies somewhere between the two ends of this spectrum. Because in many cases, the entrepreneur sets out on a well-intentioned mission to fix a huge problem for a customer base.

Image source: link

Again, it isn’t just about the idea. The entrepreneur’s vision of how the idea pans out matters just as much.

The title image is that of a vulture. When I worked in the venture capital space, people sometimes referred to the community as ‘vulture capital’. Nowadays, looking at some investment decisions and entrepreneurs who focus more on personal investments rather than their own ventures, looks like vulture capital is contagious.

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What’s Your Profession? Did You Bring More Soldiers?

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What’s Your Profession? Did You Bring More Soldiers?

In 1970s, according to the TV series Mindhunter at least, the FBI was filled with accountants & lawyers instead of more relevant experts in areas that mattered. That is, in place of behavioral analysts.

That seems to have been the case with the Indian Venture Capital industry too for some time now. They’ve strangely been recruiting a concerningly high number of Finance and CA folk. Instead of hiring more right-brained folk who can understand customer needs, likes, dislikes, and the customer experience. Those who can appreciate an entrepreneur’s vision and passion, and perhaps the grueling journey she or he has been through to get there.

Numbers don’t build businesses. They’re the result of it.

If the venture capital sector doesn’t have enough people who can understand a customer’s journey, an entrepreneur drive and vision, among other non-numerical things, just processing numbers will only make so much of a superficial impact. And bring so much of a multiple-x return on investment.

Look at the Indian funded startup space for instance. It even makes one wonder if many of our entrepreneurs possess the vision and passion. Perhaps how Flipkart is try to go after numbers, while Amazon is increasingly trying to improve the customer experience. Or how and why Uber might have logically entered the food delivery space? And more importantly, why did Ola (I hope I’m wrong!) seem to acquire Foodpanda in a knee-jerk reaction to Uber? Or how, while in India we still get mobile phones and media content literally on the same day as any developed country. When it comes to business inclination to improve the customer experience though, we get by with the bare minimum. Why?

Why can’t investors identify truly driven entrepreneurs and be able to align with the entrepreneur’s vision to create an impact? Does pushing an entrepreneur into super minority stake keep them sufficiently invested in the big plan? And is it possible for the overpaid founder of a funded startup with multiple investments of his or her own in other startups, early in his or her own startup journey, to create what people call a unicorn?

Focus! Focus! You need the right people, adequately motivated, to do one job! And to do it right!

Reminds me of a scene from the movie 300. When Daxos and his army meets Leonidas and his brave 300. Have a look!

Maybe there’s a difference between saying ‘customer service’ and doing what is necessary to delight?

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Venture Capital – Between Returns & Fund Sizes

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Interesting article by Jason Rowley on the lack of a correlation b/w venture capital fund sizes & fund returns.

Venture Capital Is Boring

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Startup Service Aggregators

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Startup Service Aggregators
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Image: source

Startups with business models revolving around aggregating services might have their days numbered. Unless they offer a significant additional benefit (than the underlying services they aggregate) to end consumers. Because without it, they’re just tech-backed middlemen looking for their share of the pie for connecting parties. This might be a steadily tough ask in an increasingly connected world.

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Think A-Team: For the Design & Strategy needs of Young Businesses

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Think A-Team: For the Design & Strategy needs of Young Businesses

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Image: link

Hi, all you enterprising entrepreneurs,

I am pleased to give to you, ‘Think A-Team’, a growth partnering service for all your business strategy needs.

The intention behind it, is to help you make your business challenges a little less challenging. And to work with you on growing your business faster & better.

The services I have selected to offer, are a result of nearly a decade of close working with entrepreneurs and young businesses. While the portfolio of services will evolve with time, what will remain constant is reliability, effectiveness, accessibility and affordability to young businesses that have had few, if any options as far as growth partners go.

Think A-Team

Give it a try today! And I’ll look forward to working with some of you enterprising folks on building your businesses for you.
Have an awesome weekend!!

R,
Shrutin

Look forward to connecting with y’all on LinkedIn and/or on Twitter.

Bubble Telescope

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Bubble Telescope

Is there a bubble forming in the Indian startup scene?

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The Hubble Space Telescope

Is the Indian startup space fast becoming a bubble? Let’s take a closer look and find out.

At the Goldman Sachs technology conference earlier this year, leading venture capitalist of Benchmark, Bill Gurley expressed concerns to attendees, of a possible bubble, caused by some over-valued startups in the US. His concerns were directed at the young companies that had almost magically reached over a billion dollars in valuation, which according to him, was largely fueled by investor fear of missing out (or FOMO, as the VC community knows it). He said that investors were making investments of sizes previously reserved for listed companies. Aptly, he said “a founder pursuing a $40 million IPO offering takes the process more seriously today than a founder raising $400 million in private capital.”

Another reason for his concern, was the presence of public market investors like hedge funds, etc., investing in the space earlier catered to only by venture capitalists. Bill isn’t wrong in saying that hedge funds, mutual funds, etc., have traditionally had a different investment appetite and strategy. FOMO, clubbed with this new blend of different investor classes and styles of investing, is perhaps what is fueling his growing anxiety of a possible bubble. Benchmark has funded numerous industry-altering young companies since 1995, including Twitter, Instagram, Snapchat, and Uber, and around 250 other startups.

The Wall Street Journal’s Billion Dollar Startup Club saw at least 73 young private companies valued over USD $1 billion this year, compared to only 41 last year. Nearly half the investors in some of the most invested startups too, were institutional and strategic investors, with Tiger Global (TG is an international firm that manages hedge and private equity funds) leading the pack with 12 investments in private billion-dollar companies. TG also raised the most money last year, $4 billion to be more specific, amounting to nearly 12% of all venture capital raised in 2014. (source)

Coming back to India, should this over-investing and over-valuing in US startups be of any concern to our booming Indian startup scene that is currently fueled by online travel, e-commerce retail and logistics, classifieds, online food ordering, radio taxis, etc.? Let’s find out.

Firstly, one of those aggressive investors that Bill Gurley mentioned, Tiger Global to be specific, is also the most aggressive investor in Indian startups. In 2015 alone, TG disclosed investments in over 17 companies, investing in rounds totaling to about $1 billion. Some of its investments include a $150 million round (series H round!) with other investors in Quikr, India’s largest online and mobile classifieds portal. Then there was a series D round of $ 100 million in Shopclues, an e-commerce portal. We could argue that the exact investment exposure by Tiger Global is not known, and could be somewhat small. Or that perhaps these startups are actually worth the millions or billions they are said to be worth.

Tiger Global, among others, may have helped inflate a startup bubble in the US. But that is a significantly different market than India, with a more mature and aggressive investor community. Therefore, a race to get a piece of what is hopefully the next Google or Uber in the US might have led investors to try and outbid each other with sweeter deals to promising startups. But is TG’s strategy or tendency to overvalue being carried to India too?

In February,  a reasonably well funded ‘mom and baby’ products portal, BabyOye, also a Tiger Global funded company, was acquired by Mahindra Retail for an undisclosed sum; in the hope of boosting their own brands Mom & Me, and Beanstalk, that have not been too strong online. BabyOye raised $12 million in 2013 from investors, partly used to acquire another company (Hoopos.com). After an earlier round of funding in 2011, BabyOye spent extravagantly on TV advertising using a former movie star in the ads.

Mahindra’s acquisition to gain online strength seemed concerning, given that such a large group felt the need to acquire a small company with only 1500 followers on Twitter (now up at 2003 followers), to bring in the capability of selling online, even if the acquisition didn’t cost them much. And at a time when a lot, if not most of those products were already available on Amazon and Flipkart. Did that make good business sense, or is e-commerce happening so fast that even the heavyweights of Indian industry are feeling the pressure to jump on this bullet train?

US’s popular classifieds service, Craigslist, only had one known investor ever; eBay. And that too not for too long. And was Craigslist popular enough? More than it perhaps ever expected. In comparison, a similar service in India, Quikr, has raised upwards of $350 million so far, and we can only wonder why. To buy and sell other companies, maybe?

And just then, in comes news of a possible acquisition of the nearing-a-billion-in-valuation Housing.com, by none other than Quikr. If the acquisition does happen, it might be a progressive step for Quikr. But it also leaves me wondering about the vision of these startup promoters. With growth strategies and business direction that seems to be going all over the place. In many ways, this startup mania is turning out to be more of an exit ground for investors, rather than an effort to give the world the next great company that’s made in India.

Looking at the magnitude of investments themselves, a layman could argue that ‘the more the funding, the better’; after all, is there anything like too much money? Or for that matter, even a sky- higher valuation. Imagine the pride and respect in your social circles when they read in bold, the value of your young company. But venture capital and investing isn’t as simple. If one funding round happens at a significantly high valuation, the next round becomes that much tougher to raise, as does getting a suitable exit for your existing investors. Of the $51 billion worth of private equity deals in India from 2000 to 2008, there have been only around 30% exits, according to a McKinsey and Co. report.

Over-investing in companies brings with it, the tendency to spend it, whether it makes perfect business sense or not. As the world, and more importantly India, is getting increasingly interconnected online and socially, it is worrying to see the amount of money young online businesses are investing into expensive traditional media, with the likes of Amazon’s catchy ad, or Flipkart’s loud and confusing one, everyone’s on TV and on billboards, trying to push their way into the heads of prospective customers.

About 5-8 years ago, it was comparatively tougher for companies to scale. Building capacities, adding servers, fleet, manufacturing capacity, manpower, etc., took a lot more time and more money.

So, while salaries are much higher today, many services and business functions can also be outsourced efficiently. This allows companies to focus on core activities and scale faster. There is the evolution of analytics, contractual manpower, hired CXO’s and everything in-between available. Basically, the seemingly impossible tasks that earlier needed a small army, can now be pulled off with a small team.

All this brings us back to “how do we make sense of the heavy investments into these, still nascent startups?”  And more importantly, will such heavy spends only on marketing guarantee a successful future for these young ventures? And, is any funding being spent on better listening and understanding of customer needs? Or on empathizing with problems customers are currently facing?

The notorious, multi-billion dollar Uber for instance, has an extremely light operating model, asset-light, limited overheads, and is highly scalable. But has it done anything to address woman passenger safety in countries where it operates? Not so far. Even Indian taxi aggregator Meru (2 years older than Uber) had a panic button on the app long before Uber decided to put one there. Uber waited till after unfortunate incidents occurred, before putting a feature that was so logical and obvious. All that funding seemed to be spent on technology and marketing. Then why do customers still shower so much love on services that don’t feel the same way about them?

Between aggressive promoters and aggressive investors, focus has gradually shifted from the customers’ best interest. It now seems to be more about startup and investor’s best interest. Online food ordering businesses too, for example, have built strong websites and apps. And they have been advertising like there’s no tomorrow. But their internal processes remain shockingly primitive. Back in 2008, I had toyed with the idea of starting an online food ordering service, and had listed some concern areas that needed figuring out, in an effort to shape the idea better. While I eventually didn’t pursue it, online food ordering startups today, surprisingly still live with those same problems, despite the advancements that have happened in the interim.

The possible risks of overvalued and over-invested startups are many. From VC firms going bust, to startups not being able to raise the next round of funding. Or for that matter, those being made redundant by other startups. And with every startup that shuts shop, it also affects a large number of other individuals and businesses. Everyone from logistics businesses to small suppliers to even home businesses and employees. Anyone who has come to serve these super-valued startups.

And finally, in an effort to boost entrepreneurship, India has considerably relaxed rules for listing startups in the recent past. But this bold step will take its time to see benefits, especially since there is poor liquidity in this space. And the experience in valuing new age businesses isn’t anywhere near accurate.

The sky-high valuations of startups would make for interesting conversations with friends and a few rounds of beer. However, lack of clarity in funding and growth strategy in these heavyweight startups could be a matter of concern. For young stars of a new and emerging India. And India’s big startup contributions to the world would hopefully be those that are highly profitable and scalable. And most importantly, solely focused on delighting its customers.

Originally posted here: http://yourstory.com/2015/07/startup-bubble/

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Funny Side Up

All those moments that left you speechless…More like the dumbfounded speechless. I was just thinking about it today, and thought I’d share some such situations that I have been lucky (and sometimes not so lucky) to be stuck in the middle of.

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Funny Side Up

All those moments that left you speechless… (No, not like when you saw Claudia Lynx or  Mila Kunis on TV). More like the dumbfounded speechless. I was just thinking about it today, and thought I’d share some such situations that I have been lucky (and sometimes not so lucky) to be stuck in the middle of.

  • About two months back, I called my credit card company to tell them that I hadn’t received my estatement, and to ask them to mail it to me. The charming voice at the other end asked me some random questions just to make sure I was the actual holder of the card, and then proceeded to say that she’ll have the statement emailed to me. Then, as what I assume to be a part of the ‘procedure’, she thought of “confirming” my cell number, mail id, landline number, address (hey, don’t look at me, am still wondering about the logic behind it). Anyway, so when she read out my address, I realized that she’d got one alphabet wrong in the name, so I asked her to correct it. After that, again, as part of the procedure, she proceeded to fire a series of questions, about practically everything, just to (again) make sure I was me. The second last question, ‘what was the last amount billed to your card?’ Thankfully, since I had received a message when the transaction happened, I remembered and told her the amount. Last question, ‘where was that transaction made?’ How the hell would I remember, it was over 12 days ago. ‘No problem’, she said, cheerfully, ‘you can check on it, I’ll call you back tomorrow’. I completely forgot, so the next day, she called up as planned, but I didn’t have the info. ‘Not a problem’ she said again,  suggesting the same deal of me checking after I get back from work, and that she’d call the next day. Anyway, I checked that evening, but missed her call the next day. Next thing I know, I receive a letter from the credit card folks (the address on which, by the way, still happened to have the minor spelling mistake). The letter stated that “this is the last correspondence to your old address, and all further correspondence would be made to your new address.” Whoa. When did I change my address? And, if that wasn’t enough to leave anyone wondering, I received another similar letter the next day (with the spelling mistake rectified), informing me that my new address has been updated in their records and from then on, all correspondence would be to the new address.
  • Back in 2008, I got myself a Vodafone USB internet card after paying for a limited usage for the year (1GB free/ month). The little software which installs on your laptop, helps you connect/ disconnect, and also shows you the usage. So I’d keep the usage within limits, so as not to have to pay at crazy rates/MB beyond the free usage. And then, about 4 months down, I received a bill for Rs.200 for excess usage. As I saw the statement only on the due date, I thought I’d rather pay it and then look into the matter. So, I paid, but then didn’t bother check with Vodafone. Next month, I made sure I kept checking my usage. I’d used about 3/4th of my free limit for the next month, but I received a bill for Rs.1400. Ok, now things were getting serious. I went to Vodafone to find out about the screw-up. After the usual ‘Happy to help’ chat, they assured me it was probably a billing mistake. That it happened sometimes. The issue was that while my Vodafone software was showing my usage at 3/4 of the limit, on the company system it was registering a usage 40% or so more above the limit. Few days down, my connection was blocked. Next visit to Vodafone, the same exec apologized profusely. He said he had forgotten to log the complaint, which is why it got blocked. I told him to take care of it, n went my way. Next month’s bill was over Rs.1500 (Rs.1400 + late charges, service tax, the works). What followed was 2.5 months of constant comms with Vodafone, at the store, on the helpline, and to with every email id I could find on their site. They kept insisting that they’ve checked and rechecked, and that I would have to pay up. At the end of that time, I had pretty much had it, and so I went and settled the bill, so as not to let them torment me anymore, even though they still hadn’t realized that there was something wrong with their systems. Next thing you know, I receive a letter from Vodafone’s legal guys threatening to go to court if I didn’t pay. The @#$#.! I called the lady at Vodafone whom I’d been in touch with regarding this matter. She was, I think, some mid-level manager. She told me that they’d received the payment, and that I could ignore the letter. Then I happened to just discuss the problem one last time with that lady. Just to let her know the hell they’d all put me through for some mistake on the part of Vodafone. And when I, for the nth time, told her about the Vodafone software that installs on the laptop, I said, ‘you know, the little window that shows the level of usage, and other info’. Her reply was priceless. The Customer service something Manager told me she had never seen the actual software before. And she didn’t know what it did. So, I was arguing with about 12 different people at Vodafone for well over three months, had to shell out money for no reason at all, and all along, this lady, who was definitely at a fairly high up position, didn’t even know what she was arguing about or defending. No better way to kill customer care, eh? I guess all along, all they meant was ‘Happy to Help (ourselves to your money)’.
  • Several years back, my dad had applied for a car loan. So, as part of the process, the bank executive dropped by home one afternoon, to get some papers filled, and to collect the post-dated  cheques. While dad was signing the 59 odd cheques (5 year loan), the executive, with a concerned look, asks dad, ‘Sir, I hope you have the total amount (the loan amount) in this bank account?’ Dad, already a little irritated with all that signing, suddenly was at a loss for words. He tried his best not to show his disbelief at the question, which of course, didn’t work too well. He looked at the executive and said, ‘if I had that kind of money in the bank, do you think I’d be applying for a loan?’ It then struck the executive, who then tried his best to hide his embarrassment with ‘of course sir, well, I was just asking’.
  • As a kid, I used to frequent the Croissants‘ outlet near my granny’s place. I had many favourites on their menu. And we sometimes used to parcel plain croissants. A slightly microwaved plain croissant tastes great with tea, especially in the mornings. So one evening, mom sent me to pick up about 15 plain croissants. I walked in, to find that I was the only customer in the huge place. Anyway, so I paid at the cash counter, and then walked up to the counter for plain croissants and gave the attendant the little order slip. He looks at it, and then asks me, “Will you be having them here?” I looked around, and then asked him, does it look like I’ll be eating 15 plain croissants here, alone?” Talk about being stuck with your foot in your mouth =O
  • My job in Venture Capital too, made sure I got a regular dose of such situations. Like a few times when I’d get calls or even random visits from aspiring entrepreneurs. They’d go, “I’m planning to venture out on my own. How can your Venture firm help me?”, they’d ask, with a straight, I-mean-business sort of face. That would get me all thrilled, every single time. I mean, it takes a lot of guts and conviction for anyone to start a business on their own. And I admire that. So then I’d ask them about what the venture is all about. How much money they’d need, and all that. Then comes the priceless answer. Something that normally sounds like, “I have a few different types of businesses that I could possibly get into. Depending on which one, the venture funding I’d want would vary. However, I haven’t really worked out the exact funding that might be required. You see, I could either start with one of the businesses in one state, or cover like, half of India. So accordingly, the funding I’d need would vary. I wanted to know how your fund could help me out.” Huh.! I could’ve sworn the board outside my office didn’t read ‘Charity Venture’ or something to that effect. Then why.?

Lemme know bout your ‘at a loss for words’ moments…

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Way to go, Alok! The Venture Capital Differentiators

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Way to go, Alok! The Venture Capital Differentiators

A few years ago, I came across this interview with Alok Mittal on the internet. Alok is the Managing Director at Canaan Partners, one of the leading VCs in the technology and healthcare businesses, the world over. And in that interview, Alok was talking about their investment in techTribe a few years earlier. techTribe, by the way, happens to have a job referral service offering, similar to the incentive based job referral business model of the company I wrote about earlier.

Alok had publicly agreed that the incentive driving referrals was not going as expected. And that they have been planning to sell the company as the business model didn’t seem to work. I did feel a sense of pride and satisfaction that my gut feel and reasoning was in a way being backed by someone, who is to me, something of an authority in the field.

Then, something struck me. Here was a world where everything that everyone spoke about publicly was, like the Americans popularized, “good”. And amongst them was someone as knowledgeable, intelligent, and capable as Alok Mittal. It took someone humble, grounded, and true to his work, to openly talk about his mistakes. Literally in Rudyard Kipling’s words, he could ‘meet Triumph and Disaster, and treat those two imposters just the same‘.

Hats off to your humility and honesty towards your work, Alok.!

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Models that Puzzle Me

This is one of of some business models that just don’t make sense to me.

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Models that Puzzle Me

If you came here expecting some scoop on Gisele Bundchen or Miranda Kerr, I suggest you hit the ‘Back’ button. This one’s more about the ‘less figure, more strategy’ business models. I’ll work on a post on real models sometime soon though, I promise.

A few years ago, on a random day at office, I received a call about an investment opportunity. At the time, I used to take an average 2.5 inquiry calls per day, speaking to a wide assortment of people. From second and third generation businessmen to entrepreneurs working on their second or third successful venture. And even some final year students who had budding dreams about what could as well be the next big thing. And every once in a way, I’d get a venture who’s business model was confusing. Here’s one of a few business models that puzzle me.

Anyway, so this call, Mr. Promoter of a company that was into the job portal business that was based on referrals. Simply put, the usual job portals work on the model that companies that hire from a particular site would have to pay them certain fees which would give them access to a filtered set of numerous candidates, and perhaps if some of them were hired, the portal would get another x amount of money per candidate hired.

Now that model, as we know, perhaps works just about fine, as demonstrated by the popularity of naukri.com, monster.com, timesjobs.com, and several thousand others.

This particular business model Mr. Promoter told me about, seemed to be based on a reward system. How it works, is as follows. You are  a good friend of mine. I know you’re looking for a job, so I get in touch with this company, and give them your cell number or perhaps your mail id. They get in touch with you, tell you that they’ll help you with getting a job. They ask you for your resume, and for the particulars of the kind of job you’re looking for, etc.

Now suppose they find a suitable opening for you. They put you across to the company, and in case you’re hired, obviously this firm would get their fee for helping them find a suitable candidate. Of that fee they receive, I would get a small percentage for the lead. Thus incentivizing me to refer more friends of mine for more requirements.

I tried discussing with Mr. Promoter, almost to the point of arguing. I just couldn’t see the future of such a business, and I wanted to make sure he saw my perspective. It appeared simple to me. I could of course, be totally wrong. I mean, that’s what the VC business, just like anything else, is about. It’s about perspective. I could have my views, Mr. Promoter would have his. The market and success or failure of the company would prove one of us wrong.

Anyway, so my points of argument were, that the higher the post, the higher the pay the firm, and in turn the person referring someone would receive. But, in the real world, you don’t really find a VP or CEO of a company referring someone to a firm. Right? I mean, who would have the time or the inclination for something like this. And at that level, one would have bigger things to worry about that trying to find people in order to make some quick bucks by way of referral.

So that leaves us with entry-level all the way to perhaps lower or mid-management candidates. Now most of them would anyway be registered on all the top job sites, where many if not most companies, would be tapping into, as one of their many sources for finding candidates. So that being the case, we can’t really expect a group of students from a college to refer each other to this firm in the hope of supplementing their pocket-money, eh?

So, anyway, I turned down Mr. Promoter’s investment proposal and even called him later to try to reason out that somehow, the business model didn’t seem to hold. He however, seemed convinced.

So much for one of the business models that puzzled me. The promoter and I have not been in touch since. And while I do hope he’s doing well, I am curious to know how his business worked out for him.

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