Every new day brings new experiences and in my case new surprises. In my role as a mentor and investor I meet many entrepreneurs each of them with a story, unique business, passion and blind belief in their business. Many of these entrepreneurs have good backgrounds and generally well prepared for the meeting. They are able to share a crisp presentation on the plan and in my case within 5 mins of the presentation they start getting a volley of questions and we discuss, debate, agree, disagree and generally it ends up to be a 1 to 2 hour meet. While few of these meeting convert into a funding event in most cases I love to keep in touch with the entrepreneurs and keep advising them if they come to me with any query.
However I had a recent experience with an entrepreneur which got me baffled. The entrepreneur Johnny (name changed) made an aggressive pitch for his company MAX (name changed) In the first meet. He went on and on about how MAX is going to be a very big company and is in a space which is like a $5billion market and he is going to be capturing a significant percentage of that market. However I found his plan had too many holes and it was difficult understand his model in the time i had. Therefore he spent more time with one of my colleague and we decided to meet him at a later date.
At the later date Johnny arrived for the meeting and started discussing with my colleague I joined the meeting in a little while. Johnny had some aggressive plans he was going to grow his business to a top line of Rs. 13 Cr (approx $3m) and a net profit of Rs. 6 Cr (approx $1.3m) surely an exciting business. And in three years he was going to build a Rs.3000 Cr ($600m) revenue company. He had acquired 300 customers in the past 4-5 months with a team of 2-3 people and his plan was to acquire 13,000 customers in the year which would get him to this revenue and bottom line. Johnny spoke non-stop and was hundred percent confident that he is going to hit the numbers. Therefore I had to ask him the basic question on why does he need funding as looks like the way he has bootstrapped he could continue the same. Instead of answering this question he went on and on about how much his customers love him, he started talking abut customer case studies, I had to interrupt him and ask him the same question to which after beating around the bush a million times he answered that currently the 300 customers he acquired were offered the service for Free and he plans to start charging a free of Rs.2,500 ($50) per customer soon. To much my logical next question was could he walk me through his customer acquisition process and cost. He once again went off on a tangent talking about his passion, how he knows he is going to succeed etc etc. I pulled him back to answer the question. He explained that he has 3 people in acquisition who make 2 sales a day each and hence he is budgeted 50 sales per person (assuming 25 days) and said he plans to ramp up the team to 30 people. I told him at 30 people he can maximum expect is 1500 per month but that’s on a free model, how much has he estimated the sales to be on a paid model. He once again went on a tangent and started talking about his unique concept and how no one else is doing it and how a few other companies who are in similar space just don’t have the capability to execute what he has done. This time I had to tell him PLEASE ANSWER THE QUESTION and not go into stories to which he answered that the answers to my questions required explanation and were not that straightforward. This was the first time both of us raised our voices..
I then asked him what is his current revenues a fairly basic and straight forward question to which he once again started spinning a yarn. And finally said his revenues are Rs. 0.8m in April and Rs. 1.8m in May and he had no idea what would they be in June. I asked him how does he realize his revenue ... he got offended to this question and asked me if I don’t believe his word. However my point was how is the revenue booked after probing him for 15 mins he finally said that in April while he has made sales of Rs.0.8m his customers have only made a booking of that amount and are expected to only pay in June and therefore his real sales in only Rs.50,000 and he had a similar story for the subsequent months.
He said that his current sales conversion percentage is 85% and he believes once he makes it paid service it would go down to 50% to 60% and hence he was looking for funding. I was shocked and surprised as I had never seen that kind of conversion percentages in any business in my life. I asked him what data does he have to back a ridiculous conversion percentage like his. He had none he best he could come up was that he personally made 60 calls and sold almost 45 (free) he is confident enough that he is going to achieve his numbers. I could see his temper was rising...
I once again asked him that to me he is talking of going from Rs.50,000 to Rs.130 m in 1 year and at a conversion percentage of 50% from lead to paid on a new business model... that seems to be very risky proposition. This time he lost it and started lecturing me on how i have no understanding of his business and I should not pass judgments on this plan and all I am saying is all crap. Seeing the situation go out of hand my colleague intervened and told Johnny that he needs to learn to listen and back his assumptions with data or examples on how it can work. We cannot invest in businesses where all the assumptions are based on fiction and not facts. To which he once again went on a loop on how he has Mr.X , Mr Y and Mr. Z as his advisers and based on their advice he made many changes in his business plan. I asked him to name 5 major changes he did in his plan based on external advice after a lot of thinking he could come-up with 2 major changes i.e Start giving his product for Free initially and once established start charging, target the right customer to whom he should sell the product instead on going on a blind database. I burst out laughing since this was the most basic advice which one get on any business and I then asked him that we normally invest in businesses where we can actively mentor and advice companies and given our discussion so far did ht think we can add any value.
That’s when the shit hit the fan! he started shouting on top of his voice and declared that he is going to be India’s youngest billionaire at any cost and is one of the smartest person on the block and I have no clue on the business and have not been able to see his vision and that I will be a big looser if I don’t invest in him. The then said that given the line of questioning I took him through he doesn’t think i can add any value to his business and I don’t DESERVE to be an investor in the business. Now this was bizarre and I said enough is enough and told him thank you we don’t intend to invest in his business MAX and he can go.
From being a hot pot he suddenly became cold and calm and wanted to continue talking. I told him 2 more times that he can go but this dude refused to leave the room. And he replied to me that I can leave the room and he will continue to discuss this further with my colleague. It was clear in my mind that Johnny’s passion has made him insane and he looked at me and my colleague as a threat to his being India’s youngest billionaire dream Finally I had to tell him that if he doesn’t leave I am going to call the security...... and thank god finally he left.
While me and my colleague are still recovering from the shock and are thinking of hiring private security guards to save ourselves from entrepreneur’s who’s business we would have not invested in or asked them many a questions the biggest question I have in my mind is that are entrepreneurs like Johnny the reason why VCs and investors are not as hot on the startup space. Is the mentoring provided in India not good enough for entrepreneurs to get basic business concept right. Do entrepreneurs take rejection from investors so badly to the point they can loose their mental balance or become a threat to the person on the other side. I am sure any investor who meets entrepreneurs like Johnny may become vary of touching startups with a bargepole... however as it is said that a diamond is find in a coal mine and as part of the process you have to dig out the dirt. So are far as I am concerned I am looking forward to meet many Johnny till I find my Mark... which according to a dear friend of mine is co-incidentally is the most successful first name in the valley for successful entrepreneurs Mark Anderson, Mark Pincus, Mark Zuckerberg ...
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Comments (30)
Excellent article Vishal. Also make sure you install metal detectors in your office.
Regards,
Taj Haslani
You are right Taj, this is interesting article. How do you exactly get inspired writing such article?
good professional approach for extortions
That must have been some experience.
I feel sorry for some other good Entrepreneur who may have got to meet you guys in that time instead.
Many people I’ve met in the start up community are clueless too but atleast most of them are humble and polite about it.
Cheers.
-aniket
PS: Am not a big fan of Pincus, his policies seem to be nothing short of extortion either.
Wow, quite a gripping read!
Having done (and doing) the rounds myself, I can feel for the dude in the story a little bit. But, like in relationships, if an investor is ”just not that into you”, you just pack your laptop, get up, and take your show elsewhere :-)
Srikanth
While I was going through the write up, I was thinking maybe Johnny would ask for a referral at the end, as he was so damn confident of his business model, and wasn’t ready to take rejection in the first place.
An interesting piece no doubts :)
Hahahahaah.....
Maybe we should do a special feature on this... how should vc’s protect themselves from dangerous entrepreneurs.
I see videoconferences increasing in popularity soon...:)
I such cases the best solution is to keep a plateful of obsessively good cookies made from Indian grains and millets with butter and ghee.
This will not only attract your attention but as well as the aspirant towards those innocent cookies, and the atmosphere will cool down.
Tactic 1: Ask the aspirant to take a bite of these delicious cookies, and now talk to him, he has no choice but to listen to you.
Benefit: Indian grains and millets along with ghee is healthy and will sharpen the brain of the aspirant, energising him to think on what you trying to say.
If the trick fails, well you have the cookies to enjoy your rest of the day.
Courtesy ’baCookie’ (www.bacookie.in)
Indian gourmet cookie with no chemical preservative or artificial colour or flavour.
Really a good read to know the mind of at least a section of the budding entrepreneurs. I am an old man but to love to hear about entrepreneurs in India who are poised to take the country ahead notwithstanding so many odds. But this type of character reminds in the basic flaws in our primary education. Noted historian Ram Chandra Guha has recently noted that the first Prime Minister of the country expanded the higher education such as IITs at the cost of neglect of primary education. That is why we dreamt to build a sound building on a poor base.
However, I enjoyed the post
Hey Vishal,
Fascinating story and well put across. Yes, it did go out of hand, but you have to give it to this guy for sticking to his guns.
I must admit being on the other side that some of the VC questions are due to non-understanding of a particular domain.
However, being honest and straight-forward about questions you dont have answers to, is the key in such kind of meetings and this Johny guy doesn’t seem to know that.
Vishal,
Its interesting read, but as I was reading it, my mind constantly wandered off to what would have actually happened with your man, before he met you.
He is passionate, I am sure about that. Most probably he comes from a middle class family, has done something to be real proud of, and has real conviction of his skills. He seems himself as a billionaire, its just a matter of time. But he has got only one small problem to solve. He requires funding.
I can almost hypothesize that your man, must have gone to atleast 6-7 VCs, ”invested” tens of hours of emotional involvement, only to get rejected.
Lets accept it, Vishal,in India, VCs act like banks. So, its natural to see him getting all worked up, when you question something so deeply he believes in.
I think, had I been, in your place, definitely no-no to somebody who can’t take criticisms/questioning. One thing I learned long time back of how to ”spot” experts. No magic formula, but some cues. Look for, the ability to clearly articulate one’s ideas.Clearly, he couldnt.
Had I been, in his place, I would have got myself some cold water to drab onto my face, and introspected on your questions.
And lastly, if I had any power, would have made the Indian VCs a bit more risk-o-philic.
Best,
Soham
Hmmm...
I cannot recall that many self-made billionaires, millionaires, or even ”thousandaires” who didn’t start out with selling or making their own product or dream in their spare time, free time, and/or sunup to sundown.
There are no free lunches, and the sooner this young wanna be figures this out, the sooner he will see he needs a defined plan, and goals and strategy guiding and defining that plan. Then get out and get a few paid customers results to get started. Maybe (maybe) then he can hope to get in front of some venture capitalists let alone recruit some quality salespeople. Geeesh.
well written article that shows the give me a freebee mindset of the new business breed this world is creating.
What’s he got to loose? At least then he could afford a better gun for his next venture capital meeting???
Simple lesson people. If you are seeking credit as a loan or venture caapital, business or personal, get your plans and resources in order to increase your chances. Credit cannot be seen as an entitlement. It is your responsibility.
Simple lesson folks. Regardless if it’s business or personal credit you seek, get your plans and needs and repayment plans in order before you begin. Credit is not an entitlement and it’s your own responsibility
sounds like you had a harrowing time! I guess its bound to happen since you sit through a lot of VC pitches ;)
This thought, often aggressive, makes you win in life. That is the life that we live every day. A real jungle. Do not live in a world where labor can do something. We live in a world where time should be speculated. There is a healthy society but it is.
thanks for sharing
No wonder its so tough for genuine entrepreneurs to get funded. Every $hithead thinks his bizplan is bulletproof. I know you an active investor like David Cohen but you should setup an initial screening process - atleast on an email :)
Very good post. It demonstrates how important it is for entrepreneurs to be open, flexible and ready to listen loop holes in the vision / business plans. This is not only important for our success but rather for the success of ecosystem overall....hope many angels / VCs don’t get carried away with such Johnny’s and be persistent Mark finder :)
Very good post.
Thanks for you
That was a great piece of information., I enjoyed reading it..,
These are wonderful! Thank you for finding and sharing
aahhaha thie picture is funny lol
I was very pleased to find this site.I wanted to thank you for this great read!! I definitely enjoying every little bit of it and I have you bookmarked to check out new stuff you post.
good,thank you admin
good,thank
Thanks for taking the time to share this, I feel strongly about it and love reading more on this topic.
Although I can’t agree with all you staded, I must confess I do love your way of writing.
which according to a dear friend of mine is co-incidentally is the most successful first name in the valley for successful entrepreneurs Mark Anderson, Mark Pincus.