starting up

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Starting up Starting up Rajesh Venugopal Young Kerala Foundation Young Kerala Foundation www.youngkerala.org What they don’t teach you in B-School

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Page 1: Starting up

Starting upStarting up

Rajesh Venugopal

Young Kerala FoundationYoung Kerala Foundationwww.youngkerala.org

What they don’t teach you in B-School

Page 2: Starting up

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

Page 3: Starting up

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

Page 4: Starting up
Page 5: Starting up

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.

Page 6: Starting up

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

Page 7: Starting up

Lets understandLets understand

Young Mind

Input Output

• It’s the process which is flawed never the person

Page 8: Starting up

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

Page 9: Starting up

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

Page 10: Starting up

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

Page 11: Starting up

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

Page 12: Starting up

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

Page 13: Starting up

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!!

Page 14: Starting up

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

Page 15: Starting up
Page 16: Starting up

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!!

Page 17: Starting up

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

Page 18: Starting up

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.

Page 19: Starting up

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)

Page 20: Starting up

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

Page 21: Starting up

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

Page 22: Starting up

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

Page 23: Starting up

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)

Page 24: Starting up

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

Page 25: Starting up

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!

Page 26: Starting up

A life spent making mistakes is not only more honorable but more useful than a life

spent in doing nothing.

- George Bernard Shaw

Page 27: Starting up

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

Page 28: Starting up

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

Page 29: Starting up

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

Page 30: Starting up

Ecosystem

$billion

0

50000

100000

150000

200000

250000

Kerala Tamil Nadu Karnataka UAE

$billion

20 72 50

Page 31: Starting up

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

Page 32: Starting up

Kerala needs productive young people

& this World needs people like you to make a difference!

Page 33: Starting up

With love,

Yours,

@RVGRocks