The Hindu Business Line : `Young entrepreneurs must bank on emotional money than smart money'

`Start-up companies should refrain from borrowing from professional agencies or venture capitalists in the initial stages and mobilise funds from friends, relatives or any other non-commercial or informal sources'

Hyderabad May 11 The first thing most young entrepreneurs will look for while staring a venture is sourcing funds from professional financial agencies.

But the start-up companies should refrain from borrowing from professional agencies or venture capitalists in the initial stages and mobilise funds from friends, relatives or any other non-commercial or informal sources, is the advice from Mr Verne Harnish, a management expert from the US.

"This is possible by making the initial fund requirement smaller. My advice to young entrepreneurs in India is to depend more on emotional money than smart money while starting new business ventures," Mr Harnish told Business Line here.

The management expert is here to conduct a workshop for top executives of companies organised by Knowledge Capital Services.

Success formula

"In the US, the young entrepreneurs float start-ups at very young age keeping the fund requirement at a minimal. In a sense, this is the success formula for the US corporates and can be emulated here," he said.

Elaborating further, Mr Harnish said that key avenues such as VC funding from overseas or domestic financial agencies should be reserved for expansion of a firm rather than for floating it. "This minimises pressure and increases performance," he added.

Finding customers key

On acquiring customers, Mr Harnish felt, the exercise for a start-up should begin with finding the first customer. "We always hear projections about number of customers who can be acquired. But a start-up must elicit commitment from at least one customer before the actual take off. Get a customer, make the sale, deliver the product, then scale up," he said.

Hands-on experience

On the availability of talent in India, he said entry-level talent could be further improved. "The MBAs here have more theoretical knowledge which is not required by the industry. The curriculum should be made more hands-on," he felt. There should be more innovation in corporate thinking, as well, he added.

On corporate culture in the country, Mr Harnish, who is on his maiden visit to India, said Indian culture was much more open than any other Asian country. "In my day-long interaction with top executives here, I am amazed by intelligent questions and humble innocence. Things are in tact here for a knowledge-based economy," he observed.