This post builds on the Dhando Investor post which with 20 comments was getting a bit cumbersome. Deepak Nadiger made an interesting comment and I wanted to respond and decided to do it with a fresh post. The hurdle rate discussion is an opportunity to be innovative and delight customers. In the businesses I have built in the past these have been central themes and I believe that there is an opportunity to build interesting plays that scale fast using the approach of innovation and delighting customers. In 1985 in India we used this approach and in four years built a business which had revenues of $12 million.
Time is the enemy of IRR which is why startups need to work extra hard to create value quickly. In the case of PayPal start to IPO was two years ( four is a hard par for the course). The PayPal IPO was post dot com bubble. In fact it was in late 2001 which was really dot com winter and a very tough time to IPO.
As usual please chime in with your views.
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Sanjay,
I didn’t elaborate the obvious. Citibank has institutional, time tested domain expertise in Cash Management (CM). In that sense, CM wasn’t quite a startup. It must have at best been a variant, a niche product to enhance liquidity for businesses which helped arrest the loss of time value of money-in-transit.
Capital at a zero / seed stage is indeed a constraint for the Average Joe founder because few investors can envision the scalability of an idea while at an early stage. We can’t blame them since betting on an untested, untried idea is not for all.
I am not much on the background of founders of companies you mentioned. To my knowledge, mostly previously successful entrepreneurs or those who would’ve anyway managed without seed stage support [ Stock option multi-millionaires like Basab Pradhan ex-Infosys, now co-founder of Gridstone Research] have a much easier access to seed stage capital as they are (quite rightly) regarded as *brilliant team* worthy of a capital bet – even with an idea that’s not exactly their core competence.
What I meant by Average Joe / Gangoo Taili is a guy who’s not got much besides the idea he’s working on, which he obviously thinks is workable – in simple terms, the stereotype. To such a guy if we say, go get some customers then we’ll talk, it’s no go.
Krish,
I had way more resources to work with in PayPal then I had in Citibank. Risk capital invested by Citi was less than 20 lacs so I beg to differ and say that the premise is not flawed. Time will tell.
In India capital is not the constraint for average Joe founder. Getting customers without a trusted brand may be.
However, what is your comment on educomp, indiabulls, naukri , shaadi, bharat matrimony etc. etc. I do not mention the travel people or baazee. Were they Raja Bhoj or Gangoo. Even if we succeed we will not be pioneers. This is what makes me fairly confident of success.
Is Gangoo Taili the equivalent of average Joe. I am not familiar with this metaphor.
Can we compare a `startup’ founder Citibank with that by average Joe founder ? That too `with recourse’ Cash Management processes and using other branch network…who bore the risk other than the 800 pound gorilla ?
Kahan Raja Bhoj, Kahan Gangoo Taili…?
Your intentions are good. But premises are miserably flawed !
It was an intrapreneurial venture done within Citibank India in the corporate cash management space in India. 275 of the top 300 companies in India used this ( 90%+ mkt share in target market) and around 5% of India’s GDP was collected or disbursed through Citibank. At that time Citibank had six branches in four cities
>In 1985 in India we used this approach and in four years built a business
>which had revenues of $12 million.
>
okie… and what was the name of your company ?