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Twelve Years of Indian Startups – Part II

After landing in India, I realized the bureaucracy was going to make it really difficult to get started. I won’t bore you with the details but it took me eight months from the day I landed in India to having all of the required papers in place in order to setup a Private Limited company (or corporation). I’m sure the process is much easier today to set up a company but it is definitely not easy to shutdown a company in India.

The view from my balcony

Once I got the company registered, I started looking to hire a few people. I used headhunters, job boards, and, of course, asking people I had been meeting in Delhi. I tried pretty much everything under the sun that I could think of. I hired two interns, one of which was the younger brother of another founder I had met. A few weeks went by and I hired my first full-time hire.

To be honest, though my long-term vision for a reverse auction platform serving the labor force in India was something clear, I had no idea what the magnitude of the problem was and the kind of people I needed to hire. I thought I needed developers so that’s what I tried to hire before anything else.

I interviewed anyone that was desperate enough to to work at a startup (in 2007 working at a startup was definitely not where the cool kids were). Finally, I found another developer who was a Microsoft dev and didn’t quite have the technical background in LAMP technologies. I made a bunch of mistakes in the interview. I should have asked more in-depth technical questions but, instead, I was satisfied with theoretical answers to my questions. I wound up letting this developer go on their first day, partly because of my own mistakes in interviewing and hiring and, in part, because the developer only had theoretical knowledge and wouldn’t be able to contribute to building the product for a long time.

A few months later (probably around April 2008), I was out of town for a funeral. The two interns were working on an important piece of the project. Unexpectedly, I got an email that they were both quitting. Together. Effective immediately.

Most interns didn’t get paid in India back then. I was paying them from day one and relative to what other recent college graduates were getting paid, these college students were getting paid very well. Needless to say, I was furious and shocked at the lack of professionalism by these two interns. They quit right in the middle of an important deadline with an email while I was out of town. I have the email they sent me and my response. Perhaps I will redact some of the emails and share them.

At this stage, I was completely and utterly dejected. I had no idea what I was doing. I was beaten down and there wasn’t a day that went by where I didn’t want to throw in the towel and head back home, to New York City.

I Kinda felt like this truck…or what was left of it.

I still had enough money left to continue bootstrapping this small company, so I continued to push ahead (completely uncertain in which direction I was actually going). The same acquaintance whose younger brother bailed on me was working out of small incubator in Okhla, Delhi. I went to check it out and see if I can get some space. I moved in with my sole developer. I was more confused than ever about how to build out a team that could build the product I needed. I dusted off the cobwebs and started teaching myself PHP while looking for a designer to join us. Eventually, I found a designer and hired him. He wasn’t too thrilled about using Gimp instead of Photoshop but I wanted to see what he could do before spending the money for a product no one else knew how to use. I never really got the chance to find out. After multiple absences during his first week of work (on one instance, his mother called to tell me he wasn’t feeling well), I had to fire him as well.

I’m a little hazy on the time lines now but somewhere around the middle of 2008, I got involved with organizing BarCamp Delhi and that eventually led me to co-founding the HeadStart Network and launching Startup Saturday Delhi. My initial reason for getting involved was to broaden my network and find good people to hire. Also, around this time, I met two people from IAN (Indian Angel Network). They both wanted me to come and pitch IAN but I wasn’t ready to raise money. I viewed raising money from outsiders as something I should do only after I figure out the basics of building this business.

I can’t find any screenshots but we did a soft launch of Semblr in August of 2009. It was a rough and rocky road getting there but we got there. Building a two sided market was much harder than I thought. I quickly found that not having background checks in India was going to be a problem and scaling the process of doing “police verifications” across the city was going to cost a lot of money.

By December, I was almost out of money and I decided to start doing some services to generate a little cash to pay my employees (I had hired a few folks again). That didn’t work out so well. Our first client didn’t pay me for the work we did and instead, hired away my employee that was working with them.

That was pretty much the end of Teknatus Solutions. More or less, that day, I decided to shut it down. I told my last employee (also my first full-time hire) that I would help him find another job but I was done. He was the last person to walk out of the office and turn off the lights. I still try to see him whenever I’m in the same city.

Running a startup in India was an incredibly difficult and it forced me to reexamine a lot of what I had learned about doing business and running operations over the previous 10-15 years. It was more importantly, extremely adventurous, exciting, and educational experience. I wouldn’t trade it in for anything. I learned a lot more about doing business in India than I ever would have in a MBA program or at a job. The experiences gave me a lot to digest and learn about myself which I may not have had the chance to learn had I not taken the leap. The opportunity for introspection that “failing” in a startup gave me has been invaluable but most of all, the people I met and the relationships I built over the last twelve years is something I will always cherish.

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Five-ish Team Building Pitfalls Faced By Startups in India

Picture by Carbon Tippy ToesSome rights reserved

Building a team under the best of circumstances is difficult at best. As technology entrepreneurs, we will look for co-founders or senior management team members that have experience in engineering, sales/marketing, biz dev, management, fund raising and so the list goes on. In places like New York or Silicon Valley or London, it’s a bit easier to connect with the appropriate people and convince them to join your crazy idea.

Management/Co-Founding Team

In India, specifically, New Delhi, it’s a completely different ballgame. Though the word “startup” has become en vogue for college grads and those early in their careers, it’s still not something that more experienced people are comfortable with. Cities like Pune or Bangalore may be a bit different but it is rare to find someone at a startup that has 10 or 15+ years of sales experience, for example. Out of all the startups that I have come across in Delhi, I can only think of one startup that had a solid co-founding team out of the door and was also hiring senior sales, engineering, and operations folks very soon after starting up.

Finding an experienced team for a startup is very difficult, mostly because successful fist timers either continue on with their venture for various reasons, they cash out and join a VC firm or they disappear for a few years on an extended vacation. Very few of them become serial entrepreneurs and not many of them take on mentoring first time entrepreneurs.

Already having a network of entrepreneurial folks is the ideal situation but since that’s not necessarily the case for those of us not living in India, you can also try a recruiter to help you find an experienced management team, though, recruiters weren’t very useful for me when trying to put together my co-founding team.

I would suggest using personal and professional networks, organizations such as TiE, HeadStart, and Proto to start building a network of potential co-founders and senior employees well before you’ve made the decision to startup in India. If you’re not in India, I would strongly advise creating a budget for traveling to India a few times prior to moving to spend time and meet with some of the people you’ve identified as potential co-founders/senior team members.

Obsession with Entrepreneurship

India truly is a land of entrepreneurs. Everyone ranging from the corner grocery “thela” or pushcart, to the founders of Reliance and Tata are entrepreneurs. What this means in the context of startup team building is that it’s very hard to find good people who want a job a for very long. Generally speaking, competent people in India are perpetually trying to figure out how they can go off on their own and be their own boss. Many times they will get a partner like a friend or relative but rarely will they join a startup where they aren’t at the top of the pyramid.

There are plenty of engineers, sales/marketing people that start up a business of their own on a daily basis, most typically a service oriented business because of the low capital requirements.

One of the ways you can use this entrepreneurial desire in Indians to build your own startup team is to seek out those you want to start their own business. Nurture them, mentor them, and give them equity in your business as well as look at the possibility of funding/incubating their business ideas. Though they may not be ready to be co-founders in your venture, they very well could be superstars in your startup and when the time is right, they may even be your first angel investment.

Being a No Name

Another stumbling block to hiring a strong team is the Indian obsession with brand names. Indian families place a great deal of stress on their kids to go work for a large brand name company. In technology, this means college grads looking for jobs at a foreign multinational corporations (“MNCs”) like Microsoft, Google, Yahoo, Nokia, Motorola, etc. or one of the Indian multinationals like Wipro, TCS, Infosys, HCL, etc. (referred to as The Axis of Evil by Vishal Gondal of IndiaGames). Startups obviously haven’t developed a brand name so recruiting good talent in India is much harder.

Because of the emphasis on brand names in India, what happens is that most of the great talent gets sucked up by the big MNCs and large Indian MNCs who hire 20,000+ engineers yearly. What’s left over goes to the second and third tier tech companies. Finally, whoever didn’t get a job anywhere else submits their resume to more or less every job opening on Monster India, Naukri, etc.

However, there’s no reason you can’t build a brand with a little bit of money and some time. Build your brand by blogging, engaging with people on Twitter and contributing useful, insightful comments in the appropriate Linkedin groups. You’ve all heard this stuff so let’s move onto the fun stuff. Give your time to an entrepreneurial organization like TiE, HeadStart or Proto. Organize events, speak at events, create presentations and if possible, get some press coverage. Traditional media in India still has the breadth and depth of distribution that new media hasn’t been able to achieve yet. Organize and hold BarCamps or similar unconferences and promote yourself and your startup accordingly. You probably won’t be able to build a nationwide household brand name in a few months or a year but you will be able to build a localized brand name for your target audience, potential co-founders and employees with an entrepreneurial bent for your startup.

You can also use the Indian job sites mentioned above but you’ll be buried under a deluge of resumes. Good luck sifting and sorting those few hundred resumes to find the diamond in the rough. It happens but the odds are totally against you finding a star amongst the flood of resumes you’ve received.

If you can find a decent head hunter (“Recruiting Consultant”) that is willing to work with a startup, then I highly recommend using one. They will sort thru the resumes for you and instead of getting two hundred resumes, you may get fifty. The other benefit to using a good recruiter is that they will make sure the candidate actually shows up for the interview.

Dealing with Recruiters

Recruiters will typically take a month’s salary for “freshers” or mid-level candidates and they can take up to twenty percent of the total package for a senior candidate. Everything is negotiable so don’t hesitate in negotiating these fees. One recruiter I worked with started with sixteen percent of the total package or CTC (“Cost to Company”) paid within one month of the person being hired and they finally settled on one month’s salary being paid every quarter over the first year of the candidate’s employment. Recruiters are notorious for placing a person and then recruiting them for another job within three months. This was my insurance policy against the recruiter farming my employees, at least for the first year of their employment.

The flip side to working out a deal so favorable to you is that many recruiters will weigh the opportunity cost of working with you under conditions like this and as the market picks up, they will instead focus on the companies that will give the recruiter more favorable terms like full payment within thirty days of the candidate being hired. If you’re doing a high volume of hires this problem can be mitigated. Unfortunately most startups don’t hire twenty or thirty people in their first year in India unless their a service company and have positive cash flow very quickly.

Miscellaneous Pitfalls

“I’m two hours late to the interview because of traffic”

I’ve had quite a few candidates either show up more than two hours late for an interview or not show up at all. Traffic being the most often used excuse. The truth is, Indians don’t really respect time and this shows in all aspects of day to day life. Don’t take it personally. It happens more often than not so it’s nothing about you or your startup. Forget about it and move onto the next one. One thing that may make you feel like you’re not wasting your time is to schedule two or three candidates to come in at the same time and interview them on a first come, first serve basis. I wouldn’t dream of doing this in the US but in India, it’s the most productive and completely acceptable way of working.

The Employee’s Blank Stare

I had hired a designer who talked the talk really well. I’m not a designer but he sounded good. I hired him and he started work on a Monday. Wednesday morning, his mother called in sick for him. The following Monday, I had to fire him for spending too much time on IM with his wife, looking for another job while sitting two feet away from me and also downloading other people’s designs and logos off the web and passing them on as his own ideas. In the hour and a half “discussion” we had, rather than apologizing for the things he was blatantly doing wrong, all I got was the blank stare. It was my first experience with this sort of thing. Had I gotten a “I’m sorry about that and my problem is …..”, I probably would have given him another chance, while keeping a very close eye on him. I’m still not quite sure what the blank stare is for but in hindsight, I’m assuming it’s an apology without admission of guilt. Much like most settlements with the SEC.

Asides

Design, image, graphic theft is a very common issue in India. Many “designers” are really just PhotoShop jocks taking other people’s work so keep an eye out for this and encourage fresh ideas.

Many new developers suffer from the copy and paste syndrome so try to encourage them to write their own code hence, developing their skills as programmers, and limiting any sort of legal and other liabilities.

Firing people in India isn’t so clean cut so, I’d advise you to look into some of the laws related to Hiring and Firing in India.

“I want my own startup but I don’t want your stinkin’ Equity”

Conserving cash and giving options or equity to employees in India can be tough. Very few 20-somethings will opt for more options than cash. The reason is pretty simple. A check every month going into their bank account that they can show to their parents, grandparents, extended family, significant others and potential marriage proposals goes a lot further than showing off a share certificate. Budget for paying salaries instead of very low salaries and some equity options (“ESOPS”). You may wind up giving the employee some options later on, if they stick around for some time or if you sell the company or go public but for various sociological reasons, “cash is king” so save the equity for those who really value it.

I would love to hear some of your stories and comments. What do you think? Drop in a comment below with your thoughts.

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Another Cog in the Wheel

Here’s a great post on Amit Ranjan’s personal blog about how large technology and outsourcing companies in India are turning the cream of the crop engineers into just more cogs in their wheels.
I worked at a very large Wall Street firm for a few years and then I’ve worked at small companies (small in terms of the number of people). The best part of working at a small company, by far, is seeing the results of your labor on a daily basis and how it directly affects the business. Good luck seeing how busting your hump on a daily basis benefits Infosys.

There are, however, significant drawbacks to working for a small company.

  1. The likelihood that your family and friends will know the name of the company that you are working for is close to zero.
  2. The pay is usually lower at small, unknown companies.
  3. The benefits are usually not as good as they are at large companies.
  4. The dangerous of a small company going out of business is generally higher than a large company going out of business.

The benefits of working for a small company are:

  1. You’re a name, not an employee number.
  2. The excitement of helping to build a business is enormous.
  3. Seeing how your work affects the growth of that business is an even bigger high.
  4. Working at a small firm helps you develop a sense of camaraderie that goes deeper than the relationships you can develop at a large firm.
  5. You could be learning and contributing much more in a small company than a larger one if you prove that you’re a doer not a talker.
  6. There’s more work and less politics at a smaller firm.

For more, in depth, details, jump over to Amit’s blog below.

Ques- What warning sign is written on the boundary walls of the TCS office in Madras?

Ans – ??Beware Trespassers- If you are not careful, you will be recruited??

amit ranjan

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