A Pleasant Surprise on the Upside!

While redoing our website, I accidentally stumbled upon an interesting piece of information.

I wanted to create a portfolio filter that would allow a visitor to create portfolio cohorts using factors such as the year of our investment, whether we were current investors, which startups we had exited from, or which sector the startup operated in and so on.

While tagging the startups, my team discovered that 4 of Artha Venture Fund’s portfolio companies had at least 1 female founder, i.e., 66% of the fund’s portfolio! This statistic piqued my interest as I stress the importance of being gender-neutral when it came to choosing our founders. Yet our female founder representation was far higher than the 20% female founder representation reported in CrunchBase EoY 2019 Diversity Report published in January 2020.

I dug further to look into our upcoming pipeline, which told me that out of the 5 deals which were at an advanced stage of closure, 3 deals had at least 1 female in the founding teams – 2 where the female founders held the CEO position!

I still felt that my sample size was too small to form an opinion. So I widened my search. My team & I started an investigation into my previous portfolio that I had set-up through our family office, i.e., Artha India Ventures.

The team keeps granular information on my past performance to report to institutions and family offices that need the information as a part of their due diligence. It took a few hours to figure it out, but 22 out of the 69 startups I had previously invested in had one female founder, i.e., almost a 33% representation!


The team went deeper to uncover that the female founder cohort delivered a 41% IRR with 4.3x multiple on invested capital in comparison to an overall portfolio IRR of 56% with a 4.6x investment multiple. Though the female cohort performance is lower than the overall performance; it does not tell the entire picture.

Our 330x multiple in OYO skews the numbers in favor of the XY chromosome cohort, but several of our female founder companies are raising new rounds of capital. One of them is months from becoming a unicorn, so it is a matter of when (not if) when the female cohort will be the alpha for the portfolio. While an eye-opener, I am not proud of beating the gender bias – not this way.

What I am proud of is that diversity happened without gender bias in favor of the XX chromosome. I am very vocal in stating that we do not favor a particular gender in our employees or founders. I believe that being entrepreneurial is a gender-neutral trait, and to invest in someone because they have or lack a Y chromosome is foolhardy.

Despite these results, I continue to stand up for what I said in last year’s blog post, Why I refuse to promote Women’s Entrepreneurship. 

The moment that I start treating a founder differently because they are women, it means that I do not see them as equals. I will skew my thoughts to cater to my bias, and it will hurt them as much as it will hurt my bank balance.”

To investigate if my lack of bias was something I felt or did it percolate down to our treatment of our female founders, I asked my XX founders whether they felt any bias from our end. Besides, I asked them why they gave a seat to Artha for their entrepreneurial journey. This is what they had to say:


WhatsApp Image 2020-03-09 at 7.24.53 PM

The diversity of the artha eco-system is felt in all the events we come together with Artha- where we meet entrepreneurs working on awesome ideas - pushing through- without feeling any differenc

In closing, while global reports state that the penetration of female founders in startups is very low, I have little concerns for the same. People whose investment lens has a filter against a particular group of people due to their color, country, or chromosome will lose out – lose big.

I am glad that our lens is crystal clear and that my team chooses the best people for the founder’s job. We follow an incredibly meticulous approach when it comes to choosing our founders.

Not always do we have the most qualified founders, but we attract the most passionate founders’ with a deep internal drive for the problem they are solving. We trust in our process of channelizing a founder’s energy to win one battle at a time and create category-leading companies.

Now if that means that our winning portfolio has a disproportionately high number of female founder companies – then so be it!

Let's talk about entrepreneurial stress

It has been fourteen days since VG Siddhartha took his life. In that time, the entrepreneurial ecosystem has heard arguments from several vantage points to understand the cause of the stress that led to his untimely demise. It is stomach-churning and thought-provoking stuff.

Various arguments attempted to place the cause of VG’s entrepreneurial distress onto a multitude of issues. His close political affiliations, the stress that different business bailouts had put on his balance sheet and even his battles with the income tax department. His balance sheet was funded using debt and private equity; therefore, the private equity guys were to blame as well. However, to place the blame on any one person or phenomenon is to oversimplify a very complex issue i.e., the effects of entrepreneurial stress. 

The one silver lining of this somber episode is that it has got us all talking about entrepreneurial stress. It is a real thing, and there is an excellent chance that an entrepreneur close to you is under this stress right now. Yes, even the most successful ones.

In the Indian ecosystem, a successful start-up founder is treated as a demi-god. The media can quickly relate that entrepreneur into a Tony Stark-type invincible personality – capable of resolving any situation and turning almost anything they touch into gold. The price of this success is steep because the lens of failure is brutal. Ask any of the high-flying entrepreneurs that witness a reversal of fate – the fall from grace can be cruel and lonely. 

The truth is that an entrepreneur undergoes the same level of stress as that of a high-performance athlete. Another reality is that this stress will not vanish. 

The first step to dealing with entrepreneurial stress is to admit its existence. This step is most difficult because it hacks away the cloak of invincibility that entrepreneurs take painstaking effort to build. However, unless we admit that this stress exists, we cannot act on its causes. Ray Zinn wrote a great post on Stress and the Entrepreneur that delves deeper into this.

The next step is to identify the factors causing stress. There are internal factors that the entrepreneur can control and external ones that they cannot. It could be the nature of the business (like running a stockbroking platform), an environmental factor (like the transit time from home to office) or a personality trait (like procrastination and putting off decisions). The factors that can be addressed, should be acted on immediately and earnestly. The factors that cannot be addressed can be overcome through several methods, which high-performance entrepreneurs utilize to channelize their stress positively.

Lastly, once the stress factors have been identified and dealt with, an entrepreneur needs to build a core group of people to fall back on. The people invited to this core (aka inner circle) play a critical role, and they need to be educated on the things not to do.  

This post is one of the toughest blogs I have written because I have had my personal experiences with entrepreneurial stress, which kept clouding my arguments. I kept reverting to the times in my career when I stared from the cliff of despair into the depths of failure. I know today what I did not back then. Even then, I sometimes find myself feeling overwhelmed, overworked, and slightly burnt out. It usually shows up with the burning sensation in my eyes, persistent pain in my back and a marked drop in my physical stamina. 

Initially, I did not know that it was stress. When I could self-diagnose, I took a short vacation, reduced my meetings load or delegated more. The awareness helped with resolution. However, the VG Siddhartha episode has awakened me to change my stance from a reactive one to a proactive one.

So should you.

The Udupi Approach

In many cases, food-tech founders extend their line of products to capture as many customers as possible, if they aren’t convinced about the size of their target market. There is a business case for extending into multiple product lines to provide complementary options to a loyal target market, but the decision to go wide right at the start is like opening a new udupi restaurant in Mumbai  that serves all cuisines to cater to  every guest but loses its core of serving the udupicuisine. Therefore, I jokingly call a ‘go wide’ approach of an early stage founding team as the ‘udupi restaurant approach’ as this approach is harmful whether you are in food-tech or not.

Let’s be honest, sales matter. But when you have limited resources in an increasingly noisy world, the quality of sales matter even more. Therefore, it is important to build a niche and own that space in your target segment. That will make your customers your best salespeople i.e. they will recommend you to their network which will bring in tons of new customers. For example, when I randomly asked people in my network for the best place for South Indian food in South Mumbai the answer was Muthuswamy, for people in Central Mumbai it was Madras Café, in Bangalore it was MTR and in Hyderabad it was Chutneys. These people were willing to advocate why their recommendation was the best.

However, when I asked the same audience for the ‘best food place’s in their vicinity, – they were stumped. They almost immediately questioned me about what my preferred cuisine is, whether I was looking for a family restaurant or a date place, what my budget was etc. They did not know how to answer the question until they had some clearer direction. Can you imagine (now) what happens when your start-up does everything? Even your best and loyal customers will not know what to recommend you for!

What is dangerous is that they could be recommending you for something that isn’t even the path you planned.  More dangerously, the customer who is promoting your product may not even be in your target segment. And most dangerously, they may not be promoting you to people who fall under your target segment. Such a sale is more toxic than beneficial!

I understand that it is scary to be focussed but there is a lot of value in doing so. Customer feedback focussed on a concentrated product line will indicate whether you should pivot or accelerate your build-out. However, when there are multiple product lines catering to several audiences it pollutes the feedback, creating a lot of noise, making it hard for you to tune out the disturbance and assess what’s important in order to drive decisions – much like choosing what to eat at a Udupi restaurant at mealtime!


What a Bank Should Do for My Business

After what seems like an eternity, the relationship manager of one of the largest private banks in India sat down with me to understand my grievances with this bank. Recently, I moved one of our business accounts to a competitor bank and that triggered the RM of the current bank, to question why I was looking elsewhere. When asked, I pointed out the inconvenience of needing a specific certificate to be issued and installed on each device to be able to log into my business bank account. If for some reason I ever found myself without the certificate ordained devices, I was locked out of all my business accounts (which for obvious reasons is a hassle). While I am yet to understand how this process made it off the drawing board in the first place, the fact that one of the biggest banks in India was still using it, years after expiry, clearly indicates how little the bank understood about the requirements of a business today.

The RM promised that a completely revamped system was coming into place in 7-8 months and tried pitching the “support” that they provide for start-ups. As a response to this, I asked if I would have to continue to write physical letters to be able to change the address of my digital mailbox (aka email address). While he could not answer my question, I got the exact answer that I expected – to put it bluntly, large banks take their business customers for granted because of the lack of better options. While the start up support initiatives that banks put on marketing creatives look good, their backend continues to operate like it did in the 1990s. It is high time that this changes. Though the RM left with promise to do what he could, we both knew he was just a small cog in a big mess.

When I woke up this morning and replayed the interaction in my head, I had serious doubts whether the relationship manager could do even 10% of what he had promised. Therefore, I created a wish list of what I would like my bank to provide in order to have me and my business as a customer…  

  1. Single-day opening and shutting of bank accounts
  2. Business savings accounts to park excess monies
  3. Painless and easy ways to obtain a corporate credit card
  4. Seamless processes to add/edit/remove employees from company accounts
  5. A smart and all-encompassing mobile application
  6. An automated overdraft facility based on corporate credit history
  7. Easily accessible innovative lending products
  8. Quick and simple access to company investment accounts to park excess funds (in mutual funds or other investment products)

Do you have any to add?


The Down Rounds are Coming

There is a serious funding crunch in the early stage start-up ecosystem. Therefore, founders should get prepared to deal with the prospect of a raising a flat round or in many cases, a down round. The reasons behind the funding crunch are clear but there is also a fair bit of profligacy in the valuations made by first-time founders’ in their PowerPoint business plans. I often notice that with start-ups that need a down round, the founder and/or funder has made an error in judgement of one or more of the following-

  • the size of the target market
  • the time and/or cost it would take to get a significant portion of the SOM
  • the time it would take to achieve positive unit economics
  • the costs it would take to achieve product-market fit

There are three things that a founder can do when facing a down-round situation (in order of increasing difficulty)

  1. Give the previous round’s investors more shares to preserve their percentage shareholding in the company i.e. invoking the anti-dilution clause
  2. Convince the investors to take a haircut on the paper value of their investments
  3. Extinguish all the stock of the investors that are not investing in the round including the shares held by founders, employees that are no longer involved in the business. Start the cap table afresh with a new round of funding i.e. recapping the cap table
  4. Shut down the business 

Being involved in a down-round is not the end of the world. I have been an investor in each of the situations above and have seen start-ups turn around after the painful experience. However, it takes a lot of courage & care for a founder to convey this painful reality to their investors and I pay close attention to the empathy with which they deliver the news in a such this situation. If their attitude is indifferent, it gets my alarm bells ringing but if the founder/founders are genuine and can clearly display how they went wrong and why things will be different next time, I’ll agree to do the down round, and invest more capital.


The 24x7x30 Networking System

Today is the last day of the Rise 2018 conference. This year’s conference had over 15,000 attendees where I received and handed out over 200 business cards, just like I do at every other conference. However, every time I meet some great people at an event, I end up losing contact with them and it isn’t until the next time I bump into them that we speak again. Tired of consistently failing at my networking efforts, I was determined to figure out a system to keep in touch with the network I formed at Rise. My quest for a system was solved by Gaurav Singhvi, founder of the Financial Supermarket and an Executive Director of BNI Surat.  
Gaurav introduced me to a 24x7x30 system of networking that he learned from Dr Ivan Misner and Brennan Scanlon’s book Avoiding the Networking Disconnect. While I have not had a chance to read the book (it is available on KindleUnlimited for free) I did read Dr Misner’s post on Entrepreneur.com and heard a podcast through which he explains this system. 
In a nutshell, Dr Misner advocates that one should reach out to a person that they have met at a networking event within 24 hours through email or a handwritten note. 7 days later, add them on the social media account that they use most frequently but without an intent of selling them anything. In the next 30 days, try to set up a meeting either in person, via Skype or a GoToMeeting and seek out how can one provide help in their business. This must be done with the intention of relationship-building and not market a product or service. In this way, the contact becomes a part of one’s network and the networking exercise can bear fruit.  
I believe that this system makes more sense than any random system (read: lack of system) that I utilize so I am going to apply it right away and measure my results. If you have utilized this system or know of an alternative, I’d love to hear about it!

Which Sectors is India's Bullish Market Running Towards?

During my interview with Sudhir Chowdhary of the Financial Express in August 2017, I emphasized my excitement about the catalyzing effect that GST & Jio are going to have on the $2.2 trillion Indian economy. That excitement has been materialized by AVF’s 4 out of 5 investments being a part of the consumer sector. In the medium to long term, I believe that this trend will continue with India’s continual digitization and Tier 2 and Tier 3 cities’ increasing access to maninstream products and services. It is therefore obvious that Artha Venture Fund (AVF) and Artha Group will continue to invest our time & money on consumer facing ideas in food, fintech, lending, etc.  
I formulated this thesis based on a combination of AVF Analyst’s research, my own research and a couple of interesting meetings with people who are knowledgeable about this space. As an avid student of economics, I also view a lot of content published by researchers and especially enjoy video content that they release. The 2027 bet by Morgan Stanley, is one such video that managed to leave an indelible mark on me. The MS experts predict that the BSE Sensex will cross 1,00,000 by 2027 piggybacking off a $6 trillion Indian economy. 66% of this new India in 2027 will be made up of the consumer & finance sectors. The implications of that bet are explained in greater detail in their report India’s Digital Leap: The Multi-Trillion-Dollar Opportunity. It also talks about the impact that a rise in per capita income to $4100 will have.  
Morgan Stanley’s Managing Director, Ridham Desai prepared a short video on this report and did an interview with Bloomberg Quint to explain his predictions further. If there is one video that you should watch today to prepare yourself for the massive bull run that we are already witnessing and will continue to come our way with greater force, this is the one.  


Jet Airways' JetPrivilege: A lesson in how your loyalty program can chop off your brands feet and then shoot it in the groin for good effect

I am sitting at the Starbucks in Mumbai airport muttering unmentionable obscenities at Jet Airways for making yet another change to its loyalty program which devalues my membership and its JPmiles. They have now decided to keep their top-tier members out of the airlines lounges unless they purchase a certain class of ticket! So much for being loyal to your customers.. just shove it up their behind in the name of profiteering!
I am so incensed at the continued decimation of my loyalty rewards account at Jet Airways that instead of working on my fund presentation, I am motivated to write a post panning Jet Airways and using them as my subject for a learning lesson for startups.
Honestly, I am at a loss on what Jet is doing with its loyalty program and whether they understand that loyal customers (like yours truly) are getting increasingly disillusioned with the airline and are choosing to fly other carriers. In a situation of an apples to apples comparison on ticket price Jet Airways is losing out to the low-cost carriers (LCAs) as their premium services, that should allow them some leeway in pricing power, are just mediocre services with which the airline is hoodwinking itself and not its customers. The situation in which a full service carrier like Jet Airways is unable to command a price higher than that of the LCA is a death knell for them. Effectively what it states is that the value of the frills (mediocre class premium services)  and the brand behind has zero value in the eyes of the customer. In fact on net revenue per mile of flight after the deduction of the cost of the frills, Jet Airways has a lower revenue per mile flown. 
Jet Airways started the slow journey to decimating its brand loyalty by making it difficult to redeem the JPmiles, putting an imaginary limit on how many tickets can be redeemed per flight (especially on long haul international flights). Internally they have branded these redemption tickets as non-revenue tickets, so that their computer system ensures that there are just 1-2 seats available for redemption in their business class section and a handful tickets available in the economy class section. To protect their behinds, the Jet Privilege customer service team will flat-out lie to you about the business class section being full when in fact they are selling tickets for customer willing to pay – a brand that teaches its employees to lie is a brand rubbing its own nose in the dirt.
It should be an eye-opener for Jet’s staff and customers that a listed company calls award tickets as non-revenue tickets but that is against the IAS principles as it clearly states that

An entity shall apply paragraph 13 of Ind AS 18 and account for award credits as a separately identifiable component of the sales transaction(s) in which they are granted (the ‘initial sale’). The fair value of the consideration received or receivable in respect of the initial sale shall be allocated between the award credits and the other components of the sale.

So it is very likely (and I hope likely) that Jet Airways is in fact recording the each mile that it is awarding their customers as revenue, however, the airline is just befuddling its customers by calling them non-revenue tickets. Then to use this false premise to impose artificial and ad-hoc methods to prevent its loyal customers from utilizing their miles that they have earned by patronizing, the airline should be punishable with a public flogging of the genius that came up with this idiotic idea.
If Jet Airways (and Etihad’s) think tank had an economist advising them, he/she would tell them that the perceived benefits of a strong Jet Privilege program made a customer choose Jet when they were on the fringe of choosing between Jet and another carrier. In fact there should be enough data that a strong Jet Privilege program would have enticed customers to choose Jet even if Jet was 5-10% dearer than its competition – that was the super-normal profit that a leader like Jet would have commanded.
Alas Jet continues to operate with a dinosaur dated mentality in which, brands feel that they can screw over customers because with a population of a billion plus and few airline operators a customer wouldn’t have many other options but to choose Jet. However, that scenario is changing rapidly and dynamically with Vistara, Air Asia and a number of regional players carving out a piece of the skies for themselves and Jet Airways will see rapid erosion in its market share by alienating its customers.
Jet can learn a lesson from Amazon, specifically from what Amazon learnt after the 1999 meltdown. New customers are very expensive to attract and true profit comes from attracting a previously acquired customer to visit and transact with your brand multiple times. In venture capital speak, the cost of customer acquisition (CAC) has to be exceeded by the lifetime value (LTV) of that customer – so always, and I repeat always, find way to keep your customer coming back to you for more!
Jet Airway’s share of Indian skies stands at a lowly 17% beating the universally panned Air India by a whisker and is in danger of falling below the recently bankrupt SpiceJet. Even in terms of filling up its air-planes Jet Airways has an abysmally low PLF of 77% in comparison to Indigo’s 91%. All these point to death spiral that is consuming Jet Airways.
I can offer a starting point – look at the appalling treatment of its loyal customers and you will find correlation that has seen previously a top airline in India own a paltry 17% market share of the skies and will soon see the previously bankrupt SpiceJet overtake them – the signs are ominous that Jet Airways is in an identity crisis and is going to have to do something drastic to make up for what it is losing each day – loyal customers.
When Jet  rebranded themselves as a full service airline they took on a responsibility of providing frills like meals, reward points, business class seats, etc that would make the decision to choose Jet over an Indigo and maybe even pay a slight premium to compensate for the frills – the strategy was to take the fight away from price and into services. That would have created value for the Jet Airways brand.
However Jet Airways completely messed up the execution. They continue to behave with a low-cost carrier (LCA) mindset, slowing eroding the value of the frills that they promised to give to the point that today, Jet Airways is chosen only when they compete with the low-cost carriers (LCAs) on the pricing front, even though, it is a premium service. All those frills are perceived by the customer as having zero value – how does this create value for its shareholders is beyond my level of reasoning!
To further add insult to injury  Jet’s frequent tinkering of the loyalty program is alienating those customers that chose Jet over anyone else. By devaluing the JPmiles and putting ring fences around its redemption they are making it easier to choose other carriers faster, timely and infinitely more comfortable airlines.
I used to shun offers from all other airlines because the Jet Privilege program made me feel like a VIP and I loved the lounge access, instant upgrades to business class and the last-minute no charge cancellation policies which allowed my family and me to book our flights almost exclusively with Jet Airways.The JPmiles were influencing our buying decision and allowed Jet Airways to make up for the old planes and later than on-time arrivals at my destination. However, as the value of its JPmiles and the utilization of the miles eroded, that liberal allowance we gave them started to erode as well.
First, my father stopped booking with Jet unless they were cheaper than Indigo or Spice, because he knew that the miles were not going to be utilized without haggling with the Jet Privilege staff. That precious time lost in getting the brand to give what it promised and to make its loyal customer feel like a beggar completely demolished all signs of brand loyalty with my frequently travelling father and Jet also converted a promoter of its brand into a detractor – well done indeed!
Next, he stopped all the credit card point conversions to Jet leading to further loss in revenue that Jet got from his point conversions. What is detrimental for Jet is that due to their treatment of its loyal customer he gave another airline a shot at taking his business and once that happens it is like allowing your spouse to flirt with others, you can never be sure if they will come back. If they end up falling in love with someone else, you could have also lost a precious relationship for life.
So now he loves the LCAs loving their on-time performance and the cleaner, quieter and faster aircraft deployed by them. I can safely say that this is a loyal customer that Jet has lost for life – unless they offer cheaper nominal fare than a LCA. So, a full service carrier is now perceived as an equal (or inferior) to a discount carrier  – this has to be outrageous for the bigwigs at Jet/Etihad (or is it?)!
Of late I too have flown Indigo & SpiceJet in the last couple of months. I am starting to wean myself off the Jet Privilege kool aid and the shock today will wean me off even faster!
Jet’s loss is, however, a learning opportunity for startups and companies that are running or are going to run loyalty programs. If you have influenced the purchasing decision of a customer by parading the benefits of your loyalty program then make sure you deliver on the promises that were made at the time of giving the points. The loyalty points so awarded are an unwritten contract between your brand and its customer and by delivering on your unwritten promise you create an aura of trust with the customer which is infectious and magnetic – it keeps the customer coming back for more and increases your brand value.
Even other brands that co-brand with successful loyal programmes should pay very close attention to the ease of redemption and the value of the points that were awarded at a 3rd party brand for a buy decision made at your brand. Any erosion in value of the points that were awarded has reduced the value of the discount you have provided your customer and they will take note and they wont forget – so be vigilant Citibank, American Express, etc – Jet is playing with your brand’s image as well.
So be very careful about making changes to your loyalty program and if the change does not increase value for the points or miles that were gained by your customer then err on the side of caution and do not make that change. I cannot stress this point strongly enough that when you break the unwritten contract you have demolished the aura of trust and trust once lost is almost impossible to gain.
Just take a look at the frustration that a tax payer has had when the previous government made retroactive adjustments to tax laws which nullified all the planning that was done for making business transactions. There was an unwritten contract and trust that a financial year is complete, there wont be any changes made that would hurt a person retroactively since there was no way for a person today to make right (something from the past) what is being considered wrong today (unless we discover time travel). Now just take a look at the effort the new government has had to make to ensure investors that those days are long gone – but the feelings of mistrust continues and will most likely continue since that aura of trust once broken makes all promises empty and all assurances seem to be cover-ups, all in a single swipe.
However, if you as a brand have to make any changes to your program that even makes a 5% devaluation of the reward points that were previously awarded to a customer, make it up to your customer by giving them 10% additional points to make up for the loss… give them 20% extra reward points! Then sincerely apologise for the erosion and ensure that your compensation is not enough, but it is a token of your appreciation for the patronage.
Don’t go the Jet Airways route of touting how awesome lesser rewards are for the loyal and how amazing it will be to be out there with a begging bowl to get some value of the useless JPmiles – rubbing salt in the wounds of the trust placed in your brand will make your loyal customer shun you for treating them as idiots.
I doubt the people at Jet will care for an email from a decade long loyal customer but I am certain that Jet no longer figures on the top of my list of airlines.. RIP Jet Airways.

Are you prepared for the Journey of Entrepreneurship?

A quick disclaimer:

  1. The use of he is for both sexes
  2. The views below are totally my own without any intention to hurt anyone’s sentiments or beliefs. Any reference to that effect, I apologise for as it is not intentional.
  3. There are adaptations below from the Bhagvad Gita that I am currently studying, however, there is no intent to preach religion.
  4. When I study the Quran or Bible I am sure that there will adaptations of those holy scriptures in my thoughts and writings

So here we go…
When I read about the young techie in Hyderabad ending his life when his venture/app failed, it shook me. In the glitz and glamour of OYO-s, Flipkart-s and Freecharge-s of the startup world, the new age entrepreneurs & those around them should be well aware of the mortality rate of new businesses and it is only when something this tragic takes place do we get the time to introspect on the reasons & preventions.
My intent here is not to delve deeper into a disturbing & tragic event. Nor do I wish to suggest what the departed or his loved ones could have done better/faster/earlier but in the words of Mahatma Gandhi,

“It is idle to adjudicate upon the right and wrong of incidents that have already happened. It is useful to understand them and, if possible, to learn a lesson from them for the future. It is difficult to say for certain how a particular man would act in a particular set of circumstances. We can also see that judging a man from his outward act is no more than a doubtful inference, inasmuch as it is not based on sufficient data”

My only wish is to provide a platform to discuss the mortality of startups and what separates an entrepreneur from the rest.
So first let me define what a start-up is in the words of Neil Blumenthal, cofounder and Co-CEO of Warby Parker.

“A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed”

The key word is that success is NOT guaranteed. In fact, it is a well-known fact that 90-96% of all businesses fail to make it to their 10th anniversary. Even those that remain very few are in the same company or capital structure as they had first started out. Companies get bought, sold, merged amongst a host of other possibilities.
Next, let’s define who is an entrepreneur?
I found this amazing post written on entrepreneur.com that sums up the definition of an entrepreneur better than I can. One of my favourite quotes in there is that:

“The entrepreneur is the person in charge, the leader and the person to look to for leadership. He or she is the one that pushes forward and inspires a team to follow. The entrepreneur is the one that sits in the driver’s seat, and has the ability to change direction, accelerate, slow down or even stop a venture.”

So, in essence, the entrepreneurs are the creators of a business and not the other way around.
What an entrepreneur practices is entrepreneurship or as I like to call it – the entrepreneurial spirit. I believe that the entrepreneurial spirit is that unseen thing within an entrepreneur that finds opportunity in adversity. It is that innovator or imitator part of the entrepreneur that keeps him/her awake at night writing the way he/she believes is the way things should be and not as the way they are… The entrepreneurial spirit exists in everyone… Only the ones that can identify, nurture and grow that spirit become Entrepreneurs.
So it is not possible for entrepreneurs to be successful at entrepreneurship or not… the fact that they are cultivating the entrepreneurial spirit itself is proof that they are on the path to becoming entrepreneurs. Their ventures, projects and ideas may fail but the entrepreneur wins each time he practices entrepreneurship… win or lose.
Just like an athlete that does not win a good medal does not cease to be an athlete an entrepreneur who fails in gold venture does not cease to be an entrepreneur.
So what separates an entrepreneur from a “wantrepreneur”?

  • He identifies himself as a separate entity from his business 

In legal lingo, a business is a separate entity from the promoter/founder. However, It has been rare for me to find an entrepreneur who did not identify his venture and himself as one person therefore when the business is bad it automatically means that he is a “bad” entrepreneur.
This not only affects his objectivity towards the venture it starts affecting his personal confidence, personal relationships and the person who had the “idea” is reduced to a ghost of what used to be an entrepreneur.
I do not have to look very far to find such an entrepreneur – I could see him in my mirror not so long ago!
It is therefore extremely important for entrepreneurs to don the hat of a 3rd party who looks AT the business versus IN the business to fix the problems from a macro level. Too often in the daily grind of the business, the entrepreneur loses the role of the entrepreneur and just becomes an employee who is going through the motions. Just like a doctor could not identify himself with the disease that he is curing neither can the entrepreneur fix a problem that he does not see objectively.
When the entrepreneur can identify where the venture ends and where they start is probably the FIRST step to being the entrepreneur.

  • He is not fearful of failure of the business 

A good entrepreneur is not fearful of failure. He knows that 90% of all businesses fail in the first 5 years and that he can only do the actions under his control to build a successful business. He can prepare a well thought out business plan, hire a good team, motivate them, get the financing, ensure that prudent business practices are put into place, he can sell his product/service to the best of his ability and he can pivot his plans based on the feedback he gets.
He cannot, however, force the market to accept his services and ensure the success of his business – that is outside his circle of influence as the Late Stephen R Covey used to say.
When the entrepreneur does not have the fear of failure hanging over his head he makes decisions that are best for the long-term sustainability of the business.

  • He is not swayed by the boom & bust cycles of a business  

If a business is an ocean then the waves are just a temporary characteristic of the business. Just as we cannot define the ocean by gale force winds that shatter the shore neither can we define a business by the success or failure cycles that it goes through?
It is the duty of a business to sail through these cycles just as it is the duty of the entrepreneur to steady the ship and keep the brethren informed & motivated to fight through the tough times as well as humble & vigilant through the good times.
It is an exercise in failure for anyone to engage in the battle of entrepreneurship without fully understanding the course that lies ahead. The people around the Entrepreneur should also keep these things in mind and try to steer him clear of their own unfulfilled ambitions of entrepreneurship… celebrating wildly in his success and heaping pressure on him during the failures.
An entrepreneur is made of steel so when he starts he is just like the iron ore has to burn itself to molten liquid to purify itself before it takes a final tough form as steel… so does the entrepreneur.
So in closing let me remind all who are contemplating an entrepreneurial plunge, it is truly one of the most satisfying journeys of life and the trials and jubilations of the journey is what makes it enjoyable… if some ventures didn’t fail the successful ones would not know that they have succeeded and therefore even participating is part of the spirit of entrepreneurship… and if an entrepreneur loses one race he can always dust himself off and take a new plunge with better planning… as only ventures fail, not an honest entrepreneur.

Screw Amendments… Rewrite the Law !

I have wanted to write this post for a very long time but kept putting it off for some good reason best known to the subconscious. However, the attack on e-commerce by the tax-man was the spark that ignited this story. As it is normally the case, some law that was written in goodness-knows-which-generation is going to be used to harass a business enterprise. It doesn’t matter that our PM Modi is racking up air miles in convincing the world outside and within India on a red carpet welcome to capital and services but alas, did someone forget to tell that to the tax man?
So, it all started when I on my daily cramming of articles on Startup Logic read this article on the application of outdated laws to new age business models to a global behemoth like Amazon. The clash has led to a cancellation of licenses for Amazon’s warehouse in Karnataka in addition to the umpteen headaches from the tax authorities and the obvious loss of face. This doesn’t even count the numerous transactions that will be delayed or cancelled due to the diktat.
So while each government has a Finance Ministry which oversees the balancing of the budget, do they have an Economic Impact Unit that offers a perspective on the economic impact of shutting or opening a business unit? Are the tax authorities asked to give an assessment on the positive and negative impacts of their actions and the bigger affect that their actions can have on the country’s image? Or are they just allowed to march in and shut a unit down all in the hope of sweating out a few people and greasing their own dirty palms?
It is high time that the majority government passes a law that mandates the ‘rewriting’ of laws that are over 25 years old. There are just too many cases today where the outdated laws of pre-independence (and some that even pre-dated to the birth of my great-great-grandfather) are being used to harass entrepreneurs, law abiding citizens and even party revelers from enjoying their ‘independence’.
The reason I choose 25 years is because it provides a balance between the generational change in India with the rapid change in the pace of technology and society. Unfortunately our legal system has passed its expiry date on both accounts and it is time for a radical change through the rewriting of this system for the youth of today to believe in the legal system and to agree to follow it.
To know how deep the malaise of outdated laws affect our ‘independence’ and outdate reality, just read this article from India Today. While the article only touches the tip of the ice-berg it should have further gone on to explain how the Indian Partnership Act was passed in 1932 and was last amended in 1983!
Why amend such old laws, they don’t change the intent of the law and neither do they capture the changes in the applicability of the law (can you imagine what a partnership meant in 1932 or even in 1983 versus what it means today?) for that matter imagine what was the intention when the Press and Registration of Books Act of 1867 was written… electricity was a privilege then and we are in the age of the e-book!
These laws aren’t just affecting our entrepreneurs, imagine what intention the Indian Divorce Act of 1869 wanted to achieve versus the reality today? What about the Indian Evidence Act of 1872! I don’t even want to read what those acts say except knowing that their entire intention is defeated when the intent with which an act was written is no longer a reality my generation or even the generation after me can imagine.
There are umpteen number of my friends, family and brother and sisters of my country that are breaking their heads and their spirit against the colonial laws created by the British curb Indians and in a way we are still enslaved to the draconian laws 68 years after our Independence. So Mr. Prime Minister before we attract billions, trillions and gazillions from China to Timbuktu… let’s clean up our judicial system and restore its faith and stature in the eyes of our generation.
A list of laws & acts governing us is available here