Entrepreneurship 101 For India

These few weeks, I have been hearing from a lot of Indian entrepreneurs in response to the series I have written on early-stage activity in India. There’s frustration, there’s despair. I want to give you guys a few pointers, as you are thinking through your options on how to get your companies to the next level, or just to get yourselves off the ground:

Prepare your business plan assuming that a VC will evaluate it, even if that’s not the route you go.

This means, that you need to be very focused on what you want to do. Indian companies, typically, claim to do a LOT of different things, thereby diluting the positioning. The one thing that VCs NEVER fund is a defocused business plan. You shouldn’t either. Think of yourself as a VC, investing your own time, energy, credibility, career in a deal. Should you?

VCs invest in 3 things: (a) Market (b) Team (c) Defensible Technology.

Positioning is one of the most important things to learn for an early-stage entrepreneur. Read Geoffrey Moore’s “Crossing the Chasm”. It’s the best book on high tech strategic marketing. It has concepts that new entrepreneurs absolutely need to learn and use. Most importantly, this helps you define the market.

Once you have a positioning hypothesis, calculate the corresponding Bottom-Up-TAM (Total Available Market). The big mistake people make in pitching VCs is that they use “a multi-billion dollar market opportunity” that is high level and top down. Be clear, that a top down, 30,000 ft approach means nothing. The question that needs to be addressed is: How much can YOUR particular solution be sold for? How many people / businesses are likely to buy it? The multiplication of the two is your bottom-up TAM. THIS is the crucial number.

If your positioning hypothesis yields a miniscule TAM, you better change the positioning and try to expand the TAM.

Your Team must have some relevant background in what you want to do, unless you have such trackrecord that you can move outside of your areas of proven expertise, in which case, you don’t need to read this post. Pick an area to work in where your background can be leveraged.

On Technology, the key issue is that VCs prefer to invest in companies that either have or can build some technology advantage, as opposed to pure labor arbitrage. This is not to say that labor arbitrage deals are not being funded, but your chances would go up significantly if you can find a nifty technology angle as leverage.

Litmus test: Hold your business plan against this checklist. It, however, is more of an Enterprise / SME oriented checklist. You need a variation of this for Consumer facing businesses.

Understand how the Venture Capital business works. In 1997, when I started raising my first venture round, I read this book to learn the basics: “High Tech StartUp” by John Nesheim. Anytime you are out to sell something, you need to understand the buyer’s point-of-view. In this case, you are selling equity in your venture to an investor. You absolutely need to understand the investor’s point-of-view.

You can bitch and moan about the fact that VCs don’t fund you, or you can learn their game, and present a fundable deal to them, in which case they WILL fund you. Those of us who have traveled down the path of entrepreneurship multiple times, have all had to start somewhere. We had to learn the same things that you have to learn now.

So learn it. And succeed.