And then there was light…

There comes a time in every venture’s lifespan when it needs to scale the mountain, round the bend, bell the cat, bite the bullet – or in layman terms: Start running on its own cash flow!

There is only one thing that I can say for this event: Its a proud moment, and an EXTREMELY liberating one. FYI: We arent there yet – but god willing, we will be there by end of next month. We eat what we reap. We start generating positive (monthly) cash flow. We have enough commitments from our clients to become operationally break even next month.

Its been a long journey – and could have taken much longer. It started when there was the ‘Inception’ of an idea in my head by a gent called Krishna Jha. Krishna is a partner at TelNet ventures and a previous entrepreneur with experience of building and exiting a business in the telecom space. I had met him at Proto and had interacted with him many times. He had come to our office a couple of months back and at that time, we were clocking Rs. 40K per month. Krishna’s advise was to triple the revenues – Bring it upto 120 K. His words were “Simulate a kick in your balls. Right now – you are running on the cushion of investment – Simulate a scenario that you dont have that much cushion.” The idea stayed with me – and morphed into a bigger hydra than what Krishna had suggested. Why some? Why not NO cushion?

We thought about the ways and means of enhancing revenues to become operationally break even and yet keep growing. We thought hard but not for long. We did only two things:

1. I went back to our investor (who had committed SGD 1Mn of which we had utilized 15%) and said with a lot of difficulty: “No more money please. We have decided to live off our own produce. No more ‘Khairat’”. I think the investor was a bit taken aback at first – it isn’t often that they hear the entrepreneur telling them that we don’t want your money any more. The fact that he appreciated it much more became clear when he made me a director on the board of Regional Airports Holding International Ltd. (RAHI) <– that’s another story.

2. We got out there and started gunning for business. Raised the prices, went back to our clients and thankfully our product was good enough for them not question the raise in prices – but rather they came out and said give us 10 times more! We obliged. One client went from Rs. 20K to Rs. 200K in one month flat. Next month – they want to double that!

We are still a bit away from complete operational break even, but the ‘feeling’ that I am already getting is one of sheer exhilaration – and frankly, I cant explain it enough in words. Its a mix of the bubbles in the stomach & the twitching smile &  the jump up high & the scream out loud feeling.

So here we are: Some extremely marquee names as paying clients. Currently integrating on top of a unified telecom platform in India. International launch as a VAS service on top of probably one of the most innovative operators in the world in 2 months. 3G launch on an Indian operator (signed, done – launch whenever it happens). Brought down the sales cycle from 5 months to 1.2 months – and focusing only on the VERY big clients. And a situation where we will break even operationally in a months time. With all of 9 extremely dedicated and proud people.

Its too early to start taking bows. Its too early to break out the bubbly (we will have a nice session the day we actually get to operational break even). It is actually time to start taking stock of the much harder road ahead. Time to think about scaling while maintaining your own cash flow and business. When someone asks me about investment – I say that yes, we are looking to raise funds. Not because we wont get there, but because with the right ‘kind’ of investment, we will reach there faster.

A reputed VC recently told me: “Thats quite a bit of progress for a year of operations”. My response was “Not enough. Not nearly enough”.

Watch this space!

M

The real problems of grass root entrepreneurship

I have been away from this page for a fairly long time, and trust me, its not because I didnt want to come back. Its just been crazy this past month or so. The Red Herring Global Top 100, took me for the first time to the US, and I got to understand exactly why the Silicon Valley is a hotbed for innovation and entrepreneurship. To drive a convertible mustang on Highway 101 to Vegas is another world experience. Thanks Mr. GPS inventor! I could go on – but this post is not about the US or Vegas. Its about the learning that I had at the RH Global 100, becoming a finalist at the Mobile Premier Awards and more recently at Proto.in. I will present here the key issues that are being faced by entrepreneurs in building businesses (as I see them at the grass root level) + I will mention one specific Idea that I came across (and the reason I put it here).

The real problems faced by Entrepreneurs in India: In order of importance are

a. Gathering the right team: At the IAN discussion at Proto – 75% of the questions were about the team (maybe because thats the single most important thing that investors look at). It struck me that people become entrepreneurs – and they dont really even know what type of a team member do they require. Sutra HR does a good job of helping you find the right guys. Not sure if they can help you identify what talent you require though. Jay and I have had some discussions – and their new product is something that I would use (again).

b. Pitching it right: I met some incredibly brilliant guys who have some really cool stuff happening – but I had to dive into what they were saying to figure out their business. One advise that I would like to give is to keep practising the pitch. To customer one – x pitch (30 secs). To customer two – y pitch (40 secs). To investor – z pitch (60 secs). Remember – before you pitch anything, know the pain point / sweet spot of the person you are pitching to, and focus ONLY on that. Not on YOUR product – but his sweet spot. If you have a demo – dive into that and let your product do the talking. <— this is relevant to the last part of this post

c. Knowing what to ask, and having the balls to ask it: I came across innumerable entrepreneurs who wanted to ask some hard questions – to whatever their audience was, but very quickly fell into the ‘community and validation trap’, where you tend to ask what everyone else also wants an answer to, and frankly you already know the answers to. ‘If I dont have a tech guy in my team for a web based business – is it ok?’ (errr.. NO) , ‘We are two graduates and got rejected from a bplan competition because we didnt have relevant experience – is that important?’ (errr.. duh), and so on are about 60% of the questions being asked. The harder questions like ‘How many startups have YOU invested in which were a napkin idea’, or ‘Whats your typical investment ticket size’ will tell you more relevant stuff about the investor you are talking to, and place you as an equal to him rather than you being subservient and asking for validation from him

d. Understanding the difference between a fundable business vs. I want my website funded: This one has a link to all the above. A fundable business (depending on the stage) would to my mind be one that has put together the building blocks of a business. Forget tech, forget product. A business. Management, Sales, Marketing, Finance, Operations, Logistics, Customer service – or whatever it is that your business requires. Websites dont get funding – businesses do.

e. Access to capital: There is capital out there. We all know it. Its about how you have tackled the first four points that will define whether your 60 sec pitch to the (right) investor you meet at the next proto.in or Headstart conference extends to 20 mins and then to further meetings. I wont bore you here with the names of the various angel networks and stuff – but they are there, and you know it.

f. Mentoring: I mention this last, because this realization came to me at 8.00 PM last night, while I was sitting at the IITB canteen swatting away life sucking mozzies . I was approached by a young couple. They introduced themselves and we sat down to talk. They wanted some advise on their business. I wasnt quite sure why they chose to speak with me – but I was all ears. They dived into their pitch about the product and we waded through it for a good five mins, but I wasnt able to understand what they wanted to tell me. Then at some point, the guy took out a rough cardboard sheet and 10 thinner peices of cardboard (Yes Cardboard). He proceeded to demonstrate his product to me and the results that it could produce in children – and my eyes opened wide. www.dewink.com is the company – and they have one of the most mindblowing products derived out of their own creativity and logic, and it increases the creativity in children by as much as 50%. An 8 year old with the creativity of a 12 year old. I saw the drawings and stories done by children – and being a father myself, I told them “If you have a product – Here is Rs. 2000 right now. I want one”. I will offer to help them in any way that I can – mentor them as much as I can and help them bring their product to market. The reason for this short story is simple – There arent enough mentors around, but also – entrepreneurs dont approach enough people for thoughts, validation, and are hesitant to get mentors on board. Big mistake. My one question to them was – can you imagine your product. Whatever you can imagine – someone will be able to make it happen. They had never thought of it like that – and maybe thats what is required for this company to create a product that has a clear market of over a billion dollars, and a ready need. Think BIG, THINK.

Comments welcome!

M