Category: Startups

Current State of the Sri Lankan Startup Ecosystem: The Rude Awakening Show

StartupWordCloud

I posted a little infographic yesterday on Sri Lanka’s Startup Ecosystem. The intention was to create a conversation (which a lot of people have provided me feedback by now) within the community on what really matters to build a stronger community. I will recreate the infographic based on the findings the next few days. My personal opinion is that the current ecosystem is just wrong. The community is doing all the wrong things possible.

Brad Feld’s book, Startup Communities is great read and he talks about how he and other folks converted a non-tech, non-entrepreneurial Boulder to a high tech startup scene. This is indeed a 20 to 30 year plan and there are no short cuts per se. Back in early 2011, Startup Compass started ranking the ecosystems around the world based on several factors (The 2015 report is out now!). They factored things like funding, talent, performance, support, mind-set, differentiation, output and trendsetters into the equation to rank the places. Let’s review what we have in Sri Lanka, mainly the Colombo and its nearest suburbs.

Talent

Yes, the Sri Lankans are talented indeed. We have a set of good developers, there’s no question about that. Missing part are the product people (we lack both product people and product developers). There’s a clear distinction between a product developer and just a regular software developer. The academia puts out software developers, targeting largely the BPOs in Sri Lanka, mainly places like Virtusa. An ordinary developer you see in a BPO is used to look at an SRS and code what is asked. In most cases, these SRSes are sent from the product folks in foreign countries and in many cases they are foreigners. The worst part is that, once these developers do start working on a technology stack, they are stuck with it for the most part of their lives and they know that and nothing beyond that.

For a product developer, the story is very different. He has to challenge the status quo, build features over and over to see what works. He has to have his input and his say in the features built, what to prioritize and what to not. This requires playing around with all new products and tools that are coming out, every single day. It is a lot of work, but our guys can do it. The issue is unless you land at a place like WSO2, where the company is well funded with a visionary CEO, you might not get the chance to play around with these tools. He is going after some of the major players in the tech industry and that itself needs to be respected.

In today’s world, it is really not only about the technology stack. While building something people want to use, the design is another key element. Most cases, the product guys have to have a real good design sense to make it all work until Apple or Google puts out the next technical jargon or the paradigm shift to deal with. This makes iteration cycles smaller and we only have a few months to make things happen.

We as a community, are doing very little to fix this problem. In a startup ecosystem, talent is not just developers. Matter fact, it stretches far beyond than just the coding skills. This can only be done with exposure and it only happens with collaboration, which I will get in to in detail later on. The best example is Singapore, they have absolute very little developer talent within the country itself and they have gotten it from the neighbouring countries.

 

Funding

Funding is a real problem. Yes, as an Asian country, we all have the traditional conservative approach with money. But, certain things have to be changed to make it happen in a startup setting. It is still a great progress from where we were few years back to see Lanka Angel Network, BOV and others have come together to make it happen. I have heard that the equity splits for the fundings have been 40%-60% and even at times 50/50. This is not going to work. We need to keep in mind that the entrepreneurs are going to be working on the product or the company many more years to come. On one hand, it is not fair to get that much of equity from a product and at the same time, it is going to make the entrepreneur far less interested in actually making it work with that kind of a split. As VCs or Angels, they would be better off getting 10X or 20X over a 5-year period than trying to get 100X over a 2-year period. If we nurture the ecosystem and good exits happen, they will get the 100X they are expecting over within the very short time span. The ratio is about 1:10, even in Silicon Valley. The one that makes it covers for the rest of the other 9 losses. That is how it works everywhere.

The real issue is that there aren’t that many angels or VCs in Sri Lanka that have had the startup experience. The startup entrepreneurs turned VCs do this well and the best example is Anything.lk. I met the folks in Singapore some time ago and they nailed it (I have a different perspective on Daily Deals businesses and that’s a separate discussion). They can, because they understand the startup culture. Currently, in Sri Lanka, most VCs and angels seem to be coming from a corporate background, consulting background or traditional ‘brick and motor’ type of businesses and don’t seem to have any startup experience. The startup experience is brutal. If you have not had to pawn your wife’s jewelleries, you have not been in a proper startup situation. Unless you have gone through that experience previously, it is difficult to understand the startup mind-set and the real needs of the startup entrepreneurs. It is just brutal, even if you are well funded!

This is what seems to distinct the startup crowd from SLASSCOM as well. Everyone understands that startups can make money, so it’s a good bet. Everyone has heard of the $1B exits like Instagram, so everyone wants see if it works for them. If $$ is the primary motivation, then you are in it for the wrong reasons. All these startupers could have made so much more money than most of the corporate folks you see by working at a corporate environment. They have decided to go on a startup route mostly for the impact, because they love it! Making money is not their primary motivation. Until everyone understands this, it is not going to work out for either one.

VCs and Angels here in Sri Lanka are often in the look for currently profitable businesses to put more money in. In many pitch competitions I have seen, the primary question they often ask is, “How do you plan to make money?” or “How much do you make now?” I can’t think of a single startup that really made it big and was started with a projected income plan for the next 5 years. Their primary goal was to solve a problem in a very detailed way. If you nailed that down, there will be a revenue model somewhere. Examples? Facebook, Twitter, LinkedIn, Tesla and every other major success story out there! Harsha (Purasinghe) once told me, “If you are going to build something here, focus on what you can sell right away! If you are going for a world changing idea, move somewhere where you have the ecosystem ready!” He was absolutely right. Spot on!

We really need folks like Dr. Sanjiva and Harsha P to come forward with small angel investments here and there. That will not only kickstart the engine, it will start to create a culture that has never been seen before!

Generally, funding comes with a lot of other goodies. VCs or angels should not be putting money in if the business is not in their domain of expertise. The founders should not be raising money if the angel or the VC cannot add any value or give constructive feedback to the product and the vision of the founder. Our founders are so desperate that they will try to raise money from anyone who comes across. That is so destructive later down the road. I once told an angel that if I am going to raise money in Sri Lanka, it will only be you and no one else and I never even spoke to anyone else, because none of them matched the criteria of the angel I wanted to have. At times, you might be better off not raising any money than raising money from the wrong person/s.

 

Collaboration

Collaboration is the key to any successful ecosystem. Unfortunately, we Sri Lankans don’t collaborate and share. We are in need of a co-working space so badly. I wanted several premier politicians to help us with putting a coworking space together, but unfortunately nothing got materialized. They just did not get it. There’s a difference between renting out office spaces and coworking spaces. We need a place where folks like Chandika and Aloka can organize events like Refresh Colombo. There are so many PHP meetups, hackathons, etc, but meeting places for entrepreneurs are far more important than PHP meetups if we really want the ecosystem to work. It is indeed sad that events like Refresh Colombo weren’t able to do their work in an on-going basis, because no one funded them. Folks like Google, Microsoft, Virtusa should actually be sponsoring these events completely. Again the real issue is that, decisions makers there aren’t really coming from a startup background. The reason Google does this in NY, SV, London is that, there are folks there who have run startups.

SLIIT at Malabe has office spaces and they call it the first incubator. It is really renting of office spaces, nothing more than that.

We need some good affordable coffee shops around Colombo. Usually the VCs and successful entrepreneurs meet at places like Coffee bean. It might be ok for me, but no student with an idea or a prototype is going to be able to spend 750 bucks on a coffee. Let alone, they might not even know what different types of coffees are. Experienced entrepreneurs have to come together and make it possible for the students and the new comers to hang out. This has to be in the affordable range. Co-working memberships can be around 3000 to 5000 a month for hot seats and dedicated seats can be a bit more. The folks with real capital have to study Singapore and Bangkok startup scene very well to make this happen.

 

Academia

Academia currently plays a next to nothing role at making this happen. There have been some events that had happen every now and then, but that’s pretty much it! The universities have to include startups and entrepreneurship in their curriculum and they need to be taught by folks who have done startups. That is very important. I just completed my MBA (Of cause for other reasons, not that I learnt very much from it) and the entrepreneurship class was the worst thing I have ever seen in my life. Entrepreneurship in schools should not be taught by corporate consultants or folks with a corporate background in their entire lives. It should be done by startupers. In startups, you challenge the status quo, not live by it de-risking every possible thing. I was talking to a VC (Vice Chancellor) of University of Moratuwa few years back along with Shamal Ranasinghe back in the day and nothing good came out of it. The team, lead by the VC had absolutely no idea what the hell we were talking about.

Universities can get a 5 to 10% equity from startups can provide them with office spaces, Internet and coffee. There’s enough space at Moratuwa, Colombo and Japura. Peradeniya can be like Chang Mai, Thailand. Can focus on a different branding. Once they start doing that, it will create sub cultures around campuses and that will help tremendously. NUS does this in Singapore and it has been working great! Again the real issue is that, corporates who have the money are the ones who are friends with the ministers and they don’t understand the startups. We really can’t blame politics completely, because they are not expected to know everything. Although, they have the responsibility of learning these. It is our job to make them aware and make it happen. This is where our experienced, well-funded entrepreneurs need to come in.

Finally, seminars funded by ICTA, SLASSCOM are not going to cut it. This is a different game. If we look at the startup ecosystem from a consulting perspective, it is not going to work. Once these basic things are in order, people like Shamal Ransinghe, Chamath Palihapitiya will come and actively be involved in the community. I hope ministers like Eran Wickramaratne, Harsha De Silva will understand the importance of this. It is irrelevant how much money is pumped if the basic underlying principals of a startup ecosystem is not there, it is going to fail.

ICTA, the government body that is supposed to be looking after this has to have the right people in place. Hopefully, after the recent changes in the board and a new CEO at ICTA, we will see if that is going to be any different. I still have hope, because the current CEO is an entrepreneur and a product guy! We don’t want $5K grants being distributed to people, because that is simply not going to do any good. Instead of 100 $5K grants, we will be better off with 20 $25K grants that will actually be enough to put a fundable MVP together. $5K will give an entrepreneur 4 months of runway, just to pay his bills and live in Colombo. Further, we need a concrete plan from ICTA to help the startupers. A gentleman at ICTA once told me, “don’t come to meetings looking like a Steve Jobs wannabe!” That is just sick! I wear black T shirts often, because I like the color black. Not going to talk about it anymore than that. They should really focus on what creates a startup ecosystem than looking at what people are wearing.

I finally hope that the relevant parties mentioned here are not going to be defensive and hence, take these comments positively. One person said, “Brace for onslaught!” and I am expecting.

Crowdsourcing Tuition and James Altucher on the new startup idea

Tuition

I opened up a GoFundMe campaign to see how it would help to raise the money for the PhD. I actually want to see how it would work. Of course if it works, it will certainly help! After setting it up, I felt cheap to share it on Facebook. I was skeptical as to what people would think. Would they think that I am begging for money and I am dead broke? Would they think ‘what the heck is wrong with this guy?’ So I started asking a few folks around.

First I asked a friend of mine, a serial entrepreneur who had a very good exit. I asked him what he thinks of the GoFundMe campaign. He waited a while and said “my immediate reaction is that your education is what you should pay for. most people aren’t denied education because of funds.” He has a point in a way. It is true that most people aren’t denied education because of funds. It is the cases in States, people are denied education for parents pure stupidity, laziness and many other things. This is mainly in the western world. In certain parts of the world, people are denied education for many other factors such as religion, poverty, lack of opportunity within the system and many other things. So there’s definitely two sides to this argument.

Then I asked another friend, James Altucher. James is known for several of his very successful exits, podcasts, talk shows and of cause the books. He wrote several NYT best sellers. I had a short but a very interesting chat with him. I thought I would share some of it, because it may help fellow entrepreneurs. I, again, asked him what he thought of the GoFundMe for the tuition. I asked, “Does it look cheap to crowdsource the first year’s PhD tuition?” and his immediate reaction was “No! you should try it and see what happens!“. I kinda felt relaxed. After getting that out of the way, I told him what I was working on. Below is the conversation after that. He points out several key things.

SP: yeah, thats what I thought too. Chamath just funded an exact copy of ******* product I was working on and now I am working on a different one. A platform that will enable startuper to take an academic (PHD) route. My thesis is going to be on that too.

JA: neat!

SP: Startupers have a lot of research knowledge, why don’t they get a PHD for it as well. That will also enable universities to build a great portfolio as well..

JA: yes, some schools are starting to do that. like Georgia Tech here in the US and schools often take a piece of any tech that is developed on campus like I bet Stanford got a piece of google for instance

SP: exactly! People here think Im crazy when I say this.

JA: you should get all the data together. show how much money each university has made in the past 2 decades of spinning off startups. CMU made hundreds of millions on Lycos for instance

SP: Yeah, I am working on collecting the data. I need to figure out a way to keep things running to work on this full time. Its very difficult to juggle too many balls at the same time

JA: No it isn’t. don’t tell yourself that. the only way to succeed is to juggle more than you think you can juggle. Else, everyone would do that! the average multimillionaire, for instance, has over 7 different sources of income

SP: mmh.

JA: when I look at what I’m doing: I do books, blogs, podcasts, i’m on the board of 2 companies with billions in revs, and I’m an investor in over 20 cos that i keep active in. i’m not bragging when i say that. that’s all just simply what i do. and i have to do it because that’s where everything i have done before has led me. Today i had to put on at least 5 different hats just to keep up with things. or, rather, to stay ahead

SP: So you think the idea is worth pursuing?

JA: not as a PhD, no, unless you want to be an academic. But, perhaps there is a better way to do it. you collect all the data and then help universities set up their own incubators

SP: I was thinking, if I get in an academic setting, it might be easier to get the word out.

JA: yes, but a PhD will take you 5 years or more. The world will be different then.

He makes several key points. Pursuing a startup in an academic setting, specially for a PhD might not work, but launching of the startup can really be done in a few months. Most of the research would have to be focused towards getting the academics and universities within the framework we would build, not to mention the endless amount of work that will be involved in building a framework PhDers would follow to create a startup.

As for the GoFundMe campaign, I asked several others and they had mixed responses. Most of them were ok with it and said should give it a try! I am going to leave it up and see what happens.

Less is More: The Minimalist Entrepreneur

Hamster Wheel
Hamster Wheel

If you have been working 18 hours per day, you’d exactly know what I’m about to write about. Micro-managing and trying to be involved too much in everything is a disaster. It effects your productivity, creativity and causes a lot more stress than you’d anticipate. I’m not necessarily talking about ‘lifestyle-type’ businesses here and I’m not really a fan of those either. Although they may seem to make money, having the need to have certain type of a life style and building a business around it doesn’t look that exciting. Anyway, what I do want to talk about is dealing with the minimum number of unwanted issues to focus on the areas that are most important for your startup! Here are few hacks to do so.

Figure out what matters most. It doesn’t matter what scale your startup is at, there are things that matters the most. Figure those out. Spend the time on what matters most and try avoiding the things that doesn’t make an impact. If you are just starting out, read The Lean Startup, practice Validation Board by Lean Startup Machine. Identify what makes your startup progress each day.

Disconnect from people who don’t bring a positive change. It can even be your own family members. If they are not adding any value to you or vice versa, disconnect! Else it will only drain your energy down for no reason. Surround yourself with people who inspire and mentor you.

Don’t get involved in all kinds of businesses. You just can’t be successful in 50 different kinds of products or services. You can’t run a good design agency, while building a product, while trying to custom code for other businesses and doing private consulting work.  It simply doesn’t work. Select a niche. Focus. Master it day in day out. Read more about Malcolm Gladwell’s ‘10000 hour rule’ on the book Outliers to get a sense of mastering a niche.

Go Cloud. Try to use as many cloud services as you can. There are cloud services for basically every aspect of the business process. Whether it is maintaining a code repo or having your own personalized phone service, there’s always a hosted solution you can choose. Handing over all the maintenance for a small fee is much less time consuming and much more productive in the long run than trying to maintain these yourself.

Try to stay paper-less. Having a deal with printed contracts, faxes, accounts books and everything else in between is a disaster. There are services to keep you up-to-date with a very minimal fee.

Be equipped with the most wanted not the most amount of things. Being a startuper requires a lot of travelling. You always need to base yourself where the next best opportunity lies. Unless you are in to some sort of a work-from-home type of a business or those ‘lifestyle businesses’ I mentioned earlier, you have to travel. There’s no alternative to it. Identify the gadgets or objects that makes you most productive and get rid of the rest. Maybe you don’t always need the latest iPhone that comes out every 6 months unless you are specifically building something for it.

Reducing doesn’t always mean de-cluttering. I usually have messy work spaces. Messy work spaces make me more creative. Some of the most creative powerhouses have had the messiest work spaces.

Quit running after fame! If you have made some money and want to buy a few luxury things, that’s fine. But quit trying to get yourself into a Hamster Wheel by maximizing the amount of things you will have to deal with in a day today basis. That drains your energy down. While you are on a certain stature with these among your friends, family and of cause the public, it needs constant overlook and attention. It can be maintaining your luxury house or the vehicle or consumes so much time you should be putting into the business. If you really really need to have some of these, hand it over to your significant other or someone whose close enough to be trusted.

You can always follow Lifehacker and they put out a lot of productivity tips and hacks to make things easier in life.

How We Made A ‘Minimum Viable Product’ For 2 Years And It Just Sucked!

Minimum Viable Product - Image Credit Paul Kortman
Minimum Viable Product – Image Credit Paul Kortman

Back in 2010, our outsource model was growing. We were getting medium scale projects. I always worried about delivery of these with the limited amount of technical resources we had back then. After a few months of discussion, I ended up hiring one of close friends from an outsource model to head the technical team along with more technical staff. During the same time, I was learning so many lean startup techniques as well. Back then, it wasn’t called Lean Startups or Lean Development or whatever the fancy names we are used to hear now a days. I was just identifying what worked best to deliver products we were working on, the fastest possible way.

So the idea was pretty simple. I was on many different social networks and all of them were cluttered with so much junk data I didn’t want to read. I used social media to connect with people that I wanted to approach or stay in touch with. Most of them were my customers. That data was like gold for me! I was reading about what my clients and prospects would like in their real lives, their dislikes, personal info and the whole nine yards. I talked to them the best possible way they wanted to hear based on what I gathered from this social data. Their birthdays, funerals, weddings were so important for me. Going tru Facebook feeds, Twitter’s, LinkedIn’s Feed was a pain. I technically end up spending more than 2 or 3 hours a day trying to identify these types of information, which I called the ‘Pattern Breaking Events‘ in their social graph. I wanted something simple, some tool that gave me everything I wanted to know about my customers. I wanted to send flowers on their birthdays, I wanted to reach out to them if they are having issues with anything at all! That made a very special bond. They started reaching out to me every time they needed help.

I first had the discussions with my friend who was just hired and we started working on the product mid 2010. Of cause most of these big data companies didn’t exist back then so the approach had to different if it was to be built now and my friend was working at an outsource model for nearly five years and his approach to code products was way different than what I imagined it would be. There were number of times we had heated arguments on reaching milestones, committing code and whatever else involved in building technology products. I spoke to so many people about what I was working on and they all wanted the product when it was built. They all wanted to find easier ways to reach out to their contacts. In short, while we were arguing and making very slow progress is having the actual product ready, a service called Connected was launched in 2011 and was acquired by LinkedIn in late 2011. They were on the similar lines in what we were working on. By the time LinkedIn integrated the technology and the features they had, it was exactly like the features we had in our product! So the bottom line was, we had a great idea and while we failed to execute the idea, another company was launched, acquired and integrated in to LinkedIn along with almost each and every feature that was on the initial product mockups we had.

With a lot of experience in social space, I started working on a new product to measure skills. I want to make it the standard for Skills Measurement. Sign-up to get early access.

Startup Act 2.0: The Bipartisan Job Creation Plan

U.S. Senators Jerry Moran (R-Kan.) and Mark Warner (D-Va.), along with Marco Rubio (R-Fla.) and Chris Coons (D-Del.) introduced Startup Act 2.0 – bipartisan legislation that picks up where the JOBS Act left off by doing more to jumpstart the economy through the creation and growth of new businesses. Startup Act 2.0 builds upon the original Startup Act, introduced by Sens. Moran and Warner in December 2011, and the AGREE Act, introduced by Sens. Coons and Rubio in November 2011. Startup Act 2.0 includes the following provisions.

  • Creates a new STEM visa so that U.S.-educated foreign students, who graduate with a master’s or Ph.D. in science, technology, engineering or mathematics, can receive a green card and stay in this country where their talent and ideas can fuel growth and create American jobs;
  • Creates an Entrepreneur’s Visa for legal immigrants, so they can remain in the United States, launch businesses and create jobs;
  • Eliminates the per-country caps for employment-based immigrant visas – which hinder U.S. employers from recruiting the top-tier talent they need to grow;
  • Makes permanent the exemption of capital gains taxes on the sale of startup stock held for at least five years – so investors can provide financial stability at a critical juncture of firm growth;
  • Creates a targeted research and development tax credit for young startups less than five years old and with less than $5 million in annual receipts. This R&D credit is designed to allow startups to offset employee taxes – freeing up resources to help these young companies expand and create jobs;
  • Uses existing federal R&D funding to support university initiatives designed to bring cutting-edge research to the marketplace more quickly where it can propel economic growth;
  • Requires all government agencies to conduct a cost-benefit analysis of all proposed “major rules” with an economic impact of $100 million or more. This new requirement will help determine the efficacy of regulations and their potential impact on the formation and growth of new businesses; and
  • Directs the U.S. Department of Commerce to assess state and local policies that aid in the development of new businesses. Through the publication of reports on new business formation and the entrepreneurial environment, lawmakers will be better equipped to encourage entrepreneurship with the most successful policies.

Following is a great presentation by Kauffman Sketchbook. It will get you thinking!

Mark Suster And This Week in VC Are Back!

I was searching for Eric Ries videos on youtube and accidently(Isn’t accidently a word?) landed on his video with Mark Suster on This Week in Venture Capital a few days back. I was thinking to myself, ‘Wait a mint.. What the heck happened to This Week in VC??’ I thinking about dropping an email to This Week in Crew to get an answer. There comes and email from TWiST and it said ‘This Week in Startups – Mark Suster GRP Partners.’ I was thinking to myself, ‘great! I can find out what the guy has been up to..’

Mark Suster has been very inspirational to me in many ways. I used to quote him, send his posts to my co-workers and fellow entrepreneurs I come across. I don’t even remember how many times I went through his post ‘Intros!’ I always loved the authenticity he brings on to the table. You can really get to know the both sides of the table well enough to make very analytical decisions.

You can follow Mark on Twitter and watch the whole episode below. Mark will be back on This Week In VC again from August 2nd week on-wards!

Domain Hole and NameCheckList will Reduce Your Time Spent on Domain Search from Hours to Minutes!

I had been using these two great tools for years and had forgotten to blog about it. Domain Hole and NameCheckList are two great tools that will make your life much simpler when you need to select a name for your startup. I used to spend hours searching Mydomain.com, twitter and facebook trying to see if the name we brainstormed is actually available. Yes of cause, all social handles are ultra important for your startup, we all know that. These two tools have cut the time I have spent on finding good brand names from hours to minutes.