CASE: Ajay Bam

With the quiet click of the meeting room door, Ajay Bam was left with one fewer person on his team. It was the spring of 2002, and Walter Stock—Ajay’s friend and partner—had finally succumbed to the pressures of time and money. Troy Chen, the other founding partner, had exited two months earlier.

Ajay dialed new-venture attorney John Hession to vent his frustrations. Maybe at 27 he was just too young and inexperienced, right? Of course, he had understood that it was not going to be easy to start up a wireless payment and loyalty solution in the United States, but did it have to be this draining, this fraught with rejection and naysayers? Sure, he had assembled a top-flight board of seasoned advisors, but what good was that if he was unable to keep his team together or get any traction with investors? Broke and exhausted, Ajay confessed that, even though he had worked for two years to earn an MBA degree in Entrepreneurship, he was giving a lot of thought to a six-figure job that was still waiting for him with Lehman Brothers in New York.

As Ajay clicked off his cell phone, he was suddenly struck by the fact that the attorney had said almost nothing. He swallowed hard as he realized why; he had been talking like a quitter—maybe not worth the free advice and networking support that the skilled lawyer had been providing for months. And what about all the other professionals who had given Ajay so much of their time and encouragement over the past two years—including a major venture-capital investor that he now considered his mentor? Was he willing to make a similar call to them as well? This is just too hard, too lean.

Ajay rubbed his tired eyes and looked out at the cold April rain. What had he missed? What else could he try? Should he keep at it, or cut his losses now and attempt something else at a later time after he had rebuilt his personal savings a bit?

In addition to his precarious financial situation and his state of exhaustion, Ajay was certain of at least one other thing: if he didn’t start up a mobile payments and loyalty enterprise soon, someone else would.

Ajay Bam

Ajay Bam grew up in Pune, India, just north of Bombay. His father, a textile manufacturer, and his mother, a greenhouse business proprietor, had raised their children to be independent, critical thinkers. Looking back, Ajay said that, although he wasn’t always in agreement with their choices, he could see they had been pushing him in the right direction:

I am so grateful to my parents. I remember when I went to prep school, I hated it… I didn’t realize at the time what my parents were doing, but they did the best thing. I have seen a lot of amazing things, and I am cosmopolitan because I am very world traveled. It puts a lot of things in perspective…. You know who you are, where you have come from, and what you have.

By his early twenties, Ajay had earned an undergraduate degree in computer engineering and a master’s degree in software engineering. He then landed a job as a technology analyst for Lehman Brothers in the World Trade Center complex in New York City. He was young, single, successful, and growing restless:

This case was prepared by Carl Hedberg under the direction of Professor William Bygrave. © Copyright Babson College, 2002. Funding provided by the Ewing Marion Kauffman Foundation. All rights reserved.

The pay was great. Everything was fantastic, but it gets to a point where the money doesn’t matter anymore. You know you are good and you know you are going to make a good living…. In the back of my mind I always knew I wanted to go for my MBA… so after getting two years of full-time experience I decided to apply to a number of schools…. Babson, being number one in Entrepreneurship, was my first choice.

Babson College

Ajay left Wall Street and in the fall of 1999 began a two-year program at Babson College. He immediately applied for and was accepted into a new offering at the school: the Entrepreneurship Intensity Track (EIT) program. EIT was “a compressed and highly focused entrepreneurial curriculum designed to provide students with the necessary skills to take a business idea through the critical stages of exploration, investigation, and refinement.” Ajay was thrilled with the opportunity to meet the many successful entrepreneurs who were participating in the program as well as to work with a diverse, talented group of instructors and students. He recalled that the learning experience was quite different from his more bookish engineering studies:

To me getting an MBA was 50% networking, 20% classes, and 30% doing what I wanted to do. It was not about what your professors did for you; it was about your level of participation.

Following his second semester, Ajay signed up for a four-month international management internship. Eager to travel again and test his proficiency with at least one of several languages he had learned academically, Ajay chose a startup in Munich, Germany. Ajay enjoyed working for the COO, who agreed to let him sit in on board meetings:

The great challenge for me was that the meetings were in technical German. It was hard to understand every word. So I would come out of these meetings and ask, “What just happened? I got bits and pieces but could you put the story together for me?” I think they liked it because they thought it was very challenging of me to be sitting in and trying to understand what was going on.

The COO encouraged his soft-spoken, hard-working intern to take three-day travel weekends. Ajay grew particularly fond of Western Europe, and it was there that he began to see cell phones in a new light:

As I traveled around, I noticed that people had very fancy phones—sometimes several; like one for a party, one for the office, one for home… I still had my phone from the States and it was just a clunky old black box… I just hated it… I decided that mobile applications were going to be the next big thing in the United States. When I came back from Germany, I decided that this was the space I wanted to work in.


In the fall of 2000, Ajay and fellow MBA Walter Stock were meeting at Starbucks to brainstorm consumer applications for mobile technology. When the discussion gravitated toward the hassle of coffee cards, the pair spied their opportunity. Ajay explained:

I carry a lot of loyalty cards. I have four coffee cards in my wallet. To be honest, it is a pain carrying all these cards; I don’t have them when I need them, I lose my rewards, it’s a pain to sign up, and it’s a pain if you lose them. And for merchants, the struggle is getting their card into your wallet.
Walter and I started thinking about building a mobile coffee card that would allow you to track your coffees on your cell phone and let you know that you have, say, 11 coffees on your card. Then you wouldn’t need to carry all these loyalty cards.

Over the next few weeks, Ajay’s EIT sessions helped to shape the business model, and they began to gain an understanding of the challenges that merchants were facing. The new venture would develop a technology platform that would enable customers to carry out payments and participate in loyalty programs using any type of cell phone. The partners viewed the loyalty component as key, since vendors large and small were discovering that loyalty-marketing programs developed from actual customer behavior—a discipline known as customer relationship management, or CRM—could produce stunning returns on investment. Ajay explained how the transaction would work:

As a first-time [user] you have to sign up your mobile phone and credit card into the Vayusa portal. Once you do the sign-up process, you walk into a participating store—say, Blockbuster—and they ask you how you would like to pay: Visa card, Visa phone, or cash. Our vision is to be the Visa phone.
There is a pre-programmed [toll free] number on your phone that will ask you for the… unique tonal [point of sale ID displayed by that merchant]. Say it’s 100. Press 100. Simultaneously, the Blockbuster guy enters $4.99, and on his tonal he says, “Visa mobile.”

When you authorize the payment, [the system] automatically reads your [online] coupons and lets you know whatever the best one is. Then you enter your pin number to complete the transaction.
Afterward you get a text receipt on your cell phone and an e-mail receipt sent to your e-mail address. Then we automatically update your loyalty rewards with Blockbuster. Again, you don’t need to carry [a vendor] card in your wallet. You don’t even need to carry credit cards.

The company name, Vayusa—Sanskrit for “rhythm in the air”—was chosen to evoke the effortless mobile transactions they were hoping to foster (see Exhibit 6.1).

Ajay and Walter had no illusions about the odds against two young MBAs (with no industry experience) developing a complex technology enterprise that would likely require a significant infusion of venture capital, in addition to corporate alliances and partnerships. Ajay set out immediately to understand the payments industry and, at the same time, build a top-tier board of advisors.

EXHIBIT 6.1: Point-of-Sale System

A Legal Education

Although he had no money to pay for such services, Ajay was determined to secure the best new-venture legal advice in the Boston area. After hearing attorney John Hession, an attorney with Testa Hurwitz, one of leading U.S. law firms specializing in technology new ventures and venture capital, speak at an MIT venture forum, Ajay decided that he fit the bill. Ajay recalled that, predictably, the busy attorney was not an easy sell:

I pursued him. I sent him e-mails, I called him up. I told him that I have to work with you; you have to hear my story. So John and I met one day for breakfast and we just clicked. He said okay; let’s see where we can go. One reason why John and I clicked was that he wasn’t about making money with startups. He knew that startups don’t have money.

He said, this is how I work: You educate yourself on a lot of legal stuff so I don’t have to spend a lot of time telling you what it means, and you will save some money there. You [Ajay] will prepare all the drafts. He sent me stock agreements, things like that. He said you are going to cut and paste to put documents together and then you are going to come back to me for a final review. He said that he would rather spend his time on people who are paying him, and it made sense. It is a great philosophy. So I saved myself thousands of dollars, and I got an education.

When John saw that the young man had an insatiable thirst for learning and for meeting people who might be of assistance, he opened his Rolodex. In addition to referring Ajay to a number of business leaders, John provided him with free passes to the many entrepreneurship and technology events that were being sponsored by his firm. Ajay attended every one of them.

SeaPoint Ventures

Babson Professor Jeffry Timmons put Ajay in touch with his close friend Tom Huseby, the managing partner at SeaPoint Ventures—a Seattle-based venture capital firm specializing in telecommunications. Ajay said that after a couple of phone conversations, the venture capitalist invited him over for dinner and a sail:

I spent my Thanksgiving with Tom’s family in Seattle. I flew to Seattle and had one of the most wonderful times with Tom. He was a great guy. He’s a Stanford MBA. He has started four different telecom companies, was very successful, made money, and decided to start a venture fund. It was my first visit to a VC office and it kind of blew me away. It was grand, something totally unexpected.
Tom took me out for four hours on his million-dollar sailboat, and in that four hours he explained to me the entire process of how a startup works, how to reduce risk, and what it was going to take for him to invest in my company. So that was fascinating, and it motivated me. Wow, this is how I want to be. I want to have money, I want to do a lot of philanthropy, and I want to be in a position where I can control and do more. I came back and decided that Tom was going to be my mentor for life.

Cracking the Chicken and Egg Cycle

By late 2000, Ajay and Walter found themselves running in circles. Potential merchant-clients were interested in their idea but would not commit to anything until Vayusa could demonstrate the application. Developing a prototype would require funds they didn’t have, and funding sources explained that, before they would be willing to invest, Vayusa would have to sign up some merchants.

The pair decided to concentrate on the technology piece of the puzzle, since that was the element over which they had the most control. In January, Ajay began looking into product development grant programs and came across the National Collegiate Inventors and Innovators Alliance (NCIIA) at Hampshire College in western Massachusetts. Launched in 1995, the NCIIA was created “to support educational initiatives in creativity, technological innovation, and entrepreneurship.” Ajay sensed a fit, but he immediately encountered his first obstacle in the grant process:

When I started looking at NCIIA I found out Babson needed to be a member of NCIIA. That would cost $500…. While I was at Babson, I was significantly involved in a lot of different activities on campus, and that helped my credibility with my professors. Everyone knew me, and I was talking to the Associate Dean, Wendy Baker, every day. I told Wendy that Babson needed to be a member in order for me to apply for this grant. Nobody had done this before, so I said that it is likely that, if we do this now, more Babson students will end up getting grant money in the future.

In February, Ajay and Walter had brought in a third partner: Babson MBA student Troy Chen. In March, after Ajay had successfully enrolled the college as an NCIIA member, he was faced with new hurdles:

My partners refused to apply for the [NCIIA] grant. They said this is all crap—just a lot of paper work. I just said that I was going to work at it and get the grant. I remember that I applied for a [$20,000] grant a day after the deadline and I called them and I said my partners are not listening to me, I want to do this, will you still accept my app? They said we’ll do it as long as you FedEx it within a day…. They got it the next evening and they agreed to take it.

While Ajay was busy investigating grant opportunities, he was also helping his partners search for an engineer who might be willing to develop their prototype software for an equity stake in Vayusa. In March, they signed up Tim Patel, a recent computer engineering graduate from Tufts University.

It was early spring of 2001 when Ajay started to run short on cash. To cover his rent, he began to cast around for some sort of employment that would not seriously undermine his final semester of MBA studies or his work with Vayusa. He discovered the answer in his own academic backyard:

The Olin Engineering School had opened, and they were looking for a student housing director. So I applied, and guess what? I was accepted because [at the time] I was a student housing director with Babson. With Olin, it was exciting to be part of something new, exciting, and something very entrepreneurial. I just moved from one side of the campus to the other.

With all his commitments, Ajay found himself screaming along at a breakneck pace of 18-hour days. One of his favorite posts was serving as the director of the Babson Technology Venture Group. In that capacity, he traveled to technology conferences around the country, led Babson College to the Harvard Cyberposium—the largest gathering of MBAs in the high-tech industry—and spoke with a wide range of entrepreneurial and technology experts about the mobile payment and loyalty space.

Even with solid work experience, two engineering degrees, an interesting business model, and boundless energy to promote and network, Ajay was still hard-pressed to gain any traction for Vayusa. As they neared graduation, his partners appeared to be losing interest. Just then, they received word that the NCIIA would be awarding Vayusa a grant of $12,500, and that Babson College would kick in an additional $8,500 from its seed fund.

The VeriFone contact took a liking to the enthusiastic MBA and ultimately provided Ajay with a list of VeriFone vendors and contacts. He suggested that Ajay work through the list. Ajay did. One of the people he met over the phone was Nick Epperson, a former chief marketing officer at VeriFone and the chief technical architect who had designed the VeriFone box.

As the summer of 2001 drew to a close, Ajay felt that he was beginning to build a good relationship with Mr. Epperson and a number of other potential investors and advisors. Although the prototype was still in the design stage and investors appeared to be waiting for merchants to sign on, the overall momentum seemed to be in their favor.

Then came 9–11.

The Aftermath

The terrorist attacks in September exacerbated a downturn in the capital markets that had been showing signs of weakness for some time. The drying up of the investor pool was a tough reality, but for Ajay, the horror of 9–11 had hit far closer to home:

I lost six of my friends in the September eleventh tragedy…. The next three months after that were very depressing…. Troy was supposed to have gotten married on September fifteenth in New York…. His grandmother was now stuck on a flight from Japan in Seattle for three days…. Everyone was depressed…. The wedding was postponed…. October was Walter’s wedding, and that wedding happened. With the weddings we had a precondition that you could not take a long vacation, so they came back after two weeks. So he was married now, and it just was worse. He had more responsibilities…. For me, I am still single so it makes it easier to do things, to make decisions… It was a terribly emotional ride.

In early November, despite clear indications that the gathering would be dismal at best, Ajay decided to attend the West Wireless Conference in California. He explained that, even though he had been correct about the conference, his decision to attend yielded a golden connection:

My timing was so lucky. It turns out Nick Epperson had just left VeriFone and was looking for his next gig. VeriFone had kept him as a consultant…. The conference was so bad. There was no one there. I don’t even know why I showed up. But I met Nick in person. He and I clicked and he said, “I’m on board; let’s do this.”
I went back to VeriFone, and I said, “Guess what? I just got Nick as my advisor. Do you want to work with us?” VeriFone replied, “Absolutely”—because now we had credibility. It is all about having the right people.
After the conference, Ajay flew north to spend his second Thanksgiving with the Huseby family in Seattle. Ajay presented his Vayusa plan to Tom’s three general partners at SeaPoint Ventures. In summary, Ajay explained that Vayusa needed to raise $2 million in the first year to support the beta development and implementation, and to hire senior management. Vayusa would then need another $5 million in funding to reach a positive cash-flow position in year three (see Exhibit 6.3). The presentation went well, and all but one of the partners seemed to be on board. Unfortunately, that was one fewer than Vayusa needed to garner a SeaPoint term sheet.

Spring Exodus

By January of 2002, Vayusa had a working prototype to support a detailed business plan, and a board of advisors that included—in addition to Tom from SeaPoint Ventures and Nick from VeriFone—a former CEO of NYNEX, a former CEO of Citibank, and Bob Anderson, director of the MIT Enterprise Forum and former CEO of GenRad. Nevertheless, the founding team had been unable to make much progress with the Boston merchants or secure commitments for a first round of venture funding.

Each month Ajay was painfully reminded of their need for a capital infusion by a persistent Indian national whom he had met through an organization of Southeast Asian entrepreneurs:

Rahul used to call me every month to see if I was interested in working with him. He was based in Boston and had an outsourcing company in India to write software code. Every month he used to call me and say like, “Hey I like your idea, would you be interested in working with me? I want to work with you.”

Due diligence by contacts Ajay had back in India verified that Rahul would be an excellent choice to build the software platform, so Ajay continued to string him along until he could raise enough capital to take that next step. Ajay had applied for a follow-on NCIIA grant, but that money would likely be less than the first award—and far less than they would need to move ahead in a substantial way.

Troy, whose wedding had been rescheduled for April, announced in late January that he was leaving the team and moving back to New Jersey. The following month Ajay kept a meeting that Troy had scheduled long before with a gentleman recommended by a venture firm that had liked their concept but did not participate in early-stage funding. Ajay described the meeting with Jack Weston, a 20-year credit card industry veteran who had recently joined a startup that was building applications to store coupons on charge cards:

When I showed Jack what we were doing, it struck him that we were one step ahead [of his company] because we had the chip and our solution was with every cell phone…. He loved the demo, and we ended up having a two-hour conversation. When he started asking me about the team, I realized that he might be looking for his next gig. I hinted to him in the meeting that we were looking for senior people or someone from the industry who knows the space. I asked if he would be interested. He said, “Let me think about it.” We started meeting once a week after that.

Two months later Mr. Weston joined Vayusa as an advisor, but at the same time, their software designer Tim Patel decided to leave the team. Soon after, Walter brought in Phuc Truong, a Babson MBA with whom Ajay had never worked. Ajay commented that his initial skepticism was soon allayed:

Phuc was running Club Nicole in Boston. Phuc and Walter had worked together in some of their classes. I didn’t know Phuc at all then. Walter said that Phuc wants to join the team and that he had a lot of merchant contacts… he knew a lot of wealthy people in town as well… I’m like, I don’t know Phuc, and he runs a club; what is he going to bring to the table?

It turns out that all the merchants in Boston knew Phuc because he had worked before for a startup that was a retail business and he knew every damn merchant in the city… It made a lot of sense because I didn’t have time to go out and talk to a lot of merchants. I needed someone who knew the merchants on a very personal level [because] with a lot of shops—like small mom-and-pop shops—it is very much about personal relationships.
While it had seemed that Walter had suggested Phuc as a substitute for Troy, when Walter called it quits less than a month later, it was clear that he had not wanted to leave his good friend Ajay standing alone at the helm.

Go or No Go?

With all of his original partners gone and Phuc barely up to speed, Ajay was once again standing on the edge of a decision to try to keep moving forward or cut his losses and head back to Wall Street. It was maddening. Without a substantial startup investment soon, Vayusa would most certainly fail. Ajay leaned back, glanced at his cell phone for the time, and considered his next move.

Midterm Paper Instructions?Due in Oct 3,2014
For your Midterm paper, you will review the case of Ajay Bam. This case contains a manageable amount of material but presents the opportunity to consolidate the material covered to date in the course.

•	Entrepreneurial Attributes: Consider Ajay’s background and experience. Create a comprehensive list of attributes that you think Ajay possesses. Which three are the most important; why do you think so? How did these attributes help him succeed?

•	Business Plan Outline: The case includes an executive summary; using the model on page 258, create a brief 10-slide PowerPoint presentation about his new venture.

•	Bootstrapping: Why did Ajay pursue the bootstrapping method of getting his company off the ground; please describe at least six examples of his efforts in terms of financing, services, and people.

•	Opportunity and Market Assessment: How did Ajay and Walter find this opportunity? How big is the market, do consumers and merchants have a need for the product, what does Ajay have to do to answer these questions? (Instructor Note: Ajay needs to gather initial sector market data and customer feedback to gauge attractiveness.

•	Funding and Team: Would you invest? What does Ajay have to do to get funding sources interested?

Paper Length: Four to five pages
PowerPoint—Max 10 slides including cover.