SBenegaL

Blog

  • Market – does it exit or is it created?

    A component of the imagined venture idea is represented either as a potential group of users/consumers or as customers/buyers in the market. In many cases, this assumption of the existence of a potential market for the offering is implicit. But how do we know if a market indeed exists?

    We can debate that we know but fact remains that we will never be able to conclusively claim that a market exists before it is realized. What do we assume when we say there is a market then? Without a market, how can we really claim that the business has a total addressable market (TAM) or a service addressable market (SAM) of a specific size? If we carefully look at the numbers, the estimation of these TAM and SAM are made through the multiplication of a potential offering price with the number of individuals who have access to the offering. However, the question of ‘how do we know that it exists’ is still unanswered.

    Here, it is important to understand what a market exactly is. A simplistic case is that of a mandi or a local market where sellers with different commodities set up their shops and buyers visit these places to purchase the commodities. While there is a designated place and set of rules that run the functioning of the market, it is ultimately all about people.

    But people exist everywhere, don’t they? How do you know which people are your market? You will never know who your market is, until you engage with them. As entrepreneurs, it is important to be grounded. Speak with people, interact, and develop your criteria to understand who is a typical individual in your market. Is there a quick way to identify an individual who fits into the market you want to address? If you can identify them, the next question would be how you would serve them. Can you serve each one of them? Who are the people you can serve now, or later and why?

    Answering the above set of questions helps ground your market assumptions and size in the real world. It is almost futile to look for numbers and the projection of growth from public sources like Gartner or IDC. You can never be certain of those assumptions. How realistically would those numbers fit into your calculations of the market? And, just like you, many look at the numbers and get excited. 

    A better means, thus, is to have a true sense of the ground realities and develop your market size and associated calculation. You know your assumptions and it is easy to make estimates based on these ground realities and you would become much more realistic about your numbers.

    Ask yourself:

    Have you made the estimate of the potential size of your market?

    Who is and who is not going to be in your potential market? Do you know how much the individual would be spending?

    Where and when would you find your customer? How realistic are your assumptions about the market?

  • Founder/co-founder as status signalling

    This note is more of a ‘leave the points made thus far’ with a cautious reminder of the reality we face today.

    The rapid acceptance of entrepreneurship as a career option has been giving rise to another sub-phenomenon. It is not too long ago that entrepreneurs were considered to be people who did not have a job, and therefore took up self-employment. The entrepreneurs of that era had to deal with the lack of support in their families. One could compile an impressive set of tactics these entrepreneurs used to overcome this liability of being the early few in taking the entrepreneurial plunge. While some would not pay heed, others would simply disappear to a friend’s office saying that I am employed there and work on their business in relative seclusion.

    Today, media coverage has made the title of ‘entrepreneur’ or ‘founder’ more acceptable and sought after. The craze has gone to such an extent that some individuals put up a stationery store, employ a manager to run the operations of the store, and update their status on LinkedIn saying ‘educational entrepreneur’! To enhance the social recognition, the same individual goes to different investor forum meets, exchanges cards, clicks selfies and puts them on a profile in other social media platforms to keep the reputation bubble going. Before you know it, the same individual would develop some videos, which are often copied in content from other sources, and also claim to be an influencer.

    This trend seems to be dangerous at the ecosystem level. Such people create a market filled with lemons and fool the aspiring minds. It is important to realize that using the tags merely as status symbols would not be beneficial in the long run. Maybe somewhere a genuine aspiring mind is not able to convince their parents who have recently gotten to know about a person managing the whole scene this way!

    There is no fix to this for now, except being true and brutally honest to yourself.

    Ask yourself:

    Am I falling prey to the social status trap?

    Do I spot others who seem to be spreading this downward spiral? Whom do I work with to build my business?

  • Plan your leap or plunge

    One common oversight of entrepreneurs as they decide to take a calculated plunge into entrepreneurship is the preparation for the plunge. Most entrepreneurs in Bengaluru take this plunge after a few years of work experience in the corporate, mostly with an exposure to the technical aspects. So, this forms the primary aspect that this section focuses on.

    In the zeal to take the plunge, entrepreneurs often jump to quitting their stable job and developing the product and then taking it to the market. The first dimension they seem to underestimate is the time it would take for the business to grow. They would have anticipated a six-month runway but may often take up to two years to get the product off to a market. Creating the financial cushion which helps manage the journey is important on multiple fronts. One, it allows you to focus primarily on the business. Two, it gives you an upper limit on the amount you could wastefully spend in other activities. And finally, while giving a realistic target, it also allows you to have a checkpoint where you can independently assess the potential of the business taking off.

    The second dimension of underestimation comes from the assumption about other people and their behaviour. The dominant training, often in science, creates an illusion of people and develops the perspective that their behaviour is absolutely predictable. This is akin to assuming point objects in studying the motion of physical bodies. The social world is more complicated than what we have learned in the physical world. The complexity arises due to the free will of the individual. Despite being exposed to the same environmental situation, it is less likely that two individuals will behave in the same manner. The way we think about the situation plays a major role. This raises the question – when you cannot predict people, what is the next best thing you can do?

    Influence! Yes. We could influence people and study their behaviour. More importantly, it is essential to understand them before we can influence. Understanding ensures that we appreciate the free will component of their decision making. To understand, we should shift from the mindset of treating every interaction as a transaction and instead approach it as an exercise in relationship building. Through relationship building, we would be able to understand the situation more realistically and design appropriate means to influence people.

    The third component is setting up the expectations in entrepreneurship. A new venture’s journey is filled with uncertainty, and we are often not trained to deal with this. To ease the process and also possibly to ask ourselves if we can handle it, one would need to taste it. A quick way to taste this uncertainty is to work in a startup environment. Invest a year maybe, to work with a startup – looking at how decisions are being made, what parameters individuals consider, and how do they behave etc.

    In essence, preparing for the plunge would be a good investment if you are serious about the transition and, at the same time, give yourself a rope to hold on to, just in case.

    Ask yourself:

    Have I prepared myself financially for the journey ahead? How much runway have I created? What is my absolute no go?

    Could I experience the environment of a startup and assess if I am willing to take the plunge? Have I invested in people? Could I rely on some of them to help me through the entrepreneurial journey?

  • Entrepreneur with corporate experience

    A large number of people who come to NSRCEL to build their ventures come with substantial corporate experience. In many ways, the assumptions of the corporate world move into the entrepreneurial journey too. Here are our observations and some questions which could help you identify them.

    A corporate environment ensures easy access to resources. In the entrepreneurial journey, resources are central but scarce. Judiciously managing these resources through the early phase is essential. Managing resources is not only about ensuring the adequacy of your inflows by addressing your capital needs but also about finding innovative ways to manage your outflows by devising new ways to do more with less.

    Another element you have in the corporate world is designations. These designations come with their span of control, responsibilities, and a variety of roles. As you transition to being an entrepreneur, the role distinctions evaporate. You are the driver of your venture and own the responsibility regardless of having early employees. Some entrepreneurs jokingly put this out by saying – I am the CXO of the company. Just that X, in this case, is from algebra and represents a variable. X could mean the chief janitor at one time and chief executive at another.

    A cushion that the corporate environment provides is the reputation and brand name that the corporate has already built. The corporate brand has a rub-off on the individual employees as they engage in work on behalf of the corporate. But as a startup, no one knows about your firm! What would get them to open the door for you? You, standing alone without your corporate backing may seem like a very risky proposition for your potential customer. They may be unsure if you can deliver the promised value or not!

    People try to break these negative factors in engaging with potential clients by leveraging either their prior corporate background or by making it a virtue. They showcase their academic qualifications and trajectory to symbolically imply that they have the necessary capabilities for the same. Yet others form partnerships and project these partnerships as sources of strength, which could help others accept the new entrepreneur as a credible individual and his or her business a credible one to deal with.

    Lastly, we also find some corporate individuals carrying a strong bias of knowing everything about the industry they worked in and the industry they intend to enter. This bias drives them away from learning, which is so central to being able to build the business from scratch. So, watch out!

    Ask yourself:

    Have I watched my mind operate while I am starting up a new venture?

    Do I still carry my assumptions from the corporate world of resources, reputation, and designations?

    How do I leverage what I have as an experience to help get my initial opening?

    What would get the potential partner to believe in my ability and my offering?

  • Lifestyle entrepreneur?

    One of the choices that an entrepreneur has to make while they are working on the venture is how they would like to continue engaging with their venture? While one may initially get into entrepreneurship for the excitement, freedom, etc., these could change rapidly as an individual begins engaging with the venture creation process. The difference between the assumed and the real could be quite stark.

    The initial focus of the entrepreneurial journey may be to get to the first customer, and then find a pool of customers. The relatively stable revenue stream from the business you set up, opens up a new set of questions. Let us say: you have built up a venture that now provides you with a regular income, which is about four times that you used to get had you taken up the usual corporate trajectory. Other demands from the personal front don’t seem to change much. It is important at this junction to re-evaluate your entrepreneurial choice.

    It is not about asking, do I want to get back to work, but asking do I want to scale up at all? It is not about asking do I want to get back to work but the better question to ask yourself is do I want to scale up at all?  If you want to scale up, make sure you have made it clear to yourself and correspondingly begin engaging with different people towards it. On the other hand, if you choose not to scale up, you are essentially making this a lifestyle business, a business that is stable and supports the lifestyle you imagined.

    To clarify, this does not make this kind of an entrepreneur any less valuable or accomplished. But making this choice is important. Acceptance of this is essential to make a lot of subsequent choices about your entrepreneurial career. People at this juncture often shift away from active management of their firm for growth and think about playing the investor role more actively. They begin mentoring and take up equity for the same, offer their business as a platform for growth to other startups, and many more valuable roles when seen from an ecosystem perspective.

    Ask yourself:

    Now that I have reached a relatively stable position in terms of my venture, what excites me further?

    How should I manage my existing venture? How do I think of keeping myself occupied as the existing venture is operating in a stable state?

  • Entrepreneur mindset vs Investor mindset

    An important element of clarity when one decides to plunge into entrepreneurship is the mindset. In people moving away from the corporate, we find a deeply entrenched mindset of investment. It is essential to understand that entrepreneurship is not merely about generating returns on investment – entrepreneurship is about being enterprising in a resource-constrained environment. In addition to resource constraints, the uncertainty that you face in entrepreneurship is unparalleled to the dominant understanding of risk. A shift in mindset is essential if you want to leap into entrepreneurship.

    The investment mindset believes in prediction; it assumes that the entrepreneurial act would be risky, and capturing more data and analyzing it is likely to ensure a return on investment. Contrary to this, an entrepreneurial journey would not be initiated if there was so much analysis of the risk. You do not have enough information to make a complete analysis. Such an analysis would lead to paralysis and no action being taken. Acting without complete information based on judgments is central to entrepreneurship.

    If one is to continue to act based on judgments, the outcomes would likely be less adherent to the expectation. It is here that the act of creativity is necessary to make course corrections. The action is essentially the source of data, but there is no guarantee that the past trend is a lasting one. In such cases, if you intend to be part of the entrepreneurial journey not with an entrepreneurial mindset, but with an investor mindset, then think about it as an affordable loss. An option you are creating for yourself if it works out!

    There are quite a few cases we have seen where entrepreneurs raise money from people who do not understand the context of the entrepreneurial decision-making process – the uncertainty involved in it. Raising money from someone who does not understand your business, nor the risk involved or the uncertain environment you work in is a definite recipe for disaster. You are more likely to shut the venture down due to investor misfit, rather than the lack of business!

    Understand the difference in the mindset of the various stakeholders you get onboard your entrepreneurial journey. If you do not manage these mindset differences on an on-going basis, you are more likely to shut down your business.

    Ask yourself:

    What is my mindset in building this business? Am I thinking like an investor or an entrepreneur?

    When should I get a person with a different mindset? What will I have to do to ensure that the person with the investor mindset plays the formalizing role needed in the venture? Am I seeking the services of an individual with the investor mindset sooner than I should? Can I hold on a bit longer? Have I managed the risk, and overcome the uncertainties?

  • Entrepreneurs and the management of business(es)

    Based on the style entrepreneurs engage in while building their venture, we can think of three distinct groups – single venture entrepreneurs, portfolio entrepreneurs, and serial entrepreneurs. Single venture entrepreneurs consider their entire entrepreneurial journey to be closely entwined with their debut. They are not interested in any other opportunity that comes their way, and believe in the single specific business and making it big.

    Portfolio entrepreneurs capture the environmental triggers and create businesses as and when they sense a challenge or an opportunity. You will find themselves tied through ownership links with these multiple ventures that they would have started. The multiple ventures often are not in the same industry. They are interested in solving problems and enjoying the new possibilities that entrepreneurship allows them.

    Serial entrepreneurs, on the other hand, conceptualize and grow a business only to exit it. Following this, they may cool off a bit before they start another one inspired by another opportunity. The new opportunity may or may not be in the same industry, but they are interested in the entrepreneurial journey and the excitement it brings to them.

    Whichever route you may take in the entrepreneurial journey, learning is central to the process. The three distinctions we mentioned here is more to highlight the differences in the learning and capture the application of the learning we find while interacting with these entrepreneurs.

    In the single venture scenario, the nature of decisions made are often with a long-term orientation and ensuring sustained growth becomes a primary focus. Lessons learned from past decisions are matched well with the realities of the industry in which they operate, and incorporated into the subsequent venture decisions. Development of the industry itself may be an essential focus area so that all players in your industry can benefit from long term growth. Their learning may be deeply embedded in their industry, and hence they are very good mentors for new entrants into their industry.

    Serial entrepreneurs who start multiple ventures after building and exiting a specific venture may seem to be in a hurry to accomplish a goal – say your first sale, ticket size. From past experiences in earlier ventures, they may have developed heuristics, which could be useful in identifying a specific external situation as favourable, prepare substantially before making the launch and leverage credibility in accessing resources. Their heuristics could be transferred across ventures – this makes them extremely valuable mentors to understand how to start a venture.

    Portfolio entrepreneurs are often excited about problems or opportunities and capitalize on them. You may find them enjoying the initial phases of the entrepreneurial journey but liking to stay away from the venture building process itself and delegating the task to other managers of the firm. Formalization and growth of these ventures is often the outcome of the interest and freedom experienced by the managers of the business than the entrepreneur.

    While there are these different types, your motivation to leap plays an essential role in choosing any of the three. Do not judge anyone to be superior to the other, as it is just personal choices.

    Ask yourself:

    Which type of an entrepreneurial journey would I like among the three?

    What should I do to ensure that all the ventures are initiated and achieve scale?

    How do I leverage the learning across different ventures if I do start many ventures?

    How do I ensure my attention does not slip away from the venture I have begun?

  • Novice vs experienced entrepreneurs

    Entrepreneurial experience plays a significant role in the way entrepreneurs engage in the venture building process. To understand this better, we structure this section into two – observations about novices and those of experienced entrepreneurs.

    We find novices to be consumed with the development of the offering for a substantial period of their venture development activities. It is almost as if they believe that the development of the offering is the equivalent of building the venture. They align their venture developmental activities almost sequentially as if the first step is to develop the offering. The product/service is to be void of flaws, incorporating inputs on user experiences and only reaching out to the market after they have developed the offering to their satisfaction.

    Experienced entrepreneurs seem to have understood the role of networking in the venture building process well. They seem to stitch together the information derived through networking to develop a road map to conceptualize and build the venture. They hold back on the offering development efforts and keep things under control on the feature addition and testing for adoption. It is possible that the learning of a single domain may be translated into templates as they begin engaging in the same domain again, but we find that entrepreneurs also find it relatively easy to transfer the learning from one domain to another.

    Does this then imply that novices are poorer at building ventures, and the experienced ones are better at developing them? Not at all, these are not normative statements. Experience definitely has an advantage. If a novice gets to know how an experienced person handles the venture development efforts, it is likely that the novice could adopt this vicarious learning into the venture development process.

    It is not difficult for novices to gain access to experienced entrepreneurs; these could be in the form of a mentor for themselves and their venture, or someone whom they could bounce their ideas off of despite having access where individual-level differences emerge from the nature of the guidance one seeks. As novices, it is easy to be enamoured by our ability to develop the offering and only seek guidance on how to make our communication more efficient. However, it may be more beneficial if we could get the experienced person to think about the problem we are trying to address and learn from them as to how they think about the problem itself!

    If we shy away and seek only specific inputs, we may lose out on the wealth of knowledge and not see the challenges that may be highlighted by the experienced entrepreneur. Get others to work on your idea while you have them pay attention to your issues. Leverage the learning of others; your journey is too short for making all the mistakes and learning from them yourself.

    Ask yourself:

    Can I experience every challenge in the entrepreneurial journey? Do I have the time to develop my own solutions to these challenges?

    How do I ensure I have a bird’s eye view of my business and guard myself against myopic thinking? Who are the people who would have experienced a similar challenge? Could  I access quality mentors? How do I access them? What do I ask them?

  • Networking

    Personal networks are an important source of resources and information for entrepreneurs. You are going to rely on your networks more in an entrepreneurial journey than you would if you were working your way up the corporate ladder. However, most common stories on entrepreneurship do not highlight the role networking plays in the sustainability and subsequent growth of a venture. If you have generally overlooked the role of networking as an entrepreneur, it is time to rethink and get to networking.

    Each individual has a preferred networking style. Please note that we call it a networking style and not a personality trait. A style is something that you can change if you desire; a trait is so embedded in you that it cannot be changed; it’s in one’s nature. We have seen many entrepreneurs who came in as shy people, waiting for their turn to seek help, and over the entrepreneurial journey evolving to be more persuasive, building their potential to network and communicate. So, do not merely call yourself an introvert. Your passion for the product shows when you speak; if you desire to see the growth of your venture, you are going to have to change yourself to suit the requirement.

    Two broad aspects of the networking style could be thought of like a preference for breadth (that is meeting many people) or depth (developing deep connections with a few people). You may have a natural preference for one over the other, but it is important to keep a mix of the breadth and depth while you are engaged in venture development.

    Additionally, it is important to cultivate your network connections. The most valuable connections in the initial phases may not be as valuable as those in the later phases. For example, a generic mentor may be very valuable in helping navigate the initial uncertainty. However, as the idea gets crystalized, you are more likely to benefit from domain-specific mentors who can delve into their network connections and help convert leads into businesses.

    The cultivation of network connections also indicates a secondary point. Many entrepreneurs develop strategies to make their network broaden and resource acquisition efforts more productive in terms of time and effort. These are individual specific. We leave you with the thought that if you invest your attention on the appropriate networking style, you can be more productive.

    Ask yourself:

    How do I currently network? Is it my preference? Or have I simply assumed it to be so?

    Will the current network be useful for me in building my venture further?

    How do I cultivate the network that I may require for the future?

    Is there a mix of connections that would best suit the requirement of the venture? If I am sure, I cannot network, can I find someone more capable to help get the networks that the venture would need?

  • Passionate and headstrong or flexible with pivots

    Most inspirational stories about entrepreneurs go back to showing their struggle against all the odds, the victory of a passionate individual who overcomes all odds to build the venture of their dream. We could simply think – This is such a great motivation, isn’t it? In our story, too, we see the struggle, we see hardships, I am sure if we can stick passionately, be headstrong at building the venture, we would be successful!

    At the other end, walk into a bookstore and ask for books on the lean startup. Or go to the internet and check out lean. You will find that the underlying value portrayed is completely different. Be flexible, learn from the market. Make experiments fail quickly, learn, and improve. Here we see flexibility to be the dominant message.

    If we take these two pointers together, it is but logical to ask – should I be passionate, or should I be flexible? What will guarantee success for me?

    The answer lies in understanding that both these are perspectives of the entrepreneurial journey. For those who begin questioning the delays in realizing their goals, being passionate is the answer. For those struggling to find the route, staying flexible and listening to the market is the answer.

    This does not give the complete picture yet. Passion allows you to invest the energies, handle the uncertain outcomes, and keep the efforts moving. However, the same passion could blind the individual as well as the team into believing blindly what they want to believe. Entrepreneurship is not about building something that only you want to build; it requires you to develop and sell the product, which means that someone outside the team should agree to the value that is being developed and then buy.

    If whatever you are building may end up not being valuable to anyone, what is the use of the passion? Listening to the realities as perceived by the market, out there, becomes necessary to develop the venture from the idea.

    More importantly, strike a balance in your approach – don’t be over passionate and thus deaf to the realities that the potential market is telling you.

    Ask yourself:

    Do I feel inspired by my work? Would I love to spend months without a result to get this venture to be sustainable?

    Am I listening to market reality? Does it differ from my firmly held beliefs? Should I question my beliefs with the new information I reach?

    Is there an alternate way to what I hold so closely and strongly? What is it that I am fighting for – building a business that is valuable or building something the way I see it?