Investing in Early Stage Companies in India

Timing of exit is very important

2011-08-26T03:11:00.000-07:00

Having run a venture firm for 5-6 years now, some of our portfolio companies are at interesting stages of the company life cycle - proven technology, early leadership, strong management with a lot of further room for growth. And not surprisingly, a few of these companies have recevied strategic interest from buyers globally. Potential buyers always want to catch a company early enough before it becomes too expensive for them to buy.

For first time founders in their late 20s and early 30s, a buyout offer where they can make a few million dollars can be very tempting. And this is even more tempting in India where the dollar or rupee goes a longer way. The risk of turning the millions down and continuing with the company can be daunting. Many founders feel that they are young, and it may be better to sell, build a cash cushion, and then start another company in the future.

I have tried to counsel many founders within my fund and outside, that building a successful enterprises is a non trivial task and just because they have been successful once, that is no gaurantee that will be able to pull it off again. In fact, the odds are low that they will be able to pull off another successful company which requires executing the right idea at the right time with the right team.

If a founder feels that there is a threat to the continuing the business independently and that a strategic can add value, then I think that selling the company may be the right thing to do. Or if the founder feels that the value being offered today is the value he or she can hope to create many years out, then financially it may be a good move to sell the company today. However if the founder feels that there is a lot more value could be created, and that they are in a strong leadership position, then I would suggest that the founder not sell even if they are getting a reasonable cash out, because creating similar value again may not happen and most likely will not happen.

Timing of exits is very critical. It can change the outcome of the company by many multiples if done right.

Ecommerce Entrepreneurs : Choose your investor wisely!

2011-06-21T03:31:00.000-07:00

Everyone I meet today wants to start an ecommerce company - groceries, furniture, jewellery, mobiles, handicrafts, carpets, toys, food, diebetes monitors, stationary, and the list goes on and on.....And there are investors flying down from New York , San Francisco, Delhi, Mumbai and Bangalore, meeting many of these budding entrepreneurs with a blank cheque book asking "how much?".

There is no doubt that the internet has reached critical mass in India today. And ecommerce is very important for the country as it has the potential to leapfrog the inefficiencies of rolling out traditional retail in an infrastructurally challenged country like India. But creating an large ecommerce company is non trivial. For every Amazon created, there are thousands of boutique ecommerce companies that couldnt scale. This ratio is going to be very even more stark in India give the complex supply chain, cost and complexity of delivery, cost of Cash on Delivery (many shoppers dont use thier credit cards to shop), high marketing costs, cost and complexity of enabling returns, low switching costs, state taxes, which all add to the challenges of running a profitable ecommerce company.

I have no doubt that many ecommerce entrepreneurs will be able to raise thier initial financing due to the hype today. But if they are not able to continue to attract future financing/capital, there will be no choice but for them to scale back significantly or shut shop given the challenges articulated above. Early signs of this has already begun. I personally know of a few ecommerce companies that got funded in 2009/10 who are unable to raise further financing today primarily because they have not been able to demonstrate that they can scale on various dimensions and/or show a clear path to profitability and are now contemplating a fire sale. I predict that this trend is going to magnify in the coming years.

Word of caution to the ecommerce entrepreneur - don't take external institutional capital (bootstrap as long as you can), till you are convinced that you have understood the challenges of building an large ecommerce company and convinced that you will be able to build a large profitable company in the long run. If you cannot bootstrap initially, take money from friends and family or institutions whom you think will be able to help you address the challenges menitoned above to be able to build a large ecommerce company or will be open to you scaling back and continue running your company and not pressurise to shut shop if you cannot grow fast enough, show path to profitability and/or raise further financing.

Select your board member wisely

2011-04-20T05:31:00.000-07:00

I think it is as important for a start up entrepreneur to be selective about his or her investor representative board members as it is for the investors to be selective about the entrepreneur. Often times, the entrepreneur is only focused on raising money at the early stage and forgets that they will have to deal with soemone from the investor side at the board level if they have given that investor that right.

Having been an entrepreneur who has dealt with investor board members and now an investor who participates on boards of companies we invest in, board members come in all shapes and sizes. Here are a few common examples :

1. The "friend" - Wants to look good and avoid conflict of any sort. Doesn't want to stir the pot in any way. Doesnt ask tough questoins at the board. Completely hands off.

2. The "operator" - Thinks he or she knows it all. Tries to tell the founders how to run their company at the granular level. Likes to get into the operations. Likes to interview candidates that the founders are hiring.

3. The "doubter" - Always questioning the market and execution of the founders? Do you really think you will meet your numbers? Why cannot you execute faster, better?

4. The "big picture guy" - Discusses the big picture only. The market size is so big, therefore we should enter this space. Somebody else executed an initiative, so we should also do it.

5. The "coach" - Likes to give advice on how the founder can do his job better. Constantly advising the founders how to improve at various levels.

6. The "shrink" - Is a sounding board for a founder when he or she is in distress. Helps the founders cope with the emotional rollercoater of a startup.

I personally think that a good board member of a startup has a blend of all of the above characteristics. I would strongly recommend that entrepreneurs do their homework on the board representative before signing on an investor at the early stage as it is a relationship that will last from inception to exit and be an important influence in shaping the direction of the company. I have seen many companies fail solely due to dsyfunctional or ineffective boards.

Avoid raising too less at the seed stage...

2011-03-31T06:12:00.000-07:00

Seed investing in India is garnering a lot of interest. From angel networks to seed funds to individual investors, there is a lot of interest in funding entrepreneurs in India who are starting out. Professional Indians who have made money globally and in India over the last decade are now wanting to allocate some of that towards this high risk and potentially high reward asset class. While this is very good for entrepreneurs looking to do their own thing, one must really understand the capital needs of a company and understand what is the likelihood that there will be follow on capital available if needed once this capital runs out. Let me give you an example. A very solid technology entrepreneur who has build a strong product in the internet space had approached me for financing earlier and I mentioned to him that this space is very difficult to scale beyond a particular limited size due to market restrictions in India and therefore it is unlikely I would look at this company for financing unless he can demonstrate that he could expand the scope of this product offering to cover a larger market opportunity and that potential customers would be interested in that expanded scope. Since he was a really solid guy, there were many angels willing to write him a cheque. My opinion is most angels in India dont really pay attention to how big the opportunity could be and are happy to write a cheque hoping that they will make something if they like the entrpreneur/technology thinking that they will sell out to someone someday. So this entrepreneur raised usd 50-100k from a few angels. 6 months post the financing, he had a few paid customers and now decided that he would like to go for VC funding as his angel capital would be running out soon. When he approached VCs, he got the similar feedback I had given him - market is too small to build a large company and unless there is proof that he could build adjacent products that he can monetize or enter new markets, it will be tough to raise financing. A few months later, he ran out of cash, his angels didnt want to fund him anymore since they were scared they would lose money since the VCs were not interested, and so the entreprenuer had no choice but to close down the company. In this case, had the entrpreneur raised usd 500-700k, he may be in a different place today. Moral of the story - Raise enough cash to get to a milestone that will attract follow on capital or allow the company to be self-sufficient, assuming that you may not have the capital yourself to keep funding the venture yourself. If you are unable to raise enough cash at the seed level to get to the milestone, then may be better to rethink whether you want to start the venture with sub optimal cash. If you are rational about why you need a certain amount of cash to get to a milestone, most angels will understand this and fund the company so long as the cash requirements are not absurdly high.

Look Beyond the Resume

2010-07-28T03:45:00.000-07:00

Many times, start up entrepreneurs seem focused on education and experience when recruiting. IIT, IIM, Tata, Reliance, ICICI, Hindustan Lever, Mckinsey, etc are some of the that I keep hearing in discussions about recruiting. No doubt, some of these people who studied or worked at these hallowed institutions are very smart. But that doesn't necessarily translate into being able to succeed in a start up environment. What you need in a start up environment is what I like to succincitly call "edgy", especially in a business role - someone who is willing to challenge status quo, try and not take "no" for an answer, not be afraid to make cold calls to potential customers if needed, finds ways to get things done, think out of the box, make decisions quick, adapt plans quickly if needed. Most of this cannot be gauged by a resume. So spending time with the person to judge these inherent traits is critical. Asking open ended questions and listening not only for what the person is saying but what the person is the motivation, aspiration, intention behind what the person is saying and extrapolating competence and execution ability from that is critical. It is part art, part science. But worth spending the extra hours doing that, rather than hire for education and experience solely and later learn that this person is unable to adapt to a start up situation.

Let me give an example. An entrepreneur in one of the startups I am associated with wanted to hire a senior CXO level candidate. He hired an IIT/IIM topper who had worked as a CXO in another MNC for a decade. This person was rated very high by the MNC. This entrepreneur spent most of his time convincing this person to join him and very little time gauging whether this person would be the right fit. When this person finally joined the start up, he was ineffective from Day 1. He didnt have an army of people to execute below him and didnt have a brand platform to recruit top talent like he did in his earlier job. This startup was venturing into a new service never been offered before in the country and he didnt have the "gut" judgment to really know how to position and price the service. He was not used to rolling up his sleeves to talk to potential customers to really figure out the pain points. He was not willing to risk his reputation by trying to convince customers to buy this service. His concern was what if the company couldnt deliver? He was used to selling a service that existing for years at his previous job and had good foot soldiers below him to execute. He was basically managing a set of strong resources earlier where the brand was the calling card and not himself to open customer doors. Needless to say, this person soon parted ways with the startup.

Moral of the story - Look Beyond the Resume! Spend a lot of time "understanding" the person being hired. Remember some of the best entrepreneurs in the world didnt go to college and didn't work at blue chip companies either.

Venture Capital - a largely misunderstood term in India

2009-11-23T03:21:00.000-08:00

Have idea? Will seek venture capital. This seems to be the mindset of many Indian entrepreneurs seeking venture capital in India today. Over the last few years, we have seen plans from entrepreneurs looking to start a restaurant, a coaching class, a web 2.0 project, a power plant, a budget hotel, a boating company, a travel agency, a pre school, a real estate brokerage, a jewellery shop, a nursing home, a dental clinic, etc. Many of these ideas can translate into successful businesses. However, they may not be suitable for venture capital.

What many entrepreneurs haven't understood is that Venture Capital is also a business at the end of the day. Venture Capital funds have a responsibility to its investors to maximize the returns on capital invested. The investors in the venture capital fund have chosen to invest in this asset class vis-a-vis other asset classes like public stocks, later stage private equity, with the expectation that it is a high risk righ reward asset class. Given the inordinate risk that a venture capital fund takes when backing an entrepreneur with a new idea, it is only fair that the fund expects a disproportionate return on that investment. Chances are that several of the investments may not yield the returns expected, so therefore it is even more important to be disciplined about the return expectation as the investments that do provide the expected returns need to make up for the ones that don't in order to be able to generate expected high returns for the investors on this high risk asset class.

Therefore when a venture capital fund evaluates a new business idea, it is looking for the possibilty of a "super normal" return. Many businesses don't pass that filter as they are typical linear growth cash generating businesses that most entrepreneurs think of. And therefore they have to turn down an investment proposal of an entrepreneur who has a perfectly viable business plan.

As an ex-entrepreneur, I empathise with these entrepreneurs as they have entrepreneurial dreams and are seeking start up capital to get their venture off the ground. What India needs is more angel/seed investors that are investing their own monies and are willing to help these entrepreneurs get started without the expectation of a super normal return. Typically in India, a family member or relative would provide the start up capital to another member in the family to start a business. What is important that is that start up capital is available beyond the family so that first generation entrepreneurs who could otherwise not dream of starting a company can now do so with this seed investment available.

Venture investing in education in India

2009-08-31T02:45:00.000-07:00

Every entrepreneur I meet in the pre school and vocational training space include k-12 schools in their future business plan. One also keeps hearing of business families opening schools and universities across the country. When I recently heard that an entrepreneur who was selling sweets in North India decided to open a university with the spare cash and land available, I asked myself the question "Is this a bubble?"

While there is no argument that education is a big need in the country, I am not sure if there is really an opportunity for a venture capital firm to invest in this sector. The reasons are the following :

1. Teacher dependency. Attracting and retaining talented teaching faculty is not a trivial task. Scaling faculty across locations is even more of a challenge. I remember when I went to school, not evey faculty member was top notch. If a single school cannot maintain quality across faculty, how do you scale this to different classes and geographies?
2. Capital intensity - Purchase of land and/or building/leasing of property can be suck up capital. If the amount of capital is high at the outset, then it defeats the venture capital model of low capital-high return.
3. Regulatory environment - Certain laws prevent investors from investing in the educational institutes. Investors try and work around this by investing in a management company. There is inherent risk in that model as the school that gives the teaching contract to the management company could potentially reneg on that.
4. Lack of gauranteed jobs - Given the plethora of universities and vocational institutes cropping up, there is pressure to fill seats which sometimes dilutes the quality of candidates admitted. Many of these students who graduate cannot get placed as they don't meet the quality criteria of the employer. In the vocational training sector, many jobs don't require formal education/diplomas unlike the western world (ie. plumber, carpenter, courier, etc) and hence make these institutes less viable.

Be careful before investing in a startup in India with no strong leadership

2009-06-24T01:23:00.000-07:00

Many times, I have heard VCs in the US talk about investing in a great product or concept without a strong CEO. Typically a bunch of engineers build a great product that can change the world, but there is no management leadership within the founding team to build a business around the product. In such a situation, a VC invests in the company and brings on an entrepreneurial CEO who can run a very young company.

Given the risk taking psyche and the robust entrepreneurial ecosystem in the US, hiring a professional management that can successfully lead a startup is possible. However, this is not as easily done in India for several reasons :

1. The risk taking ability amongst these managers is low. What if the company fails? The lack of a safety net in case of failure scares many potential managers from joining startups.

2. Parents, family and friends have a big influence on career decisions. Leading unknown companies are not widely accepted as a mark of success. Joining a Mckinsey or Citibank is looked more more favorably than joining an unknown small company.

3. Cash is more important than stock to many of these managers as they have to look after not only the spouse (who typically doesn't work) and children but also the parents and in many cases siblings as well. Typically startups don't offer the renumeration that can sustain these obligations.

4. Many of the managers are not trained as entrepreneurs. They may be bright, but they are not comfortable with selling unproven concepts to customers, hiring top talent to an unknown company, thinking out of the box on pricing, promotion, processes, etc. So even if you are able to convince a professional manager to join the startup, the chances of being able to successfully execute during the early days of the company is low.

As the entrepreneurial ecosystem builds over the next several years as more and more startups get funded, hiring strong entrepreneurial leadership into a start up will become easier. However, for now, I would caution any investor that is looking to invest early stage with no strong leader who can run the company in its early years to think twice before investing.

Investing in early stage retail is not as easy as it seems

2009-03-03T02:02:00.000-08:00

India is a nation of shopkeepers. In a growing consumption led economy, it would seem very logical for a venture capital fund to look at investing in the retail sector. I hear a lot of VCs talk about how they would like to invest in businesses that are consumer focused and retail in particular. There are many good entrepreneurs selling services and products via retail in India and it is very tempting to believe that if they could only replicate thier initial success across a few stores nationwide, a large enterprise can be created. I believe there are several challenges in the sector, especially in India, that raises questions on whether extraordinary returns are possible in a 5-7 year timeframe for a Venture Capital investor.

Some of the salient challenges for a VC are :

1. Capital Intensity - Rentals in tier 1 towns in the best locations are still relatively expensive compared to most parts of the world. Annual rental deposits, inventory, marketing are all costs that can multiply as you scale. The company may need to raise working capital debt which further burdens the companies cash flows.

3. Lack of Brand Loyalty - The Indian consumer is very value oriented. He or she will shop where there is better value. Brand loyalty is limited.

4. Heterogenous Markets - India is a conglomeration of states with different laws, languages, cultures. To be able to scale across states requires local market knowledge and relationships which can take time to build. There are many cases where a product or service has been successful in one city but it has taken years to crack another location within the country.

5. Inefficient Labor - While labor maybe cost effective, there can be a challenge in finding productive, honest pool of self starters (executives and managers) that can help the company scale across the country.

While I am sure that there could be some unique opportunites that could counter the challenges above, one needs to be cautious about investing in early stage retail ventures if you are expecting rapid growth in a relatively shorter time frame (5-7 years). If an investor has a longer time horizon ( 8-10 years at least), then it may be more attractive.

Slumdog Millionaire = Investing in Indian Technology Ventures

2009-01-29T23:49:00.000-08:00

Recently, I had the privilege of sitting next to the cast and crew of Slumdog Millionaire on a Mumbai- Delhi flight. It was interesting to learn about how British Screenwriter, Simon Beaufoy came up with an original script that was an adaptation of a book by an Indian author and British Director, Danny Boyle made a film based on that script using largely Indian cast and crew. A non Indian director and screenwriter had the global mindset, key relationships, access to capital, and the agility and smarts to leverage Indian talent where appropriate to create a global runaway success.

Many of the technology product companies that are being financed by Venture Capital firms in India today have similar team characteristics to Slumdog. An Indian or Non Indian entrepreneur that resides outside India or has recently relocated to India, with a global mindset and key relationships worldwide , leverages Indian talent to produce a globally successful product. Nexus India Capital has several companies of this nature in its portfolio - Kirusa (designed in New Jersey, developed in Bangalore), Pubmatic (designed in San Franscisco, developed in Pune), DimDim (designed in Boston, developed in Hyderabad).

Both film making and technology development are huge industries in India where there is a lot of mid and junior level talent that is available to execute projects. However in both these sectors, a critical mass of globally focused entrepreneurs doesn't seem to exist in India today. While we hope that this will change in the future, for now it seems like the mantra for globally success in film and technology will largely continue to be "designed outside India and developed in India."

Ten Tips for startups to ride out the economic slowdown

2008-10-24T22:55:00.000-07:00

1. Don’t panic! Economic cycles are a part of life. The best companies are built in the worst of times. If you panic, your employees will panic.

2. Conserve cash. Delay spending on non-critical things that do not result in revenue generation. Renegotiate vendor contracts, rental contracts, etc.

3. Improve productivity. Get more out of your team.

4. Differentiate between high and low performers. Reward high performers. Counsel out low performers.

5. Optimize the organization. Hire critical talent as they may be available at a reasonable cost. Transition or re-deploy non critical resources.

6. Continue selling or marketing your product or service. Being in front of customers or vendors builds confidence that you are a long term player.

7. Focus on growth with an eye on profitability. Since the cost of capital is high today, be cautious on how much capital you raise to invest for growth. Avoid over-investing in the business in the hope for exponential growth in the future.

8. Communicate with your team internally. Make sure that your team understands that you’re building a lasting and successful enterprise and that some of the cost cutting measures, including layoffs, are necessary for the health of the company. Anxiety levels can be high in tough times.

9. Act swiftly. Try to deliver any bad or tough news at one shot to the company. Continuous bad news can affect morale and instill fear.

10. Have fun! Make sure your team is having fun. A happy environment builds loyalty and performance for the long term.

Venture Capital is about investing in the right people

2008-09-19T02:48:00.000-07:00

Markets change. Competitors change. Customers change. Regulations change. Suppliers change. But people rarely change. What differentiates a great venture capitalist from a good one is the ability to identify and invest in the right people or "six sigma" entrepreneurs as we like to call them at Nexus India Capital.

TOP 10 TRAITS OF A "SIX-SIGMA" ENTREPRENEUR :

1. Smart - High on common sense
2. Passionate - Really believes in the idea
3. Quick - Acts on things immediately
4. Great listener - Understands the customer's needs
5. Adaptive - Willing to change course midway if needed
6. Team builder - Can attract and retain a leadership team
7. Self aware - Understands own strengths and weaknesses, leverages the strengths and finds ways to compensate for the weaknesses.
8. Focused on execution - Spends majority of the time on the high priority issues. Does what it takes to achieve a task.
9. Visionary - Dreams big. Spots trends in the future before anyone else
10. Ethical - Honest. Genuine. Can be trusted

More often than not, companies fail because of the wrong person at the helm. It is better to back an "A" entrepreneur with a "B" idea than to back a "B" entrepreneur with an "A" idea. Many of us Venture Capitalists get swayed by domain experience and/or top tier eduation as that is something tangible we can relate to. For e.g., we are more likely to fund someone from the travel industry to start an online travel company than someone who has worked in garment exports. We are more likely to fund an IIM MBA who has worked at Infosys or Tata than someone who has worked at a small software shop with a local chartered accountancy degree. While domain expertise and a decent education can be a plus, it is not what makes a six sigma entrepreneur.

Identifying six sigma entrepreneurs is more of an art than a science. It requires a killer observation, good listening skills, laser focus and a lot of intuition. And those who are good spotting these entrepreneurs make great venture capitalists.

Is there money to be made on the Internet in India?

2008-08-27T23:02:00.000-07:00

30 million + internet users in India is not a number to snigger at. Check out Linkedin, Facebook, Orkut, Expedia, Amazon, Youtube, Google and you will find that there are hundreds of thousands if not millions of Indians actively engaged with these sites. On the home front, names like Rediff, Naukri, Shaadi , Bharatmatrimony, Baazee, Makemytrip, Yatra, Cleartrip, Indian Railways boast similar usage patterns.
Indians are accessing the internet from home, office, cybercafé, college, mobile, wherever. Indians are no different from the rest of the world in their online needs – they are looking for entertainment, information, convenient commerce, social communities like their counterparts in Brazil, Poland and China and the US.
So why is there so few online successes in India today when there is such a great need? The popular reason seems to be “lack of broadband”. While broadband can definitely enhance the user experience, lack of broadband is not the reason why millions of Indians today are not widely adopting internet sites within India today. Multi user environments like office and cybercafés do provide ample broadband access today. Many applications also work fine on narrowband access. Many global and domestic companies have done just well with the current internet situation, so why can’t more such companies exist?
The answer is simple. The main reason is that there are not enough compelling applications online today that really solve a customer need. Take for example, bus ticketing online. Intuitively, a great concept. There is a consumer need to book bus tickets online and get them delivered to your doorstep. There is no reason why bus ticketing online cannot take off just like railway bookings did. However, if you go to any of the popular bus ticketing sites today, you will find limited inventory which either kills the consumer experience or limits the audience appeal. The reasons for this are structural within the bus operator industry – fragmentation, lack of online connectivity, questionable practices (double booking), lack of manpower to manage orders and fulfilment, etc. So unless the bus ticketing sites decide to solve these issues, consumer adoption may never take off. A pretty looking site with limited inventory doesn’t solve mass need. The day these bus ticketing sites offer breadth of inventory, instant bookings where the seats are guaranteed without a fear of double booking, flexibility of payment options and prompt fulfilment, you will see adoption take off. Online companies, especially in ecommerce sometimes need to solve offline structural issues to succeed.
Another good example of a lack of compelling application is social networking . There are more than a dozen Indian sites seemingly trying to solve a need. Don’t understand what the need is given that Facebook, Orkut, hi5, etc allow Indians to connect, chat, poke, play games, flirt, form community groups, share their moments, etc. I firmly believe that if there is a site in India that meets a compelling social need that is not being addressed by the global sites today, it will take off, no question, broadband or no broadband.
There is a lot of wealth to be created by Indian entrepreneurs who come up with Internet companies that address a real need. And it may require more than just putting up a pretty site and praying for something great to happen. Nexus India Capital has invested in two companies that are trying to solve a real need online - Komli and DimDim. Komli is an online ad network in India and DimDim, is a free web conferencing platform - both addressing real needs in the country today. Komli is helping Indian advertisers advertise across a list of online publishers that would otherwise not be accessible to them and Dimdim allows small businesses to hold a web meetings for sales training, seminars, etc at no cost to them.
Hope to see more online companies emerge in the future that address a real need. There is tons of money to be made on the Internet in India.

Raising the appropriate amount of capital is key

2008-07-31T03:48:00.000-07:00

Many times, I run into Indian entrepreneurs who want to raise less capital because they dont want to dilute equity in their company. They feel that they could raise less money initially, cut corners to make the capital last, try and build some traction, and then go out and raise further capital later. Sounds very logical. However the danger with this strategy is that you if don't raise enough initial capital to be able to execute effectively to get some decent traction, raising the next round of capital may become a big challenge!

It is very important to really understand what it will take to take a company from a concept to early growth - people costs, product costs, operating costs, capital equipment costs, marketing costs, etc. It is always good to overestimate costs and underestimate revenues in the early days to really get a sense of cash requirements. More often than not, the best people you want to hire in India will come at a cost that is higher than budgeted. Sales cycles with corporate customers are generally longer than expected. Small missteps in execution can cause unexpected capital outlays.

My advice to entrepreneurs is to raise a bit more capital than you think is required even it is means a little more dilution. The main focus should be on building a successful enterprise and not on immediate ownership levels. Having said that, too much capital is not a good thing either. It can ruin fiscal discipline and dampen the entrepreneurial spirit in a company. The right balance is key.

Building the management team in an Indian startup

2008-04-28T04:23:00.000-07:00

It takes a few good men and/or women at the top that are passionate, focused, and work well together and have the right complementary skills to get a startup off the ground. However attracting quality senior management to a startup is certainly a non trivial task. Identifying, attracting and converting senior management candidates in India is time consuming and a lot of hard work.

Here are a few tips to ease the process of attracting senior talent into your startup in India :

Start focusing on the organization early. An entrepreneur needs to quickly evaluate the gaps in his or her organisation and be obsessive about bringing on the "right" senior management team on board. An entreprenuer needs to be intellectually honest about his or her own strengths and weaknesses and look to bring on people who can execute much better than him or her in the weak areas. An entrepreneur also needs to think laterally when looking at bringing on senior talent as there may not be abundance of talent available with direct domain expertise in India. Often, domain knowledge can be learnt. What is more important is the core competencies and values that an individual demonstrates.

One a candidate is shortlisted, convincing them to join can be a difficult task. A credible investor, board member and/or advisor can play a very important role in helping build the senior organization in a startup. Typically, Indian managers harbor entrepreneurial ambitions but are scared to take the leap to join an unknown startup. If there is someone the candidate can converse with whom they find credible that is personally involved with the company, it can really help faciliate thier decision to join. So an entrepreneur must always try to choose the right investors and advisors that can help them build a strong organization. This holds specially true for India and may not be the case in other developed markets where startups are well understood and an entrepreneur can easily attract talent.

Understanding the Internet consumer in India is critical

2008-04-09T00:54:00.000-07:00

There has been a lot of "buzz" recently about investing in consumer internet in India. There are VCs flying down to India from all over the world looking for the next big Internet venture for the domestic Indian market. And keeping these VCs busy are a plethora internet entreprenuers with "me too" ideas (internet businesses that have worked elsewhere in the world)- social networking, blogging, travel, peer to peer collaboration, dvd rentals, photo sharing, matrimonials, ticketing, payments, classifieds, etc. As an Indian internet entrprenuer and now most recently a venture capitalist, I have met almost every internet entrepreneur in the country looking to start a new venture. A word of caution to those starting an online venture or to those looking to finance one - understand the "pain" of the Indian consumer that your online business is trying to mitigate. For example, lets take a look at a hot internet category - Online travel. Today, an Indian traveller calls up his or her travel agent (there are thousands of these companies in every part of urban India) and requests a flight or hotel reservation for a desired date. The travel agent does the research and typically calls back within a few hours with several options and fares tailored to the Indian consumer's request. The consumer then chooses amongst the several options given, post which the travel agent will send a person to the consumer's home to deliver the ticket and/or collect cash/check payment. The biggest pain today for the Indian consumer is seat/room availability and transparency (ie. Am I getting a competitive fare?). Collection of inventory and payments is not a pain for today's Indian traveller. And talking to an agent on the phone is certainly not a pain point for most. In fact it is something that the Indian travel appreciates. So a Online travel intermediary that provides competitive pricing of inventory on the website, guarantees availability of the most popular flight/hotel inventory, provides phone service, home delivery and payment pick-ups will win in this market. Online travel companies who insist on remaining purely online and not provide these so called "non online" services will find it hard to survive. It is no secret that internet is poised for a take off in India. And broadband will eventually happen. Entreprenuers who understand their target customer's pain points and come up with indigineous solutions to mitigate thier pains will make a lot of money for themselves and thier investors. Others who try and port US models to India will be in for a rude shock!