starting up
TRANSCRIPT
Starting upStarting up
Rajesh Venugopal
Young Kerala FoundationYoung Kerala Foundationwww.youngkerala.org
What they don’t teach you in B-School
Disclaimer
• Not competent to teach• It’s a discussion in the unconference mode• Don’t want any one to agree with me • Sharing and learning from each other• Not complaining • Format – talking about failures more than
success• Not using company logos• Not naming anyone alive • There is no right or wrong
Personal Reason• When you deviate from conventional paths, you can be extremely
lonely. It helps talking to support groups
• Young people need a lot of benevolence to become fearless risk takers
• Young people are naïve and upright for the ways of the world
• Young people are constantly ostracized impeding their self confidence to dream big or handle failures
• If we cant provide them capital, provide them knowledge capital and inspiration
• An ecosystem which is tolerant of failures, will discuss failure and will learn from it. Learning, collaborating, sharing will be the norm in that ecosystem
• Wished if an angel from heaven came to help
The sapling has to be nurtured to grow up to be a mature oak tree. Along the way, it weathers many
rains, wind, seasons, drought, flood. Some environments, even human interventions, help, some
don’t.
Background• Set out to start a business @ 28, Year 08/2000• First customer after 2.5 years• Lead investor died in the 1st Operational quarter after his investment• Break even @ 24 th month, ISO Certified• Sacked customer in 25 th month• Rebuilt again in 2005 to 160 employees• Mid 2006 - Decided to quit telecom sector – a startup sector which
hadnt stabilised in itself• Zero Revenues in Aug,Sep 2006, Less than 10 K revenue Sep 2008• Got a Rs. 1 Crore bank limit in Aug 2006 and no business in hand!!• Rebuilt again to achieve 63% gross margins, but one customer
defaulted• Supplier invoked a Bank Guarantee leading crisis with Bank in March
2007• Stable from a business point of view since 2007• Sense of stability and profitability in 2008-9• Rebuilding is a way of life• 100+ employees, billing Rs. 10 lacs(10/09) Rs. 14 lacs (12/09)• Confidence after hard knock downs
Lets understandLets understand
Young Mind
Input Output
• It’s the process which is flawed never the person
Unhappy
Young Mind
Leads to low
Self Esteem
Negative Inputs
Negative social econom
ic output
Feudal normsabuse
Constant criticism
No emotional support
Brain D
rain/M
igratio
n
Suicides
Alcohol Abuse
Happiness drugsViolence & Terror
Late G.A.Menon• Was a dream Angel for a Young Keralite• Harvard Alumnus, Chairman of 14 Companies, some
were Billion$ corporations, lived in Beverly Hills • Didn’t invest in the business plan, he invested in me.• Would follow his instinct, risk his name for his mentee,
do opposite of what people told him. • Talked about the virtues of being a perennial optimist
and playing to win• HR ‘process’ -> input management approach for better
output• Felt that “Sir” and “standing up” – a common malayalee
fad was unproductive• Died in the 4th month of investment – not factored in the
B Plan• A positive input on your life is always revered
Making your mark on the world is hard. If it were easy, everybody would do it. But it's not. It takes patience, it takes commitment, and it comes with
plenty of failure along the way. The real test is not whether you avoid this failure, because you
won't. it's whether you let it harden or shame you into inaction, or whether you learn from it;
whether you choose to persevere.
Barack Obama
Happy & Confident
Young Person
Positive S
ocial Econom
ic outputP
ositive Social E
conomic output
Self EsteemBreak Feudal traditions
Mentor and foster
Support Groups
Fearle
ss le
ader
Productivity
Innovation & Risk TakerBenevolent Society
Economic prosperity & non financial investment in young persons
Getting Started
• Start as Proprietorship/Partnership firm• Get a SSI Registration• Dont mortgage your only home• Nationalized Banks are better• There are specialised branches for SMEs – avoid retail
branches• Everything else is a waste of time, get customers• There will be surprises!• Funding should not stop you from starting a business• Some one else not agreeing with you should not stop
you from starting a business• Don’t be rigid in the face of revenue• Don’t get into business if you don’t have emotional
intelligence
First few yearsFirst few years• You will typically be a single, at best a 2 client operation• If your first customer doesn’t cover cost, you need to
fund it. It’s the choice you have made.• You will be everything in the Company. • May not get the respect you think you deserve. • You are never able to pay salary on a set date• Take defaulting customers to IFC a tribunal set up by
SSI on arbitration• You find employees are not sticking with you• Most of us are begging for money most of the time• You realize back stabbing is a corporate way of life• Oh, man!! there are rattle snakes out there!!
Scaling upScaling up
• Scaling up is a pain, some times it is better to be small and profitable
• Scale up only if you have track record of 18 months continuous profitability
• Your existing customers must have given you stability for the last few years
• Let the scaling up request and commitment funds come from the customer
• Borrow debt on CGTMSE Scheme• Do not borrow on personal loans – the repayment tenure
is too short for a startup !!• Reschedule loans if you are unable to repay• Don’t borrow if you can help it• This is the time to register as a Private Ltd Co
Customer is king!• Whats a business without a customer?• Wear a sales cap from the time you wake up till you get
on with routine, making that Cold call gets you the entry• Even big customers may not manage projects properly• Be patient:Negative managers with the customer leave,
because they will be negative internally• Customer’s do advance money – you have to take a
stance on it• Seek other types of revenue from the customer even if
not connected directly with your line• Let the customer yell, make your staff take it. You stay
behind the bush, come out when the fire works are over, try to diffuse the negative energy
• Be extra nice to difficult customers – just agree to what they want and SSS on them
• Sack the unethical and unscrupulous customer• Get out if the business is being commoditized!!
Kerala Advisors: Full glasses Spill
• Ecosystem lacks understanding of Startups• Warning: Lawyers/Auditors look at you as a
‘Customer’.• KELSA, free legal aid, an alternate dispute
resolution mechanism.• You have to do your own research, find solutions
around the Ecosystem issues• If possible avoid localized advice. Reach
outside the well• Web 2.0 forums, are better source in a Kerala
type ecosystem
Negotiating
• You have power only when the customer really needs you. (usually the startup has no power)
• Your only chance to get good terms is before signing the contract (you have been salivating for long, and want to get done with it)
• Long term is only for individuals, in today’s world no Corporate can guarantee anything long term especially certain sectors
• Apply the Mind of a Cheater trick• Most often very long drawn and runs you out of patience• FEAR is the only reason we give in.
Simple tricks• 5 Why’s• PEST analysis• SWOT analysis• Infy’s website – PSDP model (predictability,
sustainability, dependability, profitability)• Fixed cost & Variable Cost understanding is MUST • Financial ratios – gross margin, return on equity help
Rajesh’s survival tricks-• Mind of a cheater• Behind the bush trick• Austerity• Kissing the frog trick• Bomb shelter trick (avoiding negative emotions of others)
Communication
• Key factor• Sit in front of the customer to know his next
move!!• Be assertive, firm, but smile• Emails copied to superiors may get your
relationship in trouble• Chat on MSN and Skype may cause
misunderstanding• Even letters can cause misunderstanding• Face 2 Face and telephonic are the best
Employees• It’s a punt, some times you get it right, some times you get it wrong.• Shake hands and part ways even in hard situations• If given a learning opportunity, freedom and new wave of thoughts, they
cherish working with you. (its an afterthought, but a feel good factor later in life)
• Using your network to place them on better positions earn you a lot of goodwill
• SSS – is feudal baggage creating a barrier between you & the employee• We cant tie an employee to our company, once you stabilise, the team
stabilises. All this just happen as you go along – don’t worry abt it• Emotional upheavals are usual in startups• Unfortunately, ecosystem issues invade, peer and society pressures force
them to leave your snake and ladder board game• Interns are good idea• Why do you want to employ, take temps• Do not expect loyalty• Employees are not born proactive. You have to tell them what to do
Stability
• Team members been with you 5+ years• Customer been with you for 5 years• Your entity has been around for 8 years (HBR Article)• You have different revenue streams, your business
model is robust• Your knowledge is now transferable to other businesses• Customer has his skin in your business• Margin improves, there are invisible margins now• You have full control, even if you are away• You loose your cool may be 4 times a year• Your mobile doesn’t ring that much
Looking after yourself
• Pay your self first, only then you can take care of others and the Company
• Work in and Work out – stay fit to avoid a heart attack• Show up only in positive circles where you can learn and
connect with• The negative circles wear you down – IGNORE people
who are talking ill of you, the revenge must be with yourself
• Ping ‘The Secret’ - it works (there is a lag!!)• Things will happen, the snakes get older and tired and
you start outsmarting the snake, then luck turns in your favour
• And you will be an entrepreneur!! (start another company and roll your dice again, if you wish)
Everyone screws up..• I didn’t know what margin’s where. Never understood fixed cost and
variable cost until recently. • Upped my stake from 10% to 26.05% on personal loans• Acted very corporate when I was a proprietor after Menon’s demise• Didn’t ‘manage’ my customers, lost temper, yelled• Mortgaged everything I have. I only have 2 companies• Didn’t handle pressure gracefully• Gave in to threats easily until I was pushed to the wall and nothing
further to loose.• Sacked a staff publicly, caught him by the shirt• I pay every one else first particularly staff • I don’t negotiate, I deliver first and hope for the counterparty to
deliver – I still get cheated. But I move on• I realized just yesterday FEARLESSNES is a virtue I need to have
Business & Choices
• Have a good lawyer. Preferably a law firm
• In a land where ethics has no value, what else do you do?
• Hand in the papers to the lawyer and move on with your work
• Remember, it’s a long drawn processes
• Court verdicts are hard to enforce• If the counterparty is good, he will iron out
differences, if he is bad, he wont!
A life spent making mistakes is not only more honorable but more useful than a life
spent in doing nothing.
- George Bernard Shaw
About Young Kerala
• Mentoring is the bedrock of a progressive society
• A mentor creates mentors and that goes on, the reverse is very true!!
• It comes from a feeling of abundance of resources
• Aimed at creating self confidence in the mentee• If I share my learning with Young friends, I learn
from them in return• We don’t fund, we are just there for you in a
virtual world
Young Kerala Facebook Group
• Aimed at 15 to 30 year olds• 500 odd member – make it the biggest K group on FB• Free benevolence and no expectation or obligation• Group of NRK’s willing to help Young people• NRK’s have better exposure in bigger ecosystems• Proposal creation, Presentations• Moral support group – don’t feel alone• Every success depends solely on yourself • Keep mind and body positive
It is not the critic who counts, not the man who points out how the strong man stumbled, or where the doer of
deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes short again and again, who knows the great enthusiasms, the great devotions, and spends
himself in a worthy cause, who at best knows achievement and who at the worst if he fails at least fails while daring greatly so that his place shall never be with those cold and timid souls who know neither victory nor
defeat. • Theodore Roosevelt - From a speech given in Paris at
the Sorbonne in 1910
Ecosystem
$billion
0
50000
100000
150000
200000
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Kerala Tamil Nadu Karnataka UAE
$billion
20 72 50
Since 2011• The foundation needs revenues
• Transferred 42% shares of my company to the trust
• Scaling up on Rural BPOs & Skill Development centres
• Working with 30 plus, home makers, husbands away in the gulf
• It’s a hard and arduous processes, needing a lot more support from the educated society
Kerala needs productive young people
& this World needs people like you to make a difference!
With love,
Yours,
@RVGRocks