Wednesday, 29 May 2013

At the May Startup Saturday Event

It’s always intellectually stimulating and energy boosting to attend startup conferences. The May edition, on the 11th at LaMakaan, was no different and it was about startup war stories - mistakes people had done and the lessons they learnt.

The main speakers of the day and who made attending the session really worthwhile were Rahul Chowdhury and Ram Chaitanya Reddy. But first, notes about the featured startup founders and their messages.

Abhimanyu of 10,000 startups had come from Delhi and talked about the Nasscom initiative of funding 10 thousand startups by the year 2020. They would make the startup journey very convenient for the entrepreneurs by partnering with incubators, accelerators and will bring angel investors for your funding. He mentioned about a learning center that has a lot of videos. They had one session in New Delhi and the second is being planned at Mumbai. They would come soon to Hyderabad too. He briefed the audience about startup warehouse, which was essentially a startup coworking space at very subsidized cost.

Next to speak was Sai Krishna of Window Square. He had his message printed on a pamphlet titled “Mistakes and Learnings of Window Square” and handed copies over to the members. It was a good move. Here’s what they wrote on the handout and Sai talked about:

a) Give equal importance to sales: Like many other startups, we were initially driven by passion and never gave a thought on sales till we confronted empty days. Sales is like quarterfinals and our core product or service is like finals, many people tend to say finals is more important. Give a thought, if you don’t get through quarterfinals how come you get a chance to prove the essence of your product or service?

b) Failure or Success, do it fast: Since success is a function of time, delaying is by default resulting you failure. Embrace your failures, they do teach us a lot more than success stories. Start-ups are best for their intensified learning in shortest time through their successes and failures.

c) Listen to your data: While performing any marketing activities, make sure that you are listening to the data (input/responses). Decoding the collected data is another complicated and most important phase of any marketing activity. This helps you better in making your next step foolproof.

d) Speed is better than beauty: In this competitive market every competitor claims their own USP. Of all, the most commonly liked factor by clients or consumer is speed. Shortest turnaround times clearly depicts one’s commitment on their service.

e) Collaborations: Since startups are the one with lot of budget constraints for marketing and advertising, collaborating is one good way to pick up the pace and enhance your visibility in multiple folds.

f) ESOP (Employee Stock Options): It is always suggested to be human when it comes to ESOP. Employees are the major assets for any organization and happy employees are the ones who give their best to the organizations. Make sure your hard workers are happy enough.

g) Do not overcommit or over-promise: It’s difficult to keep your prospects or clients happy when you do excess number of promises and commitments, by increasing their expectations on your service/product. Rather, it is good to leave the client with a good impression on your service/product with their normal expectations. This scenario is also applicable to pricing your service/product. Once they get used to the low price offering, the chances of retaining your services/product with a revised cost is very less. Being genuine is the best way to find genuine prospects.

h) Undercapitalization Errors: This is one of the most commonly committed mistakes of many startups. Since they are not aware of the unexpected/unplanned investments it is always good to have a buffer capital that acts as cushion over the time.

i) Empty Days: This is the phase that major percentage of startups are put through. Staying confident and positive can happen through balanced introspection and actions. Just remember that you are not the only one who is being put through the empty days.

j) Personal Life: For very obvious reasons, startup people more frequently do burn the midnight oil. It is good to make sure that your family members understand the availability of your presence and even sometimes your being cash unhealthy.

The next speaker, Sachin Bhatia, the founder of GripCell opened his talk with an interesting statement that when he started his venture he’d never heard of startup meets or angel investors. But he is a startup entrepreneur now! Everyone he met said: innovate. But, do we really have to? He took the example of Lays, Kurkure, and Hippo to point out that even if someone says a particular segment is monopolistic, go for it. Even in a crowded market like eCommerce, you will get an untapped segment.

People, Process, and Technology are the three vital parts of startups, Sachin said. On people: There’s no need to be obsessive about premier institutions. He wondered, where shall I locate all these top shot people? Sachin looks for passionate people who are entrepreneurial, rather than the colleges they went to. It’s not that his firm doesn’t have alumni of top academic places, yes he has taken people from IIMs, ISB, Symbiosis and local Hyderabad institutes. The question is, how do you recognize such people? One way he gauges is the answer to the question: What do you do in your current organization? Sachin’s advice is, if a person can talk passionately about his/her job for ten minutes, you take the person.

On the process part, he talked about some peculiarities of the Indian market. There are customers who want to pay Rs 2, but want you to deliver offerings worth Rs 100. This is true of not just India, but APAC. They roughly have 1000 customers in 40 countries, out of which 8 are in India, but have to spend more time on the eight than the remaining. His experience was that more than a structured evaluation, clients in India get comfort with verbal confirmation. They keep asking, “Ho Jayega?” and you have to say “Yes, yes” to get the order. On process side, his advice was to document everything.

On the technology side, Sachin said that you will do you research, but the competition will take away your research in a jiffy. So maintain your excellence by staying two steps ahead of the competition.

Continue to innovate, “add +1 +2 to your offering” and if you marketing and service is good, you will get good clients. He talked about moving from pull to push strategy. Have four valued clients rather than 40 who don’t pay much, but eat your brain. He has four categories of customers: A, C, E, and F. F are those whom you will just avoid. He is not a big fan of Google advertising, which everyone seems to be suggesting. They didn’t use Google adwords until a week before. He feels the better options for marketing are blogs, forums, and social media.

Someone in the audience responded that there is nothing wrong with IN customers doing their bargaining; we should consider them as very value conscious and he found the same kind of attitude in USA where clients push down the prices to ghastly sums.

When asked about their business model, he replied that, to start with it was bootstrapping, they didn’t get any funding. Once they get funding, GripCell will move one part to the incubator, so it will be a hybrid model. They have some exit barriers, so can’t move wholly to a incubator right now.

After this, came Saurabh Chandra of The Solemn who started in a flashy style with a lot of question. Initially I felt what is he getting at, but through the various answers to his questions, he would drive his points.

He initially talked about ethical practices and the need to have sustainability in mind.

One crucial question in entrepreneurs mind would be: Am I late, because there are already other players? He asked what was the most important aspect of a startup. Only three people (including me) said selling. Saurabh said the answer is right and said most Indian entrepreneurs don’t think through about selling. Out of the big audience here at LaMakaan, only three had responded “Sales”; similarly out of all your competitors only three would have mentally concluded how they will sell and hence that is your only competition. Don’t worry about a large number of existing players in any segment, you are only competing against those who get their sales strategy right. Another important question faced by a startup entrepreneur is: how much market share can you tap in a year. Because of limitations, people go into decimals. Ten years ago, people would be asking if you are from the TATAs, or Birlas, or Ambanis. But today the market has evolved and if you consider and maintain a 10 - 90 day sales cycle, you are good. You can aim for a bigger market share.

His architects come with great ideas on their products, but he keeps asking them how will we sell them to customers. So though your team doesn’t do it, you got to connect all the dots. Doing so avoids problems with customer pitches. He has met many customers (55) but so far none of them has said that his problem statement is not clear.

Then came the next speaker, the geeky Jagdish Nomula, who previously worked at ebay. He returned to India in December of 2010 and helped found ecommerce portal maansu.com and shopping comparison startup saasthe.com.

Realizing that he was trying to do too many things he got back to gifting. TopGifter which he co-founded, uses machine learning algorithms, which he patented, for gift ideas to people based on their Facebook data.

The good things he accomplished were generating IP and filing patents. His main advice was to execute from your point of strength. Whatever be the idea you are executing, you will uncover large amount of territory, even with a seemingly narrow domain as gifting. You think of what you can achieve through your areas of strength. He has his office in Silicon Valley, and to a question from the audience, he said that he wants to keep it there as he gets his work done efficiently.

Jagdish’s talk was followed by Hersh Haladkar of Instillmotion who was introduced by Ramesh Loganathan as someone who were doing fascinating work in many areas. They describe themselves on their website as an innovation consulting firm. Hersh started by saying that they were starting a school where they will teach you to fail. When you have an idea, hundred people will say it won’t work. But the idea is to “fail cheap, fail early”. Hersh says they fail everyday. I have to confess, I haven’t heard statements like this by any speaker before.

Regarding innovation, the example he cited is of baggage not coming faster from airplanes. He says that’s not the real problem if you talk to airport authorities and the passengers. The real problem is the waiting. Probably people don’t have anything to do or see when they wait. People as diverse as food packaging units to bharatanatyam dancers are consulting with them.

Now for the mains speakers: the investors. Rahul Chowdhury, CEO at DenuoSource, who said that after six years in his venture; he couldn’t carry further as he wanted to do other things and now he is an Executive Committee member of the Hyderabad Angels plus an active TiE Charter member for the Hyderabad chapter. Rahul’s talk was chock-a-block full of tips for the budding entrepreneurs.

Today even if you fail in one venture, other investors can pick your other projects. A frequent question asked of him is: Is an entrepreneur born or made. The answer - they are not born, they are made. Entrepreneurship is an art.

As an entrepreneur, you would be lonely and you are expected to answer even if you don’t know the answers. You will have twenty choices and none of them would be perfect; you gotta pick up the most perfect of the imperfect choices. Wear sales on your sleeve all the time and be selling shamelessly.

The bucket of portfolio for angel investors is changing. At Hyderabad Angels, currently they are looking at non-IT investments and are interested in brick-n-mortar projects. India is a consumption story and Tier 2 - 7 is where you have to look at.

The days of super glorious valuations are over. He joked that most entrepreneurs who come to meet investors smoke pot, because when asked how much is their valuation of their startup, they reply 25 crores, but when asked how they arrived at that valuation, they have no idea. Most people just don’t know how to articulate their story; they should come well prepared and capture the attention of the investor quickly, in 2 minutes. Valuation is both an art and science. His key advice in this regard was fast track the business: six months to raise the money no matter who you are. But remember, angel investing is the riskiest of all forms of investing. Go for angel investing after 1 - 1.5 years after starting your startup. For technology led platforms, Rahul advised: have a good management team, 8 - 10 crore valuation is fair; find a creditor upfront and provide milestone based timesheets. The sweet spot would be 5 - 6 crores.

In general, if your idea is good, prototype is good, and have a good management team, then you can come earlier than 1.5 years. You personally need to put six months full time in your startup before approaching angel investors.

A lot of people are trying to get in front of angel investors, so don’t get disappointed if you are not getting chances initially. With sheer tenacity you will get your opportunity, but during your meeting, in the first 30 minutes if the investors are not taking your pitch, it’s over -- go back to the drawing room.

Get someone to bless your idea, someone who has been in your field for a long time or who has already opened a firm. Also,try to get into privy into some one in the angels group. Angel investors are a group and if you have the buy in from one, the others would piggyback on to that backing.

The last speaker of the session was Ram Chaitanya Reddy, a serial entrepreneur, angel with Hyderabad Angel Network and Co-Founder of Pace Catalysts, a strategic advisory and mentoring firm. He was a picture of poise and smooth confidence has he narrated his struggles on getting his firm going. A mechanical engineer and a master of business administration, he started manufacturing steel components for nuclear reactors. It took 2 years to get funding from IDP.

Due to the Pokhran tests, Japan had cancelled the funding for nuclear projects and orders for his components dried up. He had bank loans borrowed at 18.5% interest rate. Not one to give up so easily, he purchased a 40-day fly-around-the-word ticket for fifty thousand rupees and hopped around meeting clients and pitching his products. By the time he returned he had four contracts over fax valued at eight million dollars. The point being: Don’t give up, don’t be rigid. Be flexible and ready to change and adapt to new conditions.

In this context, he mentioned Kranthi Visthakula whose dream was to make and sell thermal jackets. He had signed his funding papers in a hurry but when the product did not take off, he found himself in a tough situation. Apparently Kranthi had to sell of his personal property (land) to get through and Ram Chaitanya started mentoring him about 8 months back. Know what? Three days before this session, he got an exit with a high valuation (16 million dollars?).

So, Ram Chaitanya advised the attendees not to be too desperate to raise money. Have faith in your product. If you are sure about your valuation and can survive for two years, just hang in there. Amen to that.

During the network chat after the presentations, someone asked Ram Chaitanya about the round-the-world air ticket. Ram replied that it was no longer available. I thought if it appealed to the person, then it is a good idea and someone should take it up. Similarly, I heard another student telling Ram that he would like to fit protective airbags to cars that don’t have. Ram suggested to the young fella that, if there are garages retrofitting airbags, and he could do it cheaper than them, then he can start a very good business.

You see the length of this post and what I mentioned at the beginning of this post. The whole atmosphere was intellectually stimulating and energy boosting.

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