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The Saga of Startups 1.0 201005

The Saga of Startups 1.0 201005

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Published by Shridhar Lolla
First generation entrepreneurs pass through extremely rough terrain and existing systems are inadequate in increasing their chances of success while simultaneously reducing the risk of failures. The truth is that the failure rate of startups is unacceptably high. This document is part of a series of caselets on the impediments faced by first generation entrepreneurs and what rules they must follow to successfully navigate through them.
First generation entrepreneurs pass through extremely rough terrain and existing systems are inadequate in increasing their chances of success while simultaneously reducing the risk of failures. The truth is that the failure rate of startups is unacceptably high. This document is part of a series of caselets on the impediments faced by first generation entrepreneurs and what rules they must follow to successfully navigate through them.

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Published by: Shridhar Lolla on May 23, 2010
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Current Reality of A Startup
Copyrights ©2009, CVMARK, All rights reserved.
1Dr. Shridhar LollaCVMark Consultinglolla@cvmark.comOctober,2009The following is the saga of a majority of first generation entrepreneurs.You have graduated with flying colors and your final sem project has a lot of businesspotential. Anyway you wanted to make a mark in business. Or probably you have beenworking in one of the large conglomerates that is in diversified areas. You are typicallyin design, product development, RnD, training, implementation, service, testing , supplychain department. And you get a realization that the company is not focusing in the rightdirection. You get frustrated that the company actually does not understand the clientssufficiently and perhaps, not addressing one or more significant needs of the clients. Youtried to prompt many times and also submitted suggestions; but it went no where. Youactually took a development project, did preliminary research and also prepared prototypeto demonstrate your idea. Some time you feel that there are so many opportunities for theorganization that probably it is not possible for it, to do everything even if something ishot and burning on clients side.You have been in this state for a long time now. You have been reading and hearing boutsuccess stories of a lot of people who went on their own and made a difference. Actually,a lot of these were in a similar situation like yours and in fact, they come from muchmodest background, qualification and experience levels. Yesterday only you read thenews of a new company barely 2years old receiving global award on entrepreneurship,which is solving a real social problem. And there was a story on the youngest CEO, whois now multimillionaire and his company aiming to be listed on NYSE. Actually, quite afew youngsters in their early 30s are already retired from the work. status. And areengaged in the most passionate work; and there too, they are making real big impact. Youchecked a couple of business idea competitions and found, amazing way that people aretransforming their ideas into business. Suddenly, it looks that entrepreneurship is the realthing; where you not just work but also create work for others and make significantcontribution. The contribution is also fast because you are working on the mostpassionate thing for you. You want to take a plunge.So, to repeat…You might have got an idea struck in the middle of night, or were workingon it that your organization did not encourage you to work on but had real potential (sinceyou are an industry insider), you came across a real problem or client need, you noticedsimilar though not same idea successful, you already have a small prototype that works,you have identified a generic cause, or that there is an opportunity waiting to be fed. Inmost of the cases you know that such gut feeling has been correct.You start looking deeper into your idea, you check a few businesses working on similarideas and then you find that there is either enough opportunity or your idea is reallydifferent. You actually test it out with you confidante & buddies. Actually, they knowthat you are already spending a lot of time on this and they admire your patience to deal
 
Current Reality of A Startup
Copyrights ©2009, CVMARK, All rights reserved.
2with a cause. Secretly, they want to help you also. And one day you decide that you aregong to take the bet. No more 8-5 job, no more stuck into the groove on a work that isdecided by somebody, no more working on something of which you are not sure if it isadding to companies bottom-line, no more waiting for somebody. The time has come toderive actual benefit of your own worth.You consult people, read case studies and perhaps, attend a few seminars from successfulentrepreneurs and VCs and; it looks quite logical for you to be there among them and youfeel a lot of potential for yourself, especially, since business seem so logical and straightforward. You know that all the business have their objectives, Money is a necessarycondition for the success of a business. And therefore it becomes necessary for you toeither pool in your money or the one available from somebody else at no risk.You are told and you understand that the way to go ahead is to have a Business Plan. Yousubmit the business plan to the people who want to invest into your business. Actually,you talk to several VC funds and obtain various formats for the business plan. By nowyou have actually read a number of business plan cases on internet; all look veryplausible. You pick up one of the templates and start placing details of your ideas into it.Very soon, you start getting jerks, because there are so many issues that need to bedetailed, value proposition, clients, distribution channels, partners, market potential etc.Actually you struggle to understand them first. You talk to people , refer internet and reada bit, first to understand the terminology itself. Then you look at how others have writtenin their Business plan. Since it is a template, it is not difficult to follow the flow, you startwriting your business plan. You also get some numbers and trends of business frominternet and cut and paste it. You are now spending time in placing texts and figures intothe template. But you still feel that you are not able to connect various content andelements of business plan together. You feel that it is just like filling a regulatory formby collecting data from different places and placing them on the paper. In fact, it seemslike preparing for exams that you have taken so many times, where you reproduceanswers in the fashion and to the details so that you could pass the exam. You reach astage where you feel that it is getting mechanical. You actually, get irritated sincedifferent sponsors have different template and need details in different way.You also wonder while preparing the business plan that your experience of business wasminuscule compared to what may happen if you were to be responsible for the completebusiness plan, and actually you indeed be and therefore, you are writing the businessplan. It was quite a different thing to work in one department of an established companyand do ones daily activities, without realizing what other departmental machineries areworking in the back ground to enable and drive your work. For the first time youunderstand that business comprises different subsystem and all have to be consideredand well thought before it works. This was a good realization for you !But you still remain confused, since you hardly understand the things and talking toothers through various rounds of discussion only confuses you . you know that there is nocookbook for entrepreneurship. You feel hard pressed, since you are squeezing yourself into a template; and ask your self, if you had a helicopter view of the business, it would
 
Current Reality of A Startup
Copyrights ©2009, CVMARK, All rights reserved.
3have been easy for you to deal with business plan template. You feel that agenciesassume that you know the business and therefore, could plan it easily.Anyway, you fill the templates and one after another you prepare business plan informats as needed by respective agencies. Submit them and wait for the call.Since you have applied to multiple agencies and entrepreneurship is on the rise and youridea is no meek one; you are called for meeting and you prepare yourself to meet. Yougo through the grilling. You realize, how simple the questions were and yet how difficultthey were to answer. Questions were coming from all the corners and you were not ableto link them; and got lost or overwhelmed by your ignorance to answer them. But youdid feel that they were simple, logical and no-brainer. You also recall that you still do nothave a feel for numbers, although you had placed them after a lot of complex calculationand manipulations, to the best of your knowledge. So far, you were dealing with a fewlacs of rupees, but you hardly had any realization of what it means to deal with over Rs50Crore of business. Actually how does it fee to make Rs 50Crores, is it same as makingRs 50 lacs by a factor of 100 efforts. As of now these numbers mean just calculationsand projections, nothing more. You were a bit worried that you might miss one or twozeros somewhere, since you are not used to large numbers. You know that it was more of a fictional story than a
viable
plan. You actually thought that it would not have beendifficult for you to pre-estimate those questions. Actually, all the interactions took placein a very friendly way but both sides knew that you need to do a lot of preparation. It isthese set of meetings that give you a chance to re-read your business plan and understandsimple things like: what was expected to be written in the template, meaning of someconcepts, why those questions being asked, and how to find answer for them and how tolink things logically. Actually, meeting with investors forces you to look at basic‘assumption’ based on which you tried to start up. And you realize that you need to goback to the ‘
drawing board 
’ and make the logic clear-first to your self. Only when youhave the logic clear, the numbers, dates and commitments made in the plan will makesome sense.By now you had met quite a good number of VCs and every one bring you to the samethings; and you can not improvise your business plan overnight, since it calls for a lot of introspection of your own understanding of business and logic.So you go back and work around a few things, and since you had beaten quite a fewsituations in your personal life, you pretty well know how to ‘workaround’ interviewsand you succeed to win over one agency. After much of discussion and changes in yourbusiness plans by the agency (so that they are also comfortable); you enter into apartnership to start the venture. The VCs very clearly indicate their role of supporting youand not being the main operations people and that the whole responsibility of the successof business is yours, since you are the
owner of the idea
. That is fair expectations. Youmade your day !!! A few months of struggle, collecting data from internet, placing thingsin business plan, facing a few interviews and changing a bit here and there, and … youget
commitment for funds
.

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