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Sunday, January 15, 2012

Anand Lunia's talk during Ideafest held at IIM Ahmedabad

Mr Anand Lunia, a seed fund MD gave a talk during the Ideafest at IIM Ahmedabad. It was highly interactive with a high level of audience participation. Some points I gleaned from the talk were
1.     His own entrepreneurial experience:- He had the computer based education quite early in India, but faced issues and later sold out in 2005 to  Sequia Capital. But after that, computer Based Education(CBE) really exploded and Educomp benefited despite having entered the market later. From that, he learnt the lesson of hanging in till the time comes.
2.      About skin in the game:-If you need VC money to start, you’ll mostly not get it. They want to see your commitment first, be it by using your own seed capital or quitting your job etc
3.      The Redbus story:-Most of us must have heard of Redbus or even booked bus tickers through it. As an initial investor in that, Anand recounted an interesting story about how the initial idea of the promoter was to help bus operators manage inventory through software, but then a TIE(The Indus Entrepreneurs) Bangalore chapter member advised them to chuck that idea and directly retail tickets via a  website. Convinced by that idea, Anand’s fund invested Rs 2.5crore initially to help get the site started, but it got off slowly, selling just 100 tickets/day for first year, before reaching its present scale of around 10,000 tickets/day today. The founder’s biggest USP is how he built and maintained relations with his vendors-the bus operators who had to look beyond travel agent(fixed quota etc). For that, he wore lungi(dressed like them), attended their functions, helped them out with ideas etc and won their trust, thereby he cracked the tough nut operators. All this is not  fancy stuff and happens at back end,  but such doers are exactly the kind of entrepreneur they want to back. And as the business model is so robust, very little marketing spend needed, just some search engine spend to attract customers to the site. To their credit, Redbus has resisted the temptation to extend beyond to hotels/pop corn until they meet their full coverage of buses, given that there is so much more to be done. Anand praises the promoter’s focus/tenacity/filter out outside noise and take his own decision.
4.      Carwale:- As an investor at that site also, Anand gave their example that the entrepreneurs even had to enroll in English speaking classes and all, but that did not deter them from starting a good site.
5.      Bschool degree as entry barrier: Speaking from personal experience, he compared the MBA degree to golden handcuffs, as one not only abandons a well paying job post graduation, but also experience the effect of seeing your peers race past in short term. Hence, his opinion was that the best thing to sell a company and then chill out in bschool for 2yrs till you decide what to do next.
6.       Selling your business idea:-Commenting on the information overload faced by a VC, he said that cold calls/direct meetings/referrals much more useful. He even said that for feedback, force your way into someone’s room for frank feedback-else it will be boilerplate .
7.      About assembling the startup team:-Very few people would want to quit jobs in established companies and blot their CVs by joining a startups. To get such people with the required passion is even more difficult. Hence, the CEO is usually all the positions whom he can’t hire, which makes it even more importance to be an allrounder, or to assemble a good team before-hand.
8.      About how MBA helped in entrepreneurship and VC:- In his first startup, he feels it actually hurt on balance because the rational thinking made him go against his eventually right hut feel. But then, he could assemble 16 people from IIML in 3mths post funding(most of whom stuck on later), so that may relationship matters. He felt that in MBA, we hardly pay attention to the basic courses like HR, accounting, law, costing, MIS etc, but that comes back to bite you when you learn something by trial and error, and then realize that you learnt it in Bschool years ago! However, those professions need gut feel and MBA is the opposite.
9.      Some General tips for Entrepreneurs:-
                           i.          After getting money, there gets an implicit pressure to produce numbers fast. Entrepreneur should be able to resist that, and be disciplined about launch etc.
                          ii.          Instead of worrying about initial valuation of first venture(which is a black box anyway), build chemistry/relationships with the decision makers, and seek funds from those whom you trust.
                         iii.          First mover advantage cannot be taken for granted. For example, carwale was the 2nd player, when the initial portal had raised 10x money of carwale’s funding, and yet flopped.

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