Breaking Out and Making Big: A No-Nonsense Book on New Age Start-Ups and Entrepreneurship

BREAKING OUT AND

MAKING BIG

A NO-NONSENSE BOOK ON NEW AGE START-UPS

AND ENTREPRENEURSHIP

RUDRAJEET DESAI

FOREWORD BY

ALOK KEJRIWAL

COLLINS

BUSINESS

Dedicated to my wife, Brinda,

who gave me the idea and

a reason to write this book

CONTENTS

Special Thanks To

Foreword by Alok Kejriwal

I. INTRODUCTION

A bit about myself

Why I have written this book

Who should read this book?

II. TO BE OR NOT TO BE AN ENTREPRENEUR

Why do you want to be an entrepreneur?

Twenty-five personal qualities you will need as an entrepreneur and why

Myths about entrepreneurship and start-ups

III. CHOOSING THE RIGHT BUSINESS

What do you want to build and run?

What should you bet on?

Evaluating a business model

IV. PEOPLE WHO MAKE THE START-UP

The co-founder(s)

The core team

CEO—The most important person in the company

V. SHOW ME THE MONEY

Understanding investments

Understanding venture capital

Dealing with venture capitalists

Ninety-nine questions every investor will ask

VI. THE FOUNDATION AND THE STRUCTURE

Compliance and structure

Who is running your start-up?

Building conscience and culture in your start-up

VII. IT’S ALL ABOUT THE PEOPLE

Creating a Happy People company

Don’t hire people, build great teams

Organizational structure and employee management

Getting rid of bad resources

The importance of a good boss

VIII. RUNNING THE START-UP

Marketing

Five-point theory of simple task management

Efficiency is the biggest strength

How to remain a start-up forever

IX. PRACTICAL SUGGESTIONS TO HELP YOU IN YOUR JOURNEY

For the entrepreneur

For the business model

For the company

Thank You

Appendix

Index

About the Author

Copyright

SPECIAL THANKS TO

Radhika Yelkur

For helping me with many valuable inputs throughout the process of writing and publishing the book.

Alok Kejriwal

For giving me that final push to become an entrepreneur and helping me set up Ideacts Innovations from just an idea.

Mohit Bhatnagar

For gifting me Good to Great by Jim Collins which made me appreciate the benefits of reading, and for teaching me numerous things in my entire entrepreneurial journey.

FOREWORD

Entrepreneurship and starting up are ‘secret sciences’, subjects that have little or no curriculum, methodology, best practices or measurable outcomes. Hence, it is such a pleasure and honour to be writing a foreword for a book that attempts to demystify these secrets and make the subject of entrepreneurship approachable and easy to understand.

In my capacity as a digital entrepreneur, I have known Rudrajeet (Rudra to me) for the past decade or so. In the first instance, he was a colleague who worked in a company that I was financially invested in, but not part of its operations. It was only later, when Rudra approached me with a bunch of my other colleagues, that I got to know him better and had the chance to work with him closely.

From the day I met him and his team, I knew they were winners. Most entrepreneurs who have been fighters know a fellow fighter when they meet him. The same was for Rudra. His demeanour, ability to adapt and absorb, improvise and, most importantly, deliver were early signs of a soon-to-be successful entrepreneur.

Now, let me define what success means to me (and to a lot of entrepreneur folks like myself). It’s not only always about being in the headlines for selling your company for hundreds of millions of dollars and smiling smugly at the cameras. It’s actually the story of the underground—of surviving, fighting, surviving, fighting and living to finally tell the tale. Rudra’s book delivers just that, without the melodrama and backed purely by facts.

So why is this book, Breaking Out and Making Big, important? Because it attempts to answer and deliver on the issues that no textbook in the world (or online search) will assist in: providing simple, real-life and usable suggestions to entrepreneurs on building and managing start-ups. It’s a summation of some basic yet important suggestions which most entrepreneurs could miss or not come across in their journey, but could help them in saving a lot of time, effort and money. The book talks in great depth about areas like self-analysis of an entrepreneur, myths on entrepreneurship and start-ups, evaluating business models, co-founders, building a start-up team, CEO-ship, investments and venture capital, compliance and organizational structure, start-up culture and employee management. It also has exercises and reference documents that would help entrepreneurs in creating a business plan, in equity dilution, in making an investor pitch, in start-up hiring and in task management.

It is time such an attempt is made in the direction of guiding entrepreneurs young and old, and I am glad it has come from my friend Rudra.

Victor Hugo had said, ‘No one, not all the armies of the world, can stop an idea whose time has come.’ May this meticulously written, honest book light up the ideas for all those entrepreneurs whose time has arrived.

ALOK KEJRIWAL

Founder, Contests2win Group of Companies

Mumbai, July 2014

SECTION I

Introduction

A bit about myself

Why I have written this book

Who should read this book?

A BIT ABOUT MYSELF

Thank you for buying the book or for borrowing it from someone. I hope you will find it worth the time you spend on it.

I strongly believe that it is very important for a reader to know who the author is, what his background is and what makes him qualified to write what he has written. Especially if it is what is described as a self-help book, or presumes to give any kind of advice. The true value of any advice or suggestion can be gauged only after knowing the person who is giving it. Hence, I thought it best to present my credentials and then get on with the rest.

My name is Rudrajeet Siddharth Desai. I was born in an Indian army officer’s family in Chandigarh Cantonment. Like any other fauji kid, I had an awesome upbringing in towns like Delhi, Mhow, Udhampur, Chandigarh, Jalandhar, Rangia, Leh and Pune. Schooling was in Kendriya Vidyalayas across the country and college in Pune University.

I am a thirty-four-year-old entrepreneur and have been in the internet, technology and mobile industry in India for the last eight years. Almost every day, since I was sixteen years old, I had dreamt of being an entrepreneur and building a large company. It all started when I read Business Maharajas by Gita Piramal around that time. My entrepreneurial journey started back in 1999–2000 when, with two friends, I worked on the idea of building an advertising network in cybercafés. We succeeded in getting the idea off the ground with over thirty-five cafés in Pune and four advertisers. But we soon realized that nineteen-year-olds are not taken very seriously in the market and we had to shut shop and move on to gain more experience. So, I went on to work in sales and business development in Cadbury India, BPL Mobile (Loop Mobile), mobile2win and GroupM in Pune, Mumbai and Bengaluru.

But although, by job experience I am a sales, advertising and marketing man, by passion I am a techie/product guy. And so, in September 2006, I quit my last job as a business manager in the Mobile Team of GroupM India and went on to start Ideacts Innovations.

About Ideacts Innovations

Ideacts runs India’s largest cyber café management application and advertising network under the brand icafé Manager. It works in the domain of the internet, software product technology and advertising. It has over a hundred employees in four offices, business operations in 300 cities and advertising relationships with over 250 companies, including the biggest global names in the internet, such as Google, Facebook, Microsoft, Yahoo, Naukri, Pepsi, Aircel and Vodafone. Ideacts is funded by Sequoia Capital and Saama Capital and has a founding team of five members.

Why I feel qualified to write this book

In the process of building and leading an organization like Ideacts, I have gained immense knowledge and understanding in diverse areas, such as operations, technology, product management, sales, finance, human resource, facilities, people management, advertising and venture capital. I started at the age of twenty-six, when I quit my last job and have been CEO of Ideacts for a full five years. I bootstrapped the company for two years, built a team of 220 people, have gone through three large strategic business evolutions, seen two downturns, raised three rounds of funding and one round of cost cutting. I have done active sales, been the product manager of the company since its inception till date, managed and assisted my finance team in financial analyses, hired people more experienced than me, hired people smarter than me, actively cracked deals with clients and partners, fought and worked hand-in-hand with co-founders, team members, clients, investors and helped a new CEO settle in and take charge.

This book is based on what I learnt from all my experience. Every line of code written, every paisa earned or spent, every deal signed, every employee hired and every meeting organized has contributed to it. A mind constantly flooded with questions and a determined pursuit of self-realization have helped me look at my business from different perspectives. A lot of what I share with my readers are ideas I may not have implemented or acted upon because I did not have the time then, or I lost the opportunity when it came. Sometimes, it’s the situation in which you find yourself that teaches you the most.

I am certainly no guru or preacher, and I won’t be termed one of the most successful entrepreneurs of my time either. But knowledge comes through experience, which could be of success or of failure. I have tried to share my experience of entrepreneurship and start-ups which I acquired through the successes and the failures I have been through. Some of the suggestions I have made have been inspired by a few people whom I met on this journey and who have taught me things I wished to put down on paper.

I believe implicitly in everything I have written and not a single word has been put there just to make it a good read.

I hope you find this book useful in your journey.

WHY I HAVE WRITTEN THIS BOOK

Entrepreneurship cannot be taught or learnt from someone else. The very essence of entrepreneurship is that it needs one individual to start something from scratch and run it with his own philosophy and ideology. But one can draw inspiration from others and take one’s own decisions and create one’s own philosophy based on others’ experiences.

It is with your best interest at heart that I have written this book, so that you will know how to use it on your journey to becoming an entrepreneur. It is not a description of my entrepreneurial journey or of my start-up. It is about the learning I acquired from my six years which, I believe, will be extremely useful for any budding entrepreneur to have.

There are many facets to entrepreneurship that are unique to each journey and which, time and again, can lead the entrepreneur in several different directions. It helps to pick up a few suggestions from someone else’s experience—suggestions that might not drive your decisions, but are useful to keep in mind. And should you come across similar situations, you would have some prior knowledge which would help you as you navigate through your own problems and arrive at your own solutions. It is necessary to customize these experiences and suggestions to your own circumstances and start-up—taking something at face value is not a good idea. So, try and learn the lessons behind the experience and see if and how it can relate to your game plan.

Today, entrepreneurship has an aura of glamour: work for yourself, be your own boss, try something new, get out of the corporate world and so on. Most people around you will appreciate and applaud you for venturing to become an entrepreneur. At least to your face, they will. But not many will actually ask you or force you to think whether you are capable of doing it and consider the negative aspects of being an entrepreneur and running a start-up. I have discussed this point directly in one of the following chapters, ‘Why do you want to be an entrepreneur?’ and indirectly in the rest of the book. I hope that someone with experience of entrepreneurship and start-ups can help you evaluate whether you have what it takes to run a start-up. But let me clarify here: you yourself are the best judge of that; I am merely going to put you on the path to thinking correctly about it.

The downside of entrepreneurship: Running a start-up isn’t going to be easy: you will probably end up sacrificing a lot more than you can ever imagine today and it will change your life 180 degrees. Before you set out on this journey, make sure to give deep thought to the pitfalls and the problems. Not because the world needs fewer entrepreneurs, but because you must be one hundred per cent sure that a start-up is the only thing you want to do and were born to do.

Self-Introspection: Introspection is one of the most important personal traits needed in an entrepreneur. But it does not come naturally to everybody, nor, I think, can it be taught. Through this book I intend to help you understand just that and kick-start a thought process on many such points.

Realization: There are many things that you won’t realize on your own in your journey, largely because of the day-to-day chaos and frenetic operations. For every entrepreneur, running the business, taking care of the revenues, the products, profit and loss and other such matters are of the highest priority and that is as it should be. What I aim to do here is bring to your notice many other aspects of running a start-up that might not be equally urgent but still need to be considered. If, at any point in time you say, ‘Oh my God, I hadn’t realized this but it is actually true and very important,’ I will feel gratified that I have been able to guide you.

Many a time, we need to have things put in simple words and sentences in order to understand and remember them. Just being in a situation will not help you understand it or cope with it effectively. I do not intend to include ‘famous quotes’ here, but only to give some suggestions in simple words, easily recalled when needed.

I didn’t have it: That is certainly one reason why I have written this book. I didn’t have it when I started and, today, I know the importance of having some guidelines. I am aware that a lot of books are available on how great companies have been built and what many successful entrepreneurs have done. But when you actually start, when you cannot afford to make mistakes, when every mistake or incorrect decision costs time and time is more precious than money, when you grow at such a pace that self-introspection becomes impossible, that is when you wish you had a guide in hand.

Getting rid of some myths: There are many myths about entrepreneurship, venture capital, investments, start-ups and building companies. I intend to help you look at these myths and clear some of the misconceptions about them.

Practical suggestions: Many entrepreneurs make mistakes in areas which are not core to their business or personal expertise. That is where some guidance and mentoring can help a start-up best. I am not going to tell you how to run your business, but how to avoid making mistakes which could damage any start-up.

I have included here suggestions on a lot of small but important points which might help you become a better entrepreneur, build a good start-up and run a great business. These suggestions are based on my experiences and on factual incidents; they are not mere theory. Some of them could also help you in your team-building efforts and make your team members better working professionals.

Hopefully, reading this book will ensure that you get to spend more time on building your business and doing work that matters, rather than wasting it learning things the way I did—by making mistakes or, sometimes, by doing them right too.

WHO SHOULD READ THIS BOOK?

The obvious targets for a book like this are wannabe entrepreneurs, as well as those already on the path to starting and building companies. Established entrepreneurs, too, could find it useful.

Ideally I would want this book to be added to the syllabus of management colleges across the world! But, on a serious note, my target readership comprise the following:

■ Co-founder or top management: From my perspective, the difference between an entrepreneur and anybody working for a start-up in a senior position is the equity they might have. Everything else is more or less the same.

■ Working for a start-up?: You need to read this book if you are working or going to work for a start-up, for it always entails a lot more than just knowing your job description. It is about knowing what it takes to build a company and which mistakes should be avoided.

■ Investor: This book is a must-read for both angel investors and venture capitalists, mainly because understanding a start-up is as important to an entrepreneur as it is to an investor.

■ The entrepreneur’s spouse: Nobody gets more affected by the life of an entrepreneur than the spouse. The spouse should know how difficult and exacting the life of an entrepreneur can become once the enterprise takes off.

SECTION II

To Be or Not to Be an Entrepreneur

Why do you want to be an entrepreneur?

Twenty-five personal qualities you will need as an entrepreneur and why

Myths about entrepreneurship and start-ups

WHY DO YOU WANT TO BE AN ENTREPRENEUR?

I often wish that I had at least this chapter, if not the entire book, to read before I launched my start-up. I am passionate about entrepreneurship and I like to know what entrepreneurs are made of, but, to start with, I am going to ‘un-sell’ entrepreneurship to you. You should not entertain any false notions about entrepreneurship, nor should you get carried away by the glamour attached to it. It is hard work, it is tough going and you should be aware of that. You need to be prepared to die for entrepreneurship . . . because it is going to kill you.

Being prepared: If you are well prepared and ready for what lies ahead—if not prepared, then at least you are cognizant about what is coming—you will not end up getting a mental setback every now and then.

Knowing yourself: It will help if you know a bit more about yourself from the perspective of entrepreneurship. It might also help you choose what business you should start up—if you have not already done so—and, later on, help you decide what role you should play in your start-up.

Drawing up a plan: This chapter aims at helping you chalk out a growth and development path for yourself. Every person needs a plan to grow into a better professional and so does the founder/ co-founder of a start-up, more so if it is your first one. Most of the people you will hire will have had some previous experience in the areas for which you are hiring them. In your case, this being your first start-up (in this book, I am assuming so), you, as much as anybody else, perhaps even more so, need a growth plan.

Having the right perspective: Many people would like to launch a start-up or have a business of their own, to take no nonsense from their bosses, to make a lot of money, to go to office whenever they want to, to do what they love, to have their photograph on the cover of popular business magazines and to give interviews on TV. But not everybody is made for it and if you are not, then you do not want to waste precious years of your life and hard-earned money to get to know that. My objective is to give you the right perspective for making that momentous decision of your life.

I strongly suggest that you consult someone you know, someone with experience of business, who would, for genuine reasons, advise you on the negatives of being an entrepreneur. If you know, or find someone like that, do spend some good time with that person.

Ideally, I would prefer you to do all the exercises I am suggesting below on an MS Word document or on an MS Excel spreadsheet so that they can be available later, but paper is also fine. Needless to say, please follow the instructions given and the order of the exercises and keep them at least till you reach the end of the book.

I have made an MS Excel spreadsheet with the templates that are used in the exercises given ahead, called ‘Chapter II—Exercises’ and it is available on www.breakingoutandmakingbig.com.

Exercise 1: Understanding yourself

I want you to write down as many qualities about yourself that describe you, rate each one, giving a reason to support it, if possible. They need not be related to your professional life, they can be anything that makes you who you are.

Always remember one point: entrepreneurship is not just about how you are at work, it’s about who you are as a person overall. Generally, most of us are two different people—one at work and another when away from it. But an entrepreneur is always the same, personally and professionally.

Example: Creative—2—I write mediocre poetry.

Please draw up the format given below on an MS Excel spreadsheet and use it for this exercise:

It might help to get this verified by people close to you at work and at home. Personal qualities are individualistic, they can have wide definitions and there are chances that you might forget to mention some vital points.

Exercise 2: Your definition of an entrepreneur

In this exercise, I want you to put down all the qualities you think an entrepreneur should have, rate them in importance and give a reason justifying why they should be there. Be honest about the qualities you really think necessary for an entrepreneur; do not put only those in which you rated yourself 3 in the previous exercise. One way of avoiding that is by taking a break between these two exercises.

Please draw up the format given below on an MS Excel spreadsheet and use it for this exercise:

Now draw up another MS Excel spreadsheet as shown in the table below and fill it up with the data from Exercise 1 and 2.

We can analyse this as follows:

■ Count the number of qualities you have for being an entrepreneur from the ones you have listed as necessary for an entrepreneur to have.

■ You can see your Importance versus Rating. So, if you rate something 3 in Importance and 1 in your own Rating, then you know that there is a gap there.

■ Doing a qualitative comparison between the Reasons columns would also be helpful. You will know the reason why you say you have a certain quality and the reason why an entrepreneur should have it.

■ These exercises will help you form a foundation for the growth and development plan on which we will work later. You might have noticed that these exercises are simple, they are not rocket science, but most of us would not do it on our own. My objective is to bring more of such simple things to your notice.

Exercise 3: Reasons for becoming an entrepreneur

In this exercise we will list the reasons why you want to become an entrepreneur. It will also help you know which business you should do (if you have not already decided) and what role you should play in your start-up. I have listed a few reasons why I feel a person would want to become an entrepreneur. Please do add as many points as you want to the list. Start another MS Excel spreadsheet in the format given below and rate each point.

By rating 1 mean that the reason given there is not why you want to be an entrepreneur.

1 I am bored with my current job.

2 I am bored doing any job.

3 I want to make a lot of money, which I can’t with my present salary.

4 I want to be my own boss and not have to report to anyone.

5 I don’t want to work for more than six hours a day.

6 I have a business idea that I want to pursue.

7 I have a product idea that I want to pursue.

8 I am not getting a chance to do good and exciting work in my job.

9 I want to retire early in life.

10 I cannot get a job anywhere.

11 I want to be admired.

12 Everybody around me is an entrepreneur.

13 I just want to give it a try.

14 I want to build a great and big company.

15 I want to learn a lot of things which I can’t in my job.

16 I want a career change and am not getting it through a job.

17 I am getting paid very little compared to my peers.

18 I have a lot of money and don’t know what to do with it.

19 It’s the ‘in’ thing nowadays.

20 My father is a businessman and he wants me to be one too.

21 I have worked in the corporate world for donkey’s years and now want to try something new.

22 It will look good on my résumé.

23 If they can do it, then so can I.

24 I have a lot of knowledge about a particular field and hence can start a business in it.

Now we know:

■ The qualities you think an entrepreneur should have.

■ The qualities you have and which of them tally with your definition of an entrepreneur.

■ The reasons for both and where the gaps are.

■ Your reasons for becoming an entrepreneur and how much importance you give them.

These exercises will help you be very sure about why you want to be an entrepreneur, which qualities you have to be a successful one and the gaps between them.

TWENTY-FIVE PERSONAL QUALITIES

YOU WILL NEED AS AN ENTREPRENEUR

AND WHY

Given below are twenty-five personal qualities that I feel every entrepreneur needs. Some of them might sound basic in nature, but please consider this as one of the most important sections of this book. Here, I assume that you want to take an active part, playing a CXO’s role and ideally, CEO or COO.

Before we consider each point, let me add that a start-up is like a family in that a lot of what the members do depends on what the head of the family does. The culture, the habits and the general mode of operations are set in place at the top. Hence, it would be essential for you to have many of these qualities so that they get inculcated into the work culture.

1. Ideation: By ideation, I mean a focused approach towards evaluating various thoughts and perspectives regarding a subject. It’s more of a process than just a spark that has come to your mind. If you are a ‘I-just-got-a-great-idea’ kind of a person then that would be an added advantage. But either way, you will need to know how to ideate, since you won’t necessarily get