Day One – ET Power of Ideas (#ETPOI)

In case you did not know already, I am at the Indian Institute of Management, Ahmedabad, India for an 8-day workshop that brings together 74 of the top ideas from among more than 16000 submissions to the Power of Ideas initiative. The first day so far has been interesting and I like the fact that I am returning to an academic environment after a long break, albeit for a short while.

Sandeepan Budhiraja’s first session on Identifying Customer Needs and Market Research was, interesting, particularly when he talked about focus on heavy users as the primary concern of business. When I tried to ask if this was applicable to all markets and economies, referring to the Long Tail and Power Laws being an opposite source of focus, the consensus was that the long tail consumers made incidental (a word I inappropriately used) purchases and that could not be the basis of product strategy/positioning.

Ignores pretty much what is happening in companies like eBay and Google and the media industry where distribution costs are negligible! In fact one opinion was that the monetization of the long tail is either the preserve of very large companies or at best something that is a more long-term outcome, both conclusions I would disagree with. Some links I found:

The other two sessions by Akshat Rathee and VC Karthic were interesting. They shared insight on the business planning components, presentation skills and key insights when talking to Venture Capital. Here is a short set of notes from those encounters.

First translate what your vision is – where you were, are, want to be

Putting together the Information Memorandum (IM)

  1. Build pitch
    1. Pitch is contractual – this is what I provide with a difference from others
      1. Question: Making a pitch involves propositions that need to be commonly understood: e.g. I will provide you a GFX Super accelerator for half the cost – is probably not a good idea because it is too technical
      2. Let the pitch give rise to questions, it should intrigue; make a statement that can be tuned at a second step to thinks like target segment, how will it be delivered etc.
  2. Build scale up vision while maintaining low-cost and high profitability
  3. What do we need money for? Investment is for growth; Asking money for marketing is a bad idea; for capital, working capital is a good idea – What do we need money for? (Split money between debt and equity); state your Internal Accrual; include CAPEX
  4. Exit
    1. How do we repay debt or show high returns to the investor (33% margin = 2X, meaning you have to grow by 100% every year if we don’t think of shares sale)?
    2. Who are the people who would like to buy this company x years from now giving investor an exit option; what would be total cash dividend that investor would get on exit? Specific names and numbers. IPO as an exit (strategic/PE investor).
    3. From the venture perspective:
      1. They want a team that can execute this the best way
      2. They want billion dollar market
      3. Want 5-20X return
      4. A good exit in 2-3 years
      5. Ways in which VCs can exit: Sells his stake, Sell the company, Goes IPO?
      6. Keep pitch simple, limited vocabulary
      7. Need to feel comfortable at a personal level, exploit any prior connects
      8. Identifying the pain; attacking the business thoroughly demonstrates the market research
  5. Things they look out for
    1. Competitive sustainable advantage
    2. Patent – adds guarantee Show the demo
  6. Business Plan – how you are going to make money
  7. State Assumptions: They (Analyst) will check formula and then assumptions. Plan is based ground up not on desire. Make assumptions that follow from what we know about the industry and the business. They must intuitively make sense. Quote the exact source. Backup with verifiable data. Make sure you know conflicting sources. Know how to defend each assumption.
  8. Now we are ready to make a business plan.
  9. Put in a FAQ or sections for team, capability etc.

Would welcome any corrections from the other participants! I think we have a really cool bunch of people here.

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