Journey of an Entrepreneur – Part 7
The memories of starting Focus Infotech came flooding in at the end of a panel discussion – when a youngster approached me and told me that he wanted to start-up a venture and queried me about the ways to raise money for the same. The word “start-Up” has become a fashion statement in some of the youngsters.
It was back in 1997 and the word “start-up” was not much in vogue. During that time four individuals (including me) came together and discussed the idea of starting a training company that would help address the problem of shortage in trained IT personnel to handle the Y2K changes. It was a problem that had a definite success formula or so we believed. We raised Rs. 6 lakhs amidst ourselves and we had to “borrow” the rest of the investment. Terms such as “start-up” and “funding” were not in our vocabulary back then.
We went ahead and borrowed Rs. 45 lakhs worth of computers and software at a flat 18% interest rate as we were convinced that the problem of real. It was obvious to us that trained resources were definitely needed by all IT companies. The debt – equity ratio was skewed beyond anyone’s imagination… we were dreamers and did not have even the slightest of doubt about our ability to attract trainees and offer them to the IT companies.
Today, I look at the conviction about an idea and its success in addition to the approach when I meet the budding entrepreneurs who make their pitch – the conviction holds the key. The slides are secondary – I talk to them and listen to them to understand their conviction about why the idea would succeed rather than going through their power point presentations.
Looking back, the primary reason our idea took off was because of our conviction and the belief that we had the solution to a problem. The course material was prepared by our then Chairman whom we considered as an expert in the field. We were so convinced about the quality of our material that we could convince the trainees that we had a good thing going, and they will definitely have jobs on their hands at the end of the training. People look at your belief and conviction about the product rather than the product itself. Your belief on what you are doing is paramount to the success of any venture.
During that time, we concentrated on training and the going was good for the initial two years. Our aim was to scale our business and none of the partners were looking to take home a bigger pay package than was necessary to meet our basic needs. This spirit of investing in the business rather than trying to ensure personal growth is one key that helps in scaling business – this prevents the fall of a venture soon after a successful upside.
In the early days, it was quite difficult to get the trainees for the Y2K program, as our advertisements did not trigger in the footfall that we had envisaged. We had priced our training at a premium and student counseling was done by us personally and we also had good counselors who supported in the same. We were clear that the students should have a mathematical background and preferably be engineers. We were honest in counseling the parents that students with other backgrounds may not fit into this training.
I have been tempted to take in students and presented the challenges to our then Chairman, and his advise was “being open and telling the truth is the best strategy”. Our honesty and upfront approach helped us build our reputation. I have taken this advice very seriously and till date firmly believe that nothing works like truth. Believe me, it works!!!
We had opened the first few centers of training, and we were busy promoting our final product as a staffing partner to the larger IT companies. This was the period when every engineer dreamt of going to US. We were ready with our first Internet based course that was designed by a 16-member team. We changed our tagline to “Year 2000 and Beyond”. We introduced our development center to host trained resources to work on projects. IT companies were hiring inexperienced engineers trained by us, and our staffing business was taking off.
We felt this was the right time to go to the US and market our engineers and offshore services. One of the earlier management team members was keenly interested in moving to the US to establish our services. The business model seemed simple. We had to file H1B for the resources and move them to the US to be employable.
The belief of success and the aim was too high and we realized that we did not have enough financial resources (we needed more than Rs. 1 crore for Visa filing) to meet our belief and dreams. The expertise of our partners who were from premium B-schools came in handy as they made an excellent presentation that tied up our belief with our success story. We had raised funds from close family and friends till then, and this was the first time we approached VC firms and investors.
One of our partners was able to convince his relative who was an investor to look into our venture and the gentleman was convinced and he not only invested in the venture but also got in another investor to invest at a premium.
On retrospection, the first four years were consumed in managing cash flows and taking collective decisions to promote scale. There were definitely difference of opinions but the collective concentration was on scaling the business rather than leaving money in the kitty for disbursement. Fundamental financial decision making tools such as Profit and Loss statement, MIS and expenditure control did not really enthuse us much.
We signed the shareholders agreement with the new investors group (NIG) without much thought. We believed that the investors come in with their own wisdom that will add value to our organization. We as promoters did not even debate the shareholders agreement. Looking back, some of the clauses were not really favorable to us.
My learning is that it is mandatory to go into finer details even while the excitement of funding tends to make us ignore the same. Reading the fine print before signing any agreement makes good sense.
The excitement to scale was infectious and we made some quick decisions without much validation – we believed that we could invest in online city portals and we believed that we were on track in becoming of the major news online portals. Most of the time, we were ahead of our time in our thoughts and we did not have the skilled resources to convert our thoughts into an actionable model. Our limitations and limited scaling made us take these decisions – and the lesson learnt is that any changes in the set up has to be made when the going is good and not during downturns. It goes without saying that our belief of creating the online portal did not materialize that easy.
The first major lightening struck when the dot com bubble burst. People lost faith in training, and we had to look beyond training and withdraw from the same. The H1B engineers did not take the flight and the money we raised was diluted into ventures that did not materialize the way we envisaged it. Looking back, our staffing engagement was the only business that was steady.
At that point, we believed that the software business was more attractive than staffing. We failed to see our core strength, and by core strength I mean the team’s ability to foresee and run certain operations well becomes the core strength of the company.
The new investors called for meetings and we experienced the Power of the Board and investors. The importance of reading through the financial tools (MIS, P&L,) hit us then.
The golden period of collective decision making and tasting success slowly waned away and the difference in style of operations and interests came to the limelight. The interesting learning and adventure period seemed like a thing of the past. Some of the partners wanted to move on.
This is a stage in every entrepreneurial venture – the first roadblock… what happened next? Wait for the next part…
Journey of Entrpreneur
Part 1 : http://wp.me/p19Spj-5X
Part 2 : http://wp.me/p19Spj-61
Part 3 : http://wp.me/p19Spj-6h
Part 4 : http://wp.me/p19Spj-6s
Part 5 :http://wp.me/p19Spj-6C