A step by step guide to a Happy Holiday season!
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Posts Tagged ‘startups’
A step by step guide to a Happy Holiday season
Saturday, December 26th, 2009No remorse compensation: Bring friends to work with you, but don’t part as enemies
Friday, November 27th, 2009Two people get together and start developing a product. You are one of the founders. Few more common friends join. Everybody starts working towards a goal. Six months out, the product is still taking shape; Few people who contributed move-on to other things. This is a usual startup story.
In the above scenario a formal agreement or a compensation is the last thing in everybody’s mind (or like-minded people) when people start working together.
Moreover, working together for some time helps people gauge the ‘mutual fit’ before signing each other up for 4-5 years. It is quite possible that after sometime a few members of the team decide to mutually part way and move-on. The question pops — what/how much would be the compensation if things do not move forward into a formal agreement? How much should be the compensation for the person who has worked his ass off but now thinks that he needs to move on?
People leave because of several reasons; personal, financial, etc. 100% possible that they come back a year later when they have sorted things out.
You as a founder of the company need to worry about people joining your startup — at the same time you also need to think through of compensating people who came trusting you for shorter stints. You have to decide this upfront when the person starts working using a simple math.
No Remorse Compensation is a way of rewarding people (esp. friends) who plan to contribute in building your startup but may move on later to do something else. To keep things simple you agree on a compensation before writing things on stone say 6 months later. Here’s a simple math:
1. 2 people team, started, now looking for a seasoned techie to manage the codebase and developers while the two of you do sales/marketing/product as well.
2. The 2 founders decide that the techie would get 10% of the equity (and some salary, if any, but for now, none) — however, the techie says “lets work together before making a decision.” You don’t want to leave things hanging without making any decision on that. Assume that the techie would work 4 years (48 months). So the techie would “earn” 10% / 48 = 0.2% equity every month.
3. Most probably you are not paying any salary to him — so add 25% – 50% more equity. So the number becomes 0.3%. Assuming you have 1,000,000 shares outstanding, that becomes 3,000 shares every month.
4. The techie earns 3,000 per month until you come with a formal agreement which maybe in line with the 10% equity or maybe less. Make sure to arrive at a decision point in 3-6 months and convert this into a formal agreement.
5. If ok, you can sign a simple consulting agreement with the numbers mentioned.
The above idea is simple — You bring friends to work with you but don’t wanna part with them as enemies, if it did not work out. You may meet him again at beer in the evening!
Build. Sell. Build. Sell. Lather. Repeat
Tuesday, August 25th, 2009One of the biggest dilemmas faced by an entrepreneur who is starting up is to figure out when to stop building and when to start selling. Although, easy it may sound there are no hard boundaries between one or the other. Once, you have 5-10 people in the team then the question is different — you can have half of the team building the product and the other half selling it. What do you do when you have have 2-3 members in the team?
The idea is simple — build an initial set of features and then instead of only building, you, build, sell, build, sell. Repeat. Put a constraint that for every 5 new features, you acquire double the number of leads (or users if you are a consumer internet product) than the last time. That would be a perfect balance.
Here is a chart depicting a hypothetical idea where for every 5 new features you add to the system, you double the number of leads you acquire (or acquire users for consumer internet products). ‘R1′ in the figure below represents a baseline set of features for acquiring first set.
Lead (definition): A prospective customer, or someone who you have talked to but is not ready to use your product unless few more things are added. Or he is a free/trial user but not ready to pay the money, yet (Keeping it broad so that theory could be modified in specific situations)
Requires great discipline. As a coder-entrepreneur you may wanna go into the “comfort” zone of continuously building or if you are a non-techie entrepreneur you may just sell without a product in hand. Both are extremes and equally detrimental. Especially, in Indian conext where capital is meager and having the revenues in the books is golden, you strike a balance until your next inflection point where you are cash-flow positive.
So, how do you attain that perfect balance between sales vs. development OR feature build vs. lead acquistion? Here’s the recipe:
- Build an initial version of the product which has some baseline features. These features may be targeted or have been developed after talking to a set of potential customers.
- Call that base version as alpha, beta, R1, whatever. Sell the product or convince your leads to start using it. Maybe a small set of people would start using it.
- Don’t start building new features, just yet — Talk to them. Get feedback.
- Now, add another set of features and then widen your net to bring additional leads (or convert existing leads who may have told you that they would use the product if a, b, c is implemented)
- Now, don’t go incremental, go exponential in acquiring leads (or converting them). For every 5 new features, try to double your lead flow.
(The above example; for consumer products however, you may add few zeroes to the y-axis legends to get the point).
Thanks to Ankit, Sameer & Nandini for vetting the thoughts & clearing bugs in the draft
Morpheus Venture Partners, the new batch of 10 & my official onboarding
Saturday, August 15th, 2009Visitation rights is a term used when a mom/dad gets the right to see his/her child on a fixed interval basis. Most of the times, visitation rights & monetary support are also intermingled.
This is what is my observation of funded startups in general in India. They raise money — the investors come & ”visit” them time to time — Best, you send weekly reports and harness few contacts in their rolodex. Question to ask; are they helping you in building your business?
Entrepreneurial ecosystem is in it’s infancy in India — resources are not available, event platforms are sparse, celebarations of success barely exist, peer support is meagre, etc. What we need is hand holding, support, building of business and not just money & remote supervision. Of course, money helps to reduce the friction of starting up — but it’s not the only lubricant required.
Comes Morpheus Venture Partners, a Business Accelarator out of India which I joined as a Partner few months ago. Our vision is to reduce the friction of starting up & provide end-to-end support ranging from building your pricing model to finding the right technology stack for a startup. Of course, we want to provide money too, which we are working on.
Less than 24 hours ago we announced our latest batch of 10 startups — each one of them is envisioning to bring a change using their model for people of India. Being a deep technologist, I always thought that the next big thing can only come out of technology and maybe the next Google is going to be from India. That’s very much a possibility but it’s hard to sustain a viable business when less than 40 million users are online (a large % of which use the net only once a week!).
So who are these guys? What’s the new batch of 10 upto? I totally resonate the way Nandini Hirianniah (Founding Partner at MVP) summarized these 10 heavy-hitters:
Adscoot’s Suyash, stands for hours in the major junctions at mumbai to learn traffic patterns and measure footfalls!
EasySquareFeet’s Ashu & Snehesh are the most positive people i’ve seen! I can see their smiles through the phone when i talk to them (serious!)
Viv & Hari of InterviewStreet are two rockstar techies who are consciously & fast learning other skills to take their product to market. They have the passion & drive to make things work!
Shashank & Abhinav started on Naabo right out of college – the freshness in approach & the passion they bring with them is infectious.
Arjun of Picsean is an engineer, but his passion towards photography is amazing! He’s a good friend & i’ve seen his focus and smart work in his past ventures. His attitude to learn is commendable!
Robin of ReachTax is a star CA, but i love his humility and the motivational skill he has to make his entire team perform month after month!
Pankaj & Gaurav quit their fancy paying jobs to work on Retail Vector. Focus, quick work and frugality of life is what they are committed towards as they scale this venture!
The first thing that stood out when i met Abheek first was such an young guy and such maturity & humility. (Often age and humility dont go too well). This guy was 7 years old when he started putting Lego pieces into perfect ensemble & several years later, he’s using them at RobotsAlive!
I loved their designs and the quality of tees – Rahul & Mohit of Scopial have their focus completely on “Quality” “Design” “Niche”! They sell tees one could die for! Check a sample out here
I read about these guys in a print article & the next time we were in Mumbai, we met Jayesh & Karthik of VeriCAR. Two guys crazily passionate about automobiles!
Thanks to the startups for choosing us their ‘limited co-founders’, I’m sure this association is going to go a long way. Now, for the next 4 months, we spend dozens of hours every week with the founders poring over the details of their business and helping iron out every possible kink.
Agreed, we can’t change how users would percieve their offerings and how big they could possibly get — Yes, we can influence the positive outcome to a great extent.
Update: Added VeriCAR’s sound bytes from Nandini’s post