| Travis Hughes Interactive
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> Lawrence Sinclair wrote:
> Bruce,
>
>I posted the original message asking if anyone would like to start up a co-operative incubator type operation in India.
>
>The problem with the sweat-equity model that you support is primarily as you point out: it is hard to get the five or six guys to agree on one idea. This is why most sweat equity ventures are made up of one or two people at that stage in their development. Usually just one.
>
I think both Bruce and Lawrence bring up excellent points - both models are doable, each has its own benefits, pitfalls and risks.
>One person can do far more today than they could fifteen years ago. But if one goes to India, that one person could hire two to five other people to fill gaps in the entrepreneurs skills (and interests, e.g. accounting, system administration) and free time to focus on the key elements of the business (technology choice, system design, innovative features and functionality, seeking venture capital, marketing, business development).
>
>Most Indians are not interested in equity. They want prestigious titles and employers, cash, and H1B visas. All of these help them get respect from their parents, and the best spouces. The first two are likely what most Americans, outside of Silicon Valley want, with the addition of good health insurance benefits.
>
This is a great point. Also, it opens you up to more workers. For instance, I did meet some very capable people who wanted to work my venture but they had a house, family, etc. They couldn't work for free or even at a great deflated salary yet if I had funding they could be hired.
>But people who don't want equity are still great team members. And more reliable in some senses. Equity holders are like volunteer workers. They figure you are lucky they deem kind enough to come into work. And if they lose interest or want to run the show, they leave or struggle for power.
>
This is also true in many cases, not always. But when you pay someone they feel they are more obligated or have to perform. On the other hand, there are many dedicated people in this world who don't get paid but are willing to work themselves to the bone or even blow themselves up because of a cause they are associated with or believe in.
Ideally if you can find a good person who is passionate and will do it for sweat equity or a reduced salary they could be a great contributor.
>I think it makes most sense if the founder or two hold most of the equity, and share some with those employees who value it, to engender a good incentive structure. To those who value cash, as most do, one must pay cash. In India, that means a drain of an extra couple thousand dollars a month for people who would cost twenty thousand dollars a month in San Francisco.
>
In this case, you are right. If cash is the motivating item or a gating item to bring people in, then India suddenly has the cost savings advantage.
>While I do agree that one could be generating revenue in 3 to 6 months. I am sure everyone knows that is not the same as covering ones operating costs, let alone making a profit. An entrepreneur needs to be able to fund their business for at the very very least, a year, while losing money each and every month. That buys time to bring in other investors to validate the equity you have built and to bring in cash to cover the business in the two to five years it takes to become profitable.
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And even if bringing in revenue and breaking even, it doesn take time to break even on a cashflow basis. In my last startup, we were breaking even after a few months, but it took 6 months or so later (and a major infusion of personal working capital) to break even on a cash flow basis.
>An operation set up in India could be brought to the revenue generation phase in six months. Perhaps. Then the founding entrepreneur could leave India, return to the US, preferrably to Silicon Valley, and seek venture capital funding, or marketing, or other activity to bring the venture to profitability. All the while, because the operation is in India, that founder can fund the operation with two to five thousand dollars a month. This is the sort of money a person can easily earn consulting or doing other work. The venture can be self funded for as long as is necessary.
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>I know this method works. I have done it. Except I never spent the time in India, which I think is a necessary step to get things up to speed with the right vision and direction.
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I also think the India model is perfect for proof of concept, first version of product, etc. It just opens up so many options and it's something that most entrepreneurs could seed on their own.
I only wish the India open was as accessible and on my radar in 2000 as it is now - things may have turned out far differently for a fraction of the cost.Private Reply to Travis Hughes Interactive (new win) |
