Greek Complexity

When should start-ups think about going global?

An entrepreneur asked me: "Should you 1.) start efforts simultaneously, 2.) wait to establish yourself completely in the domestic market or 3.) get some domestic traction and then launch global efforts as well?"

Definitely not start both simultaneously. Now, whether one should follow option 2 or option 3 depends on a lot of factors. Instead of giving you an answer, let me give you some questions to think about:

1. How do you acquire customers? Do customers sign up through your website on their own or perhaps via your partners? Or do you need to invest in selling to customers?
2. How do you service your customers? Once a customer pays you for your product or service, do they need hand-holding?
3. How much does local knowledge matter in your business? Do you and your team have experience in your markets of interest?
4. Are you sure you know what "global" really means? Even some of the best known companies don't go global immediately and when they have tried, they have failed in some markets. Amazon, Google, eBay and many others have failed to crack some major markets they were interested in (some examples for those companies I just named: China, Japan, Korea). The only example I can think of in recent memory where a start-up went truly global in a very short time is Groupon -- and we all know how that story ended.

Also look at a recent comment by Phani of Redbus here. He was asked whether he saw Redbus expanding globally since they now have a big backer in Naspers. His answer makes a lot of sense:

We want to continue to do what we are doing until the market is saturated. There are a lot of infrastructure problems that need to be fixed. For instance, the road transport corporations can’t take our load. The technology needs to be robust and someone needs to solve it. The return on our time is higher if we are working in a known market especially when there are fundamental issues to be solved.

"VCs, are you scaling yourself?" – Dave McClure

Snip: "VCs have been extremely lazy in the last 10-15 years. They have been taking their big pay cheques home from very lazy LPs. And the probably really is LPs. They are not challenging their VCs enough. Most VCs walk around like they are Golden Gods. More than half of the VCs don’t return capital, and yet we think we are Gods. ... Lately, we have seen traditional VCs do a lot of things that don’t look like investing, including recruiting and business development. I would say that is a good development."

Changes in Venture Capital & Tech Startups (Nov 2013, Mumbai) from Dave McClure

More here: http://yourstory.com/2013/11/dave-mcclure-500startups/

My start-up competes with another start-up in my investor's portfolio: what now?

Here's today's instalment of my Ask The VC series on Yourstory.com:

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What happens in a situation where two companies in a VC’s portfolio start off as being indirect competitors, but in the future show potential to becoming direct competitors?

Here are a couple of scenarios of what can happen next:

1. Nothing. Both companies continue to operate as they always have and don’t have any formal connection apart from the shared shareholder. This is not a super-common situation but it’s not rare either. In this situation, you want to ensure that you have a commitment from your shareholder that you are not going to be put in a disadvantageous situation (e.g., one company’s information being shared with the other). You should realize that your VC most likely cares a lot about his reputation for professionalism and ethics, and would not want to shred his future prospects for a low-likelihood short-term profit.
2. The companies decide to join forces, either purely as business partners or going the whole hog and merging the two companies. This could be a great way forward but can also be difficult to execute if you have two sets of strong-willed founders or two different sets of shareholders who don’t share the same aspirations.

Or perhaps you’re asking what happens if you pitch your company to a VC and learn that they have a potential competitor in their portfolio already. In that case, as I said on my blog some time back:

…on the few occasions when someone has made a pitch to me similar to one of our existing investments, I have either said no straight off the bat or introduced the two companies/teams to see if they can collaborate or, rarely, pursued the new opportunity with the team’s full knowledge that we have another similar investment (overseen by some other investment professional). Other VC firms may have different (not necessarily better or worse) portfolio management strategies, including deliberately making several investments in similar/overlapping areas of interest.

Just as I or any other investor may think about whether it’s okay to invest in more than one company in the same sector, you too can make a decision whether to take money from someone who already has an investment in a competing company.

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What are the pros and cons of startups meeting with VCs early for feedback?

The following is for companies only seeking feedback and not a commitment to invest now or in the future and for companies that are at a very early stage of development, not yet ready for a VC round.

Pros:

1. You get feedback! I’m of the school of thought that more feedback is always better than less. Whether one should bestow all feedback with an aura of omniscience is an entirely different question (I don’t recommend it) but learning what the outside world thinks is always a good thing even if you don’t agree with the speaker.
2. If you think your company is likely to need VC funding in future, obviously getting feedback from a VC is a good idea.

Cons:

1. Depending on who you speak to, speaking to a VC well before you and they are ready for a formal relationship, may colour your chances of actually closing a funding round in future. Shared your plans to be a 20 crore company in two years and eventually achieved 20 lakhs? Oops.
2. At a very early stage of development, not everyone will understand your business. The VC you approach may be the smartest person on the planet but they still may come up with feedback that’s not quite appropriate for you. This isn’t really a “con”, to be honest. It just tests your ability to accept or ignore feedback based on whether it makes sense for you. It also gives you the opportunity to assess whether the particular VC you’ve approached is the right partner for you in future.

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What is considered as the perfect time for a startup to start looking for venture capital?

There is no perfect time and there are no formulae. If you’ve done your homework and decide that you need capital, then that is the time. For example, Atlassian raised its first round of funding 8 years after inception, raising a whopping $60 million even though they were already profitable at the time.

Nonetheless, reading between the lines, I suspect your real question is “When and how can I present my company as a credible investment opportunity?”

To answer that, I direct you to this great TED video on how to pitch effectively to VCs.

It's not OK to kill cyclists

From the Economist:

Motorists in America generally receive no punishment whatsoever for crashing into or killing cyclists, even when the accident is transparently their fault. This insane lacuna in the justice system reflects extreme systemic prejudice by drivers against cyclists, and would be easy enough to fix. All that America would have to do would be to adopt traffic regulations like the ones in place in the Netherlands, where the number of cyclists is vastly higher than in America while the rate of fatalities per kilometre ridden is far lower.

And does the Dutch system result in gross injustice or even a major inconvenience to drivers?

The Dutch regulatory regime places an extra burden on drivers. That burden can be summed up as follows: before you turn, you have to check carefully in the mirror to see whether there's a cyclist there. That's it. When you are driving in the Netherlands, you have to be more careful than you would when driving in America.

This is what is known as a no-brainer.

via Cycling v cars: The American right-of-way

Helping marketers pretend they know the future

Snip: "Advertisers are getting better at making their data-based divinations about who you are, what you like, and what you might want to buy seem like mind-reading."
More about what Kiip and ComScore are trying: http://pandodaily.com/2013/10/21/kiip-partners-with-comscore-and-introduces-new-tools-to-help-marketers-pretend-they-know-the-future/

Take the Healthcare.gov approach and create new entrepreneurs!

Clay Shirky on an important lesson from the poor implementation of Healthcare.gov:

In well run organizations, information runs from the top down and from the bottom up.

As Clay points out in his piece, well run organisations gain the benefits of efficiency and effectiveness by taking this approach.

Just as important, this approach also gives line employees a stake in outcomes and implicitly creates a sense of motivation and purpose. Without two-way information flow and some degree of devolution of control to those actually doing the work, your organisation is almost guaranteed to see talent walk out the door. Beyond a point, no monetary incentive can compensate for the frustration that talented employees feel from the lack of genuine control over one's work.

Which is what I mean by the very tongue-in-cheek title of this post: the more you frustrate your own employees, the more likely they are to leave and start something of their own.

See Clay's piece for background: Healthcare.gov and the Gulf Between Planning and Reality

The rediscovery of India

Snip: "Is India even a country? It’s not an outlandish question. 'India is merely a geographical expression,' Winston Churchill said in exasperation. 'It is no more a single country than the Equator.'"

More: http://www.mckinsey.com/insights/asia-pacific/the_rediscovery_of_india

This is an auto-generated post from my reading list.

 

One by two

"One by two" is a quintessentially Indian term. Every Indian understands it and I would guess that no non-Indian does. It's a phrase heard frequently at one's local "chai-wallah" or tea-shop. What does this cryptic phrase mean?

Indians in most parts of the country like their tea and often drink it several times a day. The first thing you're offered when you enter a meeting or someone's home, no matter what time of day it is, is a cup of tea. Those not familiar with Indian tea should be forewarned that it may not be the kind of tea you'd expect to find in China, Japan, the US or other parts of the world. Indian tea is made with black tea leaves and is usually quite milky and very sweet.

Even growing up drinking this kind of tea, you wouldn't be expected to drink large quantities of it in each sitting.

Combine that with Indians' famous tendency towards frugality and resource optimisation, and you come up with "one by two". Which means, when you order tea at the local tea-shop, "split a cup of tea into two halves, please" for yourself and a friend.

Photo credit: Michal Svec

As you can see the standard tea cup isn't very big to begin with. Two or three gulps and it's gone. Yet, "one by two" is by no means an absurd request, and definitely a quite common one at roadside tea stalls.

Why am I blogging about tea all of a sudden? Because the other day I heard the phrase "three by five"! That really made me do a double-take. Most interestingly (and here, I shall resort to bullets):

• I overheard this in a fairly high-end food court. The question of affordability does not even arise.
• The food court is in Singapore. Language export!
• How did the busy server quickly divide three cups into five with a minimum of wasted time? Does he get similar requests all the time?

The other thing that struck me recently in similar vein was India's recent launch of a Mars-bound spacecraft called Mangalyaan. As this piece in the New Yorker points out,

Mangalyaan’s mission to Mars cost India seventy-three million dollars. For comparison, Boeing prices its least expensive commercial airplane at seventy-six million dollars. ...

The I.S.R.O. has a reputation for austerity, exemplified in a famous photograph from 1981 of India’s APPLE satellite being transported on a bullock cart. The agency’s scientists are paid between twelve hundred and two thousand dollars a month, and, unusual for space programs, its equipment is endlessly tweaked and recycled: the rocket that carried the Mars orbiter into space was adapted from a launch vehicle that first flew in 1993. Only one physical model of Mangalyaan was ever produced. (The I.S.R.O. relied extensively on software for testing.)

Photo credit: The New Yorker

All of which should interest and inform India-watchers and those who do business there. Remember that many (but not all) people and institutions see strength in frugality. It's not a "right" or "wrong" way of doing things; just a different way of doing things compared to many other parts of the world. Don't let yourself be surprised.

Also watch out: sometimes, the philosophy of frugality gets abused and taken to an extreme.

Aussie Startups Looking Up To Brighter Future

Snip: "Mike Cannon-Brookes, co-founder of enterprise software company Atlassian, is a role model for future Australian entrepreneurs looking to scale their businesses and expand internationally."

More: http://www.forbes.com/sites/rebeccafannin/2013/08/26/aussie-startups-looking-up-to-brighter-future/

This is an auto-generated post from my reading list.

Here's why South-East Asia is increasingly attractive to start-ups -- and what still remains untapped

A few days ago, I spoke to Connie Loizos, a San Francisco-based ex-Thomson Reuters editor, who's now set up StrictlyVC. I highly recommend StrictlyVC's daily email newsletter for its brevity, breadth of coverage and lack of nonsense news.

This is a re-post of the somewhat abridged interview from her website.

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Singapore Sling: Entrepreneurs Head In – and Out – of Tiny Island Nation

 

Murli Ravi is the head of South Asia investments for JAFCO Asia, and from his perch in Singapore, he’s never seen so much cross-border activity as in the last 12 months. “Let’s just say I’ve made three trips the U.S. in 2013. I made zero trips to the U.S. in the four years prior,” he observes.

Late yesterday, I Skyped with Ravi to learn more.

Globalization is an ongoing trend. What are you seeing?

I cover a lot of territory – Southeast Asia, India, Australia – and I’m seeing a preponderance of people not just coming to Singapore and staying here, including U.S. companies, but I’m seeing startups in Singapore whose attitude is to quickly expand. I see many more of them looking to enter China and India, which are both about five hours away [from Singapore] by plane, and even sometimes Japan and Europe and the U.S.

What’s changed in the last 12 months?

I think Southeast Asia as a whole just has a much larger pool of talent coming online now for startups to harness. Also, historically, broadband penetration wasn’t high. Incomes were low. The smart guys would typically leave. All of those patterns are reversing.

What types of companies are coming to Singapore from the U.S.?

Broadly, you have a lot of small U.S companies and Australian companies and even Japanese companies that are realizing that Southeast Asia is an interesting market. If you just look at the English-speaking countries across the region – India, Australia, Singapore, Malaysia, the Philippines, and almost all the others have some English in a business context – that’s close to two billion people, or roughly 30 percent of humanity.

You also see companies move here because [their product is better suited to the market in Asia]. I sit on the board of a company called Bubbly, formerly Bubble Motion, that was founded in the Valley but moved to Singapore.

I remember reading about that move and thinking that it boiled down to lower costs for the company.

Well, Bubbly is a social messaging service like Twitter, except that instead of read and tweet, you speak and listen, which also appeals to the markets here. Unlike on Twitter, where you’re talking to the world and hoping someone will talk back, with Bubbly, it feels like someone is talking to you because you hear them in your ear, whether it’s a friend or a celebrity who has recorded a message about picking up her kids or an upcoming show. Unlike on Twitter, by the way, consumers here are also willing to pay to listen to celebrities. Right now, the biggest markets for Bubbly are India, Japan, Indonesia, Philippines – all of which have their own celebrities.

Do other recent transplants jump to mind?

A couple of other companies that have taken the same route are Vuclip — which hasn’t quite moved its headquarters to Asia, but does focus mostly on Asian and especially Indian audiences — and Mig33 — which did move and has seen success in Indonesia in particular.

You also have companies like Line and Kakaotalk that didn’t originate in Southeast Asia but now have a huge user base in this region. Coincidentally or otherwise, these messaging companies have a lot of similarities with Bubbly.

What about enterprise companies?

It’s so far been a little less common for enterprise companies to move here, and I see that as a major untapped opportunity. There are lots of inefficiencies in the way big business is done in some of the countries here, which gives more competitive firms from elsewhere a potential advantage if they choose to come here. Equally, some startups from this region who are able to thrive here have shown that they are quite capable of stepping onto the world stage, because the historical lack of resources available to small companies is a sort of trial by fire.

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For another perspective on the same topic, see this piece from Techinasia, which ends on a surprisingly downbeat note: No surprise, Asia tops the charts for internet and mobile growth, but are Asian startups ready?