How should entrepreneurs evaluate opportunities? Dr K Ramachandran, Professor (Entrepreneurship), ISB offered some tools, while Raj Gollamudi asked and answered some questions. Rajat Gupta, our man in Hyderabad, was there on Day 1:
Dr. Ramachandran suggested that entrepreneurs analyze their product and how critical it is – whether customers are desperate for it or not: Is it high or low on criticality? Is it affordable? Does it have mobility?
One example was that of ‘Good Night’, an electrical mosquito repellent which was a runaway success in India because customers had options which were inconvenient. It had a first year turnover of Rs. 91 lakhs. Cease Fire and Vaccumizer were launched by the same entrepreneur, and the latter failed because it was not customer centric.Also, past successes do not ensure success in the future.
One way of getting new ideas is by observation – ideas are in solutions to complaints. People are lazy, pleasure seeking and comfort seeking – if you solve customer dissatisfaction, you have an idea that could work.
Dr. Ramachandran also shared some issues related to new ventures:
1. A business plan is not engraved in stone. It is a dynamic document
2. Entrepreneurs tend to fall in love with their idea, and don’t do an objective evaluation
3. Entrepreneurs tend to lack real insight of the market.
4. Inadequate understanding of technical requirements can jeopardize the venture.
5. Govt. regulations can change the situation dramatically.
Raj Gollamudi, Founder of BlueStream Ventures then offered a VCs perspective, which resulted in a barrage of questions on VC funding: How should one make a plan for VC? What is the VCs exit strategy? Someone shared a bad experience he had had with VCs, which put the fear of VCs in people. Questions on whether the VC can fire the promoters, on stringent clauses in the termsheet, on veto powers on the board. Gollamudi, though, had questions of his own to ask, for which VCs seek answers: What is the need for your product, what pain does it solve? What are its benefitts? What is the maket size? Who is the customer and what is his buying behaviour? How do you reach the customer? What are the success factors?
Gollamundi said that around 70% of startups get sold, and the rest get acquired. He mentioned that there are signs of an angel fund coming up, and one may even be created at ISB.