Part I: Tips to become a successful entrepreneur
In the second and concluding part on entrepreneurship tips for the young, Ranjit Shastri of the Indian Angel Network dwells on maintaining and nurturing a successful enterprise.
The Indian Angel Network is an organisation that invests in early stage businesses of entrepreneurs who can create immense value. The members of this network have prior entrepreneurial and/or operational experience that they bring to help nurture and grow early stage businesses.
Shastri co-founded PSi, Inc, an investment advisory firm incorporated in New York with an associated company in India. PSi has assisted a wide range of international investors in India, including both strategic investors and private equity firms, in identifying opportunities in India.
Maintaining and Nurturing
Tip #1: Add value.
By this I don't mean 'be useful' -- as Adam Smith pointed out, water is useful, but not as valuable as diamonds -- but 'increase the size of the pie.' As you enter a market, consider who the competition is and what their total combined profits might be.
If by entering the market you increase industry profits, then you are increasing the size of the pie, and if you do that you are more likely to get a slice of the pie. You can increase the size of the pie by getting existing customers to pay more, getting new customers to enter the market, or by lowering industry costs while maintaining prices.
The De Beers cartel has managed to add value by restricting the supply of diamonds, which are more plentiful yet more expensive than rubies.
Governments actually encourage monopolies as a way to provide incentives for businesses, as in the case of patent and copyright protection. These legal monopolies enable entrepreneurs to create valuable companies.
ElectronicTender one of the companies backed by the Indian Angel network, knows this well and has been vigilant in protecting its government procurement software. In fact, it managed to foil two attempts to steal its technology by appealing to Indian courts and obtaining ex-parte injunctions against the offenders. Like De Beers, ElectronicTender is enhancing the value of its product by preventing competitors from diluting its value.
Tip #2: Attract great people to join your cause and to remain committed.
Although many entrepreneurs take all the credit for the success of their companies, I've yet to come across an entrepreneur who has managed to build a business on his or her own.
Imagine there is a great treasure in the jungle, but it's too heavy to find on your own. You need to enlist experienced, energetic and talented people to help you extract the treasure and return to civilisation without murdering each other on the way back.
Some entrepreneurs find that some of their team members break off to form their own company, and compete with their former team members. The only way to prevent this from happening is to be fair to people and guarantee them a stake in the payoff.
Many of the entrepreneurs who contact the Indian Angel Network are looking for money to attract and retain people, but money to pay salaries is not a substitute for real commitment. If you cannot get talented people to buy your idea, then investors are unlikely to buy it. The Indus Entrepreneurs, or TiE, can help you connect with mentors and other advisors who can help you attract other great people.
Tip #3: Get the right financial backers.
There are many organisations, such as the Indian Angel Network, who can help you. Some venture capital firms do look at start-ups, though in India there are just a few. There are many boutique investment banks that can help you raise money from investors (typically in return for a retainer and/or commission).
For those of you who do not like to pay commissions, you may want to consider engaging a firm like Stern Fisher, which focuses only on arranging meetings with venture capital firms and other investors for a small one-time fee.
Tip #4: Be ready to constantly adjust to changing realities.
Markets are constantly changing, and those who maintain the course out of ignorance or stubbornness can end up on the wrong side of history. DesignPresentation is a good example.
This started out as a simple roster to vector cad drafting service operation, converting scanned images of old blueprints into electronic AutoCAD files for hundreds of clients in the USA and Europe.
Over time, this business has become commoditised, but DesignPresentation had already branched out into higher level work, including logo vectorisation, drafting services, 2D/3D modeling and architectural detailing. Today the company is moving into Building Information Modeling (BIM) and engineering support services, such as structural, Mechanical-Electrical-Plumbing (MEP) and Heating-Ventilation-AD (HVAC) CAD services.
By next year, the company will be completely different from what it was just a few years ago.
Moving on
Tip #1: Persistence is good, but too much of a good thing can be terrible in some cases.
Every start up is essentially an experiment. If the experiment is successful, do more of it. If it's not working according to plan and you've given it enough time, then move on to something better. It's best to agree on a time-bound definition of success beforehand with your partners and your family.
Otherwise, you may find that you end up claiming victory when everyone around you is unhappy, or keep postponing the payoff date and get stuck in a rut.
If the experiment has failed, quickly figure out the solution or pull out your back up plan and move on. I learned this painful lesson about 10 years ago when I had to shut down a 4-year old company that made plastic injection moulds. A group of investors and I had invested in it and I persisted in the belief that we could make a success of it.
In retrospect, we should have shut it down sooner. Soon after closing down the company, we invested in another venture that ended up doing very well financially, and we had much more fun along the way.
Tip #2: Even if you succeed, it may be time to call it quits.
For example, you might want to find a buyer for your shares, lock in your profits and retire or pursue other interests. Or you may have an even better idea than your first idea, and the sales proceeds from one business could help you build a much better business.
Or you may find that you enjoy being part of a start-up, and that as the company matures you begin to lose interest in the daily grind and hassles of running a large enterprise.
My role in SmartAnalyst is a case in point. I helped developed the concept and co-founded the company, but am now just a Director and am happy to know that the company is run by very competent professionals, many of them who understand the work -- business research, analysis and decision support -- far better than I do.
This frees me up to spend more time with other visionary entrepreneurs that I meet on a regular basis through TiE and the Indian Angel Network.
In conclusion, creating, nurturing and moving on are a natural part of the entrepreneur's journey, a cycle that you might recognise as part of the natural order of things.
The examples described above are real, and I would urge you to visit their websites to see how each of these entrepreneurs has managed to not just survive, but also to prevail in their respective markets.
I respect all of these entrepreneurs not just because they are successful and are making a positive contribution to the world around them, but because they had the spirit to give entrepreneurship a try.
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