Easily Maneuvering Through Entrepreneurial Risks

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.