Wednesday, June 04, 2008

Devil's Advocate

This is a great term. I wish people would feel it more deeply when they succumb to the temptation of criticizing friends and colleagues who are trying to create something. Giving birth to a new idea has to be one of the most fragile psychological processes we go through as adults. When you talk to someone who is starting up, I encourage you to stretch your imagination to find those aspects of the venture which hold the most promise, and then to concentrate your attention and words in praise of that.

The devil will come, we need more angels.

Monday, June 02, 2008

Active Investors

When we were raising money for Kendara we had a number of conversations with David Cowan of Bessemer ventures. He had funded Visto which was cofounded by a number of our friends from the Java group. One point I remember him making was that we were 'Assuming Success' which meant that the value of the system would be most apparent when it had achieved critical mass, but that it would be difficult to get this traction without already having it. I didn't agree with him in our case, but I have seen several startups making that mistake.

He was very busy, and said he couldn't be a primary investor on our deal, but that he would be interested in being a passive second investor. This sounded great to me as we already had very active interest from a couple of investors including Jon Feiber at MDV. In conversation with Jon, I mentioned the idea of a passive second investor, and he basically said, "yeah, I'd like to be passive too". But he wasn't and said that if we were going to get a second investor it needed to be someone very engaged in the business. We ended up working with him and Tim Haley of RedPoint Ventures.

Its a slight contrast with Paul Graham's philosophy. From YCombinator About
We try to interfere as little as possible in the startups we fund. We don't want board seats, rights to participate in future rounds, vetoes over strategic decisions, or any of the other powers investors sometimes require. We offer lots of advice, but we can't force anyone to take it. We realize that independence is one of the reasons people want to start startups in the first place. And frankly, it's also one of the reasons startups succeed. Investors who try to control the companies they fund often end up destroying them.

Both Tim and Jon had seats on the board and more than influenced certain actions like bringing on a CEO.

Paul et. all clearly contribute and I'm sure heavily influence a variety of decisions the founders make. Its interesting that they don't wire this kind of power into the terms. Maybe, with the small equity they have (2 - 10%), and the number of teams they process, they simply don't have time or incentive to fight, or take on the real (time consuming) responsibilities sitting on the board entails.

It works out right for the entrepreneurs too. Nevermind legal action, pissing off PG isn't going to be in the best interests of any founders career objectives. The equity is too small to get too worried about, and not having to worry about board approval or meetings is definitely a significant burden very small companies may be better off without, if they can get input in other ways.

EIR (Entrepreneur In Residence) programs at VCs seem to work on similar terms. Small amounts of money, lots of interaction and advice. Without specific legal restrictions prohibiting EIRs from working with other companies, the goodwill generated from the program creates a strong bias towards that VC. And again, its very reputation oriented.

cost of living India

One fascinating aspect of living in India is how economically diverse the population is and how the different classes coexist relatively harmoniously. When I first came to India I was on the full back packer path spending $4 / day for a nice room with attached bath on Sutter St. in Calcutta.

Then I moved to Pondichery and worked 6 hours a day for free food and lodging on the Solitude Farm inside Auroville.

In Delhi I spent $50 / night for a hotel, and in Bombay I paid about $1000 month for
an apartment in Bandra.

When I moved to Pune, initially rent was just $75 / month for a room in a gorgeous old bungalow on Lane 4. Since then I got one 2 bedroom place with Soum that was $200 / month, and later moved into a large 2BHK that overlooks the park that is cheap at $450.

Now, if I sold my 2 bedroom apartment on the water in San Mateo, I couldn't get something I liked as much in Koregoan Park for the same price.

A friend is running an NGO out of a 2bhk on Nagar Rd. ~5 km from Koregoan Park where rent is 6-8k rps ($150 - $200). Nagar Rd. is interesting because its a very wide road connecting it to Koregoan Park, and there is a huge amount of new construction there. The society my friend is in has about 9 buildings of about 15 stories each, and it is just one of several societies in the area.

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Decent, reportedly 512k (really, Im lucky if I get 300k), unlimited broadband internet from Tata is $50 / mo.

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Food at all the Thali places around KP is around $1 / meal for a full Thali. Breakfast of Idli, or paratha, or poha is generally less than 50 cents. A Salad, Pizza and a Beer at Il Fungo Magico is about $10. Cocktails at Mauve, Kiva, North Main, Unaki are $5k - $8 each.

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I think electricity is about $20 / mo. unless you run an AC.

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Rickshaw transportation is one of the biggest wins on the price parity index. In Pune its around 6 rps (10cents) / km. Tho the equation is much more complicated (# of kilometers * 6 + * of km tenths / 2 + 2)

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Computer equipment tends to be about the same price as in the states, tho service is between 5 and 10 times cheaper.

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Im not a heavy mobile user, my total costs are less than $12 /mo

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Estimated Monthly expenses
at a variety of lifestyles

Koregoan Park
-------------
$450 rent
$200 food
$70 entertainment
$70 transportation (not counting air travel)
$100 travel
$100 misc.
----------
$1000 / mo


Nagar Rd.
---------
$200 rent
$80 food
$50 entertainment
$70 transportation
$60 travel
$40 misc.
---------
$500 / mo


Yerwada
-------
$100 rent
$50 food
$30 entertainment
$40 transportation
$30 travel
$50 misc.
---------
$300

Slums
-----
~$100


* These numbers are high as they assume single occupancy which is almost never the case. Having groups of 4 or more friends sharing a 2bhk is common. This reduces rent and some of the other costs as well. Another data point is that many call centers pay about $300 / mo.