Entrepreneurs- Do you need VC Money?

I think VC money is just one piece in the big puzzle of making a business success in India. For the first generation entrepreneurs money is a big issue. But at the same time, the passion and fire to do it is so important that all other things, including the need for money, become secondary.

Let’s face it, we have lot of issues here that we can’t solve (as startups)-

1. We don’t have many precedents of great success stories. This doesn’t allow many VCs and Angels to take big risks.

2. VC firms in India dealing with startups are very few and most of them are not homegrown- I mean they themselves did not get started here. Most of them have come from abroad. They may carry with them an agenda or mindset which may not necessarily work for Indian startups- the challenges here are different.

3. There is no ecosystem here in India- which would have increased the probability of a startup’s success.

We keep hoping that some success stories will happen, so that VCs can entertain further more startups, eventually leading to creating desired ecosystems. We are a long way from making a Silicon-Valley-like-story probable here. It will come about only through some disruptive examples. And we, as entrepreneurs, all hope we are one of them. (That’s the hope which drives us!)

Instead of solving these bigger problems, hoping that VCs understand us, hoping that there is an ecosystem, etc, which are beyond us, I think we should concentrate on JUST DOING IT.

JUST DO IT! is our mantra. (from Nike Ad)

It takes lot of hard work to raise money, but it can be done. There are not many angel investors, granted, but it can still be done. Its tough to get a team in place without money, granted, but it can still be done. It may be tough to sell your product/idea to your customer, but it can still be done. Through dogged perseverance! And I think that’s the only way to go about it- in the present scheme of things in India. Some of us will fail, some of us will succeed. Hopefully, the next-generation entrepreneurs will have it better because of the successful examples we set.

I think there will be lot of time for us entrepreneurs to sit back and analyze - to reason what-we-did-right and what-we-did-wrong. But for now, I think the only mantra that works is JUST DO IT! Thinking too much about the right way to do it may not help. What is the right method to raise money? Boot-strap? Sell your Apartment to self fund? Borrow Money? Angel Money? VC Money? Who knows! Frankly I don’t have a clue what is the right method. We thought we knew the right method- because many ‘experts’ told us what it was. But it didn’t take off. Come to think of it, there are examples galore to justify all these methods. May be, any one of them is OK. May be, all of them is OK. Moreover, I think we wasted lot of our time trying it get some VCs convinced. In retrospect, I believe we could have utilized our energies in a better way. But then again, how else would we be so convinced that there is no VC money chasing companies like us?

What we believe now is this- Take each small step at a time, prove it, convince someone around you to pump more money and then go the next step. I have been told by some VCs that it is NOT the right way to do it. Then I asked one of them if he was ready to fund us so that we can do it the RIGHT WAY. Of course, you can guess what the answer was!

We are a two year old company with 15 people working full time and we are self-funded and angel-funded- and we are about to launch our product. We have a long road ahead but we believe we will scale it (with or without VC money/advice). One step at a time!

[Edited from a comment posted by me at Venturewoods.org]

Tips for Entrepreneurs

These are excerpts from an interview with Mahesh Murthy, entrepreneur and venture capitalist, and published on Rediff.com. [emphasis added]

[One what is needed to start and run a successful company]

The conviction that the whole world is wrong and that you are right. The ability to resist giving in to the temptation of listening to others or being ‘reasonable.’ And, of course, some foolishness!

[On reasons for his success]

Perhaps that I'm foolhardy, unreasonable and foolish!

[On importance of education for an entrepreneur]

The content of what you study is completely useless. In fact, if you do a typical MBA at a typical business school, you will almost never become a successful entrepreneur…

You are taught to be an 'employee' and not an 'employer,' and you are actually handicapped compared to someone who hasn't gone through the degree programme…

[On future of the Indian IT industry]

We barely have an IT industry, we have an IS (information services) industry and all we offer is lower-cost services.

There is very little technology we develop.

Over time, our stability and growth will not come from sweatshops like Infosys, TCS and Wipro, but from companies that create brand and market their own products, getting larger profit margins and a reputation in the process.

[On Innovation in Indian companies]

Well, we have the ability to innovate. Our brains are at least as big as anybody else's. But what we need are not brains but guts and support…

There is no route to be a global player other than to produce the best products in the world -- 'products', mind you, not 'services'.

[On lessons learnt]

No one knows anything, least of all any supposed management guru or consultant or expert. You can discover your own rules and create your own playing field. It is better to move in business as an innovative naive person than as a cautious experienced person.

[Message to entrepreneurs]

Don't listen to the Gartners, the IDGs, the BCGs, the KPMGs, the PwCs. They know nothing! Reject the job offers from the Goldmans and the Lehmans… Why do your B.Tech in Computers and MBA in marketing to become a banker?

Understand the gaps in the market. Create a product that can service those needs better than anybody else can, sustainably and do it at a really low cost.

And dream big. The earth's the limit.