Why its “never make or break” for an entrepreneur #nevergiveup #ycombinator

I had a very good entrepreneur who came by and talked to me yesterday about his company. After 2+ years of being at it, he finally claimed he “got a break” when he was selected to be interviewed for YCombinator. He had applied a couple of times before and was not shortlisted. He was obviously excited and I was thrilled as well. He and his cofounder are really awesome folks who are among those very rare breed who make everyone around them feel good even when the chips are down. They are both fairly young and an absolute pleasure to hang out with.

The last month, had been extremely tough for them. They figured out that the market in India was not quite ready for their web service, both culturally and also from the ability to monetize. They had both been in the US, and moved back to India so they could lower their costs during the prototype phase. They were facing the choice of moving out of India to the valley or just pivoting to another idea.

In the evening after the initial euphoria had died down, though, he made a remark that surprised me. He said “this is make or break time for us”.

I could understand, but there was a tinge of disappointment in my heart. Two years in a startup can do this to anyone. Two years in an Indian startup is even tougher for most founders. I have a theory about startup in India.

There’s one part of about the Indian entrepreneur that struck me as their unique value proposition.

Survival.

That’s it.

You survive after starting your company, beyond the first year, you deserve an achievement award.

Survival is the Indian startups unique value proposition.

So imagine all you are trying to do is to stay alive, making some revenue, but not quite making it big. That’s the only stage you are hoping to get to. Till the breakthrough idea, investor, channel, customer or accelerator comes by. Breakthrough in the context of giving your venture a fillip.

Lets then imagine you get that break.

Chances are, that break will not suffice. Not because its not the break you wanted, but because  the chances of it being the only thing that propels you to the next step in the ladder are slim.

That’s the case to keep going and building momentum. That’s because 90% of people will give up at the stage.

If you dont get past the YCombinator interview, have a plan B. Keep going. Dont give up. That was my advice to him.

I know that’s easy to say but very hard to execute. 2 years of no paycheck is bound to turn any  person cynical and jaded.

Here’s hoping he reads this and makes up his mind to have a plan B if the YC plan does not work out.

When and why should an Indian startup “move” to the Valley? #bangalore

Yesterday a friend who works at a large company and is experimenting with a side project had heard from several founders that given the type of product he wanted to build, he should relocate to the valley.

I have heard many variations of this advice so I wanted to give him a framework to think through this issue.

I initially thought the debate was very simple and based on customers alone. For cutting edge early adopter customers of any type – consumer or business, there’s no better place for a startup to be than where their customers are.

Then I also looked at the problem as one that has multiple dimensions.

The dimensions are:

1. Customers. Specifically type of customers – Cutting edge consumers on smart phones – Valley. Later stage consumers using SMS on feature phone – India, etc. You get the drift.

2. Financial situation of the founder. The valley is expensive. India, not so much. You can build a product and experiment until you get some initial version or product market fit at a far lower cost than the valley. Especially if you are a non-developer founder. Even if your customers are in the valley, you can have one founder in the valley or go to the valley every few months (its tough, but possible).

3. Stage of the company. Earlier stage, with rapid iteration it is better to be where your customers are, but honestly it can be done with remote customer meetings using web conferencing.

4. Product. Most founders tend to think what they are building is unique, but that’s never the case. There would be at least 10 other folks who are aware of the problem and possibly trying to solve the same problem. If the product is relatively simple from a technology standpoint and requires a lot more business development and sales execution, then its preferable to be in the valley would be my thinking.

5. The entrepreneurs network. Most entrepreneurs dont realize that it takes significant time to build a good network of partners, investors, customers and employees that are needed to support their venture. I have found (not statistically, but just my rule of thumb) that it takes me 2 years to build a network from scratch in any new area, location or domain. If you have a network in the valley, by all means, move there, but if you dont, getting legal help, hiring the first few employees or getting the first few customers will be hard.

As I follow up to getting funded by US or Indian investors post, I had many folks reach out to tell me that it was not a fair debate. While there were pros and cons, most felt that the valley was a much better place to be.

All things equal the valley is possibly the best place in the world to start a technology startup, but that does not mean you cannot start at other places and move to the valley later.

Given the type of your customers, stage of the venture, the type of company (B2B, B2C, mobile apps, etc.), the product you are trying to build, financial situation of the founders and your “network”, you will find that going to the valley vs. staying in your home country is a very good debate and a hard decision, not a no-brainer.

I have removed the aspect of obtaining a US visa, which albeit a hard issue, is still a procedural and administrative one than strategic.

Pickup lines of Indian entrepreneurs #startups #funny

I love to beat a dead horse and a meme to death. Given how much I like to stereotype, I think the fictional entrepreneur from each city in India will possibly use these pickup lines to get attention from the opposite sex.

Bangalore: She will most likely meet you at a traffic jam someplace, riding a Kinetic Honda and you the smarty pants guy she’s trying to woo are on a sports bike. While every car and bus driver is right behind honking like there’s no tomorrow, she pulls out her smart phone – (Android dude, iPhone is for the Mumbai-types) and shows you the traffic sensor app she has built in just 4 weeks, which tells you what the traffic patterns are in M G Road, and while she’s at it, she’ll also tell you to come to the side of the road, and in 10 minutes flat, she’ll root your phone, install Zomato to check out the best places to eat in Indiranagar or Koramangala and then drop the line “Do you want to come and work at my startup”?

Chennai: He’s likely to meet you at the Marina beach, taking the bus from Anna Nagar, where he stays with his 3 other bachelor friends. He’ll notice that you have 3 other friends who you came to just hangout with, and try and get your attention by ordering “sundal” but constantly looking at his smartphone to find the next Rajini saar joke that he can find. He’s hoping his laughter will pique your curiosity, and you’ll ask him what’s so funny. While he’s likely to tell you 2-3 of the Rajnikanth jokes, he’ll also ask you for your “Kulam, Gowthram“, etc. just so he knows that you’ll pass his parents approval. Finally after you expect him to ask you for your phone number, he’ll say “What’s your parents’ number? I want to give it to my parents”.

Hyderabad: She’s extremely rich and decked in 2 tons of gold, and the daughter of a very rich man who’s made a lot of money in real estate, agriculture or owns many wine stores in Andhra. Her startup is her way to “show” her dad that she can do something on her own. While she wont tell you she’s passed from Osmania university and has a MBA from a college in London, she’ll certainly make it a point to ask where you work. When she’s satisfied that you are a “true techie” working at a large company, she’ll drop her line “You want to come to our office for a movie marathon”?

Mumbai: He’s already tired after a 2 hour bus / train commute and is looking for any distraction from his 100 Sq. ft. “Global headquarters” startup office space in Vashi, which seats 10 people. He’ll likely meet you at a coffee shop in Bandra, trying to order an exotic drink that the “Bangalore-types” just dont get. While the drink is being prepared, he’ll order a vada-paav as well, and see that you are standing in the line behind him. He’ll pull out his iPad and show you the pre-release version of a movie that his startup is the online partner for, and try to see if that gets you to think that he can give you a “chance” to be in a Bollywood flick. His line is very well rehearsed, “Do you want to catch a movie next Saturday? I can get us invitations to the first screening”.

Delhi: She’s with 3 other friends, at Ambience Mall using the coupons from a daily deals site, when she notices you. She’s dressed really well, possibly in the high street fashions from Kimaya and that’s really surprising given she’s an entrepreneur. In her attempt to prove that she’s worth your time, she’ll loudly speak on the phone “Just ask him to call my assistant and she will connect him to the information minister’s office”  (with a hint of a humble brag for good measure). Before she can finish the sentence though, the phone will ring and the sheepish grin will reveal that she wasn’t really talking to anyone at all. She’ll offer to buy you coffee and will make it a point to let you know that her startups is both making revenues and is profitable, which should convince you that she’s worth dating. Of course her pickup line is still “I know the Deputy Commissioner of Police, so I’ll be able to get us parking in anyplace in Gurgaon”.

Pune, Kolkata and others, feel free to write your own pick scenarios and I’ll link to them all. Just drop me a note on twitter.

Delhi entrepreneurs will outsource technology, Bangalore will outsource sales, and Mumbai, everything but finance #startups #entrepreneurs

 

Tweet

Tweet

I put a half serious tweet last week based on several conversations I have had with entrepreneurs in Delhi, Mumbai, Pune, Bangalore and Chennai. I have been to Hyderabad as well, but the numbers are low.

I have limited data, since I am not in Delhi often. My observations are based on looking at 51+ applications from Batch 1 and about 60+ applications from batch 2 of our accelerator from NCR.

Besides that I have interacted in 5 events in the last 6 months at Delhi – Think Next at Saif, Reverse Pitch at 91 spring board, one VCCircle event, one at Leela with people matters and an event of Media companies and startups at Le Meridian. In all at these events I met a cross section of about 120+ companies and founders.

The following are my observations, so use a grain of salt.

1. I met fewer than 5% of developers and technical architects in these events and fewer than 2% of founders from our applications at NCR. The deep technical people dont come to these events or apply to our accelerator. We prefer meeting and dealing with developers, technical folks than generalists such as domain experts, marketing or sales founders. In contrast to those numbers, developers make up 14% of Bangalore applications and Pune a close 10%.

2. Delhi founders dismiss strong technology plays as “engineers building solutions in search of a problem”. This statement is my interpretation of a “show of hands poll” that I did in 2 events.

3. In our internal database of 402 technology and software companies we track at Microsoft based in Delhi, our own biased, internal ranking of “technical” expertise at these companies, our average rating is at 2.9 on a scale of 5. Bangalore and Chennai top at 3.7 and 3.5, followed by Pune at 3.3. I cant share more details about the ratings yet, but will do so as we get more comfortable with sharing this data and not getting people flaming us for that.

While we are certainly not dismissing Delhi as a non-technology startup hub, we certainly dont see deep fundamental technology startups in storage, cloud infrastructure or networking from Delhi. Bangalore or Pune are likely better bets for those. This data was reconfirmed to me by both SAP and Intel who have startup engagement programs in those cities.

Why forced mergers in the eCommerce space is a good thing

Right now there are many distraught entrepreneurs and industry watchers who are either a) saying “I told you so” or b) saying “this is bad for startups”, when they read the latest “forced merger” between several eCommerce companies. While many felt it started with Flipkart and Letsbuy, the most recent BabyOye and Hoopos has more commentary on the negative side.

While we in India, have been witness to these mergers only in the last few years, this has been happening in the valley for eons  The new age name given to some of these funded startup exits is acqui-hire. Somehow acqui-hire in the valley is great and forced mergers in India is not.

There are and were many naysayers when there was a raft of funding in the eCommerce space a few years ago. Many folks were right about unsustainable business models, rampant discounting, unsustainable customer acquisition costs, etc. To them I say:

From Alfred Lord Tennyson’s poem In Memoriam : 27, 1850

“‘Tis better to have loved and lost
Than never to have loved at all.”

The eCommerce bubble in India has created a new set of entrepreneurs. They did it with other people’s money. No one really lost except for the LP’s who I am sure are now once bitten, twice shy about returns from Indian startups.

Honestly though, I have talked to 5 Limited partners at large organizations who are disappointed with returns from Indian Venture capital, but also realize they dont really have much of a choice but to stay invested.

There are some that claim that other deserving entrepreneurs, who were working on non eCommerce startups, were ignored during the eCommerce bubble. That’s absolutely nonsense.

In India over the last 3-5 years, if you were a good entrepreneur with a good business, great team and chasing a large market, you were able to raise money. The ones that did not get funding, either were chasing smaller markets, were going to grow slowly or were not sufficiently good teams.

Now what do I claim that mergers are good for Indian startups?

1. They help companies and their employees consolidate to create one large player in a mid-sized to big market, instead of 10 players chasing the same market and being extremely competitive.

2. They provide a means of employment for the many employees at those companies who were not the founders or the investors.

3. They give hope to the many entrepreneurs in the making that you can have a “failure” and still be considered for another opportunity in a startup.

4. It provides the investors an opportunity to consolidate their portfolio and hence double down on their winners, without spreading themselves too thin. That way the remaining portfolio companies win.

5. It frees up time from several investors having to spend time on middle-of-the-road companies, and gives them more time to spend chasing new opportunities.

6. It is easier to merge a company in India than it is to shutdown. The process to shutdown a company is also a lot more expensive.

Anything I missed on the other goodness from the eCommerce forced mergers?

When does serendipity play a role and when does it not?

M. E. Graebner describes serendipitous value in the context of the acquisition of a business as “windfalls that were not anticipated by the buyer prior to the deal”. source.

As the new buzzword in the startup world is serendipity I thought I’d take a few minutes to share the fear I have of many folks engineering serendipity.  Put many interesting (or intelligent) folks in a room they say and serendipity happens.

I do though unfortunately feel many folks are taking it to the extreme. Given the many conferences, meetups and events that occur for startups, I am sure its very tempting for entrepreneurs to make sure they are at all of those meetings, to ensure they dont “miss out”.  If you are however meeting the same people again and again and doing the same things, talking about the same 10 startups, there’s little room for serendipity.

At most startup events, I see the same folks who make up 50% (increasingly) of the audience both on the investors side and the entrepreneurs side. While its good to see many familiar faces, I am doubtful that there’s much serendipity and goodness that will come out of it.

As an entrepreneur the one thing you have on your side is time, besides your ideas and intentions. I dont believe you can really waste any time and much worse, attend meetings just to make serendipity happen. I would highly recommend a very strict discipline of attending events that you believe you will have a good chance to get something done, and then hope for more serendipity to happen.

If your sole purpose of attending events is to make magic happen just because you are there, then you are going to likely waste more time and get little done.

What should you expect from an accelerator?

I have written previously about how to evaluate accelerators and choosing the right accelerator since there are so many of them these days and also about what the goal of an accelerator is.

I wanted to share somethings that entrepreneurs should expect from an accelerator from a perspective of a startup founder. I think the best thing that has happened is that so many accelerators have opened in the last few years. Similar to eCommerce companies in 2010-11, I expect many to close or shut down within the next 2-3 years.

There are 3 top things an entrepreneur needs according to me:

1. Access to customers: Whether it is beta customers for feedback, early adopters for providing traction (paying customers) or larger customer for growth, startups thrive on customers. Depending on the stage of your company, if an accelerator does not help you get customers, they are not doing their job. That’s the first lens I would adopt to judge accelerators. If you have access to customers, you can practically write your own destiny. If all the accelerator does is provide advice on getting customers but does not provide introductions to customers, or have customers be ready to adopt and review your platform, you are not going to get much traction or be “accelerated”.

2. Access to talent: In India, for startups, good development talent is hard to get , marketing & sales talent is harder and design talent is extremely challenging to get on board. If your accelerator does not help you with talent sourcing or provide talent in house to help you tide these critical areas when you need them most, you should run away. I have heard the notion that the graduates of the accelerator will help you, but entrepreneurs helping other entrepreneurs by providing time  is not very sustainable. Most of the very successful startups and their executives are extremely busy. While a sense of pay-it-forward does exist, its just not sustainable is what I have found. There’s no substitute for dedicated people to help you with development issues, help you with User experience and design (mockups, wireframes, HTML/CSS development and information architecture) or marketing talent to roll up their sleeves and run campaigns.

3. Access to capital for growth: While I am personally not a big fan of funding as a metric for accelerators to gauge their success, capital is nonetheless needed to grow and thrive, especially in India, where most founders are not serial, successful entrepreneurs or those that come from a “rich family”. So look for an accelerator that provides you an extensive and wide set of investors from seed to early stage and from venture to growth. If all the accelerator does is “showcase you in front of several investors” but does not actively nudge investors to help take a closer look at your company, I dont think they are doing their job.

There are several other things that matter which include a support system of the existing entrepreneur network from their previous batches, access to meetings internationally that possibly help get some global exposure, and a great space to work from, besides other things. However if you dont have access to customers, talent and capital, there’s no value in joining an accelerator.