Page 13 of 24

Experience Matters – Lessons from my dad

March 4, 2014 / Sri Srikrishna / 4 Comments

“I can line up ten old and experienced fools in front of you this evening.”

My father always began his story with this line. As the professional CEO of a family-owned business, one of the challenges my father had to contend with was the different working styles of the younger generation. The speaker in this instance was one of the founder’s grandsons, who was being groomed to run the business.

The discussion was about the relative strengths and weaknesses of a potential new employee that they’d just interviewed. My father, a big believer in hiring the best person for the job, had expressed the thought that this particular candidate was not experienced enough.

My father’s contention was the young clearly had a big advantage, in both the energy they brought and in not being tied down to the way things were done. But for their business, a fast-growing company in a commodity market, experience mattered and could just not be replaced.

Thereupon a debate ensued on the relative merits of youth versus experience, before the young executive made this assertion about old fools. My father always laughed when he recounted the passion and vehemence with which his young protege made this statement. His response always was that no amount of education – whether football, swimming or sex education in a classroom was as practical as getting out in the real world (or in that field or pool) and experiencing it.

Many years later, when hiring in my first managerial job in California or my startup in India, I found this to be repeatedly true. The fresh college grads, almost were always smarter, had studied stuff that we had not even heard of and thought of absolutely new ways to accomplish things often getting things done just because they didn’t know it couldn’t be.

Yet like with good design (or a good meal) no amount of studying prepares us as having done it before – ideally more than once. Riding a bicycle or banking a car on the curve or setting up a website or negotiating with a Japanese customer all works much better once you’ve done it before.

My father hired more than a hundred folks, with absolutely no experience – often young men who were looking for their first break. Several of them are running their own businesses or in leadership roles today. Nevertheless, he taught me, that for many roles or jobs, experience trumps all. The trick is knowing when you can’t do without it!

My father would have turned 85 yesterday.

Photo by Aleksandar Popovski on Unsplash

2 Ways Growth Can Kill Your Startup

March 3, 2014 / Sri Srikrishna / 2 Comments

Photo jurvetson via Compfight

A popular Frank Sinatra song speaks of love and marriage going together like horse and carriage. The words startups and growth seem to be used much the same way. Recently I moderated a panel on “Why some startups grow and others don’t” at the TATA First Dot powered by NEN student startup showcase.

One of the questions that came up during the discussion was

“Is growth always good? Are there instances when growth can be bad?”

The panelists all agreed that NOT all growth is good growth. Specifically,

Non-focused growth Naga Prakasam, angel investor and mentor, brought up the point, that growth unless directed and focused can easily derail a startup. So growth in revenue, even when profitable, could turn out to be bad in some situations.

One of two things most commonly happen

Revenue consideration – as a cash-strapped entity many startups chase any and all revenue – so you have product companies taking on services or service firms taking on non-core functions – pretty soon the organization is pulled in many directions with people stretched either too thin or into areas that are not their strengths

Customer retention – you have a major or important customer for whom you provide specific products or services. They want you to support them doing something that another vendor is doing – for instance in my first startup we did only Bluetooth software. However our customer, one of the largest accessory makers in the world, wanted us to help them with IT support too. Luckily we turned them down even though the risk of losing our core business to their IT vendor loomed. (Of course their IT vendor claimed that they could do Bluetooth software as well – but that’s a whole another story 🙂 Such growth, unless planned as part of a larger strategy, will eventually end up hurting the customer and your business, as you take on things for which you either don’t have competence or distracts you from your core business.

Non-profitable growth In the semiconductor business, we’d always joke about “making it up in volume!” As airlines, magazines and mobile phone companies learned the hard way, growing non-profitably, especially when you lose money on each sale is not a good thing. In fact, the more growth you have the more money you’ll lose (or burn through) and rarely is the outcome pretty. Sure, there are times you have to get your foot in the door, enter a new market, test a new product when you will lose money – but hopefully that’s well planned and the downside is contained. Either it allows more profitable products to be sold or customers to be acquired and cross over from loss to profit making, when some volumes are attained (or fixed costs or amortized).

Growth, when focused and profitable is good. But when neither can easily hurt your startup and possibly kill it too!

How much money should you raise?

December 23, 2013 / Sri Srikrishna / 2 Comments

The best answer to this question, as you’d probably guess is “Depends!”

The most common answer I hear is, “As much as you can” – which I’m not sure is the right answer, for at least two reasons. If you raise far more than you actually require,

you’ll be diluting more of your company at a price lower than you need to
you run the risk of developing a wide range of bad habits starting with mistaking raising money with running a successful business

Entrepreneurship literature suggests too much money can be as much (or greater) a cause for business failure as not enough money. Of course the same literature suggests that under-capitalization is the primary cause of slow to no growth of startups.

Better minds than mine have grappled with this issue, in a variety of manners. However most of them are set in the context of the US of A. I provide links to several at the end of this post.

Whether you raise money, in what manner and how much will depend on

Nature of business – is it a service business, that is better boot-strapped? Web design, IT services, most consulting businesses all fall into this category. Does it require significant capital expenditure or up front investment – multi-location courier service or restaurant, manufacturing or high tech businesses fall into this latter category. Of course a slew of businesses fall in between these two – which would put them in the sweet spot for formal fund raising.

Nature of capital – are only friends, family or fools going to fund your business – most businesses would fall into this category – particularly service businesses that are going to stay small or local. If you are already profitable or revenue making and are looking for capital to grow, you’re likely better off with debt. Of course in the Indian context debt may be non-trivial to access, despite a pile of money being available. Or do you need equity capital – as offered by angels or venture capitalists?

Assuming that you are a fundable business, I’d suggest asking the following three questions to determine how much money you should raise in your seed, angel or a series A round.

How much are you likely to spend over the next 18 months for your business plan?
Do you intend to raise another round and If so how many rounds do you anticipate?
How much of your business will you be diluting in both the first round and subsequent rounds?

Fred Wilson’s advice to US startupsis largely applicable in the Indian context too with a couple of caveats. He advises

raise enough for 12-18 months of business – in India I’d recommend at least 18 months
try not to dilute more than 10-20% – in India this might have to be as high as 25% percent

Can you raise too little money? Absolutely. Two things to keep in mind are

Things take much longer than you anticipate – the product ship, the first customer, incoming payments In India a rule of thumb would be
It easily could take six months from the time you start your fundraising to when the money hits your bank

Good hunting!

What is the right amount of money to raise at a startup – Mark Suster
How much money to raise? – Fred Wilson
How much money should you raise from an early stage investor? – Seedcamp
How much should we raise? – Venturehacks

Valuation 101 – for startups looking to raise their first round

December 12, 2013 / Sri Srikrishna / 8 Comments

A recurring topic in conversations with young entrepreneurs and journalists across India has been that of startup valuations. Despite all the writing that’s out there, innumerable forums and meet ups, some questions – often very basic ones – persist. The questions themselves vary in actual phrasing from

How do VCs or angels value startups?
How much should I raise?
How much should I dilute?

And each time as I’ve attempted to answer the questions raised, I’ve found us going back to the basics of What does valuation entail – what are its components and the math behind it.

Note: In India, when people talk of valuation, they are usually talking of post-money valuation and the dilution refers to the percentage the investor owns, after their money is invested.

At the risk of oversimplification, all fund raising and valuation – regardless of fundraising round (angel, seed, Series A) – breaks down to three variables, which from the entrepreneurs’ perspective looks like:

I believe my company is worth so much today (pre-money) pV
I intend to raise so much money- A
You sir investor will now own D% of my company

The reality though is more like this

Amount (how much money you absolutely need to raise?) A
Dilution (% you’re prepared to give & investor’s ready to accept for A) D%
Valuation (what the company’s worth post the investment (post-money)) V

Math dictates that the post-money valuation is

(for the curious, pre-money valuation is obviously pV = V-A)

In this scenario, the valuation (V) is an artifact of how much money you absolutely need to raise (A) and how much ownership (D) you are prepared to give up (or how little the investor is prepared to accept). Once you fix any of these two variables the third is automatically fixed. So it’s important to understand which of the variables are really in your control and what degree of flexibility you have in them.

Amount So how much should you raise? Any kind of serious fund raising can easily take you six months between first discussion and the money hitting your bank. So it’s a good rule of thumb to raise money for 18 months of operation, so that you can focus on running your business for at least a year without having to worry about raising money. You’d need this money to cover the operational expense of running your business over the 18 months and any capital expense or investment that you’d make in the business. For a startup that’s not raised any outside (of friends & family) money, based on your business plan this amount may vary from as little as Rs. 45-50 lakhs ($65K) to say 1.5-2 Crores ($250K). So this fixes one variable (A) in the valuation triangle. Of course if you plan to start an airline (Indigo) or overnight delivery (FedEx) or semiconductor firm, you’ll need a lot more money to start with, but most of us can start with $60-100K.

Dilution Particularly for any first round (seed or angels) the investor likely would expect to get 20-25% of the equity. Depending on where your business is at – concept, prototype, early customer traction, they may go as low as 15% or want as high as 30%. This is largely a matter of the maturity or stage of your business, the perceived de-risking done and the line of business you are in.

Comparables (what other companies in your line of business, in your geography got valued at) are relevant as is your revenue, margins, free cash flow but treat them as rough guidelines rather than definitive stakes in the ground. Sure, your market size and share, your business plan, your product or service state all matters – but usually, in the Indian context valuation is not absolute but a direct output of answering the two questions.

How much money do I need to raise in this round?
How much ownership am I prepared to dilute

So for instance, if you seek to raise Rs. 60 Lakhs (Rs 6 million) and desire to dilute no more than 25%, then your post-money valuation is

Just as easily for the same money, if you have dilute more – your valuation could change without any real material change in your business. Depends how desperate you are and how greedy or generous the investor is. The table below shows the effect of A and D on valuations.

Reality rarely is this clean. Happy hunting.

Why I Tell Indian Entrepreneurs “Stop reading TechCrunch!”

December 9, 2013 / Sri Srikrishna / 12 Comments

Every time I hear an entrepreneur in India tell me “It’s Angel List meets GitHub” I try not to grimace. Given the ardor of youth and the desire to get their elevator pitches easily understood, I can certainly understand young entrepreneurs pitching in such a manner.

TechCrunch (Alexa score 369) is more popular than livemint.com, India’s #2 biz paper (837) or nextbigwhat.com (640) and yourstory.in (802) – two popular Indian startup destinations. At one level just as the BBC (112), Huffington Post (264) and New York Times (305) are popular in India, it’s not a big surprise that TechCrunch given its brand and Silicon Valley pedigree is followed closely and devoured by the tech startup community in India. However the fact that something is understandable doesn’t make it healthy (as with my Doritos-eating habit).

Silicon Valley, even within the context of the United State is in many ways unique – and unlike anything in India. From the time Fredrick Terman first began molding young minds at Stanford, more than three-quarters of a century has passed before Instagram, Twitter and Facebook appeared on the scene. And before them came the first generation Internet folks – the networking and computing folks before them and the granddaddy semiconductor firms before them, who were themselves preceded by the likes of Hewlett-Packard and Litton. So nearly five distinct generations of companies and innovation preceded this current crop.

Alas, young Indian founders approach TechCrunch without any of this context. For most of them, 2005 when I sold my first tech startup, is practically the dark ages and 1999 another geological era altogether.

As an angel and mentor when I encounter entrepreneurs, I find that TechCrunch plays an inordinate role today in their thought process. This is true particularly with startups dealing with bits rather than atoms.

Many of their assumptions are not grounded in the reality of today’s India – may not even in today’s America.

All they see is that a startup to sell tampons online raised $250K with just an idea on a napkin. Or Pinterest raised whatever astronomical amount of money without any real monetization strategy and Fred Wilson invested in Zemanta (who’d by then acquired a million downloads) even whilst acknowledging that none of them were clear how they’d make money.

The reality of the Indian entrepreneurial ecosystem is that we are yet to see more than one turn or “generation” of tech entrepreneurs. A large amount of money is following very few quality deals. The VCs are acting as PE players would elsewhere. Angel groups are acting like VCs would. Everyone’s looking for revenue, customers, and traction (all of which are good), but not quite the high risk/high reward perspective of early stage funders. To be fair to the funding community in India, the supply side problem of deal quality is compounded by the fact that there have been very few exits, and their LPs may be looking for medium risk/medium returns.

The needs of the Indian market and Indian consumers are quite distinct. Enterprises in India do have needs similar to those of companies elsewhere – databases, analytical tools, HR software, CRM systems – but their behavior and culture often are different. Consumers, on the other hand, can and do have very different needs. So when we talk about “building the Amazon or Zappos of India,” and unimaginatively try reproducing something done elsewhere, it serves no one well.

The good news is that oodles of young entrepreneurs are starting companies each day in India. Now if only they paid a whole lot more attention to what their customers are saying and what problems those customers face than what TechCrunch is reporting from the Valley, I’d like to think, we’d see a whole lot more innovation and business building amongst Indian entrepreneurs.

Art as inspiration for advertising

November 10, 2013 / Sri Srikrishna / 0 Comments

As consumer internet companies wax and wane, the need for eyeballs never goes away. Only some are subtler than others.

notebook — Photo by Suzy Hazelwood on Pexels.com

“This week” – the secret to managing your time well

November 3, 2013 / Sri Srikrishna / 3 Comments

“Honey, can you make the insurance payment? ” my wife would ask me.

“Sure dear, I’ll take care of it,” I’d respond.

Early in our marriage there were often fireworks due to such seemingly innocuous conversations between my wife and I. It took me a while to figure that my wife meant, “Can you get the insurance paid NOW!” And it galled her no end, that my response meant, that I’d get it done one of these days.

Fortunately for us, we arrived at a compromise that all such conversations, especially ones where I needed to get something done, meant I’ll get it done that WEEK! Twenty years on, we are still on talking terms largely due to this one agreement.

Each year, as I work on new projects and often with new team members, I learn a thing or two about managing my time better – even if it’s only what not to do. From my early Franklin planning days of the early ‘80s through the 7 Habits of Highly Successful People all the way through Getting Things Done and Wunderlist, I’ve tried my share of tools and methods to be more productive and get more of the right stuff done in less time. Truth is that it’s still a work in progress and I continue to struggle with procrastination.

As the parent of two teen girls, child of an aging, recently widowed parent, as a slightly overweight middle-aged man trying to get in shape, the operational head of a non-profit and spouse of a professional musician, my to-do list is overflowing. Even when it’s incomplete.

If you are like me, your to-do lists are ambitious – maybe more hopeful than practical. The very act of opening them is daunting. But we still put too much for a day on ‘em. It finally dawned on me to apply the lesson I’ve learned in making commitments to my wife. Seek balance over a week – and not try the impossible of trying to achieve it each day.

Plan your to-do list for a week. Yep – not just for the day. The reality is some days you’re going to get only one thing done, if that. On other days you’re going to be on fire. By keeping your to-do horizon to be a week, rather than the day—things will be a whole lot less stressful. Sure the first week you’ll over commit, but very soon you’ll get the knack of it.

Now say after me, “I’ll get it done sometime this week!”

3 Things That Great Speeches Can Teach You

July 21, 2013 / Sri Srikrishna / 0 Comments

“Bear with me;
My heart is in the coffin there with Caesar,
And I must pause till it come back to me.”

As I read Julius Caesar with my fifteen-year-old, I wonder what it is about Mark Anthony’s speech that’s made it a keeper. Sure the Bard had a way of words and it is him speaking rather than Mark Anthony. Yet the words alone, however powerful, fail to explain their hold over us.

Each of us across nations and times, have our own favorite speeches — often cutting across generations — Winston Churchill’s “We Shall Fight on the Beaches” June 1940 speech, Martin Luther King’s “I have a dream” August 1963 speech, Steve Jobs commencement speech in May 2005 at Stanford, Randy Pausch’s Last Lecture in September 2008 and Barack Obama’s “Tuscon Memorial” speech in 2011.

Oratory seems to be a skill that politicians and lawyers (many of whom end up as politicians) have cornered the market on. Starting from Cicero, a lawyer turned politician from Julius Caesar’s time to Barack Obama, yet another lawyer-politician in our own, the power of a well-rendered speech have moved nations. Actors and clergymen, who’ve relied on the gift of their gabs to succeed have just as assiduously cultivated their oratory. In trying to understand what it is that makes their speeches memorable, worth transcribing, passing on through word of mouth from the dawn of time through the age of YouTube, three things stand out.

Content, Context, and Cadence.

Content What is said in a speech is clearly the biggest contributor to its success. No amount of skill or theatrics can salvage an empty speech. The content needs to be clear, concise and compelling. Like poetry it needs to be able to stand alone — complete in itself. Try reading the transcript of any speech you feel is well done and you’ll see why it works. Mark Antony’s speech is an excellent example as is any good tale, be it To Kill a Mockingbird or Cannery Row, content still trumps all. But you knew this.

Context When your spouse (or in my case my teen) wakes you up and say’s “I had a dream,” or when an interview candidate tells you “I have a dream” it doesn’t evoke the same sense of Dr. King’s words at the Lincoln Memorial. Context is important. When four men carrying a funeral bier in India, utter “Ram, Ram” or as Gandhi calls out “Hey Ram” when he was shot or in the epic Ramayana, when Rama’s father calls out after his exiled son “Rama, Rama, Rama” — the same words mean very different things. So context is what makes what’s ordinary and makes it extraordinary. The words “a more perfect union” when used by Barack Obama yesterday in the context of the Trayvon Martin case takes on a whole new level of poignancy than in his original speech titled “A More Perfect Union” in 2008.

For Brutus is an honorable man;
So are they all, all honorable men

Mark Antony’s words taken out of context lose their power.

Cadence makes the difference between a good speech and a great speech. The pauses and silences of a speech often can and do say more than the words themselves.

When English teacher Taylor Mali narrates his poem, “What teachers make?”

“I decide to bite my tongue……..instead of his” his pause adds emphasis.

When Jesse Jackson in his speech at the Democratic convention in Atlanta in 1988, says “With so many guided missiles ……… and so much misguided leadership, the stakes are exceedingly high” his pause serves to highlight the irony not unlike Mark Antony’s literal “And I must pause till it come back to me.”

Repetition is the other not-so-secret weapon of powerful orators.

Here’s Dr. Martin Luther King speaking at the Lincoln Memorial:

But one hundred years later, the Negro still is not free. One hundred years later, the life of the Negro is still sadly crippled by the manacles of segregation and the chains of discrimination. One hundred years later, the Negro lives on a lonely island of poverty in the midst of a vast ocean of material prosperity. One hundred years later, the Negro is still languishing in the corners of American society and finds himself an exile in his own land.

Later in the same speech, the phrase I have a dream is used ten, yep ten times in consecutive sentences as is Let freedom ring nine times in his closing words. Cadence.

Content, Context, and Cadence.

Make sure your next speech covers the 3 Cs.

July 9, 2013 / Sri Srikrishna / 0 Comments