How do I reach out to a VC fund?

This is the beginning of the season of events. TiE Chapters, VC Circle, Your Story, Unplugged, IAN, MA, incubators the list is endless. All of them are all putting together events that focus on entrepreneurship. It is a great place to network for early stage founders, potential recruits, wanna be entrepreneurs and of course VCs. There will always be a few sessions on fund raising at all these events.

Two questions that always come up during these discussions.

When is the right time to reach out to a VC?
I am of the opinion that there is no one best time to meet a VC. In India, there are not many funds that back companies which are still on paper. Most funds will look for some validation from the market for your product or service. We at our fund track companies that are very early for us on a continuous basis.We reach out to them regularly to understand the progress and also sometimes push young companies towards certain goals which increases the chances of funding. It also helps us to understand the product, culture and more importantly the entrepreneur better. I would guess it works the same way for the founder too. So that's why I would recommend building a relationship with a few VC's can only help whether you are looking for capital or not.

How do I reach out to a VC fund?
There are over 200 funds in the country working on different models starting from dedicated teams based here to people who fly in and out on a regular basis. Last year at out firm we saw over 1,500 business plans. This I am sure is the case with most of the active funds. Given the size of the teams this is a large number of plans that need to be screened. So to cut through the clutter, the best way is to reach the firm through a referral. Find someone in your network who is connected to these funds. Today with all the social media more channels are open to reaching out to firms whether on Linkedin or twitter.The events  provide another platform to reach out. It is not that the other ways don't work, this is the fastest way to reach out. The VC's are also constantly looking out for new companies and entrepreneurs. We have very active outbound program where we reach out to companies based on our research.

One piece of advice for entrepreneurs reaching out to funds, do a little bit of work on the people at the fund. Not everybody will be looking at all the sectors, so it is important to reach out to the investment professional who understands your sector best and has investments in similar domain. One look at the statistics will tell you that most of the time money chases good companies and not the other way round. At out firm we strongly believe that the entrepreneur comes first and the VC next.

Attributes of a startup CEO

I have been fortunate enough to work with a set very good tech entrepreneurs. I have also as an investor, come across people who have fantastic skills in product development. What differentiates the two is that the former understands that building the product is not the end game. Value realization is in customer adoption. As a founder one has to have strong passion and conviction, articulate a vision, inspire people etc. Apart from these there are also a few very fundamental attributes that I think are critical.

Sell,Sell,Sell
To build a good product is so much more under your control than to get someone to pay for it. When is it the right time for the founder to get someone on board to sell? To arrive at this balance is what most tech start up teams struggle. To have someone in your founding team with customer facing skills is the ideal situation to be in, but it is not necessarily the case all the time. I am of the opinion that as a founder there is nobody better in the company who can talk more convincingly about the value of the product and company than you. In fact as a founder you are constantly selling, to customer, potential hires, investors,etc.

Cashflow is king
I have seen a number of firms with offerings like CFO on demand . They add value no doubt as start-ups cannot afford a CFO in their early stages and are more focused on product development. In fact most technology founders shy away as soon as you talk finance. As a techie you might not know profit and loss, balance sheet, etc. But as a CEO you have to understand finance. If you shy away from knowing / looking at the burn, you are on the way down the tube.

Metrics and Measurement
Another important attribute that I look for is how ruthlessly  one measuring the progress. To have a strong metrics driven discipline from the beginning is very critical. It also shows how honest you are to your self being at the top. One might not get it right all the time but to be more sure about the decisions that are made information will go a long.

If you are looking to branch off on your own, I would encourage you to spend a little bit more time on some of the above too. Building a company takes a lot more doing than a product.

If you meet the Buddha, kill him

There is a purpose to why we are all here is what we are taught. We are in a constant endeavour to find the purpose and fulfill our obligation. There is a very famous Zen Koan which goes like this "If you meet the Buddha on the road, kill him".

Like most things in Zen, it is up to the individual to derive his own meaning and so there are many interpretations of this. The one I tend to agree with most is that it is not possible to see a Buddha outside you. Buddha is inside you, in fact you are the Buddha. It is not for one to replicate, but to find your own. And my belief is that it will be different for each. One cannot find a purpose outside, maybe there is no purpose at all and there is no shame in that. Enlightment might be in just understanding that there is no purpose afterall.

Where are the doctors ??

Healthcare is one of the largest industries globally estimated to be around $2.8 trillion. In India the industry is valued at $79 billion growing at 17%. It is projected to hit $280 billion by 2020. These are large numbers very difficult to ignore, if you are an investor. Also, when you consider that 75-80% of the healthcare expenditure in India is spent by the private party.

Not surprisingly the sector has attracted a lot of investments the the last 24 months.

A staggering $600M has gone in the 2012 across 19 deals. This is the investment in health care delivery alone. Given where we are as a country my belief is that more investments are required to build our health care ecosytem. We need many more hospitals, specialized and otherwise to cater to the massive demand. But here is something I worry about...

We have about 450,000 doctors in our country. This means 1 doctor for about 2,500 people. We produce only 51,000 doctors in a year. About 1,000 of them go abroad for further studies. To change this ratio will take time given that it takes a minimum period of 5 years for a doctor to graduate. So all this capital going in to create infrastructure will hit a wall because there are not enough doctors around. Further, the willingness of a doctor to go to smaller towns will reduce as more money will chase them in bigger towns and cities.

A lot of money has gone into specialized care delivery whether in eyecare, diabetes, nephrology, etc. The ratio of specialists are even more dismal. Not much has gone into increasing the support system. demand for nursing, paramedics, etc will also go up if we are to reach better standards of healthcare delivery.

There must be a more planed investments from the govt to increase the pool of doctors today to see the benefits 5-10 years from now. They have come up with this plan of asking students who go abroad for higher studies to sign some kind of bond which I think is ridiculous. Instead they should focus on incentivizing people who are willing to stay back.

Season of the incubators

I have a noticed a couple of things in the last 12 months both of which are probably connected. One, the quality of the business plans have improved significantly from what I was seeing 5 years ago. Be it the start up team, the idea and its articulation and the overall strategy - everything has undergone a huge change for the better. Another important phenomenon the start up ecosystem is witnessing is the rise of angels, angel funds and incubators. There was a definite gap here 5 years back and seems like that gap is filling up now. There have been about 15 that have come in the last 12 months. Follow the link to pluggedin team who have put together the list of incubators. The List.

To give some perspective about the angel ecosystem in the US - the dollar amount of angel deals totaled $22.5 billion in 2011. Some 66,230 enterprises received angel funding last year, from about 318,480 angel investors (Center for Venture Research). Compare this to India where Venture Capital firms invested about $1.09 billion over 209 deals in India during the twelve months ended December 2011(Venture Intelligence). We still have a long way to go.

One incubator that I found very interesting is the Startup village, a public private partnership with Govt. of Kerala with a INR 1000M fund. Kerala has done a wonderful job of developing tourism with their God's own country campaign. However, they completely missed the IT revolution in spite having the first technology park in the country. This is their second coming and I hope they do some serious work in developing the entrepreneur ecosystem in the state. I do have bias here since I also hail from the same state :-).

It is interesting times for entrepreneurs today, with a lot of people with global experience wanting to contribute more than just their expedience to young start ups here. The aspirations of these young start ups also represent the growing opportunity that India has to offer.This agrues very well for people who are looking to start up companies. Passion and commitment are not the only requirements to succeed, learning from people who have been there before is important and if it comes along with money that will certainly help.

Silver lining of the cloud

We are among a few venture funds in the country that have invested in the the hypothesis of product companies from India. India has  produced big companies in the services sector in the last 15 years. It is this growth that I believe will become the bedrock on which the next wave will rise. Products from India for the global market.
Products not just in the software domain, but also hardware. Companies like Perfint Healtcare and Forus Healthcare are testimony to the fact that we are capable of building effective products in tough domains such as medical devices.
I was at the Amazon Web Services event last week both in Chennai and Bangalore. The new energy there is very difficult to miss. Entrepreneurs who are taking on this new challenge of building software on the cloud not just for domestic consumption but for global markets . IDC estimates the Indian cloud market to be in the region of $535 million in 2011, with a growth of more than 70% expected for 2012 and almost 50% growth forecast for the next three years. This is definitely a growing market, but I believe that as a cloud based company the world is your market. It is very important for the company to reach out to global customers. To have a few global customers will help in validating the product and more importantly help you understand better the kind of roadmap the product should have going forward. This is why I believe that cloud startups should also look at how they can build an exposure into the developed markets.
This is the beginning and the road is long, and most companies I met are only just starting up. The cloud is a leveller of sorts and we are looking at a very exciting phase which will see the next set of big companies this time in the product domain being built out of India.

Humanities in MBA courses

When I was growing up it was important to take either the Math or the science stream. Even as you progress in your career and want to get into a B school it is your math and quants that are tested to see if you are worthy of joining the school or not. Once you get in, it is amazing to note the emphasis on quants again , its all about number crunching they say. Do not get me wrong this is an important domain to understand.
Now, having spent about a decade in the corporate world one thing I have come to understand is that nothing is accomplished alone, collaboration is the key and  it is relationships that drive businesses.  Be it your customers, peers, subordinates or your bosses it is building strong relationships that drive success.
So how many subjects in humanities did I take in my B school. Zilch.... I am of the opinion that if you are planning to become a leader or a manager it is mandatory for you to take a few courses in humanities. To understand how to build relationships, nurture and maintain relationships is a very important aspect of a manager or a leader.
It is the responsibility of these schools to emphasise the importance of understanding the softer aspects in becoming a good leader along with building your ability to crunch numbers. Number crunching is a skill that can be picked up but building relationships is an art...you better invest in that very early in your career.

Education is a function of demand too

I came across this video on education by Ken Robinson on our education system and i have been thinking on it since the last couple of days.
www.ted.com/talks/ken_robinson_says_schools_kills_creativity.html.

He makes an interesting case on how public education actually kills creativity. In a sense i do agree with him that we need to re-look at our education system as a whole and make changes to the way our children are taught and what they are taught.

Everything in this world is a function of demand. We are in that phase of our life-cycle as humans where there is tremendous pressure to improve productivity, better utilization of resources, better healthcare, reduce poverty, improve living conditions of man in general. This would require an element of social engineering too no doubt, but I would guess science has to play a huge role in helping us deliver more better with less. Incentives are also aligned to these objectives and I would want to believe that why when I was growing up we had to choose either math or science as our path else we were told one would end up with nothing.

Appreciation for liberal arts can only be built on the solid foundation of economic stability. There must be a belief that pursuing them can help bring economic stability to our lives. In this domain you have to be perceived to the best to make a good living. There is no place for an average artist as the demand is little. Compare this to the demand for an average engineer or a doctor and you will see the point i am making. That is why i think while discussing education context becomes very relevant. Fundamentally education must be able to deliver a better job, better livelihood along with teaching how to be better human beings. If in one generation education can deliver this economic stability then the next generation will be able to explore the finer aspects and make that choice to pursue then more confidently.
Interestingly, during the renaissance period there was greater emphasis on music, arts, dance , etc than on math and science. People saw that pursuing liberal arts could take them out of their present conditions.

In my view there is no doubt that the system of education needs to be re-looked, however when making those drastic changes it is important to make sure the context and the purpose is not missed. It must be done to deliver prosperity be it in economic terms or in social terms and the demand for these could differ depending on where and when.

Renounce greatness

One of the many translations of the poem "How to go to the temple of Tao". I have picked a few lines from there.

This in my view is pure Zen....

Speak silently, if speak you must

Like the rock speaking to the trees

and leaves to flowers.

Silence is the sweetest of voices and

nothingness has the fairest of colours

Let none see you coming

and none, going

No pride; You and not even formed

No anger; Not even dust is at your command

No sorrow: it does not alter anything

Renounce greatness, there is no other way to be great.

The soft shall survive the hard,

Like the tongue that survives the teeth.

Only the one who does nothing can do everything

Go, the unmade idol.

awaits you.