Wednesday, October 22, 2008
Monday, October 13, 2008
The Dilemna of a Venture Catalyst
By Sarath Srinivasan
Recently a fellow venture catalyst and I were having a discussion on the real meaning and intent of a Venture Catalyst. The debate revolved around on what we must and must not do for a client. What does a client truly value in a Venture Catalyst? How should a Venture Catalyst add value?
To answer this we must look at the Milagrow vision – "We are Venture Catalysts. We nurture ideas and enable enterprises to attain ethical, sustainable and profitable growth."
We must work with clients to add value in a sustainable manner. A quick way to test whether we are engaging the client in a sustainable manner, at any point of time is to perform a thought experiment. If we have been carrying out a host of activities and we decide to stop those activities at some point in time - will the organisation have benefited in the long run? If the answer is yes then you are on the right track, if the answer is no then we need to rethink our role in the organisation.
Initially in any organisation there is an inertia that we need to overcome. We will need to push more from our side and do more ourselves and less through the client teams. But as we move forward we must consciously take the effort to ensure that we are operating through the client and that our efforts are resulting in real on-the-ground change in the organisation. If the effort comes solely from our side without client ownership then our though experiment will clearly tell us that there was no sustainable change in the organisation. And thus the growth that gets enabled by the change falters.
Coming back to the debate, I believe that while we must make every effort to get things done and this means taking the lead and showing the way – such efforts must be restricted to situations where a particular initiative is stalled purely through lack of conviction or ability. If an initiative is not moving forward due to lack of manpower or lack of effort on the client part then our role must not be to do it for them. If we reduce ourselves to that role we are no longer Venture Catalysts. We become manpower.
In conclusion there are two questions that we must all try to answer to ensure that we are being true to our vision.
- What are the objectives of our engagement with a client? - Can we clearly state in simple terms, the change that we seek to bring.
- Are we engaging the client in a sustainable manner at every level?
Below I would like to add some excerpts from my previous blog post a few months back, on the meaning of Venture Catalyst. As the organisation has grown it might be appropriate to recall.
People within an organisation intuitively know the inherent problems. Often, they even know what kind of changes and initiatives are required for the organisation to improve and grow. Typically, this knowledge does not lead to improvement. The ingredients for change are there but the change does not happen.
The role of the catalyst is to make the change happen - faster. The reaction involves taking the individual's knowledge of the firm's inherent problems, the intricate working knowledge of the way the company operates and turn it into solutions and opportunities. This strengthens the foundation and removes the barriers to growth. The catalyst turns the organisational strengths into gold – The catalyst is an alchemist.
Organisational change is successful only if it is effected by people within the organisation. Although it would be the organisation's own personnel effecting and driving the change, the catalyst ensures that the reaction happens. As catalysts, a refreshing attitude and a commitment to the growth of a company has its impact
Where an organisation sees problems, we see opportunities for improvement. In our roles as Catalysts in a Scale Up or Turnaround process for example, we keep the organisation focussed on identified problems so that solutions are developed. We help the personnel in a firm put on their organisational hats. This works because we begin by building a thorough understanding of a firm's strengths and weaknesses. We remain focussed on capitalising on the strengths and countering the weaknesses. We are not weighed down by the past baggage that people within the organisation carry. Although we are embedded as team members within the organisation, working on different projects, our point of view remains neutral and objective.
Venture capital cos may focus on growth equity
Experts say because of changing risk profiles, there may be a shift away from earlier stage to later stage investing
Bangalore: In the face of a global meltdown, some venture capital firms are planning to shift from early stage start-ups to backing companies that have been around for some years and need capital to push growth.
Sunday, October 12, 2008
The Entrepreneurial Flame
When the promoter of a company seeks help in scaling up, it stems from an underlying feeling of unease. Possibly his company has been performing well over the past few years but has just hit a plateau. More often, the entrepreneur feels that something is wrong even before it manifests itself in the form of slowing growth. She knows that the business idea has been validated but somewhere-somehow things are just not right. All is not well with the business. The promoter knows that there are weaknesses within his organisation that will act as an impediment to further growth. The company is perhaps a victim of its own success. The initial entrepreneurial spirit of the company is replaced by a team that is restricted to just doing their job – even though that "job" might not be clearly defined. The organisation needs help. But then there is that famous saying that goes – "God helps those who help themselves." The solutions to the apparent problems lie within the organisation. When organisations come to Milagrow for help as venture catalysts, they have to be fully committed to travel on this path of discovery. At the end of the rainbow lies a glorious age for the organisation where the promoter gets back in touch with his dreams, feels fully empowered to take on the organisation to the next level of growth. He knows that the entrepreneurial flame of his organisation will be lit.
The most common refrain that you hear from employees that prevents companies from growing – "But that's not my job, it's the managements job." It is this refrain that pushes all decisions upwards. Ownership is an oft-repeated word in this context. The environment for the growth of the organisation is not created because the employees loose the sense of ownership. This happens over a period of time as the organisation grows – the employee starts to feel insignificant. Where once he was driving the growth of the company he is now restricted to performing his job. Little does he realise his own potential and ability to drive the growth of the organisation. What ensues is a vicious circle with neither the employee nor the organisation realising full potential. Perhaps one way of creating the sense of ownership within the organisation is to actually transfer a percentage of ownership to the employees. Since this might not always be suitable, another option is to reinvigorate the entrepreneurial spirit within the firm – this should be the focus of a venture catalyst.
Friday, October 3, 2008
It's trendier and easier to build your own startup
Many individuals consider themselves ‘born entrepreneurs’. They may work regular jobs and earn monthly pay cheques but deep down, believe that the
y have what it takes to strike gold some day. Add to this the fact that today, it’s trendier, easier and infinitely more desirable to build your own startup.
No surprisingly, more people with bright ideas and an independent streak are now quitting their jobs to be the kings—or queens—of their own domain. But then not everyone makes it. In the corporate jungle, an alarming majority of startups, even those with a great business proposition, get mauled by high operational costs, lack of skilled manpower and market fluctuations.
In such a situation, some find it comforting to put their entrepreneurial urge to use while staying on with their employers. Enter the ‘Intrapreneurs’ who combine the best of both worlds: a secure job that comes with the freedom to innovate, sans the risk. They also raise an interesting question: Even if the grass is greener on the other side, why not stick to the side you’re on right now?
While many organisations pay lip service to the concept of building entrepreneurs at the workplace, there are some who take it seriously. Lalitesh Katragadda works for one such company. An engineer with Google India, Katragadda, is also the developer of Google Mapmaker, a tool that allows users to edit and modify points of interests, such as roads, schools, parks, etc. on virtual maps.
He recalls, “About four years ago, when we started the Indian office at Bangalore, our mandate was to create a product that would have local application, and also create a global impact. It also had to be in keeping with Google’s core philosophy, viz, that it had to be a completely new product and should have the potential to touch every user on the planet.”
Katragadda mulled over this for a bit before the solution struck him. “Today, technology has diminished distances, but most people’s lives still revolve around local things, such as a neighbourhood restaurant, school or shop,” he explains, “So we designed a solution that would help people understand their localities better.”
The solution was Mapmaker, an ambitious project in 2004 owing primarily to the fact that back then, Google had ‘zero local information’ on India. That problem was solved by using satellite imagery via Google Earth. Users would be given tools to trace data on maps based on these images.
In typical Google fashion, once founders Sergey Brin and Larry Page approved the idea, a team was quickly allotted to the project. Key issues were worked on and solved in 6-9 months. The product was tested and launched earlier this year.
In just a few months, Mapmaker has gone live in 122 countries and counting and Katragadda, who steers the product, has been catapulted to an elite group of successful Googlers. Says Vinay Goel, head of products at Google India, “It is a conscious decision at Google to hire people who possess an entrepreneurial bent of character.
We then give them a culture where there is no failure cost and where innovation is highly regarded and rewarded. And the results are there to see.”
Laura Parkin, executive director of The National Entrepreneurship Network (NEN), says, “If you’re not sure about whether you should give up the comfort of a steady job to start your own enterprise, use these three filters: first, is your big business idea aligned and synergistic with the goals of your current organisation? Second, how do you stand to benefit if you do sell your idea to management and third, if you quit, can you handle the lack of structure and be responsible for all the everyday aspects of your business?”
The Aditya Birla group actively promotes intrapreneurship and incubates employee ideas through annual competitions run across its group companies. For example, through ‘Idventure’, managers from various levels are given a platform to suggest new business ideas.
“We got 75 such ideas in the last competition,” says HR Shashikant, VP-HR of the Aditya Birla Group. These ideas are then put through three levels of screening and a list of top eight entries is prepared. The one person/team finally selected is given three months off from work and gets funding to further develop the idea.
“We get both new business ideas, which fit within our ecosystem and those that are not really connected. The group helps them get VC funding if required and incubates them,” he says. The caveat though is that ABG will hold part of the company when they plan to get out. Shashikant feels that the benefits of intrapreneurship are multifold.
The first advantage is that the person is already comfortable within the company and doesn’t need to prove himself again. When one starts his own venture, there is a need to prove yourself to the outside world,” Shashikant says. More importantly, such a system allows one to fail.
“The person has a safety net to fall back on. The employee can pursue his or her dream, and even if it fails, he or she is richer for the experience,” he says.
Vishal Borker stands on the other side of the fence. Borker started his company, NextBit Computing, in 2005 after quitting his job at Isofttech, an IT firm. He quit because he had an idea and was sure it would work. And it did, after some initial struggle.
NextBit’s offering, gCoSign which allows advertisers to remotely manage signage screens at less than half the cost, has already got a few customers, some of them global. But it wasn’t easy getting out of a job and starting on his own.
“I had a hard time convincing potential clients about my idea,” he says. Faced with a lack of quality talent, Borker had to hire freshers straight out of college and spend considerable time training them. And all this while, he was struggling with attrition. “All these hassles are bypassed when you are an intrapreneur.
You have talent at your disposal, easier access to R&D facilities and free mentorship,” he says. But the feeling of being his own boss still fascinates Borker. “With some ideas you are so confident that you are willing to take that entrepreneurial risk,” he says, cautioning, “But if there is only a 50:50 chance your idea will succeed and if it is a capital-intensive business, being an intrapreneur is a better option.”
He feels that the lesser the risk, the lower the pressure. There might be pressure to deliver, but unlike in a venture of your own, the pressure to deliver might not be there. “To survive, an entrepreneur does crazy things,” he says simply.
Chennai-based Suresh Sembandham, founder and CEO of OrangeScape, agrees. Sembandham, who worked with Hewlett Packard and Selectica before quitting in 2003 to start his own venture along with Mani Doraisamy, endured many finance-related struggles before the going became smooth.
Compared to that, his days as an employee were a breeze, he says. “At HP, as well as Selectica, I worked on quite a few independent projects that were appreciated and rewarded. However, in 2003, when the insurance division, which I headed at Selectica, was taken over by Accenture, I realised that I could not continue,” Sembandham recalls.
The problem was that Accenture, being a consulting company, would probably not encourage product innovation anymore. “They had well-defined rules and procedures that could not be violated. So I took the opportunity to quit and work on my own company,” he says. After two years of research, his decision was justified when ‘DimensioN’, a software that helps users build web-based applications using spreadsheets, was born.
Like Sembandham, Manish Khera has seen both situations. The organisation Khera heads, Financial Information Network & Operations (FINO) started off as a venture incubated within ICICI Bank in 2004. Khera feels that this helped the fledgling company tremendously.
“The initial cost and the formal and informal costs of setting up a company were taken care of by ICICI. Spending a few lakhs on pilot projects was not a problem. But if we had to invest our own money, things would have been a lot different.
Also, a big parent company backing you makes life easier when it comes to building your supplier network,” he admits. At the same time, Khera says that being associated with ICICI put certain constraints on FINO’s freedom. “The initial decisions we wanted to take had to go through many filters.
How start-ups can survive the credit crunch
The current financial crisis is rocking the business world, but start-up businesses have a special challenge: how to keep growing while trying to stay afloat.
With that in mind, here are some tips to stay ahead of the game during the financial crisis. While this list was written for the US publication Cnet, some of these suggestions will no doubt apply to you and your business.
1. Don’t rely on advertising. If your start-up relies heavily on advertising revenue, don’t exclusively expect it to keep your business afloat. When there’s less consumer spending, advertising declines, so make sure your contracts are sealed and you have a plan for the months ahead.
2. When searching for revenue, you may want to consider selling to businesses. While it’s harder to sell to businesses than individual consumers, you’ll be rewarded with slower churn and predictable margins. Make sure your sales team is up to scratch!
3. If you want to sell to a business, make yourself credible. No one will trust a start-up with little experience, so partner up. Join a business with more experience and you’ll likely have a better chance of selling your products or services than if you worked on your own.
4. Focus on angel investors. And forget about venture capitalists for early stage development.
5. Conserve credit! The difference between now and the 2001 bust is that credit is even scarcer, so lay off on unnecessary spending and stock up for your business’ hibernation period.
6. Go with the flow. Don’t be scared into retaining all your credit and never spending a thing. Watch the markets and go where they go. If the economy doesn’t look set to recover relatively quickly, move to a booming one.
Monday, September 8, 2008
Problems faced by Start ups
Contributed by Sashank
Milagrow, Hyderabad
Start-ups face many problems from starting up to gaining birth weight and catapult into bigger leagues.
The woes of a start up begin at validating the Idea and understanding its potential. Many start-ups, being driven by young and aspirant minds, are wedded to their ideas and tend to justify the chinks rather than re-design. These start-ups do not have the resources to conduct primary research to validate their ideas. So it is very important for them to get third person perspectives from experienced corners to validate and get reassured of their ideas.
A successful start-up has a dedicated, passionate yet level headed, core entrepreneurial team that leads from the front. These teams, despite being high potential teams, tend to be a bunch of ‘everyone does everything’ type wanderers due to lack of proper delegation of responsibility and a strong organizational design. When these bunch of people come together and set out with big dreams, they need mentoring and hand holding to channelize their energies better and achieve more with less.
Business plan development has been as area where start-ups often falter. Some reading on the internet will not guide a start-up enough to develop a business plan. Start-ups are usually lost, not knowing what are the areas that require planning right at the start, and how forward they should look. They need strong experienced hands to guide them with planning to execute an idea that has immense potential.
Funding has been an area of concern for most start-ups. Cribbing about getting funds consumes more time than actual work for many start-ups. Many a time it is not the eco-system to be blamed, but the start-ups themselves. The start-ups don’t know whom to approach, with what and how. They are wedded to their ideas so much, that they feel complacent that the universe is waiting to buy their idea and all those who have rejected them are missing out on opportunities. In a way they may be right about it, with the given potential of their ideas. What usually lacks is content in the pitch these start-ups make to their investors. Many start-ups need guidance in making the right pitch to their investors, by incorporating the right elements about return and exit.
Start-ups get overwhelmed by the fact of doing business and tend to neglect aspects of infrastructure planning. They tend to overspend on unnecessary luxuries and undermine certain important items, purely because of lack of experience and poor planning. Start-ups do not think through sufficiently about this important aspect, but it can make or break.
Dealing with the government is not an easy job. Mere idea and its potential do not ensure a market entry. There are usually a slew of regulatory compliances to be obtained before the start itself. Mere complying with some laws at start is not enough, but they need to carefully monitor the effect of these compliances. Start-ups need support to understand and comply with least damage to business. There are many schemes that govt. announces for the benefit of start-ups, which they are unaware of.
Many start-ups feel that defining policies at the start curbs their business and it is an unnecessary exercise. But it is very important for start-ups to make the organization as people independent as possible. Start-ups are highly people dependent, and loss of small resource can lead to major vacuum in Start-ups. As far as possible some important policies must be laid down to free the business of individuals and protect them against their first clients. Sticking to certain pre-defined policies can protect small companies from being overrun or cheated by their first few big clients.
Branding the services or products and defining a go to market strategy is a big challenge for start-ups. Defining the 4Ps for a start-up is a major task. Defining a target group, where and when to launch, what price to quote, and how to market the product is an uphill, stammering task for start-ups. Many start-ups lack managerial expertise and experience to be confident about the definition of the 4Ps.
Today technology is such an enabler for businesses! In the context of start-ups, implementing the right technology as part of the journey to build flesh in the business can enhance the organization’s growth. Investing in the right technology is a critical decision many start-ups will have to take.
Plans are made with certain factors in mind. Direction is chosen initially with certain focus, and these plans are implemented diligently and passionately. But many start-ups fail to audit their performance as diligently as implementation. Start-ups begin to justify their failure rather than taking corrective action. This at times can lead to the fall of the organization.
The standout of the success of a start-up is to wage through the problems effectively and capture market.
Ten Essentials for a Startup
Gurgaon, NCR
Opening a business in India has never been a more attractive option. With domestic and foreign investors inundating Indian soil with investments, more and more people are taking the entrepreneurial plunge. But most of these start ups lose the plot midway due to inability to gauge the needs and requirements for their start up. Here is a list of 10 essentials for a start up which act as the foundation stone for future success.
1. Business Idea: This is the starting point of all successful ventures. Gauging the potential of the idea is very important and subsequently following it up with right actions is the first step towards building your own company.
2. Core Team: People are the most valuable asset for any startup. With no fully developed product and service, people are the only assets startups have. It is extremely important for startups to manage and retain their people in a right way.
3. Business Plan: Business Plan helps in transforming an idea into a executionable plan. Without a sound business plan, organization loses focus and direction.
4. Funding: An organisation requires funding at various stages of its life cycle. The initial launch funding for a start up is as important for it as the idea itself. Linking up with VCs and investors is one of the many ways of getting that initial launch funding.
5. Initial Infrastructure: Each organisation has its own set of infrastructural requirements. From office space to web space, all requirements must be fulfilled in order to ensure smooth functioning.
6. Regulatory Compliances: Registering your company and understanding the legalities and compliances is very important.
7. Policies and Procedures: Policies and procedures of an organisation provide a definite method to the various activities being carried out in it. Keeping the standard industry practices as a benchmark, the organisation can arrive at its own set of best practices.
8. Brand Strategy: Proper positioning and brand differentiation helps in making the right kind of impact on the customers. A properly crafted brand strategy goes a long way in creating a sustainable brand equity.
9. Use of Technology: Using the right kind of technology helps in increasing the efficiency and productivity within the organisation. It is thus important to understand the technology requirements of the business.
10. Performance Audit and Course Correction: After the kick start of the operations, you need to sit back and analyse the performance of your company and you need to make the necessary corrections to ensure that you don't tread the wrong path.
Why Venture Catalysts are not Consultants
Often people ask me, how is what we do different from what consultants do. Although I know the answer to that question, it is often difficult to put into words. But when I use the word Venture Catalyst, it just makes sense. A Catalyst is substance which is not consumed during a chemical reaction but increases the rate of the reaction. Catalysts generally change in the course of a reaction but are regenerated. We are Catalysts and each of our engagements is a Venture - A journey on a growth path.
Without a catalyst a reaction will happen, but at a very slow imperceptible rate. For a company change is inevitable and unfortunately change often happens out of necessity and crisis rather than in a planned and proactive manner.
People within an organisation intuitively know the inherent problems. Often, they even know what kind of changes and initiatives are required for the organisation to improve and grow. Typically, this knowledge does not lead to improvement. The ingredients for change are there but the change does not happen. The knowledge is stuck in a quagmire created by the lack of focus on improving the company. Each individual tries to protect his own interests and finds no reason to spend his time in trying to improve the organisation. Very often corporations fail to create the right environment for the individual to take an interest its growth. It does not encourage it. The fear is that the "altruistic" nature of the task of improving a firm will be interpreted as inefficiency. The fear is that the benefits of the effort will not accrue to the individual.
For example let us consider a small firm of about 50 people. The firm has been in existence for 4-5 years and has seen rapid growth driven by a core group of enterprising people. But during the last few years the company has suffered due to the haphazard and individualistic nature of the same people who were responsible for the growth of the company. They do not have the right processes to deal with bigger operations. Despite realising this, individuals within the company do not want to conform to a singe process since it would mean a lesser degree of freedom in their day to day work.
The role of the catalyst is to make the change happen - faster. The reaction involves taking the individual's knowledge of the firm's inherent problems, the intricate working knowledge of the way the company operates and turn it into solutions and opportunities. This strengthens the foundation and removes the barriers to growth. The catalyst turns the organisational strengths into gold – The catalyst is an alchemist.
Organisational change is successful only if it is effected by people within the organisation. Although it would be the organisation's own personnel effecting and driving the change, the catalyst ensures that the reaction happens. As catalysts, a refreshing attitude and a commitment to the growth of a company has its impact. At the end of a project the catalysts are refreshed - ready to catalyse the growth of another company.
Milagrow as Venture Catalysts:
Where an organisation sees problems, we see opportunities for improvement. In our roles as Catalysts in a Scale Up or Turnaround process for example, we keep the organisation focussed on identified problems so that solutions are developed. We help the personnel in a firm put on their organisational hats. This works because we begin by building a thorough understanding of a firm's strengths and weaknesses. We remain focussed on capitalising on the strengths and countering the weaknesses. We are not weighed down by the past baggage that people within the organisation carry. Although we are embedded as team members within the organisation, working on different projects, our point of view remains neutral and objective.
An Analogy:
A good example of a catalyst is in the disproportionation of hydrogen peroxide to give water and oxygen:
2 H2O2 --> 2 H2O + O2
This reaction is slow (hence one can buy solutions of hydrogen peroxide). Upon the addition of manganese dioxide to hydrogen peroxide, the reaction occurs rapidly as signalled by effervescence of oxygen. In demonstrations, the evolved oxygen is detectable by its effect on a glowing splint. The manganese dioxide may be recovered and re-used indefinitely, thus it is a catalyst — it is not consumed by the reaction.
Source: From Wikipedia.
Taking this analogy further, as catalysts we help generate the water and oxygen in a company. The water and oxygen help companies grow. In a scale up process we help the company gear itself up so that the effort required to manage their day to day processes diminishes. From people dependent the organisation becomes process dependent. The oxygen and water becomes easily available and after that the organisation has room to breathe and focus on the future and growth of the company
As Venture Catalysts, we venture where no one dares venture. We Catalyse change in companies. In companies where the reaction to the threats and opportunities at hand were slow, we speed up the reaction. A Venture is an investment. Venture capitalists invest money. We invest time and belief and reap rewards.
