Starting off on the ground level, I have helped grow family business 20 years ago in India. The concept of venture financing did not exist at that time and no seed funds were available through bank loans. My father, who is my hero and role model made it seem that anything was possible if you believed in it. He knew how to grow the business organically and take manageable risks. I co-founded Serus Corporation based in Mountain View, CA, along with Barbara Hoefle who also believed in much of the same principles. What have we learnt? Some fundamentals that haven’t changed over time—fundamentals that we are very passionate about.

Create Return on Investment—the Bottomline: You have a great idea and want to start a company. What is the first thing to do? Develop an investor presentation and start looking for money? Wrong! You need to put together a product presentation and start looking for paying customers. This may seem like an impossible task at first. It is not.

Focus on a sustaining model: Start thinking about creating long-term value. Before seeking investment, you need to understand that your primary responsibility is to generate value and return 10 to 50 times the investment, within a 3 to 5 year period. Investors are in the business to make money and entrepreneurs are in business to innovate.

Investment alone is NOT going to help: It saddens me to see today’s entrepreneurs’ first task while starting a company is to seek investment. It almost seems like obtaining venture capital is the main goal of starting the company. This is quite like thinking that you want to buy a house because your goal is to get a mortgage loan. The goal is NOT the mortgage, the goal is to improve your living conditions or to make an investment by buying the house. A mortgage loan just enables you to achieve that goal. The aim of starting a company should be to satisfy a market need that would in turn nurture the life of your company. Venture funds should only be to enable you to achieve that goal.

Measure Revenue-per-employee and profits: In failing to educate young entrepreneurs of their responsibility when seeking investment, we will continue to create companies doomed to fail rather than succeed. Avoid falling into the hole that many companies have fallen into during the last few years. Entrepreneurs need to stop getting carried away with investor pitches. Example: The very famous ideal “hockey stick” financial growth plan that everyone knows is just that—ideal.

Start thinking about how to win paying customers to validate the product idea. If the service or product is needed, the market will respond and customers will be willing to pay. Entrepreneurs need to start thinking about revenue per employee and profits from day one—the matrices we cared about 10 years ago. Focus on creating long-term value and the investment you seek will come.

Control your destiny: We see that most founders of young startups are asked to step down and new CEOs are brought in to revive the company. Often the investor himself becomes the CEO. This happens because the entrepreneurs (Founders) fail to own up to the responsibility and ownership they worked so hard to build. Honesty and integrity are the foundations of a working relationship between an entrepreneur and the investor.

Entrepreneurs need to understand the responsibility involved in taking someone else’s hard-earned money as investment. Think deeply before you spend. When you spend, ask yourself the question “Will this $1 dollar I spend generate an opportunity to bring in $10 to $100 dollars in return?” Luxury products, services and perks should be purchased from the profits the company generates, not with the investment funds!

Until entrepreneurs start owning up to the responsibility of returning back the investment they received, there is going to be enormous anxiety between the investors and entrepreneurs.

Serus Corporation was founded in 2001 after evaluating the market and the founders’ expertise and identifying a problem we could solve. Our first job was to find a customer who wanted this problem solved and recognized that no solution to it existed then. With a $250K purchase order from our first customer, we obtained $100K in seed money from an angel investor. With that seed money we ensured that we had 1. A satisfied customer, and 2. Built something of value that could be sold to other customers.

Serus took on some advisors and some more seed investment. We used that capital to get our next two customers and worked very hard to make sure those two customers were satisfied. Our customers are the best sales assets we have. They helped us sell to many more customers.

This is the same model SAP, HP, Microsoft all followed. SAP started three decades ago much of the same way. (sapfans.com/sapfans/saphist.htm).

How do Entrepreneurs make it work?
• Show that you are committed to returning the multiples
• Take only the needed amount of money
• Spend only on valued items (Only when there is true return)
• Acquire only paying customers

Own up to the primary responsibility: creating Return on Investment!

Indu Navar Bingham is the CEO and co-founder of Serus Corporation, Mountain View, CA. She has been on the ground floor of several startups and large companies, including Healtheon (WebMD), Silicon Graphics, Black and White Software (Segue) and NASA. Indu was Co-founder and President of RightOn.com, a wireless scheduling solutions company for the services industry. Bingham holds a B.S. in electrical engineering and an M.S. in computer science.