Investing in a Startup

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I have always thought that investors had the easier end of the bargain. They had people coming to them to present their proposals, which they would evaluate based on their knowledge and accept or reject. All that changed since we put in place a Student Project Grant at VIT University, Vellore.

The premise was that there are a lot of engineering students who have great ideas that they wish to pursue but are unable to find the base seed money that they need to get off the ground. We thought if this support was provided they could get going. We had planned to support between 5 and 10 student projects. Bare in mind, we were just trying to stimulate the eco-system not profit from it!

Well… It was not all that simple. What was even more surprising was that we faced problems with sourcing quality proposals!

In the first round of call for proposals, we got 24 proposals out of which 4 were given the grant. In the next round we got 33 proposals, out of which we have still to approve even one. Looking at the odds we might have to seek a third round.

The first challenge was that most proposals although extremely great research projects but did not make good business proposition. They lacked any kind of validation (Technical, Consumer, etc.).

50% of the proposals were rejected for this reason alone.

Then there were proposals which were extremely great on paper, but we did not feel that the students would be able to execute the Project that they were proposing with the kind of resources, financial and otherwise at their disposal.

This ensured that another 35% of the proposals left aside.

Then can the few which seemed interesting enough. There was a possibility that those projects could see the light of day. The ability to execute was there, but we felt that there was a lack of sincerity. In the sense that I had my doubts that they would follow through on it.

This took out about 7% of the proposals.

With that gone, we have a very small basket of proposal that we are actually supporting. Not to mention, there is money left behind in the grant.

So the fun does not end there. So, we went like, this needs an eco-system boost and there needs to be more exposure and education about Startups and what is possible. We setup The Blueprints Club as a means of reaching out to students and giving them learning and support.

Guess what happens?

We get a dozen students who are actually working on a real product and even have a prototype ready! They are just too vary of trying to do a real business with it. I got to see some real amazing stuff, which may be ripe for commercialisation; if only the students would be willing to take a plunge! We tell them there is grant available.

At this point you get three categories for students:

  • Those who wanted to apply for the grant, but did not really bother about it
  • Those who will go ahead with a startup idea ONLY if they get the grant
  • Those who don’t want the money at all; all they need is inspiration!

This got me thinking, is this the same problem that most VC Funds face in India. People with ideas and probably capabilities as well, just lacking the inspiration or the courage to go out there and build a business!

Is this really the problem that confronts VC investors in India?

Finding your Co-founder

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Last week we had a great Startups Club meet at Chennai. The topic of the meeting was ‘Finding your Co-founder’. We had a discussions about the importance of a co-founder, after which, we arrived at the customary game. As a part of the game, all of the individuals who were present in the room were divided into two groups. Each was handed a slip which contained the name of an animal.
The participants were suppose to act like the animal mentioned on the slip and find their pair in the other team. As soon as the activity began, people started finding their pairs. It all happened really fast!
Once most of the members had found their pair, we got down to understand what we had learnt from the entire exercise:
Don’t be afraid to be who you are – In the context of the game, individuals were forced to act like a monkey, a dog, etc. Those who were not afraid of being what they were, were the first to find their counterpart. In life as well it is important to be who you are to find your right match. Pretending to be a person who you are not might get you a co-founder, but in the long run it will end in disaster.
Be around the kind of people who you are looking for – If you are seeking a technical person, there is no point in going to startup meets and looking for them. Go to places which such people frequent. Go to ‘Developers Conferences’ where you are certain to find people who have a technical background. hang out where you are certain they would!
When you find an opportunity don’t judge it and embrace it – We all have a view of ourselves. The way the world views us might not be the same as the way we view ourselves. Therefore, it is important to stop judging, when seeking a co-founder. You might be mighty surprised with what you find. Don’t stereotype people on the basis of how they look, talk, walk, etc. be open to everyone, you might be surprised how smart a ragged looking guy might turn out to be.
Keep moving forward – One of the member who did not find his corresponding partner, found out at the end of the game that the person next to him was the one! An entrepreneurs life is filled with challenges and difficulties. Just because a couple of attempts do not work out for you, does not mean nothing would. If you stop moving forward, you move backwards.
Perseverance
Never give up as an entrepreneurs, you might just be about to strike gold!

The Blueprints Club

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For a good part of the last 6 months, we have been pondering over the absence of sufficient number of startups emerging out of Engineering Colleges. On one of our visits to VIT, Vellore; we decided to work along with VIT-TBI to have the opportunity to work with young students with ideas. As a part of this initiative we decided to setup a platform called “The Blueprints Club” through which we could bring such students together.

Yesterday was a very important day; we launched The Blueprints Club (TBC) in VIT University, Vellore.

The reason we created this platform is two fold. Firstly, for students to be able to develop their ideas, they invariably require interdisciplinary skills. In an institution like VIT, where each branch consists of more than 600 students; they rarely get to meet all of the students who are a part of their own branch, let alone other branches! It is important that the mingling of like minds takes place in order to achieve greater goals. TBC provides a platform through which students with similar thoughts, expectations and hopes can meet one another, share their thoughts and find others who have similar passions. Also, in order to keep up the morale and motivation of the students who are pursuing their own ideas, they need to be able to see those who have succeeded in the pursuit.  This platform provides an opportunity for student teams to showcase what they have been doing and how far they have developed it.

Apart from this, we intend to bring in expert speakers and people from the startup eco-system to provide the students much needed knowledge and perspective about what they are trying to do.

We hope that this small step will play a huge role in the development of startup ideas within this university. We move forward with great hope and anticipation.

On Glocal

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I have heard this term Glocal often and have wondered what they mean by it. Think Global, build local! What do you really mean by that?

So continuing from the last post I wrote; a phone got lost and we found it using iCloud. While iCloud is a global platform and had a huge role to play, in helping us locate the phone; it would have been good for nothing if the phone had been switched off. Here is where the local knowledge comes to play.

This boy had put his phone inside a bag and left it in the locker. His knowledge of the local scenario prompted him to put a lock on the bag. Now, normally, had a theft occurred the phones would have been switched off immediately. In this particular case, since the bag was locked it was not possible for the robber to even know that there was a phone within. This small lock bought us sufficient time to track down the phone and retrieve it. A fine example of Glocal.

Although you may build for a global reach, the local knowledge is essential to make sure that the impediments on the execution level can be overcome.

Think Global, build local.

Having your sights on the goal!

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So yesterday, my partner’s son had gone to an amusement park and his bag got misplaced. Worse the bag had his newly acquired iPhone. He was still at the amusement park when we came to know of this, and as you would expect it was shocking to hear this.
After the initial “Oh Shit!” “God!” and other choice expressions, we resigned to the fact that the phone was lost. At this point it just occurred to me that the phone could be tracked using his iCloud account. After calling the phone up to see if it was switched on, I lodged into iCloud. The moment iCloud came live and we could see the phone on the map, a new aggression swept the room. “Screw the driver, ask him to wait, you go back into the park!”
Directions were being given, every micro-movement on the map was being tracked and there was this sense of excitement (at being able to see the phone and being so close to getting it); a sense of frustration (when the directions were not being understood); a sense of teamwork (trying to work out alternate ways of explaining the same set of directions); all combined into one; finally we located the device.
It got me thinking how important it is, in general, to be focussed on the goal that one want to achieve because once you have that in sights, the energy that gets infused, by being able to see that goal is immense. This is the energy that makes impossible, possible. Makes groundbreaking innovation, reality. Makes lofty targets, achievable. Having your goal in sight is the fuel that energizes a team during the toughest of times and makes entrepreneurs successful.
This is the fuel, the energy that any startup desperately needs. Never take your eyes off your goal.

We should thank Barack Obama for Crowd-funding!

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So today, I was getting all bent out of shape about the shame that is, Indian Politics. The so-called saviour, who was elected last month in Delhi is engaging in a form of economic stupidity that cannot even be expressed in words. He was probably the first guy in India who was able to pull donations from common people to get his party elected to power. (Obviously, not all of it came from the people and if we had to do a detailed analysis I would certainly have to write a book, so for the purpose of this blog, we will only consider the funds raised through the people.)

It got me thinking; whatever prompted this to happen?

‘A man who was fighting to be elected to power in a STATE in India, has been getting contributions from across the country and even from across the world, because people hoped that he would clean up the Indian political system!’

The only two reasons that came to mind were technology and a precedent. The internet is a very powerful tool; one that is being increasingly leveraged by all. The reason, word was able to spread so fast and people could react equally fast was due to the internet & social networks. This has also been sighted as the reason for the successful uprisings in the Middle East. The precedent that I talk about was set in the elections of 2008 by Barack Obama.

It was Barack Obama that led the first and I believe, to date, the most successful crowd funding campaign over the internet. He was able to raise money far in excess of what many pundits thought possible. He was able to galvanise the people of America behind his vision and support his campaign, not only by casting a vote, but also by donating  their hard earned money.

No sooner had he finished his campaign (Dec 2008), by the spring of 2009, Kickstarter was born. The crowd-funding revolution was up and away.

I don’t care for the future politicians who may use the same method to raise money, but the startups community, especially the hardware startup community definitely owes a debt of gratitude to President Obama for opening this door called Crowd-funding!

Little Eye Labs – Facebook Acquisition

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Yesterday, a small company called Little Eye Labs, which helps optimise Android apps got acquired by Facebook. Normally, not a lot of press would be extended to such an acquisition, since the company being acquired is rather small; but the media in India exploded with this news.

This acquisition is the quintessential, ‘One small step for man, is a giant leap for mankind’, moment for the Indian startup eco-system.

Typically, investors look to invest in startups because they have the ability to grow faster than established firms, simply because they start from a lower base. So, if you asked anyone; What is the kind of business would an investor seek to invest in? They would say, there should be a strong team, the idea should be great, you should solve a real problem, it should be scalable, there should be barriers to entry, large addressable market, etc.

The fact that most miss out is that an investor seeks to enter a business that he can profitably exit. Exit being the keyword here. For most small software product businesses, scaling the business to its full potential can take a decade or longer. Acquisition is a very attractive exit for investors. Up until this point, Indian startups had not been acquired by US technology firms. This one deal has opened the doors for many such deals to be explored in the future.

What does this mean for Indian startups? Well, the confidence on the part of the investors would be on a whole different level as such deals begin to materialise. Moreover, the exposure that the Indian startup eco-system would begin to get as a result of this is going to propel things forward.

This one step for one Indian Startup is a giant leap for the Indian startup eco-system!