Xconomist of the Week: Sramana Mitra Combats Infant Entrepreneur Mortality

3/8/12Follow @wroush

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doing the public roundtables. Using the more than 100 hours of lectures and case studies, startups can come to me at the private roundtables with a much more sophisticated understanding of the issues, and the conversations are much more specific. Although at the private roundtables we will see a tremendous amount of naivete on basic stuff, on things like the difference between an exit strategy and a business model. We have produced a series of cartoons on that, that are totally rooted in our experiences at the roundtables. [We've embedded one of these cartoons at the end of this interview.--Ed.]

X: Okay, back to the One Million by One Million initiative, then. What’s the core idea, how does the business model work, and what kinds of things are being achieved through the initiative so far?

SM: The idea is to help a million entrepreneurs reach a million dollars in revenue by the year 2020. That addresses the most vulnerable period of an entrepreneurs’ journey. Once you reach $1 million, you have many options for bank or venture financing. The world becomes a much more accessible place, because you are more robust and you have validated your business. As I have said in my writing, the entire startup funding ecosystem is focused on just one percent of the players, the cream of the crop, while the other 99 percent gets basically ignored. I wanted to create something more comprehensive.

I went to MIT, and the “MIT mafia” in Silicon Valley is very strong, so when I came here in 1996 I was able to navigate my way into the inner circles of the valley, and I am very connected. But I fully appreciate how difficult it is for people just coming to Silicon Valley or trying to connect to Silicon Valley from other parts of the world. It is very much a tribal, knowledge-based environment where nothing has been institutionalized and everything is inside people’s heads. The network is a very elitist, closed network. My thought was to try to democratize and institutionalize the tribal knowledge and make it portable and accessible to anyone anywhere in the world.

The business model is very simple. We charge a $1,000 annual membership fee for unlimited access to the resources of the program. Those resources include the curriculum, the private roundtables, and network access, whether that means introductions to channel partners or introductions to investors. All of that is included. We are effectively a virtual incubator. But we make a very specific distinction from the equity-based incubators like Y Combinator. For their model to succeed, they have to pick only the cream of the crop. Our philosophy is that we want to help anybody who wants to learn. As long as you are willing to pay your $1,000 annual membership, you can access as much of the program as you want. You can even think of us as “pre-incubation.” Some of members are going on to other incubators where there is investment involved.

We are very excited about the number of companies and the kinds of businesses we are seeing [in the One Million by One Million program]. One of our entrepreneurs was at stage zero when he started, and now he’s doing $30,000 a month in revenues, so he’s a third of the way to $1 million a year. The most exciting part of it is that we have been able to contribute to the growth of multiple enterprises, and that has allowed us to fine-tune the program, improve our curriculum, and get a rich network effect going on. This morning one of our entrepreneurs came to me in a private roundtable and said she needed $40,000 for inventory financing to deliver on her sales business. Another member was in the room, and right after we finished he reached out to her and offered to finance her. So it’s very exciting.

X: You’ve argued that there’s too much emphasis in Silicon Valley on fundraising. But aren’t there limits to how far as startup can go without raising outside capital? When is raising outside capital a good idea?

SM: I am not against equity-based financing. One of our very successful companies, Freshdesk, was funded last year by Accel Partners. They compete with Zendesk in SaaS-based customer service for small businesses. What I am saying is that the bar for getting financed is getting raised higher and higher. In 1999 you could get financing with just a PowerPoint presentation. Today, the only businesses that get financing are … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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