Is it a good idea to ping an investor via LinkedIn?

I personally think it is worth a shot for an entrepreneur to try reaching a potential venture capital (VC) or angel investor via LinkedIn. Particularly if you can find a mutual contact to provide an introduction. The main benefits of this approach, over just cold calling or dropping a note on the investing firms website, are the following:

  • The investor can quickly browse through your profile to get a good sense of your professional background and relevance to the startup you are working on
  • Check for mutual connections to do a quick reference check

But, here are a few suggestions while trying this approach:

  • Do some research on the VC firm you are trying to reach and figure out the most appropriate person to reach out to, based on their profile. Most investor profiles list areas of investment interest (e.g. internet, mobile, education, etc.) and so this should not be tough to do
  • Reach out only to one or at most two people at that firm who are appropriate for your particular startup. It does not help if your ping everyone in the VC firm. Yes, this does happen often and if anything it’s counterproductive. What happens is one of the investing team members who receives this, will forward it to the other team member who is more suitable to look at your company (based on interest areas) and if they realize you pinged all the members indiscriminately, it shows that you have not done any research on which of the investors would be better suited for your startup
  • If you have a mutual connection with the investor, see if you can get an introduction by the mutual connection (especially if this person knows the investor well and is willing to refer you)
  • Avoid requesting to “add as connections” directly. Try sending a message via InMail or through mutual connections. Many investors are particular who they add as connections and so, if you directly try adding them, they might “ignore” your request
  • See if the VC is part of any group that indicates a mutual interest area and use that group to reach out to him/her
  • Keep the LinkedIn message short giving a 3-4 sentence summary on your teams background and what you are trying to do. Ask the VC if you could get 15 mins over the phone to give more background and see if mutual interest. Avoid very long messages.

While on the topic of reaching out via a social network, I would highly recommend reading the following article by Ried Hoofman on “The real way to build a social network“, if you haven’t already read it.

Note: Pluggd.in published this blog here.

 

 

Intellectual Property in India

I had the pleasure of attending a very informative round table discussion today on Intellectual Property (IP) in India organized by Zinov Consulting and NASSCOM Emerge. There was representation from academia, large multinational corporations, IT companies, startups, IP specialists and startup investors. As you can imagine, being a VC investor, this is a topic that is close to my heart and I thoroughly enjoyed the discussions. Wanted to share some of the data I collected as I was preparing for this event and some questions/observations from the discussion today.

Patents and Startups ???

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If you look at the US and two very active VC investment markets there, California and Massachusetts, it is no surprise that the level of IP creation is quite high in both these states. Obviously, IP alone is not the only ingredient to successful startups, but in the hands of a good entrepreneur, IP can act as a key ingredient to cook up some outstanding companies.

How does India fare?

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As can be seen from the above graph and the statistics, India has some ways to go to catch up with other leading IP generating countries such as the United States and China.

My Key Observations

Still early days in India

  • India is 10 years behind China in terms of patent numbers
  • Patents are around Indian market constraints and application of technology to solve these constraints (e.g. Financial Tech, Mobile) – what some might call Frugal Innovation or Reverse Innovation
  • Unusually high concentration in Biotech/Life Sciences
  • Fundamental scientific innovation still rare

Startup perspective

  • Not too many IP-based exits (M&A, IPO) hence startups not too eager to file – especially in IT. This will change with more IP-based exits happening.
  • IP incubation centers such as academic institutions need more active participation. It’s tough for VCs to fill the shoes that an academic center plays (in countries such as the US) over extended periods

Questions/Observations of other participants

  • India files about one-tenth the patents filed in China. Also 60% of Chinese patents are filed by Chinese companies. In India, only 20% are by Indian companies, rest is by MNCs.
  • Public companies, particularly the bigger IT companies cannot compromise on margins even by a few basis points. This makes it tough for them to focus on long-term and spend money on IP 
  • Time bound (project based) innovation happens in India but that’s not the same as unconstrained innovation that happens in startups in the US (based on one technologist’s experience working in startups in the US as well as India)
  • There is a need for multi-disciplinary faculty to enable IP creation (and guide doctoral students) for solving real issues faced by industry
  • On a similar note, Indian industries do not value PhD and due to this the brightest and the best opt for an MBA post their undergraduate degrees or go abroad to do PhDs and never return
  • Frugal innovation – someone had questions around whether this can really produce IP. Particularly in areas such as “Open Source” software development (which Indian companies adopt for cost reasons).

I have outlined above some of the questions/observations from the session. Just want to throw these out and see what people have to say about this.

Would love to hear reactions on this very important topic from a startup ecosystem perspective.

Note: Yourstory.in published this Blog here

Articles/resources  (do feel free to send in other links):

Hosting On The Cloud: Inputs For Early Stage Startups

I recently came across this post on Quora that talks about various hosting options for Indian startups and found it very informational. Many early stage startups are faced with the question of where to host especially as they get off the ground. Key questions they have are: what are my hosting options, costs involved, what other aspects should I consider and what are other Indian startups doing? I have tried to collect data to answer some of these questions. This is particularly aimed at startups that are just getting off the ground (very early stage) and not for ones trying to optimize performance/cost.

Note: The intention of the article is to help early stage Internet startups get quickly off the ground using hosting services. Inputs regarding various services mentioned in the article should not be considered as an endorsement by the author or the organization he is associated with.

Comparison of various hosting options

Here’s a quick summary of comparison between various hosting options (both in India and the US) for an early stage startup. Please note that these are just off the shelf monthly prizes (based on assumptions of usage as outlined in the table) that we could get either from the web or by calling the company. Obviously rates would change based on your particular requirements as well as your ability to get discounts such as yearly subscription, etc.

Key takeaways:

  • Amazon’s AWS offers the most cost-competitive option (at least for the configuration mentioned).
  • If you are focused on hosting in India (particularly for latency reasons) E2E seems to have a reasonably priced offering. I haven’t been able to talk to someone hosted on E2E and hence don’t have too much information on them.
  • If you go with AWS and want to improve your performance, you can refer to the Quora post referred above that talks about using Cloudfront (CDN) for optimizing latency as well as hosting non-latency sensitive workloads in the US and latency sensitive workloads in AWS Asia (APAC).

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Getting off the ground

If you are just getting off the ground as a startup, your easiest bet might be to go with a cloud based provider. The costs for setting up are not high and it is also scalable (elastic) depending on the demand (which is usually tough to predict in advance). In addition, some of these services (e.g. Amazon, Rackspace, E2E) are quite granular and so you can pick and choose configurations that work best for you (computing, storage, bandwidth, etc.). One caveat I gathered from talking to startups is that you need to have someone on your team who understands configuring these options. For example, if you are going with Amazon’s AWS, you need someone who understands and preferably has worked on it before. In particular, you need someone who understands the components of your application, various pieces of the AWS system (EC2, EBS, S3, CloudFront, etc.) and failure points so as to mitigate and avoid data loss. Don’t get me wrong, this is not very hard to configure and get going. But, it still is not trivial to take for granted and that is why the startups I spoke to recommended having a person familiar with the setup onboard. Alternately, you could start with an option that provides a simpler holistic solution (e.g. SliceHost) albeit at a slightly higher cost. You could then graduate to one of the other cloud providers at a later point on a need to basis.

Where are startups hosted?

And finally, you might wonder what other startups in your similar shoes (or ones that are further along) doing? I polled close to a dozen startups (small but good group of tech savvy startups) and 80% of them are hosting in the US. Of those, one third are hosted on Amazon’s AWS. If you are in a startup that has gone through a similar exercise of picking a hosting provider, would love to hear from you on what your experiences have been and any tips for others who might follow your footsteps?

The above is a post that I did for yourstory.in.

Homeward Bound

January 2011 marks a year since my return to India as an early-stage venture capitalist after spending 13 years in the US. Despite my earlier apprehensions, things have been quite amazing. I would like to share some of my observations in the hope of inspiring others to move back and ride the crest of the amazing Indian economy and contribute to its continued surge.

WHY DID I MOVE BACK?

Answer is simple: I believe this is the perfect time to be part of the Indian entrepreneurial ecosystem. The economy is booming, but there are many basic problems in areas like the Internet, mobile communications, enterprise IT, healthcare, energy, education and financial services that require solutions – this is a dream scenario for any entrepreneur. In cities like Bangalore, there are already many development centers addressing these needs. The work here entails not only low-skilled jobs. I have friends in companies like Yahoo, GE (Healthcare and Energy), Google, Intel, Biocon and Amazon, who are involved in cutting-edge product development. This I see as a treasure trove of entrepreneurs in the making. Our firm has funded entrepreneurs from many of the companies mentioned.

SWITCHING GEARS

What could be better? I ask this of the many entrepreneurs, including returnees, whom I have the pleasure of meeting on a daily basis and try to corroborate their responses with my observations. The top three challenges returning entrepreneurs seem to face are: getting the early team right, navigating bureaucratic red tape (like incorporation, bank accounts) and finding seed/early stage funding

WHAT DOES A VC LOOK FOR?

I am also often asked what is it that a venture capitalist looks for in a company? What does a VC in India want? An early-stage VC always looks for an outstanding team, aiming to solve a problem in an exciting market, with sustainable differentiation and a solid business model. In addition, there are two criteria particularly relevant to India — strong customer interest in a product or a service that can be verified and measured, and the ability to scale or grow a business. It is also important to understand that a business model that works in one city might not necessary scale across India with all its diversity.

PERFECT TIME This an awesome time for any entrepreneur who is considering a move back to India with a goal to be actively involved in a startup. My tips to those planning such a move is to pick an exciting industry or business segment that matches your expertise. Next, make sure that you choose a founding team to launch the business with great care; make sure you have some people with recent India experience. Do not fall into the trap of worrying about things beyond your immediate control such as traffic, bureaucracy and poor infrastructure. Finally do not look back, burn the bridges to wherever you came from, so that you are not tempted to return prematurely. After all, it usually takes five years or more to succeed as an entrepreneur and India is currently one of the best places in the world to live that dream and to impact the world.

I wrote this for the Economic Times. Would love to hear your perspectives on this topic. Here is a link to the ET e-paper column.

It’s not all about USP

Over the past few months I have heard at least a 100+ pitches by entrepreneurs looking for VC funding. Almost all of them had one thing in common. Most spend too much time/effort explaining their USP (Unique Selling Proposition) – whether they truly have a USP or not – and miss out on all the other aspects of the business that a VC is interested in learning about. I personally think this USP funda is overrated. I wanted to share my perspective on a good seed/early stage VC pitch. I know these are the basics but I spent some time browsing the web seeing if I could point to another blog and add to it but couldn’t easily find one that covers all the aspects I want to cover (particularly as it relates to Indian startups) and so here I go. At a high level, I look for the following:

  1. Team: Experience, relevance to the space, complementary skills, relevant advisors
  2. Product: Customer pain point, your unique solution, sustainable differentiation, USP
  3. Market/Business Model Dynamics: TAM, growth rate, competition, your business model, go-to-market strategy
  4. Customer Feedback/Traction: Qualitative and/or quantitative
  5. Financials:  Pro forma financials, how much you are raising, use of funds

In this post, I will address the first one in detail in this post.

Team: This is by far the most important thing. As a seed/early stage VC, I’m entering into a long-term relationship with the entrepreneur and so it is very important that I get confidence around the following:

  • Experience/relevance: Does the entrepreneur have relevant experience in the space in which he is starting the company? It could be relevant education or work experience or a combination of both.
  • Complementary skills: A good founding team has about 2-3 people with complementary skills. Be it technical, marketing, sales, business development or financial – a good team has a mix of these skill sets. You don’t need all these, but at least having one technical and one business person to begin would be ideal. Even if you don’t have the right co-founders, if you can identify these gaps in the team and make a skeleton profile in the pitch and say this is the kind of person we are looking to add to the team that will work (and you can ask the VC to help identify this person as well).
  • Quality: Don’t compromise on quality while finding your co-founders. The founders are the ones that make or break the company and so you need to be extremely selective here both in terms of relevance to your company as well as fit with the rest of the team. It’s better in my perspective if you only have two outstanding folks in a team who work well together (and maybe both technical) and missing a third founder (say business person) than to have a mediocre third founder. You can always find/hire this third person.
  • Relevant Advisors: “Relevant” is the key word here. If you are a medical technology or clean technology company that has a Scientific Advisory Board of technical experts in the space that is quite relevant. But, if you are an Internet startup and have five advisors of varying background, I would really question the relevance. I would rather back a strong team with no advisors than an ok team with a whole bunch of outstanding advisors. At the end of the day, it is the team we are backing and not the advisors.
  • Young entrepreneurs: One other question I often get is “Do you back young/first-time entrepreneurs?” The answer is an emphatic yes. Many of our portfolio companies are first time entrepreneurs who are a few years out of undergrad.  They normally tend to be deeply technical. The key for these teams is to find complementary skills as discussed above – might not need them right away but a good founding entrepreneur realizes the gaps in the team and actively seeks to fill these gaps.

Let me stop now. Would love to hear your thoughts/perspectives on the above.

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