iSPIRT works to transform India into a hub for new generation software products, by addressing crucial government policy, creating market catalysts and grow the maturity of product entrepreneurs. Welcome to the Official Insights!
Two Cs are extremely critical for startups: Capital and Customers. In India, with a population of 1.3B, customers for B2C or B2B2C startups is not an issue. For B2B startups, although the market in India is promising, global markets are still very important. Capital on the other hand is trickier. The total capital raised by startups India from 2010-2020 is around $100B. In the same period, startups in China have raised 4x and startups in the US have raised 10x the capital raised by startups in India. India needs to have a stronger mechanism to enable more Capital. There is a need to increase Capital availability in India.
IGP platform proposed by SEBI is a very refreshing initiative that aims to address the Capital issue. It provides another great avenue for startups looking to raise series B and beyond. This platform can double the available capital over the next 5 years. It addresses a key pain point of Capital availability for startups raising between INR 70 to INR 200 Cr. There is a chasm in this space- there are early-stage VC funds and there are PE funds for growth companies. However, there is not enough growth stage VC funds in India to fill this gap. IGP has the potential to be the platform to bridge this void.
The design of IGP has been very thoughtful with the key focus is on technology startups. The precursor to IGP was ITP (Institutional Trading Platform). Due to various reasons including the maturity of the startup ecosystem, the response to this platform was tepid. IGP addresses a few key pitfalls of ITP.
IGP restricts the listing to technology-focused companies with a proven Product-Market Fit and entering its growth phase. The revenue of the companies listing on this platform is expected to exceed INR 50 Cr. This will greatly help in mitigating the risk of listing by ensuring a good understanding of Product-Market Fit beforehand.
The governance issues are well balanced – protects the investor interests but at the same time provides enough flexibility for the founders to have control over strategy and execution. The companies listing on this platform cannot be burdened with the same rules of the public markets as they need to be very nimble. A balance between taking risks and moving fast with financial discipline as against governance practices such as quarterly reporting and stability is advised.
As in the case of investments in Alternative Investment Fund, the platform is selective about its investors. The companies listing on this platform need to operate as startups and not as mature companies. The risks are much greater with these companies and hence it is very critical to have investors who understand these risks and who can understand these nuances.
M&As have been a key hurdle for startups in India. This is one of the key reasons for companies opting to flip. The platform is designed to simplify the process of M&As, post-listing. Simplifying the M&A process encourages corporates and PEs to participate on the platform. However, this spirit should be maintained in the implementation of the platform as well. This is one of the critical success factors for the platform.
For the Indian startup ecosystem to become one of the major contributors to the economy, key policy changes are needed. IGP is one such platform that has the promise to increase capital availability significantly. IGP has the added advantage of enabling exits for early stage investors. This increases the liquidity in the market that will further spur the startup ecosystem- a much needed virtuous cycle.
NASDAQ encouraged and enabled technology startups to list because of its adaptability and easier listing and governance guidelines. This accelerated technology startups in the US. IGP has the potential to be that platform in India. India can build products for the world and has the potential to be startup capital, but it needs a perfect storm of- Capital, Liquidity, Policy, Customers, and Entrepreneurs. IGP certainly has the promise to address the Capital and Liquidity aspects. Most importantly it enables Indian startups to stay in India!
When constellation research published the best award for enterprise software to Zoho, I was thinking its yet another Silicon Valley startup that is kind of making some mark. But I was really surprised and it was a bit of a shame when I found out that its an Indian company – how could I have missed such a company that originated and grew from my home city and now fast becoming a saas Boomi – Chennai.
As I dig deep into this Enterprise software company, I come across more surprises, about its mission, vision, purpose and its founder. Now fascinated by watching an interview and a speech of Sridhar Vembu, the founder – it was a pleasure to meet him in Tenkasi, Tamil nadu, and this post is a rendezvous with Sridhar Vembu, and a few key takeaways from my day at Zoho, Tenkasi.
In front of Zoho, Tenkasi office with Sridhar Vembu
Rural and Semi-Urban revolution: Sridhar believes in economic development around small towns and semi-urban areas. We discussed SAP in Waldorf, and how that village became a global HQ of the German giant. With bandwidth and technology, Sridhar really believes that he would get Zoho products designed, built and supported by small towns. Tenkasi, a small town in Tamil Nadu houses Zoho’s development and Labs with about 500+ people. It was heartening to see an end-to-end product Zoho desk built and managed right from there – I even met with the product managers there who build and take these products to global markets. Other parallel examples that we have for such a non-urban revolution were Jamshedpur and BHEL townships, which housed and build excellence from small towns. Glad we are doing this for product software as well now.
Skill oriented education: Now while the rural revolution looks interesting, how will the software talent that is usually US bound, join such remote places. Sridhar’s answer to this is Zoho University. Zoho University is a unique education, follow a gurukul Indian approach, where students are pulled from government schools, and trained into important technical skills, English and Maths, Design skills, as well as business skills.I had some great discussions with Anand Ramachandran, who heads Zoho University in Tenkasi. Zoho University now contributes to more than 20% of the 8,000+ employees in Zoho, and it’s heartening to see students from villages, Tamil medium government schools very effectively groomed to build world-class products. The analogy I have for this kind of education is chartered accountancy, which combines knowledge and hands-on skills together. But this takes it to the next level.
Price sensitive products: One of the big benefits of the above focus helps Zoho come out with very price-sensitive products. Products are priced at a level that is affordable for any size business, most importantly SMBs, both for developed and emerging markets. The goal of Zoho seems to be like that of Amazon, where they offer superior products, better customer service at decreasing prices, by bringing productivity, as well as the product revolution from rural and skill-based talent.
R&D in India: Sridhar Vembu is a big fan of Japan and Germany. We spoke about several examples of how products from these countries make it to our country – up to our villages. Products such as the knife that is used to cut coconuts, motors that go into our pump sets, glasses that go into spectacles. This is such an important element he highlights that we have to go to the core of what we make, we should really get our engineers to build products – research and development from India, not just assemble. Zoho has that clear focus, going and building out the core platform, based on which its applications are built. It’s not only Make In India but R&D In India. Sridhar also highlighted that its also important for lot of Indians to stay back in the country, instead of migrating to US or other countries. Each one of them can create huge value, employment and make India proud by making products out of here.
Bootstrapped to date: Another area that was important and make all the above mission happen is the fact that Zoho is completely bootstrapped, and its till now not funded by VCs. Like many large software enterprise giants, Zoho is built ground-up bootstrapped and grew by investing back the surplus. This gives them a lot of freedom, freedom to run their endeavors and also with a long term view. It’s great learning for a lot of startup entrepreneurs. They are more of a revenue unicorn than a market cap unicorn.
In summary, what Sridhar Vembu has created and grown is a fascinating story, a story that we need to celebrate, learn and cherish, its more powerful than the stories of Indians who have done this abroad. For me, it was huge learning on Engineering, Economics & Education, it was one of the memorable day of my life!
In the first week of October, around Dussehra, a bunch of Indians gathered in the Bay Area. The setting had nothing to do with Dussehra, it had more to do with whether they would be spending their next Dussehra while settled in India or in the Bay Area.
iSPIRT conducted two sessions around opportunities emerging in India, spurred by new digital public goods that are going to create a Cambrian explosion of new software products.
The startup activity in India over the past few years has been noted by Silicon Valley and the attendees had a keen interest to discuss what has been happening on the ground.
There were two primary tracks to the discussion:
how India has changed in the past decade or so and
what factors have contributed to that radical change
The largely held view of the ecosystem among those gathered was of the 2008 – 2014 period, when the majority of them were last in India, studying or working.
The concerns raised about starting up were around ease of doing business and culture at the workplace but the consensus was that things are improving in these regards.
The keywords that came up to describe the factors causing the change in India were Jio, Modi and so on. However, the fascinating point to learn for all was about the rise of digital public goods and how they are fundamentally changing the market playground in India.
Many had heard of UPI (Unified Payment Interface) and rightfully so, credited Government for it but what awed everybody was how it came about with the effort of a bunch of volunteers believing in the idea of open-source public good and making India a ‘Product Nation’.
Everyone agreed that a new growth journey lies ahead for India, created by factors such as the rise of internet users, internet penetration with Jio, high data consumption and user education that comes along with it. However, it will get catalysed further when coupled with digital public goods.
UPI has been a success story and it crossed more than a billion transactions last month and had overtaken global volume of American Express months back! A number of successful companies like JusPay and PhonePe capitalised on UPI and similar opportunities now lie ahead with :
We dived into specifics of all these to discuss myriad product opportunities that will emerge, enabling new success stories.
This will further be enabled by :
Talent that is more agile and honed to operate in an ambiguous startup environment. This has turned around in the past few years, while a lot of talent was tuned to work in a corporate environment earlier.
More access to seed capital as more startup operatives have gained wealth and experience in the past few years
And parents are more supportive of the idea to join a startup or start one!
Capitalising on all these would need a new entrepreneur archetype that operates from first principles thinking to dig deep in the market and create viable products and business models taking advantage of unique local factors.
Volunteering with iSPIRT can act as a good channel to understand the market better, to get involved with understanding and building digital public goods that are shaping the times ahead in the country.
It’s the forum to engage with peers that help you learn more about yourself, discover your flow that brings joy and contribute towards a public good.
One attendee summed up the takeaway beautifully –
“In the US, I have created a professional career and learnt lessons by building on top of platforms in the West. Now, there are similar opportunities to build on top of platforms and participate in Indian playground. If I get to become an iSPIRT volunteer, I can not only build on top but also help build the very platforms that are driving India forward.
In my own backyard, I have the local know-how to build for India and should act on it, instead of watching Chinese and Western apps put their stake from Kashmir to Kanyakumari.”
To know more about emerging public goods, iSPIRT Foundation and know our volunteering model, check out www.ispirt.in and write to [email protected]
We would like to thank Jaspreet from Druva, Anand Subbarayan from Lyft for hosting us, Hemant Mohapatra from Lightspeed Partners for helping with the setup and our local volunteer Pranav Deshpande.
In January 2016 iSPIRT ran the largest software entrepreneur school in India, called PNgrowth (short for Product Nation Growth). The central vision of PNgrowth was to create a model of peer learning where over 100 founders could give each other one-on-one advice about how to grow their startups. With peer learning as PNgrowth’s core model, this enterprise was supported by a volunteer team of venture capitalists, founders, academics, and engineers. See iSPIRT’s volunteer handbook (https://pn.ispirt.in/presenting-the-ispirt-volunteer-handbook/)
However, unlike a regular “bootcamp” or “executive education” session, the volunteers were committed to rigorously measuring the value of the peer advice given at PNgrowth.We are excited to announce that the findings from this analysis have recently been published in the Strategic Management Journal, the top journal in the field of Strategy, as “When does advice impact startup performance?” byAaron Chatterji, Solène Delecourt, Sharique Hasan, Rembrand Koning (https://onlinelibrary.wiley.com/doi/10.1002/smj.2987).
TLDR: Here’s a summary of the findings:
1. There is a surprising amount of variability in how founders manage their startups. To figure out how founders prioritized management, we asked them four questions:
“…develop shared goals in your team?”
“…measure employee performance using 360 reviews, interviews, or one-on-ones?”
“…provide your employees with direct feedback about their performance?”
“…set clear expectation around project outcomes and project scope?”
Founders could respond “never,” “yearly,” “monthly,” “weekly,” or “daily.”
Some founders never (that’s right, never!) set shared goals with their teams, only did yearly reviews, never provided targets, and infrequently gave feedback. Other, super-managers were more formal in their management practices and performed these activities on a weekly, sometimes daily, basis. Not surprisingly, the supermanagers led the faster-growing startups. Most founders, however, were in the middle: doing most of these activities at a monthly frequency.
2. Since PNGrowth was a peer learning based program, we paired each founder (and to be fair, randomly) with another participant. For three intense days, the pairs worked through a rigorous process of evaluating their startup and that of their peer. Areas such as a startup’s strategy, leadership, vision, and management (especially of people) were interrogated. Peers were instructed to provide advice to help their partners.
3. We followed up on participating startups twice after the PNgrowth program. First ten months after the retreat, and then we rechecked progress two years afterwards.
We found something quite surprising: the “supermanager” founders not only managed their firms better but the advice they gave helped their partner too. Founders who received advice from a peer who was a “formal” manager grew their firms to be 28% larger over the next two years and increased their likelihood of survival by ten percentage points. What about the founders who received advice from a laissez-faire manager? Their startup saw no similar lift. Whether they succeeded or failed depended only on their own capabilities and resources.
4. Not all founders benefited from being paired up with an effective manager though. Surprisingly, founders with prior management training, whether from an MBA or accelerator program, did not seem to benefit from this advice.
5. The results were strongest among pairs whose startups were based in the same city and who followed up after the retreat. For many of the founders, the relationships formed at PNgrowth helped them well beyond those three days in Mysore.
So what’s the big take away: While India’s startup ecosystem is new and doesn’t yet have the deep bench of successful mentors, the results from this study are promising. Good advice can go a long way in helping startups scale. iSPIRT has pioneered a peer-learning model in India through PlaybookRTs, Bootcamps, and PNgrowth (see: https://pn.ispirt.in/understanding-ispirts-entrepreneur-connect/).
This research shows that this model can be instrumental in improving the outcomes of India’s startups if done right. If peer-learning can be scaled up, it can have a significant impact on the Indian ecosystem.
Are you building products for the everyday user? Is it becoming harder and harder to manage complexity while maintaining usability? How do you design a sustainable system for a complex multi-stakeholder environment? How do you teach a user to use your product with good design? How do you reinvent an established business model in light of rapidly evolving markets and technological possibilities? How do you design a product to be truly human-centric?
If any of these questions sound relevant to you, here’s an opportunity to seek answers on 22nd February in Bengaluru!
About Don Norman
Dr Don Norman is a living legend of the design world having operated in the field for over 40 years. He has been Vice President of Apple in charge of the Advanced Technology Group and an executive at both Hewlett Packard and UNext (a distance education company). Business Week has listed him as one of the world’s 27 most influential designers. Dr Norman brings a unique mix of the social sciences and engineering to bear on everyday products. At the heart of his approach is human and activity-centred design, combining knowledge of cognitive science, engineering, and business with design.
Presently, he is Director of the recently established Design Lab at the University of California, San Diego where he is also professor emeritus of both psychology and cognitive science and a member of the Department of Electrical and Computer Engineering. He is also the co-founder of the Nielsen Norman Group, an executive consulting firm that helps companies produce human-centred products and services.
ProgrammeTalk
Don will share valuable insights about his interactions with Indian people, products and experiences.
Fireside Chat
An informal discussion with Don about his learnings and experiences spanning his long and illustrious career.
How to participate?
We’re inviting engineers, product managers, designers and everyone else who is building for large scale impact.
If you would like to further your understanding of human-centric design and hear straight from the horse’s mouth, please register here by 18th February. (An invite will be sent out to selected participants by 21st February)
Drones have been around for a long time, going back as far as World War II. For most of their history, they were considered part of the military arsenal and developed and deployed almost exclusively by the military.
However, the past decade has seen a tremendous amount of research and development in the area of using drones for civilian purposes. This has led industry experts to predict that drones will be disrupting some of the mainstay industries of the global economy such as logistics, transportation, mining, construction and agriculture to name a few. Analysts estimate a $100 billion market opportunity for drones in the coming few years[1]. In spite of the overwhelming evidence in favour of the value created by drones, it has taken quite a few years for the drone industry to take off in a commercial sense globally.
The main reason for this has been the regulatory challenges around what is allowed to fly in the air and where is it allowed to fly. A common theme around the world is the unconventional challenges that old governmental structures have to face as they try to understand and regulate new technologies. Hence the default approach so far for governments has been reactionary caution as they try to control what are, essentially, flying robots in the sky.
However, with electronic costs coming down, the hardware becoming more accessible and the software interpreting data becomes more powerful a number of humanitarian, civilian and industrial application have emerged and as governments across the world are realizing the potential of drones, we are starting to see the first version of regulations being drafted and adopted across the globe.[2]
Closer home India has a relatively adverse approach to drones or more lackadaisical rather. [3]
But as India continues to drive to become a more technology-oriented economy the role of drones in the worlds fastest growing economy and the potential benefits it can bring are hard to ignore.[4]
However, India’s approach to drone regulations cannot be that of other major economies that have the luxury of friendly neighbours and a large network of monitoring apparatus, India has had to take an approach that has to be novel and robust. Something that balances the security landscape while also being designed to allow maximum utilization of the potential that drones offer. Out of this need to both regulate secure how and where a drone can fly and keep multi-ministerial stakeholder interests accounted for was born the Digital Sky, India’s foundational framework for all things drones.
What is the Digital Sky and how does it work?
What the Digital Sky accomplishes beautifully is to fill the institutional void that needs to be collectively fulfilled by so many institutions and make it easier for the industry and consumers to interface with the government legally through one platform. Permission to fly drone no longer requires a 90-day intimation with an arbitrary number of NOCs to be approved by umpteen number of ministerial bodies at the central and federal level. The industry and the public now know one place to interact with in order to register their drone, get recognised as a certified operator and apply for permissions and all concerned government agencies ensure their overarching interests do not interfere with the large-scale adoption of drones.
There are crucial components required for the Digital Sky concept to work, the most central being that drone operators should not be able to fly drones if they are not approved by the government. To accomplish this the Drone 1.0 regulations revolve around the concept of No-Permission-No-Takeoff (NPNT).
Our maven Tanuj Bhojwani explaining NPNT at the DigitalSky RoundTable on 4 Dec 2018 in Bengaluru
What this implies is that unless a drone has got valid permission for a particular flight through tamper-proof digitally signed permission tokens, it will not be able to take off. The Digital Sky is the platform to automate the processing of these permission tokens as they flow in from different parts of the country without overwhelming the authorities through a flight information management system (one of only three countries to build this nationally after China and the USA). In order for this vision to come true, there will be an enormous change in the way drones are manufactured and operated. Entire new industry verticals around getting existing drones compliant, developing interfaces that interact with the Digital Sky platform and making applications for India’s needs will develop. Hence this begs the question.
How are the current state of the industry are changing with 1.0 regulations
Until the introduction of the regulations companies especially in the UAV operations were doing non-restricted work and end up becoming the jack-of-all-trades. Companies in the manufacturing domain were unclear of who is their target customer and what they needed to build. All the companies in this domain were working with no clarity on the safety and permissions.
With the introduction of the Drone Policy 1.0, there is a buzz which has been created and efforts are being made to understand the regulations by all the entities who are set to gain from it. They understand that there will be a new aspect that needs to cater to i.e. the sense of accountability.
For manufacturer’s The NP-NT mandate will be the most immediate requirement, the most common route to implement the mandate will be through changes to existing firmware architecture. The changes themselves are being driven by open source initiatives with various operators, system integrators and manufacturers contributing to the shift to NP-NT for all major drone platforms in the country. The Digital Sky has inadvertently catalysed the first industry-wide initiative to bring together all members of the ecosystem. Other requirements such as ETA bring in much-needed standardisation in the hardware space, this allows benchmarking of products, easier availability of information about the standards to look out for end users.
For operators, a massive increase in the volume of business is expected as they can now focus on getting certified drones into the air, and not so much on getting approvals. The Digital Sky brings in much-needed certainty and predictability into an industry that will be focused on balancing demand and supply of drone-related operations in a market that has a huge need for drones and their data but limited expertise to acquire and process it. This also puts onus an industry to become security and privacy conscious and insurance agencies will play an important role in this regard. It will also immensely help in changing the thought process of the companies providing services and their customers. Customers will start understanding that they also need to have a defined plan, process and execution instead of a haphazard existing process of execution.
How industry/playground will change over the coming years?
With the introduction on the regulations and a platform like Digital sky enabling the ease of doing business for the companies who are serious stakeholders in this domain, there is no limit to what developments will occur in the coming years. It opens up possibilities for utilization of Drone and its related technologies in Agriculture, Medical, Energy and Infrastructure and transportation.
The existing players will become more mature and more focused. They will understand that with regulations in place a more focused approach is the key to scale. They will look at opportunities to compete with the global market also as the solutions that are developed around the Drone Regulations 1.0 and 2.0 will be key factors that contribute to the Indian ecosystem to becoming a global standard to test, adapt and innovate drone applications and management.
What are the opportunities? What does that mean for the current and new players?
UAV/ Drones as a business was a far-fetched thought for many entrepreneurs and has been a struggling industry in the past in India. Going forward it is guaranteed that it will be one of the biggest markets in the world for UAV as a business. What the regulations and Digital Sky platform will enable is a new levelled playground ground for the UAV companies to initiate good scalable business models both existing and the ones entering new to the sector.
The existing companies with the right resources can now plan to scale their operations and also have the added advantage of doing work for the private sector in India. Due to the restrictive method of operations adapted previously the solutions to private agencies was unavailable. Now going forward the companies will shift their focus from being a B2G entity to a B2B entity. Many new businesses for UAV air traffic management, surveillance, AI and ML-based UAV solutions and deliveries will emerge out of India with technology specific to India.
Since SaaSx second edition, I have never missed a single edition of SaaSx. The 5th edition – SaaSx was recently held on the 7th of July, and the learnings and experiences were much different from the previous three that I had attended.
One primary topic this year was bootstrapping, and none other than Sridhar Vembu, the CEO and Founder of Zoho, was presenting. The session was extremely relevant and impactful, more so for us because we too are a bootstrapped organisation. Every two months of our 4.5 year-long bootstrapped journey, we have questioned ourselves on whether we have even got it right! If we should go ahead and raise funds. Sridhar’s session genuinely helped us know and understand our answers.
However, as I delved deeper, I realised that the bigger picture that Sridhar was making us aware of was the entrepreneurial journey of self-discovery. His session was an earnest attempt to promote deep thinking and self-reflection amongst all of us. He questioned basic assumptions and systematically dismantled the traditional notions around entrepreneurship. Using Zoho as an example, he showed how thinking from first principles helped them become successful as a global SaaS leader.
What is it that drives an entrepreneur? Is it the pursuit of materialistic goals or the passion to achieve a bigger purpose? The first step is to have this clarity in mind, as this can be critical in defining the direction your business would take. Through these questions, Sridhar showed that business decisions are not just driven by external factors but by internal as well.
For example, why should you chase high growth numbers? As per him, the first step to bootstrapping is survival. The top 5 goals for any startup should be Survive, Survive, Survive, Survive, Survive. Survival is enough. Keep your costs low and make sure all your bills are paid on time. Cut your burn rate to the lowest. Zoho created 3 lines of business. The current SaaS software is their 3rd. They created these lines during their journey of survival and making ends meet.
Why go after a hot segment (with immense competition) instead of a niche one? If it’s hot, avoid it i.e. if a market segment is hot or expected to be hot, it will be heavily funded. It will most likely be difficult to compete as a bootstrapped organisation and is henceforth avoidable. Zoho released Zoho docs in 2007, but soon as he realized that Google and Microsoft had entered the space, he reoriented the vision of Zoho to stay focused on business productivity applications. Zoho docs continues to add value to Zoho One, but the prime focus is on Applications from HR, Finance, Support, Sales & Marketing and Project Management. Bootstrapping works best if you find a niche, but not so small that it hardly exists. You will hardly have cut throat competition in the niche market and will be able to compete even without heavy funding.
Most SaaS companies raise funds for customer acquisition. Even as a bootstrapped company customer acquisition is important. As you don’t have the money, you will need to optimise your marketing spend. Try and find a cheaper channel first and use these as your primary channel of acquisition. Once you have revenue from the these channels, you can start investing in the more expensive one. By this time you will also have data on your life time value and will be able to take better decisions.
Similarly, why base yourself out of a tier 1 city instead of tier 2 cities (with talent abound)? You don’t need to be in a Bangalore, Pune, or a Mumbai to build a successful product. According to Sridhar, if he wanted to start again, he would go to a smaller city like Raipur. Being in an expensive location will ends up burning your ‘meager monies’ faster. This doesn’t mean that being in the top IT cities of India is bad for your business, but if your team is located in one of the smaller cities, do not worry. You can still make it your competitive advantage.
Self-discipline is of utmost importance for a bootstrapped company. In fact, to bootstrap successfully, you need to ensure self-discipline in spends, team management, customer follow-ups, etc. While bootstrapping can demand frugality and self-discipline, the supply of money from your VC has the potential to destroy the most staunchly disciplined entrepreneurs as well. Watch out!
And last but not the least – It takes time to build something successful. It took Zoho 20 years to make it look like an overnight success.
You’ve shaped up your business idea to flag off. You have a pool of talent believing in that idea and lined up with working prototype with feedback. Now, it’s time for funding to take your idea to concept to design to product to a successful business.
Depending on the idea, startup projects can be particularly expensive and often incur new, unforeseen costs. That is particularly true of technological ideas, which are currently in vogue but require exploratory costs (to pay experts to determine if the idea is feasible) and initial product development costs. Even if a team proves the idea is feasible, they often need to build a working model or prototype to prove that to investors, which can sometimes add thousands of dollars to startup expenses.
The vital idea behind bootstrapping in commercial means is to borrow as minimal finance as possible. In two words, you only rely on either on your own budget and savings, on some crowdfunded amount or simply on loans from friends and family. This scenario urges you to borrow insignificant amounts of money and thus keep interest costs minimal. But as the market dynamics populates further, the wider entrepreneurial community starts delivering differing views.
Guy Kawasaki has proclaimed that “you should always be a boot-strapper… too much money is worse than too little” but goes onto to suggest “if you do get offered venture capital, take it, but don’t spend it”.
Most people focus all their time and attention on building their idea, and forget that even the coolest product or service is worthless if people don’t use it. Creating a successful product or service requires two things:
A solid implementation of the idea.
People that use it.
For the best chance of success, you need to identify the smallest core of your idea that has value to your potential users, build only that, and release it. This “minimum viable product” or MVP serves as the ultimate idea testing ground. It lets you build a relatively inexpensive version of your idea, test it with real users, and measure adoption.
Investors see a lot of ideas, which is why they won’t sign an NDA (your idea is not original, no matter what you think). But if you have a team that has delivered products in the past, worked through adversity, and has a failure or two to learn from, then the investor can see a group of people who will protect his investment, and has demonstrated the skills to do so.
So No. An idea will not get you funded.
To be investible, a start-up needs to have a good product-market fit and the potential to scale up quickly to a large market. It needs to be defensible with intellectual property or some other competitive advantage. And it needs to have a credible team in place, people who investors will believe can execute. And there needs to be some kind of proof, also called validation, also called traction.
Building an early prototype also helps you attract tech talent, because it gives people something to look at and play with, and it communicates your idea in a more “tangible” form. Then you can shop it around to potential technical co-founders to get them excited about your vision. If you have the means to actually build a working prototype, so much the better!
Most Angel Investors (and VCs) won’t pay much attention these days without some other sign of traction, especially because the financial and technical barriers to entry are getting lower and lower.
Additionally, the current market size doesn’t matter. The market size in 10 years is what really matters. You want to be in a small but rapidly growing market. You can change everything in your start-up except the market. So spend a lot of time up front to make sure you’ve thought through your market. “Having value” and “being fundable” are two completely different things.
Two of the most valuable things that the investor community seems to have been seeing from close quarters are: customer feedback and data from pilot research, which can enable them ask questions that lead to product breakthroughs. Angel Investors would need to know how your idea has improved to a bit more than a fledged product wireframe, so that their willingness to invest into those ideas via money, and social reach can increase to ensure that the success of your product is further defines by cutting-edge product development process.
Following guidance is thus seems to have gained ground and immovable traction for all the aspiring entrepreneurs who are progressing from a Bootstrapping channels to Angeled funding:
Be value-driven rather than fund-driven
Be independent of technologies that make you lose control over your idea
Make the customer a base for your product than profit
Base your ideas on supply and demand and not on the money it can attract
Once again, this isn’t a strict definition, but the seed round is normally used to fund the initial stage of your company where you’re finding product/market fit, and the following rounds are meant to help with scaling. That said, the road from concept to readiness (aka product MVP) is long and winding. Entrepreneurs’ single greatest challenge in this sphere of activity is balancing bursting creativity with structured, method-driven decision making.
If I say “the startup scene in India has taken off in a big way”, it’s probably the biggest understatement of this year! Startups are sprouting from every corner of this country fueled by big success stories. An eager online and print media are doing their best to fan the flames of entrepreneurship. That’s why India has now the third largest base of Startups in the world.
The glamour of starting a company masks a truly challenging task that every brave entrepreneur will confront and that is “how do you market your product idea in a highly competitive marketplace?”. If you are bootstrapping your company and have limited or no seed funding to rely on, you have even more challenges to deal with.
Assuming you have done the basics right, namely, identified a gap in the market that you can address or tap a unmet need and your target market has the required scale to fuel rapid growth for your product, the million Dollar question is how do you market your product or idea without spending money!
Let me narrate my own entrepreneurial journey. I started Jodi Logik in September 2015 with my own money. Till end of February 2016, Jodi Logik was a bootstrapped company and only recently a couple of individuals chose to invest to push my idea to the next level. For over 6-months, I was on my own but managed to move things along in terms of marketing without spending a single Rupee. Let me share 3 lessons I have learnt in my 6-month journey in terms of driving product marketing without spending money.
Lesson #1: Good karma pays off
One of the easiest thing an entrepreneur can do is to help others and let good karma pay you back! Let me explain this idea. Let’s say you have an idea to sell mangoes online. You can just set up an ecommerce site for your mangoes. However in order to attract customers, you will need to spend a lot of money advertising your site through the internet or traditional media outlets. To further compound the problem, you will have to deal with other sites selling mangoes! You will have to outspend your competition even if you are convinced that your mangoes are better than that of your competition!
There is a simple way to get your name out without burning cash.
People are looking for answers and that’s one of the reasons Google exists. As an entrepreneur selling mangoes, all you have to do is to find and answer questions people have about mangoes!
The first thing an entrepreneur should do to get started with product marketing is to seek questions that your target customers have about your product or product category and make sure you make a genuine effort to provide the best answer possible.
Here is an example of what I did. The target audience for my company include young Indians who are single. Jodi Logik offers an online solution to create a biodata for marriage and hence my area of interest was to answer questions from single Indians about marriages, arranged marriages, love marriages, dating and relationships.
So here is what I did. I was already a member of Quora and it has millions of users and a lot of them are young Indians. I quickly figured out that there were plenty of questions on the topics that fall squarely in my product category and the quality of answers for many of the questions that I consider as important were below par. I decided to invest my time in answering as many questions as I can on Quora and in 6-months, the number of views for my answers have grown significantly as seen below.
Figure 1: Answering questions on Q&A sites is good for business!
When you answer questions on Q&A sites like Quora, Yahoo Answers or in Discussion Forums, make sure you follow these guidelines:
Provide a high quality response. Do your homework before answering anything. Providing an in-depth and meaningful response is always appreciated.
Don’t try to pitch your product. Try answering the question genuinely.
Don’t take a holier than thou stance even if the question is really “bad” or poorly framed.
Don’t get into heated debates with anyone over your responses or someone else’s response.
Humour always helps.
Remain consistent. Find time every week to contribute to the community.
Here is a simple thing you can do on Quora. Create a headline that includes your brand! Every time you answer a question, you give your brand some free publicity and potential traffic!
An added bonus in answering questions is that you become very aware of your target customer’s need and expectations from the product category you are interested in and this feeds directly into your product road-map!
If you are selling a B2B product, LinkedIn and Industry forums / sites are a great place to demonstrate your competence and showcase your unique take on the subject matter.
Lesson #2: Cost of creating great content is ZERO
Google is a great leveler! It provides anyone (with access to the Internet of course) the same information on any topic and this is a boon for bootstrapped entrepreneurs. All you have to do is to create great content that people would love to read and share and see traffic to your site grow organically!
While I am still in the early days of launching a company, I decided to focus on creating great content in addition to a great product. I shared the content I created in two ways:
Started writing detailed blog posts on topics that my target customers were interested about.
Created in-depth guides to help my target customers and made it available free of cost.
Guess how much I spent to do both? A big, fat zero. But, it’s not easy. Here are the challenges I overcame to create awesome content:
I worked almost 14 hours a day including weekends. I was obsessed with publishing once every day for 5 days a week. This went on for over four months. I dialed it back significantly after that and I will explain why later.
I had to go through a crash course on content marketing as I was new to online marketing for a consumer product. All my experiences were in the B2B space!
I did not have a co-founder who could share my burden and could not initially afford to hire a professional content writer.
Luckily, I was good at a few things that really helped me:
I was good at finding answers for questions and giving it my own spin.
I have a decent command over grammar and storytelling.
I was obsessed with creating great content!
The reason I listed the challenges and my skillset above is that every entrepreneur is different. Some are good at churning out content and some are good at churning out code. But there is one key trait every successful entrepreneur has – i.e. to craft and sell stories! This is a skill that every entrepreneur should develop and improve upon. Irrespective of your own skills, here are some free tools and resources I leveraged to churn out great content:
Start using Canva to create awesome images that will supplement your content
Install the Grammarly plugin for Google Chrome to make sure everything you publish is free from grammar errors
Learn to work with WordPress. It’s free and a great platform to launch your awesome content
Familiarize yourself with basic SEO concepts and analyzing keywords for your content
Learn to use Google Analytics to track how your content is performing
Recently, I published a post on The TechPanda listing 11 free tools that every bootstrapped entrepreneur should use.
In summary, it doesn’t cost you anything to create great content as long as you are willing to put in the effort. At least in the beginning, great content is one of the primary requirements to build traffic to your website and you can do it free of cost.
Lesson #3: Unleash your hidden PR skills
While it is true that great content on your website can drive traffic, it’s not that simple. For a while, I was under the impression that churning out great content will get me noticed on Google. Boy! I was wrong. I had great content going up on my blog page every day of the week but traffic was just trickling in and the expected take off never really happened. There is nothing more demotivating than to see your effort are not producing the results you expected.
The reason is simple. Even great content requires a vehicle to be delivered to your target audience. Let me explain a few lessons I learnt on the topic of getting the word out about your content or product.
If you are bootstrapping your company, you cannot afford a PR agency. Don’t waste time talking to any agency of any kind! Believe me. I already wasted my time.
Hiring a PR agency makes sense when you have traction in terms of customer acquisition and product engagement. Premature publicity can kill your product if you are not ready.
You need to back yourself to tell a story about your company or product at every available platform. Here are some simple ways of getting word out about your Startup that worked for me:
Use job boards such as Hasjob to advertise for any freelance positions you may have. I used Hasjob to hire UI designers and front-end developers for my product. Advertising for open positions (even if it’s just freelance positions) creates a good impression. Oh! Did I tell you it’s free?
Write guest posts on high quality sites. The idea of writing a guest post is not to gain publicity, but to build credibility and reputation. This one article I wrote for Youth Ki Awaaz created a lot of traffic for my site although I had no intention of driving traffic! Reach out to site owners proactively and offer to write. Everybody loves good content and you don’t have to pay anyone to write a guest post.
Partner with experts who can share useful insights that your potential customers will love! In my case, I reached out to top notch wedding photographers and I am already working on creating exclusive content that my audience will love. The advantage of this approach is that in addition to getting exclusive content, you can also leverage the expert’s network to get your name out! The key question you need to ask yourself before approaching an expert is “What is that you can offer them in return?”. If you think hard, you will invariably find a compelling answer!
Use Facebook groups to your advantage. One simple way to create some publicity for your brand would be identify active and large Facebook groups that may be interested in the awesome content you have created. Sharing relevant content with the right groups will certainly give you some free exposure. For example, if you have awesome content on how your mangoes can make a great mango lassi, try sharing it with a Facebook foodie group. Just remember to read about the group rules before you share your content!
If you follow the lessons I learnt in point 3 above, you will reap one more reward. Every time your company name gets mentioned or a backlink to your company is created on other sites, Google will attach a greater importance to your site and that’s good for boosting traffic to your website!
I am already seeing an uptick in traffic to my site. Check out the 6-month site traffic data for Jodi Logik here. Notice how increased focus on promotion in the last three months is boosting the numbers. For a first-time entrepreneur like me, seeing the steady uptick in traffic to my product with no external assistance is encouraging.
In summary, the three lessons I have learnt in the last 6-months has given me greater appreciation of the fact that the Internet is a great leveler! You don’t have to be a marketing wiz kid nor do you need an army of digital marketing experts to get your brand off the ground. If you are willing to put in the time and effort, you can certainly kick start your marketing campaign for your Startup at no cost! Of course, I have provided only high-level information but will be glad to share in-depth insights. I look forward to your comments
Valuefy was started in 2010 to empower fund houses to make informed decisions better and faster. Vivek Singal, a B.Tech from IIT Bombay and Sharad Singh, an MBA from IIM Ahmedabad worked together at Fractal Analytics, an analytics firm, before starting Valuefy.
On choosing to build a product like this, Vivek shares, “When we chose our niche, which was a B2B product for such a specific market, at the time when eCommerce was growing, it took a lot of faith. It was a slow journey, but definitely a profitable journey. Our clients have been very sticky and we are collectively helping manage over 100 billion dollars worth of funds at this point.“
Here are some excerpts from a conversation with Vivek:
Where did the story of Valuefy start?
VS: “Whole science around the portfolio management is a very niche play. Valuefy has been serving Indian players so far. To give you an idea, we are servicing 2 of the top 3 fund houses of the country. We have cemented our place in an Indian market.
We picked up analytics as a domain since number crunching was our forte, coming from our experience with Fractal Analytics. We were intrigued to find the frameworks and algorithms that helped the fund houses make decisions. We wanted to understand if there was any tool that they were using to decompose their performance, analyse returns, and understand what are the drivers.
There are some large global organizations that were working in this area, but they didn’t seem to respond to the change in technology to create more sophisticated agile tools. So they were placed as a middle office tool, but not a decision-making tool.“
What were your major road blocks in your journey, and how did you overcome them?
VS: “First off, it is very difficult to do a product strategy in this kind of a market. Our clients are very comfortable with excel as a tool where they can manage their reports on an ad-hoc basis, even though it can only give 10% of the information. Our study says that 60% of a fund manager’s time goes in understanding and processing the data which leaves them with very little time to analyse the performance and the portfolio. The problem is that they are so used to it, that it is very difficult to break this pattern and bring the adoption of technology amongst the fund managers.
Second, when we started, the markets were not favouring our product. We realized that the bigger clients were more open to it. Also, we think the international customers would have been more open to the product but the markets were slow.”
What goes into marketing such a niche product?
VS: “
We have created a global advisory board. It includes people who have experience in the domain, people from our competition, also, people from the academia who are helping us with it.
We have formed some key partnerships with global conglomerates. It helps as a marketing platform as well as a distribution channel.
We started as a hosted product, but we have grown it into a SaaS based model, which has made it simple for us to integrate with the global companies and this will help sustain our global expansion.”
What is your advice to people who want to startup?
VS:”
Identify the market correctly. We served the Indian market for a very long time. While our market was global, we spent a lot of time on Indian markets first. So you will need to take the decision and define your market.
Get the connect to the market. While you may be good at creating something, but a venture needs both a good product and good marketing and sales. So plan accordingly.
Keep faith in your journey until you decide that you have given a fair chance to it.
People become a pendulum between deciding whether revenue generation is more important or increasing the valuation is more important. While valuations are sexier, I think if you want a sustainable growth and a strong business model, revenue generation helps create that solid foundation.”
Valuefy has definitely established that B2B businesses focussing on revenue generation and profitability can create a sustain an enviable growth. We wish Vivek and his team all the luck in their journey.
You have an idea, and you start up. Then you quit your job, and pursue it full-time. What follows next is the quintessential dilemma of a startup founder — “Should I raise money now?” Unless you have a machine that mints money, you will find yourself wondering about it in your startup journey. In mine, I reached stages where I had questions in my mind to which raising money was one of the answers.
You Have An Idea And It Needs Investment
You have an idea which you need to transform into a functional product. You will need resources for that. Times have changed, and nowadays, investors rarely prefer to invest in startups in the idea stage. Having a fabulous idea is not enough; it’s the successful implementation of the idea that eggs the investors on to invest in you. Raising money in the idea stage is not entirely impossible, though. You might still stand a chance if you have graduated from an Ivy league college, have a great work experience, or have built a successful startup previously.
If you have a prototype ready, you can always pitch to the investors. Raising money from your friends and family is also an option, but I’m strongly against it.
My story: I did not have to hire someone to develop the first version of our product, or outsource it as I was a software developer myself. Moreover, my savings came to my aid as I was working part-time to sustain myself. So, I coded the app and launched it in February, 2010 while I was still working.
You Have A Product And A Question: Make Money Or Raise Money?
Pull all your PR strings at the time of your product launch as this is the only thing that will fetch you your first batch of users. If your product exceeds users’ expectations, you will not need to spend money on marketing it. You can take a cue from WhatsApp, Slack or even my own product, Crowdfire. However, you will definitely require money to incur operational and other expenses to keep the product up and running. That’s when you have to either find ways to make money, or raise money.
After 6 months of starting up, Crowdfire had reached a point where the server charges had eaten up almost all of my savings, and we needed to make money somehow in order to survive. I realised that there were only two ways to do it — look for funding or find a way to monetise the product. Back then, I had no connections within the investor community. Besides, raising money is a full-time task, and I was already juggling my day job as well as my startup.
With no other alternative in sight, I decided to go ahead and monetise my product.
Now the thing is, if you’re a consumer product, making money can be difficult in the beginning because charging users before they even use the product might not be the best idea. However, if your target audience is not the consumers, i.e., you have a B2B model, and you want to make a viable business out of it, you should totally monetise it. We monetised Crowdfire and decided to go the freemium way.
First prove to the user that the product provides value. Then ask them to pay a part of that value as your charge. Win!
People are using your product, but you would want to grow it. There will, again, come a point when you (and your teammates or co-founder) will realise that you want more — to level up and build a company. You need people in order to build a company. Finding people of your tribe, people who are willing to take the risk of an early stage startup is tougher than you can ever imagine. In 2012, I quit my job and went full-time with Crowdfire because it was making me more money than my job was. Moreover, I made my co-founder quit his job too, and together the two of us decided that it was time to build a company. We had 600K users back then, and only one thing in mind: To build the best marketing product. We met investors, and even got the term sheet. However, there was a catch: The investors offered us $ 500,000 and in turn set a target in front of us — to reach 5 million users in 24 months. With the amount of money offered, the target seemed almost unachievable. After a lot of discussions, we decided that if we were to go down, we might as well do so without wasting the investors’ money. To us, it was a risk not worth the rewards that it offered. And 15 months later, as a bootstrapped startup we had 7 million users, and a revenue of over million dollars. If not money, we did take a big lesson away with us during our first tryst with the investors: The first step to success is to aim high.
It’s Time To Go All Out And Capture The Market
For some of you, raising money may have been the answer in the third stage itself. Looking back, we realised that we didn’t really need the money back then, and hence, going for funding just for the heck of it would have been disastrous.
Company A raising $100M is part of their growth plan. You raising because they raised is part of your death plan.
After a point, even great traction doesn’t seem good enough. Fast isn’t fast enough. You want greater traction, and faster progress. Even though we were making enough money to sustain ourselves, the revenue wasn’t enough to fuel our growth. On top of it, we wanted to shed our image as a “follow-unfollow feature” as we had surpassed that stage long ago. It was evident that external funding was needed to fuel our product growth as well as help us increase our market share.
In February, 2015, we raised a Series A funding of $ 2.5 million from Kalaari Capital. It’s been a year, and we’ve just released the beta version of Crowdfire 2.0 — your marketing assistant on iOS (you can get early access here), and I’ve never felt prouder of my team. Crowdfire 2.0 is going to help small businesses like e-sellers, cafe owners, bloggers, authors, youtubers, influencers, photographers, freelancers and startups market themselves by being their marketing assistant. These small businesses would not be at a disadvantage anymore for lack of a marketing team compared to big businesses that can afford one.
We’re just getting started. But, there’s one thing that I firmly believe in. Stay bootstrapped for as long as you can. In Paul Graham’s words:
Don’t raise money unless you want it and it wants you.
To me, entrepreneurship is a dynamic manifestation of creating connected values with compassion; so I focus on creating connected values without worrying for my funding orientation.
When I started, after coming out of Sun Microsystems, I was not thinking about money as I was able to get some money by helping people who were using the product that I built at Sun. I did not know what it takes to build a company and more so, what it takes to build it in a constrained environment. In the meantime, I developed a passion for the bootstrapping model for building company. I created a community around it called “Bootstrap Bangalore”, it’s been 3 years we have been meeting every other Sunday at breakfast.
Later on, I was introduced to another powerful tool called “effectuation”. I attended a workshop conducted by Professor Saras Saraswathi. The effectuation principles are simple and empowers bootstrapped companies more meaningfully. This has become a language for me to express my business model. The effectual principles help an aspiring entrepreneur to bootstrap quickly. It also makes it easy to navigate the future, which is unknown.
Fear is a constraint, and at times, courage can become a constraint as well. Starting with what was available to me when I begun (and acting on it), has given me amazing new possibilities. Understanding myaffordable loss allows me to be courageous or passive, as the situations demand. As a result, I don’t have the fear of failing; and if I do fail, I will be able to reassemble myself since the cost of failure is affordable.
Predicting the future is unnecessary. The future can be created or co-created without predicting it, if we have the ability to embrace surprises and adjust to a new situation. Sometimes, external funding could become a constraint for the entrepreneurs, and force them to predict and gamble in an unnatural manner, without an affordable framework in place.
Unnecessary courage and prediction without commitment does not enable freedom. When taking external funds, one should look deep to see whether the investor has the appetite or commitment to co-create the future, and therefore expanding affordable loss bracket. I don’t believe in a wave on my back, that’s just a feel good factor. I hate to go after an artificially created market without the commitment from the consumers. When customers don’t know what they want, they go slow and iterate to identify what they may need.
Taking external money eventually turns out to be expensive for any entrepreneur. If you can build and scale a company on revenue, there is nothing more satisfying than that; but in the same time if you must need to increase your affordable loss bracket, you can take external funds to scale up. Don’t take money simply because your competitor is raising money. On the contrary, external money does not necessary mean you are loosing freedom, but if you take the money when you don’t need it, you will eventually compromise on your freedom.
As we talk, about models and funding orientations, I would also like to quickly touch another important subject. Sales is one of the most critical challenges for any entrepreneur, and especially the bootstrapped ones. I was very fortunate to interact with sales gurus like Deepak Prakash (Former VP Tally), who helped me to understand yet another simple thing – don’t sell; demonstrate what you have or what you can do; if you are solving someone’s problem they will buy. And that has worked for us.
Finally, the best way to build a business without depending on external money is to seek commitment from the customers – sell it before you build it. Be open, and allow others to help you in co-creating a company/product. Collaborate to create connected values. Again follow the first principle of effectuation, do what you can do now, without depending on others, look for participation from there on. Freedom is in your hand and it’s up to you make that choice.
Enjoy the freedom of creating value, that can bring impact and meaningful change.
Hope you had a wonderful Independence Day!! Let’s celebrate the freedom throughout the year and reimagine a “Start-Up India”, “Stand-Up India”. Jai Hind !!
By Ahimanikya Satapathy, assisted by my daughter, Adya Satapathy 🙂
I had started InBoundio in Jan 2013. After doing lot of freelancing, services and building casual hobby products, this was my first serious attempt in building a web product and business. This also made me took a dive into core technology as earlier I only had surface knowledge of technology. It did well and got reasonable success. We did plenty of iterations with product feature and pricing and we did got good number of inquiries about white label marketing software.
Since I am building AeroLeads too, it was difficult to focus on 2 products hence after 6 months of talks with many businesses, I have sold my startup InBoundio to an Australian Media company c9.
The last 2 years were fun in terms of learning and experience and now I have both as well as some cash, so now I will be using all this to grow current product much faster.
Learning and Experience
1. It was little tiring since I did all the work of talking and communicating with people. Though it was rewarding too since now I understand complete business cycle as well as understand complete technology and marketing stack of a business. I was also able to understand what are the metrics which a buyer look for. Saying this, I am very sure I am done selling businesses for a long time since it don’t excite me. Building businesses to sell it is also not a good business model.
2. It is not easy to sell your startup sitting in India to someone in other countries. Trust is a major problem as no one know each other. This also means you will only appeal to buyers who are looking to buy in certain price range to minimize risk for them.
3. I have seen many Indian businesses who go under the radar getting sold in 1M USD range through business brokers. If you think you can sell your business in this range, you should look to engage with brokers who have the right network. Do note that you will get valuation in multipliers of 2x-5x range which is the industry standard for web businesses. It can be 10x if the buyer sees real growth potential but don’t expect 20x or such valuation which rarely happens. Being realistic is important.
4. You can get much higher valuation if you are willing to work with the new buyer for few years, do partnerships or take some money now and rest later. At the end of the day, everyone wants to mitigate risk.
I had few such proposals but for me, it wasn’t about money, I knew it could get messy as it is not easy to partner someone in different country so went with outright sale.
5. The whole process is time consuming and can take 3-6 months. Make sure you don’t rush and covers legal aspect of transferring ownership and assets.
6. Prospective buyers will always look for these 3 parameters. If your startup have them, you should be fine, if not, you will find it difficult to make the calls.
i. Growth Potential
ii. Minimum liability
iii. Existing revenue
Where to find buyers for your Startups and Businesses
1. LinkedIn – I contacted lot of businesses founders on linkedIn using inmail and got good response. Few of them showed interest but it was also the issue of “not having enough paying customers”. If you want businesses in similar vertical to acquire you, remember that most of them only look for paying customers and not for technology.
2. Business Brokers – There are plenty of business brokers and firms who help you selling businesses in 500k to 10M range. They take about 10-15% fees and for someone in India, if you think you have the above 3 (growth, minimum liability and revenue), you should talk to them as this reduces risk, cut down your time/effort and speeds up communication.
Feel free to message me If you need some advice or if you think I can help you. I can be reached at “pushkar.gaikwad at gmail dot com” or through linkedIn.
There are many paths to successfully bootstrapping a start-up. The trick is finding the way that works best for you. Now more than two years into my journey, I want to share a few lessons I wish I had learned earlier.
I would like to share a few tips from my experiences of bootstrapping an international startup. I want to speak the reality I experienced, my personal opinions, and I do not intend to contradict what others from the industry have said. I only mean to share what I have learnt from my B2B start-up experience within my business context.
Starting-up: Find a problem that exist in a considerably large scale and is solvable. Ideate solutions that could make lives easier. A problem could exist anywhere — in your current job or existing business models. People may or may not know about it. Develop a market need. Don’t build a start-up in view of a million dollar exit. Be obsessive about what you do, aim higher, execute mid-long term plans and take it higher.
Office: You don’t need a flashy office to start with. Work from home, Starbucks & co-working spaces. It’s alright to work from anywhere as long you have a seat, decent connectivity and fewer interruptions. When you set up the office, design it with bright colours and lots of natural light. Adopt a hybrid infrastructure of open workspace & cubicles. At some point in time, when you turn profitable with adequate cash balance and have a strong cash flow — consider owning an office instead of renting. It helps to save significant dollars in the long run and build company assets.
Team building: If you have an idea that you believe in and you have the skills, get started immediately. A few dont’s:
Don’t wait on a perfect team and plan to get going; such a thing does not exist.
Don’t be fascinated about rank holders, high percentile college degrees and flattery resumes.
Don’t do meaningless interview rounds and tests.
A co-founder is not a must-have. Look for freelancers & part time workers to help you get on the road. What matters the most is if the candidate can do your job, whether has the right attitude that fits within your company culture and goals. Give part-time work; engage to get more comfortable before offering the job. Look for skilled human capital available at low cost economies and build your teams internationally. Communicate efficiently, be transparent and set the expectations clearly.
Product: Build products that could be desirable and likeable for large, yet targeted audience. There is nothing wrong with taking a legacy business model, apply modern science and improvise it to create a new business. Change is inevitable; there is always a market for disruptive solutions. Once started, run faster and not ever stop innovating it more.
Go-to-Market: Know your buyers. Short-list them, study their potential business needs corresponding to your products and prioritize accordingly. Approach them with tailored messaging. Focus on showcasing customer benefits, NOT product features. Buyers only care how you can solve their problems not your badges in the sales pitch deck. Plan to be global from day-1. Build your products and company culture for global scale. Gaining market traction should be top priority. Constantly engage with prospective buyers, form a customer council to validate your products and gather market feedbacks regularly to improve your product road map.
PR: Winning new customers is the biggest award and growing your business profitably is the best coverage for startups. Don’t waste your time on pitching into media and investing with PR agencies. Instead, use your website and social media channels to shamelessly self-promote your company, products, case studies and thought leadership. Your prospects won’t buy from you because media covers you and you are popular — they will invest in you if you have a good product with proven benefits and referencable customers. Your company will become popular if your products are useful. Grow your company with disruptive products, global customers and an innovative team. Create newer jobs and give back to the society — let journalists bump into you.
Fund raising: Think of external capital only if you need it. Be sure about why you need the money, investment plan and projected outcome. Do your homework on who you want to partner with. Convince yourself with realistic valuation of your company and practical terms you want to work with; stick to it. Be honest in your pitch deck and fund raising approach. Investors are expected to do their home work too, so don’t be afraid to correct them. If they say ‘Grand ma should understand your business’, and you don’t sell into such audience, tell them openly. Avoid investors looking for start-up lottery. Instead, find backers who promote innovation and entrepreneurship. You can’t do an enterprise startup investor pitch in 3 minutes. Stay away from 3 minutes pitching gimmicks, it’s a ticket selling tactics for startup media events. You can easily find the VC communities from Google search. Pick up the phone and call them or send them an email. Use LinkedIn & leverage reference contacts. It’s at the best, if you build your company with market traction and proven products to be in a position to choose from whom you wanted to take money, if and when you need it.
Networking: Start-up events are trendy and fashionable these days. There is a lot of noise and smoke out there. Be smart to rise above the noise. Don’t compare yours with other startups. Don’t be too excited about showy startup media. Be selective in networking events and look for agendas that can give you key take-away for your business. Remember, your ultimate goal is not to build a worldwide network of know-who, but to know those few who can complement to build your company. Invest your networking time wisely. Not all great companies are built out of startup accelerators. Many successful companies are bootstrapped, built from garages and bedrooms. Startup media publications make most of their money from their event tickets, hackathons etc. It’s severely hyped up. Be practical and selective.
Mentors: Surround yourself with like-minded people who can inspire you and give guidance; people who can introduce you to customers, partners and investors. Build an advisory board that could help you establish your network & connect with right people and open doors to money. Advisers should be fluid, review and make changes at different stages of your start-up journey.
Social: Associate yourself with entrepreneur community. Share your experience and learning with aspiring start-up entrepreneurs. Volunteer in community development projects in small ways you can. Creating new jobs through your start-up is the best contribution you can offer to the prosperity of humanity. Build a company culture to help others and give back.
Personal: Be prepared to sacrifice, compromise and tolerate. Improve your patience level as much as possible. Don’t bring emotional sentiments in customer situations. Make friends with clients. Engage in some sports. Fall in love with everything around you. Never shut down. Travel the world, it makes you richer. Stay humble.
“Pulling oneself up by one’s bootstraps” refers to 19th century high-top boots that were pulled on by tugging at the ankle strap. It generally means doing something on your own, without any outside help. In the present day context, bootstrapping is a commonly used term used to describe startups that rather than seeking help from external investors, an entrepreneur fund the development of their company through their own money or internal cash flow.
At a time when funding has become more a norm in the startup world than a necessity, it is common to see startups go investor-hunting even when the ‘brilliant idea’ is still at a concept stage. They have nothing to substantiate their claims before investors – no product, no customer, no traction. For some this is a new job category.
It is startups like these that need to understand that funding is not the only way forward. Bootstrapping, can be a very powerful alternative to create a more impactful company. Sometimes, a hybrid model might be more effective, where the entrepreneur could bootstrap for an initial period of time and only take external funds when the business is ready to scale. We wonder then, why most entrepreneurs these days fear to tread this path and settle for the seemingly easy route of seeking angel investors and VCs!
Someone has very rightly said, “Raising capital is not equal to success, not raising is not equal to failure.” One should understand that funding does NOT guarantee success. Also, it is important to realize that when growth occurs faster than the business model that supports it, the result is an increased likelihood of ending up in that disappointing majority.
There are many successful bootstrapped companies across the globe, including India. According to iSPIRT – the Indian ‘Think Tank’ that is actively helping and promoting Indian product companies to make India a product nation, 73% of the Indian software product companies are bootstrapped. It recently came out with an interesting Index – India Software Products Industry Index – B2B (iSPIxB2B) to highlight some surprising facts about the Indian B2B software product companies. According to the data collected, the enterprise value of the top 30 companies dealing in the B2B software product space is $6.2 bn (₹37,500 crores) and about 37% of these companies are bootstrapped.
As a matter of fact, even VCs prefer to back bootstrapped companies to those with early angel investment. They would much rather invest in a startup where the entrepreneur’s own money is at stake as well, since it shows the amount of confidence he/she has in the product or idea. There’s no denying that while it is easy to play with someone else’s money, no one wants to play with their own money unless they truly believe that they can make it work.
Bootstrapping forces entrepreneurs to constantly think about cash flow, which in turn forces them to become customer focused and create value. It forces entrepreneurs to become effectual, where the entrepreneurs navigate their journey to co-create the future that does not exist today.
Fundraising is a time-taking process and especially for early stage startups it can be a dangerous thing to dedicate so much time on meeting investors or preparing pitches, so much so, that you lose focus on your product and your customers. If you are self- funded in the initial days, you won’t have to make rapid decisions that you repent later. You can always raise funds in the future, once the foundation of the business is stable and you are ready to scale up.
Sometimes, growing slow is better. Specifically when there is a lot that is unknown; but once you find a direction, it will become easier to run faster; and then the need for external funds becomes more appropriate.
Once you have something more concrete to show to the investors after you have developed the product; tested it; and generated substantial traction – chances of getting valued will certainly be more. Moreover, you will be in a better position to bargain and negotiate the deal on your terms.
The decision to go down the road of bootstrapping and create a self-funding business has been known to provide rewards that can be both immediate and lasting. Many of the successful companies that we see today – Dell Computers, Facebook, Apple and eBay to name a few, had humble beginnings as bootstrapped enterprises. It clearly reiterates that funding is not a norm for success and as far as you can go solo, you should. Remember – customer money is the cheapest money that you get.
There is no right or wrong way; the fact remains you need funds to run a business and as an entrepreneur, the funding orientation is a choice that you will have to make. One should understand that every business is unique and demands different resources to build and operate it. Do a quick assessment for your reasons in seeking funding from an investor – big or small, angel or first/ second round of funding. You need to look at many other factors such as the industry type/ business you are into, the kind of working capital required, competition, opportunities of scaling up etc. Carefully analyze the pros and cons and then choose the path that is suitable for your business.
Remember not to be lured by the halo attached to the big funding news that is generating headlines in all the pinkies. You can go solo, yet achieve the same ‘stardom’ while retaining full control of your dream venture. However, simply put – ask for funding when you are ready to scale big time.
To me, entrepreneurship is a dynamic manifestation of creating connected values with compassion; so focus on creating connected values regardless of your funding orientation.
Skill oriented education: Now while the rural revolution looks interesting, how will the software talent that is usually US bound, join such remote places. Sridhar’s answer to this is Zoho University. Zoho University is a unique education, follow a gurukul Indian approach, where students are pulled from government schools, and trained into important technical skills, English and Maths, Design skills, as well as business skills.I had some great discussions with Anand Ramachandran, who heads Zoho University in Tenkasi. Zoho University now contributes to more than 20% of the 8,000+ employees in Zoho, and it’s heartening to see students from villages, Tamil medium government schools very effectively groomed to build world-class products. The analogy I have for this kind of education is chartered accountancy, which combines knowledge and hands-on skills together. But this takes it to the next level. 
Starting-up: Find a problem that exist in a considerably large scale and is solvable. Ideate solutions that could make lives easier. A problem could exist anywhere — in your current job or existing business models. People may or may not know about it. Develop a market need. Don’t build a start-up in view of a million dollar exit. Be obsessive about what you do, aim higher, execute mid-long term plans and take it higher.