Preparing for failure: startup’s karma conundrum

To best describe an object, describe by what it is not than by what it is

– Unknown

In this post, by a startup I shall mean an upstart venture created by its founders with a vision to create an enterprise of value.

The law of causality simply states the relation between a cause and an effect. Every effect has three possible outcomes for an action: best, average, worst. The best case outcomes are always the happiest; there is champagne and there are more investors ready to pour money into the company. The average case is still good; it’s a lot better than the worst case; the current investors will still hopefully stay with the company. It’s the worst case that’s debilitating for a startup. The killer for every startup is the limited revenues available with it, there is always a cap on the amount of resources available to expedite. Every step is line a mine, a misstep and you as an entity don’t exist anymore.

Every entrepreneur always dangerously lives in a make believe world of assumptions, scenarios and checklists; living off on a heavy dosage of caffeine. In this highly charged potentially sensually overloaded environment of a startup, the entrepreneurs are either paranoid or optimistic. Optimism is a people magnet no doubt, but it can potentially shoot down the startup even before it has taken off. In cases where the other side is a body (institution/corporation/client/person) greater in stature than themselves, it should a good heuristic to go for the worst case to average case out come of the result.

Say you have a project coming your way. And your client is yet to send a complete requirements spec. Expect at least three times the delay in time for the version to reach you. Same goes to their response and maybe for the payment too. I have this friend of mine who constantly lives his life on the worst case scenarios and even prepares and plans for it. He consistently and diligently prepares for the worst outcome from everything he is involved with. And he has had a much higher rate of success in life than an average Joe boy. A startup too must prepare itself for the worst and aim for the best possible result. The final result is often midway through them.

The general rule of thumb.
For a given uncertain scenario expect the positive outcome to have a probability of occurrence as 1/10 as against a negative outcome of 9/10. Lets take a simple scenario and try to understand the point.Say you are in negotiation with a client for a project that you expect the response to come over to you within a week and project to run for 3 months. In this scenario always estimate the response to take three weeks time & the project to run for 6 months. And hence your idea of buying the new computer with the payment from the first phase can essentially be postponed or shelved.

The reason for this rule is simple: Startup entrepreneurs are a optimistic lot. In the rush of passion for `their` product, they forget about the most crucial aspect of the game: the market and its attitude towards their product. Not all ideas are groundbreaking and not all are welcomed by the market with open arms. In this case, the simple rule of the thumb of expecting success with a 1/10 probability. Remember, the general rule of the thumb is that only 1 startup out of 10 survives the haul. Every step in the problem must be broken down into a simple manageable piece and put all of them down on the storyboard. Now, for every step put down the probability as 1/10 for success and failure at 9/10.

Prepare yourself for only a 1/10 of the success possibility.

Marketing
Whenever you approach the client from your side, expect the client have a meaningful conversation only 1 out of 10 times. After the first meaningful conversation, expect the client to show interest in your product only 1/10 times. Now that means only one client in a hundred will show interest in your product and would want to know more about it. Expect the deal to be made only 1/10 times. Now that means out of 100 clients you go to meet only 1 `might` turn into a real client.

Long term vision + short term survival strategy
A startup cannot afford a short term debacle to live and see its long term vision fulfilled. It has to survive every huge storm to be able to live another day. The startup experience is a sensory experience: it requires constant monitoring, evaluating, analysis and change. A huge company can easily afford a long term cut in its revenues to be able to fend off a short term debacle. A whale can stop flapping its fins and it will still stay afloat; the large lung capacity and the fat help it through. The sharks cannot afford to stop swimming; you stop and you go deep, very deep.

With such heavy odds against it every startup has to balance two visions of itself. Short term survival & growth on one side and long term vision. Each are important and must not be traded off for the other. Once the short term survival is compromised, it ceases to exist. The long term vision is important and must be carefully tallied by the founders regularly otherwise there is the danger of it getting just getting lost in the local minima and maxima for ever.

And its generally this very tendency of a startup to be extremely vulnerable to events outside of is sphere of influence that make its existence shark like. The lean muscle of a startup makes it extremely easy(compared to a well established corporate juggernaut) for a startup to be able to change its direction as per the demands of the situation. This however should not be understood as a change in the vision of the company. Its very easy to confuse vision with the direction and it can be fatal to misunderstand this difference.

This ability to quickly adapt and innovate is the basic survival tactic of a startup and will/should remain so.

Uncaffeinated Desktop Discussions 1: Buxfer

I had had a personal interest in understanding the dynamics of social money in some personal posts of mine. Recently on Rajat’s blog I had the chance to meet up with Amit, one of the cofounders of Buxfer. The meetup coincided with our plan to get entrepreneurs to talk about their products… from a more critiquing PoV.So here’s the first edition of Uncaffeinated Desktop Discussions with Buxfer. I have used it and personally felt the UI feel polished compared to BillMonk.

Q. Can you tell us a bit about your team? More specifically, each of your roles
and responsibilities and what all each of you are accountable for?

The Buxfer team consists of Ashwin Bharambe, Amit Manjhi, and Shashank Pandit. All three of us are Ph.D. students in the Computer Science Department at Carnegie Mellon University. Â Shashank does research in the areas of information retrieval and data mining, Ashwin in large-scale distributed systems (high-performance multiplayer games), and Amit in scaling data-intensive Web applications. We have included the URLs to our research pages at the end of this answer.

Currently, we do not have a clear division of responsibilities. Since we can only work on Buxfer in our spare time, anyone who is free has to take care of any issue that arises. So pretty much everyone has to take care of everything.

Research page URLs:
Ashwin Bharambe http://www.cs.cmu.edu/~ashu
Amit Manjhi http://www.cs.cmu.edu/~manjhi
Shashank Pandit http://www.cs.cmu.edu/~shashank

Q. My ideal app is always a very simple, intuitive app very much unlike GNUCash. Buxfer takes care of that for me at least helping me track all my expenditure… But I’m still not comfortable sharing my finances on the network. Whats your reply to this kind of profile of user?

Buxfer makes use of HTTPS to encrypt all the information that is sent to and fro over the network, so that it can’t be intercepted by a third person. Furthermore, you do not need to put your credit card number or bank account number into Buxfer. In fact, we don’t even ask for things like name, age, gender, zip, etc. Passwords are stored in an encoded format, so that no one (not even us!) can recover them as plain text. Â Users who do not want to reveal their email to Buxfer can use their Facebook or Yahoo! account to login. In short, users with the profile you mention can use Buxfer while disclosing very little of their personal information.

Q. Buxfer is a stranger name like my pet dog. Was this intentional, to have this zing feel to it?

Buxfer is an abbreviation of “bucks transfer.” We wanted to come up with a short and catchy name, and Buxfer fitted the “bill” perfectly!

Q. How would you profile your company ideally as?

Buxfer is a service meant to simplify tracking of shared expenses. Â By shared expenses, we mean expenses of an entire group of people which are paid for by just one or two members of the group. Examples include house rent for a group of roommates, dinner or movie outings with a bunch of friends, vacations or business trips with work colleagues, etc. Buxfer provides a centralized mechanism for such groups of people to report their shared expenses and be able to track how much money they owe each other. Currently, the service is web based, but it could be integrated with a variety of devices (in particular, cellphones).

Q. Tell us about the buxfer growth story? The first people to fall in love with it, the evangelists and other adopters?

We opened Buxfer to public in late September. Since then over 5000 users have joined Buxfer. The growth rate has been phenomenal, given that we invested very little time in marketing or publicizing Buxfer. Its just that our users have been very happy with us, and spreading the word around for us. Many of them write us fan-mail saying “Buxfer rocks!” or “We have always wanted such a service!”

Buxfer has also gotten media attention. It was covered by the Pittsburgh Post Gazette and
Associate Press.

Recently, the AP also put an article on the international wire, which was circulated as far as India and Australia. This article also appeared in Business Week and NY Times. So we have been getting very good coverage via the press too.

Q. Now about the idea. There is Billmonk and then there is Quicken, two plays concerning the individual but their target user profiles are much different. Buxfer is probably a mix of both – social money combined with individual expense tracking. However your target user profile (non-professional, non-serious but money tracking individual) Â looks very niche, ideally suited for students who have lots of small expenditures and it becomes difficult to
track them…


We believe that our student market is big enough to make money. We estimate the size of this market to be in the millions. Moreover, this is the market that many advertisers want to target, making it possible for us to generate revenues via advertising.

Q. What about its vision? Do you intend to make it mainstream as in for the general mainstream audience or make it the niche play?

Currently, we intend to focus only on the money tracking student market.

Q. How many users have you had till now? How is the viral growth compared to the general organic growth (the numbers or %)?

So far, our growth has been exponential, doubling every month or so. We currently have over 5k users with an increasing number of users joining every week. So far, the viral growth and organic growth are more or less equal.

* Q. Any interesting trends that you observed till now; say some spurt of growth during a season? *

The number of users signing up on Monday is almost twice the number of users signing up on either Saturday or Sunday. However, the maximum number of transactions are posted on Sundays. Maybe people are partying hard over the weekend, and on Sunday night they sit down to enter all their shared bills 🙂

Q. Considering that your name includes transfer of [funds…], do you intend to combine Buxfer with a payment gateway say PayPal? If yes, are you in discussions with anyone?

We are investigating the possibility of integrating Buxfer with a payment gateway in the near future, but so far, we are not in discussions with anyone.

Q. Any possible funding by VC ideas?

We have been contacted by a few angel investors, but haven’t yet finalized any deals.

Q. Is Buxfer earning you any bux?

Not so far. So far we have only earned the praise of many of our users.

Q. You guys seem to have put quite a thought on the UI front; mostly concentrating on the functionality. Like the signup form appearing in place of the login form – simple and elegant. Or say the groups functionality; which integrates very well with the real world functionality.

Thanks. Indeed UI is, and will remain, one of our main areas of focus. We believe that a simple and intuitive UI is extremely important for a website to be popular. We also like to thank our early users for helping us hone our UI.

Q. How about the inspiration for UI. My first impression was the GMail – global links at the top, dashboard in the center, contacts & groups & invites on the left, vertical tabs…

It does bear some resemblance to Gmail, but it would be incorrect to say we were inspired by Gmail. We tried out a couple of different design ideas, and this one was the most appealing (as per the feedback of our initial users), so we went with it.

Q. Billmonk does plan to go into individual accounting. Are you concerned about
that?

It is not a matter of concern because we think (and we are sure Billmonk will agree) that our main competitors are bits of paper and spreadsheets, which a vast majority of people still continue to use to track their money.

Q. Your thoughts on making a successful webplay?

First, you need to address a real need that people are facing, and second, you need good execution to make the site very simple and intuitive to use.

Q. Any parting thoughts to other aspiring entrepreneurs?

Well, we are not exactly experienced entrepreneurs, but we can say one thing for sure: being an entrepreneur is FUN! Yes, its a lot of hard work, and a tough path to pursue, but at the end of the day when you see people out there using your product and liking it, there is no better reward you can get for your work. From our experience, we would say that the most important thing is focus and dedication to your product, and a strong determination to make it succeed. The idea is as important as the execution, and a motivated team with a good mutual understanding can achieve the impossible. We wish good luck to all of
you!

Readers, do leave your comments! 🙂

-kopos

Why Google is dangerous than Microsoft!

Everyone loves the underdog, or lets say most people root for them. Microsoft was the evil empire hellbent on world domination and Google was the david; the only hero capable of felling the Microsoft Goliath Juggernaut. But just looking at the way Google is rapidly gobbling up startups or more specifically eating into lunches of other startups markets; Google has long ago lost its ‘Startup Badge of Honor‘. I still think the most awesome technology to come out of Google stables is its search technology; not that I dont love Gmail or its Desktop Search(still to use this one though!). Ok back to the point.

Every corporation is a hulking conglomerate of people (manpower, resources, experienced moronic bosses he he), hardware, software and ton loads of dollars. This hulk makes it an inevitable juggernaut and most companies do use this advantage to the maximum. But this bulk itself is its biggest hindrance to pace. So all they do gain on this lost advantage is by taking the M & A route. Thats a very simple top down approach to abuilding a company compared to a startup’s bottom up.

Think of it, a top down approach to corporation doesnt allow a company to go into a new niche area (which is not its strength) even though theres lot of money it; it simply cannot just change gears and shift focus so rapidly; that was the beauty of startups playing with the big ones; you know its a virgin market and there are no direct competitors and for any biggie to come to this play it still gives you a enough window of time to ship your product before they can change direction to accomodate this new money making opportunity.

Now, just look at this discussion.

HUFFINGTON: Whatever products Google (Charts) is developing, they are incorporating a 60 Percent to 70 percent failure rate. I find that utterly fascinating. Talk about that culture and how that translates into our lives.

MAYER: As we’ve grown, one of our challenges has been, How can we continue to innovate? We have a theory around failing fast. If you assume that one in five things you do will turn out to be really successful, and maybe two of five will be moderately successful, and the other two will languish, you want to do a lot of things. It’s all about being agile. Most of the teams at Google are three to ten people. Five people launched Google News. About five people launched Google Toolbar. They operate like small companies inside the large company. Google is a lot like managing a VC firm, because you’re placing bets on different teams.

Semco was probably the only other company that had this bottom approach. As is each of its smaller more specific functionality units spun off as a new company by its own employees. But then that was an extreme case of zero shittake in the company; but i digress.

With such a bottom up approach, Google no longer becomes our typical hulking conglomerate but a sprinting juggernaut! As the myth goes, think of every interesting problem that you want to solve and Google already has atleast one team of 10 folks working on it and looks like this might not be a myth at all! Google just probably became the worst startup nightmare. Look at the developments. Google releases API to enable vertical search and has almost instantly flattened out IP value being created there by the new emerging vertical search startups. And the number of startups it bought?!

Google just might be the beginning of a new nightmarish approach to corporation building. Lets petition with the almight market to stop Google for inducing such horrible nightmares onto startup entrepreneurs.

-kopos 

Understanding Smack Shopping – Deal of the day

The first thing that comes to your mind as soon as you read about Jellyfish’s Smack Shopping – Deal of the day is Woot. Woot was a very innovative concept which took the consumer market to a new paradigm. It was just a limited time, cant-miss deal, which had the users hooked for the one main reason – one product, great discounts. It made great sense to the wholesalers too, for one day their product is assured to be sold.

Since we dont have any details on the discount rates on items by the W00t retailer, lets just say W00t buys the products at some x% discount on the market price from the wholesaler. And then W00t sells the items to its consumers at y% discount on the market price. The final profit that W00t nets is (x-y)/100 * N * Cost of each item.
However, Smack Shopping Deal of the day (SoTD) makes this number game much more interesting. The main reason is the number of variables involved is more than two {x,y}. Lets now consider SoTD here. For instance, consider the statistics provided here. In the first three days, the lowest cost has risen from 0$ to 60$ to 100$ (agreed though that the items are different on each day!).

Because of the many different variables involved in this market, the major play is by the consumers, the questions im having are:

  • Is there a standard price at which the users might stabilize? Will the prices hit a plateau in the long run?
  • Can the system be gamed? Of course, in India, people would not go on a shopping spree and wait to buy the items for free.. he he.

Lets consider for a second how the mathematics might work:

First the variables.

  • x% is the percentage discount price that SoTD gets from the wholesaler. To make a profit on the deal, on average the item should sell for more than (100-x)/100*Unit Price
  • We dont have a y% here as the reverse bidding on the item starts from its Market Price.
  • Whats tough to quantify will be the users response; because here’s its the race between greed of one consumer and the wisdom of the community. In the general case, when the wisdom overwhelms the greed, there will always be customers who will buy the item for zero [Heres the point where Smack gets Gamed]. When the greed overwhelms the wisdom, the customers will buy the item for the least possible discount; maybe even for less than the y% discount price .
  • Mostly the average cost of item bought will mostly be the region where the consumer feels he has got the best buy. On Woot, we understand that 62% of customers buy 1 of an item, 14% buy 2, and 24% buy 3; i.e for every 100 users, the number of items they buy are 162 (62 * 1 + 14 * 2 + 24 * 3) implying on average every user buys 1.62 items to get a standard discount of y%. This unit price / unit profit made on W00t is not important to us; the point is can this statistics of user behaviour predict how it will extrapolate for SoTD? Can we without no useful data on SoTD, extrapolate that of W00t to SoTD? Can it correspond to that
    • 62% of the users buy the item in the first time slice.
    • 14% buy it in the second time slice and so on?
  • Also is there a pattern that will emerge to the number of items that SoTD puts on sale? I dont think the variation will be a lot, or that the numbers will be less. Mainly because if SoTD has to survive it has to get large numbers on sale to reap the benefits. An occasional rapid random decrease of the number of items on sale will keep consumer on their toes.
  • The SoTD market looks very much like the stock market, Im guessing that overtime, there will be a definite pattern that will emerge that will behave the stock market tendencies – rewarding consistent study and effort and punishing small time investors who follow the herd.

SoTD will emerge as a very interesting social experiment in the consumer space not only because the consumer deals with escalating discount but also with the uncertainity of the number of items involved in the sale. User patterns that will emerge will for sure show

  • How users react to uncertain buying deals?
  • On average, there will always be the high risk-high reward folks who wait till the end, which might actually be the 24% of W00t. The average buying pattern in general will be those individuals whose asking price on SoTD is marginally less than the discounts they get at other areas. This might consist of the 62% that W00t had. The losers might be the early birds who on getting a good enough deal buy it – that might be our 14%.

Other links:

More about W00t

PS

Though not an economist, I sometimes assume supereconomist role to the T. However, my excitement is at seeing a simple product like SoTD exhibits properties of many other markets mainly the free markets existing today – stock markets, job markets.

– kopos

Value vs Revenue for startups

Yesterday, we were having a discussion on a possible kiva-like play in India which will help connect two very disparate but mutually enriching communities and what kept us puzzled was inspite of the value being created, the revenue-generating mechanism for us was nowhere in sight. Taking any sizeable cut from either of the connecting communities would diminish the value being generated; however, without revenue mechanism there was no way we could keep surviving.

My intuition was to pursue the idea deeper mainly because:
1. It has the scope to generate immense value.
2. Can alter the dynamics of the current system, from marginal to a major extent.

Which bring us to this post…
1. Should startup entrepreneurs pursue an idea even if doesnt have a revenue generating idea now itself but creates value?
2. Occupies a niche field in an area where there is a lot left to be done and can help remove the pain points of customers.

My `opinion` is definitely a yes. Creating value creates fills a dichotomy: people who need it and people who benefit by filling up that need. Generally, a startup is expected to be the latter. However there are cases where the essential dichotomy exists between two subgroups in the former; i.e the role of a facilitator who takes care of bridging the gap between two people who need each other; but there is no way of getting to one another in the best way possible.

Google stands out as a best example of this gunning for value philosophy. They didnt have a business plan until they were about 2002. They had created an essential value of being able to bring search to unstructured data.

For all I know, if a product startup is not creating immense value, it will meet either of two fates, either getting trounced heavily by another player who does create value or will just go bankrupt.

Would love to hear your views on if value is the way to go for a startup (rest assumed that the ways for surviving till they have a business plan is chalked out). I will tackle the ways of value creation of a startup in my next essay ‘Big Guy vs Small Guy’.

What my one & only job interview had taught me about entrepreneurship…

I’ll not be a bozo to lie to you & tell that what I had done in my job interview(2 years ago) was totally preplanned. Most of it just happened. However whatever happened was precisely the way I think now, it should be played. It was my first successful pitch to a company to whom I promised I would definitely leave them in 10-15 years time to go setup my own company… 😉 And now two years after acing the interview & getting that job, I will be now vain enough to tell what I think I had done right then…

Dream Big

This was first on campus job interview I was appearing for, and I was competing against the best minds in my class for the job. On paper I never had a chance, not one in a seventy. My grades werent spectacular and I was a Computer Vision Technology student who was sitting for the recruitment drive of a Database company. I was not even on the outliers factually speaking. But the end result was I made it. The reasons why I think I could is what the remaining part of this post consists of. However, that leaves me one simple conviction. It never hurts to dream big.

Play to your strengths

I always am/was a hardcore C/C++ guy. Java never was my cup of tea. It is now but again I cannot do it with the same raw passion I have for C/C++. But I knew that the recruiting company majorly recruited Java guys, C/C++ ones had almost no chance. I even actually started to prepare reading up on Java and started working on it. It was only after struggling for one full day with a new language and after a peptalk with my friend did I realise the truth: trying to play to the company’s questions was never going to help me.

The only best way to survive was to completely leverage my own strengths. All I did during the interview was to be careful to never let the interviewer step out of my core areas of strength. I made it a point to make him interview him in my areas of expertise(C,C++,Data Structures) and never let him move into a field I had no inkling about. That just about saved my day.

Every startup is in a searing hurry to make its inroads into a specific area and learn about it as much as possible and do work on it. Its not uncommon to find that the founders try to work out of their areas of expertise. And hence a startup with technology guys at its helm will lose its mark if it makes its core area of business as commmodity market or finance, when actually its strength is in providing the technology. Now just imagine how long it would take for a pure finance or pure commodity market startup to come and just kill you? Not long.

Its personal; Not business

Why do you think customers love people that take personal care of them? Why do you think a low cost airline like Paramount Airways with its cost almost twice as its nearest competitor Deccan Airways have good occupancy rates? Its simple, the higher cost is made up by the personal attention given to each and every passenger. As in the Pinko Marketing, they say, Markets are Conversations. Markets are about conversations between sellers and buyers. Any startup that can understand this simple concept has already won half the battle. The ability to be able to make meaningful conversations with your customer, understanding their needs and necessities just about concretizes their survival.

Inspite of it being a job interview, I was carrying on a conversation with my interviewer(s), they never were Q&A sessions… learning about `their` own experiences in the company, `my` role in the structure, et al which actually made the process for each of us much easier and of course brownie points for me for looking like an excellent communicator. yay!

Its not about what you can. Its about who you are

When getting funded VCs dont fund the ideas, they fund the founding team. Have a compelling business plan, amazing revenue projections, virtually virgin market, have a lousy team and 10/10 the team will never get funded. No business plan will ever make up for a brilliant, excellent founding team.

There was never a chance of me succeeding if I looked to my potential employers as just another guy with a skillset. If that was the value I was bringing to the table, I was making a rookie mistake, 30 other guys in that same room could boast of better credos than me on the spot. Instead I presented myself as a self motivated team player with no fear of learning new technologies or skillsets. They were not looking for my skillsets; they were looking for me.

No competitors; No money

Every startup guy dreams of capturing a virgin market virtually unexplored till now. They spend all their savings and considerable amount of time just developing this product in stealth, and finally after 9 gruelling months, they get it out and all they know no one’s interested in this product. Where did they go wrong? Though the product had great IP value, it did not solve any issue the target market had. They frankly never had a chance there; there wasnt no market at all. More startups fear only one thing more than the ‘stealing’ of their ‘world-changing idea’; of having to deal with competitors. They rightfully should be too; but nothing more is gratifying than the the jostling rush of competitors into your market because it validates your one single conviction: you are making a product for a market that exists!

I was in for a shocking treat when I learnt that every bigwig in my class was shooting for the company. Before them I definitely didnt stand a chance, but then it validated my one simple conviction(to not to appear for two previous companies’ recruitment drive): it was now a job `worth` fighting for.

Exceed Expectations Consistently

For a startup to survive it is extremely important that it exceed expectations consistently everytime. A startup is no place for mediocrity atleast never in its early formative years [after IPO of course its a different story altogether ;)].

My strategy to the interview was simple. To impress my interviewer, I followed only one directive: Prove consistently that I knew my subjects substantially much more than he expected me to. It was a simple strategy, but it worked wonders.

Evangelise your vision/plan/idea

When asked about to tell about myself, I insisted regularly that my aim was to setup my own company 10-15 years from now which was my long term goal and my short team goal was to learn everything i can from the organization. It was baffling to them atleast to listen from a fresh graduate speaking of his own company when he was actually appearing for their job interview. It was a jolt but it was a vision that helped translate positive feelings towards my candidature.

There is no point in having a startup if you yourself dont belive in your idea. Even though evangelising is a tricky business, if you yourself dont evangelise it better shut shop and go back to momma.

Never Give Up / Keep Adapting

In my fifth round of my interview I was asked a question I barely remembered having done 4 years ago. Though I could not get the answer right, I had refused to give up, I used up all possible strategies I knew I could to arrive at a convincing solution. It was a simple answer, but Im vaguely sure the interviewer did notice the fact that I was sticky as gum when it came to leaving the problem and going to next.

A VC loves a startup that never gives up easily in the face of adverse situations. Also every startup that faces difficulties must change its course of strategy as per the new demands of the situation. Only these mercurial startups survive the onslaught of the market.

-Kopos(poorna)

PS

There are a hundred other things that I did right there and of course a million mistakes that I was lucky to not to be thrown out for ;). This definitely is not a post in vanity but just some lessons I thought that can draw on the analogy between two high stake, highly tense situations.

Entrepreneurship for the Employed – II

Please note that this post is second in the series formerly called ‘Taking the Leap: Job Holder to Jobless and Beyond‘ now called ‘Entrepreneurship for the Employed‘. After our Why? post here’s the How? post. In this post Ill say what I think are the best ways to prepare mentally for the leap and test if your answers are true.

Know Thyself: Evaluate your thought process.

In situations of extreme monotony, its not uncommon of think of entrepreneurship as the best way to escape the mindnumbing monotony. It is dangerous to the self if this escape route to monotony is mistaken for passion. The problem with turning into an entrepreneur from employed is by the time you realize, its a bit too late and your loans are upon you and your financial situation has turned horrible. Use some mantras (which are actually heuristics) to see if you really are fit to take the hit.

Mantra 1. Evaluate Financial Hit Resistance (most obvious yet most underrated)

Monthly operating costs for the enterprise, costs to sustain your basic needs of food, clothing, rent & entertainment, unforeseen liabilities, all these are the compulsory basic expenditure from your pocket. Now add a couple of ten grand per annum to pay for those Mutual Fund bonds, PPF or any funds you have invested in to escape the tax net. Now add a few more grand if you have a bike loan, car loan or some education loans to take care of. Sum all of these expenditure up. Find how much it costs you per month. Now just calculate & see how long your savings can take care of your expenditure, if it comes to less than 6-7 months, be forewarned, the first important thing to kill your enterprise would be yourself by not supplying enough capital.

And give it a second thought as how long you can survive like that. Can you take a financial drought hit like that for 6-7 months and still stay in the game?Assume this zero-revenue period as 5-6 months for a service company; for a product company make it atleast 9-12 months.

Mantra 2. Test your passion

Do you strongly and fervently believe that the amount of time you give to your enterprise is being sidelined because of your full day job? That your passion is being unfulfilled because of a serious lack of time? Ok then, try the following tests.

    1. If you have normal 8 hour shift or a normal day time job do this. Allocate daily 2-3 hours for working on your idea/passion/project. Change your weekends to be `full-day-job` days. Note down your progress, evaluate it and find if you are going anywhere… If frankly your passion is there where your reason is, you must be making progress & now maybe the time to quit becuase the time spent on this will be much more valuable than you do by sticking with this model. Else cheerio to venturing…
    2. Take a complete leave for about a month (comes to 22 days which you already must have accrued if you used them well) and start working in the project. Are you ready to work in such a unstructured, chaotic environment? Are you ok being the CEO, COO, peon, clerk, accountant, developer, QA? Are you ready for this sort of thing and sure it will not turn to be a monotony? Answer them well my padawan for they are the answers to your destiny.

Passion is not about having the time but getting it and squeezing everything you can. No time is not a very good excuse for not work diligently about your passions, if we are truthful to the self.

Mantra 3: Time your exit

Timing your entry and exit is a very important part of life of a startup; so it is in your corporate lifespan too. Be very aware of the policies of your company while you are quitting from it. Is there a time period for the PF or gratuity to be vested to you? And where do you stand in that time line? Is this time period negotiable to you?

I had been careless in my side [or assumed no issues] where i did not actually find anything of the vesting process of the PF/Gratuity of my former company; as a result of this by leaving 20 days before my 2 year service, I was not able to take my Gratuity amount in full. Do your corporate homework.

Mantra 4: Be prepared for delays

As against the highly overpampered environment in a MNC, where sending a mail solves all your problems (ok, not as magical as that, but the bureaucracy headaches are a minimum); it will be a strange experience how slow things can go on. Dont expect your client to respond to your requirements document by tonight, ping you back, setup a conference call and finish it in an hour. Expect an average of atleast a 3 days – a week’s delay for any response; which actually makes you more vulnerable to disaster (think of all the money lost during the times of zero productivity!).

Mantra 5: Sense of urgency / Demo Fast/ Proto first

In the same vein of relaxed work, life heading a startup can be pretty hectic. Considering that your captial resources (read savings) are constant and constantly depleting faster and faster every month, it makes sense to jump into the idea as quickly as possible (of course assuming you’ve done your homework). Dont wait for anything else, only aim to demo fast and prototype faster. Work with a sense of urgency on everything: your meetings with your team (keep them short, straight for deux sakes), that protocol setup, everything… F.A.S.T.

Entrepreneurship for the Employed – I

[Formerly ‘Taking the Leap: Job Holder to Jobless and Beyond… – I’.]

This is the first part of a two-part article aimed at job holders who want to quit and go independent. This will be about the Why? of the question while the next part will be about the How?

For all the readers that find the heading above quite ambiguous, the same can also be read as ‘Taking the Leap: From being an Employee to being a Jobless enterpreneur and an Employer, Peon, Cleaner & Everything Else’

The article below is for job holders who want to make the leap of faith… for everyone who nurtured or nurtures the dream to start an enterprise of their own. Just follow the checklist below and maybe I’ve got to help you take the decision. However if you are already the one that has already taken the leap, all the very best maite, just chug on and just see if Ive missed something important!

The only thing that stops us from reaching the bare truth is the question, posed unambiguously, ruthlessly and to the point. So this essay contains what you can call a check list of questions that you might want to ask yourself, the more honest the better. Entrepreneurship is not a child’s play and definitely is not something you just try play and go back, it’s a deep commitment to the self to stretch your intellect, intelligence and patience to its logical limits; to create value. When looking at it from the outside, entrepreneurship looks like a very simple logical sequence of steps mastered effortlessly, like when we see a model on the ramp and never understand why they are paid so high when all they do is walk, strut and party all night long!

Know thyself a.k.a Why are you planning to take the leap?

Our hero is this bring, young, ambitious, intelligent, fun-loving, risk-taking (not to be confused with risk- mongering) young man, we call ZaCh. 6 months into his job after directly getting recruited by a famous MNC through campus placements, ZaCh’s finds himself restless & disappointed with his work. And he finds many other reasons for his feelings… Lets say you is ZaCh.

Following are the some questions that you must be ask yourself when you think of taking the entrepreneurial leap. Remember, this is not a questionnaire where Ill ask you to count your yes’s and no’s and then tell you that ‘Congrats! You are Entrepreneurial material’ if you get 10 ayes. The real intention is in asking the right questions and be totally truthful to yourself.
Though the choice of entrepreneurship is extremely personal, entrepreneurship itself is not personal, its about business, its all about the right choices, and knowing everything about yourself. The leap is generally a significant part of your life. So to the reasons…

My job is monotonous

Q. Have you tried playing around with your job profile requirements to deal with this boredom? Have you say tried doing something that’s not part of your job specification exactly? Say tried to automate some set of processes on which generally you regularly spend a lot of time just doing the task repeatedly manually? In other words have you given your current job the 100% attention it requires? Have you tried excelling in it? The power of this question doesn’t lie in the yes or no answer you give; but more specifically in the reasons you give for them. Say you say No, but if your reason also contains this clause that when you don’t like the job how can you ever give it your 100%, you may be closer to the truth than you think…

This may sound clichéd and philosophical, but your job is always as interesting as you want to make it. Its just as good as you think it is. My friend who is in a MNC in India works on a Microsoft technology product which a geek like me would love to brand as a ‘no brainer dead-end product’ and yet I’ve seen him master it so flawlessly that he’s now been moved to China to deploy this same product from scratch. And come to think of its he’s only been 1 year into this product! This however no way means everyone who’s bored with job is not giving their 100%, they are sometimes trapped in a vicious circle; the jobs so dead-end that it no way requires the 100%; once the 100% is not given, you are just plain bored.

Q.Have you tried changing your job or your job profile? If you love coding and if your current job profile doesn’t actually deal with coding; go change your job. If your boss is bad and all his bosses are bad, try changing the job [but frankly you will be disappointed ;)].

– My job is just a 9 to 7 stretch of boring meetings, frequent trips to the pantry, checking the mail every 15 minutes and some coding in between. You think, err you know that there is no point anymore in this job – working like a drone and drawing the salary.

Considering that 80% of the jobs available really require you to work at 20% your prowess; it is no wonder that restlessness creeps in quite soon, about 6 months to 1 year is the time when you start feeling restless, unused and unsatisfied. Its definitely a time when the thought of entrepreneurship enters the mind; however let not the 80-20 principle fool you. Monotony is generally a function of your current job profile, your job, your company, your team, your boss or just you. Give the job one chance, try moving to a new job or a job profile you wanted to work in. And even after this change you are restless again, go kiss the world and take your leap…

I want to be my own Boss!

Q. Because you believe you want to be your own boss and hate taking orders from anyone else other than youself? Oh boy dear! Psst… psst… let me tell you a secret. If you think your boss was the most demanding manager ever, just be content in the fact that you haven’t ever seen a pissed off customer. If you think your boss was a devil incarnate, after seeing your customers you might actually feel a great wave of thankfulness to your boss…

– Entrepreneurs are free spirits by nature, questioning the natural order of things. And so it comes as no surprise if as an entrepreneur you want to run the own show. But be forewarned when you say you want to run your own show; cause if you are you not only get to be the ringmaster (ceo), but also the lions (coder), the cleaner (QA), ticket-seller (sales), canvassing (marketing) and a host of other things. Be prepared a fresh baked apple find might also find its mark on your face one time or the other…

Peer Pressure a.k.a That loser from my class is a very successful entrepreneur now. Why cant I?

I! Do you know what sort of people get slaughtered in the capital markets time and again? It is those individual small time investors who have just read it off the newspapers or that euphoric salesman on TV who spouts eulogies of a rebounding economy and start buying the shares at highly elevated prices and before they know the prices start falling rapidly (bull market). And then there are those that sell off the shares at the exact time where the markets just are about to have a rebound Or hold onto to the stocks when the bear market is about to commence. These are the stuff capital market nightmares are made of. And peer pressure is the stuff 1/10 startup success statistic is made of. Even if you feel encouraged to make the leap because your loser friend has hit the jackpot; DON’T. Start analysis, learn as much as you can and only then decide. Let him be your mentor… But learn, understand and analyze first.

Its my dream

– Well my dear padawan, dreams are the stuff big things are made of. But is the dream a wishful fantasy or a burning need/passion? Understand that nothing less that 100% of your dedication will suffice for your enterprise.

Its all about value

– Well said my dear jedi, you are already on the right track if you are able to think in terms of value. A job is generally a linear progression of roles and responsibilities. You just get to play just one role – the developer, manager or the qa guy or anything else. An entrepreneurial career is nothing like these… its more like all of these in less than half the time combined! Yes, entrepreneurship is like living through your professional life of 20 years in a single span of 4-5 years. Just think of the hit you will take professionally, personally, socially and health-wise. And now lets just say none of them takes a hit as you must multitask. Yes dears, that is your worst office nightmare come true.

Now is my chance

– Jedi master I am humbled. Entrepreneurship is all finally about being in the right place at the right time doing the right things by making the right choices and that pinch of luck. Jumping and seizing opportunities is an important trait of an entrepreneur. Your reasons might be varied, say now you are young enough where you can afford to take risks or you have a huge life altering project coming your way through a contact you know with whom you have left your feelers with. It takes a lot of patience to wait and strike at the correct time, so just be sure its not a instinctive response you are putting in action; just an instinctive decision.

And of course there are a couple of hundred questions that you must ask yourself but be sure the crux is about the Why? That will help answer your dilemma. As I said, its not the ayes and nos that are importantly, but the reasons that you give to each of them. Just be truthful and sincere to yourself and you’ve got a winner in your hand: Yourself.

– kopos

Planning For Success

Why do you think the same five guys make it to the final table of the World Series of Poker EVERY YEAR? What, are they the luckiest guys in Las Vegas? Mike McDermott, Rounders

Can success be planned for? This I guess is a fundamental question every entreprenuer should ask himself/herself(Yeah yeah politcally correct blah blah) and strive to find the answer to. The very notion of success being planned for, or in other words ,the predictability of success for a course of action seems absurd at its best. Are we naive in asking ourselves the question when we know that 9 out of 10 ventures fail? Well I think and hope that we are not. So how should we even attempt to find an answer to this question?

The Genesis
I like many other people used to, and still to some extent take decisions based on gut instinct. There was no formulaic way in which decisions or ideas were approached. Then during the short time I was co-founder of Advetta i met Rajan my antithesis in regard to ‘decision making’. Interaction with Rajan was one of the best things I retained from my stay at Advetta and I learnt a lot from him. He was a guy that played chess(metaphorically of course) all day long. For every step to be taken, we would bring to the table the analysis of all the possible consequences we could think of for that step and Rajan would try to quantify in a mathematical (I know i lost all non geeks here) way how one step was better than another. I am not saying we always made the right decisions or such a process will always lead to the right decision, but atleast we were working within a framework that attempts to reach the best possible decision. Which made me ask myself can’t we extend this to plan success?

Success? Planning? What does it mean?
First lets try to understand what “planning for success” means. The only thing that is certain right at the outset is that success is never certain (Hehehehe pun intended and gotcha!). Success here is not about an absolute certainity but a probability which in English would mean “we don’t need to win or loose we simply need to win more times than we loose“. When we attempt to plan for success we are attempting to create a framework or science which would increase our probability or chances of being successful. With this framework if we fail only 8 out of 10 time we are already more successful than the average Subramaniam/Kumar (the india version of the average joe). So to put it in a nutshell….

“a good plan for success should ensure a higher statistical probability of success”

Is this too much to ask for? Can there be no scientific (systematic) way in which we can approach this problem and attempt a solution. To the casual observer this might indeed seem so, these are the people that feel its a game of chance and that most successes are just a result of pure dumb luck. Yet what they fail to realize is that many people consistently make a killing at stuff that to the layman seems like gambling. “Consistent success” is the key factor to consider here. At this point lets indulge in little logical rambling shall we….

  • Consistent Success means success at higher probability than the norm
  • Probability that this consistent success is because of luck – Is very very low (decreases as consistency increases)
  • Probability that this consistent success is a result of a system that works(atleast for the time) – Very Very High

So a person who is consistently successful in a high risk market is advertently or inadvertently using a broad system or a broad set of rules to do it. Now that we have established that consistent success in a high risk environment is more the result of a good framework or system than luck let us look at one such scenario.

The `Stock Market’

Speculation in the stock market is the crucible for our assumptions that success can be planned for. There is probably no better or easier way to demonstrate that in the long run luck won’t get you anywhere and even simple well formulated ways of building and maintaining a stock portfolio can result in enormous returns. In fact speculation in the stock market has given rise to computer software that can consistently make profits given the appropriate statistical data regarding the stock market and external factors. In essence…

Statistical Data => System => profit

So a system working on certain assumptions and real world data can consistently generate profits. Another important lesson from stock speculation is “Dont put all your eggs in one basket” aka Diversification. Spread your risk, diversify your investments on many levels. Such a strategy would more often than not give you better downside protection.

Coming to the high risk world of Technological entrepreneurship, can we come up with some sort of a broad system to build ventures which would more often than not succeed? Well that is our hope at this point, we can’t say wether we or anyone else can come up with one such system, but we intend to attempt to find the solution as scientifically as possible. Here unlike the stock market there are hardly any precedents and they keep changing fast. But how can one build or discover such a system not just for startups but any other field where a systematic approach to success is possible. Following is a broad list of guidelines we intend to follow to arrive at such a system. Note that this is not a list on how to achieve at success but how to build a plan that delivers success at a high probability.
1. Define goals the plan or system tries to achieve

You can’t reach your destination if you don’t know what your destination is. Think what you are planning to achieve. If you are not too sure about the specifics define broad goals(hehehehe that is what we are doing), you can fill in the specifics later. For example my goal could be “My plan or framework should achieve 80% leads to sales conversion.”

2. Trial and error

Try and avoid error part of this as much as possible
– Learn from other peoples mistakes and successes.
– What works, why it works…
And trial and error is as necessary to arrive at a comprehensive plan for success if you are not committing errors you have luckily stumbled upon one possible path to while all other paths are closed. Only through friction can the true nature of the system be perceived.

3. DATA, DATA, DATA, DATA, DATA, DATA…

Oh and have i mentioned data. The crux of any scientific study is based on data and lots of it. Collect data from every angle possible, on everything possible. Once the data is collected and observed an inference or a hypothesis can be reached that tries to arrive at the end result from the given data. This at the very highest level is an attempt to discover how the system produces observed results for done actions.

And now the above paragraph in english. Imagine you own a chain of restaurants and you notice one day that the profits in winter are low. You don’t understand why? Now you go back to all the detailed data you have been collecting regarding your chain. You see that your sales in colder regions of the country are falling off drastically when compared to your partners only in the cold parts of the country while your sales in the warmer parts of the country are more or less the same. Once we have things in this perspective we can reach one of several conclusions…
Your chefs suck in winter – low probability
Customers in cold places are crazy – low probability
Your supply chain is not sourcing fresh ingredients in winter – High probability
Once again data saves the day!

At the end of all this, what we hope to have is a comprehensive system that delivers success with a higher probability. So begins our journey into the abyss of the unknown, unheard and unseen (A bit of melodrama for our female readers just so they know we may be smart but we are also sensitive and caring(who cares girls always seem to go for the jerks with a high probability (that should be your “scientific” plan for bagging a girl, be a jerk(wow too many brackets))).

-Suman