A Note on the TATA NEN Hottest Startup Contest

I stumbled upon the TATA NEN Hottest Startup contest yesterday. The site can be accessed at http://hotteststartups.in. The site features a slide show on the 30 finalists, 5 of whom get declared as the hottest startups in India. I spent some time going through the websites of the finalists and I found the array of ideas and business models extremely stimulating.

A word here. It is one thing having an idea, it is another making it work. "Making it work" involves pricing it right, selling it in packages the customer wants, having flexibility to adjust to demand, managing operations, managing short term and long funding etc. Essentially, the same idea can be operationalised in different ways. One way to break down the operational aspects of a company are in terms of the 4Ps. (Product, Price, Promotion, Place) One can take an idea as old as the hills and play around with this mix and come up with an entirely new offering. Therefore, you could have a lorry business, but maybe if you came up with an innovative pricing scheme, and if pricing was very important to clients in this business (which is the case), then just that innovation could make your company different. You can take this one step further and become a company that comes up with pricing solutions for the lorry industry. (Of course, the demand would have to be large enough and all that) This is on the marketing side. On the finance side, for a startup, if your idea does not generate cash quickly, the pressure is that much more. Getting all these elements right ensures success. Frankly, it is not as complex as it sounds. One must always remember this. The MBA program is 100 years old, Corporate Finance in the modern form is 50-60 years old. Business on the other hand is thousands of years old. Hence, all these fancy terms constitute a checklist of stuff that the entrepreneur needs to be wary about. A more organized form of this "checklist" is the business plan.

Enough talk. Let us get into some ideas that I thought were worth sharing. (Please note that the list is very very subjective. These views are shaped purely by the personal experiences of one individual and in no way a reflection on the other startups)

There is a startup called Wyn Brands whose business model is based on managing the supply chain for fresh vegetables for customers like McDonald's, Domino's, Pizza Hut etc. Till now, I assumed that this would be an in-house function. Apparently, these firms outsource vegetable procurement (maybe even cutting of vegetables) to vendors! Who knew! But once you are aware that this opportunity exists, it makes perfect sense. If I ran a big restaurant and my vegetable demands are well understood (which is usually the case), why not leave the headache to someone else and just focus on quality check. I like this because the idea is simple and the value is clear. The problem is that it is easily replicable and risk of margin pressures in the future (due to competition). But that is ok. I am sure something can be figured out in time. What matters is that someone has got this to work. The company started in 2003 has a turnover in the range of 1-5 crores. Again, it would be interesting to see the net profit margin, but I still quite like the idea.

Another interesting startup is FieldTurf Tarkett. This company offers artificial grass for landscaping, indoor sports flooring, synthetic tracks etc. I would have expected that designers/architects would have normally been responsible to find a subcontractor for this kind of thing. In the case of sports flooring, I suspect that one would have had to contact foreign vendors. Currently, there is a lot of interest in non-cricket sports in India and I think these guys have come in at the right time. Of course, there is always the question of pricing and profits. But the reason I am highlighting this idea is that just by looking around us and asking how did this get here, we could get thousands of ideas. All of us walk into beautifully designed offices day in and day out. Some of us admire them, but we just assume that the builder would have taken care of it. But even the builder would have to contact so many vendors to achieve that goal. Just breaking down those elements and researching about them could be a starting point to ideate for the budding entrepreneur. For example, maybe, specialized energy management solutions for buildings are a big business segment. Observe and ask!

One totally whacky idea on first encounter, but kind of obvious on reflection is Sacred Moments. The company offers designer pooja kits! Outwardly, all of us like to pretend we are oh-so-rational, but face it, all human beings need something to hold on to. One would expect that this business is not only recession proof but one that thrives in recessions! I am sure these Bhakti Packs are sold for a few hundred rupees, but I doubt if it would cost much to put one of these things together. The biggest costs should be packaging and transportation costs. I would expect it to be a high margin business. Since I am currently not a pooja doing type, I don't see the value of this product for me. It would be interesting to see how this evolves. But I still like the entrepreneurial thinking! :) This is to highlight that you don't need to have high funda to the max ideas to become a "succesful" entrepreneur. If your objective is to earn a steady and comfortable income by working a few hours, then such "low funda" ideas could give you more bang for the buck.

In the Indian business environment, legal services and logistics are two huge huge gaps. Remember both of these are essential for the smooth functioning of companies in the macro operating environment. In the field of legal services, the startup featured here is TakeOverCode.com. Imagine, there is a fresh faced kid right out of school who wants to start something. The biggest stumbling block or the "fear factor", in my opinion, is the labyrinthine legal system that one may have to confront. I guess most people would go to their family lawyers. What if you never had a family lawyer? Then you would go by referral. Normally, lawyers do not advertise. (Someone told me that they are not allowed to advertise) This kind of a site, while clearly not advertising, serves just as that. By presenting some oft needed resources on the net, the company must be able to strike up quite a few clients.

Coming to logistics, we have Chennai based Ennovasys. Ennovasys' company profile says that "..[It] is a software company providing real-time asset visibility across supply chain." This is a really cool idea. Imagine you were a trucking company owner and could monitor your assets on real time basis. For the right price, I would buy it.

A related idea is Rasilant Technologies which offers tracking services based on RFID. However, their product offering is quite interesting. They offer inventory management systems, smart card solutions for campuses and clubs as well as secure access systems. There is nothing new about the business model but the reason I have featured it is because they have claimed in their profile that "Rasilant tackles Security concerns and improves organization processes through RFID automation and has a turnover of INR 1 Billion in three years." If this number is true, damn, who knew!

This post has gone for too long. The full list of finalists can be found here. In the IT services sector I liked DeskAway. I did not understand the exact value proposition of some of the other ones, but some of them have really high turnovers.

I will conclude shortly. There are two business models that I found to be very innovative but not sure about the take off for these ideas. One is librarywala.com. This startup uses the internet to revive that beautiful tradition of lending libraries. You choose a Price plan and the books get delivered to you! They claim that there are no late charges! Even with all that, I don't see myself signing up for such a service. But again, I would be very interested to observe this startup.

The other one is Mumbai based Ecomove solutions. While the argument that increasing pollution would see people switching to alternative modes like bicycles is well taken, unless the government makes special facilities for cyclists I don't see the idea taking off. Again, I could be wrong. It is not for nothing that these startups made it to the top 30 from over 500 nominess.

There are many more exciting startups here. Happy ideating!

A different approach to Business Education

After a year of management studies, I am beginning to doubt the aptness of the term “B-School”. The term B-School or business school conjures up an image of a place where “business” is taught. To most people (or atleast me) that brings images of entrepreneurship. However, the primary objective of the Indian Institute of Management must be to create managers. But are managers and entrepreneurs poles apart that the terms “B-school” and Management should appear contradictory?

Usually, the entrepreneur is portrayed as this swashbuckling man of action, stepping boldly and bravely into areas outside the realm of the common risk-averse common man who is contented working for others. I have always felt this portrayal cinematic and an unrealistic dramatization.

A framework that I came across recently sums up the difference better. In different situations, people either behave with a trustee mentality or a promoter mentality. (Reference: A Perspective on Entrepreneurship by Howard Stevenson) The term trustee more closely corresponds to the term manager and the term promoter more closely corresponds to the term entrepreneur. Therefore, any action can be classified in this spectrum as “trustee”-like or “promoter”-like. To give an example, a trustee may view a resource as something that has to be controlled while a promoter is willing to rent/borrow (or beg or steal) for this resource.

The crucial distinction lies here. Therefore, the association of entrepreneurial with certain personality traits is wrong and misguided. What is more important is the association of entrepreneurial with certain world views. Say, there is a person who wants to open a metal fabrication shop. He is new to the metal fabrication business, but his father and grandfather were traders of some commodity. Since they were traders, he is ready to rent machines, taking the gamble that the machines would pay for themselves. Now, would one call this an entrepreneurial personality or a promoter like world view? The individual may consider himself to be the most risk-averse person on earth, he just does not think it is a big deal renting out the machine. To extend this argument, our metal fabricator could show extremely un-entrepreneurial qualities in other matters.

Why all this Ramayana and how is it related to the title? Well, I just think you could design a different kind of business school education with the intent being to foster an entrepreneurial world view. What does that mean?

I would like to design a “B-school” for entrepreneurs in the following manner. The course is of two years duration. It has the semester system. However, each semester has two halves in terms of breaks. There are 60 days of holidays but they occur in 4 regular intervals of 15 days. (The benefits of a wise rest cycle can never be over emphasized).

The first semester has courses – Marketing, Corporate Finance, Organizational Behaviour and Operations. The third semester has a course. That is it. Conspicuous by their absence is Micro Economics and Macro Economics. Frankly, I am in a dilemma in this regard. On the one hand, it would be downright foolish to argue that micro and macro economics are not required by a businessman. Yet, say when you are brainstorming for ideas, or talk about new venture creation, frankly, you don’t use any of those principles, maybe a bit of game theory. Whatever economics you need can be obtained from the net or there are lots of “Economics for Dummies” books. Read it from there. (As an aside one book strongly recommended is Thinking Strategically by Avinash Dixit and Barry Nalebuff.)

Then what about consumer surplus or pricing? My submission is that whatever you need for a business is distilled into marketing. But when it comes to these four courses, just drive people crazy by the rigour. For new venture creation, you do not need accounting, but you need to be able to understand balance sheets. You do not need economics, but you need to know to do marketing research. You do not need to get into indepth quantitative modeling, but you need to be able to interpret SPSS results.

That is first semester. The next semester is spent on coming up with business ideas and refining them. This is where things get tricky. There are no classes as such but faculty mentor business idea teams. Therefore, the class size has to be small. If the intake is 20 say, then there could be 20 business ideas. (though that is unlikely) As and when the guys hit a hurdle they go and talk to the faculty. But there is a catch. What if these guys grow dependent on the professors running to them for every little thing? Every team gets a cap on the time they spend with the faculty. Therefore they better do their homework and come for the meetings. The first term is supposed to have taught the student the basics. Ideally, he/she should be able to google and figure out whatever can be googled and figured out and approach the teacher only when the limit of his/her thinking has been reached. That is why it is important to adhere to this rule very clearly.

The second year is spent on implementing the business plan. Two courses are run now. They are one hour courses that are optional. The two courses are “Business Law” and “Business Ethics”.

Here is an outlandish idea for what the school could do. What if the school gave everyone a sum of money in return for equity stake in the company? (The precise details of this system may have to be worked out) Issues crop up now. In this kind of an arrangement, will innovation truly survive? What if the school has a bad year, will it go out of business? For one, this sum of money will be given to a person and it will be lesser than the individual fees. This also unintentionally incentivizes people of the school to join together. But by giving money, the school also walks the talk. Also, the school could also grow to be obscenely rich or go bankrupt. The consequence of such a system would be to prevent its copying by others and that can be good or bad.

But let’s leave the “school-putting-money-where-its-mouth-is” idea out for a while. The second year is spent on implementing the business idea. The school arranges for legal help, which is again free upto a number of hours after which the startup has to start paying for it. The school organizes seminars and focused networking events. The main merit of the model comes here. Prospective investors (angelic or most often non-angelic) or Venture (Vulture) capitalists would find a lot of incentive to attend these events as they are ideas which have already been whetted to a certain degree.

At the end of the two years, everyone is given a degree. There are no examinations; the market place is the only judge. Also, the need for CGPA is primarily driven by the placement process. Oh and I forgot, this school does not organize a placement process. You are welcome to drop out at any time, you just forfeit the fees, which will be on the lower side.

Therefore, what are the incentives of someone who goes halfway though the course and realizes this is not for him/her. For one, surely outsiders would be very interested in knowing the various ideas that individual worked on. Also, the course could unintentionally create a market for entrepreneurial managers. But the creation of this market must be “natural” and the school must not do anything. That will be a test of the idea as well.

How does it tie-in with the initial framework of Trustee and Promoter. As you would have felt, the course is marked with uncertainty and constraints. This kind of an environment should alter the world view of anyone irrespective of personality. The fundamental point is, you don’t need to know all the answers, you just need to improvise as the problem comes up. From the little anecdotal evidence I have gathered, few people start out on a grand vision and few things started with a grand vision work. So don’t wait for that great idea to come, just look to do different things with small ideas, for a starter.

This just popped into my head today. Do comment on this