s t r a pp ed

Boot
Building Businesses
^
@ksrikrishna

http://ksrikrishna.com/
 Selling stuff
people are
prepared to
pay for

Building
Usually involves
people and laying
a foundation
Should you stay?
● In my fourth startup (2nd as founder)
● busy making mistakes every day
● Sunk/shutdown at least one business
● with over 1.5M investment while at Sasken
● Worked as #2 guy in at least two startups
● before quitting in frustration
● Built a $50M business within a 600M company
● the product marketing manager
● Build one business with $20K cap., $0.5M angel
● Sold the business at $9M
Product is but Your product
is
only
a piece of it
People Your people
are a
bigger part
of it
The Journey (3/3) the process
& journey
are the most
important
part of it

Flickr joiseyshowaa
Basic Business Cycle
● <assumption>

● [Customers are out there]

– [They have an unfulfilled need]
● [Your product &| service addresses it]
– [They are prepared to pay for it]
[You can access them/they can reach you]
●

– [What they pay you is more than what it costs you]

● [You make a profit]
● </assumption>

● [Repeat cycle]
Reality Check (1/2)
● What's the ratio of
● engineers:sales:others?
● What's the R&D expenses
● as % of sales?
Reality Check (2/2)
● What does their P&L look like?
● Revenue
– Cost of Goods
● Gross Margin
– Operational Costs
– R&D expenses
– Marketing expenses
– Admin (SGA) expenses
● EBDITA (PBIT)
Startup Reality
● Average US startup took nearly 8 years (yep eight)
● to get to $50M revenue
– Microsoft took 8 years & Oracle took 10
● We took four years to get to our 1st million dollar year
India Funding Reality
● Angels
● ex-entrepreneurs, HNI, non-blood relatives
– Usually betting on the person (you)
– Finite money and finite help to step up or scale
● Family & (soon to be ex-)Friends
● Where much of the action is to get rolling
● Bootstrapped
● Customer foots the bills
India Funding Reality
● VC are businesses too (duh!)
● Ideally (un)reasonable risks for unreasonable returns
● Eco-system is far from ready
● We should quit all this Silicon Valley of India talk
● Entrepreneurs are far from ready
● We have the spirit (motivation) but the flesh (skills) is weak
● Most of us are unfundable
● Doesn't mean we won't get funded!
Your Motivations
● Why are you doing this?
● What constitutes success?
● Is that what your partners think?
● How long are you prepared to go at it?
● Why or why not?
Our story – the beginning
● Want to build a tech product company
● Out of India – maybe in DSP area? EDA? wireless?
● Pitched 13 different concepts to customers
● Over a six month period
● Mostly B2B concepts – ranged from
– deeply tech (chip design, DSP software) to
– enterprise apps (sales automation)
● All but one founder held day jobs
– Got first 15K service contract, hired one programmer & bought computer
● Operated out of founder's apartment
– Lost one founder in year 1 (culture)
Year 1-4
● Finally picked Bluetooth over Wireless (this was '99)
● Because latter required 10K payment for group membership
● First 3 clients (350K, 250K, 200K) landed with Powerpoint
– Leveraged relationships and hustled like crazy
● Screwed around nearly 2 years to deliver product(s)
– Lost first 3 customers :-) and brought in more (Japanese) customers
● Tech market imploded in 2000
● Bluetooth declared (nearly) dead at least twice 2002/3
● Broke even in year 4 and realized we are a business
Year 1-4 Behind the scenes
● Brought on chairman who knew banks
● Arranged for 250K line of (packing) credit
● Borrowed 350K between angels & family – interest bearing
● Hired (& fired) sales guys in NA & Japan
● Put our own guys in NA & Japan
● Shut down VLSI initiative & outplaced people
● Shutdown 1 (profitable) service client
● Made the transition from software to system company
● Employee 18-34 turned out to be wrong fit
Year 5 - Focus
● Focused on stereo music over Bluetooth
● Transitioned Japan service business to 3rd party
● OEM focus in North America & Europe
● Silicon vendor partnerships/licenses for royalty rev stream
● Reference design as a means to sell software
● Major account strategy
● What is our growth strategy?
Year 6 & 7
● Competitors get snapped up in marketplace
● We develop Plan B to enter retail stereo headsets
● Hippo LifeStyles Pvt Ltd. Singapore
● Customer express anxiety about us being acquired
● But unwilling to acquire us themselves
● We hire an investment banker from the Valley
● They run a good process with 4 final bidders for Impulsesoft
● We opt to get acquired by SiRF as we deem best fit
● We were partly wrong – for cultural reasons
My $0.02 here

● Focus on building revenue (model)

● Paying customers are always good
● Refine, tweak and re-do as needed
● Customers & revenue will keep you honest
● You'll have better funding options, hopefully
Takeaways
● Product is only part of your business
● People are the major component of your business
● Better enjoy the journey
● Belt up it's a roller coaster