Friday, June 26, 2009

Startup Pains & Pleasures #2 - Axiomatic HR

As I mentioned in my last blog (Startup Pains & Pleasures #1 – Funding), I had set out to start up a real business and not a garage operation. Therefore, I spent a considerable amount of time thinking about people issues – what kind of people do I want in my company, how do we evaluate ourselves in a transparent way, what would help all of us contribute positively and so on. This is what I came up with over one or two months . . .

I call it “axiomatic” HR (human resources). The idea is that there are a few core basic beliefs or values or axioms for the company. Answers to any questions within the company can ultimately be found if you refer back to the axiom; or in a more mathematical way, every evaluation, promotion, interaction and other procedures can be generated from the few basic axioms. I called them “Company Priorities”.

Company Priorities:
• Tiled teams
• Globally-integrated business
• First to market
Tiled Teams: Microsoft used to try to hire clones of BillG (called “hardcores”); can you imagine a 10-person team of all hardcores?! I am a strong believer in and a practitioner of teams created by “tiling” great people with minimal overlapping talents and skills (with a few hardcores here and there). Tiling helps minimize “group-think” which is the unintended effect of the natural human desire to associate with like-minded people. Leading “tiled” teams is tricky – a hardcore could try to bully the rest but the team leader has to maintain good team dynamics without stifling the hardcore. I start by requiring any team I train to read (and re-read) the STAR Engineer paper (“How to be a Star Engineer”, IEEE Spectrum, October 1999). I then take every team in the company through a training exercise I have developed. Team leader is usually kept very busy!
Globally Integrated Enterprise: Sam Palmisano of IBM wrote (Foreign Affairs, May/June 2006): “A Globally Integrated Enterprise is a company that fashions its strategy, its management, and its operations in pursuit of a new goal: the integration of production and value delivery worldwide.” I see three major benefits to the global approach: (1) lowest cost, (2) best talent wherever available and (3) “tiling” at an organizational level leading to a highly creative and dynamic enterprise.
First to Market: Being the first even with a sub-optimal (yet bullet-proof) product is a critical success factor. May be all the bells-and-whistles are not there (“sub-optimal”) to make the early release date but the features you advertise should work flawlessly (“bullet-proof”). Once you are in, you can add features in consultation with the customer.

Employee and the manager assess employee's performance purely based on its contribution to company priorities. Any employee’s work result ought to be traceable to one or more of the 3 company priorities. When in doubt, apply this test: Is my action going to move the company priorities forward? If so, do it; you don’t have to wait around to ask for permission.

Creativity in the workplace is another interesting topic - more about that next week.

Enjoy the haiku . . .


Let us conclude with a random haiku . . .

“Complex problems have
Simple & easy to understand
Wrong answers”

- by VR

Saturday, June 20, 2009

Startup Pains & Pleasures #1 - Funding

People often ask me, what are the three hardest things about a startup? Raising money, uncovering cash and finding funds – without a doubt, this is the single hardest issue. A variety of factors contribute to it.

1. Stage of your startup. My experience is with what is called “early-stage.”This is when a germ of an idea needs to transform into a basic business. Angels or well-wishers, and then what are called SeriesA VCs (venture capitalists), fund you till the next stage. Zaplah needed US$3 to 5 million to complete this stage. Clearly, there is maximum uncertainty at the early stage and very few startups get beyond it.

2. External events. As I was getting ready to move beyond angel stage to early-stage VC, the October 2008 global meltdown occurred (my brother uses the word “meltdown” dismissively; maybe that is because in India where he is located, growth is still 5% (positive) but in places where Zaplah was relevant such as Singapore and USA, GDP was going negative). Okay, so let us call it the Great Recession; my only advice – don’t do a startup before a Great Recession (if you can tell it is coming!).

3. My lessons. As a veteran of the industry, I wanted to start building a business – don’t do it! VCs will NOT fund such an effort; they fund clever little ideas *at this stage*. Nobody funds the building of a solid new business even by a veteran. There are a bunch of “valid” reasons for this...

  • During the early stage, investors want the bets to be small due to the large risk and hence small outlay.

  • VCs want the startup to be in their backyard so that they can check up on it frequently. This is the push back I got from the 30 or so VCs in Silicon Valley I talked to. Zaplah is located in Singapore.

  • VCs in countries outside the US are more risk-averse than US-based VCs. Singapore VCs have an appetite for early stage funding of chunks less than $1 million. Their horizon is very immediate – for great insight into Singaporean entrepreneurism, read the memoirs of the father of Singapore, Lee Kuan Yew (From Third World to First : The Singapore Story: 1965-2000 by Lee Kuan Yew). He talks about the Hakka community from mainland China who are the majority in Singapore - they are merchants who tally their sales and profits at the end of every business day! Quick returns are expected. I am definitely a super advocate of Singapore’s future role as a beachhead for a Greater SE Asia strategy – more in a later blog.

  • Talking about VCs outside USA reminds me of another story.

By the way, I will alter the names of people and identifiable details so that none of you “blofers” will sue me. [I am a “blogger”; I have not found a good term of someone like you, “blog followers” – “blofers” is what I have coined. You are super-important to me; I and other blofers want to hear your comments and ideas]

  • The story goes like this… I wanted to raise $100,000. I talked to a guy in the Middle East and he asked me how much cash I had to put in? I said “zero”. He said, “I will give you $100K and I will own 100% of the company. Else, I will give you a *personal* loan for $50K (with all the personal liabilities) which you put in and I will put in the other $50K and you and I will own 50% each!” If this story does *not* strike you as bizarre, you do not know the entrepreneurial philosophy that made Silicon Valley what it is.
  • Also, watch out for how much of your company VC’s want to own. As a good industrialist friend of mine reminded me, it is like the “The Old Man and the Sea” (my all-time favorite fiction book; see the right margin for my non-fiction favorite); by the time the marlin is brought ashore, the sharks (you know who they are) have eaten all the flesh and you are left with the bones!

    So start as a “garage” operation, locate near the VCs, don’t enter into personal liability, and keep over 50% ownership of the company to yourself.

    Who you have in your team and how you measure yourself are super important factors - more about that next week.

    Enjoy the haiku . . .


Blofer-sans, please post your comments and questions; I would love to hear from you.

Let us conclude with a random haiku . . .

Hanami festival in Tokyo in April/May is a time when *everyone* makes it a point to sit under a sakura tree.

"Sakura falling on office-mates
Cool evening
Warm sake"

- by PG

Tuesday, June 16, 2009

Startup Pains & Pleasures #0

Weekly post of PG's experiences with startup Zaplah Corp . . .

Let us conclude with a random Haiku . . .
Hanami festival in Tokyo in April/May is a time when *everyone* makes it a point to sit under a sakura tree.

"Sakura falling on office-mates
Cool evening
Warm sake"