Category Archives: eCommerce

What salary and equity should a startup CTO expect? #Startup #Equity #CTO

If you have decided that your goal is to become a CTO, then I recommend you direct your career towards that goal. Putting together a working backwards plan to become a CTO and executing to that plan helps. You can network your way to a job or find out about CTO jobs that are open as well. Having a goal and plan is good, but you need to direct your experiences and goals to become a CTO if that is your desire.

Chief Technology Officer Compensation

There are 5 variables to consider for the compensation, which might make it complicated, so I will try to simplify for 2 of the variables in this post – size of company and job location. I have collected data from 11 sources – PayScale, Glassdoor, LinkedIn, Salary.COM, Comparably and VC databases such as Pitchbook – sources below.

The variables are:

  1. Size of the company: Impact of the role to the organization is a key determinant. Startups pay less than larger companies, but give more in stock. Seed stage startups will pay less than later stage, but give you more equity (in terms of % ownership).
  2. Location of the role: Roles in the US pay the most, followed by Europe and then in other regions. Indian CTO roles do not pay as much for most startups. Self reported data from 594 CTOs place the salary at INR 2.5 Million to INR 5 Million (25 L to 50 Lakhs)
  3. Industry segment and sector: CTO roles in technology pay a lot more than roles in non technology companies, but that is changing quickly.
  4. Scope of the role: CTOs are expected to be technical leaders, but many organizations also expect them to play the role of VP of Engineering and CIO in certain cases.
  5. Years of experience or CTO background: The rule of thumb is that more experience equals higher pay and equity. Similarly if you have experience building large scale systems at companies such as Amazon, Facebook, Google or Microsoft, you will get paid more than if you are not.

The numbers below assume you are hiring a CTO, as opposed to having a co-founder as a CTO.

CTO Salary and Compensation
CTO Salary Data

Sources: US Salary Data, Bay Area Salary Data, EU Salary Data, India Salary Data and Asia Pacific Salary Data.

The next question is how can I get on the more or show that I deserve more than the guideline range? That question is best answered situationally and if you want to setup time with me for some advice feel free to email me.

The data is above is very subjective and has many nuances. Obviously salaries are very personal and negotiations play a big part in the final salary you get.

How you can use Marketplace Listing Optimization to increase your inbound leads for SaaS products

I wrote about the 3 things to do before your SaaS product launch to increase inbound leads before.

Cloud Broker Service
Cloud Broker Service

Unlike SEO (Search Engine Optimization), MLO (Marketplace Listing Optimization) for B2B SaaS has far fewer criteria to consider. Since the listing provider themselves are focused on SEO for their website, your focus and goal is to primarily show up higher if someone searches for the term or category within which your solution falls under (on page optimization), or appear on the top of the listing within a category when customers are browsing within the listing website.

So what are the portions of the listing you need to optimize?

  1. Ratings: In most of these listing and marketplace services, their internal ranking, which is comprised of multiple factors, but largely end customer ranking of the SaaS solution, tends to be the most important criteria to list higher. I would highly recommend you request, provide credits, incentives (beg, cajole, plead, request, etc.) or just ask your customers to rate your product at these listing and brokerage services. You want to ensure that customers rate you high across the criteria that you are judged. Some customers might think this is a forum for giving feedback on your product – that’s not the goal. Your goal is to rank high and be rated higher than other competing products.
  2. Completeness of profile. Most listing and brokerage services have different requirements for your profile. Similar to your own Facebook profile and LinkedIn profile, some require just your website, logo, product details, etc., while others request your demo video, high resolution screen shots, feature checklist, and in a few cases exclusive discounts or content. Find out the key things you need to complete and be as close to 100% as possible. This is the #2 criteria, but may be #1 for you to list higher, since an incomplete profile makes the marketplace brokerage service look unprofessional. To optimize your profile, ensure that you have all the profile elements complete.
  3. Billing, distribution and on-boarding : Unlike listing services, brokerage vendors actually will “resell” your product or be a channel partner – online. To that effect they will bill their customer, collect the payment, keep their rake and send you the dues. They will want to own the customer relationship, but not the support. In many cases, they will already have a billing and contractual relationship (for e.g. Telstra has over 500K SMB customers in Australia and bills them for telecommunications services anyway, so their brokerage services are an additional line item on the customer’s bill). To optimize your listing and appear higher, you will be required to bill and deliver on their platform as well.
  4. Feature checklist profiling: Most brokerage and listing services allow customers to compare features of products within a category. This means even if you dont support a few features that you competitors do, you will have to state them and if there are options to state few features that are different in your product than others, it is important to mention those. Many of these feature comparison criteria are human generated, meaning there’s someone at the listing site, putting these together – ensure that you build a relationship with them. To optimize your listing, you need more criteria you are ranked favorably for.
  5. Featured products: Once every so often, (each of them varies) the marketplace will feature certain products on their home page. Obviously they will feature products they think their customers will like or feature those that their customers already buy. These features are similar to the mobile app store feature listings, where some of it is data driven and other times it might be a “staff pick”. To optimize your listing, getting featured is important. Understand the criteria for the featured listing and find ways to get featured at least 2-3 times each quarter.

Dealflow management is now harder than fundraising for #microVC in India

In 2008 (before Angel List) there were roughly 1000 technology startups in India starting each year. of these about 50+ got funded by VC each year according to Thomson Reuters.

The percentage of services (consulting, IT enabled services, BPO, outsourcing) companies was about 29% – those that started and 33% of those that got funded.

The number of eCommerce companies was about 3% of the total.

Services and eCommerce Companies India
Services and eCommerce Companies India

Fast forward to 2014 and those number of companies starting at 22% of the total for services and 5% of the total for eCommerce.

The structural changes of the services companies have changed as well. We have gone from 8% of the companies in IT Services to 5% from 2008 to 2014.

Service Category Startup in India
Service Category Startup in India

While Thomson Reuters does not break out the data, anecdotal evidence suggest that there are a lot more digital marketing & design outsourcing companies now than before.

The number of eCommerce companies has been steadily increasing as a % of companies started, but has increased significantly as a % of funded companies and a % of total funding.

The only other category, which has grown (for which I dont have a breakout again) is software as a service (SaaS).

Over the last 7 years, the number of Micro Venture Capital firms has also grown. We have gone from none in 2008 to 5 in 2014, and I think we will end up at about 10 Micro Venture Capital firms (those that have less than $25 Million in capital to invest) in 2015. These include Angel Prime, Oris, India Innovation Fund, Blume Ventures, and others.

I have talked to about 5-10 angel investors and industry veterans who are all looking to start their own Micro VC, seed fund and combination accelerator or incubator in India over the last 3-4 months.

In 2008, the average amount of time it took to raise a fund (regardless of size) was about 9 – 12 months. That number is lower for Micro VC funds, obviously, but we have no way to know how long it would have taken.

In 2011 of the 3 funds that raised, the average was about 7 months.

This year, I am hearing funds that are < $25 Million close their raise in less than 4 months.

That means the time taken to raise their fund has dropped. It is easier for fund managers to raise their capital, they can do it in shorter periods of time and they can raise more than they initially desired.

The challenge for the fund managers seems to be no longer raising capital, but efficiently deploying it.

The gold standard for VC investing has been proprietary deal flow (startups that come to the investor for funding exclusively and go to no other investors). That’s becoming harder for all VC’s now.

If the number of companies starting up has grown significantly (as from the graph above) and the % of non services companies have grown as well, then there is a real democratization of founding startups.

So the problem has now moved to sourcing, building a brand for your Micro VC firm and convincing entrepreneurs that you are the “smartest” capital available.

The best entrepreneurs have multiple sources of funding, and they have many investors of different type chasing them.

The challenge for Micro Venture firms with no brand visibility or “magnet” founders is that their deal flow is largely limited.

From our own data, I can confidently tell you the “best” deals are usually referrals, but 3 in every 5 companies we get into our program are non referralsSpeaking to Accel and Helion last week, I confirmed that 25% of their funded opportunities were cold (unsolicited).

So while the Micro VC fund manager may have a decent network, their biggest challenge is going to be that they will not be able to attract at least a quarter of deals which come because of having a good brand in the startup ecosystem.

The problem for a lot of the Micro VC’s is going to be that they have poor quality deal flow or deal flow that’s not proprietary.

While they will still go to many events, and review Angel List startups, I suspect they will have a tougher time getting good quality companies to apply.

The bottom line is that now it is as hard for the investors to get good companies as it is for the entrepreneurs to get good investors.

Which is why I love this quote

“Every morning in Africa, a gazelle wakes up, it knows it must outrun the fastest lion or it will be killed. Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve. It doesn’t matter whether you’re the lion or a gazelle-when the sun comes up, you’d better be running.”

― Christopher McDougall, Born to Run: A Hidden Tribe, Superathletes, and the Greatest Race the World Has Never Seen

My thoughts on the Flipkart fund raising

I got 4-5 calls from journalists and reporters wanting my feedback on the Flipkart funding news yesterday. I am biased, and I like the folks in the company a lot.

That said the main questions I got were: (NB: these were actual verbatim questions from reporters).

1. Does this mean game over for other “ecommerce players”?

2. Does this news mean that the “keep inventory model” will work? Is the snapdeal model better? Which one will “win”?

3. Why does this business need so much money?

4. Will eCommerce ever be profitable? Will flipkart ever be profitable?

5. If Amazon decides to come to India, will Flipkart’s first mover advantage still remain?

Rather than answer the questions one by one, I think I will set some context first and address the questions as I see the macro picture emerge.

Indian retail market is a ~$500 Billion market. It is large. Most of this ($350 Billion) is grocery. Unorganized retail (Kirana stores, small shops, etc.) make up 92%-95% of this market.

Besides grocery, the largest number of stores are called “fancy stores” – selling everything from pencils and books to tupperware and brooms. Jewelry stores are next (in terms of revenue they might be larger than fancy stores).

Of the organized offline retailers (totaling about 1500) , fewer than 5 (changed to 5% based on IBG data) are turning profit. Everyone else loses money. Why? High real estate costs and high payroll costs, compared to unorganized retail.

When Amazon started in the US (circa 1994), they were going after a 90% organized retail market. Fewer than 5% of US retail companies were unprofitable.

Amazon was going after big box organized retail in America.

Organized retail in India is a small part of the puzzle.

Flipkart is going after the 90+%, which we know as unorganized retail.

3 major trends that drive retail in India, for the next 10 years will be increasing urbanization, worsening traffic and higher commercial and retail real estate rentals. The fourth (if it ever passes, will be FDI). I am not holding my breath for that one.

The flipkart model will do well is my perspective, given their dense logistics coverage in urban areas and minimal rentals thanks to warehousing.

Amazon surprisingly will do well as well if and when they go direct in India. The market is very large.

I dont think its game over for other eCommerce players, just like many years after Amazon, came Etsy, Zaapos and others. In India, though those markets are currently small and will grow over time, so in a few years or a decade, things will change again.

The inventory model that is flipkart’s strategy seems to be working for them. That’s the reason to raise $200 Million.

The no inventory model for snapdeal seems to be working for them as well. Snapdeal will try to help many of the unorganized retail players compete with the organized players and flipkart.

I am not sure about whether the online players will actually get profitable over the next 5 years since the offline retailers have still not gotten there in 10+ years, but the online players have a better shot at becoming profitable.

India eCommerce future: The “XYZ of the month” Club or Subscription eCommece companies

There are now according to my own count (not comprehensive) about 141 subscription eCommerce companies in the US that send you a package of “stuff” every month – from food to cosmetics, and toys for kids to cigars.

Subscription eCommerce is the fastest growing category of eCommerce according to Internet Retailer magazine.

So will this come to India soon?

There are a couple here already, but none that can solve the logistics problems with any amount of significance.

Which sub categories are ripe for subscription commerce in India?

I think subscription commerce in apparel, books and electronics are fairly niche markets. Whereas food and snacks, daily personal needs and music might be more suited for it.

Who are the likely players? New ones or the existing players?

Given the problems of managing subscription payments monthly (some may take the entire money of the 12 month subscription upfront) I suspect most existing vendors will start to offer this as a service to their partners. Which means new providers in these categories will work with Infibeam, Flipkart, Snapdeal to fulfill their customer’s request. I think there’s room for 1 or 2 good new providers, but the markets they will target will be fairly niche.

How will the new providers manage logistics?

I think there will be a smart local+central logistics player in eCommerce who will start to work this model well and deliver the goods from a local vendor.

What do you think? Any good subscription eCommerce companies in India that you are using? Are they delivering? Are they good? Am I missing any categories?

The goodness from the eCommerce bubble in India

Over the next few weeks and over the last few months, many naysayers have been & will be talking about “why the eCommerce bubble is going to  (or has) burst”.

Its true but misses the point.

Yes, over 21 companies that raised over $500K in funding have “merged” or have “been acquired” for paltry sums.

Yes, the model was unsustainable with discounts ranging from 30-70% off list price.

Yes, end consumers made hay while many institutional investors funded their “free shipping”, “COD” and “no questions asked returns policies”.

I am undoubtedly an optimist, so I see many wonderful first generation entrepreneurs that came out of the ordeal alive.

That can only mean one thing – serial entrepreneurs are for the taking.

Assuming some / most of them start companies again.

Some of them have talked to me about how they learned from the experience and how it will shape their new venture. Others are venturing into investing in startups.

The BEST thing that’s happened to Indian startups in the last 5 years is the rise and fall of eCommerce.

Of the 450+ eCommerce companies (of which 75+ raise some money either from VC or seed investors), a full 63% were first time entrepreneurs. (source: Microsoft India startup research).

That’s amazing. Really awesome.

They will live to tell the tale and venture again.

I have one request though:

The next time you meet an entrepreneur who had started an eCommerce venture and moved on, thank them for taking the risk. They did something so its easier for you to convince your family and relatives that starting a company is glorious. Even if it is not a runaway success it teaches you about taking risks, venturing on your own and going down a not-so-well-trodden path.

Side note: The hare and tortoise story though still has a lot of merit.

I personally know 5 companies in eCommerce, growing at 30-50% annually (not monthly as the VC’s wanted 2 years ago) and breaking even. A few companies chose to not raise capital (or truthfully no one would give them capital when they tried to raise it) were forced to focus on profit and sustaining pricing models. They are stronger and better after their experiences.

Microsoft Accelerator Research on Starts and Closures in Indian tech startups

We are planning to release research findings every month week as part of our startup support program at the Microsoft Accelerator in India. There are about 50 different topics that we are curious about and are consistently doing research to find out ways to help our accelerator companies perform market research, target early adopters and focus on getting more customer traction.

This series is part of our accelerator database on engagement with startups, investors, mentors & entrepreneurship. Last week we did a report on Smartphone usage in India.

This week our focus is on the rate of companies starting and closing in the technology product space. Over the last few years Microsoft has been tracking new companies as part of its Bizspark program. Besides this we have access to several databases from multiple sources which has allowed us to consolidate all these into a single system to track startup activity. While we currently track over 73 different elements including founders, starts, closures, funding, etc. our focus is on trying to find patterns that can give us more clues to remove the roadblocks that reduce entrepreneurial failure early in the system.

We track over 6200+ entities – which includes services companies with a “product” they are building and also many viable side-projects, where the founder is generating some traction or revenue and 3900+ companies that are solely focused on building products (includes SaaS, eCommerce, traditional software, consumer Internet, etc.) in India.

On average there are about 450+ starts annually over the last 3 years, which has grown dramatically thanks to eCommerce.

While Bangalore has the most number of technology product startups overall, at neary 40%, Delhi/NCR came a close second in 2011, only to return to normalcy in 2012.

In terms of closure, 26% of companies still close within a year of them starting (either the founders giving up and moving on, or the company going dormant).

The biggest issue for closure (given that nearly 80%+ of all companies are bootstrapped) is collecting money from customers who have committed to paying for their usage of the product.

While not being able to raise funds is really #1, that seems to be a generic reason enough and a motherhood-and-apple-pie situation.

Unlike the valley (anecdotal information alone) most failed entrepreneurs dont go on to start another company or join a startup, but instead go to work at a much larger company (over 60%). Most reasons given were because of loans to payoff or pressure from parents (surprisingly not from any others).

Our recommendations are for new entrepreneurs to have a “cushion” of nearly 18 months in funds in their personal capacity before they delve into a new venture as opposed to 6 months.

We also recommend asking new customers for an advance in payment as part of the Proof of Concept instead of payment after the fact to aid in managing cash-flow more effectively.

Thoughts on Flipkart acquisition of LetsBuy

In case you missed it, Flipkart acquired Letsbuy for ~$20 Million in stock and cash.

I think its a very smart move by Flipkart and the investors (Accel and Tiger Global in particular).

Flipkart is doing about 50 Cr (About $10 Million) per month in sales (approximate, from multiple sources).

Letsbuy was doing about 15 Cr (About $3 Million) per month in sales (also approx).

Flipkart can already do an IPO (I think) in NASDAQ by 2012. But with $150 Million run rate (rather than $120 million), they have accelerated that by about 3 months – 6 months.

So flipkart’s good. They got a good price, they bought some revenues and have a few folks who are category experts (or better experts than their in house ones).

The two companies share 2 investors (Accel and Tiger Global) – who just yesterday announced an investment in Myntra.

So I can easily see a discussion at Accel and Tiger where both Letsbuy and Myntra come up for follow on rounds. They would first have asked Letsbuy to get funding from other VC’s – they apparently did try Sequoia and Matrix, but could not get the deal done.

Letsbuy goes back to Accel and Tiger who realize that Myntra is in a category (apparel, which is a lot more complicated than electronics) which Flipkart will take a long time to get to, but in electronics, Flipkart is mostly there.

So they chose to fund Myntra and consolidate their position with a “clear winner” by getting Flipkart to buy LetsBuy.

I consider Hitesh of Letsbuy a friend, so I may be biased on this one, but I think this is a good outcome for them too. Better to have tried to reach for the stars and climb Kilimanjaro than aim to climb Vindhyas and end up at Nandi Hills.