Category Archives: Ecosystem

The App World is Flat!

The App World is Flat

With Apps / Mobile growth, things are changing at a fast pace in the eCommerce / mCommerce space in India & around the world; for purpose of simplicity – calling it eCommerce without bothering about on which platform the transaction happens on.

The world is fast discovering web on smartphones, gets on-boarded to services like WhatsApp & Facebook, doing their first online transactions on Mobile Recharge services like FreeCharge & Paytm, and evolving to eCommerce, On-Demand Services & Travel. Unlike the previous predictions made in 2011/2012 – which were very company specific, this time the focus is largely around the trends in the Mobile App world.

 

The (App) World is Flat!

In old days of Internet Marketing, there were strategies to acquire users / customers by categories through multiple marketing channels – Adwords, SEO, Email, Display advertising, etc

The App World is flat. Be it large commerce startups like Flipkart, Snapdeal, Ola, Uber or the ones that were launched yesterday in any space, the common ground for everyone to get started today is exactly the same – getting the App Installed. This is disruptive in many ways – if someone has $1 Mn to spend on user acquisition – no matter at what stage / scale a startup is, the cost to get the app installed now remains the more or less similar for everyone.

As other core functions of eCommerce like Logistics, Merchants, Payments get more organised & commoditised; and User Acquisition starts with getting the app installed – a new ecommerce marketplace startup that launches today with $5 Mn Series A investment has much better chance to succeed than ever before or give existing large players good competition.

That puts everything in a interesting perspective – As cost is exactly the same, what are the differentiators? Its the core value proposition of the startup – the one communicated before user installs the app and one actually delivered. This change makes every startup focus a lot on building a great product and an awesome consumer experience than ever before!

 

Discovery, Marketing & Product Experiences:

In the ‘web’ world, Google allowed marketers to reach ‘users with intent’ through Adwords (or SEO) and so did Facebook to reach a certain demographic of users on its platform. This has changed fast. For high growth mobile startups that are scaling up in India – Google & Facebook’s share of marketing spends is shrinking when compared to others.

App Installs plays a level playing field in User Acquisition today; networks & affiliates are able to drive App Installs at better volumes with very competitive rates when compared to Google, Facebook or Twitter. Discounts, cashbacks & user driven growth form new means of acquiring users at a exponential rate. Share of wallet from marketing spends for Google & Facebook is going down.

Any consumer app like Flipkart / Snapdeal or Google / Facebook can now read multiple signals off user’s phones – apps, locations, contacts, texts messages, and so on and redefine how users are targeted for advertising. Flipkart’s plans to build online advertising business are well known; could be huge opportunity if kept independent.

Mobile App capabilities can also translate into building relevant product experiences for end users. For example – a Cleartrip trying optimise its Hotel Booking Offering for users when it reads a Flight Booking SMS from Airline website on user’s phone; Housing showing financing options for house from HDFC knowing that the user has the HDFC Bank App installed on phone; or Flipkart showcasing user products based on how quickly they can be delivered; of a Finance App recommending user investment options based on his Account Balance and so on. In one of my recent conversations this came up – today a user’s mobile phone location is his delivery address.

Till now, Ecommerce products today have just transformed from web to app, not essentially unlocked the value the mobile platform brings. If existing players don’t innovate, some new startups will. Focus on building awesome products.

 

App Discovery will evolve:

App Discovery and Install today act as the top of the funnel for every User Acquisition effort. Visiting a App Store to download any app is a redundant step; its not required if app is discovered through other channels. Expect Google Play to take the Install button (or trigger) outside the Google Play Store and let users install apps without explicitly visiting the Play Store in background. If that happens, expect APIs that will trigger app installs for publishers & advertisers making user acquisition & advertising dollars more efficient. Yes – that possibly kills ASO, App Discovery as we know of today on App Store, and Google’s Adwords product for Play Store.

Mobile Apps ecosystem is cursed with high uninstall rates. Users & Marketers would want to move towards the philosophy – you acquire user only once, does not matter through which channel – App Store or Browsers. Users would want the product / service on-demand on every platform – Smartphone or Desktop Browser whenever they want without hassles of user / account management. Expect browsers integrations & enhanced capabilities on Chrome with App Stores (Google Play to start with) that enables users to access the Apps installed on their smartphones on desktop or any other platforms without having to log-in separately.

App Stores like Google Play or Apple iTunes will also evolve from their current stage of ‘enabling discovery of mobile apps’ to ‘authentication of user credentials’. App Stores will retain user information – personal details, payment info (saved cards or wallet), delivery details and so on to transform into 1-click authentication platforms. Example – Users while shopping on Snapdeal, Flipkart or Amazon Mobile App can do 1-click checkout with App Store authentication that gives the Ecommerce service all user information w/t payment information data that is required for Ecommerce sites to fulfil the transaction.

This is something similar to what Facebook did earlier where Apps & Games on Facebook Platform received user information on Login-with-Facebook. Its still early days for Mobile App Stores, they will evolve in big way going forward.

Note: Google is already working in this direction to distribute Install action with App Invites (Beta)

Engagement v/s Instant Gratification:

As consumers get habituated to transactional & on-demand services – social products & social commerce products (like Wishberg – my previous startup) or any other would find it extremely difficult now to scale up or grow without providing the instant gratification experience.

Existing large companies in this space are picking up clues and started to move towards a transactional experience with Buy buttons. To ecommerce companies, working with large networks for such 1-click transaction experiences is a big win.

Expect focus of large social networks (Facebook, Twitter, Snapchat, etc) & discovery channels (Google, Pinterest, etc) to move from top of the funnel (i.e. product discovery or media spends) to bottom of the funnel (enabling transactions or margins). They are currently driving Mobile Installs or Traffic for their current advertisers, going forward may be looking at driving customers. Such products or services know more about users than anyone else.

Products like Facebook, Google will retain customer information (delivery, location & saved card details) and move towards enabling the one-touch buy experience.

 

Frequency is all that matters now!

This topic itself calls for a longish post (may be for some other time), for now the point to note is that Mobile App makes perfect use-case for a high frequency consumer behaviour. There are already many studies that have concluded that consumers prefer to have only few apps on their smartphones – ones that are frequently used.

Apps like WhatsApp, Facebook, Twitter, Snapchat, Instagram etc which see extremely high engagement (and frequency) are less likely to be uninstalled by user while an app that is not used for few weeks (or even days) is very likely to get uninstalled. Ecommerce products would not be able to match levels of usage demonstrated by Social Apps.

Transactional apps that have a daily / weekly use case like Cabs, Food Delivery, Grocery, etc would see better usage compared to others. As that gets discovered, expect Ecommerce apps to expand into multiple categories / segments that could be completely diverse – Paytm moving to eCommerce or Travel, Ola moving to Food Delivery and so on to drive frequent usage.

This strategy works well with two big motives – increases app usage as users have more reasons to open & engage with the app and also adds up to their topline. But for vertical commerce players like Home Repairs, Home Furnishing, Jewellery, Footwear or others – surviving in App World with infrequent usage will be extremely challenging.

Today, Success or Failure of any startup is just an uninstall away!

 

OnDemand Services may disrupt eCommerce forever.

In past few months, many on-demand services have raised massive Series A rounds, the ones focussing on infrequent use-cases like Home Repairs, etc will start struggling with user retention and other ones who are driving high frequency use-cases like groceries, food delivery will start bleeding because of poor unit economics.

Ecommerce today as we know it has its own challenges – relying on third party logistics, depending on unverified sellers & products, deep discounting of products to drive volumes and their attempts to move from cash on delivery to cashless transactions.

On other hand, offline retailers in India are up in arms against online players but have little competition to offer. If OnDemand services like Groffers, Swiggy and others in this on-demand space started delivering users Ecommerce products partnering with your offline retail giants and local stores – eCommerce changes in this country forever.

No more waiting for even for 24-48 hours, the product that you want, from the trusted store of your choice, in the payment mode of your choice, in your hand – in next 30 minutes. The Amazon Prime or Flipkart First experience delivered to you, every time. This changes everything we have learned or known about ‘traditional ecommerce’.

Concluding Notes

Mobile app & growth story is just getting started. Its too early to declare winners because the App World is Flat!

Building The Next Disruptive Startup

The most disruptive word in Startup Ecosystem is ‘disruption’. Its used / abused / misused by almost everyone – entrepreneurs, investors, advisors, mentors, press and so on.

Founders love to call their product / startup as disruptive and so do investors who keep saying they are looking for disruptive ideas, both have very limited explanation of what disruptive startup actually means for them or they run out of examples or ideas when you ask them what exactly is disruptive about it. Most of the answers are – ‘If this becomes big, it could disrupt the market’.

Disruption

This is a random post, not intended to draw any conclusion or summary but sharing few things I have learned about disruptive startups and ideas. Probably also on how to get ideas to build your next big ‘disruptive’ start-up.

Circa 2008

Early 2008, I moved in my new role at Rediff as Product Head for Ecommerce. This was still the time when Ecommerce was extremely small in India, concentrated with some players – Rediff, Indiatimes, Ebay and couple of others; and the other side of Ecommerce was Travel which was growing steadily. At Rediff, we had 3 ecommerce products – Rediff Shopping, Rediff Books and Rediff Auctions (We shut down auctions soon after).

These were the early days of Ecommerce and to say we were not innovating then would be wrong. To bring up more users to Ecommerce, COD (Cash On Delivery) was introduced. To expand reach beyond (limited) online audience, experiments like Reader’s Offers (in Newspapers) were attempted by many. We introduced real-time customer support calls to users who dropped out during checkouts and assisted conversions via IVRs. Debit Cards were integrated. Top 20% products in top 20 cities were delivered in less than 3 days. Back then, all major players were marketplaces – that involved a lot of co-ordination with vendors / sellers for inventory, logistics, deals, order status and operations.

Few days into my new role a colleague mentioned to me about a new service – Flipkart. It was selling books. I loved what I had seen on Flipkart. The product was good if not best, but for a site that was launched just few months back – it did all that it was supposed to do perfectly with attention to detail. Prices were comparable if not the best; what blew my mind was the shipping times – awesome 4-6 days of delivery time.

In 2008, books sold on any ecommerce service took 6-10 days to dispatch (most of them had common vendors) and books that required procurement from US took 25 days on a minimum side (and customers used to wait!). Flipkart was quickly dismissed as a niche website, and books contributed to a smaller percentage of overall business. In fact there was a time that competition was more worried about Futurebazaar for its blistering marketing budget (oh, btw its in dead-pool now).

By end of 2009 I moved out of Rediff. And over time I started ordering books (and then other products) much frequently on Flipkart and was never disappointed by its service. I knew friends and colleagues were admiring loving it too. Flipkart kept growing and so did the word of mouth for them. Flipkart was rejected not just by many Investors, but also by its competitors. Over a period of time, all its competitors lost out on Flipkart as it emerged to be the face of Ecommerce in India.

So what did Flipkart do differently to disrupt Ecommerce? Instead of marketplace approach, it started off as a self-managed service. It picked up Books – the most under-served category then (under-served, but large – in 2008 Rediff Books had 1.2 Million Titles listed). It used most simplest channel for $0 marketing – Search Engine Optimization. Adding a million books to Google Index (this is in 2008) in a category that had less than 10 players helped them rank up well. And they rarely did goof up on delivery, dispatch or customer experience.

That was Flipkart. And the story about ‘disrupting a industry’ by a startup or underdog remains similar across the world. Startups / Entrepreneurs don’t disrupt a industry or vertical by ‘launching just another product’ in existing market. There needs to be a remarkably different approach, addressing a large market which is loved (or appreciated) by its initial users / customers.

So how do you get ideas for a disruptive startup?

Another example in Indian context is Housing.com – picked up real estate as a vertical that had more or less no differentiation and existing players were hardly innovating on product and consumer experience over years. Everyone was a copy-paste product of everyone else. Housing launched with a better product from day one for discovering real estate properties, focused on verified data, authentic photos and awesome user experience. While its competitors were serving advertisers, Housing started serving users. It is still in its initial days, but I am hoping Housing.com will become big someday (PS: its product is now bit more complex that it was in the initial days).

Coming back, a existing market / vertical, a large category, that has not changed for a long time are prefect for disrupting with a product that brings a fresh approach to it. While existing players keep thinking that their ‘yet another feature’ will kill this new startup that is making a dent, unfortunately this never happens. ‘Yet another product’ in a large market does not really disrupt a industry.

This probably is true for almost every big startup or product that is out there today.

  • AWS for Hosting:
    Huge market, frustrating times to set up & costly infrastructure, disrupted by on-demand computing and pay-as-you go.
  • Gmail for Email:
    Huge market, competition offering 4-10 MB inboxes, disrupted by 1 GB mailbox and of-course better product.
  • Square for Offline Payments:
    Huge offline payments market, under-served, simple product to accept payments with a phone.
  • Dropbox for Syncing Files:
    Huge need; users mailed files to save on multiple PCs or used USB drives. Simple & fast web storage.
  • Stripe for Online Payments:
    Huge need; developers where busy doing complex PG integrations. Simple to use payment APIs.
  • Uber for Transport:
    Huge market, demand > supply; Under-served market. Cool product that made the customer look smart.
  • … and so many more I can think of…

So where do you go looking for big markets to disrupt and build large businesses?

 

1. Look for market segments that have not changed for years.

In India context, Flipkart and Housing mentioned above fit in this example. We are (probably) done with phase of getting most of the products / services from offline world to online. Some of the verticals are still broken despite being online for so many years.

Examples that come to my mind are – Travel (Vacations – it is still an broken and under-served market), Matrimony (Nothing has changed in this vertical for more than 10 yrs, however people and culture has changed a lot), Classifieds (Largely served by few players and the model hasn’t evolved much) and so on.

Some markets are so big that there is room for multiple big players – Fashion being one of them. Some of the verticals just came online (Online Grocery & Vegetables) but are struggling to grow, maybe they need to approach differently.

One of my favorite examples here is Stripe and how it differentiated itself from others in Payment Gateway vertical. Or even Quora that came up in QnA space that had sleeping products like Yahoo! Answers or Answers.com

 

2. Look for large products that are ageing fast.

Look for large products that are ageing fast and its early users are complaining or it fails to provide value to them.

Some of the examples, LinkedIn (The product has not changed much over years, its early adopters are not using it as they did earlier or now they have other ways to connect with them) or Facebook (Its evident that the engagement levels are dropping and instant messaging has taken over Social Networking). Twitter (Yes, Twitter is ageing. For new users its complex to use, to understand).

More directions – Facebook was default private product; then came Twitter that was default public product. There is lot of opportunity for both products to reverse privacy. For example, Twitter is a public identity to many people, its private aspect ie. direct messaging is massively broken. Forget private product, even Twitter as a public conversation platform is also broken or difficult to explain to new users. Twitter itself is experimenting with removing @ replies to appeal to new users (while existing users will miss the feature most).

 

3. Look for large products that serve multiple purposes.

Look for large products that serve multiple purposes. Perfect one of their use-cases.

Best example here is Facebook. Large products like Facebook serve(d) multiple purpose – Status Updates, Messaging, Photos, Staying in touch with friends, etc. WhatsApp took up Instant Messaging, Instagram took up photos, perfected the use case and in turn made a big dent with their products. Since usage on a large product already validates the market need, build something that makes it work for users.

One of my favorite examples here is Vine how it figured out a niche for itself in the online videos vertical owned by YouTube. Though Vine was not the first to start off (there was Viddy and Social Cam who focused too much on spamy growth hacking techniques on Facebook), it was Twitter’s push that built this one up.

Also recently Zuck announced ‘Un-Bundling of Facebook‘ which serves similar use-case.

 

4. Look for missing components in daily used products that are ignored

Look for broken / boring experiences in the products around you that are in daily use. Broken, because you can fix them. Boring, because you can make them cool (or add value).

This probably over laps the above mentioned use-cases. Mobile OS features like Camera got replaced by Instagram, Text Messaging got replaced by WhatsApp, Mobile Phone Book got replaced by Gmail Contacts. There is a big opportunity if you can identify and replace basic utilities around you with products.

PS: The biggest broken experience on phone or devices today is battery / charging. And this is a tough one!

 

5. Look for big news or market changes around you

If you are too much into technology news look for changes around you and a need for product that you could build because of market changes and opportunities that come up.

Skype was acquired by Microsoft in 2011. Ever since (and even before that) there have been tons of connectivity issues with Skype. Its time for a reliable Skype, one that works as it should. Big opportunity! There is Google Hangouts, but it still doesn’t make a cut and unfortunately Google still treats this product as a part of Google+ and/or Google Talk. It requires attention as a independent product like Chrome, YouTube or Android.

Another big blow was when Google decided to make Gmail for Business a paid service for all. There are other paid business service providers, I tried a few myself when I recently was looking out for a free / alternate solution, finally giving up and settled for a paid Gmail account. Its a great opportunity to build a awesome product here.

My favorite example here is AngelList, Naval is an angel investor in 100+ startups – sensed the opportunity of creating a platform that connects startups to angels much before anyone else did. Another one is how Admob discovered mobile advertising when the world started making mobile websites (WAP sites then).

——————

Concluding Notes:

How to find Disruptive Ideas for Startup?

Listing down the 5 methods mentioned above:
1. Look for market segments that have not changed for years.
2. Look for large products that are ageing fast.
3. Look for large products that serve multiple purposes.
4. Look for missing components in daily use that are ignored.
5. Look for big news or market changes around you.

Wait, your existing startup does not fit in the above criteria? Nothing to get disheartened with, this is just a reference point. In fact I also realized that my own startup does not fit in this :)

Some takeaways,

  • The above 5 pointers all lead to a large addressable market. So next time a investor tells you he/she is looking for a large market, you fit in.
  • Just another startup or just another feature in large market does not make a cut. It should be a differentiated solution / product.
  • Disruptive ideas are plenty, it is the execution and team behind that matters most.
  • Most importantly, don’t build a product or startup in a market that is considered hot. Instead build something that you understand (or understand it well before you start).

And Flipkart, you have my respect for life!

PS: All notes referring to Rediff are expressed as my personal opinion. Most details mentioned here are in public domain already.

List of Startup / Tech Influencers in India

Many founders struggle in getting a word out for their products or startups – its crucial, something that makes or breaks your startup in its initial days. While tech press and coverage for startups is one thing, its important to have early adopters talk about your product and suggest them to potential users / customers.

India ranks among the top 5 countries by users for global products like Facebook, Twitter, Quora and so on. Clearly we have enough early adopters, question is who?

Below is list of people that I have compiled and consider tech influencers whom you might want to connect with to get a word out about your startup. Good luck!

Things to note –

  • List excludes VCs or people directly associated with Accelerator or Incubators. Their tweets reflect vested interests in portfolio companies. I don’t consider them influencers.
  • People mentioned here frequently tweet / talk about startups and new products.
  • I don’t know many of them personally or follow many of them myself; however they keep appearing on my timeline again and again.
  • I plan to keep this listed updated, if you have any recommendations – drop me a email on pj (at) beingpractical.com

Disclosure: This list is not compilation of users who tweet about Wishberg (my startup). In fact many of them don’t even have a account on Wishberg. But this includes my name somewhere in between :)

Dear Accelerators

2 years back I wrote that India has a premature incubation model. Things have changed now – Accelerators / Incubators is the new trend here. Simply too many and too much buzz around it, its all smoke without fire. I had a unfortunate encounter with one of organizers of an accelerator who claimed that its program is more beneficial for startups than YC or 500 Startups. That incident still makes me laugh, wrote about it last year.

This post are suggestions to Accelerators and is based on my personal interactions with many startup entrepreneurs, investors and enablers in ecosystem.

1. Stop looking for startups with traction. 

Accelerators start by looking for startups with traction. Its puzzling, because startups with traction are looking for investors, not accelerators. Wouldn’t it be simply awesome if accelerators start saying – ‘Join us and we will ‘help’ you gain / build traction!’.

Unfortunately, since there are too many startups, the competition and market dynamics will not make this real. But seriously, can some accelerator stand up and say – ‘Join us and we will ‘help’ you gain / build traction!’. Entrepreneurs will have more faith & trust in you.

2. Be a little transparent.

Your metric for success is simple – success of the startups that have graduated from accelerator. Tell us that story, maybe you could learn a bit from TechStars that lists detailed performance of its portfolio companies.

No matter how flashy personal brand you manage to build for yourself, all that any entrepreneur really cares about is his / her own startup. So let startups that are applying to your program judge you ‘only’ by performance of your earlier startups.

And if your startup performance report is bad, here is some ‘free’ advice for you – pivot!


3. Prove your worth before asking too much.

With exception of few top accelerators, most startups end up applying at other accelerators after they have failed to raise investment from angels or failed to get through the top accelerators (yup, I am being practical – this is the reality!).

The top accelerators take between 5% to 8% stake in a startup for $20K to $50K. You be the judge how much equity should a startup give you, in my opinion it should definitely not be more than 5%. Don’t act too pricey, you will have to prove your worth before you ask for anything more. There are also bootcamps and acceleration programs that offer similar benefits for startups at no investments / no equity.

Also from perspective of founders, 8% to 15% dilution at accelerator (some startups go through 2 accelerators), 15% to 25% dilution at seed / angel-round, 20% dilution at Series A. By this time with a 10% ESOP pool, entrepreneurs are just left with their skin-in-the-game.

PS: And if you are adding clauses like permanent non-dilution; offering your (little) cash in tranches or after several ‘gentle reminders’ from founders – there is a special place reserved for you in hell.

4. Startups are not one night stands.

No matter how much accelerators would like to think they can change the fate of startups in matter of few weeks – they are wrong. Startups take years to grow, they are not overnight successes as many people perceive them to be and most of the growth comes once they face the real world (which is after the demo day). It takes time to find the product-market fit and it comes with multiple iterations on product.

Your so called focus on batch after batch, this sounds like one-night stand with startups. Founders have trusted you, please get into a long term relationships with the startups. Be there when they need you (and even when they don’t).

5. Your partnerships with Investors means nothing to startups.

Many accelerators ‘flaunt’ their partnerships with venture capital firms to startups and also occasionally drop names of influential angel investors. First time entrepreneurs are often misled by such talks and tend to think it as an assurance that they might be funded on graduation day / demo day or their chance of getting funded is higher through a accelerator.

Honestly – these partnerships mean nothing. Venture Capital firms are always on a lookout for their deal-flow; the word ‘deal flow’ explains almost everything in this industry. Any partnership that any VC has with any accelerator is only for the purpose of deal flow, they do not want to miss out on any hot startup but this partnership is definitely not a investment commitment (unless it is on lines of YC – $80K on convertible notes).

6. Be more transparent on utilization of time (and funds).

Not many accelerators (and also many entrepreneurs) realize that the biggest resource startups should be worried about is not money, its time. Time runs out fast, for everyone.

While there are programs and activities that directly add value in building product, any time that is gone outside of that (relocation, attending events, visiting places and so on) means staying away from building product which decelerates the start-up. Make founders aware of that well in advance – so that they can make their plans accordingly or alternate plans like one of the founder stays back and manages day-to-day tasks.

Same with funds, if there are any programs, costs (legal, travel, etc) that will require startups to pay the accelerators – please be transparent about them and mention that to founders well before they join the program.

7. Mentoring the Startups

The kind of startups entrepreneurs are building today did not even exist few years back. The skills startups required today are – design, data, distribution, product and technology. Unfortunately, we do not have great talent for these verticals in India.

So accelerators are getting investors to mentor startups, this is where the model starts falling apart. 99% of time the investor will be advising / mentoring the startup without using their product or experiencing its service! I don’t mean to offend anyone here, but the fact is – Investors should be investing, not mentoring! (unless they have skin in the game).

Take a break, read this post – Great Entrepreneurs will listen to you but will follow their own instincts.

Read 2: In 30 Days My Startup Will be Dead

Be valuable to the startups in your accelerator and get mentors who can really help them grow. Get Entrepreneurs or Senior Executives (who are entrepreneurial or proven achievers) and have skill sets that startup needs to mentor them. Alternative suggestion – get founders or executives from known Silicon Valley startups to mentor!

Mark Suster said few days back at PreMoney conference – ‘Networks of entrepreneurs helping each other are significantly better than board meetings for learning.’

8. Your over-extensive focus on demo day kills few of your startups.

If I were a part of any accelerator, I would have opted out of the demo day. Simply too much focus on demo day! Of the 12 week acceleration program, 3-4 weeks (effectively 33% of time) goes in its preparation, that is not all since you get in to meetings, introductions and so on, the chances are you will spend next 4 weeks on those follow-up meetings.

Mark Suster says it best – Demo days are showcase of who is best at on-stage presentations ~ coached and polished. They produce too much hype and too little value. Also in another post (more from a VC perspective), Mark explains the importance of proprietary deal flow for investors.

If you are observing this space – you would realize that even the startups graduating out of top accelerators are struggling to raise investments. Not all of them are getting funded or are able to close their investments quickly. Probable reason – too many startups? too much hype? could be anything else.

Elad Gill wrote a brilliant post on VC Signaling last year. I believe similar sort of signaling happens with startups in any accelerator too. In a batch of 20 – 40 startups, investors are bound to choose the best – the top 20%, or the best 4-6 startups that stand out on demo day, rest 80% startups will not find it easy to raise investment.

Worst is negative signaling effect, if any of the startups from that batch are unable to close investment in next 4-12 weeks post the demo day, it will be bit tough for them to close it going forward unless they get some significant traction.

So instead of flashy demo days, accelerators should focus on getting one-on-one interaction between startups and investors. Although it is apparent that from every batch there will be few standout startups., as an accelerator you need to give a fair and equal chance to every startup in your batch. For raising funds demo day works for few startups, but makes it difficult for many startups and unknowingly kills few.

Treat demo days as a demo day – show what product you have built! Not just to investors, but also to influential early adopters and potential partners.

9. Help startups with distribution. Not pitches.

Because of these demo day pitches, there is a certain glorification of startups – even before they are worth glorifying. Companies need to be glorified by their traction, revenue, customers etc not because of a nice punchline and a great deck. Demo days are setting a wrong precedent in the very first place. Pitching has its own importance but most founders today believe that’s the only thing to do.

I have said this multiple times – the easiest thing a startup can do is to build a product or pitch to investors. Toughest thing is – finding product market fit & distribution. Unfortunately, most accelerators are trying to help startups with easier tasks, not the critical ones. Startups don’t fail because of lack of money, they fail because of lack of product adoption.

If it is a consumer startup – accelerator should help it achieve its first 25K-50K users. If it is a enterprise startup – accelerators should make introductions to potential clients and help them get their first 25-50 paying customers. When a startup succeeds on this – they will not require to pitch any investor at all!

Concluding Notes:

Most accelerators ask startups on what they are innovating on, while they are trying to replicate the success of YC. The intention of this post is not to criticize accelerators, but a feedback for them on how they can start being more valuable to their customers – the startups!

Credits: Thanks to Kulin Shah (Co-founder at Wishberg) & Avlesh Singh (Co-founder at WebEngage) for reading the draft and their suggestions on this post.

The Minimum Viable Product (MVP) trap!

Before your read this post, I suggest you go over to Hacker Street India and glance through this thread – How much time it took for the first version (MVP) of your product!

If you don’t know much about MVP, glimpse quickly through the Wikipedia post on – Minimum Viable Product. The definition: “The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.”

There is much ambiguity in this definition. Lot of judgement is required by the startup founders to define what exactly is MVP version for their product since there are no bullet points to clearly define that. That exactly is a MVP trap!

If you were to build a Social Networking site today, the benchmark for minimum viable product is Facebook. A user will expect all existing features of Facebook to be in your product! For a email service the benchmark is Gmail. For a mobile phone messaging app it is WhatsApp. For a social QnA product it is Quora. For a crowd-funding platform it is Kickstarter. For a phone operating system it is Android / iOS. For search it is Google. For a tablet device it is the Apple iPad.

Early adopters loved the first version of Gmail because it was so much better (and fast) than existing products – Yahoo / Hotmail. They loved the first version of iPhone because it was much better (and usable) than Nokia or Blackberry or Palm then available. On other hand, Bing did not see a great adoption because it was another search engine with no compelling reason for users to switch from Google. Similarly, early adopters saw Microsoft Windows Phone as a different OS for mobile which did all that a Android / iOS phone did differently (different but not better).

If the idea of MVP is showing the product to early adopters and collecting quick feedback, most of that consumer feedback will be based on their comparisons with other products they use on an ongoing basis. To create a wow factor and a compelling reason for users to switch to your product, the minimum viable product you roll out should basically not just exceed current market standards but should also be much better than current offerings.

Otherwise MVP is a trap. Getting a so called minimum viable product (defined by yourself) out in 30 days makes no sense. Every product is different. No product was successful cause its minimum viable product was out in 30 days. You can boast about how quickly you rolled it out, collect feedback from users / customers (most of this feedback is predictable and chances are you would already know about it) and keep building features. Define MVP as not something you can roll out fast, but something that is more valuable than existing product. MVP should not mean Minimum Viable Product. MVP = More Valuable product! (suggested by Nischal)

This is also true for service companies. If you are building a ecommerce company today in India, customers would expect not just similar online transaction experience but also the same level of reliability in logistics or customer support as provided by Flipkart or HomeShop18..

Is there a way out of this? Yes – build really innovating products that don’t have existing benchmarks so you can define one yourself and for others to follow. Or build products in a domain were market leaders are yet to be established.

To succeed, you have to build a better product than one available in the market or innovate and build something that does not exists already! Post that stage you can – Build. Ship. Market. Learn. Build. Let the cycle go on.

Remember, the bar for Minimum Viable Product / Service is very high!

img credit: waltimo on flickr

#FoundersMeet 3 – Collective learning of 20 Early Stage Startups

Background – I was fortunate to be invited for the #FoundersMeet 2; informal get-together of 7 startup founders last year. This time around Anirudh, Sid, Nischal, Deven and I suggested to move it beyond our circle and extend it to 20 startups to come together and share our small success stories, failures and challenges. We also wanted to create a strong connect for ‘Mumbai-Pune Start-up Ecosystem’ which sort of never existed.

The 3rd #FoundersMeet happened in Mumbai on Wednesday 23rd Jan 2013 (a working day)., was expected to go on for about 7 hours, the interaction continued for 13.5 hours (yes!) with some amazing insights discussed and shared. I’m sharing this post on behalf of all the startups (& their founders) who participated.

Selling a SaaS Product:

  • International Customers are more inclined towards using self-service products. Indian counterparts expect hand holding and need assurance of customer service at arm’s length even when not required. 
  • Customers in India will insist even on customizing a standard SaaS product. This tends to be service-model trap, best avoided. 
  • As long as the user-proposition communicated during sales pitch or on the product is fulfilled, International customers are satisfied. They will switch the product fast if they find another product delivering more value. On other hand, Indian customers take time to switch product if a good relationship is established. 
  • If a competitor is offering a product for free, users will not like to pay you for that product.
  • Sell the product to the poster-boys of the industry, rest will follow by themselves. 

Product Pricing:

  • There is a disproportionate value in the word ‘Free’. Use it whenever you can. 
  • Over 90% of users will sign-up on the Free plan. When they move to the premium plan, they are most likely to use the plan that has the lowest value. Ensure that this low value plan has a disproportionate value for its price. That makes customers love you instantly.
  • When someone is making money because of your product, make sure you are making money out of it too.
  • Positioning your product / business is important. It can either be in Income side or Expense side. Always pitch / present your product on income side – “we help you generate money / your earnings will increase / your savings will multiply.”

Up-selling Product:

  • Acquire with freemium plans. Ensure enough hooks are in place that leads the customer to purchase the product post the free period or upgrade to the next paid plan.

Identifying Product Drivers:

  • A SaaS based product will not be driven by technical people, its driven by functional people. Build a product that can be installed by techies in less than 5 minutes, and can be driven by functional people without interference of tech people.
  • Sell the product to decision makers. Never pitch any product to a tech person. The tech person will always think that he can build it by himself.

User Acquisition Hacks:

  • For B2C products: Sell traction of existing users to new users. Create a feel that – Yes, there are people here, you’re not alone. That gives new users confidence about the product.
    Example – In Mumbai when you see 3 Vadapav stalls on a street, unknowingly you will go towards one that has maximum people eating and buy from there. 
  • For B2C products: Show activity. Existing activities drive more activities.
    Example – IRCTC, startup folks and early adopters think the platform sucks and fails whiles booking; common people think of IRCTC to be a big corporation that there is always high demand. That leads to perception of credibility for IRCTC.
  • Use Associations for Endorsements – IRCTC mentions – ‘A Government of India Enterprise’. This is a big endorsement for IRCTC and brings credibility to it.
  • Bounce Rate Reduction – A transactional consumer site was featured in leading newspapers. When they mentioned ‘As seen on Newspaper A, B and C’ on their homepage – it boosted its credibility and reduced the bounce rate.
  • Social Proof for User Acquisition – The Facebook widget that displays people who have liked the brand also builds credibility.
  • Real People – A SaaS based startup focusing on product for Chartered Accountant features a local/prominent CA on its homepage. That quickly build credibility for itself in eyes other CAs. It was easy to acquire more customers.
  • Investor Hack – For SaaS startups, whenever any VC reaches out to you, get them to introduce to its portfolio companies. Its quickest way to demonstrate more traction and more importantly to add new customers.
  • Physical World – Example., Printed Coupons redeemed at Restaurants are social proofs in real world. Makes other users curious on how did a customer get discount / where did he get the redemption coupon from. 

Ecommerce:

  • Thoughts on heavy discounting in current Ecommerce business in India, its like ‘Selling a Rs.100 note for Rs. 90’.
  • Potential in disrupting offline business is huge. All online businesses are not even 1% of the offline businesses.
  • Offline products are indeed cheaper than online. Consumers researching online and transacting offline is big. This market is ripe for disruption.
  • Ecommerce players are now less focused on doing marketing campaigns, but more focused on increasing conversion ratios of existing traffic.

User Experience:

  • UI is ‘relative’. Focus on User Experience.
  • Cleartrip is loved by all of us; but its clearly MakeMyTrip / Yatra that works with masses.
  • Make the product work 100% of time for what you promise.

Entrepreneurship:

  • Don’t fall in love with your product. Fall in love with being successful.
  • Things that work in west don’t work in India. Specially with funding and investments. Currency for investment in India is not traction, its revenue.
  • Be a salesman. Never miss a opportunity to make noise about your product.
  • Don’t focus on a niche market, there are very high chances of failure. Instead focus on a large market opportunity, its more likely to find success here.
  • Notice early signs if things are not going your way. Pivot fast.

Product Distribution:

  • SaaS products: Explore opportunities to integrate with large platform players – Domain Cpanels, or ecosystem creators like Shopify, BigCommerce, etc.
  • SaaS products: Label your widgets – ‘Powered by You’. They are most valuable for Inbound leads.

Product Scaling:

  • Don’t just design products for scale / growth; also ensure you design the business model for scale.

Essential Traits of Consumer Product:

  • Curiosity. Rely on Curiosity – (Example LinkedIn – 2 people have seen your profile today).
  • Build the – Theory of Reciprocation into your product.
  • Gamify some features, let users do free marketing for you before unlocking information. (Example – Tweet about something to show details).
  • Understand show-off value in your product. People love to show off on Twitter & Facebook. Capture such points to your product.

Social Media Marketing:

  • Twitter links have a CTR of 0.5% to 0.8%. Customer acquisition here happens in scale. Spend energy wisely.
  • Don’t spend time on talking to random folks on Twitter based on their conversations. Extremely time consuming and most unlikely to convert.
  • Facebook advertising does not lead to conversion. Its best suited for brand building.
  • Facebook Contests that involve sharing real pictures of users online brings lot of credibility to brand.

Competition:

  • Once a user has signed up for the product; make sure it works it. Don’t bother about competition. He has taken pain to signup to your product, make the promise work.
  • You’re the only one who know about your competitors; not your customers.
  • Many SaaS verticals are getting crowded to an extent that price remains only factor to decide. Only the ones that are able to innovate will survive.

Visibility:

  • Founders should be visible on Social Media. Talk about the product and should be able to convince their followers about their passion. Only passion attracts initial traction.

Market Penetration:

  • If you are doing something innovative (either B2C or B2B) – you will need to spend good amount of time on educating your users / customers. Its easy to get frustrated in this loop.

Content Focus:

  • Don’t get carried away by ‘Content Marketing’ or ‘Content Sharing’.
  • Building products that have content plays is difficult – content creators are few and content sharers are in plenty (Usually 1% to 99%)
  • Look for plays that involves sharing of content already created.

Building Relationships:

  • B2B: Build great relationships with your marquee customers. Keep them educated on new initiatives, new market dynamics and help them monetize better.
  • B2C: Continuously stay connected with your early adopters and take feedback from them. Keep them informed of new updates, they’ll love you. Whenever any suggestion is considered, incorporated into the product – communicate to users.

Driving Engagement:

  • Build features that would enable discovery of relevant / contextual information – that leads to higher engagement on the product.
  • Keep users involved… the trick is dashboard views. They create the “I’m in control” feeling for users.

Search Engine Optimization:

  • Figure out what you are optimizing for & the competition on that. Example., if you are trying to optimize now for ‘Apple iPhone’ – you would be the millionth website trying to do that. Get your own niche, it works best.

Mobile Apps:

  • Discovery of mobile apps is biggest challenge for them. Notice that many apps are trying a generic name for better discovery while users are searching for any other app.
  • Integrate app with key functions of phone. For example, on Android – phone book integration, and so on.
  • There are many hurdles in mobile app development cycle, best to understand from multiple startups who have built mobile apps earlier.
  • App Ratings matters, a big consideration factor for user to download the app. Get the initial ratings by distributing the app between family & friends.

PR:

  • A press release in India goes not get you much traffic. Its great channel for visibility, but don’t depend too much on this channel.
  • International Blogs & Coverage had a higher conversion ratio for products. International users give a try to product, sign-up, explore and use it.

Mobile Advertising:

  • Despite all the hype, Mobile Advertising is still considered as experimental budget.
  • Mobile Industry – one cannot be stuck in a region or one product for more than 18 months. Fast innovation required.

Venture Capital:

  • Stop chasing VCs or attending events that have VC meets or Demo Days. Hardly any investments happens that way.
  • A VC is most likely to invest in your startup when he is chasing you.
  • Indian VCs are yet to understand product driven consumer web-plays despite traction. Skip them and move to the west, it also brings lot of traction.

Biggest Learning of #FoundersMeet: Keep Plumbing. (Those who were present would understand this!)

Note: Some of these thoughts/hacks listed above may sound very generic since we have decided not to mention the context / startup involved. Providing too much information in public domain would not be right for startups who participated. You can connect with any of them directly, the founders would be glad to help you.

#FoundersMeet 3 Participating founders: Anirudh, Deven, Nishcal, Siddharth, Kunal, Sahil, Pravin, Kulin, Sameer, Talvinder, Gargi, Garima, Shekhar, Avlesh, Rohan, Sushrut, Sarang, Raxit, Noel, Soum, Nitin, Ronak, Pranay, Annkur, Divyanshu

Many thanks to all startups who participated in the #FoundersMeet 3. Thanks to Nischal, Deven, Anirudh and Sid for reading/editing the draft of this post. Special Thanks to the wonderful folks at The Playce (a great co-working place for startups), Mumbai for hosting us.

Stay tuned for the next #FoundersMeet 4!

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Tracking My Tech Predictions: The ones that came true!

Over past few years I have been tracking technology trends, analyzing and love predicting things through posts on this blogs, on twitter or through my annual technology trends & predictions. I recently started tracking them in a attempt to see how good is hit ratio. Here are a few of those that really saw the light of day.

Other Tech Predictions mentioned on this Blog:

  • Feb 2010: Social Platform intermediaries in Social Commerce space with no clear value propositions will fail as larger eCommerce players will self-integrate.
    May 2011: Blippy / Swipely pivoted from core proposition – sharing purchases.
  • May 2011: TRPs will be questioned. Future of TRP is digital. Crowdsourced TRPs,
    Aug 2012: NDTV submits a lawsuit against Nielson alleging rigging TRP data.
    Oct 2012: Startup iDubba launches iTRPs
    Dec 2012: Nielson annouces partnership with Twitter for Twitter based ratings.
  • Sept 2011: Google+ will head no where as Social Product
    Today: Its evident! When did you last visit your Google+ profile.

From 2012 Tech Predictions:

  • April 2012: LinkedIn will acquire SlideShare
    May 2012: Yes, LinkedIn acquired SlideShare for $119 Mn
  • April 2012: Indian Ecommerce will see Acqui-hires
    May 2012: Snapdeal acquires eSportsBuy and then shuts it down.
    May 2012: Yebhi acquires StylishYou and shuts it down.
    Aug 2012: Hushbabies acquires MangoStreet and shuts it down.
    Aug 2012: FashionandYou acquires UrbanTouch, UrbanTouch management takes over.
    Related Post by me: Why Ecommerce acquisitions make no sense in early stage.
  • April 2012: Jabong will be aggressive play by Rocket Internet. Will be in Top 5 Ecommerce players in India
    May 2012: NextBigWhat apparently pointed out that they are.
  • April 2012: Series B crunch for players focused on vertical ecommerce.
    Evident: Many ecommerce startups who raised Series A struggling raising a follow on round.

From 2011 Tech Predictions: 

  • Jan 2011: VCs will consolidate Indian Ecommerce plays within own portfolio
    Feb 2012: Flipkart acquires LetsBuy
    Nov 2012: Myntra acquires SherSingh / Exclusively.in
  • Jan 2011: A large player will enter Group Buying / Coupons space
    May 2011: Times Group enters daily deals business with Times Deal
  • Jan 2011: Pubmatic will be acquired
    Nov 2011: Rumors of Pubmatic in acquisition talks by Amazon. Pubmatic turned it down for IPO
  • Jan 2011: AdMax Network
    Feb 2012: Hinted towards AdMax Network in SE Asia which leveraged local inventory and is a leader in these countries. While I expected something like this to happen in India, interestingly Komli acquired AdMax (No direct prediction here).

Why Mobile First is not the Right Strategy!

Startup events and Investor talks today have this catch phrase – ‘Mobile First’. Its actually started two years back when Fred Wilson wrote a post that says “Mobile First Web Second.

I recently tweeted, “Can write a post why ‘Mobile First’ is not a right strategy!”. The response to that made me write this post.

Why I said that?
There are some brilliant mobile apps created by startups in recent years, the biggest challenge for all of them is discovery. Few startups are working in this problem too – helping users to discover your mobile apps. The problem is – these startups themselves are struggling in getting users to discover them first.

Google’s Android has over 700,000 apps in Play Store. Apple’s iOS App Store has over 700,000 apps. Assuming these were unique, as a entrepreneur, your startup has to fight with over 699,999 competitors on user’s smartphone, who on an average has only 65 apps installed. Another trend, many users regularly uninstall apps they do not use; once uninstalled – it is very unlikely they will install it again!

Building a successful startup requires two skills – building a product and marketing it. I tweeted that few days back – “Building a product is one thing. Marketing it is another. Remember that!”

Building the Product
Product development in startup is not easy. Everyday there are at least 3-5 updates to the live web application. Even before users realize, they are using on the latest version of web app.

On mobile this is tricky, its impossible to send 3-5 daily releases for your mobile app everyday. Its even more trickier to get your users to download and upgrade the latest version of mobile app every time.

Marketing the Product
Turn around and look at web – what are the ways you can get your start up discovered – Natural Search, Paid Search, Display Marketing (Advt based or Behavior based targeting), Social, Email Marketing and so on. Most of these is very flexible, you can do it all.

On mobile, there is only one mode of discovery that works – Mobile Advertising. Its still not a easy mode of advertising; far expensive; spray and pray approach as its not intent driven (remember – no one is asking for your app!) like Google Adwords and extremely less efficient since its end result is not landing page with one-click sign-up, but its downloading the app, registering the user and retaining him as well.

Btw, I am a believer in products that are driven by value to customers; and not through marketing.

So how does one get Mobile Strategy right?
Glance through the smartphone and check the apps you are most actively using. Its Facebook, Twitter, Gmail, Evernote, Quora and so on. These are essentially web first, mobile later products.

Effective Mobile Strategy is simple – get your product right on the web, acquire initial users, iterate your product (fast), get it right quickly, ensure engagement is in place. Once you have users engaged on the web, they will see value in your product to download your app and stay connected.

Hint – Look at Quora. It was valuable to its initial set of users who were so engaged with the product that they were screaming for getting a mobile app. Quora launched iOS app in Sept 2011; Android App a full year later in Sept 2012.

As a product manager, know that driving adoption and driving engagement for a product are two different things. Don’t try to drive adoption of your product through mobile, its extremely challenging and next to impossible. Instead use mobile as a extension of your product to drive engagement.

Then what about WhatsApp, Instagram, FourSquare, Pulse, Angry Birds and others?
I don’t think anyone has defined this yet, so let me say what are truly mobile first verticals –

  • Communication – If core of your product is deep integration with phone address book. (Eg, WhatsApp)
  • Location – If core of your product starts with location awareness. (Eg. FourSquare)
  • Camera – If core of your product starts with ‘taking’ photos. (Eg. Instagram)
  • Free Time – If core of your product is being valuable to user on the move or leisure time. (Eg. Games, News aggregation services like Pulse). Again extremely difficult category – you compete with Facebook, Twitter and 1000s of apps in this segment.

Yes. These products are not exceptions – they are truly mobile first products.

Wait, will VCs invest in my startup if I dump Mobile First approach?
Next time anyone suggests you or advises you to go Mobile First, just ask them tips to hack app discovery and drive adoption.

The games of investing are simple. VCs will invest only if –

  1. A proven team or experience entrepreneurs (at least 1X entrepreneurs)
  2. If consumer startup – then traction; if enterprise startup – then revenue.

I don’t think any VC will invest in your startup just because you are Mobile first. Take any strategy – web first or mobile first; as long as you get the above two things right for your product – VCs will chase you!

Concluding Notes:
While I was drafting this post, two interesting posts related to this topic came up.

Fred Wilson wrote following in his post “What has changed“, – “Distribution is much harder on mobile than web and we see a lot of mobile first startups getting stuck in the transition from successful product to large user base. strong product market fit is no longer enough to get to a large user base. you need to master the “download app, use app, keep using app, put it on your home screen” flow and that is a hard one to master.”

Cristina Cordova put up some interesting stats about User Retention in her post – “The Biggest Problem in Mobile: Retention.

Restating it again as concluding remarks: “Mobile Strategy is simple. Get your product right on the web, acquire initial users, iterate your product, get it right, ensure engagement is in place. Once you have users engaged on the web, they will see value in your product to download your app to stay connected.”

Update: I received few notes from startup founders to also include a important note in this article which I missed – ‘Even when you build a web application, design your product as a responsive web design’. I completely agree.

475 Days of Unemployment (Read Entrepreneurship)

This is not one of the regular posts I usually write about. There is so much advice about Entrepreneurship already, many founders have shared detail about their journey. When I started my entrepreneurship journey, I wrote a post – ‘Lets blame it on Rio and not the ecosystem‘.

I meet people who want to start-up. Most have a brilliant idea, many talk about selling their companies after 2-3 years and retiring from work at early age. Raising venture capital is today considered success by wannabe entrepreneurs, which is not. 1 out of every 100 startups succeeds; given the amount of startups coming up – this will soon be 1 out of 1,000 or even 10,000. I guess there is too much press about startups these days, about getting funded, million dollar exits.

All this is attracting many people towards entrepreneurship without realizing how difficult the journey is. Sharing my entrepreneurship experience and hoping others don’t go through mistakes I made.

 

1. Control your own Fate.
To get stuff done fast, the very next day of quitting job – I outsourced product development to another company. Estimated 60 days task took 180+ days. This arrangement continued for more months. Burnt loads of cash, I consider that my biggest mistake.

Lesson Learned: Our success (or failure) is now in our hands, not in anyone else’s.

Advice:

  1. If you are an entrepreneur, please check who is deciding/controlling the fate of your startup? If its not you, you’re in trouble.
  2. If you’re planning to startup, get your own team in place; Don’t start your startup by outsourcing development.

 

2. Things will go wrong. Again and again.
This is the 4th time we’re writing our code from scratch. First two attempts were with product iterations for Tyched, next was alpha release of Wishberg. Its initial version was written by the outsourced company, it started crumbling under its own weight as users and data grew, dumped it when we hit roadblocks. Our team is now building the beta version on own custom framework, that will help us ship product fast. Really fast.

Lesson Learned:

  • When users & data starts growing quickly, you should be able to iterate quickly. We lost about 4 months with legacy code. Choose product / tech architecture with tons of flexibility.

 

3. Stay connected with ecosystem.
I started blogging on beingpractical.com about 3 years back when I had no intention of starting up. I also manage the Internet & Mobile product management groups on LinkedIn through which I connected with product professionals across the world.

Being a product guy – helped, tested other’s alpha & beta products, provided feedback, tips on product management, gave suggestions to scale up products, user acquisition hacks. Thanks to that – it connected me with many founders, product geeks and few people in investment community. Many of them were kind enough to help me back whenever I asked.

Over last 12 months, I have a built a network of about 500 early adopters to help us on Wishberg; another 1000+ are on my list.

Advice:

  • Plug into startup ecosystem well before you start up.
  • Don’t shy away from asking. People in startup community are always willing to help.

 

4. The flawed assumption about lack of early adopters.
I see more Indians on Quora these day, I recently tweeted – Future Generations may think Quora is a Indian product, like current generation thinks about Bata. India is among the top countries by users for many global products – Facebook, Twitter, LinkedIn and so.

Almost everyone who claims about the lack of early adopters in India are from startup ecosystem. Many of them have not yet tried out products from other Indian startups. I’m a founder / entrepreneur and have decided to be early adopter. I try out every new product that comes my way. Anyone who has written to me about their product, I’ve signed up – provided feedback / suggestions to the best of my experience & knowledge.

Advice:

  • As founders we can continue to complain about lack of early adopters or decide to be one ourselves. My 2 cents are here.

 

5. Have a product roadmap. Don’t build your startup on just one idea.
Many product startups that hit dead pool rely only on just one idea. We only know successful pivots like Inmobi, Instagram, Fab, etc – but there are plenty of unsuccessful ones we never heard of. Pivot is not easy, extremely difficult in both ways – managing expectations of stakeholders as well as your own.

Talk to folks before starting up on potential of your idea, its possibilities. Avoid situations where you have build all that you could in 3 months and are clueless on whats to be done next. There is no thumb-rule to this; but at least have a product roadmap that extends into next 12-18 months, talk to users / customers in this while. They will tell you more.

Advice:

  • A idea that can be finished in 3 months might be a hack. It ‘may’ not be a product or company. Build your product around a vision, it may takes years to execute.

 

6. Don’t divulge what is not shipped yet.
This is a tough one to explain. To put it simply (or wisely) – ‘You can’t build a reputation on what you are going to do.’ Here the context is different. Everyone is looking for ideas, you don’t give it to them.

We met with one angel investor, had a detailed discussion about our product – how we intend to market / acquire consumers. Few days later, one of his invested startup came up with remarkably similar approach. On another instance, one investor met us twice in a span on 10 days, insisted we share our detailed road map ASAP. A week later his firm announced a investment in an over lapping category; he was leading the deal.

Learning:

  • We could crib or just move on. We moved on to building our product without complaining. I feel the line of differentiation between startups in decreasing. There are too many similar products in investor portfolio, make conscious decisions on which investors you want to talk with, do a small ‘check’ on their investments and portfolio.

 

7. Do whats impossible, not what is easy.

If you have a brilliant idea and you think its easy to execute, there probably are another 100 startups doing it already. You are operating in a crowded space.

I have often got this advice or being questioned, why am I building another social commerce product, there are already plenty of them. Here’s the answer – we’re not building a social commerce product. We’re attempting a new method of social discovery for product intents. Its different, will talk of what we intend to build – once we build it (my rule: don’t divulge what is not shipped yet!)

I usually classify start-ups in 3 segments –

  1. One where making money looks real easily. (Enabling transactions, affiliates, advertising, lead generation)
  2. One that solves problems. (Usually loved by VCs)
  3. One that changes user habits. (Paul Graham calls them – The Black Swans)

I wrote about the third type of startup last year – The biggest innovations never solved any (stated) problem.  They are difficult, high failure rate – but once they succeed, there is no looking back.

Suggestion:

  • There is enough competition for me-too ideas or easy/obvious ones. Don’t be a part of that, unless you can completely re-define that vertical. Take up something that can radically change user behavior / habits.

 

8. Your health is important.
In this period, I’ve suffered from hypertension, blood pressure has shot up multiple times. Twice I went unconscious – had to be check’ed in at hospital.

Long working hours, erratic sleeping times is way of startup life. Managing time is myth, work manages your time. For last 15 months I’ve been working for 12-14 hours daily; 3-4 hours of daily commute (I reside the farthest if compared to all my team. Conscious decision – office is conveniently located for all team members. They can put in more time without bothering about commuting in Mumbai).

Advice:

  • Amount of stress first-time founders will go through in start-up journey is unimaginable. I’ve learned to relax and have started paying good attention towards my health.

 

9. Take breaks from Startup Life at times
Entrepreneurship makes you so passionate about your product / work, that you end up talking about your product, vision, things you plan, how you intend to change the world, etc to almost everyone.
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You tell folks stories about Facebook, Instagram, and so on. Be grounded to reality – there is life outside your startup too, find some time to be a part of it, unwind and get back. Time is most precious for every startup / founder. And startup life can be a trap., you’ll always end up postponing personal commitments for work very often, in fact all the time.
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Advice:
  • Take breaks in a while. Spend time with your family and friends; make sure you live life outside the startup ecosystem as well.
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10. Technically, you’re unemployed. Accept that.
Though the respect for startup founders is improving in the startup-ecosystem, to the outside world you are unemployed.
.
You will be often reminded of that by folks you will never expect – like the customer support staff at credit card department – “Aapke pass to job hi nahi hai. 3 years ka company IT returns aap submit kijiye.” (Translates to – ‘You don’t have a job. You will have to submit 3 years income tax returns of your company to apply for one’). This is a top Indian bank, I’m their premier customer since last 10 years and it doesn’t matter.
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This is the reason why the post title says – 475 Days of Unemployment.

Advice:

  • Plan your startup well. Talk to other startup founders before you start – understand what difficulties they went through. Startup life is not for everyone.

 

11. Learn to stay calm. You will feel humiliated.
Few people talk / act exactly opposite to what they say. One investor spoke at a conference how he thought Social was the next big thing with some awesome statistics. Kulin (my co-founder) and I caught up with him a week later – he was a different person now, had only one thing to say – ‘Facebook can do this. They can kill you!’

A known investor turned up 35 minutes late for a meeting, did not apologize, later he ordered food and drinks with no courtesy to offer us. During the discussion he was ogling at girls in the restaurant all the time, found someone he knew and told her he will see her in 5 minutes – all this right in front of us. We ended the meeting in next 2 minutes and walked away.

Another day, another prominent investor met us. He disagreed on one of our points, he started off, “Do you know whom you’re talking to? Do you know who I am?” We maintained our cool, thanked him for his time with a smile and promised ourselves never to see him again.

Advice:

  1. Though this offended us like anything, we stayed calm. We live in small world of founders & investors, never want to burn bridges.
  2. Don’t take names. Not online. Not offline. Not anytime.

Maybe those investors will never know, but I have given good amount of feedback and advice on product to founders of startups they have invested in. On other side, there are some extremely professional individuals and investors, they still continue to advice us, given us time whenever we’ve asked and have continued to open connections from time to time.

 

12. Choose your investors / mentors carefully. 

We had many funny incidents around getting funded, looking for mentors or folks we came across in this journey.

  • One investor extending a term sheet on a condition that we agree to monetize from Day 1 (something I have not believed in).
  • One senior executive at MNC insisted we take him on the board of directors and he will open doors for us. (Since then I have felt being on board of directors is the new Page 3)
  • An incubator claiming they are better than Y-Combinator or 500 Startups. ‘We can give you what they cannot.’
  • A so-called angel investor claiming to have invested in many startups, not ready to name a single since its private and confidential. (Rocket Science? Even SpaceX investors were known.)
  • Someone who does not know ‘C’ of Coding telling us we should hire a Chief Technology Officer (he even suggested one with 22 Lac INR salary, who could join us at minimal hike).
  • Feedback on Design: ‘Use bright red color instead of blue. Red means attention, users should pay attention.’

Throughout my startup journey, most of the folks I connected with in India had the common set of questions to ask –

  • Almost everyone asked: “How will you make money?” / “When will you make money?”
  • Very few asked: “How will you acquire users?”
  • Just one person asked: “How will you build this product to match your vision?” He himself is a very well known entrepreneur and angel investor. We hold him in high regards for his advice and support from time to time, even without no formal association.

There is nothing wrong with this question, businesses have to monetize and make money. But few here realize that Social Products need to monetize at scale . The ratio was just reverse when we spoke to folks from the Valley, very few asked the ‘Money’ question.

Kulin and me share this funny thought. Had Instagram pitched to some of these investors, wonder what sort of feedback they would have got. Maybe – ‘Stop coloring photos. Do some serious business.’ 😀

Maybe we met wrong people. But yes, there some really great folks available in India too. My general observation is – if you’re doing a B2B start up – there is good advice / mentors / investors available in India who can open connections, get initial customers. For B2C product startups, India has very few people who can advice on Product, Design, Growth Hacking, Technology and User Experience. We eventually started connecting with people from successful startups or individuals with relevant skills from Silicon Valley / US to help us.

Advice:

  • Take money/advice from someone you respect. If you take money from someone you don’t respect – he will kill you with his advice.
  • Spend more time with people who can help you with your product than the ones who can help you raise money. If you have a right product, things will happen to you.

I’ll write someday on how to identify good people who can advice you.

 

13. Of hiring, people and team.

Till May this year we occupied a shared office (paying per seat and amenities as used). We hired 3 engineers in a month – our costs went up 3X; We decided to quit that place and we were left without office space. During this time, one of our team members offered we operate from his home. And we did the same while our office got ready.

The only thing that matters for any product startup is quality of its team. There is only one rule for hiring at startups – Hire the best engineering team, and pay them well. 1 Good Engineer = 3 Mediocre Engineers.

Have heard of tons of advice on hiring – tell potential hires about startup, culture, fun @ work, ESOPs, etc. This does not work. Don’t try to sell future employees what they have not experienced. Let them join you – create a personal bonding with every team member, nurture your ‘friendship’ with team members, they will be your extended family. They will put in their best. Most of our team members joined us through referrals. Don’t talk with them about passion or commitment, show them yours.

Advice:

  • Genuinely love your team and be concerned of their well being. Create a bond with all your team members.

 

14. And in the end, its not always about the money.

We failed innumerable times in this startup journey. Its fourth time that we are coding our platform from scratch. Multiple mistakes made. And there were plenty of distractions – most of them come to you as lucrative job offers. When I quit my job, the very same week I got a call from the HR Head of a FMCG company to join their Online Marketing team, I was interviewed for that position few months back. I said no, and the next week Kulin confirmed to join me as Co-founder. I’ve passed many other job opportunities that came up in last 18 months, including one in Silicon Valley.

So all those who are considering entrepreneurship for money or funding; the reality is different. Its not money that drives startups, its the passion. There will be events that will test your passion – multiple failures & many distractions.

Learning:

  • Startup life is difficult, daily struggle to make ends meet. The only thing that keeps you going is your focus, passion and belief in yourself, your team and your product. Nothing else matters.

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If you are new on beingpractical, please view my profile. If you are a founder and think I could be any help to you, feel free to write to me on pj [at] beingpractical.com or follow me at @beingpractical

Thanks to my co-founder Kulin for reading / editing drafts of this post.

Why Ecommerce acquisitions make no sense in early / nascent stage

Few (Series B / Series C) funded ecommerce companies in India have started making/announcing acquisitions of smaller players. Recently when I posted about the 2012 Predictions & Trends, I made an comment that in an early ecommerce market, acquisitions of competition or startups really makes no sense. Trying to put few thoughts on that here.

A typical such small ecommerce startup that gets acquired by larger & known ecommerce player is structured as follows –

  • About 2-4 founding team members; 5 to 10 employees; up to 25 or so if the venture has received any institutional stage funding
  • Focused on one vertical – sports; electronics; kids; jewellery – Catalog of 1000 to 10000 product SKUs
  • Order Acquisition Channels – Direct Traffic, SEO, SEM, Social, Affiliates, Email Marketing, Display Advertising.
  • Team Structure: Founders, Product Development & Management Team, Online Marketing, Category Managers, Logistics & Operations Managers, Customer Support
  • Social Media presence – Fans on Facebook; Followers on Twitter
  • Business Partners – Vendors for Procurement, Logistics, Payment Gateway, Customer Support
  • Product, Platform & Technology
  • Warehouses & In-house logistics for Series A funded players
  • Gross Orders – between 50 to 100 per day; few Series A funded players may have from 200 to 500 per day.

What happens when a considerably large & deeply funded ecommerce player (say LargeEcom.com) acquires a small startup (SmallEcom.com) with assets as mentioned above –

  • Category Focus:
    SmallEcom.com will be either a horizontal player or vertical focused player. If horizontal, then most of the products will be already present in acquiring company. If vertical then it might be a small ecommerce startup with about 500 to 5000 SKUs, the acquisition further does not make any sense. The acquiring LargeEcom.com could have directly poached category managers or could have developed that category in-house just by hiring few more category managers!
  • Order Acquisition Channels:
    Any online ecommerce venture’s assets are how they are acquiring new customers. The biggest challenge is not acquiring SmallEcom.com, but making the most of these channels. Post acquisition, these channels are ‘unfortunately useless’ to the acquiring company – LargeEcom.com. Here is why –
    .
    • Direct Traffic >
      If website of SmallEcom.com needs to be shut, the direct traffic will be redirected to LargeEcom.com post acquisition, doing that quickly reduces the value to its existing users. If website is shut – value of all other channels die on its own, explained below.
    • Natural Search or SEO >
      SmallEcom.com’s URLs in Google Index no matter how well optimized will lose rankings when the traffic is diverted to another domain. All time and money invested in search optimization over months / years is diminished immediately.
      .
    • Paid Advertising: SEM & Display >
      Search Campaigns are optimized over a period of time to reach lower the cost per clicks. Though the same can copied from SmallEcom.com in to account of LargeEcom.com’s adwords account, the same CPCs will not be maintained. Well, otherwise the acquiring company LargeEcom.com’s has its own online marketing team, it will be a max one week job to create new campaigns for the catalog of SmallEcom.com.
      .
    • Social >
      Post acquisition, SmallEcom.com’s Facebook Fans & Twitter followers cannot be moved to LargeEcom.com’s brand page or twitter handle. Again – value of the time and money spend behind this channel is reduced to zero on day 1 itself.
      .
    • Affiliates >
      There are few affiliate marketing companies in India, they work with all ecommerce companies. Most likely LargeEcom.com would have better negotiated rates (cost of acquisition) with the same affiliate partners thats SmallEcom.com has partnered with.
      .
    • Email >
      There might be few duplicate email addresses, but is this a reason for LargeEcom.com to acquire a ecom startup with a small number of email addresses knowing that email marketing has diminishing returns over a period of time.
      .

The conclusion is – to retain the value of the startup’s order acquisition channels, the venture needs to be up and running. The big question for large acquiring company – should be it done at a cost of duplicating every resource available – two marketing teams, two product teams, two tech teams, two customer support teams or two operations teams?

The answer is No in both the cases – that is why acquiring a ecommerce startup is senseless; and most of them happening in India now can be termed as Acqui-hires, hired for talent.

  • Founding Team:
    The founders are retained, most likely to quit post the expiry of retention period. Once entrepreneur is always a entrepreneur by heart.
    .
  • Team Structure:
    Post acquisition, most roles will be dual and overlapping in both organizations. Unfortunately many cannot be accommodated since the larger entity cannot have – say two Online Marketing Heads or two Operations Head. Only in the case when the acquiring company has open positions, high chances that the team members are accommodated, else asked to quit.
    .
  • Business Partners:
    Vendors for Procurement – will be added to LargeEcom.com if it was acquiring a vertical ecommerce player and was not present in the same category. Most likely, this will not be more than 100 new vendors; again which could have been easily acquired just by hiring 2-3 new category managers (so why acquire?). If horizontal player was acquired – there would a overlap in vendors too.
    .
  • Logistics & Payment Gateway:
    LargeEcom.com would already enjoy better pricing for both with its partners, needless to say they both work with similar service providers for logistics. Acquiring a startup will not increase footprint in terms of pin-codes served.
    .
  • Customer Support:
    In a small startup, customer support is usually handled by a very small team; often by founders. If acquisition is across city – a Delhi based startup is acquired by Bangalore based one, clearly means that the team is either axed or goes on job hunting mode as they would not be open to relocation. This also holds true for other teams as well.
    .
  • Product, Platform & Technology: 
    The smaller startup that gets acquired will probably be running a ready-to-integrate ecommerce platform. Surprisingly, even the larger acquiring company might be as well running on some ready to use ecommerce platform and struggling to hold it up. There is absolutely no question of seamless integration here, ask your engineering folks! Either ways, since the acquisition is not for technology, the product and platform improvements on the smaller startup’s ecommerce platform will be lost as well.
    .
  • Warehouse & In-house Logistics:
    Few funded startups today have started with own warehouse & in-house logistics. Post acquisition, the lease on such warehouses expire (for two reasons – acquiring ecom startup already has own warehouse in that location with excess space + managing two warehouses in same city at a distance from each other means doubling operational costs). In-house logistics employees are either temps or contract workforce or on rolls of another company.
    .
  • Gross Orders:
    The SmallEcom.com site that was just acquired was doing about 50 to 200 daily gross orders; The LargeEcom.com site who acquired it will usually claim to do between 10,000 to 25,000 daily transactions. On order to order basis – acquiring an loss making ecommerce startup that will does 0.5% to 1% transactions will add any value to large entity? No.
    .

So why are these acquisitions happening?

  • New Vertical?
    No. It is not right to acquire a company for say $1 Mn or even 1 Crore to add new category to your product portfolio. Hire two category managers and have the new vertical rolling in 3 months.
    .
  • Acqui-hires?
    No. They happen if it was a case of known proven talent who build a super kewl product / technology platform but did not hit a right idea or execute it well. Examples – Oink (by Milk), or Gowalla and so on.
    .
  • Revenues?
    No. A large loss making ecommerce entity acquiring another loss making small ecommerce startup – two negatives don’t add up to positives.
  • Assets? No.
    Clearly no assets are doubled post the acquisition. Nothing on revenue, product, process or technology.

May be signs of desperation. May be lets try out something new. May be even VC / PE signaling – ‘Hey, we guys are growing inorganically, new category, new vertical and so on – we will require more investment capital in next rounds, care to participate?’. They may participate or may not – but is this a right strategy to present or package to existing investors where the net value of acquisition post 12 months (or even on day of acquisition) is zero.

However, some acquisitions do make sense – Homeshop18 acquiring Coinjoos or Flipkart acquiring Mime360. (Sorry – I don’t name bad acquisitions). Venturing into new vertical at times makes sense for acquisition – for verticals like huge catalog driven businesses – Books & Digital Music. It takes months together to build a team and build this massive catalog and then start business operations; acquisition makes more sense than building it grounds up; but not for any other category.
.
So Amazon.com acquires? Why can’t we?
Amazon acquires cause it should acquire and own large ecommerce companies to maintain its undisputed lead. It is a listed company, needs to focus on growing is topline revenues and at the massive size that Amazon.com is – it has capacity to absorb losses and yet show some superb green numbers in balance sheet.

My guess is Amazon keeps all acquired ecommerce properties (Zappos, Woot, Diapers, Soap, Audible, etc, etc) live and independent post acquisition not alone for the culture of startups – but for reasons explained above. They need to maintain order acquisition channels for these acquired companies active and generate revenues.

While in India, a Series B / Series C funded ecommerce venture cannot run dual operations or two loss making entities.
.
Concluding Notes:
I am not against acquisitions & exits, they are must for startup ecosystem. And they should be in plenty to keep the ecosystem building. But don’t agree with such acquisitions made by Series B / Series C funded ecommerce companies which end up adding no value to the company. They hurt in long run, when multiple investors get involved – burn their hands and then completely give up on the sector or market itself.

Otherwise I will stick to what I wrote earlier on predications for investments made in both horizontal & vertical ecommerce in India.