The Panel Members were:-

Saras D. Sarasvathy
Associate Professor of Business Administration at the Darden Graduate School in University of Virginia.

Dr. Mathew J Manimala
Prof of Organizational Behaviour, Indian Institute of Management Bangalore ( IIMB )

Prabhakar ValivatI
Managing Director , Mentor Partners

 Bungee jumping is a big risk, but people do it, because they know that it is a calculated risk, they trust themselves and the rope. For some there is a natural adrenalin rush for bungee jumping. Is Entrepreneurship like that? Are Entrepreneurs a different breed? Do they think and act different? Are you as an "Expert" Entrepreneur?  An expert panel who have studied and spent time with a lot of Entrepreneurs share their knowledge and insights in to Entrepreneurship.

Excepts from the Q & A session:

Q:  When does the Entrepreneur create the big vision?

Sarasvathy: When an entrepreneur starts a venture in the initial stages he is too busy figuring out what it is that he really wants to do.  He creates the vision as he goes along and this is likely to change based on the resources and opportunites that come along. Somewhere along the line he needs to set goals, start putting systems in place and start thinking like an MBA, there is a transition point.

Lets say an entrepreneur gets started by thinking of making a pencil, he has the idea, another person comes along saying lets make a green metal pencil, and if his idea is good and shows something tangible, then these two approach the third person, who may want to invest and grow the business. Look at XEROX, after being in the business for 15 years they came up with a vision statement "The document company!!". 

How about Star Bucks? US consumption of Coffee was going down around 1971, coffee didn't look like it was a great business. 3 guys, one a coffee fan and the other 2 good friends, they used to live in seattle drive over the Canadian border to Victoria, 3 hour drive up and down to get freshly ground coffee. At one point they wondered ‘why are we doing this, and for fun started selling ground coffee, people started asking them what it tasted like and that is when they started serving coffee, that is how Star Bucks was born. It was much later that Howard Schultz came along got inspired by the action and atmosphere in the first store and got the vision of a store that could give a great customer experience and starting more stores.

Q: Adequate resources is ok, but is having too much of resources a trap too ?

Manimala: Yes, there is a saying that, Ambition is like mounting a horse, if you jump too high, you will fall on the other side.

Prabhakar: I know several IT start ups who raised capital in late 90s, VCs (Venture Capitalists) used to give too much money and Entrepreneurs blew up the money, I've seen some of them spending money to set up a swimming pool on the 8th floor of a building, set up a plush 200 seater IT centre with plush interiors with Murals from Calcutta. Some have crunched 4 millions in 18 months. It is advisable to take the money as a pledge fund, and get the funds released over a period of time. Equity is the most expensive kind of resource, when you leverage on your equity, debt is cheaper than equity.

Sarasvathy: If you ask expert entrepreneurs, they will say, don't wait to raise the money till you need it badly, it becomes expensive. Raise smart money, money that comes with other kinds benefits and expertise.

Q: Is it better to borrow from Banks?

Prabhakar: Banks in India are trained to look at everything as a project, they keep monitoring your progress, you always report to them. VCs also ask all the questions and they look at your business plan, before they invest; they also provide you smart money. So balance the borrowing, the Banks discipline you and VCs give you access to their Network, which you can't get on your own.

Q: There's a saying that it took someone 30 years to be a success overnight?

Prabhakar: An entrepreneur needs to Wait it out, he needs perseverance. 10 years ago, when we were down, my wife was very supportive, but she was also concerned since we had kids to support and no money beyond that one month. That is the time we started RelQ. At that time, AmEx used to give professional loans, we borrowed from AmEx, Citibank, SBI and private borrowers, at the average cost of 28%. We put the money as Equity. We pledged our property. We went through hell. All rationale was lost, we did have customers and we had employees and families to support, we could not back out. The desire was to create value and wealth. Earlier, Dr. Saraswati was talking about, how much loss can be absorbed, at one point we thought that the worst that can happen is we lose everything, then we can go and get a job. We had borrowed from every known source.

Sarasvathy: I would like to add one thing here; Perseverance is the key to success in any field. Going to the last paisa should not be seen as a necessary condition to be a successful entrepreneur; expert entrepreneurs do not think so, they look at developing partnerships with customers, investors and suppliers to reduce their risk.

Q: Can you give us some insights into how expert entrepreneurs raise money ?

Manimala: Entrepreneur is the one who takes others money as well as others brains. When Reliance launched the telecom business, they had no need to raise money from other sources, they were cash rich. But they launched Dhirubhai Ambani Entrepreneur Scheme - you had to deposit money to be a part of the scheme and you were required to sell certain number of connections. Many Entrepreneurs get partners who can invest money; others would evaluate the competency and ideology other than money.

Q: To be an entrepreneur, do you have to be passionate or is it the commitment that is required?

Prabhakar: Never bet against a guy with passion, VCs look at the team, to see the level of passion.

Sarasvathy: I would say passion with commitment does the trick. Commitment gets the focus that is required. How you react to failure is a best way to success.

Balaji: When you speak of commitment, I'm reminded of the description of commitment - When you make an omelette, the hen is involved, when you make chicken curry, the hen is committed!!

These were excerpts from a Panel Discussion organized by Businessgyan and TASMAC on the topic ‘What makes Entrepreneurs Tick?'.  

Compiled by Ms. Mangal D Karnad for Businessgyan

Issue BG82 Jan 08

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