Bootstrap in Bangalore

Heard two instructive anecdotes last week related to the same quality. The first one is about a young company which sent a bid against a tender in a public sector company. Surprisingly, they got a call from the company and were asked to come over to the headquarters for negotiations. The young entrepreneur thought that going to the headquarters is going to be significant travel expense and chances of getting a contract from a public sector company is next to impossible. He decided to give it a pass. Many years later in a chance meeting he met the concerned official who had called him. He still remembered this fellow and expressed his amazement about him not turning up. He said the purchase order was ready with your name and we had to award the tender to someone else. It seems calling for negotiations was a just a final formality.

Then I heard this anecdote about rockfeller then. A journalist asks Rockfeller – How did you make so much money. Rockfeller says, whenever an opportunity came I jumped. Journalist then asks how did you know if an opportunity has come. Rockfeller replied, I didn’t – I just keep jumping.

Put the two together and you can see how the entrepreneur above did not jump enough. As a bootstrapper you definitely don’t want to be caught heavy footed. Be nimble and out jump the big guys.

Perhaps its a coincidence that while I had this draft sitting on my computer other people wrote great stuff on this topic. Anyhow, here is what I had to say:

Starting early is perhaps the easiest step you can take to increase you chances of becoming a successful entrepreneur. Apart from the obvious advantages like less risk, more energy, not knowing the 100 reasons why your idea won’t work, more time, surrounded by eager participants in your plan etc etc I think two important overlooked advantages are: 1) Having a clear goal to guide you 2) Experience of early failures or small successes

When kids are growing up most want to become some kind of a “profession” when they grow up – like an engineer, a doctor, soldier or a train driver! Somehow an entrepreneur is not looked at as something you want to be when you grow up. Perhaps its because if your parents were successful entrepreneurs, you would be inheriting the wealth and the business rather than starting your own. If they were failed entrepreneurs, thats hardly a role model to follow and surely they will discourage their children to no end. Children of the majority, the working middle class, have aspirations to be the typical professional like their parents. So kids get inspired about entrepreneurship when they grow up and either meet a role model, read about someone, get repulsed by the cubicle, are simple trying to scratch their own itch or get a random inspiration.

Any which way, once this goal of becoming an entrepreneur sets in your whole perspective and decision making gets oriented and optimized towards that. Your reading habits, skills you wish to acquire, people you want to hang around with will get affected by this decision. Where people will see problems worth despair like the huge skill shortage of college graduates, an entrepreneur will see the opportunity of a training business. The dirt in our cities provide opportunity for someone to start a waste management company. It helped me make many of my important choices – joining a lesser known product company instead of a big 3 software services company I had an offer from after college. I wanted to learn how to make software products and this fitted well with that dream. A few months into the job I realized I wanted to learn how a software product company works and not just the making of it. This made the decision to join the product/program management group a no-brainer. That function interacted with pretty much every department in the company giving me an opportunity to learn a lot. A couple of years later I got the opportunity to be the first employee in a start up, my quick ascent to the offer (I think I made my mind in hours, if not minutes) even took the person making the offer by surprise. I wanted the experience of being around when things started off so much that I said yes without even asking what my salary would be! I ended up joining even before the company was incorporated and got involved not only in my role but also in helping create the team.

The point above is not whether I made the right decisions. They weren’t really, its just that they were my decisions driven by the goal to become the picture of entrepreneur that I had. It helped to take active decisions rather than tread along through chance happenings or peer pressure shaping your life. If you are still wavering about whether you should or shouldn’t become an entrepreneur, make that decision now and give yourself time – to learn, find opportunities, make friends, save money – to prepare for when chance arrives and then let other people call it luck.

Next part of this post on the other advantage of starting early.

In the context of bootstrapping it is worth exploring what are we starting. There are millions of small businesses in India but not all of them are called start ups. Whats the difference? In one sentence: a start up is the first phase of a scalable business started by entrepreneurs. This eliminates new businesses started by existing businesses. So Reliance Fresh doesn’t qualify. This also eliminates your one-person consulting business. In my opinion, if the business is not structured to scale (in terms of revenues) practically indefinitely or is totally dependent on the founders for ever it doesn’t qualify too.

Digression: Product or Service?

Traditionally the word start up is associated with high technology software product companies in the valley. Folks in valley look down upon the service industry and see limits in scalability due to the linear equation of people and revenue. That may make sense given the high cost of human resource in western countries. However, in the Indian context service sector is full of opportunities. Having a huge number of people is a resource that needs to be leveraged rather than shunned.

It is time to look beyond the traditional views of products or services and only concentrate on scalability, sustainability and growth. Contrary to what people may think, bulk of revenue of companies like IBM and SAP comes from services and not products. Profitability of Microsoft and Infosys is almost the same. A business model of hybrid companies with both product and services angle to it may suit Indian start ups much better. The ideas on hybrid companies are explored much in detail in Business of Software.

Back to the topic at hand

With your own start up, look at whether it scales. Lets take an example: Say you are creating a restaurant which serves Kati Rolls. If you rent a place, create fresh filling every day with a good chef, put a tawa and start creating yummy rolls which people queue up to buy what you have is a nice small business. Instead of that if you standardize the recipe first, making sure following the recipe produces the same roll each time, create half cooked roties and filling which can be frozen and re-heated with consistent taste every time you are on to a start up. The second approach will create a business model like the bangalore based kati zone which is growing very well and once its processes have stabilized is able to scale. In this case the product is the recipe and the process which can be replicated successfully. If you are opening a coaching centre you could take a place on rent, advertise your credentials and start teaching students or you could create a training material, build a nice train the trainer course, build quality control, standardized examinations and follow the success of FIITJEE.

So you can look at scalable/replicable processes in the same light as products. In the Indian context you will be able to get the man power and manage it if you use the right strategy. As long as you are wired for growth you are a start up – product or service (or a combination) doesn’t matter.

Sometimes you may start in the mode of a small business. Learn the trade, identify the scalable attributes and then change gears into the scalable business. What is important to realize is that unless you don’t have the scalable ambition baked in from day one you are not a start up. Also, it is much more difficult to build the scalable dream rather than a small business. That is why there are so many burger shops but only few McDonalds or many ABC Coachings but only a few FIITJEEs.

By the way I have nothing against opening a small business. It may suit many people and their ambitions. However, this blog is not about them and that is not what I want to promote. This is about bootstrapping a start up and not a small business.