Tips to become a successful entrepreneur

Tips to become a successful entrepreneur

In the second and concluding part on entrepreneurship tips for the young, Ranjit Shastri of the Indian Angel Network dwells on maintaining and nurturing a successful enterprise.

The Indian Angel Network
is an organisation that invests in early stage businesses of
entrepreneurs who can create immense value. The members of this network
have prior entrepreneurial and/or operational experience that they
bring to help nurture and grow early stage businesses.

Shastri co-founded PSi, Inc,
an investment advisory firm incorporated in New York with an associated
company in India. PSi has assisted a wide range of international
investors in India, including both strategic investors and private
equity firms, in identifying opportunities in India.

Maintaining and Nurturing

Tip #1: Add value.

By
this I don’t mean ‘be useful’ — as Adam Smith pointed out, water is
useful, but not as valuable as diamonds — but ‘increase the size of
the pie.’ As you enter a market, consider who the competition is and
what their total combined profits might be.


If
by entering the market you increase industry profits, then you are
increasing the size of the pie, and if you do that you are more likely
to get a slice of the pie. You can increase the size of the pie by
getting existing customers to pay more, getting new customers to enter
the market, or by lowering industry costs while maintaining prices.

The
De Beers cartel has managed to add value by restricting the supply of
diamonds, which are more plentiful yet more expensive than rubies.

Governments
actually encourage monopolies as a way to provide incentives for
businesses, as in the case of patent and copyright protection. These
legal monopolies enable entrepreneurs to create valuable companies.

ElectronicTender one
of the companies backed by the Indian Angel network, knows this well
and has been vigilant in protecting its government procurement
software. In fact, it managed to foil two attempts to steal its
technology by appealing to Indian courts and obtaining ex-parte
injunctions against the offenders. Like De Beers, ElectronicTender is
enhancing the value of its product by preventing competitors from
diluting its value. 

Tip #2: Attract great people to join your cause and to remain committed.

Although
many entrepreneurs take all the credit for the success of their
companies, I’ve yet to come across an entrepreneur who has managed to
build a business on his or her own.

Imagine
there is a great treasure in the jungle, but it’s too heavy to find on
your own. You need to enlist experienced, energetic and talented people
to help you extract the treasure and return to civilisation without
murdering each other on the way back. 

Some
entrepreneurs find that some of their team members break off to form
their own company, and compete with their former team members. The only
way to prevent this from happening is to be fair to people and
guarantee them a stake in the payoff.

Many
of the entrepreneurs who contact the Indian Angel Network are looking
for money to attract and retain people, but money to pay salaries is
not a substitute for real commitment. If you cannot get talented people
to buy your idea, then investors are unlikely to buy it. The Indus Entrepreneurs,
or TiE, can help you connect with mentors and other advisors who can help you attract other great people. 

Tip #3: Get the right financial backers.

There
are many organisations, such as the Indian Angel Network, who can help
you. Some venture capital firms do look at start-ups, though in India
there are just a few. There are many boutique investment banks that can
help you raise money from investors (typically in return for a retainer
and/or commission).

For those of you who do not like to pay commissions, you may want to consider engaging a firm like Stern Fisher, which focuses only on arranging meetings with venture capital firms and other investors for a small one-time fee. 

Tip #4: Be ready to constantly adjust to changing realities.

Markets
are constantly changing, and those who maintain the course out of
ignorance or stubbornness can end up on the wrong side of history. DesignPresentation 
is a good example.

This started out as a simple roster
to vector cad drafting service operation, converting scanned images of
old blueprints into electronic AutoCAD files for hundreds of clients in
the USA and Europe.

Over
time, this business has become commoditised, but DesignPresentation had
already branched out into higher level work, including logo
vectorisation, drafting services, 2D/3D modeling and architectural
detailing.  Today the company is moving into Building Information
Modeling (BIM) and engineering support services, such as structural,
Mechanical-Electrical-Plumbing (MEP) and Heating-Ventilation-AD (HVAC)
CAD services.

By next year, the company will be completely different from what it was just a few years ago. 

Moving on

Tip #1: Persistence is good, but too much of a good thing can be terrible in some cases. 

Every
start up is essentially an experiment. If the experiment is successful,
do more of it. If it’s not working according to plan and you’ve given
it enough time, then move on to something better. It’s best to agree on
a time-bound definition of success beforehand with your partners and
your family.

Otherwise,
you may find that you end up claiming victory when everyone around you
is unhappy, or keep postponing the payoff date and get stuck in a rut.

If
the experiment has failed, quickly figure out the solution or pull out
your back up plan and move on. I learned this painful lesson about 10
years ago when I had to shut down a 4-year old company that made
plastic injection moulds. A group of investors and I had invested in it
and I persisted in the belief that we could make a success of it.

In
retrospect, we should have shut it down sooner. Soon after closing down
the company, we invested in another venture that ended up doing very
well financially, and we had much more fun along the way. 

Tip #2: Even if you succeed, it may be time to call it quits.

For
example, you might want to find a buyer for your shares, lock in your
profits and retire or pursue other interests. Or you may have an even
better idea than your first idea, and the sales proceeds from one
business could help you build a much better business.

Or
you may find that you enjoy being part of a start-up, and that as the
company matures you begin to lose interest in the daily grind and
hassles of running a large enterprise.

My role in SmartAnalyst is
a case in point. I helped developed the concept and co-founded the
company, but am now just a Director and am happy to know that the
company is run by very competent professionals, many of them who
understand the work — business research, analysis and decision support
— far better than I do.

This
frees me up to spend more time with other visionary entrepreneurs that
I meet on a regular basis through TiE and the Indian Angel Network.

In
conclusion, creating, nurturing and moving on are a natural part of the
entrepreneur’s journey, a cycle that you might recognise as part of the
natural order of things.

The
examples described above are real, and I would urge you to visit their
websites to see how each of these entrepreneurs has managed to not just
survive, but also to prevail in their respective markets.

I
respect all of these entrepreneurs not just because they are successful
and are making a positive contribution to the world around them, but
because they had the spirit to give entrepreneurship a try.


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