How to create a Real-World MBA — 1
It’s fun to think about getting MBA.
MBA is interesting for many reasons:
- Developing new business skills
- Developing a better business network
- Most often, Taking a 2-year vacation(effectively) that looks good on a resume.
I also wanted to do MBA, So I research about it a bit. I attended some online lectures and googled experiences (Best Research ;) )… I realized pursuing MBA in INDIA would cost somewhere between 18 lacs to 23 lacs (Tuition Fee of IIM Bangalore ~ 23 lacs), which will result in Some of the great lectures and Real-life Examples but Many of presentations and repeating same nuisance.
“One teacher spent 45 minutes on slides after slides of equations that could be summed up with, “If you build a crappy product, people won’t buy it.” with calculus and People were amused by that.
Coming to the topic,
There are two things : Venture Capital and Angel Investing.
Compared to traditional VC, Angel Investing involves putting relatively small amounts of money (Often from 5 to 50 lac) into early-age startups. The angels usually have relevant business experience and are considered “Smart Money” (Their advice and introductions are more valuable).
In words of Mike Maple, Co-Founder of Motive Communications(IPO to $260mn Market Cap), "Early-Stage" could mean two engineers with a prototype of website, or it could be a successful serial entrepreneur with a new idea.Here is the plan :
Make a 2-Year “Self-MBA Fund”, No Formal Steps to create a Fund, Just Keep the money aside that you wanted to spend in MBA (approx 25 lacs for India). Aim to spend these 25 lacs over 2 years on Angel Investing in 2 lac to 5 lac chunks, meaning 5 to 10 companies in total.
The goal of this “Self-MBA Fund” would be to learn as much as possible about Startup Finance, Deal Structuring, Rapid Product Design, Acquisition Conversations etc. as possible.
But Curriculum is just part of Business School. The other part is getting to know people, who will be The Movers and Shakers of Startup Investing World.
Business School = Curriculum + Network
The most important characteristic of This MBA: I planned on "losing" 25 lacs, Looking as Sunk Tuition Fee, but expecting the lesson learned and people met would be worth it.
The 2-year plan is to methodically spend 25 lacs for Learning Experience, not for the ROI.Only Follow the above plan, if:
- You have clear Info advantage(insider access) that gives you a competitive edge. i.e. Already know some CEOs or Founders, so entry would be easy.
- You are 100% comfortable losing your “MBA” funds. If the prospective financial loss drives you to even mild desperation or depression, you shouldn’t do it.
- You have started or managed successful businesses in the past.
- You limit Angel Investment Fund(MBA Fund) to 20 to 30% or less of your liquid assets.
Even if the above criteria are met, People over-estimate their risk tolerance.
Even If you say, Your risk tolerance is 20%, Unless you have lost 20% in a quarter, It's practically impossible to predict your response. Also, You might be fine losing 2000Rs out of 10000Rs, but freak out when you're down 2lac out of 10lac. (Absolute number can matter as much as percentage).As Cus D’Amato, Mike Tyson’s legendary first trainer, famously said:
“Everyone has a plan until they get punched in the face.”
Suggestion would be, Go to Casino and Don’t leave until you’ve spent 20% of a typical investment and watched it disappear, Let it bleed slowly and understand your own reaction. If you can remain unaffected, then only consider making your first angel investment.
But proceed with caution, There is an expression in Startup world: “ If you want to make a small fortune, start with a large fortune and angel invest.”
PS: This is summary of Story of Tim Ferriss, interpreted in INDIAN context, In next part, We will talk about Experience of his own “Tim Ferriss Fund” and investing in startups as Angel Investor.
