Is Silicon Valley Failing Entrepreneurs?

If you’re an entrepreneur or thinking about starting a company Silicon Valley seems to be the place to be. Not only is there a large talent pool in the area, the infrastructure to build and scales companies is perhaps the best in the world. Despite the perceived friendliness of the region towards startups, 99% of entrepreneurs are not able to get funding. While some may assume that investors are simply removing the ‘would be failure entrepreneurs’ out of the scene, this couldn’t be farther from the truth; in fact, many of these companies would likely be profitable. So the question is, why would so many potentially profitable companies be rejected?

“They get rejected because they don't fit the requirement of the venture capital model,” says Sramana Mitra, founder of One Million by One Million. Sramana’s company is an accelerator helping entrepreneurs succeed without financing. She says what VCs look for is “hyper fast growth and hyper large market opportunity. Very few companies fit that model.”

After interviewing dozens of entrepreneurs, over the years it’s become apparent to me that successful businesses are rarely started with the sole objective to make money. Entrepreneurs identify problems and bring solutions to the table- that is their mission. Many “would be” companies certainly aren’t modeled to grow to $50 million in revenue within the first several years of operation, but that’s ok. These founders are setting out to solve problems and accomplish their dreams, not build the next Wall Street juggernaut. The question I pose is, how does the current infrastructure in the valley meet their needs? 

True entrepreneurs come with solutions to problems that they see and follow their dreams

While the valley has dozens of accelerators for entrepreneurs to choose from, they don’t always have the interests of founders in mind. Why? Accelerators admit entrepreneurs into their program in exchange for an equity stake in the company. With that said, of course, they are going to groom their “portfolio” and escort them to venture capitalists where there are vast amounts of financial and human capital available. If their companies are given the green light to receive VC funding, the accelerators would see their ROI would greatly improve.

Each round of funding the founders accept, relinquishes their control of the company. It’s not uncommon for the founder to be out voted or even ousted from their own company after disagreements with their board. Steve Jobs was fired from Apple, Jerry Yang was forced to step down from Yahoo, and Martin Eberhard, co-founder and previous CEO of Tesla was asked to transition out. If these entrepreneurs had maintained ownership of their company, they wouldn’t have been kicked out by investors wanting to maximize company profits.

The concept that entrepreneurs need to receive financing to be labeled successful is a huge misconception. I was thrilled when I met Sramana and that she was fighting against this notion. When I sat down with her for an interview, she explained that her company, One Million By One Million, is the “first and only global virtual business accelerator”. Her mission is to help one million entrepreneurs reach one million in revenue- not push external financing or take an equity stake. Her philosophy is that many companies can be successful by bootstrapping- yes, even unicorns. While her business model is not traditional of other accelerators, it allows entrepreneurs to maintain ownership of their companies. Boot strapping off a paycheck can allow a company to be profitable from day one. She says, “our definition of success in entrepreneurship is customers, revenues and profits. Financing is optional, exit is optional, that's the philosophy of the program” 

Feel free to watch the interview below. If you want to contact Sramana to learn more about her program you can access her website here. I’d love to hear about any questions or opinions you have on topics in the article. Let me know in the comments section below and I’ll respond to them there.

 Interview Transcript:

Alan: Welcome back I’m visiting here today with Sramana Mitra and welcome to today's show.

 Sramana: Thank you for having Alan, it's greait to be here

 Alan: So you've done a lot of things in your life but I’d like to start with bringing the listeners up-to-date of your career path or history from school MIT graduating...

 Sramana: Well I grew up in India in pre-liberalization India and that was a long time through the 70's and 80's and then I came to America for college and the universities. I went to Smith College for undergraduate, computer science and economics I had a passion for economics as well but computer science was my main area of work and then I went to MIT for grad school. While I was at MIT this thing called the internet happened and if you remember the commercial Internet is 1994 when Netscape went public the world kind of changed and I was at MIT, I started a company in 1994 I was in the PhD program and I left MIT in '95 to do the company full-time. I took my Master's did not stay for the PhD and just went on to swim in the dot-com boom of the mid 90's. I did one company after another as founder/CEO, so three companies by the end of that decade and then the market crashed so that paused of my life and I started doing other things at that point. 

 Alan: So bringing us up to speed what are you working on now? 

 Sramana: Ten years after that- so 2000 is when the dot-com crash- I spent 10 years consulting and writing and so forth and in 2010 I started a company called 1 million by 1 million which is my fourth company and that is the first and only global virtual accelerator for startups in the world and 1 million by 1 million our mission is to help a million entrepreneurs reach a million dollars and beyond in annual revenue. That is the mission of our work and we run it from Silicon Valley with a global footprint and we cater to helping entrepreneurs get their act together and put one foot before the other. 

 Alan: So when you started this- I'll call it a project, as you're looking at putting entrepreneurs on the map and enabling them to get to the next level, did you see a gap in the market of filling that in? 

 Sramana: Yes, remember I said I consulted for 10 years before starting my fourth company 1 million by 1 million. And that was a time when I was consulting on all sides of the technology ecosystem. I was working for big companies, I was working with VCs, entrepreneurs trying to raise money, turnarounds all kinds of things and in that immersion process one of my observations was that over 99% of the companies that are looking to raise venture capital get rejected and they reject get rejected for good reason. They get rejected because they don't fit the requirement of the venture capital model which is hyper fast growth and hyper large market opportunity. Very few companies fit that model, going from 0 to hundred million dollars in revenue in five to seven years is incredibly difficult. It's an anomaly not a regularity. Hundreds of thousands of companies are not going to get there, that was the gap that I observe is that all the accelerators all the incubators accelerators and there are many of those, at that time there were you know 7,500 to 8,000 of those now there are more there probably more than 10,000 of those, they're all trying to act as feeders into the venture capital ecosystem. They all want their portfolio companies to raise money. And I thought that was arithmetically flawed. 

 Alan: There are organizations out there like Kickstarter and the crowdfunders, how does your organization compare to the to those? 

 Sramana: We're not a crowdfunding platform at all. We are primary and educational and mentoring platform so we have a full online curriculum and we do a case study based program, so we have over 800 successful case studies of entrepreneurs who have built big companies small companies various kinds of companies in various kinds of ways. We have like 50 plus unicorn entrepreneurs, 400 plus venture funded companies, 300 plus bootstrapped entrepreneurs and that's the body of work on which the whole curriculum is based it's entirely case study based. So that's how we teach and then we mentor people on their projects, so people can learn methodology through the curriculum and then mentoring is online, online round tables and then we have a tremendous rolodex. So we introduce our entrepreneurs to whether its potential customers, channel partners, investors, media analysts, other advisers, whoever can help them in their journey, that's the program. So we don't fund and we don't run a crowdfunding platform either but we do have a large community of investors who work with us whom we introduce our entrepreneurs to if they're fundable- only if they're fundable- not everybody is fundable as I said. 

 Alan: I'm visiting here today with Sramana Mitra and she is the founder 1 million by 1 million. I need to take a quick break and we'll be right back after these messages. Welcome back I'm visiting here today with Sramana Mitra and she is the founder of 1 million by 1 million and in the first segment we talked about how your company came about, which is more of a project because it's more of a mentorship or- 

 Sramana: It's a company, it's a business, it's not a non-profit, it's not a project, it's a company. 

 Alan: Okay let's talk about the revenue model okay we have a new company coming in and they say hey we need some mentorship or assistance how do how do they go about the process of sure coming part of your organization? 

 Sramana: So the first touch point is we ourselves run a media platform, so there's a tremendous amount of content that we produce that is available for free out there and you can just learn from that and we have what we call a free mentoring roundtable every week online, we run it on the WebEx platform and entrepreneurs from all over the world join into that platform and that happens every week and we have had over 60,000 people participate in those and we have like a 30 minute talk show, segment this kind of thing and then we have entrepreneur pitches which are kind of working sessions where I work with them to on their strategy so that's the online mentoring for free. Beyond that if entrepreneurs want to take the next step with us we have 1 million by 1 million basic which is a curriculum only program and for that the monthly subscription fee is $99 a month and then we have our full acceleration program which is 1 million by 1 million premium and that is $1,000 annual membership fee. So our philosophy is it's a complete democratization of entrepreneurship incubation, acceleration and education so anyone from anywhere in the world as long as you're working within the domain of technology and technology enable services you can use the 1 million by 1 million program and learn. And we've priced it so that all geographies can afford it so America still, the US, North America is still our biggest geography but we have very big adoption in India. India is an incredibly hungry entrepreneurial ecosystem at the moment and we have very big penetration into that market and we priced it so that the Indian entrepreneurs can afford it, that's the business model. We also work with corporates. We have corporate partners where we run their incubation programs and that model is called Incubator in a Box. Companies are using the 1 Million by 1 Million Incubator in a Box to run their incubation acceleration programs. 

 Alan: That's a fascinating, basically the community that you've been able to create with very cost effective yeah free in a nominal cost and then- 

 Sramana: We're touching over half a million people now, it's quite a substantial community. Just about a couple of years ago LinkedIn named me one of their top 10 influencers. Number one was Bill Gates, number two was Richard Branson and I was number ten. That really helped us with the distribution, so today I have over 350,000 followers just on the LinkedIn influencer platform. That kind of recognition acknowledgement has helped us distribute the program very broadly. 

 Alan: In addition to- you use WebEx- but in addition to that do you have conferences where people can come and attend? 

 Sramana: So we have recently started just last fall, we started this thing called rendezvous, in-person rendezvous we do those, currently we do those at Cafe Borrone in Menlo Park. So once a week we just get together and have coffee with the whoever shows up and that's been very nice. We see a lot of interesting companies through that program and gives us an opportunity to touch base in person as well.

Alan: Now I understand that at certain points you'll help entrepreneurs receive funding. 

 Sramana: Yes 

 Alan: And you have a pretty good track record of their success rate in funding. 

 Sramana: Yes, I will say this though, we do not insist that you have to raise funding and this is a big differentiator between us and any other incubator or accelerator which is the gap that I saw out there is most incubators and accelerators are working as feeders into the venture capital ecosystem, we are not. We are okay with you wanting to build your company without any external financing because we are not counting on taking equity in your company, that is not our business model as I just explained to you, our business model is not based on taking six to ten percent or 15 percent equity in your company as part of our participation in your ventures and as a result we have democratized, we are allowing everybody the opportunity to study in the program, however equal opportunity does not mean equal outcome, right, just because you're in the 1 million by 1 million program doesn't mean that you can get funded and it also doesn't mean that we are going to introduce you to investors. We will introduce you to investors if we deem your business fundable and there's a big difference between fundable businesses and businesses that need to be built organically in a self-financed manner and we believe that a company that takes 5 years to get to, 2 million dollars or 10 years to get to 5 million dollars, is still a success as long as the profitable business creates livelihood for a bunch of people, solves a good problem, has good customers, we consider that a success. Our definition of success in entrepreneurship is customers, revenues and profits. Financing is optional, exit is optional, that's the philosophy of the program. 

 Alan: Sramana I need to take a quick break and I'm visiting here today with a Sramana Mitra and we'll be right back after these messages. Welcome back I'm visiting here today with Sramana Mitra and she's the founder of 1 million by 1 million, which is in a mentoring relationship, her company helps them entrepreneurs get to the next level- 

 Sramana: First and only mobile virtual accelerator in the world, we work most almost exclusively with technology and technology enable services entrepreneurs. So that is one thing that I have to you know share with you in that we are not the place for example drug discovery companies, pharma companies trying to do drug discovery, we are not the right accelerator for you, we don't have the expertise here for that. 

 Alan: Let's jump into some of the case studies and companies here that you work with, what are some of your favorite stories? 

 Sramana: So I probably should start with the one that is the biggest in our portfolio, so I think we launched 1 million by 1 million in November of 2010 and in April 2011 a company came into the portfolio, it at the time it was called FreshDesk, today it has changed its name to FreshWorks. This company, we helped them raise their first round of funding and coach them through that early-stage process and it was in the program for three years after that. The company today has more than a hundred thousand customers, has raised $149 million dollar in funding and has done very well. It's a customer support software as a service, so cloud services customer support. So that's, you know kind of like this outlier of the charts, high level of success, very large amount of funding. Our philosophy however because we're trying to do 1 million by 1 million is to do capital efficient ventures so it's not like if you are part of one million by one million we'll constantly push you to raise money, that's not what we're going to do. So let me give you a completely different kind of example. So just this December we are right now in March of 2018, December 2017 during the holidays I had two of our entrepreneurs who have been in the 1 million by 1 million program for several years each come visit me at home in Menlo Park. One of them is based in Calcutta, the other one is based in Menlo Park. Each of these in 2007 have hit 10 million in revenue with no outside financing and that's really exciting. So the reason this is important and you know they will always tell you that these companies are constantly being steered towards financing, everybody wants them to get raise money or like they kind of dismiss these companies that, oh you haven't raised money, why should we take you seriously. The company is doing ten million dollars in profitable revenue. What is there to dismiss them about. So this kind of stuff really maddens me, absolutely maddens me. I was talking to an entrepreneur, a woman, who has built a company that does five million dollars in revenue and it has taken her a while to build this company and she was very apologetic, she was like, you know I'm just doing five million dollars in revenue and I'm like are you profitable, she said yeah I've been profitable all along because we're a bootstrap company we have to be profitable. And I said, why are you apologizing, you're running a five million dollar profitable company, you're catering to a set of customers that are happy with what you're offering them, why are you apologizing? So there's you know there's a lot of myth and a lot of garbage in the industry about that you have to raise money and financing equals success, we are completely opposed to that point of view, that worldview. We believe entrepreneurship equals customers, revenues and profits, financing is optional, exit is optional. 

 Alan: You have quite a few mentors that are stepping in and helping, I believe in their first segment you mentioned 800? 

Sramana: So the way we do the, You know bringing in the knowledge of these, you know successful people who have done it before, very long ago when I started- actually before I started 1 million by 1 million, there was a body of work that I had started doing in 2006. 1 million by 1 million was not launched until 2010. In 2006 I started writing on my blog a series called entrepreneur journeys where I would invite entrepreneurs to come and tell their stories in gory details like, how did you put one foot before the other, where were you born, where were you raised, what kind of circumstances all the ways, like how did you put one foot before the other. And these stories became very popular and soon after, I started publishing them as books. So I have now published 12 volumes of Entrepreneur Journeys books, each of them have 12 - 8 - 16 case studies and my analysis of what is interesting about these stories and each of them double-click down on a particular topic. So there's a book called Billion Dollar Unicorns, where you can read about a bunch of unicorn entrepreneurs who've built you know billion-dollar plus market cap companies and their journeys how did they put one foot before the other how did they tackle all the different strategy challenges that come up, all this is available in the 1 million by 1 million curriculum we interview them constantly in our roundtables and mentoring sessions and so forth but it's not that you are constantly sitting down with these people, you are learning from a body of work that is available through you accessible to you from anywhere in the world at anytime you want to access them. So that's the philosophy of mentoring, I do the in-person project-based mentoring, I do those myself, but they're in round table formats so every week you have round tables where you can come and share your projects and we work together is our working sessions and their case study based learning philosophy, so people who come can who are listening are also learning through that interaction. 

 Alan: Is there a common characteristic or trait with those who reach great success versus those who don't? 

 Sramana: You know of course there's a lot of X Factor in this business but in studying all these entrepreneurs that we have both as mentors, case studies etc, and also the ones that we have mentored ourselves all these years- this now our eighth year of being in business with 1 million by 1 million, the one theme the one mantra that I want to leave your audience with is bootstrap first, raise money later, because today there's a bunch of trends that are out there which you need to take into account. One of them is starting companies have become a lot cheaper so you can get much further than you could earlier 20 years ago or 15 years ago, it was much harder to get that far in a capital efficient way, today it is much easier. So you can get to a lot of validation and as a result, investors are looking for you to come to them with a very validated, deeply validated idea or business so they want to see that you have talked to customers in some cases some entrepreneurs want to see- some investors want to see already revenue paying customers etc. People have different sweet spots. So right off the bat if you are in the funding track, if you can mitigate the risk of getting to that level of funding with more validation, probability-wise you're basically increasing your probability of success. Now example, we have a company that has been in our program so they came in four years ago, learned the methodology, went out and executed for a couple of years, got customers, got revenues, came back in and right now this company is going into funding. I have introduced them into 40 investors and they have heard back from 30 of those, they've already had 20 meetings. This is a very high rate of hit right, hit rate. Why? Because they followed exactly that bootstrap first, raise money later mantra. 2017 with no external financing they did 1.2 million in revenue. In 2018 they're forecasting 3.5 million dollars in revenue, and they already have close to a million dollars in bookings and we're only in March, so this kind of a situation gives you a much higher level of probability of being able to raise money than if you came in with you know no customer, just a concept, concept financing has almost gone out of the window at this point. I was an entrepreneur in the dot-com era as well, at that time people were funding concepts- I got a concept funded. But that's not happening anymore, we're just in a very different world of entrepreneurship. At the same time, there's a lot more money in the system, there are in the last five years, there are 500 to 700 micro VCs that are operating broadly in what we call seed ecosystem. Now seed spans a lot of things, pre-seed, seed post-seed, pre-series A, small series A, all of that kind of falls in seed because the traditional VCs, the larger VC's the Kleiner Perkins, the Sequoia, the Andreessen Horowitz, there they want to do larger size series A's. They want to do 5 to 7 million even 10 million series A's to qualify for a five to ten million series A, you have to have a much more mature company with much much stronger metrics, getting there is not that easy, so you could be doing five rounds of financing before getting going to Series A. So there's a whole complex evolution that you are dealing with right now and you have to figure out what is your definition of success in that. So one way to do it is if you want to raise money and go that route is to do bootstrap first raise money later. Another way to do it is do it very capital efficient and seek early exits. That's another way that a lot of companies succeed because if you look at the vast pool of exits that happen in the industry, they are in the 50 to 60 million or lower you know the hundred million two hundred million five hundred million billion dollar exits a few are for a few and far between so again probability, if you want to if you want to build a company for a million, two million, five million and sell the company for under 50 million sometimes under 20 million that is also success. So you have to kind of- our philosophies, we're broadening the definition of success, we're looking at all these different angles in the eight hundred plus success stories. There are all flavors of success. There's a company in Indiana that's doing a virtual company, the guy bootstrap with a paycheck, he kept his day job and he built this company, now they have about 50 people, but the 50 people are not in Indiana there are like 10 people in Indiana 50 people are all over the world. He's doing a virtual company and they're already at five million in revenue and again it's a success, to me that's a success. 

 Alan: How does an individual sign up for your services? 

 Sramana: Go to the website 1Mby1M.com and then everything is there. You get the full description of the program there's lots of content, FAQ, video FAQs and you can sign up right there. 

 Alan: Sramana I really appreciate you being on today's show but we've run out of time, 

 Sramana: My pleasure, thank you for having me Alan 

 Alan: So thanks for joining us here on American Dreams and join us next week right here on this station.

 *Grammatical editing of quotes have been applied to this article.