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Monday, January 01, 2001



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A rupee saved is a rupee earned

Bharat Kumar

CHENNAI, Dec. 31

A YEAR ago, we were waiting with bated breath to see the effect of the date changeover in the year 2000. Other than this dampener, the mood was gung-ho. New economy CEOs were burning cash at only a slightly lower rate than they were getting it. If they d id not, they would not have got the money in the first place. It was fashionable to project near-term losses. Else you just were not aggressive enough for venture capitalists to be interested in you.

This year, there is a lot more sobriety around. And a lot less surrealistic optimism. Every other dotcommer laments the venture capitalist's lack of interest in his baby. Reasons that entrepreneurs give are varied: Venture capitalists are being unrealist ically pessimistic, they are risk averse, and so on. But you still hear stories of venture capitalists not being interested in a company merely because it wants too little money and will gave away a minuscule stake.

The difference here is that small companies are turning wiser, in that they realise that they cannot do justice to large sums of money. They prefer small sums and they want it at a reasonable cost, in terms of giving away equity stake.

Towards the end of this year, if one looks at the international scenario, it is interesting to see that the big demises or predicted demises are those of the big daddies. Those that spent millions of dollars quicker than you can say, ``Wow!'' Priceline.c om, and, are examples.

Those that are still around, are the ones that are crawling along, counting every penny that is spent, taking a leaf out of the Old Economy.

In India too, the contrasts are distinct. We have heard of high-fliers whose cash reserves plummeted thanks to Rs 1 crore ad campaigns and millions of dollars spent in plush office interiors. And, we have also heard of entrepreneurs who refuse to take ho me a salary till their brainchild starts seeing profit.

The latter are typically small-time shops that have a focus and have let out every rupee from their purses only with great pain.

Let us look at what a few venture capitalists, entrepreneurs and venture catalysts have to say about the past year in India and what they think the future holds.

Mr P. Karthik Iyer -- a successful entrepreneur who was part of the initial team at Microland and promoter of Inndsoft Sytekh a Chennai-based multimedia and training solutions company, now a wholly-owned subsidiary of SSI Ltd after the m erger this year -- says: ``Entrepreneurs have to concentrate on saving money, be pessimistic on revenues and optimistic on all sorts of expenses that are lurking round the corner so that one is prepared. Thrift -- always -- is the best ro ute to prosperity.''

And the first thing that he looks for in an entrepreneur who comes to him with a proposal? The ability to squeeze the most out of a rupee. He says: ``When I meet an aspirant for my funds, I evaluate every expense estimate of his. Often, expense estimates are grossly overplayed.'' His point is, ``when you have to make a return business trip between Bangalore and Mumbai, why do you want Rs 20,000? Go II class by train, (or at best III AC in summer), buy a good management book at the local shop in the rail way station and spend the journey time reading it. Once there, check into a hotel that has a hygienic environment which suits your purpose, not one that is flashy but does little else.'' In which case the expenses for the trip can be cut by a twentieth. In other words, 10 such trips a year make a difference on the balance sheet.

True. More entrepreneurs are falling in line with this line of thought. Says Mr P. Sunder, Director at, ``We are clear that we want to grow the old economy way: Increase revenues with as little an increase in expenses as possible.'' Bhar is looking to break even in March and that, feels Mr Sunder, is easily achievable.

In an interview to Business Line's weekly IT pull-out, eWorld, late this year, three venture catalysts who had joined hands to form ePowern, an incubator of ideas and start-ups, said that one of things they looked for in an entrepreneur while evaluating him for their start-up idea is frugality -- the ability to save. According to Mr Rama Rao, one of the venture catalysts at ePowern, ``If you have more money than you need, you are bound to spend it unwisely.'' The note for the beginning of the new year is clear: Take care of the pennies, and the pounds will take care of themselves.

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