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Twelve Years of Indian Startups – Part I

March 11th 2019 marked the twelfth anniversary of the day I landed in New Delhi with my family with the intention of starting a company. It was a complicated, difficult, enlightening, fun journey and I thought it would be nice to share some details of how I decided to move to India, the challenges I faced, the failures I dealt with and all of the different adventures I had over the last twelve years.

I had been pretty lucky having gotten a job at JP Morgan & Co right out of college and two years later, landing a highly coveted job at Long-Term Capital Management which then turned into being one of the founding employees at GlobeOp Financial Services (a fintech startup that wasn’t called that in 1999, which went public in 2007 and was eventually acquired by SS&C in 2007).

After leaving GlobeOp in late 2004, a friend of mine from high school and I started working on our first tech startup. It was a social network before social networks or social media became a thing. My friend and I both weren’t developers but we started coding away furiously in Perl to get the first version of the application out the door. Unfortunately, we never actually launched the network. With LinkedIn and Facebook gaining ground rapidly, we really weren’t sure how just the two of us could keep up. We both wound up getting new jobs but continued working on this idea at nights and on weekends.

Trust me, this is incredibly embarrassing ( a la Reid Hoffman) but here are some screens circa 2005:

I think we finally stopped all further development of the project around the end of 2005 but we open sourced all of the code. While working on this project, I developed an insatiable appetite for all things tech entrepreneurship. Unfortunately, there wasn’t much happening in NYC in 2005. I became an avid listener of Podcasts in 2005 and 2006 (specifically tech podcasts like John Furrier’s PodTech.net and Greg Gallant’s Venture Voice). Between TechCrunch and these podcasts, I had the entrepreneurial itch – again. I just needed to figure out how to scratch that itch. 

I began thinking of my problem. I loved listening to podcasts about tech entrepreneurship. However, this was before Apple Podcasts, Soundcloud, Spotify, Google Podcasts, etc. The only way to find podcasts was using Google. Unfortunately, Google didn’t index and make audio very searchable.

The Problem: Podcasts are hard to find

The Solution: Offer podcasters a service which will transcribe their podcasts for them and allow them to post the text on their blog/website with the podcast audio in an RSS feed.

I left the job I was at in middle of 2006 and started working on learning about the transcription industry. I found out that medical transcription was a huge business and a lot of it was run out of India. I started investigating and talking to companies that ran transcription businesses as well as offshore “development” shops that I could work with to build out an MVP for a marketplace. The solution above would be a reverse auction platform where podcasters can specify the length of their audio and put out an amount they would be ready to pay to have that transcribed. Transcribers in India, the Philippines and other places would be notified of these projects and could come in and bid on them. Payment would be helped in escrow by us and upon completion of a project, payment would be released to the transcriber and of course, both sides could rate the other (much like eLance, upwork, etc.)

As I started talking to these offshore development shops, I began realizing that most of them were a couple of friends moonlighting. I tried out a couple of them with very small work and was thoroughly annoyed but not surprised when things weren’t done. Notice, I never said I spoke to any actual podcasters.

I decided to take a trip to India in late 2006 and meet some dev shops in person as well as attend some conferences. The first entrepreneur in India I met was Amit Ranjan, author of Webyantra and co-founder of Uzanto (which eventually became Slideshare). I went to TieCon Delhi and a few other conferences but one thing really stuck out while I was in India. Every one of my relatives kept complaining about how they couldn’t find domestic help – a nanny, a cleaning person, a cook, a chauffeur, etc. I didn’t really know anyone in India other than relatives but as I was meeting people I started asking more questions about domestic help. I started seeing a pattern. It’s hard to find good help. It’s hard to retain help. It’s a word of mouth business, e.g. your cousin can ask their driver if he knows of a good driver and he will send someone to you (of course, your cousin’s driver will get a cut for helping him get a job).

It’s hard to find digital pictures from the pre-iPhone/smartphone days

I thought, this whole situation really could lend itself to a reverse auction platform so instead of focusing on transcribing podcasts, why not create impact by helping people to get jobs. With this idea and this alone, I convinced my wife that we should move to India and I should start a business to do exactly this.

More to come in Part II

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Advice Angel Investing Business Entrepreneurship Startups Venture Capital

The Importance of Updating Your Stakeholders and Investors Regularly

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There are many good reasons to update your investors regularly on what’s happening with your business. Some venture capitalists and angels like monthly updates, some prefer quarterly investor updates, others are fine with ad hoc information – one founder created a WhatsApp group of his investors and just messages us whenever he wants. It helps to build confidence when an entrepreneur takes ownership of updating their investors and do not wait for investors to ask for updates.

The investor has placed their trust in you and taken considerable risk to help you achieve your dreams. Regardless of your fiduciary responsibility, the entrepreneur has a moral obligation to let these people know what’s happening with their money.

In addition, when a startup is young and relationships with investors are new, it’s even more important to invest in building a relationship. However, an entrepreneur’s first responsibility (and passion) is to move the startup ahead. Regular investor updates help solve both problems to a large degree, without the founder(s) needing to take time away for one-on -one calls or meetings.

  • It helps continue to build trust.
  • It keeps the investors interested and excited about what’s happening with your startup.
  • If things aren’t going so well, it isn’t a surprise to your investors. Bad surprises aren’t a good thing for anyone and frequently end with frayed relationships.
  • If you need help with something, this is your chance to ask your investors for help. It is especially important when things aren’t going as planned.
  • If they know what’s happening, you continue to build trust with them, then, when you take another swing at raising more money, they’re more likely to help you or participate.

This is an example that a company selling a product online might send to an investor.

Dear Pankaj,
It’s time for another update on where our startup is going. Here are some high level things to start with:

  • Gross Burn Dec 2018: $100,000 / month
  • Revenue Dec 2018: $20,000 / month
  • Net Burn Dec 2018: $80,000 / month
  • Cash in the bank Dec 31st, 2018: $850,000
  • Runway (typically Net Burn but could be different based on growth, cost cutting, etc.):14 months
  • Total Pageviews this month Dec 2018: 4,250,000
  • Pageview growth from (last month/last quarter/last year): 60%
  • Total Unique Visitors Dec 2018: 2,125,000
  • Visitor Growth from (last month/last quarter/last year): 40%
  • Total Items Sold Dec 2018: 8911
  • Items Sold Growth Since (last month/last quarter/last year): 10%
  • Average Order Value Dec 2018: $2.25
  • Order Value Growth Since (last month/last quarter/last year): 15%
  • Gross margin Dec 2018: 35%, up from 24% in Dec 2017
  • New product summary, Challenges Being Faced, Goals and targets for 2019, etc.

Of course, please modify this for your business, include your KPIs and adjust for the frequency with which you update investors.

Getting a routine for investor updates going also helps your team focus on the targets you’ve laid out together as well as keeping you apprised of situations that may be brewing and having a good handle on your KPIs.

What tools do you use to track your KPIs, effectively create and share your updates with your investors and stakeholders? Please share them in the comments.

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Qualifying Startup Events in India

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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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Business

2008 Reflections and 2009 Plans

Happy 2009 everyone!

2008 has been a very interesting year by all measures. We saw record drops in global stock market indices – 34% drop for the Dow, the worst since 1931. We saw vast amounts of wealth obliterated. We saw the US moving closer and closer to a socialist economy. We saw the election of the first African-American to the office of the President of the United States. We saw another round of incredibly well planned terrorist attacks across India, culminating in the sixty hour standoff in Mumbai. We saw Indians get up and rebuild quickly from the attacks. We saw a new sense of urgency in the fight against terror by the Indian middle class. And we have seen India and Pakistan, once again, come to the brink of war.

Obviously, we’ve seen a number of other things that I’ve missed but these are some of the events that will always remind me of 2008. 2008 is also the year we got Teknatus Solutions Private Limited up and running in India. We did a soft launch of our Bridal network, Brides’ View and we’re getting ready for a private beta of our next product – Semblr. It’s been an interesting and tough year all around. We’ve seen an incredible amount of interest generating around the Indian startup scene, both with prospective employees and also with the media. Plenty of folks have done a great job in catering to this interest. We’ve had Proto, Head Start, Startup Saturday and also BarCamps across all major Indian cities to help get startups some visibility and to help those interested in learning/joining/startip a business. With the economic downturn, a good deal of media attention is turning to startups and venture funding. The amount of Indian startups has been increasing steadily and now, with many people getting laid off, the numbers should increase even more. As far as VC/angel funding, well, the picture in India and globally isn’t as rosey as it was six months ago. However, there are still quite a bit of deals closing.

For Teknatus, 2009 is going to be an interesting and challenging year. Our major goal for the year will be to launch a few additional products and start generating revenue. It won’t be easy but I feel confident that the product we’re getting ready for soft launch will be generating revenue by the end of the second quarter of 2009 and by then, we are planning to launch our third product which will be a SaaS product geared toward SMEs. Our next major goal is going to be working on building the team out. We’re going to have positions opening up for various roles over the coming months and, hopefully, we’ll be able to fill them with some great people.

In 2009, we also plan to continue working on helping the entrepreneurial ecosystem in India, specifically New Delhi. We’ve found platforms like Startup Saturday to be wonderful areas to connect with like-minded individuals. Hiring and building a team in India is difficult but it’s not insurmountable.

Once again, happy 2009!

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