Bill Gates - End of an Era or Beginning of a New One?

Its official, Bill Gates is retiring. David who became Goliath is riding off into the sunset.

Love him or hate him, one thing remains. Bill Gates was a phenom who will never be duplicated. I dont know if the industry would have been the same without Microsoft. Ya Ya, I know they copied everything from Apple, Lotus etc, but so did a lot of people. Wonder where they went.

I think back to the late 80's when Windows was released (the pre-cursor to Windows 3.1). The interface was clugy, programming on it was difficult but it was a big change from what we were using then.. DUMB TERMINALS.

Microsoft made the IT industry global. IBM, HP et all might have been around before Microsoft, but they were far behind Gates who made software a "commodity" available to everyone. Not just big business users.

E-Bay leveraging Skype - At last

Looks like VOIP services and auctioneering just started coming together. E-Bay will start to integrate Skype services into its auctioneering site so that people wanting to buy and see can finally start talking to each other.

This is a first step by E-Bay to start monetizing Skype’s services.

I wonder if this will bring a new paradigm into E-Commerce where Voice/Instant Messaging will become an integral part of doing business and lead to some kind of an "Instant" Marketplace.

Could be exciting.

To Sell or to Hold

There comes a time in an Entrepreneurs life where he or she has to take a call on whether to hold on or sell out.

Most of the time, the opportunity comes in at a time when the business is about to take off. Someone comes in and offers to buy over the company.

You know that if you hold on, the rewards could be greater.

Yet, you feel after all the hard work you have out it, it would be great to cash out, especially a first time entrepreneur, who has spent all his hard earned money on the business. Also who knows what could happen to the market. It could go south. The gut feel I guess is to sell and then hope that in your second inings as a businessman you can afford to take more risks.

But then will you get a second chance?

The Advisors - Larry, Curly, and Moe

So we had our first meeting with the advisory company. One of the Big 5. It was suggested that we meet at their offices.

Met with Larry, Curly and Moe.

Larry is the guy who just sits there making sympathetic sounds and throws in a few clichés. Curly is the technical expert who has studied "Roget's Thesaurus of Technical Buzzwords", and Moe is the private equity guy who decides on what the "right strategy" for funding. At the same time he is an expert on how your business should be run and what markets you should be focussing on (this from just one glance at our web site)and also seems to know what our attrition rate is. Amazing people these guys, so knowledgeable and so intelligent.

An advisory service allegedly will value our business and tie us up with the zillions of potential investors that they have lined up (I half expect to see a line of investors outside their doors).

As with the VC meeting this starts off with a statement about how we are too small ( tell me something I don’t know !!) and how most of the financing options they have are looking for bigger investments (Here we go again...). I am asked to explain our business and business model. Curly (the technical expert) impresses me tremendously with his knowledge of the technologies associated with our business. Only thing I suspect is that he just knows the names. Nothing beyond.

Anyway, so I go through our business, our plans (and dreams), focus areas etc, when Moe starts giving me a discourse on how we should be approaching the various markets. What a genius! Here I am with only 18 piddly years of experience in markets like the USA, Europe and the Asia Pacific (my partner didn't come with me that day is a novice with only about 20 years of experience), and Moe who has not worked outside the shores of India is actually telling us what markets to look at. Amazing what Google has done for him. Fortunately he has to step out for a call so I am saved the embarrassment of humbly correcting him.

So, next I get questions like, "So what kind of investors are you looking at?", "Who is a possible partner?", "Are you looking to give up management control?" etc etc. It reminds me of questions that a real estate agent asked when I was looking for a rental house. "So what kind of house are you looking for? How many bedrooms? Are you looking for attached bathrooms? Do you need an independent house? Do you need an attached bathroom?" etc.

Anyway the meeting ends with a promise to visit our office to see for themselves what we are actually doing. Which as far as I was concerned was their way of saying "Don't call us, we'll call you". Two weeks later they did call and came over for a visit (I had totally forgotten about it by that time). Maybe they needed the business.

So anyway they landed up. Just two of them. Moe (the private equity "expert" was missing). Two glasses of water and three cups of coffee later they were asking us the same questions (this time my partner in crime was with me). Once again the same "real estate" type of questions followed by suggestions on how we can improve our business.... what markets we need to be looking at etc. I am amazed at the depth of knowledge here. Just by looking at my web site and a three page executive summary, these guys are able to tell me what my focus area should be. Isn't it incredible that a guy who’s never run a business ever tells you what you should be doing? I immediately make a note to myself that in my next life I want to be an "advisory consultant" (maybe in this life even).

Finally they decide to leave with a promise to come back with a proposal. Their business model is to work for a combination of retainer plus success fee. For this, they'll represent us to the investment community. They however hasten to add that there are no guarantees.

I am still waiting for their proposal (not holding my breath though). I suspect that I need to raise another round of VC funding to be able to afford their fees. In the meantime I read an interesting article on Business Week online. Talks about how small businesses shouldn't count on VC money and how VC money comes when you least need it.

Is that the right way to go? Should we just say hell with the VCs and look at building the business to the next level on our own instead? Well, looks like that’s the way its heading.

Except Larry called me this morning.

Whats next baby? Lets go VC hunting

Ok, Ok. So I am bitter. Bitter about the hypocrisy and bitter about the hot air that surrounds the VC community in India today. As an Entrepreneur you tend to take these things to heart. In the next series of Blogs, I will take you through our quest for funding and how it pans out.


So when we started in the BPO the business we were told, "Build a good team, Build Customers. Funding will follow. Trust us". So we did just that. Stated with a motley crew of 8 people and built it way up to 100. Went out an got some customers as well . Oh yeah and revenue (Monthly Recurring Revenue). It took us 2 years to do this. Along the way we even finalized bank financing (we were later told that this was quite an achievement).

So we did all this and proudly started taking to the VCs. I ignored the advice of my friend (a fellow Entrepreneur) to stick with our "old way" of funding. Hey, I had all the ingredients right? Screw my friend. The VC he met up with was "not typical" (I was just going to learn what "typical" meant).

The first one had the week before evangelized the concept of funding startups in an interview with a business magazine. We were so excited. We would find someone who empathizes with us and take us from where we were to the next level. After all we were not asking for much money. That’s good right? ... NOT !!!!

So this guy starts talking about how his company does not have the "appetite" to do small investments and that they were just in the process of re-orienting themselves to handle large investments only. He suggested we look for friends, family, TiE and the janitor (ok I added this one for effect) to fund our "next step". He said "You need scale". So its not enough to scale from 8 to 100. It needs to be bigger much bigger!!! I guess the early stage "there’s no risk to me" advisor forgot to talk to us about scale. So we came back sufficiently chastened. I was afraid that he was going to charge us for the coffee he gave us but thankfully they absorbed the costs. After all they had $350 Million under management.

Of course he put his Harvard education to good use and floated a few buzzwords that bamboozled us. We really came out feeling we hadn't achieved much. Don't Revenues, Customers, Team mean anything without size? Probably not to this guy but for us it seemed a significant achievement. Maybe we needed to be scam artistes to get some money. Do straight businesses get funded anymore?

Then we got a call from an advisory company... stay tuned folks... it gets interesting.

P.S: I haven’t told my friend about this visit. I'm sure he'll find out 'cause he knows I publish this Blog :-(

The Great Indian Market

One of the questions I keep getting asked when I travel overseas is about the market potential for Technology and Services in India. "Hey its a country of 1 Billion, must be a huge market", they say to me. Well yes we are a country of 1 Billion and we are a large potential market (note the word potential here). This might be true to a certain extent for consumer goods but we have a long long way to go before India translates into a good market for technology and service companies.

When I visit countries like Korea, Japan, Australia, and Taiwan, I am amazed at the maturity of the local market. Companies can sustain and prosper by just focussing on the local market. Not in India though. The first thing a technology (especially Software and Services) company does is scout for overseas projects. Why is this? Why can't companies thrive on the local market? Is it price? Is it opportunity? Is it attitude? What is it that prevents Indian companies from looking at India?

The problem probably has its roots in the way computers and technology proliferated India in the first place. Software has always been seen as something thats given away with hardware. Though that perception is changing now, software and services are not something that Indian companies are willing to pay big buck for (unless you are an SAP or IBM).

Next, the software revolution in India started mainly with services (Y2K etc etc). Since there was practically zero market in India for software services, most companies were outward facing servicing markets like the USA. Even today all the big players get over 90% of their revenues from the overseas market.

All this has resulted in virtually no product of any substance being developed for the Indian market (the only notable exception being the accounting package Tally). Its just not possible for a startup to think up a product for the Indian market, get it funded and then market it here in India. No surprise then that all Indian companies wan't to get into services.

The other party to blame is the end customer in India. In most cases they are rude to vendors, dont pay on time and want to squeeze companies on pricing so much that its just not worth it to service them. To top it all, we love the "Made Overseas" sticker (must be a hangover from the British Raj). Companies here don't mind paying a foreign company list price and a premium for services (if its foreign it must be good). However they will extract every ounce of discount from the poor Indian company. Until this reverse racism goes and there is a good eco system to fund small product companies, India will always be a back office and will never make its mark as a country worthy of producing technology products. Even Infosys was not successful with its product thrust and thats saying something.

So next time one of our VC friends comes into India and gives us an expansive discourse on how we need to "develop products", I think they should walk the talk instead of theorizing and fund a few companies from the ground up. There is too much CO2 these days and its time for the theoriticians (read VCs and analysts) to put up or shut up !!

The Venture Capital Scene in India

Two weeks ago the TiE Group hosted John Doerr, Ram Shriram, and Ray Lane in Bangalore. It was a nice interactive session with the three very knowledgable gentlemen.

It was also a reminder that the VC industry (if I can call it that) is in its infancy in India. There is no true VC at least for companies looking at entry level financing. This leads me to question the very definition of a "Venture Capitalist". Most of the VCs in India are looking for mature (read as "low risk" investments). While this is fine, most of them seek cheap publicity from the newspapers by calling themselves VCs who help small and entry level businesses. However their private persona is very different than their public persona. Approach them as a small company and they'll treat you like a fly. Take for example a leading VC who got featured in Business India. Their entire interview was full of (sic !) prose that justified the cause of early stage funding.. blah..blah etc. However a friend of mine who has a fairly well established company but was looking for some entry funding found out that there was a LOT OF DIFFERENCE between what they said in the magazine and what they say in private. He was out of there in 5 minutes. He swears that he'd rather deal with banks than VCs. At least they don't have two faces.

As I said before, thats fine, but can we please stop this hypocrisy?