Things NEVER to Say at your VC presentation

Here is a list of things never to say during a VC Presentation

1. Everyone is our customer – This is never ever true. Figure out the Market Size and your customer demographics. Give numbers and a good idea of what your customer is like.

2. We will kill the competition – Yeah? Unless you are Rambo reincarnated as a scrappy Startup you won’t kill anybody. Facebook has taken years to ‘kill’ Myspace. Don’t say it because you can’t prove it.

3. We will win because of First Mover Advantage – It’s obvious you haven’t done your homework or been in the real world. This statement is inexcusable. Being a First Mover means you are developing the market, educating partners, customers, developing standards, making mistakes and hiring expensive manpower… all by yourself. Except for a few cases, this is not an advantage.

4. We want to grow from 1 store to 3 stores in 5 years – VC investors want you to think Big because they make money only when you grow fast and grow well. If your goals are modest, you will put them off because then even if its a sure-shot idea, it makes no financial sense to them.

5. Exit Strategy? Only IPO – A miniscule number of startups end up living through a public offering in the world. To bet that you are one of them, is going against probability. Even if in your heart you know that you will make it to an IPO (and gut instincts count for a lot) you should be able to underline viable alternatives to your prospective investors.

6. We need $10 Million…because it’s a nice round figure – Please tell them why you need the money, how much, when and what you want to do with it. Don’t just put it there because it looks good.

7. We will promote our product/Service using ‘Word-Of-mouth’ – No one has ever been able to control this force of nature called ‘word-of-mouth’. How can you claim to use it for your goals? ‘Word-of-mouth’ is the final result of your marketing/promotions, it is not a promotion activity in itself.

8. Customers will shift as soon as they see our cutting edge technology –Apple makes better laptops than most other players. So even though it is known and respected as such, you don’t see people dumping their netbooks/laptops in dustbins for the Macbook Air. It takes more than just a better mousetrap to get things going.

9. We are technical guys and we will hire people for sales after funding – If you aren’t doing selling on your own, you should plan on getting a senior guy as part of the core team to handle Business Development and Sales. However, if none of you takes ownership for sales in your startup, then investors will have a hard time figuring out how you plan to convert your product/services into hard cash.

10. We don’t have a product/service yet – Then don’t ask them for money. They want to see proof of concept. (Admittedly some angel investors and VCs might still invest)

11. We will start as soon as we get funded – An extension of the above statement. If you haven’t started then why will VCs invest on the basis of your Powerpoint Slides?

12. We have no competition – If you say this… Then you are an idiot. There is a famous example related to this statement. When the first Insurance company started working in India, they had ‘No Competition’. But then why didn’t they capture the market without any issues. Till date the Indian customer shies away from Insurance. The answer is because LIC had a big competitor. It was God. The customer’s intrinsic belief that God will look after him, negated the value of an insurance scheme. You always have competition.

13. 2 line definition for my Product? Ah… it’s a little more complicated than that – Albert Einstein answers this one – “You do not really understand something unless you can explain it to your grandmother”. VCs think of it in the same way. Customers definitely behave like Grandmothers.

14. I don’t really have a presentation ready but… So you aren’t prepared? Too bad. We may have still been interested had you just discussed the concept with us, but the fact that you aren’t prepared at all, puts us off.

15. We will keep our customer acquisition cost low by using Social Media – Social Media is a difficult to crack medium which has been capitalized by major brands like Axe, Coke, Pepsi etc who spend big dollars on creating great social media experiences. If you think its low cost, then you are going to be ineffective at best and shoddy at worst.

16. We have a better product/service because we sell it cheaper – Subhiksha sold stuff cheaper than other stores. Look what happened to them. You should be able to communicate Benefit and Value offered to your customer and to the investors. Just because you make a handbag which is cheaper than Gucci doesn’t mean it will sell better. Point – Don’t play on the price, but on the value/benefit even if it is related to the price.

17. We will outsource the (Core Part) of our Idea – That’s just dumb, you have to prove how you will own, grow and execute the core part not outsource it because it is painless. That’s like Apple deciding to outsource the development of the Mountain Lion OS to Infosys.

18. Our competition numbers aren’t relevant because we have a vastly different product – Your competition is always relevant in some way or the other. It’s only by using their numbers that you can build projections, costs, standards, salaries, market assessments. Not being intimidated is great. Not acknowledging or being aware is a sin.

19. We are infinitely scalable – Everything is infinitely scalable given the right resources. Just like how your foolishness is infinitely scalable with the right exaggerations. While your idea may be scalable because you have a web based business or a mobile app, you need to underline the related investments for that scalability.

20. Me Me Me Me Me… The best way to turn off VCs is to go on to monologue mode about yourself/your team and how you are God’s Gift to mankind. They are interested in you, but aren’t going to be partners in your endeavour to startup narcissism.

21. We don’t really understand the finances yet –Then be prepared. Don’t go in without the numbers. Hire a CA if nothing else.

22. Our Sales in year 1 will be $1 Billion. Why? Because its common sense – In the 1940s most Germans thought that they, the Aryan race, were the most developed race on earth. Why? Because it was common sense. Some things, which you may take for granted, may not make much sense to the VCs. Please backup whatever you state with plausible numbers and facts.

23. We only need your Money – That’s what Newbies do. Sure, you primarily need the money to make your Startup grow and prosper. But for VCs, many of whom expect to be in the thick of things, this is like a red flag.

24. Let me tell about how AWESOME the internet is – Don’t start off/bore them with the obvious stuff. They know that clean tech, internet, web 3.0, eCommerce, Mobile Apps, Cloud technology etc is hot and amazing. They probably know the contours better that you. Don’t waste their time or test their patience.

25. And as you can see on Slide No. 137… No point, they slept off/were brain dead by slide 15. Please follow Guy Kawasaki’s 10/20/30 rule.

26. I am sorry I am late – We are sorry we are no longer interested. (Please never ever be late, unless you lose your arm on the way)

27. This presentation will only take 10 minutes (and then go on to 90 minutes) –Be truthful in the real sense and don’t expect them to be comfortable with IST (Indian Stretchable Time).

28. I know Bill Gates very well – Don’t drop names. And if you know Bill Gates then ask him if I can get a discount on the XBOX 360. 

29. You Guys? No I don’t know what you (The VCs) are all about – Insulting. But more than that it shows you just aren’t aware enough or care enough to google them.

30. There are really no major risks here –Bullshit! In that case Banks should be running after you to offer loans. There are always risks and you should be honest enough to acknowledge them. The investors will find it difficult to trust you and your intelligence if you don’t.

31. As you can see on this slide… no… sorry it’s the other slide… – Major turn off. You aren’t prepared well enough.

32. Knock Knock…who’s there… – While a little humor is a great thing, especially for ‘bored-out-of-their wits’ investors/VCs, no one wants to invest in a Joker.

33. Excuse Me. I need to go pee – You will pay for breaking the momentum. VCs, due to their profile and time constraints have major ADD (Attention Deficit Disorder) issues.

34. Today we are here… to Blow your mind! – Even if you have that one Idea which will change the world, this statement ensures that VCs will no longer be surprised. So unless you have suddenly invented time travel, conducting safe nuclear fusion in your bathtub or have figured out what women really want, stay away from it.

35. Let us begin with the Definition of Marketing – No, this is not college, you don’t get marks for the definition. You get funding for changing the world. Keep it nice and meaty.

What does the Flipkart acquisition of LetsBuy mean?

Let’s look at the facts first

1. Flipkart, India’s most successful eCommerce company and definitely the most talked about, reportedly worth $1 Billion, acquired one of its biggest competitors LetsBuy for a reported amount of $25 Million to $30 Million (Cash and Equity).

2. Letsbuy, one of India’s top eCommerce companies, with an approx topline of 15 Crore per month, was looking at raising another round of funding but just could not.

3. Flipkart has been funded to the tune of $ 150 Million and LetsBuy received around $6 Million.

4. Both of them were funded by Multiple VCs. Tiger Global and Accel Partners were common VC firms.

5. Flipkart, though known for its Books category, offers multiple categories and Letsbuy concentrates primarily on consumer electronics.

6. This is Flipkart’s 4th acquisition of a startup, but its first of a competitor.

 

What does it all mean?

Consolidation – Over the last 3-5 years a number of eCommerce companies have sprung up almost out of nowhere. Moreover a number of offline players are also getting into the online space. Sites often indicate that it takes less than Rs. 1,00,000 to set up your own eCommerce site. With a number of entrepreneurs jumping in to build sites, offering categories across the spectrum, to super specific niches, to weird things which you may never want to buy, the era of unchecked eCommerce proliferation has reached a certain inflection point. The acquisition of a fairly ‘Successful’ eCommerce company which has visibility on TV, Radio and other mediums, just like any other national brand, means that it will now take more than just great topline to convince your investors and others for further rounds of investment. Lets be clear about this, LetsBuy was acquired (in part) because it and Flipkart had common investors and they wanted greater scaling up of Flipkart’s business. But the real kicker was the fact that despite impressive exponential growth and topline, existing investors of LetsBuy just did not think that another round of investment was a great idea. A squeeze on investment funds and requirement of exits will lead to consolidation in the market.

2. Changed funding dynamics – Venture Capital money is now going to turn smarter than what it was before. Startups which are general or broad category players, will find fresh funding an issue to deal with. Since new VC money is limited in supply and now looking for a few quick exits, the bet is that acquisition worthy targets, like startups which help in the process or transaction of eCommerce, specific/niche category eCommerce players, logistics players, Warehousing etc will be of great interest due to the intense scaling up requirements of the eCommerce ecosystem. So no more blind funding, though the famous herd mentality of funding certain startups is expected to continue.

3. Development of an ecosystem – A natural progression of the above point, it means that Startups like Chottu (End mile logistics players) will start supporting and creating an entire eCommerce ecosystem. We may soon see eCommerce Social Media, warehousing, SEO, GUI etc startups, which essentially take a small yet important bit of the eCommerce ecosystem and make it better than what it already is. This will lead to greater value and efficiency for major eCommerce firms. This in turn will lead to greater value and experience for the end customer leading to exponential sales in the future for established Ecommerce players.

 4. Competitive mindset – Till now eCommerce and other startups in general, considered the ability to capture the market, scale up and deliver products/services to customers as their biggest challenge. In short, their own ability and the lack of market infrastructure was ‘Competition’ for most. However with the substantial growth in the number of ‘big brand’ startups (Snapdeal, Myntra, Fashion&You, Flipkart etc) over the last couple of years and an aware, value conscious consumer set, this is leading to inter-startup competition of sorts. This is a great sign as now Startups can’t just hope to survive on building and tweaking the same mousetrap. They will have to reinvent the mousetrap or find a better way of killing mice altogether.

5. VC exit issues – It’s a fact, that with the volatility in the economic scenario and no great history of exits for the Indian Venture Capital market, VCs are looking at results in the short term to get the money in from investments made over the last few years. Since no major Startup is anywhere near an IPO, acquisitions are seen as the way forward.

6. Reality Check for Startups – You can have great topline and yet not get funded in the next round. VCs may force you to sell out if they don’t see an exit in the medium term. Most retail consumer driven startups will burn cash in the medium term. The amount of VC money ‘readily’ investible is overstated. Vanilla (undifferentiated) eCommerce was yesterday’s great idea, Niche eCommerce is today’s good idea and we better start working on tomorrow’s idea. There is no shame in selling your startup if it will ultimately lead to greater value for consumers and stakeholders. Only the well funded survive the ‘Cash Burn’ reality of eCommerce. Good is not good enough, you have to be world class now.

Watch out! Star Trek Tech is here – 3D Printing

For those of you who are cool enough to remember what the picture above is about, I want to tell you something.

It’s happening.

No, we haven’t really invented a way of transporting people by employing space age gadgetry and spouting the line “Beam me up Scotty”. But it’s fairly close to the teleporting phenomena which has long had a presence in every respectable sci-fi show or movie about space. 

3D printed Seat? Art? Anything? Who cares? It looks awesome

Now imagine, getting the Crockery Set within a day if not within a few hours because a certain technology lets these companies “Teleport” the product to a local production centre from where it is delivered to you, at little or no extra cost.

Improbable? Amazing? Crazy?

Well that’s what the world is moving towards. Thanks to 3D Printing.

3D printers work like normal inkjet printers do in the sense that they spray layers of resins (polymer or powder) and combine them with adhesives to form the object required. A laser hardens the resins as they get sprayed one layer at a time. Usually the entire product is cut into various parts which are fabricated separately by 3D printer and then joined later on. This object is formed by feeding a blueprint into the computer.

So basically whatever you can design using software, it can make as hardware (as long as it follows the laws of physics).

3D printing workshop

It will be surprising for many to know that 3D printers have been around since 2003 but back then they were large and extremely expensive. Today we are in 2012 and things have REALLY changed.

Most companies now aim to sell the home base version of this printer for as low as $350 which is around Rs. 17,500 (No idea on what taxes are applicable here). So you could end up buying this cool tech for lesser than a low end desktop! And unlike before, they look snazzy, can be set up for you office or home and almost anyone can use it.

Here are a few mind boggling changes that c0uld occur due to the proliferation of this technology

Amazing 3D print Lamp

1. Leapfrogging the Manufacturing Age – A number of countries, including India, have been facing developmental issues because a Manufacturing base was never created. All that could change since 3D printers don’t really require major government/private investments and infrastructure creation to develop products. A cottage industry made up of creative, imaginative and skilled 3D printers could leapfrog the traditional manufacturing age to a fulfilling Micro-Manufacturing age.

2. Logistics Industry – Logistics is based on shifting stuff from where it is made in the least costs and efforts to where the demand exists. But with 3D printers one could easily create production centers near the markets where the demand exists. This could change the face of logistics or even made logistics co-opt this tech to service its clients better.

Parts of the Iron Man 2 suit were made using 3D Printers

3. Hardware Piracy – Now that all you need to create a shirt, mug, chair and even TV is the software blueprint, it is foreseeable that in the future, piracy hubs could be delivering ‘As good as the original’ products once they get their hands on the right software files. Hell, rather than downloading pirated music at your homes you could be making pirated shoes from Adidas.

4. Intense Open Collaboration and Crowdsourcing – This technology will allow the world to do, what is already a major driving force and phenomena in the online and software world, Collaboration and Crowdsourcing. If millions of servers can run on free, crowdsourced software and the world considers Wikipedia the best source of knowledge today, then even hardware, which may now be infinitely customizable and shared, can be created based on the free and voluntary work of m(b)illions.

5. Reducing Development Cycles –  Automobiles, Airlines, Healthcare and Architects can now use this tech to reduce the time and money it takes to come up with a better or all together new product. With the saved time and resources one can expect not only higher quality products but also far more innovation since 3D printers take out a lot of pain of the traditional innovation model.

Citroen GT - The 2008 concept car made real using lots of 3D Printing

 6. Revolutionizing Healthcare – Creating better prosthetics, surgical implements, dental material even artificial organs will make healthcare not only far more innovative and affordable, it will lead to best practices and faster feedback since results and blueprints can now be sent across the world in a file. Villages and small towns will be able to benefit from the most cutting edge technology in ways not possible today.

 7. Localizing or Relocating Outsourcing – Outsourcing is basically shifting production and service centres wherever the cost of operations are the least. With 3D printing the skill of printers, designers and geographical proximity to markets may matter more than just the cost of labour at a particular place. Outsourcing hence will be based on the cost of raw materials for 3D printing, availability of skilled labour and most importantly proximity of customers. These factors are still the same considerations as today, the difference will be in the importance and weightage attached to them in the future.

Candy made using a 3D printer

8. Proof of concept Stage for Startups – Most Startups buckle under the pressure of creating a product that works, testing it in the market, collecting feedback and finally creating a better product based on that feedback. This process requires money and resources which few startups can manage. Hence the proliferation of services based startups where the initial costs are low. With 3D printing the development cycle will become shorter and cheaper leading to more breathing space and hence success for startups.

9. Food – No, this is not some flight of fancy. MIT scientists and some chefs have been able to create food from 3D printers which use edible material. Soon it will be possible to buy a Food printer for your house starting at $1000 (Rs.50,000 only). 3D printers let you control a number of variables of texture, colour, structure and even nutrition. In the future, it will be possible to make Hamburgers diet friendly by playing around with the structure of the food, Chicken burgers that are pure veg, whole wheat bread that is just right, pastas that taste Italian even though they are being ‘printed’ in Ranchi… Food which is not ‘Food’ will suddenly be the new food.

Stuff you can make at home!

10. Become a BOSS (Build Own Stuff Simply) – Now you can make whatever you want without having to learn a million complicated advanced skills. Microsoft Kinect (The Gaming Motion Sensor) may soon be equipped to hook up to a 3D printer and let you make stuff in software using your hand motions. So if your 5 year old can make a Lego City Model on the soffware, you can print it for him. Now that is awesome stuff!

Please do share what you think are the possibilities in the comments section.

After all, if we are going to collaborate on Hardware, we might as well collaborate on Thoughtware (Ideas)!