[An interesting experience Vishal Gondal (Indiagames founder) had to go through. This also speaks of an over-obsessive entrepreneur trying to ‘make that kill’, without realizing the difference between aggressiveness and assertiveness behaviour. At a deeper level, this is also a case of entrepreneurs not willing to listen to others].
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 minutes 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 a 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 advisors 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 …
On a similar note: To kill or Not to Kill (Is it possible)?
[The article has been reproduced from Vishal’s blog].
[If you would like to share your insights/research with PI audience, do send an email: ashish at NextBigWhat.com]