Dominating small markets

Is dominating small markets before expanding a winning strategy for early-stage founders? We believe so.

Why?

Lower competition

Dominating a small market allows you to focus on a specific customer segment and offer a tailored solution that meets their needs. This niche approach means that you are competing with fewer companies and can position yourself as a market leader. By doing so, you can attract customers who are specifically looking for your solution and have a higher chance of closing deals.

Easier to establish brand recognition

Focusing on a small market segment means you can concentrate your marketing efforts and resources to reach a highly targeted audience. As a result, it's easier to establish brand recognition and create a strong brand presence in your niche. By becoming known as a specialist in your field, you can create a sense of authority and trust among your audience, which can translate into increased brand loyalty and word-of-mouth referrals.

Opportunity to test and refine product

When you focus on a small market, you have the opportunity to test your product or service with a highly targeted audience. This means you can gather feedback, identify areas for improvement and iterate your product to meet the needs of your customers. By taking a data-driven approach to refining your product, you can ensure that it's optimized for your target audience before expanding into larger markets.

Ability to charge premium prices

By offering a niche product or service, you can position yourself as a specialist in your field and charge premium prices. Customers are often willing to pay a premium for a product or service that's tailored to their specific needs and offers unique value. By offering a higher quality, more specialized product, you can increase your profit margins and build a more sustainable business model.

How can founders dominate a small market?

Narrow down

A common problem that I’ve seen founders trying to be an ‘Uber for X’ or ‘Shopify for everyone’. This doesn’t help anyone. At times, founders zero in on a customer profile and then try to create a product. But the customer profiles are so broad that it is meaningless to create something that will wow them!

Building X for everyone is a huge red flag. Even if the founders are able to build the product, how will they start selling? If you are building something for everyone, who will you approach first? What if they aren’t your ideal customer? Imagine the amount of time and resources that will be wasted.

Instead, another option is to start off as a micro solution for a very specific use case that you can’t go any more narrow with. For example:

i) We are building a chat bot

ii) We are building a customer support chat bot

iii) We are building a customer support chat bot for D2C companies

iv) We are building a customer support chat bot for D2C companies selling on Shopify

v) We are building a customer support chat bot for venture funded D2C companies selling on Shopify

vi) We are building a customer support chat bot for venture funded D2C companies selling on Shopify with less than 100 SKUs

vii) We are building a customer support chat bot for venture funded D2C companies selling on Shopify with less than 100 SKUs and $1mn in annual sales

viii) We are building a customer support chat bot for venture funded D2C companies selling on Shopify with less than 100 SKUs and $1mn in annual sales having a team size of less than 20

ix) We are building a customer support chat bot for venture funded D2C companies selling on Shopify with less than 100 SKUs and $1mn in annual sales having a team size of less than 20 not using any CRM

Founders can go even narrower. The narrower the better. The narrower they go, the less competition they will face. And that means their solution will be more targeted, more specific, and more value-additive. Imagine how many chatbot companies make something specific for D2C companies with $1mn in sales? Very less, because these companies will hardly have a budget to pay for these services. But there is a product need. And since these are venture-backed companies, they have the mandate to grow. Growth brings complexities and a chatbot specifically tailored for them will help solve human resource, timing, and data issues. As a founder, you can create very specific workflows for small teams that large companies will neither have the bandwidth nor the inclination to create. And that makes the pitch to these D2C customers that much easier.

In conclusion

a) Dominating a small market is a powerful strategy for early-stage founders

b) By focusing on a niche market, you can establish a strong brand, refine your product, and set yourself up for success in expanding your business

Ideas, founders and investors

Most first time entrepreneurs are in love with their idea. They feel it's completely cool and that it's going to change the world. This is partly because all they do all day long is think about their idea and how they can implement it. They get completely obsessed about it and their world starts revolving around it. When they compare it with existing ideas, they invariably find that theirs is far superior - just like every mother feels her child is the best looking child in the world. 

When they get ready to implement it in real life, they find they need money to convert their idea into action. They approach investors, and naively expect them to be as enthusiastic about their idea as they are. They are sure that funders will get excited about how cool and innovative their idea is, and will line up to fund the, They get extremely disheartened and disappointed when investors don't seem to hold their idea in the same high regard they do. They get frustrated when it seems that no financier is the start-up space appreciates how valuable their idea is. They start thinking of themselves as the persecuted genius whose brilliance society has one again failed to recognize. They complain loudly and frequently about how unsupportive and short-sighted Indian funders are, because they fail to understand the brilliance of what they are proposing. 

This creates a big chasm between funders and founders, and we need to bridge this gap. The only way to do this is by understanding each other's worldviews.

Founders need to learn to put themselves in the investor's shoes. The truth is that investors are flooded by new pitches daily, which is why a lot of investors start feeling that ideas are a dime a dozen. Most are convinced that there's really not much value in the idea itself - it's the successful implementation which makes a world of a difference, and there are lots of slips between the cup and the lip.

Most entrepreneurs have very little real life experience, and grossly underestimate the difficulties which they will encounter in running a start-up. They have spent so much time in polishing their idea that they think of it like a diamond. They believe that everyone should be dazzled by its brilliance, and should be happy to throw money at them so they can bring it to fruition. They can't believe why investors are being so dumb - can't they recognise the next Steve Jobs? Don't they see that this idea is going to help them invest in the next unicorn? They believe that since their idea is so great, how hard would it be to implement it in real life, once they had the money which they required? 

It's not as if investors don't value ideas - it's just that we have learned the hard way that an idea by itself is worth very little. We know that the devil is in the details, and while it's great to admire creative ideas when you read about them in a book, only someone who has actually slogged through running a start-up understands how much blood, sweat, and tears need to be invested in order to make that dream come true. 

This is the real challenge - to persevere and remain undefeated, no matter how many road blocks you encounter. Investors are very worried that most founders are not mature enough of handling these challenges.

Forcing entrepreneurs to pitch to many funders is actually a great screening tool in the start-up ecosystem. An entrepreneur who gives up just because he can't raise funding from the first few investors he pitches to is very likely not to be able to do a good job running a start-up. If he can't handle rejections from investors, then he should accept the fact that he is not suited for the start-up space.

Many founders shoot themselves in the foot because they are so secretive and paranoid about their ideas. They refuse to share it with others, as a result of which they don't get high quality feedback. Most of the responses they get are from friends and family, who are obviously going to be very supportive, and say, "Yes, it's a great idea! Anyone will be happy to fund it!" It's only when they go out into the investor community do they realize how little an idea is worth. This is why you need to be open, and start sharing your ideas, instead of hoarding them, so you can use the feedback you get it polish and improve it, so it become fundable.

Mature founders learn from the feedback they get from investors. No feedback at all is actually a loud message that they're not excited by what you're saying. This maybe because they've heard it before; or because they think what you're saying is not practical; or that it requires too much money; or they don't think you have the capability of being able to pull this off. Now it's up to you to prove them wrong!

Why being a doctor makes me a better investor

When I tell people I'm an angel investor, they assume that because I'm a doctor, I prefer to invest in healthcare start-ups. They believe these are the companies I will be able to add the most value to them, given my domain expertise. While I do invest in healthcare start-ups, I'm also acutely aware of the fact that sometimes my preconceived notions about the healthcare industry could be completely wrong, and I don't want to contaminate the entrepreneur's perspective. 

I feel my strength as an angel is that I can be more empathetic. As a doctor, I have been taught to establish an emotional bond with my patients and to connect with them. Hopefully, some of my professional skills will spill over into my relationships with my founders, so that hopefully, I'll be a little kinder when I deal with them. 

Also, as an IVF doctor, I understand that no matter how good a job I do, most IVF cycles will not end in a baby. This is why I'm much more forgiving of failure, and am much more focussed on following the right process, rather than obsessing over an outcome which is not in my control.

This is the same yardstick I use when I measure the performance of our entrepreneurs. I don't judge them by whether or not they are able to deliver because I know they do not have any power over the external environment. I am much more interested in checking whether she is doing what she said she would do. 

Since I am a doctor, I am quite academic and read a lot. I respect professional expertise, and value the knowledge which my founders bring to the table. As a surgeon, I admire their real life practical skills even more, because the magic sauce in any start-up is the ability to implement the plan frugally, and a surgeon is only as good as his technical skills in the OR.

As a doctor, I have been trained to think independently. I have enough self-esteem to trust my judgment, even though it may be completely different from other investors, which means I am quite willing to be contrarian. 

Also, I understand a doctor's reputation is his most valuable asset, and that this can take a life time to build. This is why I usually have a long term perspective on most things in life, including my start-up investments. I don't think of them as a shortcut to getting rich quickly. Because I am in private practice, I am also an entrepreneur, and because I have "been there and done that " (though this was many moons ago!) can understand some of my founder's pain points better.

Because I don't have domain expertise in many of the start-ups I invest in, I am quite happy to take a hands-off approach, and allow the founder to take ownership of the solutions he has crafted. Just like I expect my patients to trust my professional expertise and not keep on second-guessing me, I am willing to have faith in my founder's skills and experience. I give him the freedom to set the agenda, as long as he shows that he is on the path he set out for himself - all I need is that he be open and transparent, so I can respect him. I treat my patients as empowered customers, and take my fiduciary responsibility to them very seriously. I expect my founders to treat me the same way. 

Finally, given the fact that I'm investing my personal money, I can be much more flexible as to which founder I choose to back. I can afford to take contrarian bets, because I am not bound by an institutional imperative - the only person I'm answerable to is my wife.

The lazy wannabe founder

Founding a start-up can be hard work, and the entrepreneur needs to slog a lot. This is a 24/7 job, and the final result is always unknown and uncertain. This is why founders need passion and perseverance to be successful. 

What surprises me is how lazy lots of wannabe entrepreneurs are. 

I'm an angel, and I receive a lot of pitches by email. Many founders have a cool idea and a well designed business plan, but what disappoints me is that they want to raise money from angels in order to try to implement that plan. This means that you are asking the angel to subsidize your experiments - you want to learn on his dime. 

The trouble is that a lot of these lazy entrepreneurs are also surprisingly immature. They are young, and haven't seen much of the world. Because they have never worked for a living, they don't understand the value of money. They are theory-masters, and think of themselves as being the next Steve Jobs. Their pet peeve is that investors are too dumb and short-sighted to recognise their internal genius. They are also jealously possessive about their ideas, and are paranoid that the investor is out to steal these from them. They refuse to share openly, because they do not trust or respect the investor. 

Expecting an investor to pay the price for your lessons and your failures is something which makes no sense to me. After all, the whole point of being an entrepreneur is that you can hustle and are able to accomplish stuff, no matter how cash-starved you are. The key characteristic of a successful founder is one who can innovate, no matter the constraints he is forced to operate under. A smart innovator is frugal and can make a buck go a long way. 

When you pitch, why not show to your investor how much you have been able to accomplish in real life with whatever limited funds you have. Sadly, most wannabe founders would rather sit on a comfortable chair and create attractive presentations - and then complain that investors aren't willing to give them any money to back their dreams. 

If you're not willing to put in your own money and time and energy into creating a company, why would you expect an investor to do this? 

A successful entrepreneur can be creative within the constraints he has. After all, throwing money at a problem to solve it doesn't require much innovation or intelligence! It's your ability to do a lot with very little which will increase your credibility with investors, and improve their chances of funding you. 

Mindfulness for first-time founders

One problem with being an entrepreneur is that it's very easy to become distracted. It's easy to lose sight of the big picture, because you have to take care of the 150 things which need to be done on a daily basis to keep your start-up live and kicking. Because the buck stops with you, you have to put out the daily fires which plague a start-up, and this often consumes all your energies. You have to struggle with employees who threaten to leave; customers who are never happy; and investors who are always complaining about your lack of progress. 

It's easy to lose focus, especially when you see some of your competitors getting funded and being written up in the press, even though you know that they have no depth. 

This does cause a lot of heartburn, which is why it's so important to be self-aware. Meditation can be a very useful tool, because it allows you to search inwards. It helps you to find contentment and satisfaction in the path you've chosen for yourself, rather than worry about what the rest of the world is doing. 

One way to keep your sanity when everything around you seems to be collapsing and you are finding it hard to cope is to recite the Serenity Prayer : God grant me the serenity to accept the things I cannot change; the courage to change the things I can; and the wisdom to know the difference.

How to shut down the business of a start-up

There is a lot of excitement when you start up your start up, and there are lots of books which will tell you how to go about this process. You will find lots of advisors, mentors and coaches, who will tell you how to incorporate your company; get funding; set up your office; hire a team; and start marketing your product. These are heady and exciting times, and the adrenaline rush will keep you charged up and enthusiastic.

Unfortunately, there is very little information on how to shut down a start-up. Even though most start-ups will shut down, this is one of those areas which no one wants to talk about. This is because the topic is so emotionally charged. Shutting down a start-up is like attending a funeral of a loved one, because it is a kind of death - the death of your hope and your dreams. Death has always been a taboo topic - whether it's a human death or that of a company, and it's not something we like discussing. 

The grief of shutting down

The truth is that when you encounter death, you have to go through a grieving process, so that you can emerge stronger on the other side. It helps to know what the stages of grief are, so you are better prepared to deal with this rough patch. The problem is that the process is often shrouded in mystery. Most entrepreneurs aren't very willing to talk about how they went about shutting down their start-up. Start-up conferences are happy to highlight the success stories - even though these are in the minority. It's true that these conferences are designed to inspire and motivate entrepreneurs, but I don't think glossing over the truth helps anyone. 

You need to start by acknowledging the emotional difficulty of accepting the fact that your start-up is going to have to shut down. This could be for any number of reasons, and a lot of these maybe out of your control, but you do need to confront reality, no matter how bitter it may be. Please learn to be kind to yourself during this time of emotional upheaval - there's no point in beating yourself up.

Once you accept the fact that your start-up is not going anywhere, you can take steps to wind down in an organised fashion. Otherwise you will continue to force your start-up to survive in a zombie mode. This will waste a lot of your time, and this could have been better devoted to shutting it down cleanly, and then starting on a new venture - or perhaps starting a job. It's always tempting to believe that a potential big deal or a promised financing could turn things around, but false hope can be cruel. Keeping a dying patient alive on a ventilator is not an act of kindness. 

All the experience you have gained while running your start-up will actually be invaluable for the next company you work for - whether it's your own, or a large corporate. It's important to follow a process so you don't leave behind legal liabilities which will come back to haunt you later. Generally, there are two ways this situation can turn out. You can handle failure with grace, or you can mess it up by running away. It's abandoning the sinking ship which would actually be the final betrayal, and this will cause the most damage to your personal and professional reputation. 

Professional advice

Please consult your lawyer to make sure you comply with all the formalities. An experienced lawyer will have done this before and will be able to guide you properly, to make sure you don't leave any loose ends.

For winding up the business, you need to inform all the shareholders and take their approval. After that you also should inform all your vendors and terminate the contracts. Helping vendors to sell to find other companies who are in similar business is a good step, as it ensures that your relationship doesn’t completely end on a sore note. Who knows you may need their recommendation and network when you run your next business. All the liabilities should be cleared and dues should be paid to all the shareholders on the basis of hierarchy. Please consult your lawyer to make sure you comply with all the formalities. An experienced lawyer will have done this before and will be able to guide you properly, to make sure you don't leave any loose ends.

The Government of India is also trying to reduce the winding up process for a start-up. A new set of rules have been declared - the namely Companies (Removal of names from the register of Companies) Rules, 2016,which describes. This entails the process of striking off the name of a business from the Registrar of Companies.

If I had to summarise my advice in a single word, it would be this - overcommunicate. Yes, I know you're likely to be ashamed about the fact that you've been forced to shut the start-up down, and that you let everyone down. This can be a badge of personal shame, but pretending that everything is fine is not going to make the problem go away. It's this denial which really causes most of the problems. When you have the courage to look the beast in the eye, you will find that you have enough emotional reserves of strength to be able to bounce back. Remember that what doesn't kill you makes you stronger - look at this as a trial by fire. You're going to be angry that you didn't get the financial backing you wanted from your investors in your time of need, and you're going to feel depressed and let down - especially when you read about all the other co-founders who are going from strength to strength. You wonder what you achieved by burning the midnight oil and slogging for the last three years of your life, and may start feeling very sorry for yourself, because you think the world is unkind and unfair. Don't take it personally, and don't play the woulda, coulda, shoulda game. Look back, learn your lessons, pick up the pieces and then move on

Yes, it is depressing to have to shut down. However, you need to be disciplined and do this systematically, so that the final impression everyone carries about company remains positive. Unfortunately, when the company is collapsing in front of your eyes. you are completely stressed out, and want to leave the dirty work to someone else. This is why it's even more important to remain resolute and end the turbulence with as much poise as possible, so the death is peaceful. You can't change the past, but you can certainly determine how you are remembered.

Don't prolong the agony - it can be difficult to pull the plug, but it's kinder to do this quickly, so it causes less pain. The sooner you can wind down, the sooner you can go on to focus on something positive. Take ownership and don't try to pass the buck. This was your baby, and burying it is also part of your responsibility. of the outcome. 

Being open and transparent

It can be very hard to look people in the face, especially your faithful employees. You promised them so much and are not even able to pay them their salaries on time. It's not easy to tell your employees that the start-up is kaput, but it's far kinder to be honest, rather than to waffle. They sense the turmoil, and will lose all respect for you if you try to cover up the facts. The least you owe them is the truth. Be kind, and help them to find a job- or at least providing a glowing reference.

Remind your employees that you are losing your job  too. If you have treated them well (and I hope you did), they will be much more forgiving and understanding. Share the load, talk to your cofounders, talk to your significant other. 

Your customers will feel let down, and many may be upset that you can no longer provide them with the services they may have paid for in advance. Try to say good-by with as much grace as you can and try to compensate - if not in cash, then in kind. Inform them in a timely fashion, so they don't discover the bad news through the rumour mill - they will feel betrayed.

You may be ashamed to face up to your investors and tell them you have lost all their money - but the truth is that they already suspected that the start-up was doomed a long time ago. Give your investors credit - they're smart. Explain to them what assumptions failed and why - you don't need to apologize, you need to explain, so they can become smarter. Take the time to answer their questions - this may be no fun, but this is part of your job. You may want to run away and hide in a dark corner, but this is not the time to shy away from your responsibilities. Be direct, honest and transparent and do not withhold anything - they will forgive you for failing, but not for lying. Keep them in the loop by sending weekly reports, so they can see you are in control, and are winding down systematically and thoughtfully. They want to be sure that you are not abandoning ship, so include details about cash position, customers, legal, concerns and next steps. If you behave like an honourable gentleman, they may be quite happy to back your next venture. 

Friends and family

Be grateful for the support of your friends and family. You may feel that you have let them down, but remember that they will continue to love you even if you start-up has failed. You can afford to unburden yourself in front of them, but please don't use them as a punching bag. Having someone you can confide in will help keep you sane during these crazy times. Remember that businesses may come and go, but friends and family are forever - they are your safety net. They are the ones who you had to neglect during your single minded pursuit of building your start-up, so you now have a chance to make up - make the most of this!

It's very helpful to keep a diary. This can be cathartic, as it allows you to dump your emotions, and look at the problem more objectively.

Take a break and regroup. You need to give yourself some time to pause, rest and recharge. You have been through a huge emotional roller coaster ride in the past few months - much more than most people will experience in an entire lifetime. Learn to be kind to yourself, and when you are ready to bounce back, put the past behind you and focus on the future. You are a better and wiser person now, and you can put all your hard-earned lessons into building something great. Start-ups fail all the time, and there will always be another chance. What you have learned from the School of Hard Knocks is worth far more than a MBA, so don't think of yourself as a failure. There is always a next time.

Try to keep the media and social media out of the picture until you have crafted your PR strategy. If you aren't proactive about this, a disgruntled employee may leak information and journalists may end up painting a messy, distorted picture of your shut down, 

It's always tempting to believe that a potential big deal or a promised financing could turn things around, but false hope can be cruel. Keeping a dying patient alive on a ventilator is not an act of kindness. Ensure that you have kept enough money in the business account to pay all debts. This is crucial for your investors who do not want to inject more money just to shut down a failed business. 

A new beginning

If you accept responsibility, and shut down your start-up in a transparent, forthright manner, your chances of running a second start-up and doing this far more successfully are much better. Yes, shutting down is a painful process, but you can emerge stronger!

Remember to look at the big picture. Your world will not end just because your start-up did, even though it may feel like this at the time. The four wisest words known to man are - This too will pass! 

When you are feeling down, please recite the Serenity Prayer - God grant me the serenity to accept the things I cannot change; the courage to change the things I can; and the wisdom to know the difference. 

How activist should early-stage investors be?

I am the lead investor in a healthcare start-up and I recently received a phone call from one of the other co-investors who is part of the network through which I invested. I happen to be the lead because I am a doctor which presumably makes me the domain expert; and because I invested the largest amount of money. I have been very impressed by the entrepreneur. He is very hard working and grounded, and I have learned a lot by being on the board of this company. 

However, this co-investor was very upset and worried, because he felt that the company was running out of cash, and that they weren't doing anything in order to increase their revenue. He felt that I wasn't being proactive, and was shirking in my responsibility as a lead investor. He felt it was my job to push the entrepreneur into fixing the problems. He felt that the entrepreneur needed to change his selling style, and become far more aggressive about reducing costs and increasing revenue. His concern was that the company would not be able to survive for more than a few months unless we investors did something to turn things around.

What upset him was the fact that he'd made a lot of suggestions to the entrepreneur as to what he could do in order to improve his business plan and fix the issues. However, he felt the entrepreneur was not being responsive, and did not seem to take his suggestions seriously. He felt he did not bother to implement them, or provide any feedback as to what he felt about his advice. He was very disappointed with the way the entrepreneur was performing; and was very unhappy with me as well, because he felt I wasn't doing a good job as a lead investor. He was unhappy with my approach, because he felt I was being too casual, and wasn't representing the other co-investors' interests adequately.

He was a lead investor in another company, and he was far more interventional and hands-on when talking to the founder. He felt that this is why the entrepreneur was much more responsible, and be believed that thanks to his close continual interactions with the founder, he had been able to turn the company around. He was very disappointed that I wasn't doing the same thing with the start-up in which I was the lead investor. 

Now he had a lot of valid points. He was being proactive, and wanted to make sure that the company was doing well financially. He was worried that the company didn't seem to be going anywhere, and that if it ran out of cash, he would lose his investment. 

Unfortunately, my world view is completely different from his. Healthcare is a complex and challenging domain. This is an industry where very few start-ups are actually making any money, because it's still immature, and we need to be far more patient. It's hard to pivot or generate revenue, because it's an industry which is very resistant to change, and it takes time to create inroads.

More importantly, I had very high regards for the entrepreneur. It's true that he wasn't very flashy, but he was very grounded and mature. He was frugal, and ran an efficient operation. He wasn't a pushy salesman, and had a good reputation in the healthcare space, because he'd been around for so many years. He was held in high regard, because he had been able to execute successfully. 

It's not as if he wasn't aware of the fact that his company was running out of cash; or that he was doing nothing about it. It's just that it's sometimes hard to be able to generate revenue in certain industries, but it wasn't for lack of trying. Sometimes the environment can be so unfavourable that the head winds make it hard for even good start ups to survive. I was willing to be much more understanding and forgiving, because I could see he was doing his best.

I could also understand the co-investor's perspective. He was upset because he felt that the entrepreneur didn't respect his advice, and wasn't listening to his feedback. This can be a sore issue, and it upsets me as well when entrepreneurs ignore what we tell them. 

However, I have learned to be more laid back. My approach is that the company is the entrepreneur's - he's the one who started it, and while we have given him funds in order to help him to grow, he is the one who needs to execute.

While I'm happy to offer advice, I cannot ram it down someone's throat just because I happen to be an investor - I don't own him or the company just because I have funded him. I see my role as providing a mirror and acting as a coach. I can remind him of the problems he is likely to run into, and offer possible solutions, so he can think through these.

I am happy to engage with a founder if he feels I add value - otherwise, there's no point in doing so. It's a waste of both my time and energy and his, and I would rather deploy this elsewhere. It's easy to talk about the need to raise the next round of funding, but this can suck up a lot of energy, and prevent him from focussing on delivering results to his customers. He needs to make his decisions for himself, because he's the one who needs to set his priorities. While it's very easy to give advice sitting comfortably in my air-conditioned office, a lot of it may not be very practical in the real world, and he is the one who is fighting for survival in the trenches. 

I have realised that angels come in all shapes and sizes. We have different perspectives, and I prefer staying out of a mature founder's way until he asks for help. I don't like meddling and prefer monitoring the performance from a distance. This is why it's important to make sure perspectives are aligned before investing.

I couldn't get my co-investor to agree with me, so I signed off by telling him that I had a lot of confidence in the entrepreneur - and that even if this start-up went belly up, I would be happy to fund his next venture.

Being an early-stage investor is hard work!

Many high net worth individuals (AKA the rich) in India want to try their hand at being angels. It sounds like a glamorous occupation, and a great way to get rich quick. After all, all you need to do is identify bright founders, and sign a cheque - and how hard can this be?

The problem is that they are misled by shows on TV like Shark Tank. While they are fun to watch, they are very misleading, and you need to remember that they are only of entertainment value! No serious angel would every hand over money based on a 10 min pitch, no matter how sexy the idea.

Serious angel investing takes a lot of time, energy and effort - there are no shortcuts, no matter what you read about supportive angels who had the foresight to sign a cheque after hearing a super-smart founder sketch out his clever business plan on a napkin over a drink in a cafe. Most of these stories are folk-lore - and the very fact that they have become so popular itself suggests that they are extremely rare!

Just like it takes hard work to be a good founder, being a good investor also means that we need to invest much more than just our money - we need to contribute our time and energy as well!

We have learned to be very picky and choosy in which companies we invest it, and over the years, as we have learned our lessons the hard way, we have become better at saying No. Investment in our portfolio companies is backed by a strong belief we have in them. For example, in Clearmydues, we feel they have a novel business idea with a technological moat; and in Instinct Innovation, we are inspired by the founder's grounded vision and strong passion in improving the supply chain of drugs to the retail chemist. Even if these companies go through a rough patch (which they most definitely will!), we will continue to back them, if our original belief remains intact. 

We try to say No to companies which we feel have been able to generate revenue just because they have achieve some initial traction. While it's tempting to be opportunistic and to piggy back on their success, we need to be able to buy into the founder's vision, and have conviction that he will be able to survive through the winter which every start-up encounters. By investing in a start-up, we also become partners in the pains that come with growing that business. A good investor understands his limitations, and invests only in companies which are in his circle of competence.

Because we have limited funds, we need to be picky and choosy in deciding whom to back. We need to be significantly invested in terms of time, capital and dreams in each of our portfolio companies, which is why we prefer going deep rather than trying to spread ourselves too thin. Start-ups will always find themselves cash strapped, and we are happy to provide additional funds (either as a bridge round or when they raise more money), as long as the founder's behaviour reaffirms that our trust in him is well-deserved. We prefer doubling up on our winners, rather than in looking for new opportunities, as long as our thesis remains intact. This is why we may pass on companies which seem to be doing well, because we believe our resources could be better utilized in other portfolio companies where we have bought into the founder's vision, because he has been able to wow us.

Many angels are surprisingly naive, and just affirm the rule that a fool and his money are soon parted, no matter how rich a fool he may be. 

Insights for this article were provided by Tushar Agrawal,  an ex-Analyst at Solidarity Advisors where he handled the angel investments portfolio. Solidarity Advisors is a multi-family investment office providing investment solutions to its clients. 

What books are you reading as founder?

I usually ask entrepreneurs who pitch to me what books they're reading currently, and am very disappointed when they can't come up with a title. Anyone who wants to keep up with modern trends needs to be reading at least one book a week. This is especially true for entrepreneurs because the buck stops with them. They have to wear many hats which means they need to be learning new skills on the job all the time, and putting these into practice. 

A common excuse is, "Who has the time?" However, when you add up the hours you spend on reading newspapers and posts on LinkedIn, Facebook, Quora and Medium, you will realise that there's no shortage of time - you just need willpower and discipline to invest this better. If you can't make the time to read in order to keep on top of the game, you're going to start falling behind, and this is going to be far more expensive in the long run! When your start-up fails, you'll find you have all the time in the world, but it'll be too late by then. 

Lots of founders justify their lack of reading by saying, "We don't read a book, but we do read lots of stuff online. We read blogs; Quora; Medium; and posts on LinkedIn, and that helps us to keep updated. "

While I agree there is a lot of value in reading online, the big problem is that a lot of this is very shallow, because it is designed for people with short attention spans. It's dumbed down, and doesn't have much depth. While long form articles can be valuable, most people prefer short reads, which are usually very superficial. Most of them are poorly written, because they have not been edited or polished. 

This is in sharp contrast to a good quality book, where professionals invest a lot of time in making sure that the writing is of high-quality before it's published. 

Books are far better sources of learning, not just because the quality of writing is better - it's also because you are much more receptive when reading a book. Typically, when you read a book, you immerse yourself in it. There are no distractions, and it encourages deep thinking. A good book is designed so that it allows you to have a conversation with the author. To get the most from reading, you need to engage with the author and read actively - you can't just passively expect the words to diffuse into your brain. You need to be thoughtful about what you're reading, and think about how you can apply the information the author is providing. 

The problem with online content is that it's extremely easy to get distracted by clickbait articles; ads; videos; emails; and Facebook. The truth is that it's not designed to educate you - it's crafted in order to distract you and to get you to click on ads! Before you know it, you find you've spent two hours online, but learned precious little. In order to get the best ROI on reading, you need to start reading books.

The truth is that you can often learn far more by reading a book written by an expert, as compared to actually meeting him. You may never be able to meet Warren Buffet, but by reading what he has written, you will be able to get inside his brain, and understand why he thinks the way he does. While face to face learning is great, when you factor in the time, money and energy you need to invest in order to do this, you can see how much more valuable reading can be. You can read and re-read at your own pace, in your own comfortable surroundings - and if you have questions, you can always email the author. 

Books are such a great bargain, and it's a shame that we fail to make use of this huge opportunity by refusing to read them. I think this is because many people still haven't mastered the art of extracting the information a book contains. They need to learn to read actively, but this can be a challenging skill to master, and school fills you with so many bad habits about reading, that many people dread opening a book. This is a self-inflicted disability, but one which is easy to fix. The good news is that the more you read, the better you will get at it! And the reason Bill Gates has so many books on the table in front of him is that he reads multiple books on varied topics in parallel. This helps power readers to learn new ideas through cross pollination.

Book offer a great level playing field - you don't have to live in Silicon Valley to read about why Elon Musk does what he does - his biography will tell you pretty much everything you need to know! Books can be great teachers, and the right book can change the way you view the world. You don't need to be a book worm or a voracious reader - you just need to be disciplined. A founder who reads has a huge edge over his competitors who don't, because he is a far more efficient learning machine.

Which books should you read? The last thing I want to prescribe is a reading list, but I personally prefer books which have stood the test of time, rather than the currently fashionable bestseller. 

Another criticism about books is that they provide only theoretical knowledge, and this is of little use in the real world. I think this is rubbish. Books are usually written by experts who have become an authority in their field because life has taught them a lot. They have been kind enough to take the trouble to share their practical hard-earned wisdom with others by writing it down rather than hoarding it - please make the most of their generosity!

As Mark Twain said, "A person who won't read has no advantage over one who can't read." 

The role of angel investors in the start-up space

As an angel, one of the reasons you invest in a start-up is because you share the founder's passion. You can see that he has a vision which can improve the world, and because you want to help him bring his dream to fruition, you are willing to put your money where your mouth is. The problem is that while it's all very well to talk about how the start-up will create a positive impact in the long run, the fact is that most start-ups will run out of cash before they reach that point.

As an angel, you're acutely aware of the fact that you have limited funds, and you will not be able to provide the entrepreneur with enough money until he reaches his end goal. Therefore, along with thinking long term, you also need to make sure that the founder is frugal and conserves cash.

While this is not as sexy as dreaming about the big picture, it's equally important. If he doesn't remain grounded and takes care of these basics, his dreams will turn into nightmares - not just for the investor who loses his hard-earned money, but for the entrepreneur as well, who will end up wasting a significant amount of his life.

This is why we try to make sure that we hand hold the entrepreneur until he reaches the next stage of his evolution, and is mature enough to be able to raise a series A from VCs. This is why we also need to think about what will make the start-up attractive to VCs in the short term.

We're quite happy to participate in the next round as well, especially when we've been impressed with the way the entrepreneur has been able to execute. By interacting with him frequently, we can judge his ability to build a team, create a quality product, and sell it. We are checking to see if he is responsive and responsible; if he is willing to be open and ask for help when he runs into problem; and if he respects our advice and feedback.

This is why we keep dry powder so that we can provide a bridge round and participate in a series A. We are happy to double up on the companies which we feel are on the right track. This is a very useful signalling mechanism for the next round of investors as well, and our willingness to invest makes it much easier for him to raise money. When VCs can see that the original angels are continuing to invest in the founder, it gives them a lot of confidence that this is a sound founder, and the start-up has a good chance of doing well.

We treat our initial seed investment as an experiment, and when the founder shows us that he's been deserving of our trust, we are happy to invest more money in him. This increases his probability of continuing to grow, because he can attract additional external funds. We also think this helps to keep the entrepreneur honest, because he understands that his angels have a key role to play in his success.

While it's easy to be a hands-off angel investor who only writes a cheque, an active angel who engages with the founder adds a lot of value, and improves the chances of the start-up reaching escape velocity considerably.

Should startup founders spend on PR?

Start-ups have a hard time selling their product because they are start-ups. They're small, and no one has ever heard of them. They don't have a brand and have to compete against established players. Most people aren't willing to buy their products, because they're not sure whether the start-up will still be around after a few months.

This is why start-ups invest in PR and advertising, in the hope that this will give them the brand name recognition they need.

This seems to make sense - after all, if people hear about you, aren't they more likely to buy your product? Isn't this what all big companies do?

The problem is that it's extremely easy to spend tons of money on PR activities - and most of this gets wasted. They are pretty much hit -and-pray efforts, and it's hard to track if they provide a decent ROI. It's very easy to get seduced by the ease of doing PR, and this lures many founders into a spending trap. 

When the PR agency sends out a press release and this gets covered by print and online media, reading his name in the media goes to the founder's head. What compounds the problem is that he gets congratulatory calls from friends and family members, and he start believing - "Wow, PR is a great way of creating more awareness and publicity. After all, there must be a reason why all the large brands do it, and I should learn from them. " PR is much cheaper than advertising, and which is why they employ a PR agency or a media firm in order to get more written about their start-up.

The problem is that PR firms are very good at promising you the earth and the moon. After all, don't forget that they're very good salespeople. They prove how effective they have been, by showing how many column centimeters of press they have been able to get for you. The digital agencies show you how many tweets they've published on your behalf; and many Facebook likes they've got for you.

Unfortunately, none of this translates into increased revenue! While it's very easy to spend the money - and PR agencies are very good at helping you do this - you may end up burning a lot of it very quickly, without realizing that you're not getting an adequate return on your investment.

As a start-up, you need to be very frugal about conserving cash. The secret is not to get greedy, and to understand that it takes time to grow your company organically. Trying to attract media attention by taking shortcuts will hurt you in the long run, because the only people who make money on PR are the media, and the PR agencies - not the start-ups! You should only do PR if you are smart, and can do your own PR for free.

Our revised termsheet for early-stage founders

At Malpani Ventures, we value feedback received from founders and are always looking to improve our processes. A recent feedback we received was that our existing term-sheet was very verbose and presented in a legal (not easy to digest) manner for early-stage founders.

To dig deeper, we internally deliberated whether a simpler term sheet would be beneficial for founders vs a more detailed one:

→ Option 1: Simple Term Sheet with details discussed during Closing the SHA

Pros:

✅ Can speed up the process of closing the deal as negotiations can be streamlined during the SHA stage

✅ Allows for flexibility & adjustment to the deal terms based on further discussions/ DD

Cons:

❌ May lead to misunderstandings or disagreements during the closing stage if details were not discussed or clarified upfront

❌ The process may be perceived as less transparent, potentially causing mistrust or lack of clarity between parties

→ Option 2: Detailed Term Sheet Upfront

Pros:

✅Provides a clear understanding of the terms and expectations for both parties upfront

✅Can help build trust and transparency between parties by demonstrating a willingness to be upfront and transparent

Cons:

❌ May take longer to negotiate and finalize, potentially slowing down the deal closing process

❌ Could be seen as too rigid or inflexible, potentially causing friction if unexpected circumstances arise

We ran a couple of polls on LinkedIn and Twitter to gauge founder preferences:

While the numbers suggest a skew towards a detailed term-sheet, a significant number of founders do prefer a simple term sheet!

Founders, we heard you and have revised our term-sheet to a much simpler version whilst retaining explanations , wherever required. Our previous term sheet had ~3700 words across 9 pages - we have halved this to ~1900 words across 5 pages and also added a term sheet explainer.

You can access our revised term sheet here and the explainer here as well.

We would love your feedback on these resources!

How to improve start-up events

As an active angel investor, I attend a lot of start-up pitching events. These are organized by angel networks; incubators; and accelerators, and they allow a bunch of founders to present to a group of investors, so that they can convince them to give them money. 

These events are useful, for both funders and founders. They allow investors to look the founder in the eye, so we can ask him questions and see how well he answers them. Since this is done on a many-to- many basis, it's quite cost-effective and efficient because investors get to evaluate lots of founders at one time. These events allow investors to learn from each other as well. Thus, one investor may have a lot of domain expertise, and he may ask lots of probing, thoughtful intelligent questions which you may not have thought of. Also, if a charismatic lead investor decides to fund the company, a lot of the other investors will follow his lead as well.

It's very useful for founders as well. They get to pitch to a group of investors at one time, which helps them to reduce the time and energy they need to invest in raising funds. They may also get asked some very smart, insightful questions by some of the investors, which may help them to improve their business plan; or to pivot. This is all for the best, because it stops them from pursuing paths which have a low probability of success.

However, a major criticism I have of all these pitch events is that they try to do too much in too little time. In the few minutes which are allotted to each founder, he is supposed to talk about the history of his company; what they've achieved; what their future plans are; how much money they want to raise; and what they're going to do with the money. Quite frankly, after listening to two or three pitches, the investor's brain gets fried, and all the pitches start blurring into one another. You can't remember any of the finer points and when start getting bored, you stop paying attention to the pitch. This is not fair on anyone.

I think we need to improve the format. The reality is that no investor is ever going to sign a cheque because he is blown away by a persuasive, well-crafted pitch. All the investor will do at the end of an interesting presentation is say - Hmm - this sounds interesting - I want to find out more. This is a good outcome, and all a pitch should be designed to do is to encourage potential investors to reach out and ask for more detail, so that they can do a deeper dive.

The outcome of these pitch events is binary - either the investor is interested in a particular start-up, or he is not - that's it. This is all the investor should be asked - would you like to find out more about this company? This will help to sharpen the focus for everyone attending the event.

Most importantly, it will remind founders that all they can do in the few minutes which they have is to tell a convincing, persuasive story. This should be designed to be emotionally appealing, so that the investor wants to find out more about what you want to do. Realistically, that's all anyone can possibly accomplish in the ten minutes which are assigned to you. This would be a far more productive use of everyone's time; and after the pitches are over, when energy levels are still high, the organisers can set up tables for each start-up, so that investors who are interested in a particular founder can get together and ask him questions.

What about all the technical details about the product? the market? the financial projections? Yes, all this remains critically important, but this is best shared before the pitch. It can also be circulated after the event, so that investors who are interested can study a more detailed deck at their own convenience. The whole point of the pitch event should be to facilitate speed dating between investors and entrepreneurs. Putting a gun to the investor's head and asking him to commit to signing a cheque at the end of the event is not a sensible way of raising funds - this usually ends badly. 

A good pitching event will allow founders to spark the curiosity of many investors, so that they will want to engage with him further on a one on one basis, because his persuasive pitch has piqued their interest. This respects the natural process of how most angels invest - we evaluate the pitch, and if it seems interesting, we will then allocate time and energy into doing a deep dive, to see if the start-up fits our sweet spot. 

Storyboards for Founders

As a founder, you need to be selling all the time. It's not just your product that you need to convince reluctant buyers to purchase - you also need to sell your start-up to investors, so that they will agree to fund you.

The best way of selling is to tug at people's heartstrings, and the most effective way of doing this is to tell a story. Now this can be surprisingly hard for some founders to do. They suffer from the curse of expert knowledge, which means they get so caught up in the technical minutiae of their product, that they are not able to explain what they are doing and why. They get so lost in all the cool features of the services they provide, that they are not able to excite their listeners. 

This is why they get such a lukewarm response from investors. The trouble is that most funders will nod their heads intelligently when you talk to them, even if they can't understand what you are saying. Most will not self-confidence to acknowledge that what you are saying is going above their heads, because they don't want to display their ignorance.

Entrepreneurs find this very frustrating, and when they can't get their message across, they conclude that investors are dumb, because their depth of knowledge is limited. This may be true, but there's no point in blaming funders for their lack of domain expertise - after all, this is not their core competence!

It's your job to educate them, and you need to work at improving your skills at getting your message. Stories are the way humans have communicated for centuries; and a picture is worth a thousand words. You need to learn to marry the two, and use storyboards when you pitch to funders.

Movie makers use storyboards all the time, and it's an easy skill to master. A storyboard is a graphic representation of how a movie plays out, and you can think of it as a comic book version of a movie script.

Story boards are powerful, because they use visuals. They allow you to show, not just tell, and this makes it much easier for other people to understand your idea. You will find that your listeners will get to their Aha! moment much faster if you use this versatile tool. Thus, you could use a storyboard to illustrate the three most important use cases of your product. A storyboard allows the audience to identify with your customers. It enables you to illustrate your client's problems, and makes it much easier for you to show why your clients will be willing to pay you money for your solutions. 

It's easy to make a story board - and you don't need to be an artist to do so. Bad drawings are fine - you can always improve them later. 

Storyboards are very useful, and they can be repurposed - for example, for creating scripts for your sales teams, when they are selling your services to customers. They can graphically highlight the customer's pain points, and show him how buying your services will help to improve his productivity and efficiency.

So grab some paper and a pen and start storyboarding - just tell the story of your customer, and how his life improved after using your product, and you'll be pleasantly surprised by how much interest you arouse! You can find lots of templates to help you get kickstarted at http://www.storyboardthat.com/business/team-and-business-edition

Advice On How To Ask For It!

Most entrepreneurs are acutely aware of the fact that there's a lot of stuff they don't know about running a start-up. This is why they are quite happy to seek advice, and they get this from multiple sources - by reading books and articles online; by attending conferences; by talking to other entrepreneurs; and through mentors and coaches.

The problem with the start-up ecosystem is there's no shortage of people who are willing to give you advice, and this is what causes problems! You ask three different people, and you get six different solutions - two of which are diametrically opposite to each other. 

How do you make out which is right and which is wrong? Part of the reason you're asking for advice is because you don't know anything about the topic, which means you don't know how to evaluate the solutions either. This is why it's so hard to differentiate between good and bad advice.

My advice for what to do with all this advice is simple. You need to ask for advice from lots of different people; grade it according to its quality; and ultimately make the decision yourself. After all, this is your job definition - as the start-up CEO, the buck stops with you. You can't shirk this responsibility and this is often the hardest thing in the world to do - to choose amongst conflicting bits of advice, and then decide which one to implement. 

It's very helpful to talk to different people who have varied perspectives. In fact, you should encourage them to point out holes in your argument, and ask them to push back. The best advisors are those who act as devil's advocates, and frankly point out what the shortcomings and flaws are in your perspective. They help you to think about your problem from an alternative point of view, and this can be invaluable. 

How do you judge the quality of the advice you get? A lot of this has to do with where it is coming from - and you should give more weight to advice provided by someone who has skin in the game. Thus, you should take an investor's perspective far more seriously than someone who calls himself a mentor, and is happy to provide free gyan to everyone he meets.

Look at the credentials of the person who's offering the advice. Has he tackled the kind of problems you have to deal with? Someone who's already run a start-up successfully in the past can be extremely helpful. You need someone who's empathetic - someone who understands you and your constraints. Ideally, this should be someone who respects you - he will not tell you what to do, but will help you to make your own decision. 

It's very helpful to write down the advice you get, because this will help you to crystallize your own thoughts. Re-reading and parsing it will help you drill down until you get to the right answer. 

It's impossible to know how things will play out, which is why pulling the trigger can be so hard. The future is uncertain, and none of us have 20/20 foresight, which means we're stuck with trying to do the best we can. The key skill is the ability to be able to critically evaluate the different perspectives, and have the confidence and courage to make your own decision. 

It's important that you learn not to blame someone else if you end up taking a decision which turns out to be wrong, by saying you based your actions on their advice. It's very easy to find excuses for your failure, but that really doesn't help anyone. You need to learn to take ownership of your problems, and take the responsibility for making the decisions as well, irrespective of how those particular decisions turn out.

This is the whole point of becoming an entrepreneur - you can learn a lot in a very short amount of time, not only about the world, but about yourself as well. And as you make tough decisions, you will become smarter, and your chances of being able to differentiate between good advice and bad advice will increase dramatically. 

The pros of being an introvert

Now that I've become more active in the start-up ecosystem, I find I need to attend more conferences in order to meet more people. When I do so, I admire the extroverts at these events - the people who are the soul of the party. They know everyone, and everyone knows them. They remember faces and names, and are extremely likable, because they're fun to be around with.

I would love to be like them, but I've realized that this is not my sweet spot. While I can pretend to be an extrovert for an hour or so, it's very hard to do this on an ongoing basis - I'm just not comfortable in that role. 

There are disadvantages to being an introvert, because a lot of deals in the start-up space depend on relationships - whom you know and who knows you matters a lot, because this is a system which encourages inbreeding and thrives on close personal connections. 

Part of the problem with being an introvert when everyone else knows everyone else is that you become a bit of an outsider, and you feel left out. Now, this doesn't mean I feel sorry for myself. It's fun to attend these events, but I've realized that I can't change myself. Rather than make myself miserable trying to fit in and pretend to be someone I am not, I need to learn to play to my strengths. 

I've finally realized that there are lots of advantages to being an introvert. I'm comfortable in my own skin, and am happy sitting by myself. I am happy reading a book, and don't need a lot of external stimulation to entertain myself. I am not dependent on other people to get a high, and don't need to party to feel important or valued. I can afford to be disciplined, and do what is right for myself, without having to worry about hurting other people's feelings. The problem with being an extrovert is that you have to learn to get along with other people, and this can be hard work.

Rather than making myself miserable by attending events I don't enjoy, I find that I prefer hanging out at home with Marcus Aurelius and Peter Thiel - this gives me a far higher ROI on my time!

How an investor evaluates founder risk

When an investor evaluates a company, he thinks about all the possible risks which could cause the company to implode, so that he can try to minimize them. Risks would include things like product risk; technical risk; market risk; and competition risk. These are fairly standard in any framework which investors use to evaluate a company. 

However, there's one more risk which is far more important in a start-up, and that is founder risk. Can you trust the founder? The reality is that every investment in a start-up is a bet on the jockey, not the horse. The problem is that it's extremely difficult to evaluate the ability of a founder to run the company. How mature is he? Is he frugal? Can he lead from the front? Can he manage well? Is he responsible? Is he responsive? Is he aware of his shortcomings? Will he listen to coaching? Is he a hustler? How much skin in the game does he have? 

A of entrepreneurs are extremely smart; technically very accomplished; have done very well academically; and are charismatic. But the key question which an investor needs to ask is, "Will he be able to run the business?" Does he understand finances? Does he understand that everything takes twice as long as you think it would be? Is he excessively optimistic or is he capable of dealing with all the hurdles which real life is going to throw at him?"

The difference between a successful angel investor and an unsuccessful one is his ability to evaluate how well the founder will respond in a crisis. Will he try to hide the truth? Will he try to cover up? Or will he be mature enough to reach out for help in order to be able to tide over the crisis?

It's very hard to be able to answer these questions in advance, and this is what makes angel investing such a dicey proposition!

Emotional maturity for entrepreneurs

Raising money from angels in India

Start-up founders know that after family, friends, and other fools, if they need to raise more funds in order to grow, they will need to go to angel investors. A big problem is that there are a lot of misunderstandings about angel investors. Part of this is because their impressions are based on what happens in the US, simply because most of the books and online articles discuss the practices of US angel investors. However, the Indian ecosystem is very immature, as a result of which the Indian angel is a completely different animal from the US angel investor. 

The first thing you need to realize is that every angel is different. It's impossible to put all of them in one buckets, because each of them behaves differently. Since the only qualification you need to call yourself an angel is the ability to write a check, we need to understand that angels come in all shapes and sizes, each of whom becomes an angel for completely different reasons. 

Thus, there are some angels who will write only one single cheque in their lifetime, and never ever fund another start-up again. While many will sign up based on their gut feeling and intuition, some will take a very systematic and disciplined approach. The leaders in this space, who lead a lot of deals, have a lot of clout, because of the respect they command in the start-up ecosystem. They have had successful exits in the past, and other angels look up to them and are happy to follow their lead. 

Thus, you could find a wealthy family friend who's willing to be an angel and fund your company. This can be very exciting, and it's hard to refuse someone who wants to give you money because he wants to help your dream become a reality! For many start-ups, this is a great way to get hit the ground running. However, this is usually an informal agreement, and it's not done in a systematic fashion. Because there is no formal paperwork, it can be done very quickly, but this could also cause problems in the future. The funder is usually not a sophisticated investor, and when you need to raise your next round of funding, there may be issues about what his role in the company should continue to be.

Sophisticated angel investors, on the other hand, are experienced, and have done many angel investing deals before. A good angel investor can significantly improve your chances of thriving. He is well-networked, and can open lots of doors. Because he has helped entrepreneurs in the past, he can be a great coach as well, and help you navigate the treacherous path to success. 

However, some angels behave more like devils, and they can be a real pain in the neck. They start believing that just because they have written you a cheque, they own you. They want to give you advice all the time, and insist that you listen to their pearls of wisdom, because they think of themselves as being the experts. They want you to be at their beck and call, and expect that you meet up with them whenever that want. 

They often have crazy ideas, which you are forced to listen to politely, because you have taken money from them. However, they don't add any value, and even worse, they actually drain a lot of your energy.

Since you are a first time entrepreneur, you are naive and don't know how to deal with him; and since he is a first time angel, he expects you to toe the line and do what he says. This often becomes a case of the blind leading the lame, and is one of the commonest reasons why start-ups go belly-up.

Some angels are ex-angels - they will not invest any money, but only give you advice. To add insult to injury, they will often charge you a fee for this, in the form of equity.

This is why dealing with angel networks can be much better. While they are slower and more bureaucratic, they are also better organized, because they have a formal structure, and follow a systematic process.

You will need to learn to negotiate with the angel, but if you do your homework well, this should not be difficult - after all, your interests are aligned. Please have realistic expectations, and learn to be flexible and respectful.  Every angel has their own "sweet spot" - you need to find this to determine if the fit is right, and he is the right angel for your start-up.

Many founders believe that once he's written the cheque, the angel's job is done. He should now leave you alone and allow you to run the company as you see fit. However, from an angel's perspective, signing the check is just the beginning of the relationship - it's after the funding has been done, that the work of a good angel really starts. He can guide you when you are stuck, and because he has a lot of experience, he can help you with the hundred and one things you need to do when you are running a company, such as hiring; firing; raising the next round of funding; marketing; accounting; and ensuring good corporate governance.

Yes, you could skip going to angels completely, and go to VCs directly, but this has its own advantages and disadvantages as well. While it's true that VCs have much deeper pockets and can give you a lot more money, you also need to remember that they are investment professionals. They need to return the money that have raised in their fund from their limited partners back to them, after multiplying it. They have their own agenda, and where they are in their own funding lifecycle will determine how much money they can give you; and how quickly they need to see you make a return on it for them. Finally, if they give you money for your seed round, and then don't fund your series A, you're in deep trouble, because then no one else will want to touch you.

An angel, on the other hand, is investing his personal money. He has a lot more flexibility and freedom, and can pretty much make his own calls, because he is not bound down by a rule book. Liking you is enough reason for him to fund you. However, he has limited funds, and may not be able to continue giving you more money in the future, even though you may need it desperately.

As an angel, it can be heartbreaking to have to say No to a passionate founder, and entrepreneurs need to learn not to take this personally. Angels have their own limitations, and have to allocate their funds sensibly. While we would love to say yes to every founder, this is clearly not possible.

The rule is simple - do your due diligence on an angel investor before you accept money from him - don't get carried away and say yes to the first person who offers to fund you 

Why startup orgs need to die

There's a lot of excitement when a start-up is launched, but there's considerable unhappiness and sorrow when it fails. There's often a lot of soul searching and recrimination as to why it failed. What went wrong? Who was to blame? What could have been done to salvage it? 

This is especially true when the start-up has burnt through a lot of money, and there's always tons of finger pointing at the time of the post-mortem. Not only does the failure cause personal and emotional pain, it's also considered to be very wasteful, because so much money has gone down the drain. 

Mature entrepreneurs will step up and take responsibility for the failure because the start-up died when they were the CEO; while others will try to pass the back and find someone else to blame. Either the investors failed to support them; or the external environment was not favourable; or the competition indulged in predatory pricing; or they were too early, and the market conditions weren't right.

I think we need to understand that start-up failure is not a bad thing. The truth is that start-ups are designed in order to fail! Not all of them, of course, but obviously the ones which aren't able to compete efficiently deserve to fail. 

Remember that this is the way the capitalistic system has been designed. The rule is survival of the fittest, and start-ups need to compete with each other in order to earn the right to win. Especially when an area is "hot", you will get a rash of entrepreneurs who want to enter the field. They will usually have very similar ideas at the same time, as a result of which they will start start-ups which seem very similar to each other. This is why we see a spurt of "me-too" start-ups every few months in the industry which happens to be the flavour of the month (right now, it is AI). Since the market is not big enough for all of them, a few will grow; some will stagnate; while the majority will die. 

Let's not forget that if a start-up needs to become a market leader, it needs to earn market share by crushing the competition. After all, if one company needs to become big, the others need to fold - this is what Schumpeter's creative destruction is all about! 

The start-up space is fiercely competitive, and we need to accept this. This is true, not only for entrepreneurs, but for investors as well, which is why so many of us end up losing our money. 

However, there's really no need to mourn the demise of the start-up. Yes, the financial loss hurts, but we need to understand that this is part of the natural history of start-ups

It's a bit like the life and death of a human. We're all excited when a baby is born; and we all mourn when someone dies, but the truth is that death is as much a part of life as birth is, and we need to learn to take both of these in our stride. 

Now I'm not trying to get all philosophical here - it's just that the sooner we accept reality, the easier it will be for us to live with this fact of life. In the big picture, this is actually more efficient for the economy. Start-ups are small experiments, and the financial loss caused when they fold is much less than when a large company goes belly up. By contrast, socialism forces us to keep inefficient dinosaurs like Air India alive by putting them on expensive life support, when it would be much kinder to kill them, and allow more effective alternatives to take their place.

Yes, start-up failure does cause short term pain, but instead of mourning their demise, we need to imbibe the lessons the failure teaches us, and move on, so we can do a better job the next time.

Entrepreneurs need to remember that actions have consequences

One of the key ingredients in a start-up is trust. There needs to be trust between the co-founders; trust between the founders and the employees; trust between the customers and the company; and trust between the investors and the entrepreneurs. Thus, a founder needs to trust that when a funder says they will write them a check, they will do so. Similarly, the investor needs to trust that the founders will be open and transparent; and will proactively share information with them, so that they know what's happening. 

The problem is that this trust is often taken for granted. Keeping it alive often becomes a low priority for entrepreneurs, because there are so many different things they have to juggle. Sadly, providing regular updates to the investors; having board meetings and regular calls; sharing a MIS becomes a low priority for them.

This lack of discipline can create major problems. This sloppiness often means that the entrepreneur will not get in touch with investors until they find out one fine day that they're running out of cash. They then start getting desperate and asking for more money. This is precisely the time when investors will refuse to write any more checks, because they are upset and feel you have hidden the truth from them. 

Actions have consequences, and trust begets trust. If you treat your investors purely as a source of funds, they will no longer be willing to trust you with any more of their money, because you've let them down. Because trust is so fragile and can die so easily, entrepreneurs need to devote a lot of time and of energy on making sure they are trustworthy.

If the investor doesn't trust you, this doesn't mean he thinks you are a crook and that you have siphoned them money - it just means that he can't trust you to run the business properly, and will look for better avenues to deploy his money.

Founders need to do a premortem before they start up

Most entrepreneurs are in love with their business plan. They are convinced that what they're doing will be so profitable that they fail to think about what can go wrong. This can be tragic, especially when you factor the time and energy which they have invested in a company which is doomed to fail, simply because they did not bother to think about potential problems. This is something entrepreneurs need to be wary of, because starting a company can be an expensive affair. It's not just the opportunity cost of the salary they could have earned if they'd worked in a job - it's also the emotional energy which gets drained in doing something which didn't work. 

Being an entrepreneur exacts a huge emotional toll. Not only does the founder have to deal with the daily unpredictable ups and downs which characterise a start-up, it also puts a lot of strain on your family, because it completely disrupts your work/life balance. Founders need to be single-minded in their pursuit of success, which means they often have to sacrifice personal ties and friendships in the all-consuming desire to create something innovative. 

This is why a pre-mortem is so useful. This is a thought experiment, where you imagine that you are five years in the future, and that your start-up has failed. You then have to list all the possible reasons which could have caused it to fail.

This might sound like a doomsday exercise - isn't imagining the possible reasons you could flop a very pessimistic way of starting off as an entrepreneur? Actually, you should do this to improve your odds of success! If you're aware of all the reasons which would cause your start-up to fail, your chance of succeeding become far better, because you can prevent these problems. 

This is a clever way of doing the needed due diligence on your own project before you actually implement it in real life. The good news is that it doesn't require much money to do this - all you need is time, imagination, and a framework. 

A useful way of coming to terms with reality is to actually pitch your business plan to investors and see how quickly they shoot it down. Now, you might get disheartened when people refuse to fund you, but when they say no, they're actually being quite kind. They can point out to you what the flaws in your company are - something which you may not realize because you're too enamoured by your idea to be able to see its shortcomings. In fact, sometimes the kindest thing an investor can do is to say no to an entrepreneur, so he doesn't waste five years of his life chasing mirages.

Now I am not saying you need to obsess about failure. The truth is that if you are aware of how and why you will fail, you will actually increase your chances of success. This is the famous Charlie Munger "invert strategy". After all, success is the antithesis of failure, and as he says, “Tell Me Where I’m Going To Die, So I Won’t Go There”

Most entrepreneurs try to model themselves after success stories like Elon Musk and Steve Jobs. Yes, these are inspiring heroes, but the truth is that success is usually idiosyncratic, and hard to replicate, because it depends upon so many factors which are completely out of your control. You need to be in the right time at the right place, and luck plays a huge part in success - and this is not something you can control. However, the reasons for failure are usually the same - you run out of money; or you run into people problems; or you are not able to execute because the market is not ready. If you take the time to think this through, your investors are more likely to give you money, because they can see that you are aware of the risks which plague a start-up, and have a plan to deal with the obstacles which litter the journey of a founder.

Emotional maturity for entrepreneurs

All entrepreneurs understand that they have to slog hard in order to succeed. They are willing to put in the sweat, toil and tears, and burn the midnight oil so that their start-up can take off. However, they often underestimate the difficulty they're going to have with managing their emotions during their start-up journey.

Running a start-up can be an emotional rollercoaster ride. Convincing investors to give you money is not easy, and when you do succeed, you're on top of the world. Then, when you realize that you're running out of it again, you have to go through the cycle all over again - often with a new set of funders. This becomes a recurring cycle, and while you do get better at it, it's always full of suspense and anxiety, because you can never predict what the outcome of your pitch will be. Investors blow hot and cold all the time, and it's tough to be a mind-reader. 

You will have times when everything is going like a dream, but you can never be sure how long the good times will last. When things start going downhill, they can crash remarkably quickly, and you may find your customers, employees and investors deserting your sinking ship which you are trying to do your hardest to salvage.

Volatility and uncertainty characterize a start-up, and a lot of entrepreneurs find it very difficult to deal with this. It can be a lonely journey, and you need to accept that. You need to learn with the fear, uncertainty and doubt which will assail you on a daily basis.

The good news is that don't have to do this all by yourself - you need to reach out to family members, colleagues, other founders and mentors, who can help you during this difficult time. 

Step number one is acknowledging the fact that you require help. This is often a big problem. Many founders are very macho, and believe they should be able to tackle all the problems the world throws at them by themselves. They do not even recognize that they are not being able to cope. They try to tap into inner reserves of strength which often are not sufficient, and they start cracking up, by which time it may be too late. When things aren't going well, rather than be open and ask for assistance, founders try to cover up that they are in deep shit, which just makes matters even worse.

Along with checking the IQ of entrepreneurs, I think measuring their EQ (emotional quotient) is equally important. As Robert Kiyosaki points out, the C-grade students are the ones who end up employing the A-grade students, because they are better at delegating and managing. Founders need to be emotionally strong and self-aware, so they can cope with the challenges which crop up daily in the life of a start-up. Putting out fires can drain you, and it's hard to keep you cool and to bounce back. There are lots of down days -for example, when you find that you may not be able to pay the next month's salaries; or when your investor refuses to honour the term sheet they signed a few weeks ago. 

It's not just about managing yourself. Running a start-up means you need to build relationships all the time - not just with your investors, but with your employees, your vendors, and your customers as well - pretty much everyone you come in touch with, because you have to wear multiple hats.

A high EQ is what differentiates a good entrepreneur from a bad one. However, it's one of those things which is extremely hard to measure, because it's such a soft skill. The good news is that you can get better at it by learning mindfulness, and this can be a valuable armamentarium in your tool-kit.

NB And yes, investors need emotional maturity as well. Most of them are older, and have learned it by graduating from the School of Hard Knocks, but this is not always true.

Intentional Prospecting for Founders

Learn how intentional prospecting can help B2B SaaS founders and salespersons in early stage companies. Read on for tips and tricks to optimize your prospecting efforts.

What is Intentional Prospecting and Why is it Important for B2B SaaS Founders?

Are you a B2B SaaS founder or salesperson in an early stage company? Are you struggling to grow your business via outbound efforts? Intentional prospecting might be the solution you're looking for.

What is Intentional Prospecting?

Intentional prospecting is an approach to finding and engaging potential customers who are most likely to convert into paying clients. This process involves identifying your target market, creating a targeted list of potential customers, and reaching out to them with a personalized message that highlights the benefits of your product or service.

Why is it Important?

India is a highly competitive market for B2B SaaS startups. It can be challenging to stand out and attract new customers. Intentional prospecting helps you focus your efforts on the right customers, saving you time and resources while maximizing your chances of success.

Tips and Tricks

Identify your target market: Understand your ideal customer profile and create a list of potential customers who fit that profile.

Personalize your message: Craft a personalized message that highlights the benefits of your product or service and how it can solve your potential customer's pain points. Keep it short and sweet. Focus on their key social media posts, tweets, news, companies they've worked in, etc.

Leverage social media: Use social media platforms like LinkedIn, Twitter, or even plain old email to connect with potential customers and build relationships.

Attend industry events: Attend industry events and conferences to network with potential customers and build your brand awareness. This can help you personalize your messaging better.

Follow up: Don't be afraid to follow up with potential customers who haven't responded to your initial outreach. A gentle reminder can go a long way in securing a sale. Magic happens in follow ups.

Intentional prospecting can work for funding too!

I received an amazing set of emails from a US-based founder solving a pressing healthcare need. They found out that we invest in healthcare, and personalized the email mentioning recent news about a portfolio company. Shared the problem in 1 line, and their solution in the other. No deck. Ended with a simple CTA. Follow-up emails mentioned 1 specific & different part of the problem with a data point - ending with the same CTA 'Would you like to know more?'. We didn't take it ahead since the mandate and round size were way outside our scope.

"Hey Siddharth,

Noticed [portco] had yet another publication in [journal], these go a long way in building credibility in the [sector] community. Kudos to the team.

Lack of accurate predictive diagnostics in [disease] means patients don't get the right care. We use [tech] to identify the right symptoms & provide the right [treatment] for the right patients. Our trials show Xx the accuracy of current technologies.

We'll start raising our Series A next quarter. Would you like to know more and build conviction by the time we open our round?"

Simple. Concise. To the point. Can be read within a screen on your phone. No heavy decks or fancy langauge. No jump on a call. No monetary ask. Keeping it light and conversational with a clear motive to build conviction along the way.

Intentional prospecting is a powerful tool that can help B2B SaaS founders and salespersons in early-stage companies which focus on outbound. You can optimize your prospecting efforts and maximize your chances of success in this highly competitive market.

Try it. If you want help with intentional prospecting, drop me an email titled 'Intentional Prospecting: [company name]' at ss@malpaniventures.com with more details.

Painting VCs as villains

Lots of entrepreneur love painting VCs as villains. VCs have become the favourite whipping boys in the start-up ecosystem, because they have poured money into companies which have spectacularly blown up. These VC funded businesses have ended up burning a lot of cash, without creating any profit or value. 

It's very easy to be an armchair critic, and talk about how short-sighted these VCs are. Common complaints about VCs are that they are short sighted; they prefer copy cat models; they follow the herd mentality and refuse to take courageous contrarian bets; they don't understand basic financial principles such as unit economics; and that they are obsessed with the single minded pursuit of growth, no matter what the cost.

However, I think it's actually all these entrepreneurs who criticize the VCs who are being short sighted. 

Now, I can understand that founders are upset when VCs refuse to give them money - after all most entrepreneurs think of themselves as being the next Steve Jobs, and are very frustrated when no one recognises their genius. This is one of the reasons they bad-mouth VCs. 

We also need to remember that it's very easy in hindsight to be able to say that a particular investment wasn't sensible, whereas the reality is that at the time at which the investment was made, the company was a completely different animal. However, because it failed to evolve, it died, and it's not fair to hold the VC responsible for its failure. 

Obviously, we all need someone to blame, and it's easy to blame VCs. We think of them as being well-heeled money bags, who are detached from the daily business grind. Comfortably ensconced in their fancy air-conditioned offices, we believe they are disconnected from harsh reality. All they do is play around with spreadsheets, think about the big picture, and spend other people's money in order to drive growth. Also, since VCs often don't participate in these public debates, we often don't get a chance to hear their perspective.

The key strength of capitalism is its ability to allocate capital intelligently, and VCs play a very important role in the ecosystem. They serve as a filter in deciding which companies should be backed, and which deserve to die a quiet death. Don't forget that the number of start-ups they don't fund far outweighs the ones they do. If they had funded a lot of the crazy business plans they are forced to listen to, they would have ended up losing a lot more money, and would have much less to invest in backing what they believe are the better start-ups.

Do they make mistakes? Yes, of course they do, but they are smart enough to learn from these! Just because they don't share their errors doesn't mean they aren't improving all the time. It's always easy to criticize what someone else is doing. However, unless you walk in a VC's shoes, it's hard for an outsider to understand what kind of trade-offs they have to make. Just because they are soft targets doesn't mean it's fair to take potshots at them. Many start-ups blow up, not because of the VC but despite them. However, we only hear one version of the story - and since this is what the founder chooses to share, it's often biased and inaccurate. This is because unhappy entrepreneurs are happy to go to town and complain publicly about how short sighted VCs are - about how Indian VCs don't have any vision or guts, as compared to Silicon Valley VCs, who are willing to pump in money because they are entrepreneur-friendly.

VCs have a very challenging role to play, because it's not easy to multiply money in the start-up world. Most start-ups will fail, no matter what the VC does. Often, even the tons of money, superb mentoring, and high quality support they provide cannot save a floundering company. 

Entrepreneurs and VCs need to learn to respect each other, rather than try to blame the person sitting on the other side of the table. Entrepreneurs need to learn not to take rejection personally - after all, this is only business. However, criticism and mud-slinging seem to be only things some Indians are world class at!

Using analytics to become an efficient learning organisation

Given the fact that technology is changing so rapidly, all organizations understand the importance of investing in continual learning, so that they can remain on the cutting edge. Now it's all very well to talk about the importance of being a learning organization, but how do you actually measure the learning of your employees? This can be a major challenge, especially in the new technical areas, such as NLP and artificial intelligence. How do you know whether your programmers and computer engineers have the skill sets needed to compete? Do they need additional training? Which is the best training method? And whom do you select for advanced training? Or should you hire fresh blood?

These are extremely important questions which keep CEOs, CTOs, delivery chiefs and business unit heads up at night. Surprisingly, they don't know how to answer them, because they don't have a good way of objectively assessing the technical skills of their programmers. This is a remarkable lacuna, given the fact that the success of these companies is based on the technical competence of their employees. 

They are hampered by the fact that technical learning assessments today are imprecise and inaccurate. They are usually very subjective, and are based on what the manager of that particular programmer feels about his skills. The technical competence of all the programmers in a team is not going to be the same, and it's quite short-sighted to pretend that they are all equal. However, employee ratings are easy to game, and it's not possible to know if an individual gets a high technical competence rating because he really is a programming whiz kid, or because he's good at sucking up to his manager. 

A star programmer can be 10 times as productive as an ordinary one. How do we identify these star programmers? How do we help them to get better and better? How do we get rid of the non-performing programmers who are just occupying space because they are better at buttering up their boss?

The problem with technical competency assessments today is that they can easily be gamed. Most technical skills assessment engines today offer only simple multiple choice questions. These are notoriously unreliable, because a smart programmer can guess the right answers, even though he is completely clueless about the content. Another commonly used evaluation option tests algorithmic skills, but this is useful only for employees whose job involves a lot of coding. It's pointless testing this for the umpteen other roles (front end, back end) where these skills are not related to their day to day work. 

The gold standard is to test using real life coding problems which the engineer has to solve so he can prove his practical capabilities. Now this is typically done using a whiteboard, with a highly skilled engineer taking an interview. However, because this requires human intervention, it is very expensive and time consuming, and it is not possible to apply this for junior hires. This is where the problem starts, because mark sheets and grades from India's colleges are highly unreliable.

We need a better method for technical assessment training - an engine which is human independent, and which also encourages continuous learning. This would be very useful for the company, because they can fast-track their stars and assign them to the best projects, so that they're able to create more wins for the company. They will also be able to identify the poor performers, so they can upskill them and reskill them, to make sure they don't get left behind. It's only if the company understands the technical strengths and weaknesses of its people at an individual level will it be able to do this efficiently. These people analytics can be used to ensure that employees have the cutting edge skills the company needs to remain relevant as the world evolves.

These metrics would help the business delivery heads to plan their training courses, because they could see what their skill gaps are, and how fast they need to fill them. This objective criterion of competence would also help business managers to staff their teams more intelligently, so they can optimise their employee utilisation scores. Right now, they wing it, and get the smart guys to compensate for the incompetent coders, but these metrics would help them to make better assignment decisions.

Chief human-resources officers are already starting to deploy predictive models that can help them to identify, recruit, develop, and retain the right people, so they can maximise their human capital. Mapping HR data helps organizations identify pain points and prioritize future investments.

This is very helpful for the employee as well, because he can objectively understand what his deficiencies are, and then ask for help to fill these in. He will be able to accelerate his own career progression - and will be able to objectively prove that his skills are improving at the time of his appraisals.

This will create a positive virtue cycle, as ambitious programmers will compete with each other to complete the assessments successfully, in order to get raises and promotions. Just like doctors need continuing medical education (CME), computer programmers need continuing technical education as well. HR understands the importance of this, but most HR people are not qualified enough to be able to judge the technical skills of the coders. 

A dashboard which displays the technical competence of a programmer over his career will allow the organization to become a true meritocracy, where the good engineers get promoted because they're technically better. This is the kind of company which will attract even more good engineers, because they can see that their career progression can be meteoric if they are skillful. A company which is able to measure technical skills properly, and reward them well, has an unfair competitive edge in the market because it will quickly become the employer of choice!

Even better, this dashboard can be used to prove the value of the training which the HR dept is tasked with providing. All IT organizations spend gobs of money on training, and many have even set up their own universities. Sadly, they don't have any idea as to whether the training works; why it works; when it works; which training works better; and for whom it works, because there are so many variables which they cannot parse because they do not have the data analytics to do so (which is a bit of an irony, given the fact that these IT organisations make money by providing data analytics for their clients!)

These companies still can't answer basic questions about the training they offer. Is it better to do the training online? Is peer to peer better? Is classroom training better? Should it be done informally, one on one? There are lots of options, but this just generates a lot of confusion, because the feedback loop never gets closed. 

The problem is that companies today spend millions on technical training, but they are hamstrung because they have inadequate measurement tools to assess the results of their training courses. Today, all they have to rely on is participation completion data and employee feedback reviews, but they really don't have a way of being able to measure improvement in technical performance in a quantifiable way.

A major pain point today is assigning engineers with the right skills to the right project. This is a key decision because they need to make sure they match the engineer's competence with the complexity of the project. Today, the team leads and project managers work closely with the HR teams to identify valid profiles. They query the HRMS/HRIS systems to identify people with relevant skills, and then use those shortlisted profiles, who are then interviewed by the internal tech team, and then by the client. The problem is that the talent pool has become so shallow, that the majority of profiles are inadequate. The company then either needs to hire new employees on a war footing; or re-skill their employees - both of which are complex and expensive exercises. They have been able to get away with these inefficiencies for so because they had very fat profit margins. However, as these get whittled, they are going to have to use better tools to measure the technical acumen of their engineers more accurately.

Assessments are not the end but the means to an end - the end being data driven decision making in personnel management. We need to treat people as people - not as widgets.

The issue with being right for the wrong reasons

All of us are very happy to take credit for our successes. When we are young, we believe we deserve these, because we attribute them to our intelligence and the hard work which we have put in. 

However, as we get older and more mature, we see that lots of people who are much smarter than us and who have work much harder, fail to get the success they deserve. We can also see lots of people who are successful, even though we know they are lazy and stupid. Once we stop complaining about how unfair life is, we start understanding that a lot of what happens in life is random and dependent on luck.

Often, even though you do everything by the book, you end up failing; and, sometimes, even when everything you do is absolutely wrong, you get lucky and hit the jackpot. Hopefully, everything balances out in the long run, but there's an important lesson here. 

In the best of all possible worlds you would be right for the right reasons. The good outcome would reinforce your belief and your self confidence, and would you get progressively better at what you do. Unfortunately, the world is not that simple. 

The second possibility is when you turn out to be wrong because you were following the wrong model. For example, you may know you're trying to pull off something where the chances of success are very slim, but you still want to take the chance because you don't have any other option. When you do fail, you can live with that outcome, because you knew that the odds were stacked against you. 

The problems arise when you turn out to be wrong, even though you did everything by the book. You followed all the right processes and yet the outcome was bad. This can be disheartening, and when you start personalising the failure, you think of life as being unfair. You believe that you're jinxed, and that you never get a break. The truth is that no matter how correct your process may have been, a good outcome will not always follow. Life has many moving parts, and it often behaves like a capricious chaotic system - especially when other human being are involved! 

The worst quadrant is when you turn out to be right for the wrong reasons. This is when things go to your head, and you start feeling that you are the Master of the Universe. You start believing that you can do no wrong, and can pull off anything and everything. You start taking all the credit for the success, when the reality is that it happened for lots of other reasons which were actually beyond your control. 

However, you start thinking of yourself as being infallible. This is the pathway to disaster, because once you start personalizing your successes, you no longer remain rational. You assume you are better than everyone else - after all, doesn't your success prove that you are smarter than the rest of the world? And when you are on top of the world, you will attract lots of yes-men and sycophants who will be happy to reinforce your delusions of omniscience and omnipotence. 

The next time around, in order to prove how much better you are as compared to everyone else, you start taking shortcuts. You jump to a particular conclusion, and then find reasons to justify your actions. You let your gut rule your head. You get close minded and expect to succeed every time. Even when you can see things aren't going well, rather than try to correct your actions, you double up on your bets, because you need to prove that you are right, even though nothing seems to be working out. 

We see this all the time - for example, with rookie investors in the share market. You make a few bets, and if you get lucky, you feel you know all the answers, especially when you make a lot of money at the start. You keep on making the same bets, but when the market turns and you start losing money, you refuse to accept the fact that your initial success was because of luck, and not because you are smarter than the rest of the world. This is the path to doom, and you end up burning your fingers so badly, that you refuse to enter the market again, by claiming that it's rigged!

We need to learn to separate process from outcome, if we want to use logic and reason to succeed.

A comic book every founder should read

I'm a big believer in the idea that reading provides founders and investors with an invaluable competitive edge. It's a great source of insights, especially in the start-up space, which changes all the time. Every start-up needs to become a learning organization, and books are a great source of both acquiring wisdom, as well as sharing it.

The problem is that lots of people don't like to read. Many books aren't well-written, so I don't blame them for this attitude. This is also often a hangover from their school days, when reading a book was a compulsory chore which was forcibly inflicted on them over their holidays. They learned to resent books, because they took them away from their fun and games.

This is why so many people don't know how to read well - they aren't able to extract information efficiently from a book. They get bored; while others feel they are too busy to be able to afford the luxury of reading. 

This is why it's such a pleasure to come across this great comic book called Mission in a Bottle. This is a brilliantly written graphic novel about a successful start-up called Honest Tea. 

Just the fact that it's in a comic book format means that it's one of those books which you can't stop reading once you start it. It's an extremely well-told story, which is fun to read. 

I suggest you download it on your iPad and read it through your Kindle app, because it comes alive in living colour (as compared to the print version which is just in black and white).

It's not just the brilliant graphics which make the book so interesting - it's the underlying real life story which makes it so absorbing. After all, that's what every book really is - a story which the author is telling the reader. 

Mission in a Bottle is an honestly written first person account by two co-founders, who started a very successful company which they sold to Coca Cola. I enjoyed reading it, not just because the artist has done such a great job with the illustrations, but because it's loaded with real-life pearls of wisdom about the trial and tribulations of running a start-up. 

Not only is it a wise book, it is actually a gripping page turner, because you're just dying to find out what happens next in the start-up's roller coaster journey. It's a great way of absorbing the real life lessons which they learned the hard way in a painless enjoyable hour or so! 

What makes it especially valuable is the fact that the two co-founders are so different. One is a first generation entrepreneur, who started the company; and the second is his professor from the Yale School of Management, who mentors him and helps him navigate the trials and tribulations of the real world. Since it offers the varying perspectives of the different players in the start-up ecosystem, and how these evolve over time as the company matures, this makes its message so much more memorable. It gives you a great peek behind the scenes, so you can see what the different stake-holders at the table are thinking.

This is a book everyone in the start-up space should read. It's the kind of book I would gift to all my founders (if I was sure they would read it!), because I know if they absorb the lessons it shares, they're much more likely to be successful.

When founders fight, everyone suffers

There are many reasons why start-ups fail. They could run out of money; their product may not function properly; the competition may whip them; or they are not able to find paying customers - it's a long list! However, one of the commonest reasons for a start-up going belly-up is conflict between founders. Unfortunately, this is very rarely discussed, even though it's so prevalent, because this is a taboo topic. Because no one wants to wash their dirty linen in public, it's one of those things which is buried under the carpet. 

Friction between founders can be the death sentence for companies which are failing. This is when the blame game starts, and rather than trying to salvage the company, the founders start complaining that the others are slacking. Interestingly, conflict can be an issue even when the company's doing very well! One founder feels that he's putting in all the effort, and though the other one is shirking, he is still being rewarded disproportionately, and he can resent this.

Founders get together to start a company with the best of intentions. They are happy to team up, because there is strength in numbers. They also know that investors prefer funding a team, where the founders complement each other's skills and strengths.

The trouble is that as the company matures and evolves, the demands on the founders change. While some can adapt, not all are able to do so. When one of them fails to recognise that he is no longer contributing to the company's growth, this sets the stage for future conflict.

Thus, a founder will continue thinking of himself as being responsible for birthing the company, and will therefore always believe that he should be treated as an owner, no matter how big the company has become. However, if they are unable to grow with the company, they start acting as a bottleneck which strangles the company's prospects, rather than adding value. This causes all kinds of ego issues, especially if the other founders are able to continue contributing effectively. This becomes an emotional, touchy topic, which no one wants to bring up. This means the founder who's doing all the work has to carry the dead weight of the other co-founder, but is unable to discuss this openly with him. As a result, he gets angry and resentful, but because he can't talk about it, he bottles it all up, until it finally bursts out one fine day.

The founder who's not being able to contribute anymore can continue to delude himself up to a particular point, but at the end of the day, if he's honest, he understands that he's no longer doing his fair share of work. This makes him uncomfortable, and he feels threatened. He may try to over compensate by doing more of the stuff which he understands, but this may not be in the company's best interests. Because he's worried about his future in the company, but can't talk about this to any one, he starts behaving in a completely irrational fashion.

What makes matters worse is that no one is willing to discuss this topic. Board members can sense that all is not well, but they're not sure how to address the problem, because it involves such touchy, personal issues. They feel that it's the founders who should resolve this amongst themselves, and therefore prefer staying silent. Also, they don't want to be seen as taking sides, or precipitating a crisis. 

Sadly, founders are often not able to resolve the issue, because of misplaced personal loyalties, based on their past history and friendship. They often don't have the maturity to understand that they need to put the company first, and their personal interests afterwards.

This is why the matter drags on for a long time, and this causes a lot of harm, because they are trying to paper over the cracks, rather than address the issue head on. Unfortunately the resentment keeps on simmering, until it finally blows up, and then the company implodes. 

Handling founder conflict is one of those topics which no one wants to take responsibility for. Because no one wants to bell the cat, everyone prefers to turn a blind eye to the problem, and continue pretending all is well. However, when a crisis occurs for some other reason   (for example, most commonly when the company finds it is running out of money), this often brings matters to a head, and it makes the crisis much worse. When you need founders to be helping each other in this tight spot, they end up fighting with each other, and they may drag the company down because of their personal ego issues.

The best solution to founder conflict is to prevent it - and this is why selecting the right co-founders is so important. You should spend even more time checking compatibility when selecting a founder, as compared to selecting your spouse! Treating the dispute can be very hard, unless the founders are mature and emotionally self aware. If they have a high EQ, they may be able to resolve the problem, but the reality is that if they had a high EQ in the first place, matters would never had reached this sorry pass! 

There are no easy answers, and because each situation is so unique, the founding team needs to resolve it for themselves. You need to remember that other start-ups have dealt with this problem earlier, and unless you find the courage to bring it out into the open and address it head on, it's not going to just magically disappear. Yes, it can be a painful process, but not addressing it causes far more pain. 

Step number one is not to jump to a solution, but to spend time trying to identify exactly what the problem is. What's the underlying reason for the conflict? Is it incompetence? Is he out of his depth? Is he burnt out? The truth is that you can try to resolve this - after all, you do share a lot of camaraderie, which is why you decided to start the company together. You can tap into this reservoir of good will, by remembering the good times, and using these to help you resolve the contentious issues amicably.

There are success stories as well, where the founders disagreed with each other, but instead of splitting up, they took time to sit down and make things work out. However, you need to be willing to engage in difficult conversations in good faith. If you are mature enough to be able to disagree intelligently with each other on a daily basis when running your company, it's very likely that problems will never reach a crisis situation. 

Founders should sign inter se agreements to deal with some of these tricky issues, to prevent them from blowing up. Yes, when everything is hunky-dory, you may believe that it can never happen to you because you are such close buddies, but it's still important to discuss the possibility. If you do so, at least you have some kind of plan to deal with it, rather than getting completely blindsided. 

If you don't have an inter se founder agreement, this itself is a red flag for investors. It means that you are being immature, because you've not thought about this possibility. A much more mature approach is to say if there is a conflict, we do have a plan to deal with it. This will inspire investor confidence, because it shows that you are prepared for all contingencies, and will not let the company go belly up because you are fighting with each other.

Give a Demo That Highlights the Benefits, Not Just Features

How to Focus on the Benefits, Not the Features while Giving a Demo

Struggling to get prospects interested in your demo? Learn 3 steps to focus on the benefits & not features of your B2B SaaS products while giving a demo. Previously we wrote about 'Giving Product Demos That Sell', and 'Knowing Your Audience'.

3 Steps to Highlight the Benefits of Your B2B SaaS Product in a Demo

Are you tired of giving demos that just showcase your product's features, without capturing the attention of potential customers? As a B2B SaaS founder or salesperson in an early-stage company, giving a demo is a crucial step in the sales process. But how can you ensure that your demo focuses on the benefits of your product, and not just its features?

In this article, we'll go over the top 3 steps to keep in mind while giving a demo that highlights the benefits of your B2B SaaS product, along with real-life examples and common mistakes to avoid.

Step 1: Understand Your Customer Personas

Before giving a demo, it's important to understand who your potential customers are and what their pain points are. This will allow you to tailor your demo to their specific needs and show them how your product can solve their problems.

For example, let's say you have a B2B SaaS product that helps small businesses manage their finances. Your potential customer personas could be a small business owner who struggles to keep track of expenses or an accountant who spends too much time on manual data entry.

By understanding your customer personas, you can showcase the benefits of your product that are most relevant to them, such as saving time and reducing errors in financial management.

Here are 10 close-ended questions you can ask to identify and understand your customer's persona:

• What is your job title?
• What industry do you work in?
• What size is your company?
• What is your budget for [product/service]?
• How many people will be using [product/service]?
• Which [product/service] features are most important to you?
• How do you currently handle [problem that product/service solves]?
• Have you used any similar products/services before?
• What is your timeline for implementing [product/service]?
• What is your decision-making process for purchasing [product/service]?

And here are 10 open-ended questions you can ask to identify pain points and gather information:

• Can you tell me about your current workflow when it comes to [problem that product/service solves]?
• How does [problem that product/service solves] affect your day-to-day operations?
• What are the biggest challenges you face when it comes to [problem that product/service solves]?
• Can you describe a recent experience where [problem that product/service solves] caused issues for your business?
• How do you currently measure the success of your [process/product/service]?
• Can you tell me about your goals for [process/product/service]?
• How do you currently collaborate with other teams or departments?
• Can you describe your current technology stack?
• What are your top priorities for improving your [process/product/service]?
• How do you see [product/service] fitting into your overall business strategy?

Step 2: Focus on the Outcome, Not the Process

During your demo, it's easy to get caught up in the process of how your product works. But what potential customers really care about are the outcomes - what benefits will they get from using your product?

For example, instead of just showing how your financial management software works, focus on the benefits it provides, such as:

• Saving time on manual data entry -> increase productivity
• Reducing errors in financial reporting -> increase efficiency
• Improving cash flow management -> better resource management

Highlighting the incentives that your customers will receive can help you close more sales and stand out from the competition. By focusing on the outcomes, you're showing potential customers how your product can make their lives easier and more efficient.

You can use a script similar to this!

Step 3: Use Real-Life Examples

One of the most effective ways to showcase the benefits of your product is to use real-life examples of how it has helped other businesses. This can be in the form of case studies, testimonials, or even a live demo with a current customer.

For example, if your financial management software helped a small business owner save 10 hours a week on manual data entry, showcase that in your demo. Or, if a customer was able to increase their profits by 20% after using your product, highlight that as well.

By using real-life examples, you're showing potential customers that your product can provide tangible benefits and has a track record of success.

Common Mistakes to Avoid and How to Rectify Them

Mistake: Focusing too much on features and not enough on benefits

Solution: Use the steps outlined above to focus on outcomes and real-life examples

Mistake: Not tailoring the demo to the specific needs of the customer

Solution: Understand your customer personas and showcase how your product can solve their specific pain points

Mistake: Talking too much and not allowing the customer to ask questions

Solution: Encourage questions throughout the demo and make sure to leave time at the end for a Q&A session

Real-Life Examples with Companies

Let's take a look at how some real-life companies have effectively highlighted the benefits of their products during a demo.

Example 1: Tracxn

Tracxn is India’s leading startup data platform used by 850+ VC, PE and IB firms. It helps Investors discover start ups across the world and make better investment decisions. During their demos, they don't just showcase the features of their product, such as insights on Market trends, Investor Activity and New Business Models. Instead, they focus on the benefits of using their software, such as:

• Helping investors create a dealflow pipeline according to their investment thesis
• Find startups similar to their portfolio companies in order to conduct market research
• Identify potential next round investors for their startups as per investors portfolios

By highlighting these benefits, Tracxn has become the go-to video database software for private investors and facilitators in India

Example 2: Razorpay Payroll

Razorpay Payroll is an automated payroll & compliance software. It takes care of everything payroll related for clients. During the demo it does not focus on features like dashboard, API integrations etc, instead it focuses on benefits like:

• Making payments to employees & contractors from a single page with a few clicks
• Automatically taking care of TDS, PT, ESI, PF payments and quarterly filings
• Easy reimbursement requests and approvals from the app

By highlighting these benefits, Razorpay Payroll has become the go-to video payroll tool for many small businesses & startups in India because they can automate the process without adding to headcount.

Tips and Tricks

• Use visuals to help showcase the benefits of your product. For example, use graphs or charts to show how your software can improve productivity or increase revenue.
• Keep the demo concise and to the point. Potential customers don't want to sit through a long demo that drags on.
• Emphasize the value of your product, not just the cost. Show potential customers how your product can save them money or increase revenue, rather than just highlighting the price.