Go Green - Journey towards Green IT

To get an understanding of the power saving with virtualization, one needs to start with measuring the power consumed in the current datacenter. The simplest way is to connect an energy meter to the powerline and measure the power being consumed - but that does not help much in planning for a greener data center. Isolating the power supply to data center and connecting an energy meter to the power line is a good step for measuring the power being consumed.

A typical data center

A typical non-virtualized data center usually consists several Industry Standard Servers(ISS) - x32 or x64. These individual servers are so powerful that very few applications can fully utilize the server resources. Most often, only 5-10% of the server capacity will be utilized. So when new applications are brought in, new servers were added - leading to uncontrolled server sprawl.

Measure the power consumed

The first real step is document how much power each of the devices in the datacenter is consuming. This includes servers, networking, storage, lighting, power converters, UPS, & cooling. The power consumed by these devices can be easily found in the product manuals. If you are not able to find the power information in the manuals - or if you do not have time t go through all the manuals, the faster solution will be to use HP Power Calculator or HP Power Advisor Even if you have non-HP servers, you can use HP power calculator to estimate the power consumed by choosing an equivalent HP server. Similar to HP power calculator or HP Power Advisor, other vendors - such as Dell, IBM, Cisco, EMC, Oracle also provide power calculating utilties.

Table below shows a sample of server power & cooling power requirement.

Power calculations

Power consumed by the computer equipment is computed in Watts and in British Thermal Units (BTU) equivalents.

Watt = current x voltage

BTU/hr = Watts x 3.14

Power consumed by the device is dissiapated as heat, which in turn requires cooling. One also needs to determin the cooling power needed for the data center.

Cooling power required is dependent on the total power consumed by all the devices + lighting + the data center room charateristics. As a rule of thumb, 12,000 BTU/hr requires one ton of cooling.

Providing sufficient cooling is essential for running the datacenters reliably. If the cooling systems fail, over heating of servers/devices can cause fires and complete damage to the data center equipment. Therefore early warning systems are usually installed in the data center, and the actual cooling system deployed will be greater than the theoritical requirement. In addition, the local city fire departments also have several guidelines for datacenter cooling & insulation standards.

It is therefore not possible in this article to give an exact calculation of the cooling requirements, however the calculations given below can be used as a rough guide to estimate the cooling needs. For complete accuracy you should consult qualified air conditioning equipment specialist or installer.

Calculating Heat Load

The amount of heat generated is known as the heat gain or heat load. Heat is measured in either British Thermal Units (BTU) or Kilowatts (KW). 1KW is equivalent to 3,412BTUs.

The heat load depends on a number of factors:

• The floor area of the room
• The size and position of windows, and whether they have blinds or shades
• The number of room occupants (if any)
• The heat generated by equipment
• The heat generated by lighting

Floor Area of Room

You must take into account those factors that apply in your circumstances and adding them together a reasonably accurate measure of the total heat can be calculated.

Room Area

The amount of cooling required depends on the area of the room. To calculate the area in square metres:

Room Area BTU = Length (m) x Width (m) x 337

Window Size and Position

If, as is quite common, your Server Room has no windows, you can ignore this part of the calculation. If, however there are windows you need to take the size and orientation into account.

South facing Window BTU = South Facing window Length (m) x Width (m) x 870

North facing Window BTU = North Facing windows Length (m) x Width (m) x 165

If there are no blinds on the windows multiply the result(s) by 1.5.

Reverse the constant multiplier - if you are living in the southern hemisphere.

Add together all the BTUs for the windows.

Windows BTU = South Window(s) BTU + North Window(s) BTU

Occupants

Purpose built Server Rooms don't normally have people working in them, but if people do regularly work in your Server Room you will have to take that into account. The heat output is around 400 BTU per person.

Total Occupant BTU = Number of occupants x 400

Equipment

Clearly most heat in a Server Room is generated by the equipment. This is trickier to calculate that you might think. The wattage on equipment is the maximum power consumption rating, the actual power consumed may be less. However it is probably safer to overestimate the wattage than underestimate it.

Add together all the wattages for Servers, Switches, Routers and multiply by 3.5.

Equipment BTU = Total wattage for all equipment x 3.5

In our example above - the datacenter will need ~37 tons of cooling capacity - i.e,.442,897 BTUs

Lighting

Take the total wattage of the lighting and multiply by 4.25.

Lighting BTU = Total wattage for all lighting x 4.25

Total Cooling Required = Sum of all BTUs.

Total Heat Load = Room Area BTU + Windows BTU + Total Occupant BTU + Equipment BTU + Lighting BTU

This is the amount of cooling required so you need one or more air conditioning units to handle that amount of heat.

AC capacity is marked in tons - 1 ton of cooling = 12,000 BTUs. So depending on the total BTU of your data center, you can choose the cooling systems.

Go Green - Green IT initiative with Virtualization

In the IT industry it is a common knowledge that the Data Centers are a significant consumer of power in the world today. At most of the IT offices more than half the power consumed is at the data center. The data center is critical for the business, but they also energy inefficient, using only 30% for computation, the rest 70% of the electricity lost due to inefficiencies of power and heat dissipation and associated power cooling equipment.

As a result, there is a huge opportunity to reduce power consumption in the data center, but that is not so easy. The business needs is driving up the computing demands, the power consumption by servers is increasing as manufacturers are packing more CPUs per blades, and with smaller blades - more blades into a rack. As a result the power density of a rack has increased 800% in the last decade. The individual tower servers that was popular in year 2000, has now been replaced with 1U blades which can pack 60 blades per rack.

This rapid increase in power density implies higher energy usage to power these racks and that also means more power is needed to cool these racks. In fact about 50% of the power consumed in a data center is used for cooling only, about 10% of power is used for lighting systems and power converters, so means that only about 40% of the power is actually used by the computing devices (servers, network, & storage). Even within the servers, power is consumed by the cooling fans and power supplies - thus only a small fraction of power is really used for actual computing.

In the new green era, people have started to worry about the power usage, the mounting electricity bill and the growing concern about the carbon footprint & the corporate social responsibility initiatives. As a result, companies are looking at several new initiatives to reduce power consumption - such as virtualization & cloud computing.

Virtualization & Cloud computing initiatives can save power consumption by optimizing server utilization. Virtualization allows for server optimization by eliminating old & inefficient servers, increasing the server utilization to 95% and above. This when coupled with higher energy efficiency of newer blade servers and reduced cooling requirements can result in a power saving of 70-80% - for the same workload.

At one data center, the monthly electricity power bill dropped from ~14 Lakhs to 4 Lakhs per month. This saving in power bill alone gave an ROI of 21% on the virtualization project.

VMware vSphere 4.0 has become the preferred platform for data center virtualization, and with vSphere 4.0, x86 based blade servers & Nexus switches it is possible to create a 100% virtualized data centers, where all the work loads are running on virtual machines. A single quad core blade server can support 30-40 virtual machines, thus deliver a flexible, dynamic environment with many additional operational efficiencies, including business continuity, rapid provisioning, automation, and standardized operating procedures.

With increasing oil & energy prices and shareholders demand to lower operating costs, and the public demand to lower energy consumption - Virtualization is no longer an option. It is an absolute necessary. There is a true "green" benefit in setting up a virtual data center - that goes beyond reducing power consumption & reducing the carbon footprint. The other benefits are:

• Increase application uptime
• Improve customer satisfaction
• Improve quality of service
• Faster response time to customer requirements
• Reduce infrastructure management overheads
• Better compliance standards

Closing Thoughts

Virtualization of the data center is just the first step towards a "Green" IT, this can be followed up with several other steps to reduce the carbon footprint. Desktop virtualization, Data Deduplication for Backup & disaster recovery, SQL consolidation, VoIP & integrated media gateways, TelePresence infrastructure etc., can give big dividends in both cost reduction and lowering of carbon foot prints.

Go Green - Start with yourself First

'Be the change you wish to see in the world' - Mahatma Gandhi

In the last several years I am noticing a rapid decline in flora & fauna around me. A decade ago, Bangalore had lot more trees, lot more birds, and a lot more wild animals. In the last decade the following animals have gone extinct in Bangalore city - Sparrow, Frogs, Crabs, Vultures, Robin. Several other species are on the verge of disappearing in the city: Crows, Squirrel, Parrots, Crane, Cuckoo, Fishes, Owls, Vultures, honey bees, bats, snakes, etc.

The root of this problem is over exploitation of nature. Human population has exploded in the last decade resulting in exponential increase in air pollution, water shortage, noise pollution, Electromagnetic pollution, soil pollution etc. Today if one looks at the Virshabavathi river that flows in Kengeri, the river is nothing but a toxic soup of all possible pollutants, and the stench is so strong that even stray dogs do not venture near that river. At this rate, the city will grow itself into an Armageddon - resulting in mass extinction of all other animal and plant species.

We are close to wiping out much of the planet's wild life. At the current rate, the India's national animal - Tiger will be extinct in the wild within the next decade, and along with it will go the elephants, leopards, cheetah & lions. At the same time, we are close to wiping out the entire marine life as well. Our forests are being decimated. The once fertile agricultural lands are being converted into barren land. The rivers are being killed with fertilizer & pesticide run-offs.

If we want to avoid this doomsday scenario, we can. We need to change our lifestyle to be more environment conscious ourselves first, and then expect others to do the same. It is relatively easy to green at the first level - small changes in lifestyle will lead to big gains. For example, not using air conditioning in summer, or using a scooter/bike instead of a car has a big impact on the amount of fuels consumed and the consequent drop in CO2 emissions.

To avoid this dooms day, we need to change, and we need to change fast. To begin with, we must reduce our pollution foot print. Irrespective of where you are in the economic ladder, you can reduce the pollution you are creating. A small change in your behavior will have a big impact to the world, much like the little rain drops can form an ocean.

By going green, you can force the companies to become green, force the government to enact laws to discourage pollution and finally become a role model for your children. It all has to start with you as an individual.

The first steps

As individual, you can take few simple easy to do steps to become greener and save the planet. These simple steps can have big impact.

1. Do with less:

Today's biggest environmental problems are due to excessive consumption. People in USA & Europe consume way too much, and this excessive consumption is being promoted as "developed" lifestyle - which people in developing countries are trying to imitate. This excessive consumption will destroy this planet and we need to stop this consumption first.

You can start anywhere. Take a look at your wardrobe and if you are reading this blog, I can take a wild bet that you have more than 7 sets of clothes. In my opinion having more clothes is a sheer waste. Mahatma Gandhi had two sets of clothes, he would wash every day and wear the other set. While this kind of simplicity may be too tough for us, the ordinary folks. But I am sure that we can definitely do with less. In my personal life, I have taken a route to reduce the number of clothes, over the last one year - I have donated/discarded half of my clothes, shoes, & books. The objective was to reduce my cub board/shelf space usage in the house by half.

Making all those new cars, gadgets, clothes etc., eats up raw materials & energy. Instead learn to live with less. Where ever it is possible, try to use secondhand or recycled products. There is no shame is using second hand products - instead be proud of using second hand products as you are saving the planet. For example, at Go Green Works office - All the furniture we used are second hand. The work shed was also build with second hand steel. All the computers & printers are second hand - and we are proud of it.

Remember, minimize buying. Instead try to reuse & recycle. Reducing - living with less is the best and simplest solution.

2. Opt for greener products

The next step is to change your buying habit. When ever you walk into a shop to buy something, look around for alternatives and buy the one which has the least environmental foot print. You can start with groceries.

Opt for local produce

For example, choose the locally grown fruits over the imported ones. I am sure that the apples grown in Himachal Pradesh as just tasty as imported Fuji apples. Similarly opt for vegetables/grains grown in the local area. I am sure we all can live happily with the local food. Similarly the local Nandini butter is just as good as Amul butter, but Amul butter has to be shipped all the way from Gujrat. So its greener to choose Nandini over Amul.

There is really no need for food that has to be transported hundreds of kilometers. Just think of the fuel that is wasted to just transport that food. by choosing local foods over imported or food that has to be transported hundreds of kilometers - you will save tons of pollution.

When buying food, first understand where it is produced, and then choose the one that is produced closer to your house.

Opt for products with less packaging

Industrially produced food products tend to use excessive packaging. For example cookies produced by Danisk uses a Tin box, paper to wrap individual cookies, a box is sealed in a shrinking plastic cover. Compare this with the cookies from neighborhood bakery who uses just a simple plastic cover, and he more than willing to pack the cookies in your box if can carry it to his shop. While shopping carry a reusable cloth bag & avoid plastic bags. Where ever possible take a cloth bag to avoid plastic bags.

When it comes to packaging, note that paper packaging is better than plastic, recycled paper is better than virgin paper, reusable cloth bags (made of Jute/cotton) is better than recycled paper. So at any given moment, always opt for the greener option.

For example, today I was thirsty and for a minute I thought of drinking a soft drink, but then I thought again of the choices I had: Soft drink Vs Packaged Fruit juice Vs Tender coconut Vs Fresh fruit Juice Vs Bottled water Vs Filtered water. I went through the choices - and I knew I could reach home in next 5 minutes, so I opted for filtered water at home. This was the best green solution, not only it was green, it also save money and it was also very healthy. Other choices had calories & chemicals which are harmful for my health.

Make a deliberate attempt to choose products which use less packaging, less transportation when buying.

3. Reduce energy, chemicals, water wastage

At the personal level, going green means consuming less of everything. This includes electricity, fuels, chemicals & water. Use of fuel efficient vehicles. Use a bike or a scooter whenever possible instead of a car, use public transport instead of a scooter, Walk when ever possible. At homes use the most efficient lighting - LED lights or CFL lights, use a lower wattage bulbs where ever possible.

I live in Bangalore & I do not use Air-conditioning at home. At office I don't have a choice - the central AC is always on. I have made a pledge not to use air conditioning or air coolers in my home. I use the fan instead. Even in fans, a table top fan is more energy efficient than roof fan. Back in 2000-2003 when I lived in Texas, I used a table box fan in summer and avoided using AC. It was both being eco friendly and it saved money. It was a little uncomfortable in the heat, but after a while one gets used it.

As a first step, write down the electricity used in the last month & make a pledge to reduce electricity consumption by 10% in one month - without compromising on the quality of lifestyle. Similarly reduce your gas/petrol bill by 10%.

We tend to waste quite a bit of water. Though we Indians consume just 5% of water used by an average Americans, there is still some room to save water. Just look at your life and see how you can reduce the water usage - in particular look at how you can prevent wastage of water - in terms of rain water harvesting, recycling waste water for gardens etc.

At Go Green Works, we set up a rain water harvesting tank into which all the rain water drains into & recharges the water table.

If you are reading this blog on Internet, then I would bet that you are likely to have a car - and that means you have several opportunity to reduce your water/fuel usage.

Another pollutant we use is - Chemicals. Unknowingly we use lots of chemicals in our daily lives - mostly for cleaning purpose. Floor cleaning phenyl, dirt removers, detergents, etc. It may not be easy to reduce chemical usage as it requires deliberate actions to reduce chemical usage.

Start with cleaning things with natural cleaning agents - such as lemon juice, vinegar, baking soda, etc. or other organic cleaning agents.

Natural cleaning products offer environmentally sound, cost-efficient alternatives to the toxic and potentially lethal household cleaning products used in many homes today. Use of these natural options is especially critical as most traditional cleaning products eventually contact the air, water, and/or soil, where they can cause significant and irreparable harm to animals, plants, drinking water, and food supplies.

The green mantra with chemicals goes like this: Avoid, Substitute and Minimize.

First try to avoid using chemicals. There are several chemicals we can avoid using: Room freshners, insect repellents, insecticides. If you can't avoid using a chemical - try using an organic alternative - especially for cleaning. Use of flowers or natural oils instead of room freshners, or use of incense sticks instead of mosquito repellents etc. Search on Internet & you can find lots of organic alternatives to chemical agents.

Finally if you can't avoid using a particular chemical, then minimize its use. Use such chemicals as sparingly as possible. Consuming fewer chemicals will reduce indoor air pollution and give a healthier life - with fewer problems like asthma, allergies, cancer etc.

Go Green & live better

A green lifestyle is a better & healthy lifestyle. By going green, you will notice that you have actually reduced the pollution around you - and that immediately translates to better health. Green lifestyle calls for walking - which is beneficial to your health.

It takes only three weeks to create a new habit. Start today and over the next few weeks - you may find it difficult to be green, but then once you have created this habit of being green - you will feel proud of yourself. Don't fret about things you don't control - i.e., a factory polluting a river. Such things will require a bigger action - which a single individual can feel helpless. Start with taking responsibility of your own pollution, and then you will slowly create a moment that can stop that factory.

Do what you can for the nature. Focus on what you can do, and do not lament on things that you can't. Don't blame on others for not doing your bit, do what you can do now, try and influence other to adapt a greener lifestyle. Even if you are doing it only half the time is better than doing nothing. And once you have successfully built a green habit, be proud of it and talk about it to all your friends and at every possible occasion. Soon they too will join you in the green lifestyle.

Going Green also means saving money & our planet. Most of the green choices you make today actually help you consume less and that saves lots of money. In today's world - we often confuse consumption with lifestyle, but the reality is that excessive consumption is unhealthy and thus leads to a poorer lifestyle. Once you come out of the high consumption treadmill, you will find that your life has become simpler, a lot less stressful and more enjoyable.

It is time to change and you have to change your habits/lifestyle first. There are several things you can do as an individual to help protect nature.

Learn to love nature

As one starts to adapt to a green lifestyle, one will also learn to love nature. You will soon learn how your pollution is killing nature and is also harming you. In the initial stages it may be tough for you to adapt to a greener lifestyle and in such moments - take a walk in the park or in a forest/wooded area. Think about how you can help you children live a better life, how wild animals can survive and flourish, and this simple act will give you the required strength to change for a green lifestyle.

When I look at my life and compare that with my father's life and compare with my grandfather's lifestyle, I find that in last 10-15 years I have created more pollution than what my grandfather did in his entire lifetime. My father consumes half as much as me and lives a better life than me. To me, this means only one thing. I still have a long way to go in terms of fully embracing a green lifestyle.

Be happy with less

We, as consumers have been constantly being bombarded with marketing messages to consume more and that consumption is also being seen a necessity and a symbol of wealth. But what many people do not realize is that most of this consumption is wasteful consumption which makes people poorer and leaves them worse off both economically and ecologically.

It takes a lifestyle change to get used to living with less and you can still have the same quality of life - but you are now being ecologically friendly.

Once you get off the high consumption treadmill, you will feel relived of all the stress that comes with the high consumption. This will lead to a happier and a better life.

Ecological Footprint

The ecological footprint is a measure of human demand on the Earth's ecosystems. It compares human demand with planet Earth's ecological capacity to regenerate. It represents the amount of biologically productive land and sea area needed to regenerate the resources a human population consumes and to absorb and render harmless the corresponding waste. Using this assessment, it is possible to estimate how much of the Earth (or how many planet Earths) it would take to support humanity if everybody lived a given lifestyle. For 2006, humanity's total ecological footprint was estimated at 1.4 planet Earths – in other words, humanity uses ecological services 1.4 times as fast as Earth can renew them.

India's ecological footprint is 0.91 - i.e., it takes 0.91 hectares of land per individual to sustain his lifestyle. Given India's huge population and limited land availability translates to a deficit of 0.50 hectares per person. i.e., each one of us are consuming more than what the land (available per person) can produce - this in essence we are borrowing from our future generation so that we can consume today - leaving our children with a huge ecological deficit and a depleted land. See: Ecological Footprint of countries

Closing Thoughts

Going Green is not a government initiative. The responsibility for a sustainable planet lies with every individual. If everyone starts to have a green lifestyle, it will naturally change the government and corporate companies. It is our responsibility to save and protect this planet for our children and for generations to come. So you too can start now and change your life for the better by embracing a green lifestyle.

Entrepreneurship - Avoid the following hiring mistakes

In last 3 years I have seen several startups set up shop in Bangalore. Over this period of time, I have seen several hiring disasters. These hiring mistakes are specific to Indian culture and are common in many startups. But these disasters could have been avoided. I am therefore documenting them here.

1. Hiring from big name organizations for experience

Business was expanding rapidly, the company had lots of orders and to deliver them, there was great need for experienced project managers. The company hired three experienced project managers. These new employees had the right credentials and experience on working on complex projects at IBM, Accenture & Philips. The new employees had no experience working in a start up, the start up lacked systems to support its new employees - as a result the new project managers quit within few weeks putting the project in jeopardy. The founder had to scramble in the end to get the projects completed.
Experienced project managers were used to working in large well established organizations and could not adjust to the new working environment. As a result new project managers and the start up never got along. Project managers wanted a lot in terms of systems and reports to monitor the project which the company could not provide. There was absolute mismatch between the new project managers style of functioning and the company.
Hiring people based only on their past experience will not work for startups. It is essential to hire people who have experience working in startups or in a startup like environments, and there should be a cultural fit between the founders and experienced employees.

2. Hiring friends and family members

Founder of one company had hired his friend after two years of operations. By then the company was doing quite well, and was cash flow positive. He was hired on social pressure - to help his friend. The new employee often flaunted his friendship with the founder, would often bypass the organization hierarchy, and soon began to boss over other employees. This led to fall in morale and productivity in the organization. Over a period of time, the company started loosing its existing customers and only then the founder woke up to the reality. He now had to make a difficult decision of firing his friend to save the company.
Hiring friends or relatives is acceptable only if they can perform. In a startup, the hiring costs have to be minimized and founders like to hire people whom they know. But when these friends/relatives do not perform, then the founder must take swift action - either to correct the errant employee or by firing.

3. Hiring some one to please others

In India, there can be lot of undesired political advances on any organizations. One of the common tactics is to request a startup to hire persons recommended by the local politician. This leads to an uncomfortable situation for the entrepreneur. He cannot afford to antagonize the politician & often succumbs to hiring the "recommended" candidate. This new hire soon becomes a liability to the organization - thus bleeding the company of its valuable resources. Startups which have faced this problem eventually will end up firing the errant employee and thereby facing the wrath of the local politician or end up creating a constant drain on their resources.

Founders must make a clear decision on the terms of hiring such "recommended" employees - and workout an agreement with various stake holders - including the "recommended" employee & his sponsor on the terms of employment and termination criteria. Smart entrepreneurs turn this bad situation into an advantage - by seeking out favors from the politician/sponsor to grow their business.

4. Hiring house wives or students to cut costs

Many people are willing to take a lower salary in return for having the flexibility or opportunity to work from home. For a startup, this represents a significant cost savings - but such savings typically come with several hidden costs.

In India, housewives & students seek part time or full time employment - for tasks that they can do from their homes. Hiring such employees creates lots of management overheads and introduces risks to projects - in terms of delivery timelines and quality. Often times house wives and students are driven by different priorities and may not be in a position to complete their tasks in a timely manner. This could potentially upset the delivery timelines and project schedules. So for critical projects, such part time or work-from-home employees are best avoided.

Hiring house wives or students is not necessarily a bad thing. But for a startup, it can create several overheads in terms of management - that the cost savings are often washed out by management overheads. Once the company has established a process to manage house wives or students, then only it makes sense to use such resources. But this takes both time and management expertise - which many startups do not possess.

5. Hiring rapidly to scale up operations

A startup got an order to setup a media BPO operations. This project required getting 20 people hired and trained in screening cable TV channels for particular advertisements and creating reports in a predefined format. The task was simple enough for high school graduates. So the company put out advertisements in local paper and hired the first 20 people who accepted the offer. Many of the new hires had no experience working in a regular 9AM-5PM job. As a result many of the new employees quit within few weeks. Company was now desperate to staff up the operations to avoid slippage on delivery. Again the company hired few others - who too were fresh out of school, and they too quit. After a few cycles of hiring, company learnt its lesson and in next hiring cycle, the company hired the right set of employees. In the process, company wasted money, and time - but could prevent loss of customer.
Hiring rapidly for a project is mandatory, but do not cut short on the required due diligence - do not trade quality of hires for lack of time.

Closing thoughts

Hiring is a critical activity in a startup - which can make or break the company. Startups should be very careful in hiring. Getting a wrong hire can cost a lot for the startup and if the mistakes are not corrected quickly, the business can be severely damaged.

Entrepreneurship & Size of the Business - Story of Reva

Over the weekend I was reading the book "Connecting the Dots" by Rashmi Bansal. In that book, there was the story of Chetan Maini & his "Reva Electric Car" . My wife owns a Reva car, and I am an adherent fan of Reva car. The story of Chetan Maini as mentioned in the book had to be read with the fact that Chetan Maini sold the controlling share of the company to Mahindra & Mahindra.

For many Reva fans, this was a good news. For Reva Electric Car Company, this was a major step towards becoming a success in the global stage. From a business & leadership point of view, Chetan Maini did the right thing by getting Mahindra & Mahindra Ltd as an investor in his nascent electric car company. Reva is the largest selling electric car in the world in terms of volume - but when compared to the scale of automobile industry, Reva cars account of less than 0.01% of the market.

As a business, Reva electric cars was operating at a sub-optimal scale and to be successful commercially, they needed to expand on production capacity and on dealership networks - but all this needs huge investments which Chetan Maini could not raise internally. This implied that he had to get an investment partner with automobile background and that partner happened to be Mahindra & Mahindra Ltd. With this move, Reva electric car company (now renamed as Mahindra-Reva Electric Car company) is on the move to become a large company.

Lessons for Entrepreneurs

In the world of business, it is common to see large companies buying out smaller ones. Here in this blog, I want to talk about the fundamentals of entrepreneurship & leadership needed to take a small startup on the path of becoming a big company.

Startups are of two types:

1) Lifestyle Startups: which cannot grow big - typically ends up as a Small or medium scale enterprise.

2) Enterprise Startups: Ones that can grow into a big business (say revenues of more than $100Million/year)

Small/medium business are typically run by individuals and the business is their sole source of income. These businesses are called as "lifestyle" business - as the venture is designed/built to support the lifestyle of the promoters/owners. These lifestyle startups typically start by serving a known set of customers and offer a known set of products/services. Once the business model is worked out, the business becomes profitable and the profits are used to maintain the lifestyle of the promoters. About 80% of all business fall in this category.

In case of Reva, it was not designed to be a small scale business. Reva is an enterprise startup - the one with a potential to grow into a Multi-Billion Dollar Business!

All startups have the potential to grow into a big business. Even simple sandwich shop can grow into multi-billion dollar venture - provided the leaders have the right vision and management skills.

In case of Reva, the founders had done all the right things to position the company on the path of becoming a big business. Let me explain little more about this.

Reva was started when the concept of commercially viable - street worthy electric cars was not viable. Reva was started at a stage when there were two major unknowns: unknown customer base, unknown features/functionality. Over a period of time, Reva worked on these two unknowns over 12 years to produce a car that would appeal to certain market segment. In order to do that, Reva had to:

1. Invent a business model - i.e. get vendors, channel partners etc.

2. Develop the product that meets the market requirement.

3. Develop a repeatable sales model

4. Build a team of capable managers.

It takes a high risk appetite to invest in a company that is yet to develop a business model. In other words - the startup at this stage needs a significant amount of risk capital. Reva managed to raise this "risk-capital" by raising debt financing of ~$3million in year 2000. With this funds and vision, Reva started off as a "startup".

Over the period of next six years, Reva managed to identify a small segment of customers - mainly in UK & Bangalore. Reva managed to sell ~1000 cars in Europe. By this time, Reva had to build the infrastructure that set Reva on path of becoming a large company. This involved setting up marketing systems, accounting systems, IT systems, and business measurement systems to manage the business. In the process Reva achieved a major milestone - Reva managed to validate market for electric cars through customer discovery, customer validation, get features/price trade-off worked out.

At this point, Reva was ready for its first major infliction point to start its journey to become a large company. This transition needed more capital, and Reva managed to raise a venture capital of $20 million in December 2006 from VCs.

Reva now had to build a scalable business - which implied setting up a new factory, identifying distribution & supply partners, implemented enterprise class ERP/IT, develop next generation technologies that were needed to address the needs of a much larger customer base. Reva invested in a new factory with a planned capacity of 30,000 cars per year (up from 3000 cars/year), developed a new model "Reva i" which was a major enhancement over its predecessor.

By 2009, Reva had set up a professional management in place, sales was taking off, and was ready for the big step. That big moment happened in September 2009 when General Motors licensed its technology for developing Chevy Spark.

At this stage, Reva was ready to transition from a "startup" to becoming a "large company". This transition needed a major change - the company had to join hands with a big player who could invest $200 million or more into the venture to make Reva Electric car company into a global player.

Mahindra & Mahindra was that partner who could invest big money needed to take Reva cars on the big stage & launch Reva cars all over the world. Typically during the transition, it is time for the founders to move out of management and let the company be managed by professionals. Here again, Reva founder - Chetan Maini did the right thing by handing over leadership to G.P. Goenka, who is the new Chairman of the board, and making Chandramouli as COO.

Now Reva Electric Car Company is ready for big time & is on firm path to become a large successful enterprise.

The new leadership has its job cutout: Make the company profitable, launch new products to widen the customer base, achieve rapid scale, hire more people and expand the business.

Closing Thoughts

Entrepreneurs typically start a company and set the company on the path of becoming a large business. Becoming a large company is a long arduous journey which many startups fail to complete. It takes capable leadership, excellent execution and above all sheer guts to go through the journey. And at the end, the founders must have the confidence to pass on the leadership to professional team and step aside for the new team to make their startup a truly large company. The story of Reva Electric Car is a text book case of entrepreneurship and management.

Note: I got the details of investments numbers from the book "Connecting the Dots" by Rashmi Bansal.