The motivation for entrepreneurship


Sitting at my window desk on a rainy day, as I was thinking about why I should be an entrepreneur, I spotted the vegetable vendor who visits our street everyday.

I have been seeing him since 2008.

He sold vegetables to our neighbour and took shelter from rain in their verandah for a while. Our neighbour spoke to him and then disappeared inside. Few minutes later, she came back with a tiffin box wrapped in a cover. I guess she gave him his lunch.

That gesture shows how much she reciprocates the goodwill he has created.

The guy is fairly reasonable, has a pleasant demeanour and is a hard working chap. People in our street depend on him and trust his arrival, even on rainy days.

On a day like today, it is easy for him to stay at home in warmth. That would mean few families have to go out in rain shopping for vegetables or make do with whatever they have at home.

Or he could apply a rain-induced surge pricing model and charge 2x on his vegetables. Profit maximisation by the MBA book. He doesn’t. In the process, he has earned the trust of his customers.

These guys are the real heroes of business who carry the society beyond their weight and get very little credit for it. They give me the inspiration that you can do a good job in any business irrespective of size.

As the rain subsided, he walked away pushing his cart. I came back to my thoughts and the motivations for why I am an entrepreneur.

Profit as a side-effect:

I have to admit that profit is one of the reasons we do business for. There’s nothing wrong about being profit-oriented. However, I realize we want to go beyond profits in 2016.

Great businesses have profit as a side-effect of doing something profoundly good, not as a reason for doing business. Of course, keeping costs and cashflow under control is very important. People have to be paid good salaries and expenses have to be met. Or else, the business will soon be history. Profit ensures business continuity and hence, is important. But profit and money alone cannot be motivations for being in business. There have to be stronger reasons.

After spending some time thinking on it, being inspired by various people including the vegetable vendor, here are my reasons.

Pride in performance:

Doing a meaningful job and having pride in your work is very important. Ensuring high quality service, continual improvement, doing the right thing, not taking short cuts,  paying employees good salaries, contributing to the society in a positive manner, etc are worth more than just pure pursuit of profits.

The need to build something of high quality has to be our core motivation. We will be aligning all our resources towards it in 2016.


Our capitalistic society is designed such that people with money have more power. However, money follows the law of diminishing returns above a certain limit. For example, if you think you need 3 crores to live a comfortable life, having 30 crores is not going to improve your life by 10 times.

More than the pursuit of money, I will be optimising my work for autonomy.

To walk to my own beat and to chart my own path. To venture into places my heart takes me without being constrained by the lack of money. For that reason alone, I want money. Having enough money is good because it gives you autonomy to a good extent.

Optimising for autonomy means

  • significant ownership to control the company
  • mostly bootstrapping, but being open to taking selective strategic shareholders when need for money arises without diluting voting power
  • never sell my time (for e.g, consulting, workshops, etc)

Long term value creation:

I am not talking about valuations here, but good old simple value! Value creation for employees, customers, society and finally, shareholders. It is not about moving fast and breaking things, but about caring for customers and going about business at a speed that is right for you and the business. It is not about bootstrapping or funding, but about taking the right kind of money from the right kind of people (who understand you and your business) with right expectations.

It is not about baiting customers with cash back and discount programs (and later surge-pricing them), it is about serving them well at a mutually beneficial price. It is not about being lazy about your cost structure that you try to pass on to your customer, but about being efficient, frugal and lean so that you can afford to charge lower and still create value for yourself and your company.

It’s not about being focused on value creation itself, but about being focused on the right things and let value be created as a side effect.

It’s a journey and never a destination, and hopefully, I’ll be at it for very long.

Thoughts on the Atlassian IPO


Atlassian has applied for IPO. I spent a couple of hours on the IPO draft.

Being a company that largely bootstrapped and only took some money for strategic purposes, this is a very interesting company. Their model, thoughts on culture, etc are pretty good to read. The founders together own about a huge 75.4% of the company (possible only with bootstrapping).

A few thoughts (I am no SaaS expert, so point out mistakes):

1. Revenue
  • Their revenue in 2015 was 319.5 million $. But if you dig deeper, their actual billings were ~366 mil $ (319.5-85.2+131.2, ignoring deferred revenue > 12 months as its not much)
  • Deferred revenue recognizable within next 12 months is 131 mil $. That is ~40% of annual revenue. Ability to charge upfront for service rendered later – always good for cashflow (see below)
2. Expenses
  • Their accounting expense was 319 mil $. But the actual cash expenditure was lesser at ~265 mil $ (41.5 was share-based payment, 15.5 was depreciation and amortization – both non cash expenses). So, their cashflow was +ve by almost 100 mil $ in 2015. Even after accounting for plant & equipment purchase of 31.8 mil $ and income tax, they had a 65 mil $ free cashflow.
  • Employee cost is their largest expense, at 213 mil$. That is 66% of recognized revenue. Share based charges were 41.5 and cash expenses were 171.9 mil $. Contractor expenses were only 21.8 mil$, so a large portion is on payroll. Isn’t their payroll structure a bit high?
  • Their sales & marketing costs were roughly 21% of revenue. I think this is lower than most other software companies out there.
  • Cost of revenue is 52.9 mil$, which means a ~83% gross margin. I have some problem with it. They don’t capitalise R&D / product dev costs, but they also don’t have a separate costing for product development. They have put it under R&D and listed it under operating expenses. They have a very large R&D cost – roughly 44%. I am guessing the previous years had similar pattern too. To me, this is not entirely an operating expense and good part of it has to be deducted from gross. That could mean their industry leading gross margin of 80%+ could be actually lesser.
3. Capital structure
  • They have a fairly easy structure. They do have significant liabilities, but almost all of them are deferred revenue and trade payables.
  • On the asset side, they have ~217 mil $ in cash and short term investments, giving them a runway of nearly 10 months (on cash-cost structure of ~265 mil $ in 2015)
  • ~63 mil $ in property & intangible assets
  • One possible red flag is the large deferred tax asset of 81.5 mil $. I have limited understanding on this, but it seems to be largely from over-payments after adjusting for share-based payments (~47 mil $).
4. Thoughts on profitability
  • This business is more profitable than what you see in accrual accounting figures.
    • charging customers ahead gives them interest-free money to grow
    • a good part of expense is a share-based payment to employees. Yes, its an actual cost, but its not cash. Any growing company will be happy about it I think, as long as enough value is derived out of the non-cash payment.
    • Accounting profits are understated due to higher investments in R&D (40%+) and such. Means lower tax outgo.
    • They have pretty good free cashflow. They could aggressively reinvest this and keep profits low – business keeps growing, tax leak is reduced.
    • The previous 2 years had ~10% operating profit, 2015 much lesser. However, I think the actual profitability of the business is higher than 20% (OPM) if you deduct the impact of understated entries like R&D (by splitting them into maintenance and future R&D)

1. They aren’t market leaders in each category, but an underdog to Slack, Github, etc. What are your thoughts on being the market leader in a single category vs underdog in several categories?

2. Do you agree with my point on gross profit calculation? (see #4 under Expenses above)

3. What is the chance they will still be here in 2025 and still be relevant to customers? (without answering that question, I cannot value this company using metrics like 10x one-year-forward-revenue, etc. So I refrain from doing that. Am no SaaS expert)

I have my rough answers to the questions above, but will refrain from posting it.

Shutter jam

I am a professional photographer.

Strange things are happening around me! I cannot explain it yet.

I think it all started after that particular client meeting on August 5th. The meeting was a disaster!

We met at CCD. The old man wanted a photographer for his daughter’s wedding and had asked for my portfolio.

I would have been fine if he had simply rejected me. He rubbed it in by laughing at my photos. “Enappa idhu? Ondu photo’nu nettagae illaa!”, he pushed the sample album aside with a smirk on his face.  It was the most humiliating moment in my career! He didn’t even pay the coffee bill, I had to.

What a jerk!

As he got into his car, I took my camera out. For some reason, I wanted to take his picture.

I pressed the shutter button. It didn’t work. Damn!

The shutter button had gotten jammed. I took it to the service centre. The technician took it in. He came back after 10 minutes and said he didn’t find anything wrong with the camera. The shutter button worked just fine.

“Really?”, I asked. Continue reading

The last novel

“Which idiot is calling me at 2am?”, he muttered annoyingly as the phone rang, piercing the silence of the night.


“Listen to me carefully, Simon. Don’t waste time trying to understand whats happening now. There’s been a murder… your best friend Vishal is dead. Dress up immediately. Go to 14th cross and locate a brown coloured Maruti Omni. They are running away. Go now… gooooo”

“Whhh, whoo is this!?”

Dead tone. The person on the other side hung up.

He called Vishal immediately.

“The number you are trying to reach is switched off”, an automated voice answered.

“Smitha, Smithaaa, get up! Get up!”, he nervously shouted.

“What is it? Another emergency case?”, Smitha woke up annoyed by her husbands sudden action. “It’s time you quit your police job!”.

“No, this is serious. Someone called me and said Vishal is dead. His phone is switched off too. I need to go and check.”

“Ah.. that guy! Might be a prank of his. Or another attempt to create content for another novel that no one wants!!”

“Smithaa, don’t waste my time. There was something strange about that voice. It didn’t sound like a prank call. Oh, Smithaa, there’s no time. I am leaving now.” Continue reading

Daughter diaries: Funbrella

2015-07-21 21.56.37 copy


My daughter got an umbrella as a gift for her 5th birthday and she’s been in love with it ever since. There is something about the umbrella that I can’t explain well enough.

Kids associate it more with play than with utility. They can have fun with mundane everyday objects. Tells us we have a lot to learn from kids!

Open it up, lo and behold, you have a tent! Sometimes, it’s a boat that you can sit inside. Be a prankster and rotate it after returning from heavy rain, sprinkling water all over the place. If you are creative enough, the umbrella is a lot of fun!

“Chaththri mane” (umbrella house) is a favorite playtime activity of the kids.  Open up multiple umbrellas, form a closed shelter and play for hours inside. Sometimes they have a fight and one will pickup her / his umbrella and head home. Sometimes, they play ghost inside and try to scare each other. Sometimes, they cook up prank-recipes in giggly tones!

To my daughter and her friends, the umbrella is more of a toy than a utility item. To them, it’s a ‘funbrella’.

PS: Originally, I had no plans to add this image to the photo essay on my kid. I printed a lot of images yesterday and asked her to pick her favorite – she picked this image. That was when I realized how much she likes the umbrella. This image was shot in poor light with my cheap phone, which shouldn’t matter to anyone. It certainly didn’t matter to my daughter!

Daughter diaries: Who will clean the poop?

“Whisky, my name is Whisky!!”, she quipped and started licking the plate.

Our neighbour has a pup dog named Brandy and the tiny fellow has become the attention of all the kids in our area. They swarm around the pup, dote upon it and play with it a lot.

My daughter came to me and said she wanted one too. “Ok”, I said. “What shall we name the pup?”, she asked. “Theirs is Brandy, lets call ours Whisky”, I said.

A 1000 watt bulb flashed on her face. She doesn’t know what brandy and whisky mean, but I guess the name was catchy enough to get her excited. She pretended like a pup, calling herself Whisky and goofed around a bit, until a realisation hit her.

“Who will clean up the poop?”, she worryingly asked me a few moments later.

“Of course, you will!”, I said.

“Then I don’t want a puppy!”, she stated dismissively and went back to playing with Sahil who was lost in his own world of disfiguring another toy!

The ethics of money and business

Ever since 2005, I have really enjoyed studying businesses and have kept my money mostly in publicly listed stocks and since 2011, been interested in building one myself. At the same time, I love and seek inspiration from nature.

I’ve had trouble keeping them together because capitalism and its main cogs – business and finance, seem to be largely working against nature. I find it disturbing and hard to balance.

Several years ago, I owned ITC shares – a friend questioned how I could make money from smoking and tree-chopping (paper). I got out (though my reasons are ambiguous at best).

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Side project: Simple expense tracker for busy people


I used to track my expenses religiously for 8 years – initially using notepad and Excel, later with GnuCash.

In 2011, when I started my own company, time became a limited commodity. I found it hard to keep track of my expenses. So I devised a simple minimalistic method to track my expenses – one that took just 15 minutes every month.

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Never play the Russian roulette

Charlie Munger often says, “tell me where I’m going to die, so I will never go there”. Avoidance of terminal risk is of great importance to him (and to Warren Buffett).

That is a very important thing to follow in life.

A Russian roulette is one game that is simply not worth playing at any price, even though the odds are in your favor. (There is a 5/6th chance that you will survive and there is a 1/6th chance that you’ll get the bullet, if the chamber is reset every time.)

Any game that can get you killed is just not worth it! Even if there is a good chance that you might survive and win a hefty prize.

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True financial freedom

“I want to be financially free, so I can pursue whatever I want in life”. I hear this statement often.

A friend and I were discussing money and financial freedom, amongst other things in life.

“How much is enough money to be financially free? How do you decide?” I asked my friend.

Is it a fixed number? The ability to not work for money and have enough of it to pay all your bills through your lifetime? Or is it 30 times your annual expense? 50 times? Having a good part of it in inflation beating investments? Or having a business that has good free cashflow and longevity?

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