Thursday, July 31, 2008

Being Your Own Boss

One of the side effects of being an entrepreneur is that you are your own boss. Unlike some other side effects you might have come across, it is a good one to have. You get to do things your own way - own tasks, own deadlines, own work. You are your own manager. Basically, you have lot of flexibility.

This is vastly different from the corporate way of doing things, where you are assigned a project and you have to deliver tasks as per the project plan. For any project, there is a set pattern of things to be done. There is an order.

Not so in a startup. Things are more adhoc, sometimes haphazard. You can drive things as crazy as you want. Things change on a daily basis. You are playing god in your own startup.

As Spiderman was told by Uncle Ben - With great power comes great responsibility. By doing things your own way, you are entrusting yourself with great responsibility. Now your success or failure depend a whole lot on you. In a corporate world, you might have got seniors and managers above you who would point out your mistakes, who mentor you. You do not enjoy such luxury in a startup.

But then, isn't that one of the main reasons why startups are fun? In a big company, you have set rules and you play according to that. There is not a whole lot of deviation you are expected to make. In contrast, startups are all about breaking the rules. That is in the definition of a startup.

If the startup way of doing things would have only the fun in it, everybody would be following it. The reason not everybody follows it is that it has its own risks. Risks that can jeopardize the success of the initiative.

One of the potential pitfalls of nobody being above you is missing deadlines. Because you are your own boss, there's scope of you taking the deadlines lightly and thereby missing a few. This is probably the biggest misuse of such power.

You miss deadlines primarily because either at some level you do not want to work on the task at hand, or are distracted by other things despite wanting to work on it. The distraction is even more of an issue in a startup because there are a thousand things crying out for your attention. And this is something that you need to be careful of. Prioritization is one which would help you from distractions.

The second part of not wanting to work on the task probably doesn't apply in a startup. By definition, in a startup, you love what you do. Even if there's a task which you are not expert at, you'd do it happily. So, there is really no reason to believe that you'll falter on deadlines.

In fact, it's the other way round. Because you love what you do, there is a fear of you overworking, which may lead to burnout over long period of time. So, you might want to introduce deadlines to slow you down! I think that is a bigger risk than skipping deadlines, and probably more common observed phenomenon.

When working in a startup, it's easy for people to underestimate the importance of break. People work long hours continuously to get the product out as soon as possible. This can be dangerous over longer duration.

One has to realize that while shifting from corporate world to startup world, psychologically you are in a different zone, but physically, it's the same world. You body still needs rest. Your mind can understand your enthusiasm to work more, your body doesn't.

So, take breaks regularly. If not a full weekend, take at least a day off every week. That'll help you recharge your cells and keep you fresh for the following week. Remember, a tired mind can't come up with innovative ideas. Creativity too suffers in the process. You won't be able to focus properly. And you need all of these to get your startup going. You need to be at your best as many days of your startup life as possible for it to succeed.

Two of the biggest things that you learn while being your own boss is time management and prioritization. Both of these things are crucial for success of any individual in professional life, and a startup being highly dependent of a few individuals, it directly affects the success of a startup.

Being in a startup, you'll likely be handling a multitude of tasks, not just programming. You are the admin guy figuring out whether the servers are up or not. You are the customer support answering all the questions. You are the marketing manager making sure your startup is being covered at the startup events. You are the SEO specialist worrying about rank in Google. You are the chief evangelist making people excited about your startup.

How efficiently you handle all these tasks is important. For your startup to be successful, you have to be good at this juggling, switching context in matter of seconds. Worse, you might not be particularly good at some of these tasks. You'd invariably end up spending considerable amount of time learning the ropes. Sometimes, you'd make mistakes and loose valuable time.

And that's fine. You've got to be comfortable with the fact that making mistakes is fine. That is how you learn. If you'd never try, you are never going to find out if you can do it or not.

And because there are just so many things to do at any given time, and you are just one soul, and you do not want to burn out either, you would have to prioritize the tasks.

One funny thing when you are in love with what you do is that every small thing seems important. Even the color and font of that small little footer. How can it be not important?

In a startup, everything is important. However, you need to classify items into more important and less important ones. And then let go of the less important ones. Not because less important ones are not crucial for your startup, but because you are not Superman. You can do only that much. It better be more important ones that find your immediate attention. It's hard, but it's got to be done.

With effective time management, you'd realize that with time you are more satisfied and happier. Satisfied because you would know that you have given it your best shot. Happier because you would see results sooner than later.

Being at the helm of things is tough. Some people do it better than others. Good news is that this is something that can be learnt with time and experience. What is important is that you do not loose sight. That you last to see the light at the end of the tunnel. And that is what matters.

Sunday, July 20, 2008

Of Cities And Memories

When I was at IIT this weekend for Proto, I felt very strange how little I remember of it. I struggled to remember how to reach balcony of Seminar hall! I was there for 4 full years. I walked those 7 storeyed stairs hundreds of times. I sat in classrooms for hours. I have roamed around those corridors literally every day. I should have known every corner of it. But I didn't.

When I walked past my hostel, I remembered almost everything. I could picture every nook and corner of the hostel. Those corridors we've debated in. Those balconies we've played cricket in. The doors of those very rooms we've banged on. The NC-6 room I stayed in. I remember everything.

Maybe I remember more about the hostel because I spent more time there? We started bunking classes from second year, and were literally in hostel in final year. That reflects in our grades as well!

After college, I moved to Bangalore. Been 6 years now. With time, memories of Delhi faded away pretty soon.

I've lived in Delhi most of my life. I was born and brought up here. 6 years of childhood, 12 years of school, and then 4 years of college. And still, I hardly remember anything about Delhi. I still remember my days at our first Trilogy office in Bangalore. That's a solid 6 years ago.

Why is it like that? Why don't I remember more about Delhi? Why are my memories limited to IIT hostel only?

Maybe the memories are not related to the amount of time we spent. I believe they are more related to the "happy time" you spent. The more happy you are at a particular place, the more you remember of it.

I was never happy to attend classes at IIT. They were so routine. I almost hated "insti". I was much more happy to stay at hostel. And it's not about learning vs having fun. Of course we had fun in hostel. But I believe that the best education I got from IIT was from hostel, not the classes. All the people around you were so smart that you learned a lot every single minute. It's the way in which you learned that made the difference. While talking to people in corridors. Over mess table. Discussions at 4 in morning. There was no pressure of learning. No grades to be scored. No quizzes. Plain fun.

I can say the same about Bangalore when I moved here. Delhi was like "insti". Bangalore more like hostel. I loved just being in Bangalore. I still do. I feel Bangalore is *my* city. The moment the plane lands at Bangalore, I feel I've arrived at home. I never got that feeling in Delhi.

What city suits you is highly individualistic. For my parents, it's probably Delhi. At the end of the day, you should be where your heart is. Mine is in Bangalore. You should choose to live in a city where you enjoy, where people makes you feel happy.

I'll quote a dialogue by Boman Irani from Bluffmaster. This I think is the best dialogue I've ever seen in a movie (after Tum kya Jano pyar kya hota hai by Ajay Devgan in Hum Dil De Chuke Sanam).

Roy, tumhe apni zindagi mein aise kitne khoobsurat din yaad hain....first job, pehla shoot, pehli salary, jab tumne ladki ko pehli baar chuua....pehli baar chuma, jab pehli baar tumhara dil dhadka...Aise kitne din yaad hain, 15, 20, 25 din, 30? Bas 30....30 special days...30 saal ki zindagi, aur tumhe sirf 30 din yaad hain?

Watch the entire scene on YouTube -

Saturday, July 19, 2008

Why NOT to take VC money

I was at Proto this weekend. It's one of quite a few events I attended this year; by far the best in terms of people who attended. Also got a chance to visit my alma mater - IITD, after a long time. Not many things have changed there!

After a few startup events, you start noticing patterns. People buzzing with energy. Organizors running around to make sure everything's ok. Bloggers typing in to give up-to-date information to their readers. And amongst all this, one of the familiar scenes is VCs being searched and hounded by entrepreneurs and wannabes. Many rush to introduce themselves, asking questions, pitching ideas, exchanging cards. A few keep reminding them of their previous meeting at another such event. Some refer about a mail they have written long time back (for which they didn't get any replies!). And VCs, like celebrities whom fans asking for autographs, oblige almost everybody with a minute or two of their precious time. VCs are rockstar at such events.

To a bystander, it'll appear like entrepreneurs are there because of VCs. Getting to a VC seem like their sole aim. It's almost as if if you don't get to VC, your day is wasted.

I wonder why isn't it the opposite? Why should not VCs hound entrepreneurs. Sure money is important, but aren't VCs there because of some folks who risk their professional life (and many a times even more) and start something new? Isn't it how it's "supposed" to work? Whose risk is greater, VC or entrepreneur?

To be fair, it does work like that, sometimes. VCs do initiate on their own when they see a bright startup. But it's so rare that you seldom hear such stories. And when it does happen, it becomes legend.

Why is it that this doesn't happen often enough? For one, their inbox are flooded with business plans. They don't need to. And, it's but obvious that for somebody with tons of money and lots of risk involved, it'll take an exceptional startup to get VC going after it. And certainly, extremely good startups happen less frequently. Although it doesn't have to be, at any point in time, there are only a few ideas that are life changing. And when VCs spot them, they take the initiative. No doubt, world would be a better place if we can have such startups more often.

Why, then, we don't see these brilliant startups that often? Is it lack of ideas? Or ideas?Any VC will tell you that they see tons of brilliant ideas every day. And it's not hard to believe. There are so many things wrong in this world that can be fixed. There are so many brilliant people who take up these problems and try to solve. Where they fail is execution.

And I think *one of the reasons* we don't see brilliant people execute successfully is because of our obsession with VCs - we overrate VC funding. In early stages, entrepreneurs are better off doing what they do best - executing ideas, solving problems, creating value. Not chasing VCs.

Mind you, it's *one* of the reasons, and an important one at that, it's not the sole reason. There are other reasons for startup failures - wrong strategy, wrong decisions, dispute between founders etc.

One has to realize that VC funding is difficult for a first time entrepreneur, anywhere in the world in general, and India in particular. By difficult I mean it not only is less frequent (i.e. less startups get the VC money), it also takes lots of time. Probably a minimum of 3-4 months, and an average of 6 months. Now that is detrimental for two reasons - it not only engages your precious manpower, it also shifts the focus of the startup away from their core business.

It would be foolish to say that you can get somebody to invest hundreds of thousands of dollars without adequate effort. To get VC money, you need a good chunk of your manpower focused on it. And manpower is a precious thing for any early stage startup - that's the most valuable resource you have. Rather than working on the product, you are now tied up with updating the business plan, creating forecast spreadsheets, preparing for anything and everything a VC can ask. Now that is some task. When you have limited number of people to work, it is almost impossible to do it without affecting your core business.

More importantly, the focus of the company can get affected. Now, the focus is not what customers want, but what VCs want. VCs are the new customer. Suddenly, you start working on features which will make you look good in front of VCs. It's not always a bad thing, but many a times, it can be. And it can be the make-or-break-bad. More often than not, the difference between a startup and it's well established competitors is the focus. The moment it's affected, it has the potential to setback the startup by a few months, if not close it down completely.

One other minor reason to not go for funding at early stages is equity dilution. The earlier you approach funding, the less chance you are giving yourself to implement the idea. That means less bargaining power with the VCs. Even if you are successful in raising money, you'll probably end up with little money for significant share to VC. Remember, most startups raise funding only twice, and in rare cases thrice. Each time, you'll have to shell out minimum 20%, likely more. In almost all cases, by the second round, you'd have lost control of your company.

However, the reason I mentioned the third reason as minor is because it's not going to close down the company, unless it has very bad effect on your motivation, which is less likely since by definition, entrepreneurs are strong willed. The only drawback here is that you'll probably be less rich. (Yes, as Paul Graham said in one of his articles, one of the first things you learn when you get rich is that there are different levels of richness.)

Many a times, entrepreneurs mistakes VC funding to be a success in itself. It's as if they have won a battle. They are wrong. VC funding is just an enabler for a larger good - your product. VCs are not the best judge of ideas, or people for that matter. If they reject your idea, it does *not* mean your idea is not worth pursuing. If you believe in your idea, you should continue on it, VC or no VC. On the other hand, if you get funding, that does not necessarily mean you'll be successful. We have numerous example where funded startups tanked. VCs themselves have an equation where out of every 10 startups, more than 5 just close down (2-3 giving moderate returns, 1-2 super successful). The best judge of your startup is your customers. They are the ones whom you should treat as barometer.

So, you shouldn't get VC funding at all? Is it bad to approach VCs?

No, not at all. When you need money for your startup, you should definitely approach VC. It can be a question of survival. With lack of funds, your shop can get shut down.

However, the key is to identify whether you need funding or not. Many of the startups don't realize how long they can go without funding. It's known as bootstrapping. Many don't even know what they'll do with the money they are raising. There should be a definite purpose to ask for funding. If you don't, continue working.

Before approaching a VC, you should ask yourself -
  1. Have we analyzed thoroughly the need for funding? Can we not cut the costs and continue?
  2. Have we explored all other avenues of money - savings, family, friends (in that order)?
  3. If we need to approach VC at all, what are we going to spend the money on?
For many startups, especially the web startups, you don't need huge amount of money to run on. Try and see if you can find out ways to avoid funding at early stages. Maybe you can do with small amount from your family and friends. And seriously, "Marketing" is a bad answer to #3. As Mahesh Murthy pointed out yesterday at Proto, budget for marketing is inversely proportional to the brain size! If marketing is the primary reason for seeking funding, you are better off coming up with ideas to do it without huge investments.

Indian entrepreneurs live in a world dominated by VC-centric thinking. The earlier we come out of it, the better. Part of the problem is that we do not have any role models, any celebrated success stories from which we can learn on, take comfort from.

To close, I'll quote Mahesh once more -

Think of 5 entrepreneurs your really admire, and you'll realize that none of them took VC funding in early years.

If not from Indian context, maybe we can learn from US counterparts.