With his company being referred to as gang of startups by Dare editor Prashanth Hebbar, Sameer Guglani from The Morpheus (erstwhile Morpheus Venture Partners) is a true startup guy; not giving any damn to investors, but preaching and practicing himself the idea of building great company which the investors would find themselves. His gyaan to entrepreneurs on the Day 4 of DARE Entrepreneur Week, to ‘Build a good business and money will find you’, had 100 odd audience investing their time and ears.
With an engineering background, work-ex of 6 years with technology startups in US and India, he quit his job in 2004, and entered the startup world. One theory which he has evolved over these years is the ‘horse and cart’ theory while expressing his wonder at the negligible number of VC funded companies which have made money for their shareholders, through going for an IPO. There is a myth going around with most of the people, which says that investor is the horse- the prime mover and entrepreneur is the cart. However, applying some common sense would reveal that this idea is wrong because the truth is entrepreneur is the horse- the prime mover and investor is the cart. While entities like The Morpheus and Dare, who are service providers/ media and are building an ecosystem around entrepreneurs, who are the original creators, some entrepreneurs for some reason, believe it to be the other way around.
So, we have different kinds of people here. Like - horse type investor. These are the investors who believe they are the horse and matter the most. Unfortunately, that is not how things work. Whoever’s money it is, the ground level execution is done by the entrepreneur only. On the other hand, 90% of the entrepreneurs we have in India are cart type entrepreneurs. They believe they need a horse investor to get started. So, before doing anything significant towards building their business, they’d say, “I have a business plan and I’m going to meet a VC to get funded.”
Even when Sameer and his wife, Nandini quit their cushy jobs after 6 years of experience to start on their own with their idea ready, they wasted 3-4 months on reading books on making cash flows, business plans, creating presentations and meeting people etc. In last 2 months at that time when they were in Bombay, they happened to meet one of their mentors, PH Nagesh, MD of Shoppers’ Stop who turned out to be a distant relative of Nandini. He gave them some guidance and through him and others, they met some potential investor/ VCs, all of whom showed interest but stopped short of funding. After those 2 months, while we were sitting in Nagesh’s office, he asked them, “Are you still passionate about your idea (of online DVD rental)?”
When they answered in affirmative, he further asked us, “How much money ca you invest?” a question they hadn’t thought of till that day. They calculated a total of about Rs. 8 lakhs including their savings and borrowings from parents. He then said, “My advice to you is, if you are still passionate about business, go back to Chandigarh, start a pilot on a smaller scale. If you build a great business, money will find you.”
That idea struck them, and they caught the next flight to Chandigarh. They threw the earlier business plan which suggested raising 1-2 crore from investors to scale up. They created a new simple plan- ‘Before they lose the current 8 lakh, they need to be profitable.’ He believed. “In a place like Chandigarh, nobody could take away my market and if I am doing a good job, money will find me.”
In similar fashion, 95% of the entrepreneurs are cart type entrepreneurs (like him at that time) and are chasing the money, and ultimately would not execute. Any good investor would not give you money if you don’t show the commitment by putting your reputation at stake, raising money from family and have come out to build something.
Vijay Shekhar of One97 said, “If you such an awesome guy that you should get money even before you have started, then you are too awesome to be funded.” That’s the lesson that they adopt at Morpheus and none of their companies go out to raise money, with the teaching philosophy being “Do not chase investors; Lets chase customers”. So, for getting customers, pick the smallest piece of the problem which you can solve and develop Version 1 of your product, put it out in market, get some feedback, improve it and start generating cash asap.
Keep your costs low. The skill of making and selling a product should be within the founding team. If you do have the skill, you will end up paying money, to get the same thing done, as against the situation when you develop something for which you have the skill within you. So, by the time you are ready to sell the product, your cost will almost be zero, because highest part of a startup’s cost is the salary.
In this way, you can be cash positive, even if you have just 10 customers and you will be self sufficient.
For a starting Rs. 5-15 lakh is good enough to start your business in India. So, if you want to start a factory or a restaurant, it can’t be started in this manner. As an entrepreneur, always first make an estimate- how much money I can raise on my own, or from savings of family or close friends. And always take the loan from family and friends as loan, as they not investors and may not understand your business, but only you. Get that money and then think about what skills you have and your passion.
“Do not hire sales people. Even if you are a techie, go learn how to sell. Anyways, a good product will anyway sell.” said Sameer. A little social networking in/ through events will also get you covered in media, events and blogs. You should be in a state to ignore investors so that they come up to you (just like boys do wrt girls in college). Your paying customers will give you your capital.
While he didn’t appreciate media creating hype about investors, he thanked Dare for providing this platform to him to educate entrepreneurs about realities of starting up.
Two of the many questions that he asnwered:
Q. What does an entrepreneur do if s/he has no money to start with and no other choice than to look for investor?
Sameer: Don’t look for investor. There are people I know who quit their job and took up part time jobs, teaching in MBA colleges or doing projects on Saturday/ Sunday. It’s just a mindset problem. So, figure out what skill you have that you can sell on Saturday and Sunday. You can teach, take freelance projects or something else, and use that money to run your business from Monday to Friday.
Q. How do you investment for a social entrepreneurship where the setup cost may be high restraining you to put your own money?
Sameer: There are enough examples of startups that are NGOs and started with very little money but are today doing well. E.g., an NGO that started disaster management training had no money. They thought innovatively and sold brands’ banners at Mumbai railway, earning a lakh bucks and today are a well funded NGO. So, you just need to think innovatively.
Subscribe to this comment's feed
written by Penko Penev, February 15, 2011
| < Prev | Next > |
|---|
- DARE Entrepreneur week April '11: Yogesh Bansal, ApnaCircle.com
- Welcoming New Year with the spirit of Starting Up
- How Technology Incubators Can Help Your Startup?
- Satyam to get re-listed on NYSE by FY11-12
- 'IT-BPO exports to grow by 16-18 p.c in FY12'
- How the decade passed by 2000-2010
