Geeks on a Plane India 2013: Big Opportunities, Optimistic Investors, and a Government that’s Finally Waking Up

Gateway of IndiaThis post originally appeared on the 500 Startups blog

Geeks on a Plane is a 10-12 day trip to various parts of the world with 20-25 “Geeks” (entrepreneurs, techies, designers, angels, VCs, mentors). The trips are planned and run by 500 Startups and have been going on for a few years now. The first Geeks on a Plan (GOAP) to India was in December 2011. That’s when I first met Dave, Paul, Christen, George, Anu, Samir, and a bunch of other really awesome geeks. Fast forward 14 months and I got a chance to be a “geek” on the February 2013 GOAP India trip.

GOAP India 2013 also had some really awesome people on the trip as well as hosts across India. Here are some of the things that I learned from these people during our visit to Bangalore, Mumbai and Delhi with Geeks on a Plane.

India: A Land of Contradictions

The poor are all over India. It’s still one of the poorest countries in the world. However, the rich are obscenely rich. Driving a $200,000 car is no big deal in a city like Mumbai. On your way to a swanky hotel where you’ll pay $900 for a single malt, you may drive by open sewage, dirt piled up on the side of the road for impending construction, barking stray dogs in packs, etc. However, you will also pass by massive skyscrapers, gorgeous temples, educational institutes galore, and many people hustling to make a buck. You can feel the buzz in the air and the excitement of young people who see multiple opportunities all around them.

I didn’t witness these contradictions being any more pronounced than they have in the past. Instead, I saw young people that are hopeful and welcoming of bright future for their country, their families, and themselves. As risk averse as their parents are, more and more people are willing to take significant risks to enact change and get rich while trying. For example, at Startup Weekend Bangalore, we saw many ideas pitched, of which, two of which stood out in my mind.

  • Ghati, to enable safe and clear passage of ambulances.
  • Garbage-busters, which uses mobile phones to alert civil authorities of garbage that hasn’t been cleared.

Two years ago, very few people would have considered quitting their jobs to pursue ideas that will make life better for people while at the same time, having a real chance at making money. Instead, most of them wanted to build the “Twitter of India” or the “Facebook of India”. More and more Indians are cognizant of the problems surrounding them in their daily lives and they are taking the first steps at solving them.

Great Raw Entrepreneurial and Tech Talent

Flipkart
There’s no question that India is full of geeks with great raw entrepreneurial and tech talent. Look at the number of Indian engineers in the Valley, doctors and Wall Street quants that flourished in the US. In India, having their chidren go into the “IT” industry has been the hope of many middle class Indian parents since the 90’s. That usually meant working at Infosys, Wipro, TCS, HCL, etc. Then came along PWC, E&Y, Accenture, Goldman Sachs, JP Morgan, Dell, Microsoft, Google, etc. Today we have Facebook and LinkedIn as well as hundreds of other great US tech product companies. Most tech entrepreneurs in India prior to 2005 built their fabulous businesses selling services to companies big and small around the world. These successful tech entrepreneurs built businesses to be envied and made India the outsourcing capital of the world.

What they didn’t do was build an ecosystem that fostered entrepreneurship or creative thinking.

ZipDial

All that started changing sometime in 2010. Some amazing companies have been built in the last few years by incredible people (some of the companies go back to 2006/2007) – Druvaa, Slideshare, FusionCharts, InterviewStreet, ZipDial, Flipkart, SnapDeal, InMobi, Innoz, ZoHo, Freshdesk, Wigify and Komli Media.

Some of these companies have exited. Some are incredibly cash rich. Some are growing like a weed and continue to raise larger amounts of growth capital.

Beyond some of the marquee names above, quite a few amazing founders are building great companies. A few are InVenture, WebEngage, UberLabs (gazeMetrix), Ketto, InstaMojo, ChargeBee, and Practo.

Founders’ Communication & Confidence Need to Improve

Rajat, Kavin, Aloke at 91 Springboard
Most first time founders in India still lack confidence and it shows in their pitch and their communication style. Paul has mentioned this before in his Observations on India and he also talks about gaining confidence. I continue to see this being a problem and a tremendous opportunity for founders. The founders that can communicate the most effectively, will have a much better chance at selling to their customers, their investors, and prospective co-founders, employees, mentors/advisors and importantly, in India, to their families. The good news is that in the last 7 years I’ve been here, I’ve seen pitches and communication styles get better. Although the ecosystem is still nascent, it’s maturing and giving young entrepreneurs the shot in the arm they need.

Investors are Optimistic

The Bombay Stock Exchange (BSE)
Investors across India that I met during GOAP continue to remain bullish on the long-term opportunity. Ecommerce, education, travel, personal finance, Universal ID (UID), family tech, rural tech and, of course, tech built in India for a global market are some of the broader themes that investors expressed significant interest in. Sorry folks, “social media” just wasn’t at the top of anyone’s list.

However, as bullish as investors are, most of them still aren’t very founder friendly. Some of the deal terms being offered are still quite onerous. Doing an investment in tranches is another favorite past time of Indian investors. Most founders still complain of angels behaving like series A VCs and VCs behaving more like private equity shops.

The bright side is that a few founders I met with and spoke with during GOAP, mentioned two VCs by name who work more like startup founders than VCs. They make decisions quickly. They present terms that are fair. They tell founders when and how much they should raise to minimize dilution. They make themselves available by not hanging out in their ivory towers. You might say that two VC firms in a country of 1.2+ billion people is statistically insignificant. However, if you said that, you would be wrong. It’s quite significant. VCs running their funds like real startup founders is a massive mindshift and their success will only inspire more to do the same (or lose deal flow).

Investors are also Cautious

Geeks on a Plane at the BSE
During some of the investor events at GOAP, I spoke to investors about things that concerned them. Investors are a little bearish about the short-term. Macro-economic conditions, the lack of exits, corruption in the government, the bureaucracy, rising costs all play an important part in dampening the spirits of investors. However, these also present considerable opportunities for daring entrepreneurs. Investors realize this and continue to hunt for deal where they can deploy funds in India.

The Indian Government is Finally Waking Up

During our trip, the Indian Government announced its budget. Though, not a big deal in most western countries, in India, the budget makes or breaks economic sentiment for the year. No one was terribly excited or distraught over this year’s budget. However, there were a few things added that raised the hopes of startups and early stage investors.

  • Preferential tax treatment for angels when investing together or “pooling” their capital and registering with the government.
  • Corporations are required to spend 2% of their income on CSR (Corporate Social Responsibility) investments or donations. Incubators at government or recognized universities qualify for claiming the 2% spend.
  • Startups can potentially find some liquidity by listing on the SME exchange. The BSE (Bombay Stock Exchange) runs one and had 11 companies listed as of December 2012.

A much more detailed analysis of the budget and some opinions can be found on VCCircle.

For more information on Geeks on a Plane and when they are heading to your region, check out the website and also some of the videos from GOAP South America Summer 2011, GOAP Asia 2011 and GOAP India 2011.


Geeks on a Plane India 2013

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How to Make an Introduction to a VC or Investor

Over the last year I’ve been getting a lot of introductions and requests for intros to other investors. I’ve been surprised by the low quality introductions some people make so I figured that writing a little about what makes a good investor introduction could be useful for the connectors out there.

Making the Right Introductions

Just because someone asks you to connect with someone isn’t a good enough reason to actually make the intro. Think very carefully about whether there is a fit between the two people. If someone you know has an “idea” and asks you for a connect to a VC, and you know that the VC doesn’t invest in “ideas” then feel free to tell that person that you’d be happy to make the introduction at a later date, when they are past the “idea” stage. Don’t forget to explain why the introduction might be premature.

You should also feel free to ask the person asking for an introduction, why they want an intro and if they are prepared for the connection (point them to 10 Things to Consider Before Approaching a VC).

What Making an Introduction Means

When you make an introduction to someone, the process has significant implications for you. Let’s think this through a little:

  1. You know person A that others are trying to get access to.
  2. Person B knows you and is trying to get access to person A.

You’re the gatekeeper. You should be thinking about how well do you know person B. Is person B an awesome person or is person B, not-so-awesome? If person B is not-so-awesome or you don’t know them that well, it’s ok to decline the request for an intro. You can say something like, “I’m sorry, but I don’t know you well enough to make the introduction.” Person B may not take it well, but, they’ll get over it.

Next. How well do you know person A? If person B is trying to get access to person A, chances are that others are also trying to get access to person A. What does this mean? Person A is probably getting more introductions and cold calls than they can handle or want.

If you do successfully wind up making the intro and if person A is not impressed with the intro, it will hurt your ability to make future intros and it will impair your ability to make the connection with person A stronger.

On the flipside, if person A turns out to be not-so-awesome and doesn’t gel well with person B, you haven’t lost much, but the chances of person B appreciating your spent social capital in making the intro is minimal.

Spending and Building Social Capital

As you meet new people, it’s important to nurture those connections. How to nurture them depends on the context of the connection. However, at a very basic level, you should be building trust. Building trust/social capital takes considerable time and effort.

It’s much easier to “spend” your social capital by making introductions when people ask for them because:

  1. You may just want to be a nice person
  2. You may want to be able to prove that you are a well connected person
  3. other reasons

However, do think very carefully before spending that social capital because it could either multiply when you make good intros or disappear when you make bad ones.

two businessmen shaking hands

Picture by MyTudut, on Flickr

Sample Intro 1

Below is an introduction I received a few months ago from someone I barely knew (names are changed).

Hi Pankaj,

[FRIEND A] is a friend and client to me. He has been involved in couple of web sites and businesses.

He is currently looking for some investors and VC’s. He shall connect with you with his requirements and please try to help him with investment.

[MR. CONNECTOR]

Why wasn’t I impressed or looking forward to this intro.

  1. Weak Connection: I have never met or spoken to “Mr. Connector”. I have exchanged emails with Mr. Connector when he wanted to volunteer for Startup Weekend. In the end, he went dark, never showed up. Never did anything.
  2. No understanding of investment thesis: He made no effort in the email to understand what I was looking for as an investor, what my thesis was, etc.
  3. No signal: He didn’t spend any time qualifying the person asking for the intro and signaling that info in the email.
  4. No context: For all I knew “FRIEND A”, could be asking me to invest in his gold buying business.

“FRIEND A” eventually emailed me as well

Hi [MR. CONNECTOR],

Thanks for the Introduction

@Pankj Nice to e-meet you,

We are currently developing ad network platform and will be launching it soon.

If we get an first round or angel investor I would be really glad and helpful, let me know what would you need from me to proceed for funding, I will arrange ASAP.

Best Regards,
[FRIEND A]

Yes, the email is copy and pasted exactly as it was received and yes, “Friend A” didn’t take a minute to check the email he sent realizing that he misspelled my name. Generally not a big deal but when you’re first connecting to someone, you want to put your best foot forward. In any event, I took a few minutes and responded to “FRIEND A”.

Hi [FRIEND A],
1) what’s your angellist profile?
2) what’s your LinkedIn profile?
3) what businesses have you been in and what have you done?
4) send me your investor deck
5) how much are you planning to raise?
6) what kind of ad network are you building?
7) why are you building another ad network?
8) how many customers have you brought on board for this ad network?
9) how many ad impressions have you shown this far and across how many sites/devices/etc?
10) are you raising via equity or convertible?

Pankaj

I never heard back from Mr. Connector or Friend A after asking them the questions above.

Sample Intro 2

Here’s an intro I received a few weeks ago. We are friendly even though we don’t know each other very well. However, I really respect him and the work he has done (again, names, numbers, details changed).

Hey Pankaj

Hope your’re doing good. I though of putting [ENTREPRENEUR] in touch with you. I’ve know [ENTREPRENEUR] for some time now and he is doing a startup called [STARTUP NAME] [URL]. They are beginning to see good traction ([ >25K ] signups to date) and their team has good product / engineering capabilities. You can check them out for 500startups, or even otherwise.

[ENTREPRENEUR]… Pankaj is a friend … you should sync up with him.

[MR. CONNECTOR 2]

Do you see a clear distinction between example 1 and 2

  1. Clear demonstration of connection strength: He clearly says that he has known “ENTREPRENEUR” for quite some time.
  2. Context: He may not explain the context but he gives me the name of the startup and gives me the info I need to look into the startup and do some research before taking the intro. He also indicates a potential fit with 500 Startups which is helpful for me.
  3. Traction: He gives me clear traction data points which I can draw my own conclusions from as well as indicative info about the product and engineering capabilities.
  4. Clear call to action: He gives the entrepreneur a clear call to act.

Based on this intro email, a dialogue has started between the entrepreneur and I. We are planning to meet soon.

What are some of the things you would recommend people think about when?

  • Asking for an intro
  • Making an intro
  • Taking an intro

Leave your tips in the comments below.

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11 Tips on Pitching an Investor, Mentor, etc.

Over the last few months, I’ve Been hearing lots of pitches from entrepreneurs. Before going on, I want to say, congrats to all of you on taking the leap towards building your businesses.

That being said, I want to tell you that most of your pitches suck! 75% of the time I want to go to sleep after the first 3 minutes. I guess it’s not your fault (the education system in India never really teaches public speaking). Do the research. It can only help you. Don’t “read Facebook” (I had to put that in. A lovely quote from an entrepreneur I recently met.)! Go read some incredible posts by people like Mark Suster, Dave McClure, Eric Ries, Brad Feld, Fred Wilson, etc.

I’m no pitch expert but here are a few pointers from what I’ve learned over the years.

  1. Do some research on the person/people you are pitching to and understand, as best as you can, their perspective BEFORE walking into pitch them.
  2. Start with the problem. In two to three sentences, explain what is the problem. If you can’t do it in three sentences, stretch it to five but get the problem across in e first thirty to sixty seconds. If you can’t hook the other party and help her identify with the problem in sixty seconds, you will lose them for the rest of the meeting. Check out this post by Dave McClure
  3. In another sixty seconds, explain your solution. Don’t take five minutes to do this. Sixty seconds to ninety seconds is the most time you should take to explain your solution.
  4. Don’t make up jargon that doesn’t fit with the industry vertical you are talking about. For example, I had two entrepreneurs working in the travel space talking about products and content and I’m thinking souvenirs and TripAdvisor. They were actually talking about customized city tours and concierge services. That was ten minutes of my life that I was never getting back. Stick to terms people identify with your industry. It makes it easier for people to follow along.
  5. Practice! Practice! Practice! Record yourself pitching on a video camera or webcam and watch it over and over. Critique yourself objectively and repeat. Share it with friends or family and see if they ‘get it’. Got to startup events like Startup Weekend where you can do 60 second pitches as well as long form demos and presentations.
  6. Refine your pitch every time you do it. Don’t stick to what you always do. If you have done 1), then you should be able to do your pitch in a way that resonates with your audience
  7. If the person you are pitching starts asking questions, that’s a good thing. You want them to interrupt you and be engaged. This means they are interested and/or trying to help. Don’t try to get thru the rest of your mental pitch in a specific order. Engage them in a discussion about the problem and your solution. (Check out Dave McClure’s talk ‘How to Pitch a VC’ from Startup Weekend Delhi)
  8. Be prepared to pitch without a deck. If you have one, pull it out but a demo is far more interesting if you really need to show something.
  9. Show passion! I find this incredibly important. Most of the entrepreneurs I come across in India may be passionate, but they don’t show it. Speak with conviction and show your passion about your idea, your business, and your team. Emotions can work in your favor if you do it right.
  10. Be open-minded. I may not know as much about your industry as you do but if you asked to meet, consider my suggestions with an open-mind. I may surprise you 🙂
  11. Don’t pretend to know what you don’t know. It makes you look more foolish than if you honestly say you have no idea what I’m talking about. You won’t believe how many times people pretend to know and follow Eric Ries‘ Lean Startup methodology but really know nothing more than buzzwords. If you don’t know something, it will show so don’t pretend.

Check out these additional resources:

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Startup Weekend is Coming to India

Startup Weekend is a 54 hour event where developers, designers, and entrepreneurs get together and build great new Internet and mobile products. Startup Weekend is coming to India

Get your tickets to Startup Weekend Delhi or Startup Weekend Bangalore before the early-bird pricing ends.

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