To Startup or Not To Startup….

It all starts with an Idea… So you have one but an Idea itself is not going to make you successful. You need to convert that idea into a successful business. It takes hard work, right team, correct synergy and most of all money to start-up. It is said that 9 out of 10 start-ups will fail. With a failure rate this high, how do you make sure your business will be successful. So the big question is – Should you leave your paying job and venture out to set up a business of your own?

Well the short answer is to go through the following checklist –

  1. Are you willing to quit your job to work full-time on your Idea? — Remember this is very crucial. Most people think they can work on their idea on the side while working their current jobs but more often than not a start-up requires a lot more time and effort to get off the ground. Contrary to popular belief the founders will probably be working round the clock to get the business started.
  2. Do you have an Idea that is different and is likely to change the way a business or a piece of business is conducted?
  3. Does your Idea solve a business problem that no one else has solved yet or does your idea solve the business problem more efficiently than the other solutions available?
  4. Do you have the right co-founders with you?
  5. Have you identified other team members that would be instrumental in getting the Idea off the ground and convert it into a business?
  6. Do you have enough money of your own or access to enough money to support the start-up for the next 18 months?
  7. Do you have a team of advisers who will support you with correct advise?
  8. Have you done your legal homework including shareholders agreement to rule out any legal hurdles? — This one can be a real pain along the way and can turn out to be super expensive if legal issues are not addressed right from the start.
  9. What are the entry barriers for your business?
  10. Is there scale in your idea? — Can you grow your business to be a multimillion dollar value business?
  11. In the next 10 years would you make at least 3 times more money as a businessman than what you would have made if you continued your current job career path.

If all these questions are ticked yes, you are ready to start-up and give birth to your idea. Remember to work hard and be prepared for a hard time…

Guru mantra : Always under-promise and over-deliver not the other way round…

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A long time ago, entrepreneurs started out themselves and grew their businesses big. It was a one man show. It took time but they were successful. Well, times have changed. The business environment today is very complex and very competitive. It is absolutely impossible for one person to handle all aspects of business. So what do you do? The answer is to get Co-Founders. Co-Founders complement your specialties and accelerate the growth of business by bring in their specialization. There are 3 key areas of business that need absolute concentration of the Co-Founders and each Co-Founder should have expertise in at least one of these areas.

  1. Finance
  2. Operations
  3. Technology
  4. Sales — Preferable a person with a lot of contacts in the Industry that you are going to service or sell to.

Young Entrepreneurs often think that their Idea is their baby and they should own 100% of it. This thinking in today’s business environment is a recipe for disaster. You should be willing to share success and fortunes with others to make it big.

Having said that, it is very important to select your Co-founders carefully. Wrongly chosen Co-founders can bring a flourishing company to its grave. Have many rounds of discussions with your potential Co-founders to see if the synergies match, whether thinking aligns, can you work together as a team, will the Co-founders work full-time, do they have the background to get the company started, does everyone understand the business goals. It is also a good idea to have criminal verification done on your Co-founders.

Guru Mantra: Remember 100% of 0 is 0 but 30% of 100 million is 30 million… Choose wisely…





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The Structure…

Often start-ups with a great idea and a great team hit road blocks while scaling up. Usually they realize this when acquiring finance. These road blocks are because the company was not structured correctly. This brings me to a very crucial step in the whole start-up process – The Structure.

The Structure of the company should be created very carefully and with the help of good lawyers and CA/CPA. This is a big expense for a start-up but should be considered as an investment because this will come handy in future. You should have a clear road map for the company and consider the following to structure the company properly.

  1. Where will funds to finance the company come from? — This will govern where the company is set up and how.
  2. Who is the principal investor and what is his/her citizenship status in the country where the company will be set up?
  3. What are the tax implications (both personal for shareholders and for the company) for setting up the company in a particular country or state of the country? — Most lawyers will suggest the best location from a tax and investment standpoint.
  4. What are the legal implications and compliance requirements for setting up the company in a particular country / state?
  5. How will the shareholders agreement be drafted and what all will be included in the agreement? — A good practice is to write down everything that a shareholder is allowed and not allowed to do with the stock of the company or with the operation of the company. I think it is a good idea to keep friends and family of shareholders away from the company and have that included in the shareholders agreement.

A lot of young entrepreneurs try to cut corners by hiring inexperienced attorneys and CA/CPA that have a standard format for the structure of a company and do not have extensive knowledge about the laws applicable to a particular business. This can later in the life of the company become very painful, time-consuming and expensive to correct. I am a big fan of cost savings for a start-up but this is an area that needs a lot of attention and one should be ready to spend money to get the structure right the first time. There are many good lawyers and CA / CPA who will structure the company for a very basic and minimum down payment and rest as 2-5% stock in the company. If you cannot afford good advice outright, pro-Bono would be the best option.

Guru Mantra: Early advice is very crucial and should be considered as an investment and not an expense.

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Board of Advisers…

Young entrepreneurs often have great ideas but less experience in running a company. Lack of experience and knowledge about the forthcoming challenges and how to tackle them effectively can slow the growth of the company significantly. This is where advisers come in. Advisers or Board of Advisers as it is often called is a group of very experienced businessmen or professionals that have excelled in their fields of work and help start-ups and early stage companies with valuable advise on how to get around current challenges and how to be prepared to handle future challenges.

Board of advisers also helps the business to scale up by providing access to investors. Investors scrutinize the team of the company very aggressively to see if they should risk their money with the team leading the company. With young entrepreneurs who cannot show credibility of running businesses, it becomes very difficult to attract investors. This is when Board of Advisers comes to rescue. They extend their name to the company and make it more investor friendly. The company can then tap into the Board of Advisers Networks and reach out to potential investors, clients or employees.

So how do you reach out to these Advisers and get them on board? To many young or first time entrepreneurs, advisers seem very unapproachable. In reality, these people are very approachable and humble. The best place to meet such people is Networking events of various chambers of commerce. Once contact is made and business cards are exchanged, do not hesitate to call them or communicate with them over e-mails. Take the initiative to invite them for talks over coffee or drinks or lunch and have discussions about your idea and how can they be useful in building on your idea. Once they are interested and tell you what they can help you with, you would probably have a discussion about what is in it for them. This discussion is important as Advisers are very senior people and would be earning quite a lot. If they spend time with you, they would be missing out on some other opportunity. so if they do not get paid by you, you will be last in their list of priorities.

Guru Mantra: If you cannot show credibility on your own, get someone with credibility that can be used and offer them stock to keep them engaged.

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