Bootstrap in Bangalore

This is going to be a theme in this blog/book – look around, think local and leverage available resources. Any business being started is adding some value to someone’s life. Either it is removing an existing pain point, giving gratification which never existed or creating an efficiency in a commercial ecosystem. For a young bootstrapper with limited resources the ideal customer would be herself. Lot of small projects start with just satisfying your own itch. If many people share that itch, it could be a start of something big.

Even if you are not a representative customer of the target market, look around. Nothing works better than being able to see the person you are addressing, talking to her and taking early feedback on the product/service you have. Lot of folks conjure an imaginary customer in USA who is going to spend lot of dollars. Unfortunately, remote innovation seldom works. In fact chances are that if you make something really good for the local market and it has universal appeal, you will be poised to take the leap. Think local not just in terms of audience or customer but also in terms of execution. And get really local like instead of India, think Bangalore. Instead of saying in your business plan that I will market in US, obviously saying that I will market in Indian metros is much better. But even better is to say I will start in Bangalore and open a marketing office on MG Road, Kormangala and Indranagar. Once you get to such specifics and ask the broker rental rates and deposits in these three places, you will automatically go back to the drawing board Then you get to being innovative and inventive by thinking that maybe I will use my current apartment as the marketing office till I get my first customer then once revenue comes, I can move to R T Nagar which is not that far from M G Road once I take the shortcut. And once you get more customers, you think why did I ever need to be at M G Road!

Instead of doing projections where you calculate in the top 6 cities 5000 customers exist for your service, you start with 5 that you know in case customers are business customers. They can uncles, aunts, friends at the right places in companies that you want to target as a business. People who will willingly be guinea pigs for your new idea and will provide refrences to the next 5 customers. This is what I mean by leveraging existing resources. Your network is your biggest resource, I will probably devote a post on networking later. For example if you don’t know 5 people in the space you want to target find a partner in your network who does. In the previous office location example, if office location is important to your plans find a friend, uncle or benefactor who will allow you to piggyride on an existing place.

Once you have the game plan ready for bangalore. It is easy for you to multiply that by 3 and see if the numbers are interesting to expand to Chennai, Mysore or Hyderabad (close by and easily accessible). Bangalore with a population of more than 70 million itself should be a big market and enough rich customers who are net savvy or even a whole lot of urban poor if that is your market. There is flourishing textile, auto, horticulture, biotech and other businesses around in case you think bangalore is only about software.

So what if when you look around, think local and try to leverage your resources you find that you don’t have enough to make headway. Instead of bemoaning – if I just had this, I could have made a great start – just ditch the plan and go back to the drawing board. There are just too many opportunities awaiting entrepreneurs and you have to find one that suits you. Play to your strengths, anyways starting out is going to be tough so you better have an unfair advantage in what you are starting out to do. If it is something where you do not have that unfair advantage don’t start, look for another thing where you do.

Before we go looking for that place to start up, lets just explore if we are ready for it. I was trying to be non-linear for the blog unlike the book, but seems my thought process is working better linearly.

My target audience is people who have been in a job since 2+ years and want to start out. A lot of people plan a startup in college also (I did) and very often it doesn’t go far (mine didn’t). I would recommend if one is in college, its a very good idea to try a start up especially one’s which can be executed in the hostel room and college infrastructure could be leveraged for the same. The best would be if students are the target customers since they are all around you. So this gives you some idea about the bootstrapper’s mindset: look around, think local and leverage the resources which are easily available. Bootstrappers love free resources which are aplenty in college – free bandwidth, free labs (especially if you can convince the prof in charge of labs to give you the keys and instruct assistants to work for free), free hands (a bootstrapper should be able to convince fellow students to help just as a favor or just for getting the experience) and free time (its not like you are sitting at home without a job, you are in college anyway and trading time from boozing late nights to starting up isn’t a bad trade). However, starting out immediately after passing out is a bad idea. You have just lost the ecosystem you were used to all this time. You probably have a job in hand which can give you valuable real life experience and create a professional network which will be of great value later when you start.

If you are already in a job lay some ground work before you set off on the bootstrapping journey. Bangalore is a talent scarce market. If you are serious about starting up your first priority should be to be an outperformer in your existing job. In a talent scarce market it will make you a very valuable resource. It allows you to establish credibility with peers and seniors, which could be very important when you start up. It could also give you some bargaining chip for becoming a consultant with your existing employer. Becoming a consultant helps you in many ways. Due to strange tax laws as a consultant you can claim many genuine allowable expenses like home office, travel and phone greatly reducing your tax burden. Only a 10% or so TDS (according to budget 07) will be cut by the employer leaving you with extra cash for a full 16 months since the tax will be paid the next financial year September. Both the above things allow you that extra dough every month which you can productively deploy in your bootstrapping efforts. Usually Indian employment contracts bar you from doing absolutely anything else other than your job. In my opinion work done by you on your time and not deriving from or related to your day job is morally yours but becoming a consultant very neatly absolves you from contractual obligations if any. Since any extra cash is going to be god sent – turning a consultant will allow you to get all your provident fund that you never knew you had. PF is your retirement money and considering the risk taker you are, I am sure you will figure things out on that count. It takes around 3-4 months after leaving your employment status to get the PF.

This surplus cash mentality has to pervade your lifestyle. As a future bootstrapper you have to count every paisa you can get your hands at, be it saved/deferred taxes or restructuring your lifestyle to become frugal. When you start focusing on your venture you will thank your stars for the lower expenses you have got used to. It can be in the form of lower rental, or cheaper eating out habits (say hiring a cook instead of making neighborhood restaurant’s richer), controlling your phone bills etc. If some of the things feel like sacrifices – did anyone ever say starting a company is going to be easy! Basically you put yourself in a high earning and low spending mode. Your savings should give you some seed capital and the frugal lifestyle will ensure that you last longer. The number one reason for start ups closing shop is that they run out of cash. Make sure you are the falling in that trap.

If you have the mindset, consider investing your savings wisely. This improves your financial literacy which most likely your current job doesn’t hone in any way. This is not a financial advisory blog but just one piece of advise: stocks are risky and you don’t want to ruin your start up plans by putting all your potential seed money over there. If you are not sure about investments just stick to deposits.

If you are a star employee (try and be one if you aren’t) you can also ask for a more cross functional role. If you are working in a big company, most likely you anyway finish your weekly plate of tasks in 2 days and the rest of the time is eaten by systemic inefficiencies. Try helping with per-sales or HR (designing a recruitment test, conducting a campus interview). The more departments and functions you are exposed to the better it is since in your own start up, you will be running many of them initially. Your existing managers will appreciate your initiative and give you a raise, which you mustn’t spend in a party If you are lucky to be already in a small company, most likely you are already exposed to many more things. Keep at it.

The most important thing is to identify the partners with whom you will start with. It would be great if you have already worked with them since you know how they perform under pressure and how’s the chemistry with you. If you can’t find any partner to join, you should reconsider the start up decision. If you can’t sell yourself and your passion to colleagues or friends, selling it to customers or investors later is going to be 10 times tougher. Typically 2 partners is ideal at inception. You can’t form subgroups and only have to convince one person at a time to take decisions. Speed is your friend when you are starting and small number of decision makers help. I think up 4 partners is okay if you can clearly split responsibilities (Sales and Development – as a start up don’t waste time on anything else) but 5 is too many. As you become successful you have to attract more people but thats when you have to expand as a company.

So far the blog is moving as the book would probably do – why start, why bangalore and now why bootstrap. I will not stick to a serial order in the future though.

I think in the current scenario in Bangalore why bootstrap has a very simple and short answer – 1) because you can and 2) because you have little choice. Getting to the second part first – as discussed previously there is little or no seed funding available in India. Most of institutional/VC funding is available once you are already up and running. The only option is friends and family or bootstrapping. Considering that money being put in a start up is the riskiest of any investment, you should be taking money from friends/family only if they are very sure that money may never come back. Given that most of us are not blessed with such friends, the only other option is bootstrapping. Even if you are getting funds taking them at such an early stage means that you loose so much of your equity that it will simply make you an employee in the investor’s company. Half of the fun in starting your own venture is in being your own boss (at least while you can be).

The fact that you can is obviously the theme of this blog. I am hoping to move to more practical stuff soon but am still thinking on presentation of ideas: should it be presented through fictional characters, handbook style or how do I organize this bootstrapping experience into logical units. The really practical stuff useful to young folks about to start might be very boring and obvious for many of the people reading this blog. I think you will have to consider yourselves as critics and read those pieces as reviewers rather than the audience. If you have any suggestions on the organization/presentation do let me know.

I do have a working plan though and (I will stick my neck out by saying) the next post is going to be – Bootstrapper’s guide to starting an office in Bangalore.

I think if there is a place to do a start up in India, bangalore definitely is on the top of the list. If your plan involves rural market, I would still recommend having a registered office in bangalore. After all you will need one urban base to do your taxes, take legal opinion, meet investors or just network with other people like you. Apart from the pleasant climate, the no 1 reason you ought to start in bangalore is that it is the number 1 place. Some places just have the benefit of being the first and the most famous. After a while, you have to be there because everyone else is. According to a latest (2007) report I have with me 50,000 plus product development engineers are present in Bangalore compared to second runner up NCR at around 12,000. Bangalore is just so far ahead in the innovation curve – 4 times more product companies have presence here compared to any other city. Not just in IT but pioneers like Grover’s (Wine pioneers), Namdhari’s (great veggies), Daily Bread (fine bakery), Kati Zone (food chain with a central kitchen for Kati rolls) and the path breaking deccan aviation are all from bangalore (all new entrepreneurs – that’s why kingfisher is not in the list). Two of the best fairs in India in IT and Biotech are based in bangalore.

Today I attended a TIE event and the participation, energy and competence of attendees was unmistakable. And things have been getting better and better. I have been attending TIE events for 4 years now and today they even ran out of seats (which earlier happened only when Vinod Khosla was the presenter).

If you see the background of the dias, you will notice around 7 VCs sponsoring the event in some way. Four years ago VCs were just a little better than banks in terms of risk appetite. When I used to talk to them, they would act with airs, pretend to be uninterested and not encourage any talk around asking for money. Today, they are actively looking for stuff they can fund. They will distribute cards, invite proposals and arrange for meetings all the time concerned that they might loose the good deal to the VC next door. It is still not so happening at the seed level (I think another year or two to get there) but if you have a working model of the product/idea they are game.

Silicon Valley Bank has a monopoly in the VC community (all VCs are customers of this bank) and the only place in India where SVB has a branch is Bangalore. STPI bangalore is the only STPI with world class incubation facilities. IIM-B has one of India’s first enterpreneurship cell. Finally, bangalore has a network of people who are available for advise to younger entrepreneurs and soon the angel funding gap should also get plugged with more people making it big. Brand bangalore is also so big now that if you tell a prospect in US or Europe that you are a startup based in Bangalore, the perception is already positive. Imagine saying I am a start up in Chennai (where is that will be the reply!). I think I can go on and on but the point should be clear by now. Bangalore is the place.