How to build a scalable business: GHV Accelerator Founder

What is scalability?

Scalability is the capacity of a company or system or a process within an organisation to manage the increase in demand. That is, a business is said to be scalable when it can be expanded enough to accommodate the growing business needs. Scalability helps a business grow as per its full potential. Scalable conditions provide a room for economic growth within a company.

_Investors invest only in businesses that are scalable. Scalability is important criteria for investors in deciding whether to invest in a particular business or not. Better the scalability, higher the economic value of the business and therefore higher the investor interest.

_Outsource non-core tasks: Transfer some specific tasks that can easily be contracted out to another larger company that is focused on that task. Think of the production of some specific components. Can some other company produce it? If yes, would it make your business more scalable? That paves the way for your organization to focus on the core of your business, as also leveraging the cost and operational efficiencies of someone else that is focused on doing what you outsource.

A scalable business model helps you capture the full potential of your concept. It allows you a better chance to be a leading brand in the market. Scalability also allows you to quickly adjust plans to capture additional, unplanned demand. Often when opportunities come up, organisations are not ready for scale and they miss on a chance to move into a different orbit of scale and growth.

For example, consider that you own a drug manufacturing company. In case of an epidemic, there will be more demand for drugs so the company should be able to meet the increased requirements.

Why scalability is critical for businesses?

_Scalable businesses are more attractive to strategic partners. Scalable businesses have a greater chance of attracting strategic investors or partners and a strategic buyer is likely to be interested if the future potential of a venture is higher.

_Scalable businesses attract better talent. People want to join organisations that have the potential for growth. Scalable business models allow businesses to grow, thus making them more attractive for professionals to consider joining.

What can you do to make your business scalable?

_Process orientation: Introduce process as your venture scales up. Make the processes simple and easy to understand so that training and on-boarding time for new employees is lesser.

_Reassess your portfolio of products and services: Evaluate the efforts, management time and investments required to produce a product or a service line against the contribution that particular product or service is making to the overall business. Is it worth it? If not, then assess if that business really needs to stay or can be hived off, or if required, discontinued.

_Automate routine processes: Delegate everything that you can in your business using the “self-service” approach. That means, delegate work to non-human systems that require no human intervention. For example, consider using the online ordering system, improved Web services, automatic updates to the customers etc.

Every start-up business model need not be scalable. But if your concept has a large base of potential customers who can be serviced profitably – you should think of creating the right processes, building the right infrastructure, making the right investments and hiring the right talent to ensure that your business is able to capitalise on the full potential that the concept has.

The author is the Chief Mentor and Accelerator Evangelist at Gurgaon-based GHV Accelerator. He is also the Founding Board Member of the Indian Angel Network Incubator.

For More Details - http://www.ghvaccelerator.com/

Source : e27.co 

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Why due diligence is important for entrepreneurs (ENTREPRENEUR INDIA)

In today’s complex business and financial environment that has witnessed several companies, including some of the most trusted names in the business, compromise on integrity and getting caught under the net for fudged accounts, with the intent to siphon off money and evade even the best scrutiny, it is increasingly important for investors and buyers to insist on a thorough due diligence before making the final move.It is critical for a buyer or investor to know about the financial or legal health of the company they are planning to buy or invest in. Due diligence is a vital tool, based on which investors/buyers gauge the effectiveness of corporate governance and make up their mind on merger or acquisition, after validating whether the assumptions and assertions made by the company are true and fair.

This critical step is what enables the interested parties (buyers or investors) take that leap of faith. It is through due diligence that they can check for any unknown issues, which should have been brought to their notice earlier and evaluate the growth prospects of the company. These important inputs help decide whether the investment or acquisition will be worthwhile or not.

In several cases, where issues are uncovered during the due diligence process, companies are told to put them right before any further moves are made by the investors.

What do investors look for in the due diligence process?

First and foremost, investors need to know beforehand about the company's current and projected financial details, organisation information, market size, team structure and level of competence, potential to compete in the market and future growth prospects.

These are the key areas of interests for Venture Capitalists. They also want a perusal of all stockholder communications, customer and supplier agreements, credit agreements and loan/debt obligations, partnership and joint venture agreements. From a legal perspective, it is important for them to know the structure of the company, staff headcount and cost, further requirements in staff to grow the business, and liabilities and lawsuits if any.

Any conflicting claims already made, hidden or unresolved problem areas cropping up during the review will put a halt to any further progress with the investor. Any missing or incomplete information, missing signatures on contracts or facts that arise, which are inconsistent with previous claims or discussions, undisclosed debts and liabilities, will raise all the red flags with an investor and put a halt to further movement in the process unless resolved and clarified.

That is why it is important to ensure that all these necessary documents are well organised and ready to produce as and when required during the process.

Moreover, the company must have detailed presentations together (factually correct and on time) prepared by various teams, giving a detailed overview of that respective function or department to ensure that the right information is shared with the investors and any queries or doubts addressed. Also, the business should keep all lines of communication open with the investors and immediately act on clarifications sought with factual explanations.

Importance of a legal advice

A good legal team can prove to be immensely useful to manage the due diligence and securities offerings and in making the right pitches to the investors.

After the basic information sharing, assimilation of facts and verification of the same is over; the investors will rectify the problem areas, if any. While some problems can be addressed and corrected, others may be beyond the control of business, hence difficult to resolve.

In such case, investors might insist on making changes to the transaction documents, they might adjust the bidding price for the business, the shareholding structure, or investor rights and responsibilities.

It is only when these issues are settled, the due diligence process will be completed to the investor’s satisfaction, which in turn will help the transaction follow through to the signing stage.

Thus, due diligence help investors to get an accurate view on what the company has done so far and how it might fit into a broad portfolio or investment strategy. For an investor, this research helps them from missing something that could be vital to their decision-making process. What was once a short and rather perfunctory process has now grown into a highly detailed and quantitative process offering insight into the future prospects of business.

Though there is no one formula for this process, businesses that understand the criticality of this process and its components are certainly at an advantage, when it comes to attracting investments. They can leverage it as a stepping stone to a bigger and brighter future.

I highly recommend that companies keep this in mind, even as they are just starting up. With good legal advice, keep the records clean right from the beginning. This will save any problems at a later stage and also the aftermath of cleaning up process.

Conclusion

For Investors Due Diligence to be a cakewalk, the entrepreneurs need to have self-discipline in maintaining the records of the venture, such as daily operations documents and details. It is always good to split the responsibilities amongst the Co-founders for recordkeeping and timely reviews. This not only helps the entrepreneur to keep the due diligence outcome positive, but also ensures that they have daily data on their fingertips.

To sum up, the top 10 priority tasks every entrepreneur should religiously follow, irrespective of the stage of the venture, in order to ensure complete compliance for Investors Due Diligence:

1. Do Indexing of all the signed documents and official records
2. Keep the records at one safe place
3. Label your files with color codes and time stamping
4. Do regular and frequent board meetings
5. Review all the pre-decided agenda one by one and check if the documents are in place
6. Entrepreneurs should know the financials and record them
7. Interact with your Legal Advisor/CA or the financial consultant on regular intervals
8. As early stage Entrepreneurs, you might not be perfect in processes, but be honest in your data and remain transparent
9. Never ever hide or fudge your data from your investor, because you think it’s not worth sharing.
10. Last but not the least; never be ‘Penny Wise Pound Foolish.’

For More Details - http://www.ghvaccelerator.com/

Source : EntrepreneurIndia. 

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Why Y Combinator type models won't work in India (ENTREPRENEUR INDIA)

India has seen the emergence of several accelerators and incubators in the past few years. Some of them are doing an excellent job, but many others are still getting their act together. Many of the accelerators and incubators are already running 3-5 batches, and have now started realizing that blindly copying the Silicon Valley style accelerator models will not work in the Indian context.

Most of the accelerators and incubators, who replicated the Y-Combinator model lost precious time, and as is with most organisations, they now find it difficult to completely redesign their offerings. As a result, they end up making modifications on their existing models, which may not have been as effective as perhaps a homegrown model, that is relevant for the Indian entrepreneurial eco-system, could have been.

Mimicking Silicon Valley

India’s entrepreneurial eco-system has often tried to mimic the Silicon Valley, largely because many of our initial entrepreneurs and angel investors hold rich amount of experience in the US – particularly from the Valley. As a result technology, and particularly technology, started becoming the prime sector for entrepreneurial opportunities to pursue. Launching a startup in tech space was easy as it cost less and it was relatively easier to find the risk capital.

As the market and ecosystem evolved gradually, entrepreneurs started exploring newer areas of opportunities. Also, a new breed of students or young professionals started exploring entrepreneurial opportunities. They did not yet have the experience or exposure to business dynamics and needed the mentoring support from more experienced entrepreneurs.

Forums like TiE and NEN did fill in the gap, but serious entrepreneurial ambitions needed more structured and on-going handholding and mentoring. Hence, accelerators and incubators emerged and became a popular first-stop for aspiring entrepreneurs.

Why it won’t work?

Many of the accelerators and incubators tried to copy the successful models from the US, particularly the highly successful Y-Combinator model, but those who copied that model soon realised that the model won’t work when replicated in the Indian context.

Here’s why:

Due to the widespread startup culture in Silicon Valley, many aspiring entrepreneurs already had the experience of working in startups. They understand the challenges, complexity faced and efforts required to get a concept into the market. Hence, Y-Combinator can afford to identify startups, whose ideas and teams have great potential and provide them the rocket-fuel to take off. But, that is not the case in India.

First-time entrepreneurs in India have limited understanding of the dynamics of business; hence, what they need is a foundation that can first help build assistance, and then the rocket-fuel for smooth take-off. Y-Combinator can do it in three-months because most of the entrepreneurs there are business-ready. But in India, precisely for the reasons stated above, our programmes need to be designed for a longer duration – up to a year-long, so that we can help entrepreneurs and give them the time required to become business-ready.

Unfortunately, most of the early accelerators in India run their business models on a three-month basis, which they are now gradually trying to unwind from.

Mentors spend serious time with startups in Silicon Valley based accelerators because there is a large pool of serial entrepreneurs, many of them are between their ventures and have enough time to give back to the next generation. They also have the capital to back teams. But again, that is not the case in India.

We do not have a pool of mentors, who have the bandwidth to undertake a one-on-one deep-engaged mentoring for startups. As a result, our programmes have to be designed with a combination of sessions that are one-on-one and also one-to-many.

The road ahead

Access to markets, B2C as well as B2B is relatively easier now for Y-Combinator companies as it provide their companies a seal of class. In India, we have yet to create accelerator brands, whose portfolio companies are waited with eagerness by the market. It will happen someday soon, but till that happens, accelerator programmes will have to be designed to assist in market access as well.

Portfolio companies of Y-Combinator and other major Silicon Valley accelerators come under the radar of investors the moment they are accepted into the programme. While that is also the case with some of the better-known accelerators in India, most portfolio companies from Indian accelerator programmes fail to find funding. Hence in India, we need accelerator programmes that are designed to prepare companies for Series A funding.

It is good to learn from the best practices of other more successful players. But a different ecosystem needs a different approach that is most conducive for that environment.

This piece is not meant to be a criticism of Indian accelerators. In fact, these early movers are the foundation of the fast-evolving entrepreneurial wave. The intent of writing this article was to open the debate on what is most relevant for India and how can we individually and collectively move towards a stronger entrepreneurial ecosystem, where startups are getting nurtured, funded and are becoming successful, and then return to give-back to the ecosystem.

For More Details - http://www.ghvaccelerator.com/

Source : EntrepreneurIndia. 

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Govt ropes in advisor for stuck telecom projects (The Hindu Business Line)

The Government has roped in Vikram Upadhyaya, Co-Founder of the Indian Angel Network Incubator, as an advisor to projects being undertaken through the Telecom Centres of Excellence (TCOE). The primary objective of roping in Upadhyaya is to ensure that the ideas generated by TCOEs are taken from conception to commercial deployment based on sound business.

The Government had set up TCOEs in a first-of-its-kind public-private partnership in the telecom sector. There are eight Telecom Centres of Excellence across the country working on key issues like technology management, rural application, next-generation network and policy. However, after more than five years of existence, the applications have not been deployed commercially.

“I have submitted a broad framework on how to turn around the TCOEs. I have seen some very good ideas being worked on at these centres. Over the next 12 to 18 months my focus will be on taking some of these ideas to the market,” Upadhyaya told BusinessLine, adding that he has also proposed collaboration between the TCOEs and the Indian Angel Network Incubator.

Upadhyaya has been an angel investor and has orchestrated multimillion-dollar business start-ups, turnarounds and growth ventures. Having worked in Japan in the late 1990s, Upadhyaya is known for his familiarity with the country and will try to interest Japanese in TCOE. Upadhayaya sees his unpaid advisory role as a business opportunity.

Separately, he is planning to start a seed accelerator fund in India with the backing of investors from Silicon Valley. Accelerators help new start-ups companies get off the ground and find follow-on investors through mentorship and a network of potential financiers. Upadhyaya said that India needs an accelerator that brings down the time period for a start-up to get follow-on venture capital.

For More Details - http://www.ghvaccelerator.com/

Source : The Hindu Business Line. 

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