startup

Smarter funding: How to get the backing that best fits your startup

Here are some of the trends in the tech world that have impacted how startups raise money.

When going from $0-10 million in sales, most tech entrepreneurs think there’s only one path to raise growth capital for their startups: selling equity in their business. It’s a model that has been reinforced by several decades of tech companies feeding on a steady diet of equity money. This equity model creates a cycle for entrepreneurs: found, build, raise, grow, raise, grow, and then exit, hopefully at a top valuation (and without too much dilution or a down round, since that would wipe out your founder holdings).

Then after you exit, if you’re really successful, you either spend lots of time on your sailboat, dabble as an angel investor and startup guru, or you repeat the process by starting another company and going at it all over again.

But things have changed over the past decade, and entrepreneurs should adjust their mental framework about startup financing accordingly. Here are some of the trends in the tech world that have impacted how startups raise money:

Launching a product takes less capital than it used to. Especially if you have a SaaS offering, your cost of development, delivery, support, and updates cost so much less than the days of packaged software. Development is faster, and platforms like Salesforce and AWS don’t require on premises severs and tons of tools, etc.
Recurring revenue models take time to build, but over time the power of compounding is intense.
Niche markets are easily served, meaning you can build great businesses and dominate a niche market without much competition.
More financing options are available for tech companies than ever before – if you’re creative.

If you’re trying to raise money for your business, there are now many alternatives to VC funding, particularly for smaller tech companies. Let’s look at some of the options:

Revenue or royalty-based financing

RBF is something of a blend between bank debt and venture capital. A relatively new type of financing structure, with RBF the company “sells” a set percent of its future revenues to the investor in exchange for a capital investment. The simplest way to think about it is as a revenue share between the company and the investor.

Pros: This method of financing is more accessible than bank loans or venture capital, and the loan payments align with the success of the business as they are based on company revenue. Additionally, the company retains full ownership and control, and there are no personal guarantees or covenants required.
Cons: RBF can cost more than other types of financing such as bank loans, SBA loans, or crowdfunding.
Good for: Companies that have been in business for at least 6-12 months and have a recurring revenue stream and steady growth. Also good for companies looking for growth funding to scale sales, marketing or development efforts.

Customer pre-pays for long periods

There are many pros and cons to this approach, but overall it’s cheaper than equity and it means your customers are committed to you.

Pros: In addition to providing cash flow and working capital to cover operating expenses, pre-payments may drive higher customer retention rates.
Cons: It can be hard to convince customers to prepay. This method also requires discipline to correctly manage cash flow. If you offer both monthly and annual payment options, you need to make sure pricing is appropriately discounted. Keep in mind that a prepayment discount is usually implied, i.e. 20% off if you pay for our tool/service annually vs. monthly.
Good for: Companies with large customer bases and businesses with seasonality (think landscaping in seasonal climates).

Charge customers for non-recurring engineering (NRE) expenses

Charging customers for non-recurring engineering costs will pay for your dev team! But before you go that route, you need to make sure whatever you plan to develop is something many of your customers want. You don’t want to allow one big customer’s requirements to derail your value proposition and focus. And you need to make sure you get the customer and don’t turn them off – you’ll do this by being the best overall solution for them, addressing their needs best and forming strong relationships with them.

Pros: Since you have to pay for development costs anyway, this route helps cover some of that cost. This capital boost allows you to build the features customers are requesting into your product.
Cons: You have to make sure these requested features are functional and map to customer requests/expectations. Furthermore, if you don’t estimate the project timeline correctly, it can end up costing you more time and money. Sometimes big customers can derail your product roadmap/vision.
Good for: Companies with large, complex enterprise offerings and integrations, and highly integrated tech startups that need to build products connected to other platforms (AWS, Salesforce, Marketo, etc.).

Donation-based crowdfunding

No equity is involved here, so we’re talking donation-based platforms like Kickstarter and Indiegogo. Crowdfunding only works for certain products, but some businesses have raised tons of money doing this. This financing method is simply booking customer sales in advance of having a product. It’s the best type of capital you can receive from your customers and the best thing for your cap table, since there’s zero dilution.

Pros: Crowdfunding allows you to have customer sales locked in and front-loaded before you start production. It can also serve as a good way to test demand and provide good intel on target customers and market.
Cons: You’ll have the added pressure of a large number of pre-paid customers anxiously expecting their reward or product. Plus, your offering may be perceived as a beta product and signal you’re not ready for prime time or in it for the long haul.
Good for: Companies producing material goods or who are in early stages of testing their product and market.

Equity crowdfunding

To gain financing through equity crowdfunding, a large group of investors (aka the “crowd”) gives you money in exchange for shares. If you go down this path, you may end up with dozens or even hundreds of investors, and there are more reporting requirements for investor protection, so it’s important to know how it all works. Here’s a good Equity Crowdfunding 101 article for reference.

Pros: With an online offering page, you are able to quickly share the details of your deal. This method also gives you easy access to investors and their capital.
Cons: There are many new and changing regulations around this model. While the JOBS Act is designed to open this type of investing to everyone, it has set limits. For example, if you raise more than $500K you’ll be audited, and you can only raise $1M in any 12-month period (via non-accredited investors). There will also be cap table issues and concerns about what type of investors you are bringing on. Choosing to pursue this source of capital might mean losing the ability for your investors to also be advisors. Venture investors sometimes view crowdfunding negatively — they don’t want to be one of dozens or hundreds.
Good for: B2C and early stage startups with a Minimum Viable Product showing traction (# of customers/users, MAU, DAU). Companies that have real numbers and metrics that demonstrate growth.

Line of credit

Once your company has over ~$5M in sales, technology-focused banks such as Square 1 or Silicon Valley Bank can provide Accounts Receivable (AR) and Monthly Recurring Revenue (MRR) lines of credit. Types of covenants you may see for lines of credit are minimum net income thresholds, restrictions on additional debt, and minimal revenue growth. Then there are liquidity ratios, which mean you must have a certain amount of cash in the bank vs. how much is pulled on the line.

Pros: In addition to low interest rates of 6-8 percent, you’ll also have access to the capital even if you don’t use it right away.
Cons: You must give a personal guarantee. Banks will usually require a financial covenant to secure the loan, so that means your house, or other equitable property, etc.
Good For: Companies with lots of accounts receivables and cyclical payment cycles, and companies with tangible assets.

As you review different financing options, it’s important to make sure that the options you consider map to your business goals. Here are three key questions to think through:

1. Are you sure you want to sell your company in next ~5 years? What if you really love what you’re doing and want to run the business for a long time? If that’s the case, equity probably isn’t the best funding option, since the first letter in “ROI” is “R”, and equity investors expect big returns – usually 10x or more. Successful businesses that never give a return to investors are a bad investment. It’s not fair to equity investors and can create a lot of tension. It’s hard to buy people out later, especially if you’re successful, and it means you’ll almost certainly be trading one equity investor for another equity investor.

2. Do you want to give up control? Once you take on equity investors, it’s no longer just you and your cofounder making decisions. You’ll have a whole new audience you need to please all the time, in addition to communicating with your employees and customers. Some investors will want to provide input on strategic direction and decisions. And you’ll likely get a new boss – a board of directors.

3. Are you really sure you want to “go big or go home”? What if you just want to build and run a great business? Receiving VC money is like having a rocket strapped on your back – either you’ll make it to the moon or you’ll blow up trying. While your chance of making $100M goes up when you receive VC money, so does your chance of making little to no money.

Just to be clear: I’m not against VCs or taking VC money. In fact, I’ve been a VC myself. There are many amazing companies that use VC money to grow and succeed. However, I do think if you’re looking at funding choices for your startup, you should go in armed with as much information as possible, because many times there may be a better option out there for your business.

This article was originally published in venturebeat.com

Forget unicorns – Investors are looking for ‘cockroach’ startups now

2015 was the year of the “unicorn” – private technology-driven startups that reached a valuation of $1 billion or more.
But tech and startup investment is going to be defined by a very different beast in 2016 – the cockroach.

“Everything is about resiliency now to weather the storm,” says Tim McSweeney, a director at technology-focused merchant bank Restoration Partners. “Unicorn, it’s a mythical beast, whereas a cockroach, it can survive a nuclear war.”

A unicorn is characterised by superfast growth, fuelled by VC money. They’re not profitable but the idea is that the business will reach “scale” first, before concentrating on making a money once it’s won plenty of market share. Uber is a prime example.

Startups that joined the unicorn club last year include TransferWise, Lyft, Zenefits, SoFi, Hellofresh, Prosper, Oscar, and Farfetch, according to venture capital data tracker CB Insights. There were many more.

A cockroach, by contrast, is a business that builds slowly and steadily from the get go, keeping a close eye on revenues and profits. Spending is kept in check so that it can weather any funding storm.

McSweeney says: “For the investment side, it’s minimizing the risk. Let’s find a company that can survive a nuclear war and then come back to fight another day or pivot and do something different – it has the right team, the right customer base etc.”

McSweeney mentioned the concept of a cockroach company to me at the launch of the Virtual Technology Cluster (VTC) Group recently in London and jumped on the phone later on to discuss it.

Restoration Partners doesn’t invest itself but offers banking services to business-focused technology startups. As such, McSweeney and his colleagues have a good view of the investment space.

McSweeney didn’t coin the term cockroach and isn’t the first to highlight it. The investment theory is an old one and Flickr founder Caterina Fake penned a blogpost on the idea last September.

Unicorns are going out of fashion for many investors.

But the idea of the cockroach vs. unicorn captures a widespread mood in the investment community right now. At a recent conference in London on fintech – one of the hottest subsectors of technology that boasts plenty of unicorns – I found investors and bankers worried about “froth” in the market.
McSweeney says: “I think the unicorn element is coming to an end anyway and the bubble in the market is just sloping off.”

McSweeney’s boss, Restoration Partners’ founder Ken Olisa, told me much the same thing. At the VTC Group launch, he said: “There’s a unicorn industry and they can play around with each other but all it will do is end in tears, because it’s not about the customer and it’s not about adding value to anything.”

So why are investors looking for cockroaches rather than unicorns now? The answer is funding.

2015 was characterised by free and easy funding for startups, thanks to record low-interest rates driving more and more cash into venture capital and poor stock market performance encouraging the likes of Fidelity and BlackRock to try their hand at VC investing.

But 2016 got off to a very different start, with venture capital funding drying up amid wobbles for the global economy.

This has revealed problems in the business models of many unicorns and other fast-growing tech businesses, most of which rely on easy VC money to fund their growth. Businesses like Twitter and Birchbox have all been making layoffs and Fortune’s Dan Primack recently noted that both private equity and venture capital performance declined in the first quarter of 2016 for the first time in years. Zenefits, one of the 2015 inductees to the unicorn club, has imploded pretty spectacularly.

McSweeney says: “In terms of chasing growth and growth and growth – it’s not about sustainability. It’s just trying to grow as quickly as you can without looking at the fundamentals of the house. That’s what I feel a unicorn is – chase growth so investors give you money. It’s kind of a reinforcing cycle.

“Google didn’t growth hack, they just provided a service to the internet and build a business around it.”

He adds: “Look at Powa. It’s the bubble – I wouldn’t say it’s bursting, but it’s sloping downwards. There’s frothiness.”

London-based Powa Technologies raised at least $225 million in debt and equity over the last three years and at one point claimed to be worth $2.7 billion. But the payments business went bust in February, with debts of $16.4 million and just $250,000 in the bank.

McSweeney says: “I still think there’s capital out there but the application of it is more judicious. People are looking for smarter businesses to apply their capital to.”

This article was originally published in Business Insider

Image credit: Reuters/Andrew Kelly

3 Gems of Lessons on Innovation from Steve Jobs

How was he able to turn 4 businesses into mega successes in 1 lifetime when most people can’t convert 1?

Innovation – the most overused word in the corporate world today. Ask managers what the organization needs most and they will say ‘innovation and creativity’. And they are right! But when it’s time to walk the talk… well, you know what follows as well as me.

The name that springs to mind most when ‘innovation’ is mentioned is Steve Jobs.

How was Steve Jobs able to accomplish so much in one lifetime? How was he able to turn 4 businesses into mega successes in 1 lifetime when most people can’t convert 1? Well, apart from being a brainiac (his IQ was claimed to be in the high 160s) he had an exalted perspective of things. Here are 3 gems of lessons which we can learn on innovation from him.

1. “INVEST IN PEOPLE, NOT PROCESSES.”

This was Steve Jobs’ number 1 mantra. He believed in hiring the best and most driven people; people who wanted to achieve more than personal success. Jobs “saw over the horizon” and hired inspired people who could turn his dreams into realities. But he was never for processes in innovation. “You cannot make a process to innovate”, he said. It simply defeats the purpose. So instead of making an innovation process, hire the right people (however long may take) and give them free rein.

2. “SET AN ARDUOUS GOAL FOR YOUR TEAM, AND BACK THEM TO ACHIEVE IT”

The Macintosh was about to be introduced to dealers. With less than a week to go for disk duplication, Steve wanted the software to be final and not the proposed ‘demo’ version. The production team did not believe it was possible. But Steve didn’t react with anger. Instead, he told them how great they were and how Apple was counting on them. He set an audacious goal and encouraged them to achieve it. 15 minutes before the Macintosh was introduced, his team met the deadline.

Push your people to achieve 5-10% improvement and they will just work longer hours. But demand a 25% improvement, back your team to achieve it and watch. You will initially hear outcries of rebellion, but then your team will implement innovative thinking and bring about radical improvement.

3. “LOOK BEYOND YOUR FIELD FOR INSPIRATION”

Ever wondered why desktop PCs are vertically assembled instead of horizontally? It was because Steve wanted the Macintosh not to occupy more space than a telephone directory. It called for innovative thinking on part of his production team who assembled the PC vertically, and the competition soon followed suit. Magsafe, the magnetic AC adapter that plugs an Apple laptop into a wall socket, was inspired by Japanese rice cookers being sold in Walmart. Laptop chargers drew inspiration from rice cookers! Can you believe it?

Noted author Edward de Bono writes: “Your mind creates patterns out of its surroundings. Once patterns are formed, it is possible to recognize and use them. These patterns then become firmly established in the mind.” To break free, expose yourself to varied fields. Attend seminars, meet different people and most importantly, keep an open mind. The results may not be visible immediately, but when you ‘connect the dots’, you will be glad.

3 lessons which are simple to comprehend but difficult to implement! I still have a long way to go in getting anywhere near Steve Jobs in applying these concepts. But in whatever small measures they have been implemented, they have provided phenomenal results, making me appear like a rock star! Imagine what we will become if these lessons become a part of our daily lives!

Do share your views and additional points on innovation in the comments section.

This article was originally published in bizztor.com

Image credit: qz.com

How successful people are more productive

Sharing Infographics with key things on “how successful people work less and get more work done”.

People who work as much as 70 hours (or more) per week actually get the same amount done as people who work 55 hours.

Sharing infographics with key things on “how successful people work less and get more work done”.

Image credit: www.lifehack.org

Leadership Is Learned From Experience, Mentoring and Failure

There is no magic formula or recipe to get you there, but there are some key leadership principles that anyone can aspire too and learn from.

Committees don’t create successful startups. A single visionary entrepreneur almost always is the initial implementer of an innovative new venture, but that lone entrepreneur doesn’t have the bandwidth to grow the business alone. He or she needs the multiplier of growing from the “doer” to a team-builder and leader. That’s a big transition, and many entrepreneurs never make it.

These entrepreneurs know instinctively what needs to be done, but they may have no idea how to get it done through others. Some will argue that people leadership is a skill you have to be born with, but I’m convinced that it can be learned from experience, mentoring and failures. The ones who learn quickest are the ones who move from good entrepreneurs to good business leaders.

In my experience working with entrepreneurs and business leaders, I have found no magic formula or recipe to get you there, but there are some key leadership principles that anyone can aspire too and learn from, including the following:

1. Become an ardent student of leadership.

Entrepreneurs who become business leaders study the successes of peers and seek to emulate them. They reach to find mentors who have been there, read books on the subject, and participate in leadership development programs. Leadership requires focus and effort and doesn’t happen by title.

2. Set personal leadership goals and solicit feedback.

Business leadership requires spending more time working on the business, and less time working in the business. You can measure these activities yourself and get validation from your team. How much of your time is spent on futures, strategizing and coaching versus fixing daily crises?

3. Tackle new challenges outside your comfort zone.

If you never push your limits and never fail, you never learn new capabilities. As a new entrepreneur, perhaps you have no experience with hiring and delegating, yet these skills are not rocket science. Don’t be afraid to ask for support from more experienced peers and human resources experts.

4. Celebrate small successes and learn from failures.

People who demand perfection from themselves are rarely good leaders. Learn to celebrate small steps in the right direction and failures that are a source of real insight. Be humble and transparent in involving your team and even your customers in your successes and your mistakes.

5. Recognize and reward leadership successes around you.

Working to recognize and celebrate leadership in others will supplement and solidify your own capabilities. The more often you walk in the shoes of leaders around you, the easier and more natural it will be for you to define and capitalize on your own leadership elements.

6. Demand strong performance and deal quickly with mediocrity.

Recognized business leaders are known for their expectation of excellence from their team — and from themselves. They do not tolerate mediocrity around them, which keeps their teams highly motivated and proud to be associated with the leader as a role model.

7. Work on improving your communication skills.

Effective leadership requires effective communication, including verbal, written and body-language. Your team, customers and partners need to understand your vision, goals and what is expected of them before they decide to follow you. Great leaders also practice active listening and full attention.

8. Go forward with passion and a positive attitude.

No one wants to follow a habitually grumpy or negative entrepreneur. Business people are naturally attracted to passionate, motivated and enthusiastic peers. A side benefit is that you will feel happier and more fulfilled when surrounded by similar positive people. This is a self-fulfilling prophecy.

To grow from being an entrepreneur to a business leader is a personal challenge and not one that everyone can deal with. The core principles are the same for both — develop and articulate a vision, act decisively and build personal relationships. The leadership multiplier is required to effectively incent others around you to do the same. How well is that multiplier working for you?

Author: Martin Zwilling

Martin Zwilling is the founder and CEO of Startup Professionals, a company that provides products and services to startup founders and small business owners. The author of Do You Have What It Takes to Be an Entrepreneur? and Attracting an Angel, he writes a daily blog for entrepreneurs and dispenses advice on the subject of startups.

This article was originally published in Entrepreneur.com

Image credit: www.businesstopia.net

Let Go, Keep it Simple, Move Quickly: Secrets to being a Productive Entrepreneur

Time is money, especially if you are launching a business. Let go of old habits and focus on becoming more efficient.

From figuring out the perfect sleep temperature to dumping the clutter from your desk and learning how to let go of “perfect,” streamlining everyday tasks can lead to a more productive lifestyle.

Want to know more ways to become more productive? Check out the series of infographics below.

This article was originally published in Entrepreneur.com

Image credit: thenextweb.com

How Vijay Shekhar Sharma started – Life of Paytm’s founder

His Journey is inspirational to every Indian Entrepreneur.

The man, who always wears a welcoming smile, stands true to every word he wrote during the most difficult times of his life.

From being a small-town boy from Aligarh who bought second-hand tech magazines to the founder of one of India’s most trusted technology brands, Vijay Shekhar Sharma has come a long way.

Vijay Shekhar Sharma owns a company whose current value is a little over $3 billion in the market in 2016, a dream dreamt when he was struggling to make ends meet with Rs 10 in pocket.

His journey is inspirational to every Indian entrepreneur, lets go through his journey with this Infographic showing how he started.

How to raise money for your startup?

Raising money is simple but not easy. This guide illustrates one way how to raise money for a startup, especially for first-time entrepreneurs.

Raising money is simple but not easy. This guide illustrates one way how to raise money for a startup, especially for first-time entrepreneurs. We have seen quite a few entrepreneurs go from nothing to a funded company. This infographic is a generalization of their experience. Let us know if you have any questions about it in the comments.

Few More Tips How To Raise Money

When it comes to funding, there is one thing that can increase your chance of getting funded astronomically – traction. Yet, founders often struggle to get traction and hope that investor money will help them get it. This problem can be solved if you start lean, test your product and and gather meaningful feedback from your customers.

Use that feedback to modify your product. After you get traction, you are certain to get interest from investors. How much traction? Compare yourself to your competitors at the moment they got funding and use that as a benchmark.

Preventing people from raising money successfully, the other myth is that you can raise money before you build anything. Even if you are not an engineer, you can build a prototype of your product. You can do it in WordPress, another content management system (CMS), you can learn to code the basics. If you do not go out of your way to build your own product, why should other people risk in joining you?

Finally, when you are going to raise money, have the investors feel good about what you are going to spend their money on – not marketing, not development, not business development, but scaling.

This post was written by Anna Vital and originally published in Funders And Founders.

Image credit: www.naeyc.org

20 Questions you have to answer before starting your business

Here’s a game of startup 20 questions that could get you a big payoff.

If you run a business or are just starting one, there are few questions to answer that are worth thinking about. If you have well researched answers to those questions, you will have an easier time attracting critical resources – like capital and talent.

Here are the 20 questions to answer about your business.

1. What is your business’s overt benefit, dramatic difference, and real reason to believe?

Unless it is really obvious why your product is better than anything else on the market and that you can deliver on your promises, you may not want to bother with the other 19 questions.

2. How will your business help society, the environment, and any other affected stakeholders?

Your business ought to make the world better off. You should make it clear how you’ll do that.

3. What is the mission of your business and what overarching goals is it striving to achieve?

If you want to inspire talented people to join your company, your company should have an emotionally compelling reason for being.

4. What have you learned from systematically talking with potential customers?

If you want to convince someone that people will pay for your product or service, ask 100 potential customers. If most of them ask how soon you can get them your product, you may be on to something.

5. How has customer feedback changed your view of the business opportunity?

Use customer feedback to make your company better.

6. Which groups of people are likely to be your best customers?

You’ll have more luck getting customers if you focus on the ones who are most likely to buy your product. Know the traits those potential customers share.

7. What are the revenues in the market you’re targeting?

To calculate this number, multiply the number of people in your target market by how frequently they buy each year by the price you’ll charge them for each unit they buy.

8. What product features and benefits do your customers seek?

You will be competing with other products – know which factors that potential customers compare in picking yours over theirs.

9. What evidence convinces you that customers would buy your product?

I’d be encouraged if you talked to 100 customers and many of them said that your product outperformed rivals on those factors.

10. Who are your company’s competitors and what are its competitive advantages and disadvantages?

You ought to figure out the capabilities – e.g., product development, sales, purchasing – that your competitors are using to gain market share and then take an objective look at how well you perform those capabilities compared to rivals.

11. If you sell a product, how will you distribute it? If a service, how will it be delivered?

Mostly entrepreneurs think distribution is an after-thought – customers consider it hugely important. So you should deliver quickly and correctly.

12. How much will you charge customers for your product?

Have a clear pricing strategy that will help you gain market share.

13. How much does each unit of product cost your company?

Know how much it costs your company to build, deliver and service each unit you sell.

14. Which companies will supply your raw materials or key services and what are the terms of those partnerships?

Find suppliers who will provide the raw materials you need to run your business, Make sure the suppliers deliver quality products or services, on time and at a reasonable price.

15. Are your suppliers socially and environmentally responsible?

Pick suppliers that share your sense of social and environmental responsibility.

16. How will you advertise your business and promote your product or service?

Develop a marketing strategy that gets you the maximum amount of attention among potential customers without spending too much money.

17. How much capital will you need to start your business?

Estimate all the costs you’ll incur to get your business off the ground — then double your estimate.

18. What will your income statement look like over the next three years?

Make reasonable and well-sourced assumptions to project your future income. Investors will question every assumption.

19. How long will it take your company to break even?

To find the number of units you need to sell to break even. divide the profit from selling each unit of your company’s product by its fixed costs.

20. What are the risks of this business?

Be sure you have thought of everything that could go wrong and try to run your business in a way that keeps those risks under control.

With good answers to these 20 questions, you have a shot at getting investors’ cash.

Image credit: blog.cloudmagic.com

How to write a Business Plan: A step-by-step template

Writing a business plan doesn’t have to be an intimidating task, but it does require foresight, honesty, and plenty of research. Here is an outline and some smart tips to help get you started.

Creating a business plan is the first and most crucial step to building a successful company.

A business plan is important because it communicates to everyone involved in the organization what the goals are, and how management plans to get there.

The parts that make up a business plan are straightforward. Here’s a step-by-step breakdown to get you started with your business plan, along with a few expert tips on how to attract investors.

1. Describe your startup

The first step is to simply describe the business you want to build. During the process, it’s important to be honest about the obstacles you’re likely to face.

Starbird suggests including a breakdown of the target market and customers. You should also be clear about the factors offering a competitive edge.

Be careful not to have any blinders on when it comes to your product or service. People spend a lot of time focusing on the features that make them unique without taking the time to translate that into a value proposition.

Do diligent research on what your market is, and how to communicate with customers accordingly. The most successful investors are looking for an idea that is going to have a clear and understandable market potential.

2. Have a thorough plan: Document all aspects of your company

As the founder, you need to be concerned about all parts of the plan. That means including any licensing agreements, or your location strategy, for example.

It’s especially important to know and understand your numbers. The number one reason firms go under is inadequate cash flow. If you don’t know what’s going on in that area, you’re going to be in big trouble.

3. Make sure the plan is modifiable for different audiences

Different sections of your business plan will be more important depending on your audience. Investors, for instance, will want to see your financial projections, whereas employees might be more concerned with the organizational structure of your company.

The SBA recommends that you project that status of your company for between three and five years into the future, though it’s a good idea to outline your annual goals, too. Keep in mind that the further ahead you look, the less accurate your conclusions are going to be.

A five-year horizon is fine, but a thorough business plan looks beyond that [up to 10 years], with the recognition that some of the forecasts would be of decreasing accuracy.

4. Include details to put you over the edge

When writing the market analysis, it’s a good idea to include any information about external growth trends, and why one company might have the market share. Pricing power – meaning how consumer demand would be affected if your company shifted its prices – is one detail that often gets excluded from business plans, but which can help put you over the edge.

It’s also important to keep your expectations realistic and honest: The biggest mistake entrepreneurs can make when writing a business plan is to be overly optimistic with sales and future cost estimates.

5. Remember why you care

Your business plan should reflect not only your financial goals, but also your values, and those of the community you’re working to build.

How entrepreneurs can avoid million-dollar mistakes

When joining or building a company, it is imperative that you understand the laws around equity.

When joining or building a company, it is imperative that you understand the laws around equity. As an employee, not understanding how stock options work may leave you with expensive tax bills for worthless stock. As a founder, doling out equity too liberally will leave you with a sliver of the company by the time you exit through an IPO or acquisition.

Stock options 101

Typically, when you get hired at a large firm you are given access to an HR department that explains your 401k package options. You may even receive a workshop to help you learn about the various investment strategies and mutual fund options. This is not always the case when working for a startup.

Perhaps you’ve heard stories about employees who did not understand their options and ended up with a sizable tax bill for stock that was worth a fraction of the intended price. When it comes to stock options, timing and taxation are everything.

When you receive stock options, your shares will vest over a set time schedule. This is called your vesting schedule. The shares that are vested are available to you and those that are not vested are considered restricted shares. The company has the right to buy restricted shares back from you since you didn’t earn them.

At any time you can exercise your options to convert them into shares, yielding a mix of both common shares and restricted shares. Entrepreneurs exercise early to benefit from the small variance between the strike price and the current market price. This is why timing is important. You will be taxed at conversion, so convert when with the lowest possible tax event.

Exercise if you believe the stock will appreciate in value. Be certain to research your company’s industry to understand positioning. Is this company Uber or Sidecar? Facebook or MySpace? Exercising shares of worthless stock will leave you with a net loss. Do your homework to understand the company’s outlook.

Taxation and the IRS

Of course, there is always paperwork. You must understand the proper documents – Section 83 (b) election — that are filed in each event to remain in compliance.

Section 83(b) election is a letter you send to the IRS letting them know you’d like to be taxed on your equity, even shares of restricted stock, on the date the equity was granted to you rather than on the date the equity vests. Failing to file this one document will cause taxation at the vesting date, not the grant date.

Tip: Always consult an attorney when you receive equity or stock options. Your specific taxation will vary based on your country of origin.

Equity as an infinite currency

Another common mistake that founders make is giving away too much equity and to the wrong people. It’s a common misperception that equity is free and limitless. Actually, all shares have value and limits.

When deciding whom to give equity and stock options, ask yourself this question: Is there value creation and duration? In other words, is this person creating value and for a long period of time?

Example: A branding team creates a logo and graphics during a two-week period. This type of service should be paid in cash.

Example: A developer signs on to build your prototype and your future platform. This type of service should be paid in equity.

Whether you’re a founder or early employee, your equity and stock options should be handled with care. Treat them like gold. In some scenarios, they are worth more than gold.

This article was originally published in Entrepreneur.com

Image credit: encrop.net

10 Powerful quotes from Indian entrepreneurs that will empower you

Here are ten powerful quotes from Indian entrepreneurs that will recharge your energies and once again encourage you to dream big!

Oprah Winfrey was right when she said, “Don’t worry about success. Worry about being significant and the success will naturally follow”.

Here are ten powerful quotes from Indian entrepreneurs that will recharge your energies and once again encourage you to dream big!

Crackverbal is a startup offering GMAT and GRE coaching and application services.

Author’s Take: What Arjun said is absolutely true. When I got the chance to work on an arts and crafts startup, my first day at work entailed safai, jhaado and duster intact! There is no peon going to hand you chai in the initial days of your startup, so be prepared to take on the fancies and the frivolities, both with equal responsibility.

Saumil Majumdar is personally engaged with over 100,000 children, 50,000 parents and over 200 schools in the sports domain over the last decade. He is an alumnus of IIT Mumbai and Indian Institute of Management, Bangalore.

Author’s Take: Many business owners boast about the turnover of their enterprises, but according to Saumil, rightly, the word reeks of vanity. Profit is still a more realistic interpretation of how a business is performing. But the real thing is definitely the cash.

What: Freshdesk is a cloud-based customer support software that lets you support customers through traditional channels like phone and email. It serves some 30,000 customers worldwide including Hugo Boss, UNICEF, Good Reads, University of Pennsylvania, etc.

Author’s Take: Girish’s comments once again remind us of the need to be good to others, even if you are exceptional at what you do.

Venture Partner, Seed Fund; Advisor at Ojas Venture Partners, Sanjay has over 25 years experience as entrepreneur, corporate executive, venture capitalist, angel investor, teacher, advisor and mentor. He is an advisor to early stage funds and also overlooks a social fund.

Author’s Take: Any entrepreneur who is more interested in the money than his own vision of his product is not a true entrepreneur. When you are pitching to VCs or even to a customer, what you should sell is not just the product, but your vision, your dream.

Kalpana Rao of Pari’s created a specialty store in Bangalore that deals in clothes made up of natural, environment-friendly dyes.

Author’s Take: For all those who sometimes get bogged down in the long, tiresome and lonesome journey of entrepreneurship, this one is for you!

RJS is a leading game and app development company based out of Kolkata, India.

Author’s Take: Involve customers and your social community whenever you can. One reason why the AAP was hailed as a disruptive political party when it started was that it involved its supporters whenever it could. Learn from that.

For those awesome companies that want to attract the finest minds and play the game beyond HR, plugHR drives hiring, motivation and performance, and automates people management in minutes. It also innovates for culture development in organizations.

Author’s Take: Any organization that really wants to succeed loses or wins half the battle if it is able or not able to hire the right talent. Therefore, don’t just account the experience and qualifications of the person, peer inside and try to hire him for the person that you make of him.

Practo is an innovative health startup which schedules appointments of patients with doctors online. Practo’s technology significantly improves patient experience and allows better functioning of clinics.

Author’s Take: As a new startup, you should polish the product and make it such that customers are themselves pulled by the magnetism of the product. A sales officer/team should be set up only to scale operations later.

GoodWorkLABS is a new-age boutique software lab offering solutions in Software Development, Mobile Apps and Games, UX and UI Design and enterprise solutions.

Author’s Take: The home loans, car loans and other things your batch mates and colleagues are managing will be a struggle for another day’; for now, you’ve got a baby at hand!

10.

Vaatsalya is an award winning social enterprise, focused on building a network of hospitals in Tier II and Tier III towns in India.

Author’s Take: Be a firm believer in the adage that winners aren’t those who never fall, but those stand up and fight again!

This article was originally published in MensXP.com

Image credit: www.albaniperfumes.com

7 Ways entrepreneurs stay motivated

Motivation comes in countless different forms, and in the entrepreneurial world, staying motivated is required to succeed.

Motivation comes in countless different forms, and in the entrepreneurial world, staying motivated is required to succeed. Below are seven tips for staying motivated in the entrepreneurial world.

1. Realize The Progress

That Has Been Made Entrepreneurs never look back with regret; instead, they see every mistake as a lesson. That doesn’t mean they don’t reflect upon their progress, though. If lacking motivation, take some time to realize how much progress has been made. It’s a great way to appreciate the personal progress that has been made and it can be pleasantly surprising, too.

“You can become exhausted by decision making and the day-to-day activities,” says Mary Ferguson, President of Concenter Services. “You need to always take breaks to stop and look back at the progress you have made on a continual basis to stay motivated.”

2. Meditate Each Day

Find some time every morning or evening (or both) to meditate. It doesn’t really matter what it takes to clear the mind, but finding a calming process to wipe the mental slate clean is a great tool for staying motivated. It invigorates and refreshes, allowing entrepreneurs to see each day as a new opportunity.

“It is important to stay laser focused on your strategy. Do not get caught up in the small details,” explains Stephen Hall, a Glendale EA and tax planning strategist. “I have seen small business owners get caught up in the small stuff and forget the top line revenue and the vision to motivate its employees and vendors for the overall big picture. It is imperative for small business owners to write their overall goals down on paper and look at the goals daily and ask themselves- is this activity achieving the goals written down?”

3. Exercise

For being so physically demanding, exercise is an incredible way to release stress and find motivation. By nature, exercise is similar to entrepreneurship – both involve hard work, excuses are not welcome in either, and they’re all about personal development. The dedication and motivation that comes from exercise carries over to entrepreneurship so don’t skip that workout.

4. Limit Decision Making In Other Aspects of Life

Entrepreneurs have to make a lot of tough choices each day and it can take a toll. Throughout the rest of the day, though, they tend to limit decision-making to keep things simple. It’s a great tool for motivating entrepreneurs because it keeps them sharp when their abilities are needed elsewhere.

5. Visualize The Future

Every great entrepreneur had a vision of what they wanted to achieve, and for good reason – it’s unbelievably motivating. Entrepreneurs owe it to themselves to know exactly what they strive to achieve because without a clear goal in mind, the drive to achieve greatness is limited.

“I personally prefer to turn those entrepreneurship pressures around and use them to push me and my business harder, faster, farther.” Aaron Schmitz, CEO and President of Equity Technology Partners explains that, “I’ve seen how a lack of motivation in entrepreneurs especially during the hard times can affect their mental and physical health and the health of their relationships both personal and professional and while it’s an easy trap to fall into it’s also avoidable.”

6. Take Time For Yourself And Your Loved Ones

Sometimes, a break is all that’s required to motivate an entrepreneur. They are human, after all, and they get tired. Spending some time with friends or family, or perhaps embracing a hobby, provides the refreshing mental break that allows for a proper return to form the next day.

7. Experience The World

Motivation comes from many places, and not just mental ones. With the unbelievable range of cultures, values, and regions across the world, inspiration and new ideas are virtually limitless. Entrepreneurs should explore the world and take advantage of all it has to offer. There are endless ways to find motivation in the world, so don’t hesitate to expand those horizons.

This article was originally published in Inc.com

Image credit: aloha.com

5 Ways the Stand Up India scheme could benefit aspiring women and SC/ST entrepreneurs

The Stand Up India scheme, launched on April 5, ensures that women and SC/ST entrepreneurs have a fair chance at setting up their own businesses.

In January 2016, Prime Minister Narendra Modi had launched the Start-Up India scheme, which gave new entrepreneurs a chance at making it big. Under the scheme, entrepreneurs could get loans from banks to kick start their businesses. Now, a new scheme, launching on April 5, will shift the focus to SC/ST and women entrepreneurs, to promote inclusivity.

The Stand Up India scheme provides loans to entrepreneurs of the Scheduled Caste and Scheduled Tribes, as well as women. The loans range from Rs 10 lakh to Rs 1 crore. According to the government, these are sectors of the population that are often underprivileged or under-served. Both these sectors are upcoming, and fast. The scheme helps them out by facilitating loans for non-farm sector entrepreneurship.

Loans for Women Entrepreneurs

Women entrepreneurs in India find it difficult to get funding for their startups. Global Entrepreneurship and Development Institute (GEDI) published a global ranking that looked at how female entrepreneurs fare in the world. India was placed in the last five among the 30 countries that were analysed. It stated that about 73% women entrepreneurs failed to get funding from Venture Capitalists (VC). A study based in Karnataka found that about 90% women had only their own funding to rely on, while 68% found it tougher to get bank loans. All that is set to change once the Stand Up India scheme comes into action.

Refinancing Options

The scheme helps not just those who are in the initial stages of their entrepreneurial plans, but also those who have already set up their company but still fall under the startup category. Under the scheme, the government has opened refinancing options through Small Industries Development Bank of India (SIDBI), at an initial amount of Rs 10,000 crore. Along with that, a corpus (principal amount) of Rs 5000 crore would be created, to ensure credit guarantee through the National Credit Guarantee Trustee Company. Along with the composite loan, they will also be provided with a debit card.

Support and Knowledge

A research done by YourStory in 2014 indicates that about 54% women have no idea what a startup should work like or how to work on problem solving. About 58% women need to be educated about entrepreneurial resources and techniques. However, provisions under the scheme also includes support for both women and SC/ST borrowers, all the way from pre-loan stage to operating stage. Besides familiarising them with bank guidelines and terminology, they will also know about registering online and how to use e-markets, and entrepreneurial practices. To bring together all the information related to the scheme, the government will be setting up a website for Stand Up India.

Substantial Reach for Maximum Benefit

While self-employed women working in the low-skill sector (such as manual labour or street vending) has increased to almost 1 crore between 2000 and 2010, the number of women in higher income entrepreneurship still remains low. To increase this number, the intention of the scheme is to get at least two entrepreneurial projects started in every bank branch in the country. The Stand Up India scheme is expected to benefit about 250,000 potential borrowers, according to its official statement.

Connect Centres Near Home

The number of SC/ST entrepreneurs is growing. For instance, according to The Hindu, there’s been an impressive rise in SC/ST entrepreneurs in Andhra Pradesh. The number of organisations set up by them went from 319 in 2004 to 2275 in 2012. To cater to the growing demand, Stand Up Connect Centres would be established at the offices of SIDBI and National Bank for Agriculture and Rural Development (NABARD). With country-wide presence of more than 15 regional offices and 84 branches accommodating more than 600 clusters, the reach of SIDBI is massive. The SIDBI would join hands with the Dalit Indian Chamber of Commerce and Industry (DICCI), among other institutions, to facilitate the loans.

This story was originally published in The Better India

Image credit: http://www.narendramodi.in/

Investments in Indian startups are back and how!

Compared with just 114 deals during the three months ended December 2015, there were 344 investments during January-March 2016. As many as 388 startups raised funds in the first three months of 2016.

Here is some cheer for startups this year after funding slowed down significantly in the last quarter of 2015. According to a report by venture capital and startup research firm Xeler, Indian startups raised $1.73 billion during January-March 2016.

Compared with just 114 deals during the three months ended December 2015, there were 344 investments during January-March 2016. As many as 388 startups raised funds in the first three months of 2016.

The largest funding rounds during the first three months of 2016 were by online travel venture Ibibo ($250 million), e-commerce major Snapdeal ($200 million), online grocery retailer Big Basket ($150 million), online automobile classified portal Cartrade.com ($145 million) and online retailer Shopclues ($75 million).

“On an average, we have seen at least 4 startup fundings per day between January to march 2016,” Xeler said in a report. Read full report here.

eCommerce, SaaS and health tech have emerged as the top performing investment segements this quarter with a cumulative investment of over USD 810mn across 103 startups that accounts for 47% of the cumulative deal value.

Image credit: www.livemint.com

How to start a startup?

Here is a step by step and actionable guide on how to start a startup.

Live in the future

Most of us live in the past or the present. It is easier to analyze what already succeeded and think of ways to replicate the success. It’s thinking by analogy. It is a valid way to think, except that this isn’t the way to create a big startup. With UberPool, the idea that at any given point in time there are at least two people going from about the same location to about the same destination is non-obvious. It is hard because you would have to gather and store mountains of data about where people actually go in a city. But Uber thought of it when they offered their first ride back in 2009. They were living in the future.

See what is missing in the world

You probably noticed that before Uber, taxi rides weren’t enjoyable. You probably noticed that before SpaceX people were less interested in space. But that is already the past. What is missing now? More importantly what is missing from your life now?

Write it down

When you write down your ideas you automatically focus your full attention on them. Few if any of us can write one thought and think another at the same time. Thus a pencil and paper make excellent concentration tools.

Make a prototype

If a picture says a thousand words, just imagine how a great prototype speaks volumes for your startup. Most of your thoughts, even the best ones, will never see the light of day sadly. You will forget them into oblivion even if you write them down. The only exceptions are those thoughts you prototype. It’s not fully-functioning (that will come later), but by creating a rough prototype of your vision you’ll have a much easier time explaining the concept to potential investors, clients, folks at meetups and anyone you encounter when evangelizing the potential of your startup.

Show the prototype to 100 people

You’ve been working on a cool idea for the past few months. You have made significant progress in building your first prototype. Now you will need to step out of your comfort zone and seek out people who will critique your prototype. Why 100? Because you need a breadth of perspective and hopefully a pattern to recognize from all the feedback. Don’t be afraid that one of them will steal your idea as chances for that are slim and the benefits that you can get from their input are priceless.

Iterate

Do you know that single biggest reason for the failure of a startup is building a product that no one wants? Although a few people will get it right on the first try, the odds are you will not. This is very easy to do if you are a customer of any product. You know that the product is working but needs a lot of improvement. You can take build a better version of the same product.

Find a co-founder

Entrepreneurship is tough – It’s a marathon and not a 100 meters sprint. More often than not you will need partners who will have to help you reach that 26 mile mark. While doing it alone is not easy, incompatible partners can be disastrous for the business. It is critical to choose your co-founders carefully.

Register your business. Split equity.

Finally, an easy step. Get a lawyer who will register your company. Give your co-founder as much equity as will make them work their hardest, while you keep as much as will make you give it your all.

Look for funding and build version one

Unless you have enough savings to build version one, go find an investor. While you are doing that build version one. You have to keep building because there is no guarantee about when or whether you find an investor. Don’t assume that you will just because other startups are getting funded. Assume the worst, and build your product.

Launch

By the time there is even an iota of usefulness in your product, launch it. Extra features, better interface, faster load time and other optimizations probably won’t save it, if the core features have no use.

Follow up with users

Are users coming back? Find out why they are not.

Launch again

Launch as many times as it takes. At some point, if at least a few dozen people are coming back on their own, you probably made something valuable.

Get to 1,000 users

This may not seem like a lot, but the first 1,000 users will show the weaknesses of what you have built. You probably will have to recruit them manually. How manually? Take their computer and open your website for them. Whatever it takes.

Grow

Paul Graham encourages startups to grow at least 5% a week. If you grow that much, within 4 years you will get to 25 million users. In other words, you will be one of the largest startups.

Success – whatever that is

You can IPO, sell your company to another or stay private by convincing investors that there is a bigger liquidity event coming. Even now, though, you may or may not have made the world better. WebVan IPO’ed, but quickly disappeared. Think about what kind of a dent in the universe you want to leave with your startup.

This post was written by Anna Vital and originally published at Funders And Founders.

Disclaimer: The statements, opinions and data contained in these publications are solely those of the individual authors and contributors and not of Ourownstartup.

Entrepreneurship & Venture Capital to launch $50Mn early-stage investment fund for Indian startups

EVC is launching its maiden India focused $50 million fund that will look to back enterprise software, internet and mobile-focused startups.

US Based Investor Entrepreneurship & Venture Capital (EVC) to launch early-stage investment fund for Indian Startups. EVC is launching its maiden India focused $50 million fund that will look to back enterprise software, internet and mobile-focused startups.

Serial entrepreneur and investor Anjli Jain, will lead this venture firm & will primarily focus on startups operating in the education sector, and will also look at backing early-stage ventures in the internet of things, ad-tech, ecommerce, wearables and gaming segments.

“India has emerged as one of the most assuring entrepreneurial landscapes globally, and we have launched the fund looking at opportunities that the country’s ecosystem has to offer, and the gap that we can bridge by supporting new businesses,” said Anjli Jain, managing partner of EVC.

The fund will typically invest $100,000-$5 million in startups, while its accelerator could invest $5,000-$100,000 in exchange for equity in the ventures.

“We look forward to working with some passionate entrepreneurs and bring forth ground-breaking ideas alive,” Jain said, adding that the venture capital firm is considering registering the fund under markets regulator Securities and Exchange Board’s Alternative Investment Fund regulations.

The venture capital firm also operates an accelerator programme in Gurgaon that provides physical and virtual co-working space and operational mentorship to ventures. It operates a second accelerator in Cleveland, Ohio.

Prior to launching the fund, India-born, Columbia University educated Jain had founded and invested in Kryptos Mobile, a cloudbased, self-service mobile app development and publishing platform, LookingGlass Platform, a provider of an integrated, software-as-a-service enterprise apps, portal and content management systems, and BlackbeltHelp, an information technology helpdesk and student services provider, among others.

Image credit: www.indiafilings.com

Has the opportunity for Indian internet startups been terribly wrongly estimated?

With the softening of valuations and the famous Flipkart markdown, is there still a large internet opportunity in India?

I was at a conference the other day, speaking on a panel with VCs and angels, when we were asked a question: With the softening of valuations and the famous Flipkart markdown, is there still a large internet opportunity in India?

My friend and co-panelist from a large VC fund jumped up and trotted out the now-standard schtick: that the combined market cap of Chinese internet firms is half a trillion dollars and as of now the combined market cap of all Indian internet firms is just around $30 billion – so yes, there is loads of room to grow. Maybe 10x or 15x or more.

But I believe there’s something terribly wrong with this logic, and the sooner we realise this, the better off we all will be.

Because you really can’t compare the internet opportunity in China and in India.

The Chinese market is a walled garden of sorts, open mostly only to Chinese businesses – after all, Google, Facebook and Twitter haven’t been allowed to freely operate in China. So Baidu ended up being the Google of China, RenRen is the Facebook of China and Weibo is the Twitter of China. And even Amazon has faced a huge uphill task there.

The Chinese have built their businesses without much global competition – that half-trillion dollar market cap came much easier, after much government protection. Sure Alibaba beat eBay – but that is one exception. There are significant regulatory, political and language barriers for non-Chinese internet firms to win in China.

It’s the same in Russia. Yandex is the Google of Russia and vKontakte is the Facebook of Russia.

While, in India, the regulatory barriers are almost non-existent, our internet is still mostly in English and our politicians aren’t able to control digital media companies like the Chinese and Russians can do in their countries.

The result of our openness?

The Facebook of India is Facebook, the Google of India is Google, and the Twitter of India is Twitter.

And it’s just as likely that that Amazon – not Flipkart, will be the Amazon of India; that Uber – not Ola, will be the Uber of India; and that Tinder – not TrulyMadly will be the Tinder of India. And so on.

This has a few implications. First – if you want to see the size of the Indian internet economy, you MUST include chunks of Google, Facebook, Twitter and others in it – because these are India’s leading internet companies.

There are several ways to do it- one is to look at global revenues and market caps of these companies and attribute the Indian market cap to the share of Indian revenue in the global pie. I tried that, but came up across a big issue- not knowing the Indian revenues of many of these firms, because it’s not separately called out.

I tried it a second way – to attribute the India-linked market cap to the Indian share of the firm’s global users – and that data was a little more accessible. I took all data from public sources like press releases, or estimates from SimilarWeb and the like. Wherever available, I took user or customer numbers (in regular font below) and where not available, I’ve taken traffic numbers (in italics below). And instead of private company valuations which would count Uber and such – I’ve taken more conservative public company valuations. Oh, and further, all mistakes are mine alone.

Here’s what I came up with.

The top 10 global internet companies have a combined market cap of over $1.3 trillion. But one can attribute up to $150 billion to Indian users.

Yes, of course, there is a large caveat here. First that, as said before, the Indian share of global revenues will give a more accurate picture. And our share of revenues will certainly be less than our share of traffic or users. So you can discount this number by 25%, 50% or even 75% to adjust for that – but the final number is still significant. Though I do think market caps are not just a function of revenues – user base is also a prime consideration – after all that’s where the growth will come from.

Now if you add the $30 billion or so of market cap of our local unicorns to this $150 billion, we’ll end up with around $180 billion of market cap for our current Internet economy.

Then, adjust for the fact that China has 720 million internet users and India has exactly half, 360 million users. $520 billion of Chinese market cap per head across 720 million users is $722 per user. Our number turns out to $180 billion of market cap across 360 million users – or $500 per user.

So the real difference between the Chinese internet potential and Indian internet potential is not 10x or 15x – but perhaps closer to 40% or 1.4x. Or you can be pessimistic and call it 2x if you like. But 10x it isn’t.

What are the takeaways here?

First that there just isn’t as much headroom for growth in the broad internet economy for startups in India as you’ve been told there is. The $180 billion may grow over a few years to $300 billion – but $200 billion to $250 billion of that will accrue to non-Indian firms. Leaving $50 to $100 billion for Indian startups. Please adjust your expectations accordingly.

So a more apt way of looking at the Indian potential is to see us like the 51st state of the US. Or like a United Kingdom. Large market for global companies – not necessarily a large market for local firms.

So I’d say much of the growth assumed for our current unicorns is probably vastly over-estimated. Especially if the Indian unicorn has global competition in its way.

Second, the nature of Internet businesses is largely a winner-take-all in any niche. If you see the market share that Google ended up with in search, Gmail in email, Facebook in social networking, Twitter in microblogging, YouTube in video etc – they’re all well above 80%. So if you take on a niche – you either end up the leader with 80% of it, or a distant number 2 with 8% of it or a non-player with 0.8% of it. This is where the chips largely tend to fall – though there are a few exceptions.

So your likely playbook if you take on a global internet company are (a) to be bought by the global player or (b) to end up eventually as the 8% play.

So what’s going to happen to Flipkart now that Amazon and Alibaba have declined to buy it? Or to Ola now that Uber has declined to buy it? It may not be the nicest of news, I believe.

Which leads to the third take-away. If you want to build a large Internet business in India – then do it out of the way of the globals. Build something where the globals aren’t. From my own portfolio, I’d suggest that RedBus, CarWale, MyDentist, Chumbak and others have picked the right areas. Other firms like InMobi, Naukri and PayTM are on paths outside the globals’ footprints too. This is a good place to be, over the long term – unless you’re sure you can sell out to a global like Baazee did to eBay. I personally believe this is extremely risky – as the global firm may just turn around and say “nope, I’ll build it myself” as many are increasingly doing so.

In other words – try not to be the X of India. Try to be the yourself of the world. This is easier said than done, both because we have a long entrepreneurial history in India of building copy-paste businesses, from independence till now. And second, because most investors in Indian internet firms work for US or other firms who wrongly believe they can simply fund and build the “X of India” – and have some comfort in funding copy-pastes rather than backing originals. But I do see signs of this groupthink slowly giving way to backing original companies.

And the fourth takeaway is for these firms to go global too. Naukri has expanded to West Asia. Chumbak is in Japan. InMobi is all over. And we’ll do better to expand to 2nd and 3rd world countries than taking on the first world. Because the nature of our markets and products is typically more suited to those economies than to winning in the US.

This is how you get long-term traction – do to local firms in those countries what the globals are doing to us. Sure, we might not get the market caps the US firms get right away. But it will come to us, eventually.

Is this piece a downer on the start-up excitement in India? I hope not. Our unicorns can and must happen – but should happen in original areas. Alibaba didn’t copy anybody – it started in China and rules the world, Skype didn’t copy anybody – it started in Estonia and rules the world. And that should be our inspiration. Can we build great, global internet companies out of India? Yes, for sure we can. But perhaps not in the way we’re doing so currently.

Anyway, thought I’d pen this piece and see if it might trigger a few thoughts of your own – I’d love to hear those too!

Author: Mahesh Murthy

Marketer, Venture Capitalist, Corporate Speaker.
Founder: Pinstorm
Co-founder: Seedfund
Twitter handler: @maheshmurthy

This article was originally published here.

Image credit: www.iamwire.com

[Infographics] How Sachin Bansal started: Life of Flipkart founder

The story of how the two men started with just two laptops and grew to its current size is inspirational. At the time of raising $1-billion last year, the Bansals’ combined stake of around 15 per cent in Flipkart was valued at Rs 6,000 crore (Rs 60 billion).

Sachin Bansal – The master mind behind the Flipkart idea, one of the first people to establish an e-commerce website in India, an IIT graduate and a business man who created something of a history in the great Indian internet shopping revolution.

At the time of raising $1-billion last year, the Bansals’ combined stake of around 15 per cent in Flipkart was valued at Rs 6,000 crore (Rs 60 billion).

The story of how the two men started with just two laptops and grew to its current size is inspirational.

They were not only able to ride India’s robust consumption story, but also earned the investors’ willingness to place their bets on their company.

Image credit: www.forbes.com

Government launches portal, mobile app for startups

The Department of Industrial Policy and Promotion(DIPP) on Thursday launched a portal and mobile app through which start-ups can gather all latest updates on various notifications, circulars issued by various departments and different funding agencies.

Secretary in the DIPP, Ramesh Abhishek said the portal and app were launched as an integral component of an action plan.

He said it would also provide information regarding incubators and funding agencies recognised for the purpose of recommending startups as part of startup recognition application.

He also said that the ‘Startup India Hub’, which has been established within Invest India, will be a single point of contact for the entire start-up ecosystem which would enable exchange of knowledge.

“The hub will work in a hub and spoke model with governments, VCs, angel funds, incubators, mentors. It will assist startups through their lifecycle, on all aspects, such as providing mentorship, incubator facilities, IPR support, funding,” he said.

Abhishek said a real-time recognition certificate will be available for download upon completion of the application process. Similarly, small and medium enterprises and start-ups, especially in the communications technology sector, would be able to take advantage of the IPR portal.

Start-ups will also be able to find information regarding various notifications issued by government ministries and information about incubators and funding agencies.

Entities that fulfil the criteria as per the definition of startup and are incorporated/registered in India, can obtain recognition as a startup to avail various benefits listed in the Startup India Action Plan.

“Start-ups have to pay only statutory fees, which is minuscule,” he said, adding the hub would start working from Friday. He added that while the fund was already declared in the Budget and accordingly Rs 2,500 crore each year would be released over next four years to SIDBI. All the tax benefits will be extended to budding entrepreneurs after the passage of the Finance Bill.

“The process of recognition is simple and user friendly and involves a single page application form that a user can fill either through a web interface or through mobile app.

Formats of the recommendation/support letters that need to be attached as part of the application form have been published on the portal and mobile app,” he told reporters here.

Abhishek said that a real time recognition certificate is provided to startups on completion of the application process.

“A digital version of the final certificate of recognition is available for download, through the portal and mobile app. A request for certificate of eligibility for tax exemptions from Inter-ministerial Board will be made simultaneously by selection of a simple option,” he added.

DIPP has also set up an Inter-Ministerial Board to verify the eligibility of startups opting to avail tax and IPR related benefits and to provide a certificate of eligibility to innovative startups.

“The board will not take much time to verify. It will happen at a faster pace,” he said.

The board would meet every week. The DIPP is also holding consultations with the Ministry of Corporate Affairs regarding digital signatures.

According to the FAQs of the DIPP, where a recommendation is issued by an incubator without proper examination or without itself satisfying about the innovative nature of the business it shall be “blacklisted” from giving any future recommendation or receiving any benefit from government

This article was originally published in knowstartup.com

Image credit: bigstartups.in