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What Venture Capitalists Want in a Business Plan

September 5, 2011 Leave a comment

{This article was originally published in Chief Mentor section of Wall Street Journal’s online edition: http://blogs.wsj.com/indiarealtime/2011/05/24/chief-mentor-what-venture-capitalists-want/}

A venture capitalist will, on average, receive hundreds, if not thousands, of business plans every year, but just a handful make it to a detailed review and even fewer get funding.

Investment decisions vary from one venture capitalist to another. To a large extent, they depend on the portfolio the venture capitalist is building. Still, there are a few things that every venture capitalist would like to see in a business plan.

Based on my interaction with investors and entrepreneurs, I have compiled a list of points that can increase the chances of getting support for a business plan:

Idea, its Viability and Sustainability: The most important ingredient of a business plan is the idea.  The combination of a unique idea and an identified and expanding market is something that interests every investor. The entrepreneur should be able to prove how to make the idea viable and sustainable, and include an execution plan and timelines for achieving major milestones. A venture capitalist would be much more comfortable funding a venture if it is clear how the money will be spent.

Progress till date: A venture capitalist is always more interested in projects where some groundwork has already been done. If you have a running prototype of the business, share the data on investment, customers, revenues, products, services and challenges faced. This would give a fair idea about the returns the venture capitalist can expect from an investment. Generally, businesses that are up and running, or even pilot projects, have a greater chance of attracting funding than plans that have yet to take off.

The Team and Business: A venture capitalist would like to see and meet the people who will actually handle an investment. To some venture capitalists, the people are more important than the plan itself because market conditions might change, meaning the plan might change. What is less likely to change is the team involved, and their passion, drive and expertise. If the venture is planning to have partnerships and collaborations (which any venture should) they need to be spelled out clearly. The success of a venture also depends on what kind of partnerships it has in place.

Value Proposition for the Investor: It doesn’t matter how much money the investor has, a venture capitalist still wants to invest in attractive propositions. Understand that the venture capitalist is investing for returns, so it’s well worth demonstrating what the assured and practical returns will be.

Challenges and Risks: Entrepreneurs rarely expose weaknesses in their business plans, but it is still very important to identify the challenges and risks the business might face. This also helps assure the venture capitalist that you have thought about the factors affecting and influencing the plan. If possible, share a mitigation plan for these identified risks.

Exit Strategy: The venture capitalist will want to know about the founding team’s exit strategy. An initial public offering would generally be the best way to exit an investment, but not many ventures reach that stage. If you have a plan to sell out of the business, the venture capitalist would be interested in knowing when you might make such a move.

There is no Holy Grail to make your business plan succeed in getting funding. If there was, every plan would have evolved into a multi-billion-dollar business. The inclusion of the points listed above doesn’t guarantee success in getting funding, but it should be a step in the right direction.

My Way of Consulting- Part 1

September 23, 2010 2 comments

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I am writing this article for the Enterprise Consulting Blog after a long time. This is because I have been quiet busy on my new job (Five months ago I took a job with HCL Technologies). It’s been five months now into this job and I have my hands full with a few consulting assignments, setting up a new Practice and managing a few ongoing projects. At a recent interaction with students at Great Lakes Institute of Management, I was asked to share some of my consulting experiences. Due to shortage of time, I could not go into the details at that time and promised to share the same sometime later. Here I am with the methodology I follow on these engagements. Among the consulting engagements that I have recently done, two were for Fortune 100 Companies. In this article, I would share my overall strategy of conducting a business consulting engagement. (Please note, due to job/professional ethics constraints, I cannot share the names of the clients and the exact details of the engagement. Also, these are purely my own views and my current organization or previous organizations I have worked for are not responsible for these views.)

When a consultant starts his/her career, he/she is advised to follow a set of rules/ frameworks or the footsteps of established consultants. After a few engagements, each consultant tends to develop his/her unique way of handling engagements. Having started in 2005, I too gradually developed my own style of handling consulting engagements. Every engagement is different in its own right and brings in new challenges. The following sections give a broad overview of the overall strategy I use in handling these assignments. The finer details may differ from one engagement to another.

I always divide the whole exercise into broadly 4 phases: Pre-Engagement, Discover, Analyze and Recommend. The last three phases do not have distinct boundaries as such. The Analyze Phase can overlap with the last part of the Discover Phase and the Recommend Phase overlaps with the last part of the Analyze Phase.

{I have divided this article into two parts: Part 1 covers the Pre-Engagement and the Discover Phase and Part 2 covers the Analyze and Recommend Phase.}

Pre-Engagement Phase:

This phase is generally used to prepare the ground before starting the actual engagement. Always start with the publically available material on the client as well as the industry. Go through the website of the client, public announcements, press releases, Industry news, user groups etc. Once you know enough about the client, his business and industry he operates in; start with the material available on the engagement you are starting. Before signing the SoW (Statement of Work), the client would have shared some information on the engagement. Diligently go through that information. This gives you fair idea on the kind of information and documents that you may need from the client.

Before starting the engagement, I always request the client if he can share the available documents related to the engagement. This helps me in identifying the areas I need to explore and the set of people I would want to interview.

After this phase, you are ready to kick start the actual engagement on the ground.

Discover Phase:

The actual engagement starts with the Discover Phase. This is the phase where you identify the areas to investigate and the POCs (Points of Contact) who have to be interviewed in the first wave (I have discussed about the interview waves in a later section). The recommendations submitted at the end of a consulting exercise have to be backed with facts and data. This data or facts have to be collected in the Discover Phase.  Also, the Discover Phase forms a basis for Analyze Phase which in turn is the basis for Recommendations.

Before starting the actual process of Discovery, have the objectives of the exercise very clear in your mind. This will not only help in keeping you and the team on the track, but also help in moderating the discussions and interviews.

I divide the interaction for gathering information into the following:

Interviews: I generally divide the interviews into two phases, Wave 1 and Wave 2. The Wave 1 interviews are with the key stakeholders of the engagement. It is always best to start with the Sponsor or the Champion selected for the engagement. This is to understand his/her expectations and align it to the objective of the engagement. The other key stakeholders should be spread evenly across the key areas that the engagement intends to cover. From the Wave 1 interactions, try to come up with a list of SMEs that can give more granular information.

In the Wave 2, get to specifics of the information you want. By this time you would have indentified the SMEs you want to interact with. These SMEs will be able to share much more information than the stakeholders and they have been closer to the ground.

What, How and Why?

The interview process should be an interrogation disguised as interview. This is because the first answer the client/SME gives not the exact answer that we want. It will never lead us to the root cause. A lot goes into getting to the depth of issues being faced by the client. Always prepare an interview guide. Structure the questions well making sure that all areas are covered well and there are no repetitions.

Start with What…. Always start with asking the interviewee with what he/she does? What process he/she follows? What are the SLAs etc. This will gives a complete understanding on the As-Is situation. Please note that the answer to WHAT? might not give an understanding on the problem being faced by the client and nor will it help in identifying a solution for the problem. This will only help in giving an overview on the current situation.

…go through How.… After we are clear on the business area/ process the interviewee is in, try to gain further information on how exactly does he/she carries out his/her business? This gives me a ground to think on whether this is the best way to do it? Can it be improved further? How will I do it if given the responsibilities? Some of these questions might get answered by the next question: WHY? And the rest should (must) be a part of your recommendations.

…and end with Why…. This is the most important part of the interview and might make many an interviewee uncomfortable. By the time you come to this question, you already know what the interviewee does and how he/she does it. As mentioned above, I also have a few questions in my mind on the current state of his functioning. Asking him why he does so what he does, gives me a new dimension to think on. A single “WHY” might not lead to the exact reason. I ask a string on “WHYs” to lead to the core issue or the problem area. Believe me; it is very tough to ask so many whys without making the interviewee uncomfortable.

Questionnaires/ Templates: A consultant mush have (and develop over a period of time) a set of questionnaires and templates to gather information in a structured way. This does not mean that in every interview use the same template or questionnaire. Modify the template according to the client’s industry or even the area of work or the designation/role of the interviewee in the same organization. Structured information produces the best results in the analysis phase.

Caution: Do not try to force your framework/ templates on to the client. Adjust according to the needs of the client.

Documents/ Data dumps: Ask every interviewee if he/she can share the documents related to the discussion. Also ask for data on the transactions (preferably for a few years). The documents as well as the interview alone will not give the complete picture, but complement each other so as to cover the area in entirety.

I collect as much data and documents as possible. Then keep discarding whatever I do not need. Never say No to inflow of information. You may find the answers in an unsuspecting corner. 

Follow-Up Clarifications: Once you have collected all the required information, gone through the responses to the questionnaires and templates and started connecting the dots, you will always find some gaps. It may require a few follow up sessions with the same (or new) set of interviewees or e-mail exchanges to fill these gaps and seek clarifications. The follow up session can also be useful to cross check that all the information I have is complete and correct.

Never hesitate for seeking a clarification. Whenever in doubt, it is better to clarify than to carry wrong information into the analysis phase.

{To be continued in Part 2}

Proposing a new EA Strategy:SaaS as the Testing Ground

February 1, 2010 1 comment

The years 2008 and 2009 were very turbulent for businesses in almost every industry. Many companies fell prey to the brutal shake up that happened in last two years. Others survived.

As the saying goes, circumstances which are not able to kill you only make you stronger. The businesses which have survived the tough times are taking a very cautious approach to future endeavours. As I wrote in an earlier post, organizations want bang for their buck. Every penny spent is expected to earn dollars for the business.

The year 2010 brings with it hope that the recovery is on its way and the business world will ride the high waves again. The spending is increasing. For my vested interests, I am more interested in tracking the pattern of spending in the Enterprise Solutions space.

Small businesses have realized the importance of implementing EA for their businesses. But the biggest problem for them is spending on these solutions. According to a CVS survey (also pointed out in one of my earlier posts), it takes on an average $0.19 million for implementing an Enterprise Solution for an S/MB. The same solution can be implemented through SaaS delivery model at as low as $1000 a year. This comes with the added advantage that the enterprise does not need to maintain an in house IT team to manage and maintain the system.

Using SaaS as the first step:

Many big organizations also want to implement ES, but are sceptical about the results. The failure stories of ES are still abounding. I propose the SaaS as a first step of ES implementation for bigger companies as well.

These companies can go for a single tenant SaaS solution where the application and the hardware are used by a single tenant only. Although it is slightly costly than a multi-tenant solution, but is still much cheaper than the on-premise solutions.

Once the organization realizes the benefits of the system, it has the option to “own” the system or continue in the SaaS mode. As the organization is the only tenant on the system, the ownership and the location of the system resources can be easily shifted to the enterprise premise.

Thus, vendors and SIs (System Integrators) can gain access to a large market of SMEs and even large organizations through this model. The model addresses the requirements of both the SMEs and the large organizations but also keeps in mind their budget constraints.

Cloud Computing made simple!

January 21, 2010 Leave a comment

No discussion on the emerging trends in EA delivery is complete without talking about the Cloud Computing and related stuff. Not many people are very clear on what exactly cloud computing is? What is the difference between Cloud, SaaS, IaaS and PaaS. This five-minute video explain all of this terminology in very simple way. 

What’s in store for EA-Strategy space in 2010?


We ended the year 2009 on a positive note where almost every analyst and industry watcher was expecting the economy to look up and once again ride up the crest. Things do look better, businessmen do look confident. The economic crumble had given rise to distrust but as the things are improving, the distrust is being replaced by caution.

Yes, the year of 2010 will be one of cautious approach to every major decision. The fact is that the recession has changed many things around us. The time when anyone and everyone would jump on to the band-wagon is no longer reality. Today, and the year to come, people will be pussy-footing around the platform before making up their mind to jump onto it.

I have compiled a list of top ten things around which the business decisions will be interwoven when it comes to using IT as an enabler for strategy execution.

  1. Focus on ROI: Businesses across the globe will be focusing on RoI in any type of implementation. The companies have tightened their belts and cut on budgets and money supply is low and every manager is trying to get the bang for every buck spent. Any major implementation which does not provide substantial improvements in operations will be dinged at first go.
  2. Focus on Operations: In the recession times, the companies have come to face the reality that the most important thing to survive in a business is the cash flow from operations. If the operations are not generating enough positive cash flows, it is very difficult to survive. Companies will be stressing more on the efficiency and effectiveness of the operations and reducing the wastes (the seven types of wastes). To achieve the same, companies will take the help of IT as an integration mechanism for different operations units. At a time when all the job-shops employ the best machines and cutting edge technologies, it’s the flow of information across units and partners that holds the key to efficiency in operations.
  3. Collaboration: The decade just passed has already shown that how important it is to collaborate with all the stakeholders in the business. As the flow of information across units in the organization is important, similarly, the flow of information across partners and stakeholders is very important. When everyone is working hard to lower down costs, holding inventories, wastes, it becomes very important to share information with each other so that the other party can plan their activities accordingly.
  4. The rise of SaaS: SaaS as a delivery model for EA will be in demand. The SaaS market (though has a low base) is growing at 40% percent per annum. According to the CVS Survey, it takes about $ 0.2 million to implement an ERP solution for a SME whereas if the same application is offered through SaaS delivery model, it can be done at as low as $1000 per year. That makes a big case in favour of the SaaS model. I do not say that SaaS will completely overshadow the traditional implementation models, but, SaaS will be a force to reckon with!
  5. A renewed focus on SMBs: The rise of SaaS as a delivery model will go hand in hand with the renewed focus on Small and Medium Businesses. Most small businesses have recognized the need of an EA package to manage their operations, but, cannot afford the same. System Integrators and vendors will focus on these businesses and offer them robust and affordable solutions.
  6. Risk Management: There will be an increased push towards risk management and data security. As I have already pointed above that the flow of information will be the basic requirement for the smooth and efficient run of systems, in the same breath, the security of data and the risks posed by the unauthorized access to data will be of importance.  
  7. Business Analytics: BABI (the term coined by Dr. Bala V. Balachandran, distinguished professor at Kellogs Business School and Dean of Great Lakes Institute of Management) or Business Analytics and Business Intelligence will take to the centre-stage. The companies are making use of the data available for making informed and intelligent decisions. Analytics will play a major role in helping organizations to make the best use of already scare resources and in turn help in improving the RoI of the initiatives.
  8. Organizational alignment to the Systems: Rather than implementing new systems, organizations will make efforts to align their workforce to the systems in place.  Most of the systems fail because the human component in the implementation does not give its best to make the system a success. Falling in line, the management will give a push to the workforce for embracing change and give their best.
  9. Pay for performance or pay for used capacity: At a time when every business is concentrating on RoI, performance is being attached to investments. Organizations are taking the route of attaching payments to performance. Also, paying for used capacity rather than installed capacity (Air-Tel Bharti’s contract with vendors and IBM) will gain prominence.
  10. ERP space will remain a buyer’s market: With companies taking a cautious approach to big ticket IT spending, the ERP space will remain a buyer’s market. Vendors will have to offer very competitive prices to make buyers loosen their purse strings. Companies looking for EA implementations will bargain hard for “exciting” offers.

Michael Porter on getting a Good name for Businesses.

December 28, 2009 Leave a comment

Michael Porter, The legendary Harvard Professor and the leading authority on Corporate Strategy in an interview with McGill University’s Karl Moore.

Top three learnings from CRM.

December 27, 2009 Leave a comment

I have worked on CRM as a process consultant for over four years and continued my “relationship” with CRM even after I joined MBA. Not just continued the relationship, but also widened and deepened the same with new perspectives that I absorbed on the way. To keep it short and sweet, I have listed the top three takeaways that I feel have not only widened my perspective on CRM as an enterprise solution, but also in day-to-day business life:   

  1. Relationships Rank No. 1. Customers are the lifeblood of a business just as friends and family are the fuel for our soul.  And just that companies are finding that these relationships are key to surviving the recession, the view can be extended from customers to all the stakeholders in the enterprise and the ecosystem surrounding the enterprise. Relationships and information flow across partners, vendors, customers and the enterprise is the key to deliver the best.
  2. Technology Helps: It is often said that CRM isn’t a technology, it’s a strategy, but , it is the technology helps make it happen. Leave aside the enterprise solutions such as SAP, Oracle etc. but, even in day to day life, we need technology to make a long distance call, travle to friends and family, chat with fiends overseas. Managing relationships has been simplified by technology.  CRM consists of two equally important components of the Human Component and the IT component. Both work hand in hand to make the CRM strategy a success.
  3. Garbage in Garbage Out: You can’t expect a quality outcome if you don’t have quality inputs. For long people have been talking of “user friendly” systems, but, I believe, for best results, we need “friendly users” as well. Remember CRM EA is an enabler in the process of managing and executing the CRM Strategy, even after discounting the internal system checks and balances, it can give valuable outputs only if managed properly. Be nice to the system, the system will be more than nice to you!

Best wishes for the new year!

Why Alliances have gained prominence?

December 24, 2009 Leave a comment

Over last few years, Alliances have gained more prominence than the regular route ot mergers and acquisitions. Monetary considerations have played an important role but, are not the sole reason for organizations going in favour of alliance formation. I have listed below a few important points that have driven forces for organizations going the “Alliance Way” :

1. Core Competence:

Companies tend to build on their core competence and this very fact can give a differentiating  edge on other competitors. Thus, leaving one’s core competence and getting into a new field can be a disaster unless handled very carefully. Aligning to one’s core competence and creating an ecosystem around the core competence is the right way for expansion. The creation of ecosystem can be done through acquisitions, mergers or alliances. Mergers and Acquisitions may lead to diversifying into new territories and may dilute the core competence of the company. Thus, unless handled carefully, alliances should be the first choice for expansion.

2. Affordability:

Not every company can afford an acquisition or a merger. The costs of M&A are both in terms of tangible and intangible resources. Some companies might not have money or scale for M&A and other might not have scope for M&A.

3. Government regulations:

Sometimes government regulations prevent mergers and acquisitions. For example antitrust laws in the US or anti-Monopoly laws in other countries may hinder the M&A process. Thus, forming an alliance is the most favoured way out.

4. Entry Barriers:

Some markets and sectors have entry barriers due to favours by the home governments, access to raw materials, access to distribution channels etc. In such a case also forming an alliance with an existing player in the market or sector  is the most favoured way out. 

5. Competitive Landscape:

Companies do not operate in isolation. The company takes actions in response to the changing market dynamics and for any action that a company takes, the market forces respond to it. In a competitive environment, sometimes companies bleed to death fighting each other. Over time companies have realized that cooperation gives better results than competition. 

For example when Air Tel entered Sri Lanka, it signed a pact with the biggest telecom player in the market to use its towers and some other infrastructure.

6. Role Play in Value Chain:

All companies have been playing a particular role in the extended value chain. Sometimes the strategic role that the company plays in the value chain prohibits it to go for M&A, hence the Alliance route.

Another big factor in avoiding the M&A option is that only 43% or M&A are successful. The failure rate in IT-ITES is a staggering 80%. This can be because of many reasons. Most important out of which is that companies do not have compatible cultures and even compensation issues.  In an Alliance the companies work together to achieve the desired results, but as separate entities tied by the common goal. The cultural issues and compensation do not hinder the process.

2010: The year of exploring new avenues.

December 23, 2009 Leave a comment

Every one knows what happened in the year 2008 and 2009. The analysts have made thread bare discussions and post-mortem on the economic downturn. Now, when the economy is looking up, the businesses are again gaining their senses and gathering their strengths back to climb up the crest.

The climb, though exciting, will not be easy. The large organizations have already started making strategic alliances and partnerships to be prepared for the upturn. The smaller players are also pulling up their socks. Over the last few months, I have made a list of recommendations (mostly for small players) that will help them to gear up and make the most of the upturn:

1. Look for options: This is to make sure you don’t just jump on to the bandwagon in anticipation of success. Make sure that the bus is going in the right direction and at right speed before you decide to ride it.

2. Know yourselves well: The downturn has given companies a lot of time to retrospect, but still make sure you know waht you are good at and also know very weel what you are not good at. This will help in increasing the number of successes and decreasing the number of failures.

3. Alliances: Enter into a strategic alliance. Try to make an ecosystem around the customer so that when the customer identifies a requirement, he does not have to wander far and wide for a solution. Step forward and tell the customer that you can deliver it, if not, one of your alliance partners can deliver it.

4. Have a look at emerging markets: By emerging markets I do not mean the emerging markets like India, Brazil etc. , what I mean is look for a market of requirements. There will be lots of unment requirements and if you are an innovator, target the latent requirements of the customers.

5. Keep a track of your dollars: By this recommendation I mean, keep a track of the in-flow as well as the out-flow of cash. Cash in-flow (that too only from operations) is the real wort of the company. The economic downturn has put a lot of pressure on the fluidity and liquidity of finance options. So, make the best use of the money at hand!

These are just a few of the important observations that I came across in last few months. There are many other things organizations should take care of in the oncoming upturn, but, I thought of sharing just a few important out of them. 

Oracle Social CRM: A short review

December 16, 2009 Leave a comment

Oracle Social CRM is proving itself as the next generation collaborative CRM which incorporates some very advanced features required in today’s business environment. The below video gives an overview of the functionality of the product.