Most Commonly Misused Words in Entrepreneurship

Since I live and breathe entrepreneurship, I have the privilege of meeting all kinds of entrepreneurs.What I find sometimes amusing and oftentimes perplexing is that they all use fancy words with so much panache that it leaves me speechless! Here’s a tongue-in-cheek look ata few examples:

Entrepreneur: (How I love this animal!)

Dictionary definition:‘a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk’.

Entrepreneur’s definition: ‘a person who is running his own business, the way he chooses, without being answerable to a boss, coming to work when he pleases, making loads of money and keeping it all to himself’.

Mentor’s definition: ‘a selfish person who does not like the way the world around him is, sets out to change it into a better place and in the process leave his footprint’.

Serial entrepreneur: (Whenever I hear this word I tend to cringe as it somehow reminds me of serial killer!)

Dictionary definition: ‘a person who starts one business after another by successfully exiting the previous one’

Entrepreneur’s definition: ‘a person who starts a company, gets bored with it after a point,  sells it, shuts it or forgets it’. (Wasn’t that a Hero Honda ad many years ago except that there it said, fill it, shut it, forget it?)

Mentor’s definition: ‘a person who likes to validate how often he can keep repeating the same mistakes or how creatively he can make new mistakes’!

Customer:(He has discovered of late that he is actually king!)

Dictionary definition: ‘a person who buys goods and services’

Entrepreneur’s definition: ‘any sensible person who buys my product because I know better than he, what is good for him’

Mentor’s definition: ‘a person who makes or breaks an entrepreneur’.

VC:  (Never since the dreaded SS have two alphabets sounded more ominous and sinister!)

Dictionary definition: ‘Private equity investment in a business which does not have access to capital market’

Entrepreneur’s definition: ‘capital which announces that I have arrived to the rest of the world’.

Mentor’s definition: ‘capital that you will raise when you don’t need it, not when you’re desperate for it’.

Profit: (Used to be an ugly word with all failed capitalists also known as communists!)

Dictionary definition: ‘monetary gain resulting from employment of capital in any transaction’.

Entrepreneur’s definition: ‘the difference between over invoicing and under booking of costs’.

Mentor’s definition: ‘the meeting point between your vision and execution’.

Mentor: (A new species which is troubling Darwin in his grave! )

Dictionary definition: ‘a person who is a ‘wise guide, adviser, preceptor’.

Entrepreneur’s definition: ‘not sure who he is or what he is supposed to do, but he is expected to wave his magic wand and make the negative effect of all my mistakes go away’.

Mentor’s definition: ‘a person who will neverclaim he knows it all, who is willing to share what he knows and learn what he doesn’t along with you, who will open doors for you, and if he has to choose between your good and the good of the organization, will choose the latter’.

I could go on and on but I’m stopping here, hoping I have made my point. The words I have chosen are those that define an entrepreneur’s existence, yet there seems to be such serious disconnect in perception. The more disconnect I see, the more I’m convinced that what India badly needs today is entrepreneurship education. Our colleges have to take it seriously to include it in the regular curriculum so that when we become entrepreneurs, not only do we have the right reason for becoming one but we also have the right wherewithal to become successful.

If you have more to add to this list or if you have any questions on entrepreneurship, please mail me on nandini@carmaconnect.in.

Prof. NandiniVaidyanathan teaches entrepreneurship in several ivy-league business schools across the world. The company she founded, CARMa (<www.carmaconnect.in), mentors start-ups, family businesses and mature enterprises from across domains and geographies. She is also the author of the bestseller, ‘Entrepedia – A Step by Step Guide to Becoming an Entrepreneur in India.

 

Prof. Nandini Vaidyanathan

Founder & Mentor
Carma Venture Services Pvt. Ltd.

How to Introduce Yourself to Angel Investors and/or VCs

Maybe it is not news to you, but it certainly was news to me, when I read it. And I was pretty amused too; that a certain western country was advertising that one of the ways that you could immigrate to their country was to be an entrepreneur. And to qualify for immigration to that country, one simply had to get a letter of support from an investor organization in their country. You can imagine the importance being an Entrepreneur in today’s world!

Note of advice to budding entrepreneurs while reading this article: Please highlight and right click, on all the italicized and bold words / phrases in my article to do further web search. All the best finding investors!

Angel or a VC, investors have options to invest. If you want to know how to get introduced to them, you may start with some simple questions –

  • Who are they?
  • What do they want?
  • Where can I find them?
  • When is the right time to meet them?
  • Why would they want to meet me?

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Who Are Investors?

Investors fall under many categories. A sample list of these categories are – ‘Friends, family and fools’, Banks, certain government agencies (for grants), loan sharks (avoid!), HNIs, (or High Net-worth Individuals), Angel Investors, strategic investors, VCs, Private Equity Funds, the public (IPO), and other financial institutions.

When getting introduced to an Investor, have a well prepared and memorized script (a brief one minute pitch) of introduction to yourself and to your business. The only objective at the time introduction with a potential investor is to be invited for the next meeting! Be focused on that. And know that investors appreciate the importance of cutting to the chase (meaning, get to the real point, quickly). Tip: If you get called for a follow-up meeting, and if you haven’t already prepared, work like hell to have details of your projected cash flows, and not just the projected P&L statement. Investors like to see that you are cash conscious and believe in its efficient use.
Get familiarized with the jargons of investment world, such as EBITDA, Dilution, pre & post money valuations, Burn Rate, ROI, IRR, Drag Along, Tag Along, Due Diligence, etc.

Who Are Investors?

The yellow pages in most telephone directories don’t list the Angel Investors and the VCs. Depending on the type and the stage of your business, you may have to go about building your own yellow pages.

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The overall list of sources where you may find an investor is far too long to accommodate here. Once you have a long enough investor’s list with their contact information, connect with them. If possible, write to them directly or visit their websites and submit your business plan.
Once again, remember that when you meet or write to investors for the first time, you want to communicate just enough to be invited for the next meeting! It is at the next meeting that you may give details.

When Is The Right Time To Meet Investors?

I have taken a lot of inspiration from this phrase – Beauty is in the eye of the beholder! Get introduced to the right investors (beholders) and speak to them only when you are ready for them.
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  • if you are at the stage of building a Prototype of a product, or are at the stage of discovering a drug or a formulation, you might want to consider approaching some government agencies to get investments (grants). For grants, say for a science and technology based business, you might want to start with going though the website of MoST (ministry of science and technology) and look for the right department for right type of grant.
  • if you are at the stage of Commercialization of that earlier mentioned prototype, and you are Bear in mind, that many Investors are themselves experienced entrepreneurs. So keep a look out for such successful entrepreneurs in the news.

 

Amitabh Shrivastava

Member IAN,  &

CEO at CSIR Tech

What Do Investors Want?

This is not as difficult as knowing what do women want (just kidding!). What normally does not happen is that you get an investor and then you start to build out your business plan. So, first you should build your business plan, which must include the key team, the Market (growth and ability to scale), the Product (or positioning), the debt/equity financing plan, the execution plan, the revenue realization plan, and amongst other things – the exit plan for the investors.

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In a vibrant entrepreneurial ecosystem like India’s, you must know that just as you want to get introduced to the investors, the investors themselves are looking for you! Try the following:

  • Go to those colleagues or seniors, who have, in past, raised money for their business.
  • Do an internet search to get the names of Angels and VCs.
  • Put a Google Alert on some of these names from your list. That way you will know, on a daily basis, what these Angels, VCs, etc are in the news for.
  • Use business social networks, such as LinkedIn, etc., to build your network with these investors.
  • Find Entrepreneurship Accelerators and Incubators, and get them to invite you to events where investors come to meet entrepreneurs.
  • Join or subscribe to forums like SMB Connect, Open Coffee Clubs, TiE, Nasscom, YourStory, VC Circle, ProductNation.in and organizations and websites similar to them.

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starting to see some traction,

then you might want meet an

Angel Investor.

  • If you are at the stage of scaling up your operations, you might look for VCs having the relevant interest.

When you meet an investor too early then you risk being undervalued, and in fact you are likely to be considered too risky to invest in. Quite obviously you want to meet them when you don’t sound too desperate either.

Why would Investors want to meet me?

In my view, investors want clarity of return on their investment! It is as simple as that. One simple reason why investors may want to meet you is because they are lead to believe that you have figured out how to go about giving them the returns on their investment. By and large investors bet on the Entrepreneur, while deciding to invest in a start-up. They want you to frame the real-life problem that you are trying to solve.
As an entrepreneur, you must display the right traits to attract an investor. Some of these traits include – passion, ability to learn (mentor-ability), decisiveness, visualization of future, etc. So for an effective introduction you must demonstrate that you have the aura, along with the depth, to provide them clarity on how you will be successful in providing them the return.
This is the substance, the rest is all form! I leave you to ponder much more over why investors would want to meet and do business with you. Maybe I will write about it some other time.

(The author, Amitabh Shrivastava, is a member of Indian Angel Network, and is currently the CEO of CSIR-Tech Pvt Ltd. Some images credited to Clip Art)

Do You Make These 7 Legal Mistakes? Legal Guide & Tips for Startups

Most of the businesses are started by entrepreneurs who leave their jobs, which is great for the startup ecosystem, but it may cause serious problems when employments contracts are ignored. There are certain crucial provisions that may hamper the startup journey, if not tackled in advance. Therefore, it is very important to avoid legal mistakes before starting a new business, most of which affect startups and entrepreneurs when their venture creates conflicts with their previous employers. Generally, there exists 4 crucial clauses of an employment contract, which may cause potential problems for startups and entrepreneurs. These include Confidentiality, Non-Competition, Non-Solicitation and Intellectual Property Rights.

So, if you have recently started a new business after leaving your job, or you plan to do so in near future, following 7 legal mistakes should be avoided at all cost:

1. Do Not Ignore Your Legal Docs, Read & Review Carefully

At any time during the course of employment, employees are bound by various legal documents, including, offer letter (letter of hire), employment agreement, and other agreements that the employee may have executed during the tenure of his job. All these documents should be carefully read and reviewed with a view to identify potential restrictions that will not allow the entrepreneur to launch a new business smoothly.

It is true that most of these legal agreements and documents are too long and boilerplate to read, so instead of ignoring these, you should hire a lawyer and ask him to explain all the relevant clauses and terms.

2. Do Not Disclose Confidential Information

As a common practice, all employees are bound by confidentiality obligations included in almost all the employment contracts. In accordance with such clauses, employees are required to maintain trade secrets and confidential information of the employer, and a disclosure of such trade secrets and confidential information without employer’s consent, or usage of such trade secrets and confidential information without employer’s consent for launching (or running) a new business may result in legal action against the entrepreneur and / or the startup. In case you wish to use any such trade secrets and confidential information for your new business, getting employer’s consent in writing or obtaining a waiver of such clauses from the employer is highly advisable.

3. Do Not Compete Directly with the Employer

Among all the crucial provisions of an employment contract, Non-Compete clause is very important. Generally, such a provision prohibits the employees from starting a business that will compete directly with the employer.

Generally, employment agreements with Non-compete clauses (or separate Non-compete agreements) are time bound, and often extend for a specific time period after the employment ends, which may be anytime in between 1 year – 5 years.

With a view to ensure that non-compete clauses are not breached, the entrepreneurs and startups should first determine whether there exists a scenario of direct competition or not. Various factors that determine competition include, category of business, category of customers, use of knowledge or technology. If these factors turn out to be in conflict with the employer, it is better to address those concerns in advance before launching the business.

4. Do Not Infringe Intellectual Property Rights (IPR)

Issues related to assignment of IPR to employers and infringement of IPR by entrepreneurs and startups require utmost attention, as any lawsuit related to IP issues may easily run up to millions of dollars in damages, which can only be avoided by taking pre-emptive measures and following best practices.

All the employment agreements require the employees to assign all the intellectual property to the employer, wherein employee agrees that any work product, business idea, invention, or development conceived or authored by the employee during the course of employment

will be legally owned by the employer. This may create serious issues when a new business launched by entrepreneur is any way related to, or dependent on, the work performed for the previous employer. Accordingly, such IP issues are crucial not only for entrepreneurs and startups, but also for potential investors, and investors always perform IP & Legal Due Diligence of a business to ensure that such issues will not arise.

5. Do Not Solicit Previous Employer’s Customers & Employees

Most of the employment agreements also include provisions that restrict the employee to solicit employees, customers or vendors of the employer for a fixed period of time after the employment is terminated. However, in case you are leaving the job on a positive note with the employer, it is highly advisable to discuss such issues with employer in a transparent manner, make him aware of your business plans, and obtain the required waiver in writing. This approach generally works and as a general rule, it is always better to think a step ahead in case of potential legal issues and prevent litigation at a later stage.

6. Do Not Use Employer’s Resources for Your Business Idea

This is the most simple mistake made by lot of entrepreneurs while they are still employed, and this can easily snowball into a big legal hassle for startups and early stage companies. Many employees work on the new business during their working hours, use their work email to communicate with outsiders regarding their new business idea, use company’s laptop for planning a new business, which may be intentional or unintentional, but it may result in legal issues related to non-performance, as during such working hours, employees are expected (and paid) to perform work duties for the employer. Such mistakes can easily be traced later, as once employees leave, they leave behind a trail of data, including e-mails, documents, presentations, and other electronic evidence, that can easily be recovered to determine the extent of non-performance by the employees.

7. Do Not Use Conflicting Name for New Business

Well, this is one mistake every startup and entrepreneur should avoid. Everyone thinks passionately about naming their new business, but while doing so, due consideration should be given to the following two points:

(a) Unique & Novel: The name should be new and unique
(b) Non-conflicting: The name should be not conflicting with existing names

Mostly, all business names, brand names, logos and taglines are protected legally by way of trademarks, and in case of conflicting names, it might result in a trademark infringement suit.

A good example to highlight the importance of naming a business properly is that of Zomato, which was earlier named Foodiebay. As per this news article, Foodiebay was renamed as Zomato during last week of November 2010. It is interesting to note that on November 25, 2010, Ebay initiated legal proceedings against Foodiebay before Indian Trademark Office for opposition of trademark. As per the information available to general public, the legal proceedings are still pending while Foodiebay has been renamed to Zomato. Various public documents may be accessed by checking the status of trademark no. 1813054 at Indian Trademark office website: http://www.ipindia.nic.in/. Alternatively, a copy of legal notice of trademark opposition as filed by Ebay with the Indian Trademark Office may be accessed by clicking here.

Therefore, as may be observed from the above case study, selecting a unique business name and legally protecting it by way of trademarks is very important. In case a business involves multiple brands, a strong trademark strategy is crucial to manage them, and it is highly advisable to use keep business name different from brand name. To read more about this, please click here.

In accordance with Indian Trademark Law, it is not mandatory to file for a trademark, but it is highly advisable to register a trade mark for the name of your business as well as for the brand names of your products and services. The registration of trademark provides legal right to prevent the unauthorized use of not only an identical or confusingly similar trade mark, but also an identical or confusingly similar company name, trading name and domain name. Accordingly, it is highly advisable to seek assistance from a Trademark Attorney.