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How to get acquired as a startup

February 19, 2011 Leave a comment

I love to speculate what the future will bring when this long recession is finally over. I do subscribe to the popular belief that there will be a new normal. Small business will rule. At the same time the big guys will go on an acquisition spree to play catch-up. Here are seven tips for startups planning to get acquired as their exit planning.

  1. Qualified and Passionate: The founders and leadership team should have a background that indicates not just capability but the ability to sustain ups and down.The casual and the un-passionate will not be able to face the “startup demons”.
  2. Be aware of the competition: Earth calling. Are we the only intelligent life on this universe? Others may be light years ahead. Either change course or do something to leap frog.
  3. Prove the model: Get paying customers and show that the business model works and is sustainable. This seems to be a standard litmus test for any potential investor or acquirer.
  4. Build Credibility: Have referencible customers and link up with well recognized partners. This is one part of assessing  barrier to new entrants.
  5. Get Noticed: Build a good online presence through a well laid out website and a social media marketing plan. When acquires come window shopping, they need to see an audit trail.
  6. Hit the milestones: Show a steady progress on your accomplishments. This is the second factor for building a barrier to new entrants. New entrants need to play catch up.
  7. Prove your uniqueness: Patents may not fully protect the IP but it gives instant credibility and gives investors a sense of assurance that a startup in on to something unique. The third barrier to entry factor.

What’s hot in India for business opportunities

February 5, 2011 Leave a comment

Since the 1990’s has created an image of “Outsourcing Nation” in the eyes of the West. This notion has blinkered the opportunity India presents itself as a consumer. Foreign Direct Investment (FDI) rose from $10B in 2005 to $40B to 2009. In year 2008 export from USA to India jumped 85% in just one year alone according to US Commerce Department.

Recent High Growth Sectors in India:

  1. Infrastructure: Real Estate, Automotive, Transportation, Nuclear and Alternative Energy
  2. Technology: IT product development, Business Process Outsourcing and Software Development
  3. Healthcare: Hospitals, Medical Insurance, and Biotechnology
  4. Education: Vocational Training, Schools, Universities, and Business Schools
  5. Retail: Organized Retail
  6. Food & Beverage: Packaged food and Alcohol

Some investment vehicles to consider are joint ventures or direct investment (several sectors are open for 100% ownership by foreign corporations. Franchising is taking on like wildfire with coffee chains, retail stores, hospitals, schools, white goods, eye wear, fashion accessories, garments, and fast food.

Entrepreneurship in the technology sector has proved to be a lucrative hunting ground for Private Equity investors. Several PE funds have been setup in the last three years looking for venture and buyout investments in technology, healthcare and biotechnology startups .

Lack of early insights in startups impairs profitability

January 24, 2011 Leave a comment

Here is a Startup conundrum. “If startups knew today what they will find out five years later, they would reach profitability sooner”. If we plot a curve for two key indicators – operational cost factor (OCF) and clarity of vision (COV), it would look like this.

Improving efficiency with clairty of vision

At inception, the operational cost factor is high. Startups could be spending money on wrong things as the clarity of vision is poor. As clarity of vision improves slowly – mostly by trial and error, they become more efficient and cost of operations start to go down.

What can be done to improve this? The answer is simple. Study the market, take an objective view and make the necessary changes. This rarely happens because founders have a hard time justifying the money for market researchers and strategic advisers.

Are there are any recent founders out there listening, let us know what we need to do to convince you!