Venturing into Capitalism
A while ago, on my old(er) blog, I wrote a post called Ten Things I Miss About Cambridge, in which I wax nostalgic about all the things I missed since I moved to New York from Cambridge, MA, the town in which I went to college. I love the energy and intensity of New York and I highly suggest that everyone spend at least a couple of years living in the area if they have the chance, for an experience they will not find in the rest of the US. My New York experience, however, comes to a close for now, as I move (back) to the Boston area in January and begin a new job as a junior investment professional at Longworth Venture Partners.
One of the best pieces of advice I received from my high school principal was to always think of what’s next, be it in my life, my career or any other of my pursuits. Onescore and four months ago, I switched careers from being a software developer on Wall Street and became an enterprise software industry analyst at The 451 Group. When I became an industry analyst, I had way too little operational experience that would inform my career in the field effectively. After all, there are few things worse than an uninformed cynic. As luck would have it, I happened to break into a unique firm like The 451 Group, which is truly doing some great work in the industry analyst industry with its eye on emerging technologies, startups and its connections into the investor community. After getting my bearings in my new role as an analyst, it dawned on me that the next step in my career, which would give me additional operational experience, should be either at a technology vendor or a technology investor.
My role at The 451 Group has by far been my favorite job to date for three big reasons: the wonderful people I work with, the kind of work I do and the sheer amount I have learned about how the high technology industry works. I’ve always tried to be around people smarter than me so that I can learn from them and it has truly been an honor to work with my fellow analysts at The 451 Group. My work as an industry analyst fits my preferred working style very well–short, well-defined, intensive projects with considerable variety. I’ve personally come to value breadth of knowledge over depth of knowledge in any given domain because I figure I can always delve deep into a specific topic (or draw upon the specialized knowledge of smart people) if need be. For all these exact reasons, a career forward as a tech investor rather than at a tech vendor seemed the best step to take.
Longworth Venture Partners is an early-stage technology venture capital firm, whose past successes have included Softricity and Constant Contact. The firm closed its third fund of $180m this summer and is actively looking to invest in infrastructure software, mobile/wireless and online content companies. The firm is big enough to have healthy deal flow but small enough that I’ll have much to learn about the venture investing process.
Venture capital is a line of work I’ve always eyed with keen interest and I’m delighted and thankful to receive this opportunity. As glamorous as venture capital may seem though, it is extraordinarily hard to identify what exactly makes one an effective venture investor. Even if I find that I don’t have that secret sauce, this path opens up several opportunities, be it in entrepreneurial circles, senior operating roles or investment circles.
I’ll miss New York and all my friends and associates here. I know the New York startup community has a lot of promise from my own interactions with it. Longworth is active in New York and other East Coast entrepreneurial communities, so I’m sure I will be no stranger to New York. If you are an entrepreneur and would like to bounce ideas off me, you know where to reach me.
On the brighter side, I look forward to reexperiencing the Boston area (this time not as a broke college student), reveling in all the things I now miss about Cambridge, and perhaps discovering other things to miss and write about in future posts. So, here’s to venturing into capitalism!
The Four Hour Work Week
I recently read the Four Hour Work Week by Timothy Ferriss. The book lays out the case for ‘lifestyle design’, where you, me and Joe the Plumber can become financially independent and use our time to do the things we really want to do–like ballroom dancing, kickboxing, meaningful charity work or otherwise become a Renaissance Man–rather than being chained to a desk in the most fruitful years of our lives. If you detect a faint note of disdain in my description, you are not too far off because that’s how I initially greeted the book and how it was marketed.
The initial chapters of the book reminded me of Aleksey Vayner and of tons of spam that poses as advice on how to become a PUA. If you’re willing to overlook the almost-intentional hokeyness of the early chapters, you can walk away from the book with several thought-provoking ideas on simplicity, the value of time and the virtue of being more effective by working smarter rather than harder.
More than anything else, the book emphasizes the value of time, once the time-money trade off shifts in favor of time. Ferriss ruthlessly condemns conventional wisdom, which advises people to defer enjoyment until they have retired, at which point the change of pace is a big shock and might lead to regrets and aimless time-wasting anyway. He lays out some techniques that will help readers become fully detached and mobile from one’s work; to become financially secure in ways that will help them accomplish their dreams; to trim the fat of unnecessary possessions, ties and expectations from their lives and to take advantage of labor arbitrage to aggressively outsource mundane tasks to others. The last theme especially might give some food for thought to entrepreneurs running Atomized Enterprises.
Above all, Ferriss emphasizes active living, i.e. imbuing everything you do with intentionality, self-awareness and explicit volition. The man’s effort is commendable–what starts out sounding like a tacky, get-rich-quick book winds down sounding like it came out of a Zen text.
It’s good for Tim that he has been in sales roles for much of his life, because those roles can afford a reasonable amount of mobility. At my current workplace, several of the top-performing salespeople are perfectly fine working out of a home-office so long as they are ’smiling and dialing’ enough. As part of the Generation Y ethos, I hope for a flexible work environment, varied activities and travel in my career, but I still expect to spend several more years in a traditional office environment for the kind of work I want to do. But Ferriss’ exhortations on the value of time–the fierce urgency of now if you will–are definitely something to keep in mind as I strive to live a fulfilling life.
I’ve started my next book, Getting Things Done by David Allen, which takes a whole different approach to time management and efficiency. There is a huge online cult following for the book already, but I might report back with some of my own thoughts.
Five Things About India That Blew My Mind
Last week, I attended a event organized by TiE on US-India entrepreneurship (the same one I talked about in my other post) and came home with my mind racing. Of the many great speakers at this event, one was Navjot Singh, a Partner at McKinsey&Co. From his talk and over the course of the evening, I learned the following five things about India that blew my mind:
- According to the McKinsey Global Institute, private consumption in India is set to grow 4.1X in the period from 2005-2025.
- In 2012, India is set to overtake China as the fastest growing global economy.
- By 2010, private equity investment in India is set to reach $20bn (A PE Hub report states that VCs have pumped $2.3bn into India so far this year).
- 40 percent of produce grown in India never gets consumed, due to poor infrastructure and inadequate food preservation.
- Healthcare in India will present a $20bn market opportunity by 2015, including fundamental research, drug development and patient care.
India has made a name for itself in IT services so far, but as the economy and old ways of life slowly transform, the enormity and sheer variety of opportunities in the years to come should boggle anybody’s mind.
Timeless advice for entrepreneurs
Yesterday, I attended a mini-conference at Princeton University, which explored entrepreneurship opportunities in the India-US corridor. TiE, the organizers of the event, had assembled an extraordinary roster of speakers, all of whom were engaging and made many thought-provoking points. One of the speakers was Ken Morse, the Director of the MIT Entrepreneurship Center, who was especially entertaining. One of his quips:
As an entrepreneur, you have to work 24 hours a day, but you get to choose which 24.
Almost simultaneously, the doom and gloom from the convulsions of the financial sector has found its way to the Silicon Valley crowd. Warnings from investment stalwarts such as Sequoia Capital and Ron Conway have almost single-handedly ended the exuberant atmosphere among the entrepreneurial set. Several VC firms have held come-to-Jesus meetings evaluating the impact of the credit crisis on the health of their portfolios. No doubt, it’s never a bad time to be an entrepreneur. Now is especially a good time for those just starting out to hunker down and build a company that will be in the right place when the economic headwinds turn. In his talk, Ken Morse gave some advice that applies to entrepreneurs no matter what the economic climate is like:
- Business people are essential. Ken said 80 percent of startups consisting only of technical founders (the ‘geeks’) fail. Conceiving an idea is less than half the battle. Assuming competent execution of the idea, getting the word out and selling to customers are a lot more important to the success of any venture. Ken exhorted entrepreneurs not to view salespeople as ‘lower life forms’.
- CFIMITYM. Cash Flow Is More Important Than Your Mother. Even if you are not the business person in your venture and even if you are lucky enough to be well-funded, get to know how your business model generates recurring revenue at a basic level. Make basic financial projections for your own reference that will guide your thinking for several months ahead.
- Selling skills are important. Ken said there is a real shortage of sales skills among entrepreneurs. By sales skills, we are not necessarily referring to dealing with prospective and current customers. Selling people on ideas and strategies is just as important.
- Do the homework. Regardless of whether you’re a lone business-minded founder looking for your technical soulmate/co-founder or vice-versa, you have to do the early market development yourself. Validate your ideas early by talking to prospective customers. Defining the scope of what you will do with real outside input is an experience that will refine your idea and potentially lead to new directions.
- Customers are the best source of funding. Rather than chase 4F (Friends, Family, Founders and Fools), angel or venture capital money, see if you can’t get customers to fund your development. Customers provide validation to your business model and can act as external champions of your product or service. What’s more, in return for their money they just want their problem solved and pain points removed; they don’t want any of your equity.
Ken made the above points alongside a great presentation detailing success factors for an entrepreneurial venture. Perhaps these success factors will change even as the nature of entrepreneurship itself is changing. But the points of advice above are truly timeless.
Breakfast with Scott McNEaly: keeping it lightweight
- Buy spot market offerings. As much as possible, buy products and services at going short-term rates, even if it means you end up paying a premium for not agreeing to sign on for a longer term. McNealy said that things change too quickly in our world and that locking in a profitable long-term contract rate might prove to be an impedance down the road. He said that signing on more resellers rather than more salespeople during the dot-com era would have been one example of this principle at work; he added that Sun should have preferentially grown its reseller network over its sales force.
- Minimize fixed costs and overhead. As a parallel to a supposed Japanese business maxim "all inventory is bad", McNealy said "headcount is bad". He exhorted entrepreneurs to keep fixed costs low and concentrate exclusively on their startup’s unique value proposition where they differentiate themselves. In most build vs buy decisions, entrepreneurs should only build that which will enable them to erect barriers to competitive entry by other players.
- Get someone to think you’re crazy. McNealy said that the mark of a good strategy is someone thinking that its creator is crazy. Eliciting a vehemently skeptical reaction means that there is a controversy somewhere in the business plan, which in turn is an opportunity for the entrepreneur to differentiate themselves and their startup.
- Create barriers to competitive entry. McNealy emphasized the importance of creating unique intellectual property (IP) such as patents and trademarks that will inhibit competitive entry into an entrepreneur’s market niche. He was of the opinion that a portfolio of this kind should not be used predatorily but that it is nonetheless a good defensive measure. Sounds like the IP version of the Reaganesque maxim "Speak softly but carry a big stick".
I was struck by the extent to which McNealy’s advice resonates with the themes of Atomized Enterprises that we have discussed at great length on this blog. McNealy does not perhaps espouse atomization to the same extent; for instance there was limited commentary on outsourcing or cloud computing. In one instance, he even wondered why management consultants exist at all because an enterprise should never ‘outsource thinking’.
- Nonetheless, the idea of keeping overheads and fixed costs low is an important idea I took away from the breakfast. Do you think enterprises can still create value while outsourcing the effort behind core value creation (rather than the ideation behind core value creation)? Join the discussion in the comments below!
Introducing Project Tofu
Readers of this blog have read some of my thoughts about Atomized Enterprises. But as the saying goes, ‘in theory, theory is no different from practice, but in practice it is’. And so it is now time to raise the curtain on an Atomized Enterprise project of my own: Project Tofu.
The rising incomes of India’s middle class, coupled with the favorable demographics of the country as a whole mean that the country presents a wide-open opportunity for any entrepreneur who is interested in taking it on. India’s diaspora of successful and sophisticated technology investors in the US (many of whom are former entrepreneurs) is eagerly seeking opportunities to invest in startups targeting the Indian market. Although I have deep ties to India, my recent visits have shown me the vision not just of entire industries being rebuilt but a whole country being rebuilt. Project Tofu is a venture (and a personal adventure) that I hope will teach me a thing or two about the Indian market as well as about creating and sustaining an Atomized Enterprise.
I can’t really say very much about Project Tofu right now other than that it’s an offering for the Indian wedding market, which is in its earliest stages of planning. As I go through the process of building it out as an Atomized Enterprise, however, I will catalogue my experiences here. An entrepreneur’s energies are all too often directed solely at solving problems of the venture he or she has launched. I hope to find the time to reflect here on the lessons I learn; if you, my dear reader, can also benefit from it, I’ll be so much the happier!
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