Thinking of a start-up? sit down and read this then

Talk is easy and experience is rare
Thinking of a start-up? sit down and read this then
Thinking of a start-up? sit down and read this then
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We can’t seem to get enough of it. Fail and learn, fail again before you sail is the new mantra. That’s a scary idea in a country where toddlers are expected to know algebra and parents are interviewed for LKG admissions. Disruption is key – disrupt and disrupt well is also what we are being told. I have been a part of three start-ups in India and abroad. Two of them succeeded, one tanked. I want to share what I learnt. It may even be relevant.

Speaking at a Make In India event in Mumbai recently, Prime Minister Narendra Modi said if young India – 65% under 35 years of age – takes the first step, his government will take two. The average age of the audience was 50 plus comprising people who have never taken personal risks and borrowed from Indian banks or those who have inherited family businesses. Nepotism and corruption look inviting when the cost of borrowing money is high and appreciation of innovation is low. If India has to start-up, it has to break away from business as usual.

This post is meant to alert people from falling into obvious traps. Here we go.

Never trust any angel who has not put their money where their mouth is

When people tell you money will not be a problem, you need to stop the conversation and move on. Ask your investor or advisor what kind of personal risk they have taken with their money. If they show you a power point and complicated graphs that look like gravitational forces, stop the conversation at once. The flipside of risk is passion – borrowed angels are rarely passionate.

Here is a typical investment cycle – understand it well, its your idea

The first investors are generally friends and family. They are called angels for two reasons – risk is high and trust is high. This gestation period lasts for between one to three years and only one in a hundred start-ups go to the next phase.

The second phase is where venture capitalists come in. Either the start-up makes a total strategic sale or capital is infused with a lock-in period for people who started the company. Risk is limited for all in this typically three to five year cycle. Phase three brings in the private equity people and big money. This is a seven to ten year cycle after which they exit.

A common mistake here is when the promoters get attached to their start-up and fail to make that total strategic or partial sale when venture capitalists come in. Remember, only one in a hundred start-ups get to the second stage.  

Careful, marketing gurus and communication experts at the next bend

They will come in droves if not to check out your address then to peer into your address book. It’s a good idea to meet them outside your office for these reasons. If they order à la carte when the day’s menu is good, if they pick the most expensive wine and if they tell you they have a tee off before high tea, you can pretty much conclude that the person in front of you is a clown. There’s enough of BS-lingo going around – benchmark, networker, social entrepreneur, risk, innovation etc. If the guru in front of you says money is no issue as s/he has many clients willing to invest, it is probably untrue. If you are left paying the bill tell yourself you didn’t ask to see the guru, it was the other way around. A go-to-market strategy is not marketing and communications. It is a tightly secured data-backed approach to take a product to the market. Marketing gurus sometimes miss this. Small things tell big stories about people and processes. From my training as a journalist, I have also learnt the immense wisdom captured in three words – less is more. Repeat this till it becomes a part of you.

Trust your instinct. In other words passion, hard work and never say die

This is probably the most valuable piece of advice I have ever got and it has stood me well in my avatars as a journalist, diplomat and entrepreneuse. To your work you bring your passion, your hard work – no two ways about it – and others cannot place a value on either. Think of those advertisements where a genie sprinkles a few drops on the kitchen sink and presto, everything sparkles. That’s what marketing people do – quick and easy. No successful business was quick and easy. You know you have to rub and scrub and kneel and bend to get what you want. Trust yourself – you’ll have only yourself to blame if you got it wrong. Next time you’ll know what and whom to avoid.

Get a good accountant

You need someone who understands numbers not like an expert, but like a human being. Basic rule – you cannot spend more than you make. In the angel phase, everyone is as poor as church mice – you don’t need an MBA person or someone who comes from a human resources background. They generally think big with other people’s monies. All that may become necessary later, much later. Remember, this is your money, your risk and above all, your passion. Keep a tight grip on outflow. If you don’t have any assistance, just dump every bill into a box. There will be time in a bit to get that organized. For now, you need to keep it simple – tell yourself that. Simple is not easy, but whoever said starting something was?

Read, read and listen

In other words, who else is competition and what is your niche? Don’t think of Bill Gates and Sundar Pichai – think of what you can see in your horizon and what you can do. Humility is not an over-rated virtue. You may surpass them all one day, but no one started there. Reading and listening skills are critical to a successful business. Read everything about your business, listen to what others are saying. Is there a pattern? Does that pattern stand up to scrutiny or is it just some BS circulating? Take this seriously – be your own teacher. Get a BS radar – make our own list.

No, you can’t buy those shoes – it’s not your money

I did this. Business was going well. So splurged on shoes. It was my money. I do what I want. Bills, what bills? The chartered accountant was not happy. I was red-faced. Company money was not my money. 

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