Finance Prudence in Start-ups for Success

A lazy Saturday morning, sipping my fresh coffee and lost in thoughts with the success (??) of TheAugustFest behind all of a great team, I was pouring over the many tiny teeny things that could have gone better. One thing I am not able to get over is sitting thru the pitches, thinking we should have done a better job. Then my mind travelled back to few months back to a Sunday evening in ISB listening to people sharing their ideas. A few shortlisted groups shared ideas. While watching these kids present and during TheAugustFest one thing I noticed commonly is that not many of these Wannabe Entrepreneurs know what it takes to go another mile than many have travelled.

Two points every one misses for a successful journey in the start-ups world in my mind is – managing finances and pricing the product /services right. I will run by two scenarios (one for each) and write what to consider in these situations.

Managing Finances:

Investor:  how much money did u put so far and what’s the source?

Start-up:  about 20 lakhs – raised thru friends and family

Investor: Do they have stake in company? and what percent?

Start-up:  no no they don’t want anything.  They are helping me.

Investor:  What did you use this mosey for?

Start-up:  Spent it in last year

Think for a minute not as company owner but a person or organization investing in your start-up. Every penny that was ever put in a company MUST have a stakeholder; be it your parents, friends, family. RK from Uttistha a private incubator says “Most of these people do not understand finances. They don’t keep record of the money invested and money spent which is key to raise money in next rounds”.

Lesson: Be prudent about your money; whether someone helping you or the money you are spending.

Price is Right:

I have come across many youngsters who are using the money in their start-ups without thinking of ROI.

Me: How much are you charging for your services?

Start-up: I am using AMC model where I charge Rs 4,000 to Rs 1,00,000.00

Me:  Does it work for you to make money?

Start-up:  No not necessarily

“most of the people I meet do not have a concept of ROI and break-even” says Praveen of Kauphy Talkies. They don’t understand the break-even point and profit.?

Lesson:  You as a start-up person must have an idea of what and how to fix a price. Are you making money at the end of year or you still losing money

“In Valley (Sa Francisco valley) people expect to fail, but fail fast and move on. They don’t bet on Living dead” a quote from a CEO visiting us from US. Find your exit soon instead of becoming Living dead

Product design: Art or Engineering???

If you watch James Bond movies like me many times and try to remember every dialogue I will bring your attention to a situational dialogue in Die Another Day. The villain gets on plane after show casing ICARUS and tells the person who is working on the machine, “This is still a suitcase, make it small – have you not heard about ergonomics”. I draw your attention to the word Ergonomics here which means “Ergonomics is about designing for people, wherever they interact with products, systems or processes. We usually don’t notice good design (unless perhaps, it’s exceptional) because it gives us no cause to, but we do notice poor design.” (Ref: http://www.ergonomics.org.uk/learning/what-ergonomics/)

We want our phones to look fancy and cute. How does a phone manufacturer or for that matter a product seller know what sells best and why? That is where design of product comes into picture. Have you ever heard of a man named “Sir Jonathan Paul "Jony" Ive”?? I never heard of him too.. but wondered the famous Apple Inc that become a iconic company& how was Apple designing products. Naturally I typed in Google Apple Designer and Voilà came up with a wiki page (http://en.wikipedia.org/wiki/Jonathan_Ive ) about Jonathan Ivy, the Man behind the Apple’s Industrial Design Group.

For an IT person in me the products’ software capabilities are amazing, , however the engineer in me is pleased by their gorgeous looks and the joy of handling them and using them..

Human body is a marvellous engineering model. Anything I see right from a cooking utensil to a chair or any product is designed by someone. This is where I started thinking – So product designing is it an art or engineering?

In our daily life we use so many things from morning till evening -- a toothbrush, bucket, towel, shoes, a  vehicle, office desks, laptops, stairs, elevators, and finally the bed we sleep  -- In every one of them a design principle is used.  

 A friend shared the knowledge with me recently that designers use a grid and align everything during the process of ‘designing’ a product.

When a developer does not code that exactly the way the designer envisioned, the Designer might get upset. This is where my confusion started, as usually only artists get upset when their vision is not fully presented; like a dance master when the disciple do not perform the mudra perfectly, an artist when the painting is not making sense to him, or a sculpture when he/she cannot make a stone come alive.

Here is what finally I ended up with:  for any product be it in Software or in physical world, it is important to bring together art and engineering. It’s a natural confluence to make best products.

With Engineering comes innovation and with innovation you can become an entrepreneur. How do you bring both of them together??  That is where we from Eat Sleep Drink Start-ups (ESD) present The August Fest 2014 celebrating art and entrepreneurship. The dates: August 30^th and 31^st 2014. Venue: ISB Hyderabad. See you all there (http://www.theaugustfest.com/ )