In case you are wondering what I did on Valentine’s eve…
I was here…talking to a bunch of bright people and listening to some great ideas…
Could anything have been more exciting?!
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What counts as innovation?
A few days ago I met Matthew Scott for lunch. Matthew told me the story of “Mighty Light“.
MightyLight aims to bring “light” (literally) into the lives of millions who live in remote parts of the world and don’t stand a chance to get grid connectivity. It aims to do so by a clever product that is solar-charged and uses energy efficient white LED for lighting.
It got me thinking on how innovation in distribution channels is probably as critical as innovative product design in the context of domestic consumers in emerging markets (and particularly so in the case of BOP consumers…)
Now, if you are a purist – this may not count as true innovation.
Distribution channels (or even innovation in distribution channels) is not something that you can patent…and yet there is no doubt that products like these are capable of transforming the lives of millions through clever combination of technology and distribution which hitherto was not possible.
In other words, they fit the criteria of high-impact and definition of a “breakthrough product” – and possibly innovation.
What do you think?
On a related note, I also spoke with Alok Singh, CEO of Novatium a few days ago – they too are doing something that is fairly unusual and exploting a business model around services that has not been tried in the PC industry before . Will it work? We dont know yet.
Is it an innovative approach? I certainly think it is.
Related Post: Has the $100 PC finally arrived?
The Pink Cow Conspiracy…
…now, if that did not grab your attention, I dont know what will!
I chanced upon this great post by friend and fellow VC-blogger Shin on Japanese VCs and the entrepreneurial/VC environment in Japan. The post was prompted by an event organised by The Pink Cow (a cuter version of Open CoffeeClub – check it out!).
Shin included some Q&A from the event in his post – which I think are very interesting and worth reproducing here for anyone who is interested in Venture Capital in Japan and the general VC ecosystem:
Q: What is the difference between the Japanese and US VC models?
[Ans: If you look at the history of the Japanese VC model and the background of the major VC players, you soon realise that the traditional Japanese VC is something quite different from the US (SV) VC model. But things are changing as business practices and competition become more global. Japanese VC is changing, or at least diversifying, in the business models it employs.]
Q: There seems to be a lack of Japanese VCs who really understand technology?
[Ans: Again, traditionally, that was indeed the case, with most of the major VC firms being affiliates (to one degree or another) of stock brokerages, commercial banks and goverment agencies, and the human resources at their disposal were limited, given the traditional lack of liquidity in the human resources market. But again this is changing, with VCs recruiting from industry (people like me), and with boutique VCs also springing up. Most of the top Japanese VC firms are large organisations, and as with any organisation, there are many different types of professionals within the organisation. The key is to find the right person to take your idea to. Stop thinking about the VC firm, and think about the individual VC.] [I thought about this question a bit more afterwards, and I think that the questioner may have some misconceptions about how we evaluate businesses. I wouldn’t say technology is not important, but I think many entrepreneurs overestimate the importance and superiority of their technology or technological skills, and the correlation between focus on technology and business success. I know that some entrepreneurs complain about the fact that VCs focus on issues which they feel to be peripheral, but we do that with justification. Our experience tells us, especially in Japan, that many businesses fail due to issues other than technology. Lack of financial planning, lack of sales/marketing ability, lack of corporate discipline in other areas, etc. It is our duty to point those out and inject some reality into many a technological daydream. The aim of a VC is to invest in a COMPANY, and help make that company successful so we can cash out and return money to our investors. I certainly only invest in businesses where their goals are aligned with ours.]
Q: Don’t VCs stack the odds in their favour with preferred stock structures?
[Ans: That is indeed the US VC model, and although it does happen in Japan too, the reality of the Japanese VC model is that currently the vast majority are common stock investments. (certain investment heavy sectors are more likely to feature preferred structures) There are signs that preferred structures are on the increase, but it is still a small minority of deals which see such structures in place. I personally think that barring a severe downturn, there will be VCs willing to continue using an ordinary stock model, and it is up to the entrepreneur to decide which set of terms and which VCs they want to work with. After all, no one is forcing them to take our money. But this ordinary vs preferred issue has to be understood in context, such as the fact that historically structuring preferred stock was subject to various limitations which made it difficult in practice to use the structure effectively. The small average size of investments is also probably a factor which has prevented VCs pushing for preferred stock and the associated liquidation preference, as is the lack of much M&A activity.]
Shin also mentions in his post that he has been thinking “seriously about…creating a venue for entrepreneurs to meet with each other and with investment professionals in a casual environment“. Perhaps Tokyo is ready for an Open Coffee Club?!
…which reminds me that I finally managed to cross an important “To-Do” off my list last week: went to the Open CoffeeClub meeting at Waterstones (24th)…more on that later.
A dream of “Democratizing Content”
When I first heard of Lokmanch.com earlier this year, I was intrigued.
“Lokmanch”(”People’s Platform” in Hindi) is an independent Hindi news aggregator site operating out of India. About three months ago, I got in touch with the two founders and was impressed by their enthusiasm, passion and obvious love for the business.
Although their position on (and perception of) “Globalization” is very different from my own take on it…I could not help admire the amount of work and energy that they had put in this effort. As it happened. I had the chance to meet with them a few weeks after the first conversation…and I came away from the meeting hooked!
Lokmanch’s vision is simple yet powerful – to make news and content available easily and freely in languages other than English and to be an alternative to current mainstream (English) media in India.
I would like to extend this idea a little further…and this is the dream – to make information/content available to anyone, anywhere and anytime, freely…In the context of India, other than the obvious difficulties in “anywhere” and “anytime”, you also face the challenge of “anyone” since a large number of people do not speak English* – hence the appeal of non-English online news aggregator(s) like Lokmanch. This is what I would call ”Democratizing Content“.
I am excited by this and will be watching them closely…and I wonder if there is any similar site (independently aggregating regional, local news content) catering to the Chinese speaking population?
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* Although by 2010, India will have the world’s largest number of English speakers and as Prof. David Crystal has memorably noted elsewhere, “When 300 million Indians speak a word in a certain way, that will be the way to speak it.”!
Entrepreneurs make really bad VCs
Ok…I admit that is an exaggeration…but one of the VC industry’s well-known article of faith is that good VCs must have some entrepreneurial experience in their past lives/careers… (see e.g. one of Guy Kawasaki’s best posts: “The Venture Capital Aptitude Test“. Update: pl. see comment below.
The main premise being of course that unless you have been an entrepreneur, you can never understand what it is to be on the other side of the table, you find it hard to empathise with management and you cannot really add value.
Is this really true? While empirical evidence may suggest a strong correlation, it would be wrong to infer a causal relationship based on that.
Why do I say that? Look at John Doerr, arguably one of the most successful VCs in silicon valley (or anywhere else for that matter)…and look at Mike Moritz (a former journalist with TIME magazine)…On the other hand, I know there is Vinod Khosla…
But that’s really not my point…
Fundamentally, VCs and entrepreneurs are on the opposite sides of the spectrum…while VCs need to act from the “buy” side: cautious/ paranoid/ careful…entrepreneurs would usually be on the sell side: exuberant, wildly optimistic, believing that anything is possible, in a hurry…
So to a certain extent, whether you will be a good VC or a good entrepreneur is “hard-wired”…and it is difficult to be both…
No wonder then that great entrepreneurs rarely make good VCs and great VCs rarely make successful entrepreneurs…
Exceptions? I am sure there are some…Vinod Khosla for instance and of course, Hermann Hauser…but not a large list, I guess…
Right…or wrong?
See also:
Will Price’s comment on this topic and an interview with Larry Sullivan which talks about this but is also very readable – on its own – as it recounts his experiences of managing a global start-up (that got incorporated in 3 countries within 3 weeks!)
Find of the Day: This interview with John Doerr (from 1997) with some timeless advice for entrepreneurs (and VCs); also here.
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P.S. Over the coming weekend, I have promised myself to take the VCAT and am contemplating posting the results online (suicidal?)… watch this space.
Of Latin women & entrepreneurship
Last Thursday (26th Apr) evening, I spent a very enjoyable few hours at my old school at the TiE Mentoring Event where I shared a panel with Janvi, Conor and Uday.
We spoke about our background and mentoring experiences followed by Q&A. Shai Vyakarnam asked whether VCs really took risks (I said, of course they do – but calculated risks!).
Davinder asked if entrepreneurship had anything to do with age and/or gender - in response to which Uday referred to a fascinating study by GEM that suggests Latin Amertican women have the highest prevalance rates of early stage entrepreneurial activity (Colombia, Peru, Jamaica) globally - amazing!
TiE is a great forum for budding entrepreneurs to network and meet some very interesting people – and hopefully get some useful advice. I cannot recommend it enough – especially for someone who is just starting to think about running his/her own business…and its Mentoring Prigramme is probably one of the most valuable service it offers – best of all, it is free.
And while on entrepreneurship, some of you may find this category of posts interesting/ relevant: “FAQs for Entrepreneurs“.
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