Category Archives: Learning

What does a series A funding strategy and plan look like?

This post is the first in a series that I am planning to do on fund raising. I have successfully raised money 3 times (to a total of $29 Million – series A, B and C) and failed twice (once trying to raise $2 Million series A and second time $3-$5 Million series B).

As a background please read Elizabeth’s great post on “Behind the scenes of a seed round”.

Fund raising is one of the most difficult parts of a founder’s job. Getting money from investors of any type is hard. Dont be fooled by stories of entrepreneurs talking to investors and getting checks in 10 minutes. Those are truly black swan events.

The first thing you have to realize is that you need to develop an comprehensive plan and strategy to raise your series A. Think of it as an effort that’s similar to the launch your product. For purposes of this discussion lets call series A, as your first institutional round. I am also making the assumption that you have a working product, paying customers and are targeting a very large market (>$1 B for US, >$250M in India). If any of those criteria are not met, dont bother trying to raise money in this environment.

What are the 3 most important elements of your funding plan?

1. The pitch deck – a 15 slide PowerPoint presentation which summarizes the market, problem, traction and investment requirements. This is needed only for the face-to-face meetings.

2. The target list of potential investors – a Excel spreadsheet which has investor’s firm, name of partner, list of 2-3 recent investments (in the same general space as yours), email addresses, phone numbers, admin assistant’s name & email address, investor connection (people who can give you warm introductions to the investors), status and notes fields. You could use a CRM tool like Zoho if you like, but its overkill for this purpose is what my experience tells me.

3. An email introduction (40 – 100 words) and a one page summary. A simple text file with no images or graphs (something that the investor can read on their mobile phone (most have blackberry, although that’s changing). This can be sent to your connections to introduce you to investors or directly to known investors.

What should your strategy be?

1. Who should you target by role?: Investment firms have partners (decision makers) and associate / principals (decision enablers). Partners make decisions so if you can, get a introduction to a partner. If you cant, its not all doom and gloom, since many partners rely on their associates and principals to source deals for them.

2. Who should you target by investment thesis: Every investment firm has an investment thesis (how they will deploy funds to get best returns for their investors). This should guide you as to whether you’d be a good fit for the firm. Example: An investment firm might say we believe India’s broadband access and huge number of consumers with high disposable incomes is a great target for Indian eCommerce companies. So, they will deploy a certain % of their funds in eCommerce companies. Similar theses exists for big data, SaaS, etc.

Example: if you are an education startup focusing on India, Lightspeed (thanks to their success with TutorVista) should be on the top of your list. If you are a SaaS firm targeting US, Accel (thanks to Freshdesk) should be on your list. If you are a travel technology startup, Helion & Saif (thanks to Make My Trip) should be obvious targets.

A word of caution: If a firm has invested in a company in your sector, they will very likely ask you to speak to the CEO of their portfolio company to perform cursory due diligence. You may decide that company might be competitive and likely to execute your idea better since they have more resources. So proceed with caution and dont reveal any thing during your due diligence that might hurt you later.

Many investors invest in a sector because they “need one of those in their portfolio”. Example: Every firm has a baby products eCommerce company. So, I also recommend the “herd rule”. Which means, you should talk to other investors if your competitor has been funded by your first choice investor.

3. Who should you target by investment stage: Although every Indian investor claims to be sector agnostic and stage agnostic, there are a few early adopter VC’s. If you are the “first” in a new space, then consider an early adopter investor, else any investor who has not made an investment in the sector will suffice.

In a next post I will outline what the series A funding process should look like. This post will include information about whether you should follow a “back-to-back” process, or do a “listen and tweak” process.

If you like this post, please consider submitting to Hacker News.

The power of active observation for entrepreneurs

There’s an awesome stand up act that Jerry Seinfeld does in his “I’m telling you for the last time”. In that he tells the audience a secret about men.

The question on many women’s mind is “What are men thinking about?” is his premise. He goes on to say “Let me clue you on to the secret women. Here’s what men are thinking.”


We are just walking around, looking at stuff.

Its pretty funny and mostly true. Its also true of most people, not just men. Most of our “thinking time” is spent thinking about nothing.


That’s such a waste of time.

What I think it really means is its not worth sharing what we are thinking about.

We are “constant dreaming” about mundane useless stuff and our thoughts wander to more useless stuff.

While we go about some daily routines, we are still thinking and less “observing”.

Most successful entrepreneurs I know have a heightened sense of observation.

They watch everything. I mean they observe at least 50-80% more than the average person.

Most non-entrepreneurs people see the same things an entrepreneur does, but they dont observe.

A technique I use is active observation. It is seeing, then asking questions. As you know, questions are the root of solving interesting problems.

To discipline yourself to constantly keep observing, you have to train your mind to look, then ask. Not keep looking and neither keep thinking.

There is a downside to active observation. Its that you are not in the “present”. Critics will point to the mind-rest that your brain needs which helps it recuperate and rejuvenate. They might also say you should go with the flow to generate great results.

I prefer active observation when I am thinking about ideas and problems to come up with which need solving.

P.S. Post a few comments on facebook, I wanted to clarify that active observation is observing then doing. By default I assume most entrepreneurs are doers. Many though confuse doing (action) for progress.

The frustration of “lack of progress” with your product

On the outside looking in, its extremely frustrating to hear of product teams shipping product multiple times a day.

I tend to often question: “What in devil’s name am I doing wrong”?

  • Is it that I have not defined the product requirements right?
  • Have we hired the wrong people? Does our team not have enough experience?
  • Is our culture not supportive of mistakes?
  • Are we not focusing on the right things?
  • Do we not have the capability to get stuff done quickly?

Experience with multiple startups has taught me that its ignorant to compare your company with others (who might have stated at the same time) who have more “visible progress” than yours does.

But I hate that experience.

Its hard not to compare and question why is someone else doing so well with a smaller team than you have.

Experience has also taught me that startups for most parts (like kids) have a step function in progress. Its rarely a smooth “up and to the right”.

I hate that experience as well.

Should all that experience not make the next go around a lot smoother?

So the question – “What the value of all that experience”?

There’s only one answer – Its overvalued.

There’s one solution to most of these questions and although it is a cliche and often repeated, the answer is “Hire right” – whether its consultants or contractors or full-time employees, you need to constantly evaluate and hire the right people.

So, how do you hire right? And how do you define “right”?

So lets start with not the job description, but with your culture and values. Hire the right person that fits your culture and can align with your values.

If you culture is defined by moving fast, hire and attract people that can do that.

How do you determine if someone “fits” your culture if all you can do is interview them for 1 hour or so?

Write down questions to situations where you feel your culture will make them act one way versus the other. Ask those questions during the interview.

Depending on the answer to those questions you can determine if they can align.

What I have learned is people rarely change. So its hopeless to expect someone who is not a good cultural fit, to come in and get “religion”.

The most constructive way to give feedback

I had an extremely smart manager at Mercury / HP who could hold his own on both the strategic side with the CEO and also on technical topics with engineers. Robin was one of the earliest to help me get a polished side (I am not saying I’ve mastered it, he just put me on a path to “try” to be more diplomatic and refined) to  my brash and in-yer-face “talk to the hand, cos the face ain’t listening” approach. I had been known to give the Heisman (see the image on wikipedia to understand why) to many of my colleagues and while that was fine with the Israeli culture, there was a lot to be desired with most other folks.

He ordered a book for me that I’d highly recommend called “Crucial conversations” (link) to all entrepreneurs.

The book helps in dealing with confrontations at home, at work, and even with friends.How to Notice When Safety Is at Risk, How to Speak Persuasively Not Abrasively, How to Turn Crucial Conversations, and How to Stay Focused on What You Really Want.

There one really neat trick I picked up, which was worth the cost of the book.

Every time you want to argue or have a debate about a point, or provide (negative) feedback but do it in a nice way, turn your statement into a question.

For example, if you want to tell the designer that the UI he built does not help conversion and its actually more work for users to scroll down, your normal approach would be to show him the analytics and tell her that she’d designed it poorly. That’s when you realize the designer gets defensive and she’d take the extreme position because she gets a sense you are “attacking” her knowledge or turf.

Instead ask the question “What would help us get more conversions?”. Then try to have everyone come up with an answer together.

For example, if you want to talk to your engineers and you know using AWS is better than maybe hosting your own server, your approach might be to show him multiple blog posts and other articles about why his position is wrong. Again, you’d get a engineer who’s being challenged and now believes its best to defend his position regardless of how wrong he might have been. Rare is the person that would easily take this feedback and admit they were wrong.

Instead present your hypothesis as a question. “What if …”? “What would”, “How can we”?, etc.

Then focus everyone on helping answer that question, making them part of the decision instead of being the ones to only implement it.

Try it tomorrow and the day after and let me know if you notice a difference.

Always ask questions instead of making statements of fact (even if you believe you are right).

It makes you come off as humble and truth seeking not the “know-it-all”. It also helps you focus on what you want as the end goal, instead of the minutiae.

How to A/B test your job description and hack your way to hiring success

The last post on hiring for startups touched a nerve with many recruiters, many who emailed me on why I was negative about their profession. I did not intend to throw them under the bus, but the post came off reading that way. So, to my recruiter friends, apologies. I could have been more judicious with my choice of words. I assure you though that my words are not worth their weight in gold, so many startup entrepreneurs will still call you to help them with their recruiting. To those that claim spamming is helping, please stop.

Onward and upward.

This post is about hacking your job description. Or in the new age way of putting it – A/B testing it.

I had to hire 3 engineers for our new startup. The first step I took was to send an email to a few good fellow entrepreneurs and friends.

Version 1.0 < or bachelor #1>

I told them:

“Ideal candidate will have 3+ years experience in web or mobile technologies. Should be a hands on developer (PHP, Ruby, MySQL, Java or Python)”.

After 2 weeks and 30+ emails later I got 4 resumes from friends of friends. They were “technically sound” according to my network and within my budget but were mostly out-of-towners.

I phone screened two of them to find them fairly challenged in terms of their communication skills, and the remaining two wanted me to assure them a job before they made the trip to Bangalore (I was willing to pay for their trip, but not assure a job until I met them and interviewed them).

Version 2.0 <or bachelor #2>

I added “Good communication skills required. Position is in Bangalore.” And posted it on my twitter profile, LinkedIn and facebook account.

3 more resumes landed on my inbox, but none of them were even a close fit. One person said in their email, he was a test engineer and wanted to move into development and the second was a ASP/.NET developer who “could learn PHP quickly”, but had been in Windows development for the last 3 years. The third sent me an email, saying ” I am currently 25K salary, looking for 40% hike”, in his 3rd sentence, without any questions about either the job, the company or the technology.

Version 3.0 <or bachelor #3>

I decided the simple useless job description I wrote was just that – useless. I had forgotten the cardinal rule – Sell yourself, sell the job, sell your company.

So I did a ginormous makeover. I posted version 3 on hasgeek – I titled the role “developer in residence” not tech lead.

Worked like a charm. I got 4 very high quality candidates asking for what a “developer in residence” meant. Two were very qualified, professional and very good fit for the role.

I did not stop at version 3, but went to a refined “pitch the value, not the features” version.

Version 4.0 or <bachelor #4>

I added the following and posted version 4 on hasgeek.

“We have a complete 12 quarter hands-on program outline for you to feel ready to start your own company, which we will invest in to get you best prepared for entrepreneurship.

Job perks

  • Catered lunch every friday.
  • Ability to network and meet venture investors and angel investors in special invite-only events each month
  • A working 12-quarter program to give you all the experience necessary to be an entrepreneur”

Worked even better. The posting intrigued enough people to deliver even higher quality resumes. I thought I was overreaching because and got 2-3 over-qualified folks for a “lead developer position” re marketed as “developer in residence”.

What I learned:

1. The most important part of your job description is the Job Title. Its obvious, but I see far too many “PHP developer needed” or “Web hacker wanted” and “Javascript Ninja Hatori” titles, which gets you a certain type of person. Usually that person is not the first 25 developer hires in your company. Be creative, but dont overreach.

2. Your job description is the first impression for 90% of your potential candidates. The next impression is a Google search with your company’s name. You control the first a lot more than you control the next impression. Realize that people will read your job description and decided quickly if its worth Googling your company. What you say and how you word it says a lot about your culture. Does it have many typos? Are you using cliche’s like Ninja, hacker, Superman, etc. because you cant really describe the person with a simple engineer title, etc.

3. Dont say too much, because people dont read too much. Most job seekers I found, only read keywords like PHP and sent me their resume. They did not read anything else. I mentioned “should have worked in a product company (not services company)” before in a branch version of the JD, but I ended up getting many resumes from folks who worked only at services companies.

4. Each version of the JD attracts a different crowd from a different job board. If you are posting on hackerstreet, or hasgeek – think and focus on being a little more creative. If you are looking for technical marketers, is pretty good and for fresh grads, yourstory worked best for me.

5. Describe the perks of the job. If possible please make it human by adding a P.S. at the bottom. People read the P.S. More people read the P.S. than you think. Make the P.S. memorable, or make it sound like a prize given for the one that had the patience to read the entire posting which you spent hours writing (or a few minutes copying and pasting from some other JD).

Next post – how I phone screened and what worked, what did not.

P.S. I do read and reply to every email, and I do like getting email, but I always prefer comments on this blog.

The difficulty in giving honest feedback to entrepreneurs

I met a cofounder-team last week at the Microsoft BizSpark event. They were fairly young, and were working on their first startup, after 5+ years of working in a large corporate environment. They were both a year into their startup and were looking to raise funds (seed round). They were focused on the consumer Internet space (are now considering pivoting to B2B instead) and have been building a version of their webservice.

They definitely caught me at a “not so opportune time”. Actually, a friend pulled me in adhoc after a bad call (bugs in our software, customers complaining, etc. you get the point) to introduce me to them and ask me for feedback.

The next 30 min was painful for us all is the best way to say it. After the 5th time of me asking what problem they were trying to solve and if that was a real problem, I think I had a breakdown.

I tore into them for the next 15 min with both my friend and another individual sitting next to them. I claimed they had no idea what problem they were trying to solve, who their target audience was, what their product actually did that any of 20 other startups did not do already and why I would not use the product even though it was meant for folks like me.

They were patient, gave me a hearing, but I you could cut the tension with a knife. I felt awful 2 hours later. I had forgotten the cardinal sin I kept repeating to others they should avoid doing.

If you cant give constructive feedback, you are a moron, not an investor. If an “investor” does not help you with a next step, he is a moron. Period.

I had become a moron. The very thing I had detested in many other investors (not all, there are several exceptions).

You know the type. They kill every idea and suck your soul dry. They dont think your idea is good, they dont think you can pull it of, they dont believe you have what it takes.

I used to believe this was necessary tough love. It is absolute B.S.

What I did was inexcusable. It bordered on killing the spirit of another individual, which no person has the right to do. Even if they are an investor.

So, what should you as an entrepreneur do when you meet this type of investor?

First off, try some mind-relaxation techniques.

Second, give them the benefit of doubt. You probably got them on a bad day/week/month.

Third, ask the question:

“How would you go about trying to solve this”?

Put the ball on their court to give you a SINGLE next step that they (the smarter ones) would take to get you further along on your path.

One last point. Being an investor, you meet many smart, talented individuals daily and its difficult to not do some form of “pattern matching”. So, if anyone tears into your idea, remember at that back of your mind, you are likely doing something (either right or wrong) and its worth doing some more digging.

The worst feedback to get when you are pitching your idea/product/startup is no feedback.

P.S. I did meet the team this week and offered some (my version of the story) constructive ideas they could possibly work on, and was trying to help as much as I could. That does not make me feel better about what I did last week, but its good karma to erase the bad.

Are incubators really necessary?

ReadwriteWeb had a relevant post about incubators.

As the infrastructure costs of “starting up” become lower, the barrier to get “funded” gets higher. Used to be you could get away with prototype. These days every investor wants traction. Traction is easier when you have help from an incubator.

You need not go to college to get a job, but there’s a correlation between higher degrees and higher pay. Similarly in 5-10 years

I can totally see a situation where 70% or greater of startups go through an incubator rather than go it alone.

It will increase the chances of getting funded and highly increase the chances of success.

I do think most companies will go through an incubator even if the founders are experienced folks in a few years. The current batch of incubators favor (either by design or natural fit) younger, fresh out of college grads.

The key part of this equation is that not all incubators are equal. If your incubator does not provide value (raising funding, getting customers or helping hire key employees), then its not worth wasting your time with them.

The Internet trends report by Mary Meeker – some key insights

I enjoy Mary Meeker’s annual trends  reports, which summarize key mobile and Internet stats and puts them in context to tell a compelling story. Below is a link to the report, which makes for a great iPad reading late in the day.

KPCB Internet Trends 2012

Some key takeaways for me.

1. Even though India is ranked #2 in the Internet users added in 2012 metric, (most of whom are thanks to the mobile phone) it “feels” like a comparison of apples to oranges. Most Indian users with mobile Internet access dont use it is my gut feeling.

2. 3G is dramatically changing the landscape. 1.1B subscribers is more than critical mass.

3. Smartphones are at little less than 1B. Again an amazing stat, but considering the number of feature phones is at 5 B, there’s a lot of room for growth. Most interesting is that this might happen in the next 5 years. Imagine every person (or most everyone) having a phone that has a camera, GPS and Internet. It has the potential to *change* the news media industry dramatically. The #1 thing people do (besides email and call) on the phone is get news and information (weather, stock, sports, news) and #2 is play games – this is by # of minutes spent.

4. Mobile traffic is 10% of all Internet traffic. For some websites its close to 30% of their visits. Mobile first seems like a very smart strategy for consumer apps / sites.

5. Mobile monetization is driven (71%) by app purchases, and very little <30% by ads.

6. India Internet traffic from mobile is reaching the same number as desktop Internet traffic (April 2012). Not surprisingly CPM’s are lower on mobile than notebooks.

7. Newspaper ad revenues was surpassed by Internet in 2012 and the trend is heading towards digital at a very fast clip.

Absolutely awesome read on the before and after pictures.

What makes a product “fit” a market? Or how to achieve product-market fit?

A relatively young term in an entrepreneur’s vocabulary is “product-market fit” (PMF). Attributed to Marc Andreessen in 2009, this term, has a relatively simple meaning but one that’s hard to really get a sense of:

Product/market fit means being in a good market with a product that can satisfy that market.

If you go after an awesome market – growing fast, has excellent demand and a great growth curve, then you’ve got 90% product-market fit, even though technically 50% of the challenge in any startup is coming up with a good product.

Lets assume you are going after a great market.

How do you know its a great market? Besides the fact that its large (obvious) the speed of adoption is tremendous.

What then makes a product “fit” a market?

First there are 3 important assumptions I make:

1. The best team does not necessarily create the best product.

2. The best product does not necessarily win in the market.

3. It is rare for startups or entrepreneurs to create markets.

A product “fits” a market when

1. Your metrics for adoption of your product exceed adoption of all your “competitors” combined (Instagram had more downloads in 1 week than other competitors did in 6 months)

2. There are so many missing features in your product but its still being sought after (HotorNot had no other features except an upvote and downvote)

3. The problem you solve for the user is such a big one that they are willing to forgive the lack of “nice to have” capabilities (during its early days, Twitter kept crashing daily)

The first point (metric) answers the question – What should I measure to know when I have achieved PMF?

The second point (features) answers – How can I tell?

The third point is the most important. To know about problems that are painful and large there’s one thing you need to learn:

Learn how to ask the right questions.


Relevant links that I would highly recommend you read:

1. Jeff Bussgang on why early in the product cycle entrepreneurs should be hunch and not data driven.

2. Andrew Chen on “When” has a product-market fit been achieved?

3. Ash Maurya on the 3 stages of a startup and why problem-solution fit comes before product-market fit

4. Patrick’s perspectives on steps to product-market fit.

P.S. Thanks to my good friend Dorai who asked me to write about this.

Learn how to learn

Christopher Lochhead was the CMO at Mercury Interactive during its renaissance. He’s the best speaker I have ever worked with. Period. He taught me more about marketing and speaking than anyone else I have ever known, read or worked with (yes, that includes Seth Godin). He had many one-liners that he would illustrate with examples that would drive home the point with humor. Being with him in a meeting (just one-one) would be like being in a surround-sound experience at a PVR.

There’s one thing that he said that I want to highlight. It was about experience and learning.

“50% of what you know, will be useless & invalid in 6 months”.

The point he was making was about experience & learning.

This plays in my mind daily. In every way possible. From the mundane to the arcane.

Examples (from the useless to the useful):

1. I thought I figured out the best way to get from home to work via a bunch of shortcuts and learned the right bus to catch at the right time, and change buses at the right stops. Bangalore traffic police though, have other intentions. Every road that was a one way is now a one way in the other direction. So much for “optimal way to get from point A to point B”.

2. Facebook advertising was simple until a few months ago when they introduced precise targeting. Now there are over 200 providers offering 2-3 day courses on facebook advertising and marketing.

I can give a lot more examples, but take anything you know and expect that you will not need to know it in a very short period. Since it will evolve, change and morph or more likely go away. Begs the question – why should I even learn it? And the answer is “it will teach you to learn”.

I believe there are 2 “kinds of learning” – that which is from first principles which gives you a lens or framework to learn anything new and that which is temporal in nature.

The temporal most likely is the one that pays the bills. Knowing a new language, like Ruby or Clojure will likely fall into this category. Learning how to learn a new language, though, falls into the former category.

What I have figured out is “I does not matter how much I know”.

I am constantly humbled daily by having no clue about something that I think I should know.

On the flip side, the only thing my experience has taught me is that if I learn with the intention to share / teach, its a lot more fun.