tag:blogger.com,1999:blog-31129836558872438602023-11-15T08:15:59.666-08:00Investing in Early Stage Companies in IndiaSuvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.comBlogger49125tag:blogger.com,1999:blog-3112983655887243860.post-62607208783476294102017-12-18T00:16:00.003-08:002017-12-18T00:16:40.019-08:00Food Ordering - Will the Power of an Integrated Dine In and Dine Out Community Prevail?<div dir="ltr" style="text-align: left;" trbidi="on">
Recently I ordered take out from a restaurant in Mumbai. I was passing by the restaurant and stopped to place an order. On my way out, I asked the restaurant manager which food delivery app shall I use the next time I wanted to place an order from the restaurant and his response was that many of his customers order from Zomato. He also added that a certain Bollywood star is a regular dine-in customer at his restaurant and has rated the restaurant positively on Zomato which is a strong testament to the quality of food they serve.<br />
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Given that there are multiple food delivery apps in the country vying for the customers wallet, some offering fast delivery and some offering the best discounts, the popularity of Zomato for food ordering highlights the power of the community that it has built over the years. Customers that have been using Zomato for dine-in recommendations can now use the same app/experience for food delivery. And new customers to food ordering can benefit from the community reviews on Zomato before they decide to place an order from a restaurant.<br />
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Delivery times for any food ordering platform needs to be reliable/predictable and with Zomato's partnership with Runnr, their food delivery service should be best in class. As the food ordering space matures in India, will integrated dine in and dine out platforms prevail over pure food ordering platforms by being able leverage reward benefits (ie rewards for dine out can be redeemed at dine in), and the multiplier effect of the community reviews (ie. dine in reviews can influence dine out decisions)?<br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com0tag:blogger.com,1999:blog-3112983655887243860.post-37885378564633967492017-01-10T03:49:00.000-08:002017-01-10T18:05:45.536-08:00Housing/PropTiger - The Future of Indian Online Real Estate<div dir="ltr" style="text-align: left;" trbidi="on">
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The Housing and PropTiger merger could be a potential game changer for Real Estate in the country. Here's why - </div>
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The Indian Residential Real Estate market is gigantic- over a $100b market. Real Estate is the single biggest expense that a consumer makes in the country. In almost every major country, a significant portion of the real estate research moves online while the transaction is completed offline. A consumer typically researches a home from their mobile phone or desktop and then connects with a trusted broker to complete a sale or rental transaction. India is no different and is at the cusp of this transition to the internet for property research. However, in certain developing markets like China and India, the offline transaction services is not consistent across the country. Very often, you hear the question "do you know a trusted broker?" in social conversations. This statement sums up the state of the brokerage market. In India, almost anyone can become a broker. There are large established firms and Mom and Pop shops offering similar services. This creates a variability in service levels due to differences in knowledge, training, resources. Hence the need for a full stack Look to Book solution online where a consumer can research a property and then be assisted to complete the transaction offline seamlessly. India currently doesn't have any such solution today. This is where Housing/PropTiger can potentially change the rules of the Industry. In China, Soufun, Aiwujiwu are some of the popular examples of similar full stack solutions that are changing how Real Estate is transacted in the country.</div>
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A Housing and PropTiger combination brings the following end to end benefits to the Indian consumer :</div>
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a) Accurate Information in an Easy to Use Interface - Genuine data on as many parameters possible so that the user can make an informed choice - Building amenities, locality, house interiors, estimated rent, budget, etc. Housing.com is a world class product with millions of consumers providing superlative property search experience across hundreds of thousands of verified listings with photos and data backed by a lot of research. </div>
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b) Trusted Transaction Services - Provide consumers with assistance on site visits, diligence on the property, negotiations with the landlord/builder, drafting/reviewing the transaction documents, legal advice, home loans, registration, etc. PropTiger is a proven leader of high quality transaction services across key cities across India with billions of dollars of transaction experience via the fulfillment network built.<br />
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The synergies of an integrated platform like Housing/PropTiger, if executed right, not only has the potential for consumer delight and industry disruption, but also the potential for economic efficiency at scale which is a important driver for company sustainability and shareholder returns. Nexus being a shareholder in Housing/PropTiger, I wish them the best in executing the first and only full stack online real estate platform in the country.</div>
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com16tag:blogger.com,1999:blog-3112983655887243860.post-51428925404927997082016-12-29T00:23:00.002-08:002017-01-02T21:44:28.666-08:00Time to Hit the Reset Button on Valuation for Indian Start-ups Raising Follow On Capital<div dir="ltr" style="text-align: left;" trbidi="on">
"Good Company, Bad Investment" is an often used phrase when discussing some of the follow on financing rounds for many of the funded start-ups in India. Over the past several years, start-ups were aggressively funded by Hedge Funds, Venture Capital Firms and Strategics. Many of these companies tried to aggressively build product and market themselves with little regard for unit economics or even a business model. Some of these companies have arguably built a decent product, good brand recognition and customer loyalty. What could have been achieved with $1 was achieved with $5 as capital was cheap and quick. And companies that would typically be at a Series A or B stage valuation with a strong differentiated product with early traction, are at valuations that are typically what a later stage company would command with business model in place, revenues growing rapidly and a path to profits. We have seen several companies with revenues under $5m being valued at the last round at $50m+ and in some cases over $100m. The reason for this is that the company raised a lot of capital in quick succession over a short period and raised $10-20m rounds at an inflated valuations because capital was available.<br />
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Today when I speak to many of these entrepreneurs, I hear that they are working on reducing burn, focusing on revenues and unit economics, but rarely do I hear the openness to recapitalise the company at fair valuations even it means that some of the earlier investors and founders may have to take the hit to accommodate new capital at fair valuations. In some cases, the earlier investors are happy to continue to bridge the company at the inflated valuations in the hope that the company will grow into the valuation. Time will tell how this strategy plays out. In other cases where external capital in important for survival or to maintain the competitive edge in the market, the sooner the entrepreneur and shareholders realise that the best way forward is to do a hard reset on valuation and attract further capital, the better it is for all. Companies can lose momentum or lose favour with investors quickly. We have seen a recent case of Ola where they recently raised monies at a reset valuation. It was a smart move on their part. Hope more entrepreneurs press the valuation reset button in time. One step back to take three steps forward. At the end, what is important is to build a great business which will eventually yield returns for all. <br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com1tag:blogger.com,1999:blog-3112983655887243860.post-32908682155974516402016-12-09T04:38:00.002-08:002016-12-09T04:39:37.479-08:00Start Building an Independent Board Early <div dir="ltr" style="text-align: left;" trbidi="on">
Surprising, few companies in the Indian start up space are thinking about adding Independent Directors to the boards early on. The popular perception is that when a company is thinking of going public, that is the time to bring on Independent directors. <br />
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My suggestion is to start building an Independent Board early in the company lifecycle. While there is no magic milestone on when this should be done, generally good to start thinking of an Independent Director when the company is early in its commercialisation journey. Having this conversation with your VCs early on is helpful.<br />
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At an early stage, an Independent Director is more a thought partner to the entrepreneur, someone who can guide him or her on how to think about commercialising a product, building an organisation, making customer introductions, and broadly bringing a fresh perspective and balance to the investors. What is important is that the Independent Director truly can dedicate time when needed and has bought into the company vision and team and is not doing this to build the resume. For example, in one of our start ups, we helped bring on an Independent Director who has been a CMO of a large enterprise software company. He brought a different perspective on the product, positioning and price given his experience which was valuable. In another instance, a portfolio company brought on a CFO of a Telecom Company. He was very valuable in helping define the strategy and brought a different thinking to the table coming from a hyper competitive industry like Telecom .In another case, we helped bring on a Media veteran to help with customer introductions and refining the product pitch, etc. <br />
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As the company grows and is thinking of going public, Independent Board Members with more specific skills to be able to lead the Audit, Nomination Committees, etc. <br />
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In my experience a good board composition at an early stage is 5-7 Members. 1-3 VCs, 1-2 Founders/Management and 1-2 Independent Directors. Anything less than 3 members or over 9 members can cause the board to be ineffective. <br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com0tag:blogger.com,1999:blog-3112983655887243860.post-62193227401083269272016-11-29T05:06:00.001-08:002016-11-29T05:08:44.802-08:00Invest in Capabilities before Building Awareness <div dir="ltr" style="text-align: left;" trbidi="on">
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The last few years Startup India has seen an abundance of cash. We had Hedge Funds doing Seed and Series A deals and various Strategic and other investors investing large monies at the growth stage. Many entrepreneurs were flush with funds early and were spending the monies in marketing companies (especially B2C) versus building them. In the race for market share, they were building awareness before building capabilities or efficiencies. The common perception was that "this is how the leading companies were built in China. Grab market share first and build efficiencies later." The difference in China is given the regulatory and language hurdles, international companies, rich in experience, capabilities and capital couldn't find it easy to compete there. So local companies that got funded were able to gain market share on the back of inefficiencies and below desriable service levels and then had the luxury to then work on the capabilities once they were the only one standing.<br />
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In India, being a relatively open economy, the playing field is a lot more open and allows for well capitalised international competition to flourish. International players have the know-how and the capital. If they are able to build the right entrepreneurial team on the ground and transfer the know-how, they can be formidable local competitors., Local Entrepreneurs who have been lucky to raise a lot of cash early should first invest in building differentiated capabilities over awareness as it can provide a better sustainable advantage even if it means giving up the maniacal goal of market share in the earlier days. You still need to be aggressive in building awareness but once you have your capabilities built, you will hopefully need to spend a lesser dollars to attract customers by leveraging word of mouth as a result of better service levels and experience, the outcome of smart investment in capabilities. <br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com1tag:blogger.com,1999:blog-3112983655887243860.post-83347050996185912432016-07-27T04:08:00.001-07:002016-07-27T04:16:42.259-07:00When is the right time to exit?<div dir="ltr" style="text-align: left;" trbidi="on">
Quick recap of recent M&A - Yahoo sold for broadly 1/10th the price that Microsoft offered several years ago, Jabong sold for broadly 1/10th the price that was being discussed with global ecommerce majors a few years ago.<br />
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Given the recent M&A activity both globally and close to home, I thought I would revisit the topic of exit timing which I wrote about a few years ago (<a href="http://indianvc.blogspot.in/2011/08/timing-of-exit-is-very-important.html">http://indianvc.blogspot.in/2011/08/timing-of-exit-is-very-important.html</a>).<br />
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I have found that it is very difficult for an entrepreneur, management and/or investors to take a decision to exit when there is no immediate stress on capital - either when there is capital in the bank or there is an impending financing round. And this challenge amplifies when the company is growing as it can sometimes make a company less vigilant on potential future headwinds the company may face.<br />
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So when is the right time for a founder/management to start thinking of an exit, despite cash in the bank? Here are some tips - <br />
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People - There is fatigue or lack of passion at the founder or leadership level. Or it is hard to attract or retain key talent in the company. Or there is a strong disagreement amongst the various stakeholders on the way forward. <br />
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Approach - The approach to solving the problem is either not working or not scaling. Revenues cannot scale without scaling costs proportionately<br />
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Market - The market is either not large enough, or the competitive dynamics in the market puts pressure on current business model <br />
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Obviously the company must attempt to do whatever it can to address the challenges above and continue to build value and not give up at the sign of the first road bump. But what is important is that a timely and critical assessment is made on whether the company really has a strong passionate team focused on differentiated and scalable business model in a large enough market or are their certain team or market headwinds in the near to mid term that will be hard to surmount and it is best to find a strategic home for the company. This assessment is not only extremely tough in an ever changing dynamic market environment but also is emotionally challenging for the founder especially if there is strong passion for the company. And often the responsibility lies with the investors and the board to provide the sound and dispassionate counsel to the entrepreneur. <br />
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As we have seen in the recent M&A highlighted above, a mistimed exit of a company can cause major loss in shareholder value, employee morale and employee opportunity cost. <br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com1tag:blogger.com,1999:blog-3112983655887243860.post-14561461061219103182016-07-25T01:38:00.002-07:002016-07-25T01:38:44.984-07:00Don't be afraid to fail early <div dir="ltr" style="text-align: left;" trbidi="on">
I was speaking to an entrepreneur in our portfolio who was going through a major pivot and asked him how he was feeling given the last few months of dealing with the business model change, jittery investors, confused employees, etc. We believe in the entrepreneur and continue to back him.<br />
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His reaction was that he is more charged than ever now. He has realised his past mistakes, has learned from it. He believes his BIGGEST MISTAKE WAS NOT PIVOTING EARLIER. He believes that the problem he set out to solve with his earlier company still exists, it is a large problem that needs to be solved. However, the approach to the problem has to be a lot more differentiated and focused. He understands the quality of revenues matter. They should be recurring and profit yielding. Customers need to love the product at a price/cost that allows the company to build a profitable franchise. He has spent time internally speaking to his employees and explaining to them the rational of the pivot and everyone seems to be on board with the new direction the company has taken. While I am hopeful that the new direction will work, but what is clear is that the old business was not working and the faster there was realisation around this, the better.<br />
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Many entrepreneurs face the problem of product-market fit. It is the nature of company creation. When I was an entrepreneur, I faced it and had to adapt/innovate very quickly. If I didn't, I wouldn't have survived. Many times, the difference between a failed and successful entrepreneur is not smarts or passion. It is intellectually honesty with themselves and their team early in the company's lifecycle that their current business is hitting a wall, and perception/intuition to figure out a new opportunity that can leverage the companies capabilities to create a sustainable enterprise. <br />
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I tell most entrepreneurs I meet - "Don't be afraid to fail early if you think it is not working." Admitting failure sooner can save a lot of time and capital and help direct energies towards potential problems that may be solvable. And even if you cannot think of a pivot, it is better to fail fast and do something meaningful with your life as the scarcest resource we have in our lives is time!<br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com0tag:blogger.com,1999:blog-3112983655887243860.post-68980078067389400572016-07-08T05:35:00.002-07:002016-07-08T05:35:36.941-07:00Tips for building a healthier startup <div dir="ltr" style="text-align: left;" trbidi="on">
As the saying goes, Great companies are built in tough times. There is good reason for this. When there is an unforgiving financing environment, smart companies tend to focus a lot more on costs, more emphasis is put on generating that extra dollar of revenue for the same cost, low cost marketing innovations emerge, new initiatives put on hold, etc. While there is no reason to wait for a tough financing environment to engage in some of these company health activities, it is invariably in such times that great foundations and cultures are built. There is a general fear that some of the layoffs and other cost reductions will reduce company morale, etc. To the contrary, most cost rationalisations result in a happier productive employees. <br />
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Some practical tips for current entrepreneurs to build a healthier start-up -<br />
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1. Zero base your fixed costs - Look at every cost and see if that would have been a cost you would incur if you had to start the company today. Would you rent the office you are currently renting? Would you hire as many people as you have in each function? Is there way to convert cash compensation to more equity? <br />
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2. Restructure variable cost (for e.g sales force organisation) - Eliminate non performing sales professionals. Make a judgement call on the cost benefit of the top performing sales team. Sometimes top performers in a past year may not be as hungry to perform in the coming year. Younger hungrier talent at a fraction of the cost of a top performer may yield similar or better performance than someone who was a past performer and is not as hungry any more. Think of replacing the expensive performers with younger less expensive potential. This philosophy holds for other variable costs like service delivery, etc too. <br />
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3. Focus on Customer ROI - Understand your customer need better to see what more you can cross or upsell to them with the same resource/effort. In consumer facing businesses, don't waste monies on attracting consumers if you know that they will not be yield a positive return on customer acquisition cost<br />
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4. Think "Out of the box" in Marketing - Assess if there are other ways to achieve the same touch points. Invariably every company builds a lot of flab in marketing because it is very easy to justify a marketing budget. Innovative channel partnerships, guerrilla on the ground marketing, Word of Mouth, PR, are some of the innovations worth experimenting with.<br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com0tag:blogger.com,1999:blog-3112983655887243860.post-72751087117435759442016-03-11T06:48:00.001-08:002016-03-11T06:48:25.440-08:00The Future of Free Online Horizontal Classifieds - Winner Takes All <div dir="ltr" style="text-align: left;" trbidi="on">
Nexus was an early backer of one of the two leading free online horizontal classifieds in India and was instrumental in building out its leadership in the country. Both the leading companies are helmed by smart mature leaders and the battle between the two companies has been on for a few years now. I can see this battle continue in the short term given that both companies seem to have cash in the bank for now. However, eventually, in this business model, only one player can become a strong viable business, not two. Winner Takes All! <br />
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The value proposition of a free horizontal classifieds platform is simple - Maximum Liquidity. Buyers want more sellers and sellers want more buyers. This is a true network effects business (i.e. the value of the platform increases with more users using it). Once there are a critical mass of sellers and buyers on the platform, it is very hard replicate the liquidity on the platform. More users will beget more users and the liquidity will continue to grow without scaling marketing significantly. And when there is unparalleled liquidity, that is when monetisation avenues like fees for preferred placement of ads works as there is no other alternative to market to such a large audience online. And that's when you can build a potentially highly profitable business as the costs are mainly technology and maybe some reduced marketing as a result of the network effects.<br />
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In India, the challenge with the online free horizontal classifieds industry was that it was a two horse race from the beginning. Both companies raised adequate monies, built strong platforms, and invested heavily in marketing. Users came to both platforms. Since it was free, users experimented with both platforms. Both platforms built a decent seller base and buyer base. Both platforms are trying to build "unparalleled liquidity". However the existence of two strong free platforms doesn't allow either one to become a successful business. Once a platform significantly dominates in liquidity, it is able to reduce marketing costs and switch on monetisation aggressively. In order to differentiate to be able to monetize, one of these companies has launched vertical platforms (i.e. separate platform for auto, real estate, etc.). These are good growth initiatives, however they may not help them to win the horizontal classifieds war unless they are unparalleled leaders in liquidity. A vertical classifieds business competes on "best service" for a finite liquidity (you cannot compete in best service for a very large base of liquidity - it is too complex) versus a horizontal free classifieds that competes on "unparalleled liquidity" but potentially giving up on service. There are strong independent players that compete in vertical marketplaces with focus and capital dedicated towards solving the "best service" problem. It is hard for a horizontal free classifieds who is fighting the "unparalleled liquidity" battle to also fight the vertical battle of "best service". The danger of trying to do both is that resources may get spread too thin and both battles could be lost. <br />
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I suspect some of the vertical strategies in India are driven by similar strategies in China. However, in China, the leader in free horizontal classifieds business acquired a vertical classifieds only once clear leadership in liquidity was established. So monies were invested in building vertical services on top of horizontal leadership without fighting both battles simultaneously.<br />
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Hence I believe the future for free online classifieds in India will lie in one of the following outcomes : <br />
a) Both horizontal platforms consolidate and create one platform <br />
b) One horizontal platform outlives the other with a stronger balance sheet <br />
c) One horizontal platform stops competing in the free classifieds space and pivots to vertical or other adjacent businesses.<br />
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Wish both companies luck and hope they will be able to navigate through the competitive environment successfully. Interesting times ahead. </div>
Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com7tag:blogger.com,1999:blog-3112983655887243860.post-50151980156324561582016-03-02T06:41:00.004-08:002016-03-02T06:41:39.234-08:00Valuation Fluctuations in Large Private Companies is Noise - No need to Panic! <div dir="ltr" style="text-align: left;" trbidi="on">
There has been a lot of unnecessary recent negative press and social media chatter around a recent de-valuation in an Indian unicorn by an existing investor in the company. Valuation fluctuations are par for course in large fast growing private technology companies. Let me explain why.<br />
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Financial valuations in large fast growth private technology companies is part art and part science. It is generally driven by - <br />
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a) The promise of the rapidly changing future financial metrics of a company - Most of these fast growth companies are addressing new markets that have not been addressed before, therefore there are many unknowns at the time of financing – market structures, competitive landscape, etc which are dynamic in nature. As the company evolves and markets mature, more clarity emerges or more opinion forms around future growth potential of the company. <br />
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b) Liquidity of large pools of capital - Global environment and financial cycles can affect investor sentiments and large capital flows in private companies, thereby potentially reducing the pool of further capital which could then affect valuations due to pure demand/supply economics<br />
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Valuation fluctuations are short term aberrations and don't really affect the entrepreneur or the investor. Smart entrepreneurs continue to focus on building long term value by focusing on differentiation, scalability and sustainability. They understand these fluctuations in a rapidly changing environment and manage their ambitions, teams and plans accordingly and use it to their advantage to drive efficiencies in their business.<br />
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India is going through a digital revolution and companies will continue to thrive and grow given our attractive demographics. Many investors I run into continue to say that “India is one of the few bright investment spots left”. Market leading companies will continue to attract investor interest at premium valuations. </div>
Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com1tag:blogger.com,1999:blog-3112983655887243860.post-14291564155788350142016-02-12T02:54:00.003-08:002016-03-18T00:46:13.812-07:00Uber for Hotel Rooms - Can you build sustainable value?<div dir="ltr" style="text-align: left;" trbidi="on">
My Harvard Business School professor came to visit me a few weeks ago. At the end of the meeting, he asked me what I thought of a business that is into an Uber for hotel rooms in India. My immediate reaction was "I don't understand it", and his response was somewhat similar. We both laughed.<br />
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There has been a lot of hoopla around trying to create standardised hotel experiences in India akin to an Uber, partly driven by large investor funding news. I have met many talented entrepreneurs trying to execute in this space for a few years now. While I have a very high regard for entrepreneurs being one myself, I scratch my head when I see businesses like this that is stretching the Uber for X analogy a bit too far.<br />
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Let me be more specific on this business. If someone told you can get a clean table with a good table cloth and new silverware and plates at a cheap food restaurant that is generally filthy , would your experience be any different in that restaurant? Marginally at best.<br />
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Similar is the story of branded hotel experiences. Customers I speak to swear they would never take their spouse to some of these "branded" hotel properties, the only reason they are staying there because it is cheap and they know they would get a clean bed, etc but really didn't have a great experience. The reason they are not thrilled with the experience is because the room is "just one part" of the whole hotel experience. The hotel lobby, the corridor, the food, the location, rest of the infrastructure, the other guests, are all part of the experience. Building a long term sustainable business of partially branding somebody else's sub-par property without controlling the entire property is a challenge.<br />
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Another problem with partially controlling somebody's business is that there is no full alignment with the hotel owner and customer. If a hotel owner gets a walk in customer, the room may go to that guest as he is a guaranteed customer. Again, if you are branding the experience, this hurts the brand. <br />
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The real long term value of branded hotel or restaurant experiences is if you own/control the entire property or restaurant not part of it. That is what branded or restaurant chains do. Hard to scale these businesses fast given the challenges of real estate, labor, etc and they may not merit venture capital returns, but that is indeed a real business with real value.<br />
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My advice to entrepreneurs in the quest to launch "Uber of X" businesses and specifically the Uber for Hotel Rooms is to really understand if they can deliver the service levels that an Uber is known for. They control the entire experience. In this case of Uber of Hotel Rooms, it is not feasible to provide that experience.<br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com2tag:blogger.com,1999:blog-3112983655887243860.post-65703465085397411242015-11-06T02:52:00.001-08:002016-07-27T22:04:06.724-07:00Its Time for Indian Food Tech to Smell the Coffee....<div dir="ltr" style="text-align: left;" trbidi="on">
There has been so much noise about the internet food delivery space in India recently. Internet kitchens, home chefs, restaurant aggregators, hyper local logistic companies, etc. Most of the business models are not well thought through when it comes to trying to build a scalable and sustainable enterprise. <br />
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There is only one sure way to build a large valuable online food delivery enterprise in my opinion - Using technology and tech enabled processes to enable quality food suppliers deliver via a network of logistic providers at scale. I feel many of the companies are missing the point - there is either too much focus on preparing the food or too much focus on delivering the food. Both of these should be enablers, not the main focus! This is a thin margin business in a industry that thrives on quality and variety. You cannot afford to build a logistics staff that is used twice a day (lunch and dinner) and is largely idle for the rest of the day. And you cannot scale a business by cooking and serving out of one centralised kitchen or a bunch of small home kitchens! If there are a million orders a day, can the chefs produce 10,000 pastas from their home kitchen? Unlikely. There is inevitable food fatigue that can limit scalability if you are producing food from one central kitchen. That is a big issue with any one kitchen restaurant on the internet or not.<br />
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What a company needs to do is effectively is to use technology to identify and empower the current food supplier ecosystem (restaurants, caterers, home chefs, etc) and the current logistics ecosystem to deliver quality food to the consumer in the simplest way possible. <br />
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Those who wake up and smell the coffee (literally :) ) and execute flawlessly will thrive under this business model. Those who don't may survive for a while, but most likely will end up in "hot soup" ! <br />
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We are privileged to be partners with a food ordering company that gets it - TinyOwl. Wish them all the luck in executing flawlessly.<br />
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UPDATE : TinyOwl has merged with Roadrunnr and rebranded as Runnr. Roadrunnr has innovated on a tech enabled delivery model that allows control of service without bearing the full time cost. Possibly one of the best teams in the country for hyperlocal logistics we have met. With TinyOwl's superior food discovery experience and Roadrunnr's capital efficient innovative capital efficient scalable logistics infrastructure, we hope Indian consumers are given a superior food delivery service via Runnr that delights while making profits along the way, which so far has been a myth in the industry. India will see emerge a very different food delivery company than rest of the world given the lower price points and we look forward to continuing our partnership with Runnr</div>
Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com5tag:blogger.com,1999:blog-3112983655887243860.post-50627345852153245132015-10-09T05:58:00.001-07:002015-10-09T05:58:37.819-07:00Experiment Capital Efficiently before Scaling up!<div dir="ltr" style="text-align: left;" trbidi="on">
For the last year, I have met hundreds of smart entrepreneurs with various ideas in the consumer internet, mostly sounding alike - "I want to raise usd 5m and focus on promoting my service aggressively and then go for the larger round of financing in 12 months" <br />
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When asked "Why not build the company step by step and focus iterating on a solution capital efficiently?", the answer is that is what the so called Indian Unicorns have done (ie marketed aggressively and negative gross margins ) and hedge funds, corporate biggies have rewarded them for it by financing them with large cheques. Rewarded who? A financing is not the sale of the company. A financing is largely not a liquidity event. Unless someone is building a real company with a path to real profits, a Unicorn valuation may not be worth the paper of its shares. And it is good to raise capital if needed to grow once a business model is proven out capital efficiently first. Expensive experimentation at the early days can prove to be fatal as if it doesn't work, there is no money to manoeuvre into adjacent business models and the shareholders are over diluted to be able to attracted new money at any valuation. <br />
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As an entrepreneur and investor, I have seen many situations where a company has exited for a lot less than the last round valuation. My advice to many of the entrepreneurs is that experiment capital efficiently and once there is a proven model, then raise capital to scale. <br />
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We have companies in our portfolio in consumer internet where entrepreneurs have experimented with little discounting and have witnessed healthy growth in their business. And have then gone out and raised capital to scale. It can be done. </div>
Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com0tag:blogger.com,1999:blog-3112983655887243860.post-80875859287005306292015-09-03T01:33:00.001-07:002015-09-03T01:48:38.771-07:00AirBnB clones will not work in India<div dir="ltr" style="text-align: left;" trbidi="on">
India has seen a lot of me too "cut and pastes' from internet models worldwide. From the Amazons to the Ubers to everything in between, clones have been tried in India. Unfortunately, this type of cloning will not work for unstructured stays in India because of the fundamental lack of trust by consumers on the quality/service of the property, the reverse lack of trust by the property owner on the usage of the property by the consumer, the lack of technology adoption by the property owners, the variability in property maintenance, etc. What India needs is a managed marketplace where properties are vetted and verified, assistance provided to help the consumer decide on a property based on their needs, training for the property owner on what is required in terms of capex and services to make the property "rentable" and technology assistance to facilitate the booking and post booking interactions with the customer, and a ratings/reviews system to enable users to share their experiences with others.<br />
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India has hundreds of thousands of small lodges/guesthouses and millions of potential homestays. But to open up this supply of stays to the consumer successfully requires a significant amount of process and product innovation. Some companies (e.g Oyo, Zo) are trying to solve this need by trying to control the service levels of the property owner and attach their own brand to each property experience. This is more like a virtual hotel. It can work at small to mid scale but hard to make this work at large scale this as it is not possible to "guarantee" or standardize an experience if you don't have control over the property experience completely. A controlled marketplace experience (e.g Stayzilla) where every unstructured stay available can be listed but with a verification and assistance layer on top is something that the Indian consumer needs and can be a huge success if done right. The power should lie with the consumer to decide on the property they want amongst the thousands available with as much transparency and assistance provided by an intermediate platform in an emerging country like India that is nascent in both digital savvyness and customer centricity.<br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com1tag:blogger.com,1999:blog-3112983655887243860.post-25625726535018476802015-07-24T02:44:00.001-07:002015-07-24T02:44:15.626-07:00Focus Now, Diversify Later!<div dir="ltr" style="text-align: left;" trbidi="on">
The Digital entrepreneurs in India are going through an exciting phase of rapid growth as more consumers access the web via mobile. Many companies have scaled up users and transactions rapidly in a short span of 2-3 years. Many of these companies are at critical junctures in their life cycle where they need to make sure the organisation strategy, HR, etc are aligned to support future rapid growth. Yet what surprises me as I speak to some of the entrepreneurs is their focus on new areas which is bound to take away focus from the core. Which would have been fine once a business is established and growth is slow, but not at a time where business is just about getting started. <br />
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1. A transport aggregator tell wants to get into food/groceries <br />
2. A classifieds directory service wants to get into delivery of products<br />
3. A horizontal ecommerce player wants to get into renting flats <br />
4. A mobile recharge wallet company wants to build an ecommerce marketplace<br />
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Many of these new areas of growth while sound adjacent, they require very company DNAs -<br />
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Aggregating taxis and making sure you deliver fresh bananas on time are not similar businesses. The latter requires product sourcing and cataloguing, vendor inventory management, logistics, etc. <br />
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Collecting data of a store and giving the phone number to a customer who calls is very different from ensuring the selling ships the product to the customer and collects the monies, manages returns, answers customer queries on the product. <br />
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Selling a mobile phone and renting a flat follow very different buying behaviours. The user experience, the trust, the paperwork in renting a flat is very important.<br />
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Creating a wallet where users put cash to buy mobile recharges and selling T-shirts require very different back end partnerships, fulfilment capabilities, etc.<br />
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As a company is scaling rapidly, it requires both management leadership bandwidth and capital prioritisation. If a new area is launched, it cannot scale rapidly unless it also gets the same level of human and capital attention. Human capital, namely entrepreneurial leaders, product managers, etc are not easy to find. There have been a limited set of companies in India that have seen rapid entrepreneurial cycles where such talent exists. And getting new talent from traditional settings like consulting, FMCG can be time consuming. And more importantly setting the vision, direction for new leadership in a new business will require serious entrepreneur bandwidth. So trying to manage a hyper-growth core business while trying to build a new business with the same hyper-growth ambitions can be tricky. Entrepreneurs sometimes forget the focus he or she gave to starting the core business. They feel that by getting someone new to focus on "the new initiative" will be sufficient to get it to a successful start. <br />
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My advice - Focus on the core business till it is somewhat stable, has a very strong leadership and management in place and is getting somewhat self sufficient or less dependent on capital needs and then look at pushing the pedal on a new business area for hyper-growth. Expansion and Diversification is not a bad thing. In fact, it can be an important value driver for the company. But the timing is key to be able to give it adequate attention.<br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com1tag:blogger.com,1999:blog-3112983655887243860.post-1875919860065543352014-08-14T04:36:00.000-07:002014-08-14T04:36:47.735-07:00The commerce behind Indian ecommerce <div dir="ltr" style="text-align: left;" trbidi="on">
A lot of promise on the Indian e-commerce front! Consumers shopping online is growing exponentially, mobile driven commerce is accelerating. The Snapdeals and Flipkarts are becoming household names. But what is forgotten in this e-tailing revolution are the unsung heroes - the ecommerce enablers - most importantly logistics and supply chain/inventory management. <br />
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Lets runs through the process - Assume a consumer clicks the buy button on an ecommerce site and chooses Cash on Delivery which continues to be a predominant payment method in India and chooses one day delivery.<br />
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How does the ecommerce vendor manage its orders? How does the vendor manage the warehouse? How does a vendor manage suppliers and get inventory in a timely fashion to be shipped to the consumer? If a customer pays cash, how fast and securely does the cash reach the ecommerce vendor? This is where the ecommerce logistics companies like Delhivery and inventory/order management software companies like Unicommerce come into play. The less talked about heroes that help enable the trade to happen or in other words they are the "commerce" in e-commerce!<br />
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India will see a huge revolution in the e-commerce infrastructure space over the next decade just like the tower companies and other mobile telephony equipment companies powered the infrastructure revolution in the wireless telecom space. Unlike in other developed economies where some of the basic infrastructure around logistics and retail technology was already in existence and e-commerce players focused solely on building out the front end by plugging into this infrastructure effortlessly, India is seeing the ecommerce players and the infrastructure players growing up simultaneously and adapting to each others needs as they grow and form a robust ecosystem.</div>
Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com6tag:blogger.com,1999:blog-3112983655887243860.post-12619170745931546972014-08-14T02:45:00.002-07:002014-08-14T02:50:20.235-07:00Fitness Oriented Wearable Devices is a Fad! <div dir="ltr" style="text-align: left;" trbidi="on">
I have been amazed at the buzz that has been generated around these Health tracking devices. I see a lot of people wearing bands of different colors. And now there seem to be companies that are offering coaches alongside the devices. <br />
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Really? What was lacking in our lives was a measurement device that measured how much we walked, how we slept and once we had that data, we would be able to fix our lives? Is that the real problem that we had no data available real time? Or that we didn't have anyone pinging us and telling us that we did not meet our fitness objectives for the day? <br />
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I don't think so. I think the real problem lies in the innate human motivation for anything we do. A device can remind you but it is a temporary fix. After a few months, if there is no motivation to continue with an exercise regimen, no device in the world can help. And if there is motivation to continue on a health track, a device stuck to your body all day is really of little value. <br />
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Lack of sleep at night is often tied to stress levels and other ailments which a device cannot help with. And the symptoms resulting from a lack of sleep is often visible the next day be it fatigue, irritability, etc. And even if the symptoms are not visible and there is data to show unhealthy sleep, the problem lies in the drivers of the sleep which are not easily fixable and are often deep routed which can take serious behavior and mindset change to make a positive difference over a long period of time. <br />
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So just like our New Year's Resolution to Lose Weight and subsequently signing up for a Gym Membership, I believe the purchase of these health tracking devices is impulsive and not fully thought through. While this fitness oriented wearable devices do get sales just like a lot of Gyms get memberships post New Years, there are other social motivations/influencers of a physical Gym that allow for sustaining a membership at a Gym even though the activity levels at the Gym have dropped. These don't exist for a fitness tracking device. So I don't see users continuously upgrading or renewing their fitness devices like they do Gym memberships or their Ipods/Iphones. I believe that there is a segment of wearable devices that is very valuable such as those that help with monitoring statistics for chronic diseases, etc which enable timely care. I don't believe devices that try and influence human motivation are scalable or sustainable. But devices that help with critical information that can be acted upon without deep mindset shifts can work.<br />
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I think these fitness device companies will continue to attract sales as there a lot of headroom for first time users that may buy the device in the hope that it will change their fitness behavior. In the interim, if these companies figure out a way to keep these users by introducing hooks that are beyond basic fitness, this industry could thrive. Otherwise, I forsee challenges. Not to take away from the super talent and all the hard work put in by the management and employees at all these firms. And the investor money gone in to help create these companies. <br />
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What next, shall we have devices for kids to remind them to do their homework on time?<br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com3tag:blogger.com,1999:blog-3112983655887243860.post-85486008127771431972014-07-17T02:37:00.000-07:002014-07-17T23:39:54.692-07:00What the World Cup Soccer teaches us about Entrepreneurship <div dir="ltr" style="text-align: left;" trbidi="on">
Did anyone predict that a substitute player would win the World Cup 2014 for Germany and that too against the team that has the worlds most branded player. If this subsitutute player was not brought in at the 88th minnute of the game, would the game go into penalty kicks? And who would have won if penalty kicks was the sole determinant of the outcome? Penalty kicks are more about individual performance and not teamwork. <br />
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At the end it is all about the psychological confidence, teamwork and quick strategic decisions taken at critical moments that makes a winner in this sport. Startups are no different. When a company is starting out, there are more often than not, other branded players operating in their space with experienced management. However what differentiates a successful startup from those that are not so successful is the psychological confidence, trust and teamwork of the team in executing rapidly, and the critical strategic calls - what should the product positioning be, what should the approach be, who are the key hires, etc. Great companies are created by ordinary people doing extraordinary things together under the right leadership. A well functioning team can achieve a lot more than individual prima donnas in a team that is not gelling well together. And branded/experienced individuals are not necessarily the winning formula in creating winning companies. Inexperienced passionate smart individuals can create entrepreneurial magic as has been witnessed time and again with first time entrepreneur success worldwide.<br />
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Football and other team sports are a good teacher of lessons in entrepreneurship!</div>
Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com1tag:blogger.com,1999:blog-3112983655887243860.post-41671037061279702072014-04-08T01:42:00.002-07:002016-07-27T22:39:10.140-07:00Incubated companies are not easy to pull off in markets that are not soon to mature<div dir="ltr" style="text-align: left;" trbidi="on">
There has been some activities by international incubators in india, especially in the consumer internet space. This is the path they seem to be following :<br />
a. Think of a copycat idea that has worked globally<br />
b. Fund the company with reasonable startup capital - own most of the company<br />
c. Hire smart consultants/bankers, give him nominal equity, and make them work real hard for 4 years<br />
d. Build the company with the hope of an exit in 4 years <br />
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There are several flaws to this model :<br />
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1. Hiring CEOs into ground zero startups rarely work and more so in India where there is a lot of friction to starting a company. Many hired CEOs dont have the entrepreneurial gut to tide through the myriad issues at the early stages of a company. And given that it is not their baby, there is limited passion.<br />
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2. In markets that take time to mature, hired CEOs don't have the staying power to stick it out for a decade or longer. Given that it is not their idea, there is no pride of ownership, economic incentive or moral responsibility to stick around.They look at the opportunity as a learning experience for a few years and decide to move on well before the company has really matured. Typically in such markets, an exit is unlikely in 4-5 years. <br />
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3. Sometimes Consultants/Bankers may not make the best entrepreneurs. Just raw smarts may be a necessary but not sufficient condition to becoming a great entreprenuer. And if they are really smart, they realise that working in an incubator with miniscule equity for a long period of time is less desirable than starting on thier own since the equity in these incubated companies will take a lot of time to be worth anything and it is better to start your company if you are going to put in a decade of hard work.<br />
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Several incubated companies started in 2009-10 have now begun to crack. Management is leaving these companies en masse. Moral is not high. I am sure the incubators are worried. And if not, they should wake up and smell the Indian coffee....<br />
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Moral of the story - Try and implement this strategy in developed markets where you can incubate, hire for smarts, micromanage the hired help for 4 years and then flip the company. In India it can take a lot lot longer and this formula may not work.<br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com3tag:blogger.com,1999:blog-3112983655887243860.post-87337541517923616722014-02-24T05:38:00.002-08:002014-02-26T03:48:49.654-08:00Capital doesn't build great companies, Great people do...<div dir="ltr" style="text-align: left;" trbidi="on">
There has been a lot of news recently on startups raising a large sums of venture capital in technology and the internet . For some reason, a large capital round seems to be equated to the success of that startup. The fundamental assumption is that the investors must be smart if they are investing big cash into the company and this company is bound to succeed. Well, there is more to the success of a company than capital. <br />
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The reason the investors are investing big monies is that they have seen strong traction in the company and are betting that with this large round, the company can accelerate growth, establish leadership and become profitable. However raising a large round does not guarantee success. In fact the onus is that much greater for the entrepreneurs to deploy the large pools of capital very effectively and strategically as missteps at this stage can prove fatal to a company. This is what defines a good entrepreneur from a great entreprenuer. A great entrepreneur understands the revenue drivers and cost structures of the business deeply and think though what will it take to achieve a sustainable and profitable market leadership in the segment it is operating in. Sometimes spending "habits" can creep into a fast growth company - for example, overhiring at the top, high compensation, large marketing spends, unweildly capex, large offices, high travel expenses, etc. A great entrepreneur continously checks and challenges these spends. A great entrepreneur also understands that excessive marketing can hide the lack of differentiation or defensibility in a product. He or she understands that marketing is temporary and the core value proposition and differentiation is what will eventually win and obsessively focuses on strengthening that core proposition - be it superior product, flawless customer service, etc.<br />
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Recent news on Whatsapp, the worlds biggest venture backed company exit till date, mentions how the priority of the entrereneurs were to create a very simple product that had no bells and whistles so that adoption was viral acquistion costs could be close to nil. The company could have easily invested in features and consumer marketing after they raised their last large round given the hyper competition in this space. Full marks to the founders for keeping the discipline on superior product offering with an eye towards building a profitable and sustainable business. Many other messenger companies exist in the world have access to similar levels of capital and possibly even more than what Whatsapp had.. Yet, Whatsapp has achieved world domination. Capital doesn't build great companies, great entrepreneurs do!<br />
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At Nexus, we are blessed to be able to work with some such great entrepreneurs who are on their way to building great market leading companies. <br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com3tag:blogger.com,1999:blog-3112983655887243860.post-22676428764508061192014-02-24T03:37:00.001-08:002014-02-24T03:54:32.061-08:00Hybrid Commerce...Really?<div dir="ltr" style="text-align: left;" trbidi="on">
There has been a lot of chatter recently on Hybrid commerce as a new business model. I have seen and heard various versions of this. Some examples of business lines that ecommerce companies are contemplating are :<br />
a. Offline Stores<br />
b. Bulk Exports<br />
c. Domestic Wholesale<br />
d. TV Shopping<br />
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From marketing to merchandising, from warehouse to logistics, from technology to sales, the processes and organisational DNA required are very different. The reason many of the entreprenuers are thinking about this is because they want to grow their business faster and are thinking of new avenues of growth. <br />
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I would strongly urge entrepreneurs to think through the drivers of a new contemplated business direction, the management and resource bandwidth required and the distraction/opportunity cost of not focusing on the core business. Sometimes, "new" channels may seem like the easy answer to growing revenues, but with that can come signficant hidden organisational costs that can cause strain to the core business, especially in a young startup where capital is scare and organisational stability is fragile. <br />
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An entrepreneur should assess how much of the "new channel" is leveraging existing people and processes and organisational learning and how much of it is an entirely "new business line" which requires organisational retooling. To give a simple analogy, Mcdonalds entering Fine Dining is a new business line while McDonalds introducing "Drive Thru" or "Home Delivery" is one more channel. <br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com1tag:blogger.com,1999:blog-3112983655887243860.post-29214465919377580132014-01-07T01:51:00.000-08:002014-01-08T02:12:19.533-08:00India can become an Innovation Hub for Software for Small Business Owners <div dir="ltr" style="text-align: left;" trbidi="on">
Look around you in any city in India and you will see a small business owner. High chances that someone in your family is a small business owner. All of these small businesses are resource constrained and are looking for on demand technology solutions across the value chain from more efficient marketing to easier data management to better book-keeping to cost effective communication. Unlikely any of these small businesses have an IT team and are looking for "zero touch" solutions that can be deployed and managed with ease and low cost. <br />
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The advent of cloud has really helped in innovation for the small business across segments. India can be a great test bed for such technologies that could then also be deployed globally. <br />
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India is beginning to see active entrepreneurship in this arena. Some of the early examples in the Nexus portfolio are DimDim (Web Collaboration) , Helpshift (Mobile CRM), Unicommerce (Supply Chain), Druva (Data Backup), GenWi (Mobile Publishing), etc. Some of the other notable companies are Tally (Accounting) and FreshDesk (CRM), Practo (Healthcare), Knowlarity (Communication), Capillary (Retail Loyalty), etc. There are hundreds of startups that are emerging and will emerge in the next few years. This next decade will witness the emergence of the Indian Software for Small Business.<br />
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Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com1tag:blogger.com,1999:blog-3112983655887243860.post-91957344544269054072013-11-12T04:05:00.001-08:002013-11-14T22:24:32.073-08:00Understand the local drivers when starting a "Me too" business<div dir="ltr" style="text-align: left;" trbidi="on">
Copying internet models that have worked in the early internet markets like the US has been a prevelant business practice worldwide ever since the internet was invented. From the Yahoo, Amazon, eBay, Expedia clones half a decade ago to the more recent Airbnb, Gilt, Uber and, Zillow and Yelp clones today. Almost every successful internet business model has seen copycats come up worldwide. There are some investment/incubation firms that seem to have made "Immitate and Invest" a business model. <br />
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Entrepreneurs/investors that are making a living from copying business models that have worked elsewhere need to understand the business drivers of the business model worldwide and try and understand if these drivers exist in India and what local tweak may be required for the business in India. Couple of examples in the Indian context <br />
a. Dating (Match.com of India) - Do women feel safe to put up their profiles on an internet site? Are they culturally open to doing so in a largely conservative Indian society? <br />
b. Ecommerce (Amazon of India) - Is there brand loyalty while shopping online in India or are consumers price sensitive? How does one pay in a largely cash dominated societey in India? <br />
c. Social Travel (Airbnb of India) - Is there enough trust for end consumers to list their homes for daily/weekly rentals by strangers? Is tenancy regulation amendable to this business model? <br />
d. Private Taxi Marketplace (Uber of India) - What are the altenate modes of transport available to the consumer? What pricing is neeed for the private taxi operator to make money? And how does that pricing compare to the other modes of transport (Can that pricing being sustained in the market? Given the traffic in key cities like Bangalore and Mumbai, can the taxis reach on time? <br />
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In all of the above examples, the "me too" business clearly requires significant local innovation in order to make the model viable. An entrepreneur needs to build in the friction involved in trying to localise the business to Indian conditions which could impact time to market and profitability. <br />
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Some Me too models that don't require on ground execution in an English speaking country like India may not work at all. For example, if it is a product play only that consumers need to adopt, there is no advantage of a local player over an international player if there is no langauge barrier. So India doesnt need a local Google, Facebook, Whatsapp, Pinterest while China may due to the language barrier. The business driver in the above is mainly marketing/customer adoptoin which an international company can do as effectively as a local company. So a "local moat" doesnt really exist in these businesses.<br />
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It is encouraging to see "me too: entrepreneurship flourish in India. However, there is no free lunch when it comes to copying business models. It requires a lot of deep thinking and superlative execution and long long hours at work.</div>
Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com3tag:blogger.com,1999:blog-3112983655887243860.post-78403593223385708302013-10-15T04:19:00.002-07:002013-10-15T04:19:31.636-07:00Experience is overrated! <div dir="ltr" style="text-align: left;" trbidi="on">
In a recent board meeting of an early stage internet startup, one of the senior executives asked me "Should I hire a Senior Sales Head who has experience in the Industry or should I hire someone who maybe good with managing a sales organisation but in a different industry?". My immediate answer was "Experience is Overrated!". <br />
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Let me explain.<br />
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What is required from a Sales Head in an early stage startup is someone who can roll up their sleeves and do the initial selling to the customers, someone who understands the product roadmap well and can dynamically adjust the product positioning and pricing based on market needs, can build a motivated team, can design and implement processes, operating metrics, etc. Given the nascency of the internet in India, there are few companies on the internet that have scaled where one can find Sales Heads with the right mindset and experience in a fast growing innovative and dynamic setting . And many times in the offline world, the experience is a lot more structured where there is less "out of the box" entrepreneurial leadership thinking. And often times, an experienced hire can come with unwanted baggage from an industry or a company that then requires "unlearning". Or the hire can come with strong views of how to approach things which may or may not work in the context of what the startup is looking for or may bring on board a team that may have performed well in a different context or environment (may still be the same industry but sometimes online and offline skills in the same industry can be very different) but may not be able to adjust to the new environment. <br />
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So unless there is deep domain that is absolutely required (in some fields like pharma, medicine, etc, this maybe required), the core functional skills and mindset of the person is more important than the experience. Obviously if the core skills check out in a candidate that also happens to have the experience, it is an added bonus. </div>
Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com1tag:blogger.com,1999:blog-3112983655887243860.post-58823251692194627132013-09-30T05:06:00.001-07:002013-09-30T05:06:16.015-07:00Series B/C investing ain't like Series A investing......<div dir="ltr" style="text-align: left;" trbidi="on">
Many first time entrepreneurs we fund at Series A think the fund raising process in Series B/C maybe somewhat similar to Series A where the entrepreneur meets the VC a few times, the VC does their diligence and issues a term sheet in a few weeks. Many times the process doesn't play out like this. The Series B/C process can be lot more involved where the Growth investor wants to see traction on many business metrics, comfort around the capital needed to get to profitability, a fully built out management team, a functional product with revenues, etc, etc. And surprisingly there is very little co-relation with the amount of capital being raised and the intensity and lenght of the process. This can sometimes throw the entrepreneurs into a spin as they have not budgeted enough time for their next round and they end up with a bridge round before the next financing which is always a very tricky position to be in. It is therefore important that the capital being raised in Series A is sufficient enough to get an entrepreneur to a point where some of the product, team and market risks are mitigated to enable an effective future fund raise, even if it means raising slightly more early on. And the entrepreneur should also be paranoid about spending the Series A monies raised effectively (ie it is better to spend monies on demonstrating early traction on a product even if it is not fully built out rather than building all the bells and whistles on the product at the cost of showing early traction).<br />
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Capital raising is an art and a science and entrepreneurs need to understand and master that skill along with the zillion other things on their plate. I have seen situations where very strong entrepreneurs have lost out to their weaker counterparts who have been better fund raisers than them.</div>
Suvir Sujanhttp://www.blogger.com/profile/04285896439156212257noreply@blogger.com0