Monday, January 21, 2008

What is your primary objective as a startup?

In my conversations with many entrepreneurs during the events at and, I have observed few things that I want to discuss here.

Should startups get disappointed if they do not get invested?

One top name investment banker once told me, ‘you are not an exception (referring to our state of not getting funded by a VC). Instead, you are the norm’. He added, ‘Silicon Valley (and few other areas, such as Boston) is in fact an exception. Most of the business in the world, Vietnam, Brazil, Russia, etc, start this way.’

I keep telling myself that ‘nobody will come to your aid. You are on your own. If there is no ecosystem, then create one. Don’t complain.’

There’s nothing romantic about running a startup. It is filled with many hard choices, misgivings, struggles, which you may or may not like. But as long as you are enjoying what you are doing, keep doing it.

While you are out there, struggling with the realities that are somehow so different from what people write about entrepreneurship and startups, please ask yourself the following questions.

As a founder, what is the number one objective for you right now?

1. Is it making the product and proving the technology?

2. Is it making the revenues to somehow survive?

3. Is it making your startup attractive to get funding by a VC?

4. Is it making a company that has a viable business?

I ask these questions because there is a danger that you may get caught up in the day-to-day struggle to miss out on the big picture.

These are my learnings as a startup IN INDIA. I stress on ‘in India’, because we are NOT Silicon Valley. And no matter what people, analysts or the media says, we are not one, and we are not going to become one right away (but the hope remains).

1. Is it making the product and proving the technology?

There is a chance that you may start believing that making the product (that you set out to build) is the ultimate objective. You start thinking, all you have to do is make this product, and everything else will fall in place.

Not always.

What if the product you set out to build takes five years, and by then the market is gone? What if the product you make costs you $2000 to make, but the customer is ready to pay only $200 to buy it? What if the technology that you think is so hot, is not something the world wants?

I see a great danger when you make this option – ‘making the product and proving the technology’ the primary objective. When you hit crossroads, you will not know what to do. [I agree that this is ONE OF the major objectives but it SHOULD NOT be the primary objective.]

As a startup, one of the essential and inherent strengths is your flexibility. You are flexible to change your business plan at any time, and that too quite quickly without incurring major losses. This flexibility should not be confused with shifting focus. With changing market situations, customer interactions, and other events that happen in the world, you should mould your business plan, and if needed abandon the original plan to quickly embrace another one while being consistent with the original intent.

Example, if your dream is to connect everyone on the planet with internet and phone connectivity, you may give up one technology to embrace another one, abandon one model of selling to embrace another, without diluting the original vision.

2. Is it making the revenues to somehow survive?

It’s very easy to make revenues. Think about it. You can become a coolie in a train station and earn money. It’s so easy to make money, if you are willing to work. You have to ask yourself, ‘is that how you want to make money in this startup?’

Not really.

If all you want is to make revenues, there are many quicker and easier ways. While going through the journey, you will go through many patches that are quite grueling, taxing you with many problems, financial and emotional. Many new avenues may come up which promise you quicker and easier money. Would you take up those new opportunities to get those much-needed revenues? Would you do it just because someone is paying you to do something else (which is not your original intent)?

You have to be clear on what you set out to do. That will help you in making decisions when alternative avenues arise. Some people think that you should do anything to make money – because you are in the ‘business of business’. I strongly differ with such views. What will take you far on the long and torturous path of entrepreneurship is your commitment to the original lofty goals that you set out on. Few others may have a different opinion on this – but I strongly believe that you should carry through your convictions before settling down on anything alternative. That way, your team will stick with you; some of those angel investors and VCs who have been watching you will come forward; that way your potential customers who are waiting for your product will have more confidence in you to trial your product.

[I am talking about perseverance, not stubbornness. Will write on that in future]

3. Is it making your startup attractive to get funding by a VC?

Would you run after certain milestones just to please a potential VC to get a funding? Would you get on board an executive who in your opinion adds no value to your company but would please a potential investor? Would you run after markets that you do not find suitable for your company just to please potential investors?

Not really.

This is the worst objective to have. You should achieve milestones for other important reasons than just to please a potential investor or VC. While you continue on your journey, you need to create value for the company, and for that you start achieving certain milestones. Those milestones are vital for you, your team and your company. They should not be specially designed to suit the likes and dislikes of your potential VCs or investors. They may have told you that they would invest in you if you achieve certain milestones. But what if you put all your energies in that direction only to find they no long show interest in your company? Is that milestone really on the path of your intended journey or was it introduced just to please a potential VC?

Your investor is a shareholder who will walk with you in your journey. He is a companion – sometimes a painful one – which is good because he will guide you to go in the direction that makes sense to all of you. However, his investment is not your goal or your destination.

You go with an investor and take his money when you reach an agreement on how you want to take this company forward. If you don’t agree, then you part ways as gentlemen do and still keep in touch. But you should be clear on what you want to achieve as a company and business before you start saying, ‘Yes’ to everything a potential investor wants.

[But once you are married to each other, you are both stakeholders in the company and hence you confer with your investors on what strategy you want to embrace. And once decided, whether you like it or not, you stick to it.]

4. Is it making a company that has a viable business?

While your vision is something grander and loftier, such as positively influencing every person on the planet, you should strive to create a full-fledged organization that makes a viable business. This must be your primary objective during the startup stage. As long as you know where you are going, and why you are going, and keep checking if you are going in the right direction, you will most probably make the right decisions.

You should try to create a viable business organization- it’s like a flotilla of aircraft carrier and surrounding warships, with planes, helicopters, etc, which makes it a self-contained armed force on the move. It has a mission and a goal- that are quite often loftier and bigger than any individual or single person’s dream or ambition. That mission and vision has to be permeated to all of your team members so everyone knows why we are going through these rough seas for months and years with no land in sight.

You need to put energies to hold the team together as a close-knit organization, keep the dream live, giving the team its much-needed small milestones to celebrate, adding value continuously to make yourself attractive for investments that come as fuel, courting customers and working closely with them to generate much-needed revenues, slowly growing making long strides in short periods, but at all times, trying to create that full-fledged company that is creating a viable business with a potential to scale and take on bigger markets, all the while keeping your eyes fixed on that vision to positively influence every person on the planet.

As long as you are clear in your priorities, you will take the right decisions when you hit crossroads, unflinchingly, without any trace of doubt.

1 comment:

Jayakumar Balasubramanian said...


Excellent post!

I enjoyed reading this post mainly because you have written about Entrepreneurship with Indian context.