Date: Wednesday , March 04, 2015
This month's article brings you lessons from Rajeev Madhavan, an extraordinary entrepreneur, prolific angel investor and co-founder of several companies. Rajeev is a serial entrepreneur, having founded and co-founded three successful startups. The most recent, Magma Design Automation became the 4th largest Electronic Design Automation Company in the world under his leadership. Rajeev served as Magma\'s Chief Executive Officer and Chairman of the Board of Directors since he co-founded the company in 1997, and also served as president until 2001. Magma was listed on NASDAQ stock exchange in 2001 and was ranked as the 2nd fastest growing Technology Company in 2005 by Forbes. Magma was acquired in February 2012 by Synopsys, Inc. Prior to founding Magma, he co-founded and served as President and CEO of Ambit Design Systems, Inc. Ambit\'s market leadership led to a successful acquisition by Cadence in 1998. Rajeev also co-founded and served as Director of Engineering of LogicVision, Inc. that went public and was eventually acquired by Mentor Graphics. He was also incidental in the creation of Zerosoft acquired by Synopsys and AutoESL acquired by Xilinx. Recipient of Red Herring, Top Innovator 2002, and Lifetime achievement award at NITK, India and various other awards, Rajeev is an active angel investor in a number of startups. Based on my recent discussions with him, here are four key take away (4KTA) points that center on the concept of focus from product validation, culture, getting sales and setting clear goals.
1. Product Definition
Lots of entrepreneurs don\'t do a good job of validating the initial idea with customers. In 90percent of the cases, the best value add that your product can bring to customers was not the real value. What you discover by this process of validation is something new or other key pain points that need immediate solution by the customer. Secondly, categorizing those features into a minor subset of maximum value functionality is important. This is the stage when you are talking to customers for 10 minutes and letting them talk for 40 minutes to soak in all the information from them. It\'s only as you become clear about their pain points and solution around it, you talk for 35 minutes. Let them give comments and feedback. And you don\'t get thrown out. For instance, in one of the companies as founding investor and Chairman, we had unique machine learning algorithm technology. While speaking to some of senior management of an ecommerce company recently sold to Oracle during our validation process, it made us realize that the product can be targeted to ecommerce. Despite the fact that our team had zero experience in ecommerce, we visited 20-30 customers to understand their problems and learn what could be automated in analytics and machine learning. Today the product is used by leading brands with over twenty five companies providing them 15-40percent increase in revenue.
2. Building a Corporate Culture and Right Team
The key point to keep in mind is openness. Don\'t expect everything to be secret. Your team is 90percent of your asset. Surround yourself with people smarter than yourself. Have a stringent hiring process to ensure they fit into your company culture. Team must possess the sense of ownership. Have technical checks during interview process. Having one can bad employee is like having two good employees as that person can be more detrimental to shared goals of the company. In Magma Design, the company went through litigation where opposite party was using litigation as a weapon. While there were issues associated with IP, most of it was frivolous things related to products with no merit. At the same time, the other party was trying to hire away key employees. We had a reward program in which key people were rewarded extremely well. As a result, the company did not lose any of our key employees and delivered on number of new products during this period. The rewards program, openness of culture coupled with value system and team communication helped us to achieve that.
3. Sales, Sales and Sales
Essentially in early stages of startup if entrepreneurs are not good at sales, then you must hire right talent, consultants and investors. How you learn to sell in the early stages helps you create a scalable and repeatable template for future sales and growth. It\'s not really important to have significant revenue from first few sales but having the right equation to be able to repeat it is more useful. Be honest with the customers as initial product neither may have all testing, quality assurance done on it and nor complete functionality built in it. Getting the customer\'s buy in to a tiered deployment is a key.
Make sure to run your company across the board with goals for Research & Development team, goals for sales, goals for administration and ensure that key owners are held responsible. Now remember that people can only be held responsible only if you delegate them to create their own goals and help them become successful. Weed poor performers out while rewarding high performers. Realize who your key employees are and lead them to take the company to next stage. For instance, in of the companies, I've been involved as an investor, management team had a goal for product release without having lined up a customer and understanding what customer actually needs. These types of goals are meaningless. Having a customer lined up to test the product is a key goal. Getting your first purchase order from your customer that you have lined up is a must.
The author is Co-Founder of AURISS TECHNOLOGIES INC. and a serial entrepreneur based in Silicon Valley, California. Learn more at www.4KTA.com and follow Naveen on twitter @Naveen_4KTA.