Clipping The Wings Of Angel Tax

 

2000 startups. 100 meetings. 25 articles. 7 years. 3 WhatsApp groups. 2 whitepapers.

1 unwavering ask:

No More Angel Tax.

This evening, when we first got to see the circular from DPIIT/CBDT that formalized key recommendations suggested with respect to Angel Tax or section 56(2)(viib), we admit our minds went blank for a moment. After all, this one document represents the tireless, collaborative efforts of iSPIRT, the entrepreneurial community of India and ecosystem partners like IVCA, Local Circles, IAN, TiE, 3one4 Capital, Blume Ventures etc., and the proactive support from the government. It has been one relentless outreach initiative that has seen us become a permanent fixture at Udyog Bhavan and North Block (I even checked with the guards regarding the possibility of a season pass). My colleagues Sharad Sharma, TV Mohandas Pai, and partners such as Siddharth Pai, Nikunj Bubna, Sreejith Moolayil, Monika, Ashish Chaturvedi and Sachin Taporia deserve a big shout out for their diligent efforts at connecting with various ecosystem partners and initiating a regular cadence of dialogue with the government.

The key takeaways from the circular are as below

  • Blanket exemption for up to INR 25Cr of capital raised by DIPP registered startups from any sources
  • Amendment in the definition of startups in terms of tenure from 7 to 10 years
  • Increase in the revenue threshold for the definition of startups from INR 25Cr to INR 100 Cr
  • Breaking the barrier for listed company investments by excluding high-traded listed companies and their subsidiaries, with a net-worth above INR 100Cr or a Turnover of 250 cr, from section 56(2)(viib)’s ambit

Each of these points is a major win for the startup community. If one looks at the data from the LocalCircles startup survey in January 2019, nearly 96% of startups that had received notices regarding angel tax, had raised below the permissible limit of INR 10cr. Expansion of this limit to INR 25cr is a huge boost and instantaneously removes thousands of startups from the reach of angel tax. There is an effort here to critically analyse, define and differentiate genuine startups from shell corporations. It includes measures such as increase in the revenue and tenure threshold that will not only help startups with respect to the challenges posed by angel tax but also open up eligibility for benefits under Startup India schemes and policies. We have been talking about the need to encourage and protect domestic investments and the government has paid heed to our concerns by introducing accredited investor norms and by breaking the barrier for listed company investments.

Initiated in 2012 by the UPA government, Section 56(2)(viib) or the “angel tax” section has been a relentless shadow on the entrepreneurial ecosystem. It taxed as income any investment received at a premium by an Indian startup. This provision saw many entrepreneurs clash with the tax officials about the true value of their business and pitted unstoppable entrepreneurial zeal against the immovable tax department.

All of us from the policy team at iSPIRT have been at the forefront of this issue since 2015 when we began petitioning the government to exclude startups from section 56(2)(viib) as taxing investments from Indian sources would cripple the startup ecosystem. We laud the government for appreciating the urgency of the situation and prioritizing this issue.

We first had an inkling of things to come at the February 4th, 2019 meeting held by DPIIT. It was unprecedented as it saw a direct dialogue between government and entrepreneurs wherein both sides could better understand the issues facing each other – how section 56(2)(viib) was hampering founder confidence and how it is a needed tool in the government’s arsenal for combatting the circulation of unaccounted funds.

After this, a smaller working group was constituted on February 9th, to review the proposals made by DPIIT to address this issue, in consultation with the CBDT and the startup ecosystem. iSPIRT were part of both meetings and contributed actively to the discussion.

We can now heave a sigh of relief as we have finally achieved to a large extent what we had set out to do. We finally have a solution that ensures genuine startups will have no reason to fear this income tax provision and the CBDT can continue to use it against those attempting to subvert the law.

This could not have been possible without the help of well-wishers in government departments like Mr Nrpendra Misra, Mr Sanjeev Sanyal, Mr Suresh Prabhu, Mr Ramesh Abhishek, Mr Anil Chaturvedi, Mr Rajesh Kumar Bhoot, Mr Anil Agarwal, who patiently met the iSPIRT policy team and helped develop a feasible solution.

At long last, domestic pools of capital will no longer be disadvantaged as compared to foreign sources. At long last, Indian entrepreneurs will no longer have to fear the questioning of the valuations of their businesses and taxation of capital raised.

Who knows, someday we might have a movie on this. On a more serious note, it is a step that will go down in the chronicles of India’s startup story. This puts the startup engine back on track. More importantly, it shows what can be achieved when citizens and the government get together.

By Nakul Saxena and Siddharth Pai, Policy Experts – iSPIRT

An Afternoon With Don Norman In Bengaluru

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)

White Paper On Section 56(2)(viib) And Section 68 And Its Impact on Startups In India

Angel Tax (Section 56(2)(viib)) has become a cause celebre in Indian startup circles due to its broad-reaching ramifications on all startups raising capital.

This paper traces the origin of this section, it’s analysis, impact, how it adversely affects startups. Special mention is also made of the seldom covered Section 68 and it’s used in conjunction with Section 56(2)(viib). The paper also proposes recommendations to ensure that genuine companies are not aggrieved by this while the original intent of the section is preserved.

For any support or query, please write to us at [email protected]

Why the SC ruling on ‘Private Players’ use of Aadhaar doesn’t say what you think it does

On behalf of iSPIRT, Sanjay Jain recently published an opinion piece regarding the recent supreme court judgement on the validity of Aadhaar. In there, we stated that section 57 had been struck down, but that should still allow some usage of Aadhaar by the private sector. iSPIRT received feedback that this reading may have been incorrect and that private sector usage would not be allowed, even on a voluntary basis. So, we dug deeper, and analyzed the judgement once again, this time trying to disprove Sanjay’s earlier statement. So, here is an update:

Section 57 of the Aadhaar act has NOT been struck down!

Given the length of the judgement, our first reading – much like everyone else’s was driven by the judge’s statement and confirmed by quickly parsing the lengthy judgement. But in this careful reanalysis, we reread the majority judgement at leisure and drilled down into the language of the operative parts around Section 57. Where ambiguities still remain, we relied on the discussions leading up to the operative conclusions. Further, to recheck our conclusions, we look at some of the other operative clauses not related to Section 57. We tested our inference against everything else that has been said and we looked for inconsistencies in our reasoning.

Having done this, we are confident in our assertion that the judges did not mean to completely blockade the use of Aadhaar by private parties, but merely enforce better guardrails for the protection of user privacy. Let’s begin!

Revisiting Section 57

Here is the original text of section 57 of the Aadhaar Act

Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual for any purpose a purpose backed by law, whether by the State or any body corporate or person, pursuant to any law, for the time being in force, or any contract to this effect:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.

Now, let us simply read through the operating part of the order with reference to Section 57, ie. on page 560. This is a part of paragraph 447 (4) (h). The judges broke this into 3 sections, and mandated changes:

  1. ‘for any purpose’ to be read down to a purpose backed by law.
  2. ‘any contract’ is not permissible.
  3. ‘any body corporate or person’ – this part is struck down.

Applying these changes to the section, we get:

Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual for any purpose a purpose backed by law, whether by the State or any body corporate or person, pursuant to any law, for the time being in force, or any contract to this effect:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.

Cleaning this up, we get:

Nothing contained in this Act shall prevent the use of Aadhaar number for establishing the identity of an individual pursuant to any law, for the time being in force:

Provided that the use of Aadhaar number under this section shall be subject to the procedure and obligations under section 8 and Chapter VI.

It is our opinion that this judgement does not completely invalidate the use of Aadhaar by private players, but rather, specifically strikes down the use for “any purpose [..] by any body corporate or person [..] (under force of) any contract”. That is, it requires the use of Aadhaar be purpose-limited, legally-backed (to give user rights & protections over their data) and privacy-protecting.

As an exercise, we took the most conservative interpretation – “all private use is struck down in any form whatsoever” – and reread the entire judgement to look for clues that support this conservative view.

Instead, we found that such an extreme view is inconsistent with multiple other statements made by the judges. As an example, earlier discussions of Section 57 in the order (paragraphs 355 to 367). The conclusion there – paragraph 367 states:

The respondents may be right in their explanation that it is only an enabling provision which entitles Aadhaar number holder to take the help of Aadhaar for the purpose of establishing his/her identity. If such a person voluntary wants to offer Aadhaar card as a proof of his/her identity, there may not be a problem.

Some pointed out that this is simply a discussion and not an operative clause of the judgement. But even in the operative clauses where the linking of Aadhaar numbers with bank accounts and telecom companies is discussed, no reference was made to Section 57 and the use of Aadhaar by private banks and telcos.

The court could have simply struck down the linking specifically because most banks and telcos are private companies. Instead, they applied their mind to the orders which directed the linking as mandatory. This further points to the idea that the court does not rule out the use of Aadhaar by private players, it simply provides stricter specifications on when and how to use it.

What private players should do today

In our previous post, we had advised private companies to relook at their use of Aadhaar, and ensure that they provide choice to all users, so that they can use an appropriate identity, and also build in better exception handling procedures for all kinds of failures (including biometric failures).

Now, in addition to our previous advice, we would like to expand the advice to ask that each company look at how their specific use case draws from the respective acts, rules, regulations and procedural guidelines to ensure that these meet the tests used by this judgement. That is, they contain adequate justification and sufficient protections for the privacy of their users.

For instance, banks have been using Aadhaar eKyc to open a bank account, Aadhaar authentication to allow operation of the bank accounts, and using the Aadhaar number as a payment address to receive DBT benefits. Each of these will have to be looked at how they derive from the RBI Act and the regulations that enable these use cases.

These reviews will benefit from the following paragraphs in the judgement.

The judgement confirmed that the data collected by Aadhaar is minimal and is required to establish one’s identity.

Paragraph 193 (and repeated in other paras):

Demographic information, both mandatory and optional, and photographs does not raise a reasonable expectation of privacy under Article 21 unless under special circumstances such as juveniles in conflict of law or a rape victim’s identity. Today, all global ID cards contain photographs for identification alongwith address, date of birth, gender etc. The demographic information is readily provided by individuals globally for disclosing identity while relating with others and while seeking benefits whether provided by government or by private entities, be it registration for citizenship, elections, passports, marriage or enrolment in educational institutions …

The judgement has a lot to say in terms of what the privacy tests should be, but we would like to highlight two of those paragraphs here.

Paragraph 260:

Before we proceed to analyse the respective submissions, it has also to be kept in mind that all matters pertaining to an individual do not qualify as being an inherent part of right to privacy. Only those matters over which there would be a reasonable expectation of privacy are protected by Article 21…

Paragraph 289:

‘Reasonable Expectation’ involves two aspects. First, the individual or individuals claiming a right to privacy must establish that their claim involves a concern about some harm likely to be inflicted upon them on account of the alleged act. This concern ‘should be real and not imaginary or speculative’. Secondly, ‘the concern should not be flimsy or trivial’. It should be a reasonable concern…

Hence, the privacy risk in these use cases must be evaluated in terms of the data in the use case itself, as well as in relation to biometrics, and the Aadhaar number in the context of the user’s expectations, and real risks. Businesses must evaluate their products, and services – particularly those which use Aadhaar for privacy risks. It is helpful that the UIDAI has provided multiple means of mitigating risks, in the form of Registered Devices, Virtual Ids, Tokenization, QR Codes on eAadhaar, etc. which must be used for this purpose.

What private players should do tomorrow

In the future, the data protection bill will require a data protection impact assessment before deploying large scale systems. It is useful for businesses to bring in privacy and data protection assessments early in their development processes since it will help them better protect their users, and reduce potential liability.

This is a useful model, and we would hope that, in light of the Supreme Court judgement, the Government will introduce a similar privacy impact review, and provide a mechanism to regulate the use of Aadhaar for those use cases, where there are adequate controls to protect the privacy of the users and to prevent privacy harms. Use cases, and an audit/enforcement mechanism matter more than whether the entity is the state, a public sector organization, or a private sector organization.

Note: This is in continuation of Sanjay Jain’s previous op-ed in the Economic Times which is available here and same version on the iSPIRT blog here.

The writer is currently Partner, Bharat Innovation Fund, and Chief Innovation Officer at the Centre for Innovation, Incubation and Entrepreneurship, IIM Ahmedabad. As a volunteer at iSPIRT, he helped define many of the APIs of the India Stack.  He was the Chief Product Manager of UIDAI till 2012

(Disclaimer: This is not legal advice)

Product Roadmap considerations

Roadmap1

 

Roadmap is a key part of a software product company, especially Enterprise Software (B2B) software. When you sell your software to a customer, it is not just on the current capabilities but lot of emphasis is made on the Roadmap. Especially with cloud based software this is becoming super important, as the innovation and capabilities come out incrementally, in frequent cycles.

In my interaction with startup founders, one of the aspect they want to manage better is Reliable Product Roadmap – to ensure they do not over or under promise.

There are two steps to Product Roadmap –

  • Creating or documenting the product roadmap
  • Communicating the product roadmap to various internal and external stakeholders

In this post, I would like to share some key areas to focus for effectively create and communicate roadmaps that may have different flavors.

Vision vs. Execution

roadmap2

 

Logically split Roadmap into the above two areas in order to communicate to right stakeholders. One part should cover the Product vision – or even a higher vision of the product segment or umbrella. This would be the driving factor based on which the customers should perceive the product, of how problems are solved today and into the future.  As an example, Microsoft Office vision would be to improve productivity – and how they plan to leverage future technologies to improve productivity. The other part is around the Execution – more of delivery plan, more of product capabilities that are coming in, more of the details. A clear link should exists between the vision and execution – but it is important to have this as two parts.

Long term vs. Near term

Roadmap3

 

Another important distinction to cover in roadmap is what is going to be covered in the long term and what is planned in the near term (short and medium term). Depending on the product lifecycle – long term could be between 2-4 years while near term can range from 3 months to 2 years. The long term ones are still ideas that has been experimented through some proof of concepts or things that would take a longer term to realize or productize, but they are important innovations or things that are coming to get near to the vision. Near terms are the ones which are almost getting completed or is under development, with reasonable predictability of getting them out sooner.

Rigid vs Flexible

Roadmap4

We live in ever changing world, where priorities keep changing. It is important to balance the roadmap priorities between being too rigid or too flexible. The roadmap often changes due to customer needs not being met, competitive action driving some changes, internal priorities and investments, lack of market for certain investment. On the other hand, if you keep the roadmap too dynamic and flexible, you will lose focus and probably trust from your stakeholders. It is very important to keep the roadmap and investments spread between certain areas where you can be a bit rigid, whereas keeping some open-ended areas for ability to change the plans. For this reason, it is critical to keep the future roadmap not covered in any legal or contractual commitments.

Incremental vs Disruptive

roadmap5

 

Roadmap should consist of both incremental features as well as disruptive ones. Often we get into this innovators dilemma wherein the focus is on many minor incremental features that improves the product, satisfies the customer needs, solves the problem in a better way, bring better usability – so on and so forth. But in regular intervals – atleast once a year – its important to think about the next wave, the next big thing and start working in parallel to solve some new business problems, that could eventually eliminate a problem totally. Read my post on “what product are you making – pain killer, vitamin or vaccine” – once in a way you should experiment something disruptive, create and prove , and show what’s coming. Whatsapp is an amazing example of such a disruptive technology – in the past we have seen things like Google, ipad etc which are disruptive. Many smaller, less popular products have also been disruptive. In your roadmap, while it would be hard to communicate the disruptive ideas when they are in Labs, depending on its maturity, its best to prove some of the lab ideas with few handful of customers and validate them with real life use cases and scenarios. For such create /prove situations, a more restricted roadmap with NDAs are discussed with select customers. So use your roadmap to think and cover both incremental and disruptive solutions to problems.

Objectives (the what) vs Activities (the How)

roadmap6

 

 

Product Roadmap is not a Project Plan. Many a times we come across some of the roadmap that looks like a project plan, listing out different activities and milestones. Instead of being a list of activities with milestones, roadmap should lay out the objectives of the product – the vision, the capabilities and the tentative timelines those are going to be made available. This is important because the activities may vary based on the approach taken to a solution but the objectives of the product may still be same.

Solution bound vs Time bound

roadmap7

Another question that keeps coming back is whether a roadmap is solution bound or time bound. Roadmap is always time bound, as the user of the roadmap is looking to or planning based on the roadmap. The time need not be exactly accurate, but it needs to be indicative with an acceptable minor deviation. Usually indicating a period of short term, medium term and long term with a usual timeline fixed for each of them would be a good way to represent the roadmap. This helps customers plan better.

External vs Internal

roadmap8

Finally, while Roadmaps are drafted based on common vision and solution, Roadmaps have to be slightly different for external and internal stakeholders – especially with respect to the level of details presented, the timelines and the goals. For customers, Roadmap should address solution to the problem, with rough estimate of the time and the benefits that will bring by adopting them. For other external stakeholders such as investors or partners, it may go further into details of the market potential, and the ROI of investing in a certain set of roadmap items for the business. And for internal stakeholders it could go into more details on the strategy, more specific timelines, risks, competitive reasoning and few other internal only information may be laid out.  Communicating the roadmap to different stakeholders is one of the key. Roadmaps should be clearly planned at an appropriate level of details with each of the stakeholders.

Product Roadmaps are living document and most important one for any product company. Lot of engaged time should be dedicated on documenting and communicating the roadmap.

Wishing you all Happy New Year 2018 !

Implications of GST Bill on Startups

The much-hyped Goods and Services Tax (GST), after years of stagnation and lack of political consensus, was finally passed in the upper house of the Parliament, the Rajya Sabha, on 4th August this year, almost a decade after it was first introduced in the Lok Sabha in the year 2006-07. It is the biggest indirect tax reform post economic liberalization of 1991.

implications-of-gst-bill-on-startups

The economists say, a double-digit growth in GDP, which seemed too surreal, will now be a reality. This law aims to give a boost to the new age start-ups and make India a conducive place to conduct business. Currently, India is home to around 4,200 startups growing at an exponential rate of 40% yearly. It is predicted that, with further relaxation of rules, India will be home to around 11,000 startups by 2020. This can be corroborated by the fact that India was ranked poorly at 142nd in the ‘Ease of Doing Business’ survey conducted by the World Bank in 2015. With relaxation in the rules and regulations of setting up a business and lucrative schemes like ‘Start-up India, Stand up India’, India went twelve places up and ranked at 130 in 2016.

Before getting into the nitty-gritty of how beneficial will the new law be for startups, it is important that the basics of this law are first looked into. GST, as mentioned above, is an indirect tax reform also known by the moniker – ‘One India, One Tax’. Different states have different tax structures which make the taxation structure very cumbersome and complex. This is a major reason why many start-ups are hesitant to expand their businesses to different states leaving the state concerned with little industrialization and low creation of jobs. GST aims to bridge the gap by integrating all taxes, making only one tax to be paid by everyone. As a result, the tax calculations will be simpler, saving time and energy for entrepreneurs and start-ups to focus on their respective businesses instead of investing time and energy on compliance and paperwork. However, just passing the bill is not the end of the story – there are rules to be framed, tax rates to be fixed, the central and state governments must reach a consensus, and proper infrastructure needs to be put in place. Hence, the implementation of GST still has a long way to go and is likely to happen in mid-2017.
Implications Of GST Bill On Startups

How Does the GST Help?

The Act is deemed to benefit all types of businesses but start-ups and SMEs are to benefit the most. It has been structured in a way keeping in mind the concerns of the small businesses. This is elaborately explained in points mentioned below –

Simple Taxation – Instead of adhering to different tax regulations in different states, GST simplifies the process by making it simpler and clear by integrating all taxes into one so that not only money on taxes are saved but time on compliances are saved too.

Ease of Conducting Business – Registration of VAT from the sales tax department of the state concerned is an imperative to start a new business. A business intending to establish in different states has to apply for VAT registration separately. Not only this, the VAT fees in different states is not uniform, making this one among the many other issues regarding the problems faced by startups and existing businesses in India. To fix this anomaly, the GST Act has provisions which will make VAT registration centralized, uniform and simple for companies. The concerned company/business would just need to get a single license valid pan India and pay taxes regularly. This will further help startups to establish, expand their business hassle-free.

Integration of Multiple Taxes – In addition to the VAT and service tax, there are other tax regulations that must be complied by the businesses like Central Sales Tax, Luxury Tax, Purchase Tax, Additional Customs Duty etc. Upon the implementation of the GST, all such taxes will be combined into one.

Lower Tax Rates for Small Businesses – At present, VAT is applied to businesses having an annual turnover of INR 5 lacs and above. GST aims to cap this limit to INR 10 lacs only and businesses with turnover between INR 10-50 lacs will be taxed at low rates. This move will not only bring respite to the start-ups but also help them invest the money saved on taxes back in their business.

Improvement in Logistics efficiency – Seamless movement of goods is currently a problem with border taxes and checks at state borders which delay the movement of goods which, in turn, results in delayed deliveries and enhances the product cost. GST aims to eliminate such inefficiencies making the inter-state trade less time consuming. With an uninterrupted movement of goods across the border, the costs associated with maintaining the goods will significantly reduce. According to a CRISIL analysis, the logistics cost of non-bulk goods can go down by as much as 20% once GST is implemented.

Other Side of GST: The Cons

While there are other advantages for the start-ups as well other than the ones mentioned above, the new Act also comes with implications, not necessarily for the start-ups. Start-ups in the manufacturing sector with lesser turnovers might have to bear the brunt of paying duty. As per the existing excise laws, any manufacturing business with an annual turnover of less than INR 1.5 crores is exempted from paying duties. But when the GST comes into force, the chances are, this limit could be reduced by six times to INR 25 lacs. This can have a detrimental effect on the growth of start-ups.

There are high chances that the inflation might rise after GST implementation. Also, whether ‘mandi tax’ would be included or not in the GST is ambiguous. Such causes can adversely affect the food startups.

Critics also say, the implementation of GST would also affect the real estate business and add up to 8% of the cost in new homes and as a ramification thereof, reduce the demand by 12%.

Despite its implications, GST is the most important and business friendly tax reform in India which will lead to a double-digit growth. It seeks to unify, integrate different tax structures so that there will be transparency and efficiency in the way businesses operate and the government levies taxes. This won’t just reduce the cost of the products but also create employment opportunities as more startups rise and India becomes the startup capital of the world!

Guest post by LegalDesk.com, a Do-It-Yourself legal platform for making legal documents online. LegalDesk helps startups with incorporation and legal documentation services. It also provides Aadhaar-based eSign service to businesses.

3 Levels of Product Training for growth

prodtraining2

 

You have crossed the initial milestone of proving your product has seen some initial success, covered the MVP and now its time for growth…what is one key ingredient for growth ?

You are the rockstar founder or product manager…you have the urge to be omnipresent in every customer discussion or support call…you do a good job on this…but it’s a major deterrent for growth as you become the bottleneck…

The best solution for this problem is to put together a strategy for your product training.  Based on interaction with a startup growth entrepreneur’s request I had put few things, and sharing that in this post.

I plan to cover 3 levels of product training that I have personally learnt or done over the years to make products scale and be successful, the examples are more relevant to B2B but some of this can be used for B2C as well….

The analogy i have used here is of movies

Level 1 : Trailer – Targeted to people that engage with the Decision Makers who buy the product

Level 2 : Movie – Targeted to people that interact with users of the product

Level 3 : Making of Movie – Targeted to people that interact with administrators or consultants that configure, implement or support the product

Lets look at each of them in detail

Level 1 : Trailer training

This training is usually provided to Sales & Marketing teams who have the responsibility to engage and influence the decision makers, to buy the product. Certainly while the content stays high level , I have come across 3 questions to be covered in this training, that will help Sales to effectively position the product and get the interests

The three questions

Why buy ?  – This question establishes what is the real need for the product. What is the real problem that the product solves and why is it important for the customer

Why me ? – Having established the need to buy, the next question that needs to be answered is why me, why your product vs. other choices available in the market, what are differentiators, how is your product better in solving the problems and other objection handling

Why now ? – Assuming the need is established, and the fact that your product is the best fit, the next convincing part is the timing of the buy. The “why now” training should facilitate content that will help the trainee to engage with establishing the urgency, to get the decision to be made in a realistic time.

Coverage of the content

The content should cover the following to help with the above three questions

  • Benefits – the benefits of using the product , to improve the process, derive top line or bottom line savings or any others
  • Customer case studies – this is an amazing content to help sell. How are other customers using the product, their experiences, quotes, videos and other documents
  • Competitors – its important to know your competitors and how your product differentiates from them, this is an important area of coverage in your training
  • Unique differentiators – the product may have 100s of features, but there maybe certain ones which are the outliers or differentiators, there should be specific focus to highlight these in the training
  • Pricing and ROI – how is your product pricing done, what are the flexible options, what is the discounting policy, how do you combine products , how do you optimize revenue opportunity are some of the things that should be covered. Creating presentations and videos to explain the pricing with examples would be an important tool. In addition you also should have ROI templates that can help sales to justify the ROI for the customer, using relevant metrics that is aligned to the product’s benefits
  • Short demos – 2 to 3 minutes – This is the eye catcher demo (The Trailers), as its typically done to the decision makers, the demo should highlight the most important capability and it should also try to cover the overall value proposition of the solution. Remember this is the main tool that can help sales to create the initial interest or close the opportunity for approval.
  • Role plays – This is another extremely successful way to train people – the role play enacts how a customer facing person engages with the customer, bringing in relevant questions and dictate the engagement style to bring out answering the 3 questions
  • FAQs – you know answers to several questions, but its important that this knowledge gets out. A Frequently Asked Questions document or video should be a must have.

 

Level 2 : The movie training

This is to do with the actual product in more detail on how the users would use them. So this is essentially a training that is usually provided to Sales Consultants , Partners and Others who are likely interacting and engaging with the customer users – both during pre-sales as well as post sales.

Coverage of this training

  • Product feature functionality – going into details of the features and functionality of the product, focused towards customer users
  • Use cases – talk about different use cases that the product solves, every product may solve 100s of use cases, so its important to highlight different usage scenarios
  • Benefits in detail – while you cover the benefits already in level 1, this could further explain the details with more deep dives and examples
  • Product differentiators vs competition – detailed product differentiators, on various facets of the product and how this can help especially to cover the functional scenarios
  • Detailed demos (like the actual movie) – 30 minutes to 2 hours focusing on end user functionality
  • Role plays to explain usage of the product – detailed role play videos or depiction of how customers will use the product or how you can convince the users, for them to become influencers

 

Level 3 : The making of the movie training 

The third level of the training is for the people that engage administrators, implementer, partners and consultants. This covers variety of areas and really detailed and deep dive into the “how to aspects”. This is usually done to consultants , support staff and Business/IT administrators. This training is for mostly people who engage post sales, but essentially they should also have good understanding of the level 2 training, before getting here.

 

Coverage of content

  • How to configure the application, security, data, master data etc
  • How to trouble shoot
  • Detailed functional and technical architecture
  • How to demos or videos – detailed 2 hours to a day or even multiple days
  • Technical FAQs

 

So as you can see, if you can create the above training content and start training, it will certainly help you in your growth endeavors.

Offcourse you will also have to keep updating these content as you enhance your product.

Product Training , these days can be delivered in different formats – in person, webcast or through videos. But its essential for you to understand the importance of this and make it as a priority if your goal is growth

 ProdTraining1

Write up the Business Plan !

Most of us have read the famous story about Jeff Bezos’s cross country trip from New  York to Seattle. Bezos founded Amazon.com in 1994, writing up the  Amazon business plan on the way. Jeff’s important advise for startup company or any   company is to write up the business plan.

CrossCountryJeffBezosadvise

Now if Jeff Bezos has done it, and become one of the most successful entrepreneur in the internet era, why not just do it ? By writing it down, you will certainly get a lot of clarity and reference point for what you want to achieve….

Here are some thoughts of what and how should this business plan be written to become a continuous reference point for your startup and growth story. The examples and references of this is more on Software Products in B2B (Enterprise) based on my own experience of writing business plans and working with startups whom I have mentored, however many of this can be relevant for Software Product in B2C (consumer) as well. Also this business plan should be ideally written by founder or a product manager…

What it is and some guidelines?

  • It’s an internal and confidential write-up – Don’t confuse it with presentations and business plans to be shared with people who will fund this – that should just be a subset of this
  • Is reference plan, and should be revisited frequently to change
  • Prepare it in word /excel, bit free form with text (power points constraints you)
  • Prepare atleast 3 scenarios – aggressive, best estimate, conservative plans
  • Do it for 1 year (short term – in greater detail), 3 years (medium – bit higher level) and 5-10 years (long – very high level) – Remember Bill Gates quote “Most people overestimate what they can do in one year and underestimate what they can do in ten years.”
  • Write it free form, and then organize it later, go through several iterations, review, review and review

Start with a summary:

Like an executive summary, this is the place you start jotting down the highlights of your road ahead – covering Introduction of yourself and the team, your idea, product space, history and market definition (presuming you have researched it), clear USP & value, challenges & risks, and overall KPIs that will come out of the rest of the business plan. The summary is most likely to change once you have written the rest of the plan.

Customers & Personas:

Who are the users, what are their current problems and how does your solution solve this problems.

Who pays for the software, what are their challenges and what are their company /career goals that the software would help solve

What are the financial/non financial benefits for the customer based on using this product or the cost reduction using the software, measured by productivity etc. Can there be a customer ROI estimated

Market:

Define the market category and market size ie today, and in the future that you want to focus. Try to break down into 2 – 3 levels of hierarchy and in a multi dimensional way by Business type /Geography / Revenue potential of customer/Size of the customer or any other business context.

Define the share of the market you would like to achieve of the market size, on key market segments in 1/3/5 years. What’s the customer IT spends planned for solving such problems

Market is the most key aspect that is going to drive you to successful product, so understand the potential market, research and put it in there

Product:

Now on to the product – write up about the product, to cater to the above market opportunity, with lot of details and value propositions, differentiations and what problem it solves.

Whether the product you are planning is a pain killer, vitamin or vaccine

Product priorities and use cases – focus is the key, focus on the key market, focus on the design and so on and so forth…

Product Roadmap – at level 1 (vision), at level 2 (product category ) , at level 3 (feature /function level). Product roadmap is your product in the growth face

Competitors and other players in the market, and what they have today, in their roadmap or what they are trying to do. Your differentiation against each of them,plans to differentiate. If you don’t know it, some tips for this are here

When will your product be available , the minimum viable product and is there enough time to get the baby out ?

Monetization:

How do you plan to monetize your product, don’t build a plan that ignores monetization.

Revenue and Customer Goals – Quarterly, yearly and medium/long term goals, subscription revenue including projection of drop offs etc.

Pricing model description – different options to be considered, domestic vs international, subscription based vs fixed etc

Risks , probability and dependencies to achieve these goals

Technology:

Explain the technology used for the product, how it would scale, Ux differentiations, clear differentiations due to tech architecture, performance, simplicity, implementation effort. Important this is not technical architecture , so keep this high level.

Talent:

What the skills required to sustain the business – development, design, sales, customer support, channels marketing etc. Challenges & risks associated with this.

Identify gap in availability of talent.

Layout if its important for you to relocate to be successful, due to availability of talent. Place is super important for success – what are the options – what are the pros and cons.

Customer support & feedback:

What is the strategy around customer support & feedback, how product roadmaps are affected by feedback. Level of engagement required initially and as the product matures.

Past learning’s from customers, what went right and what went wrong. How was it addressed?

Challenges of remote support and how it was addressed /planned to be addressed

Draw your effort, cost and cash flows:

You don’t have be finance person – its like putting forth your personal finances, or just google for templates  – put together your estimate of people cost, server /cloud Operating costs, sales & marketing costs, other infrastructure cost – space/communication/support/software etc,  any other expenses required to do scale the product. Link this with your monetization plan, to ascertain your overall profit or loss over the years.

As you see above, there is a lot that can be written up – as you write up in detail, your thoughts on what you are setting forth gets clearer….

But don’t worry if what you plan is not exactly how it’s all turning out to be in reality…..but its important to have a plan, adjust it for reality…

NYCtoSeattle

So now pack up and start off on your cross country trip from Mumbai to Bangalore, to write your Business Plan in Bezos style  !!!

 

 

The software eco-system in India is still influenced by the services model. Product companies require a completely different mindset, especially when it comes to the programming workforce.

Infinite Analytics is a predictive marketing and analytics company set up in 2012, by two MIT (Massachusetts Institute of Technology) graduates, Akash Bhatia and Purushotham Botla. The company has built a real-time personalization platform that learns and predicts by utilizing all available data to match a customer to a product or service. In an interview with ProductNation.com, co-founder Akash Bhatia talks about his innovative offering and predicts “there will be a big shake out in the data analytics space”. 

Tell us about Infinite Analytics. How and when it was started and its mission?

logo-1The mission of Infinite Analytics is to “Make Sense of Data”. Infinite Analytics was started by my co-founder, Puru Botla and I, at MIT, in a class taught by Sir Tim Berners-Lee, the inventor of the World Wide Web. We were working on one of the best projects in the class, and we decided to take it from a class project to a startup.

After graduating in 2012 we pursued this earnestly. Puru left his day job at Fidelity to focus full time on the start up, and I never took up a job or went back to my earlier start up – KyaZoonga.

Infinite Analytics has now evolved from our beach-head market of e-commerce to even offline retail. We are only an 11 people strong company – lean, efficient, and extremely committed to our mission. We have a very strong advisory team in Sir Tim Berners-Lee, Deb Roy – Chief Media Scientist at Twitter and Erik Brynjolfsson, the guru of Big Data Analytics.

What are the emerging trends in big data and social data analytics worldwide, and in India?

Analytics is going to drive decision-making in every organization and function. With so much data being generated every single day, organizations are already beginning to understand the enormity of being able to use this data effectively – to use clustering, predictive analytics and even AI to improve CRM, increase revenues, optimize supply chain and inventory planning, etc. And this is just in retail/e-commerce. We haven’t even begun talking about how big data analytics is being useful in healthcare applications.

There will be a big shake out in the data analytics space. Companies that pretend to be Big Data Analytics firms, but in reality are nothing more than listening tools are in for a reality check.

“Startup of the Year” at the etales 2015 awards in partnership with Ernst & Young

Infinite Analytics recently won the “Startup of the Year” Award at the eTales 2015, which was organized by eTailing India.

This award recognizes innovative start-ups which offer an innovative product or service, or those that are using an exciting new approach to improving or disrupt a traditional market. The jury included the Managing Director of Facebook India and CMOs of eminent firms in Retail & e-Commerce.

About Social Data Analytics, much has been said about its usefulness. Eventually, that’s one place online where a lot of people let down their guards and interact with people. If you consider traditional market research, surveys are generally the way research is done. A sample set of people are asked a bunch of questions and their responses are then extrapolated to reflect a larger audience.

Akash-Bhatia_profile_picAlso, in a country like India, how can a small sample set represent the vast and diverse nation that we are? And it’s only now that this data exists digitally. Social Data Analytics is the ability to analyze this data, both at a macro and micro level, to uncover trends and patterns that traditional market research does not. But that does not mean just listening to conversations in social media constitutes Social Data Analytics. Just using packaged sentiment analysis toolkits to understand positive or negative conversations does not constitute Social Data Analytics.

Infinite Analytics is at the cutting edge of analyzing social data, amongst other data sources. We use the latest NLP (Neuro-Linguistic Programming) techniques, Semantic Technologies and Predictive Modeling to come up with various inferences about consumers.

Using predictive analytics, how effectively does this help transform e-commerce business performance?

For example, if you can understand what colors the user likes, what patterns the user prefers, or what her / his spending potential is –imagine what that knowledge in real time can unleash for you as an e-commerce site. You will be able to personalize the experience for each and every consumer, allowing them to discover products or even nudging them to products they might like, just like someone at a shop might be able to do.

Predictive Analytics does just that. It helps e-commerce sites unleash the power of their customer data to increase Average Order Value, Conversions, improve product discovery and even get back lost customers.

What are the core features of your analytics offering? Do you offer it as a software product or service?

Our product is more like Predictive Analytics-as-a-service. The core features of our analytics offering are:

  • Semantic Ontology –The Infinite Analytics team has developed a proprietary semantic ontology that allows us to understand relationships between various data points. We are able to process Product Catalogs where none exist, to come up with relationships between products.
  • Predictive Analytics – Our predictive algorithms are constantly updated with newer and newer models, as and when we update new data sources. This allows constantly refreshing and relooking the way we predict and optimize our models.
  • Data Sources – We are data hogs. We consume data like a Hummer consumes Gasoline. We will take in data from any intelligent source. For example, we will use Macroeconomic data, Stock Indexes, Social Data, Electoral Rolls, along with the traditional sources of data like transactional data and clickstream data to predict and personalize the user experience for both, an online user and also an offline customer
  • Extensibility – Our product is extremely extensible.

For media and content – Let’s take the example of Netflix. Netflix first started using customer media habits to recommend top movies and shows. That led them to declare that almost 70% of their revenues came from these recommendations.

For travel – Uber and its Surge Pricing is an example of how predictive analytics can be used to effectively price a service according to supply and demand, in real time, thus increasing profitability of the company.

For enterprise businesses – If using macro economic data along with user behavior, businesses are able to predict buying patterns; they will be able to better manage their inventory. For example, in most businesses, there is a 80/20 rule – 20% of products do 80% of their business.

What kind of investment have you made so far and how was your project funded?

We were semi-finalists in the MIT $100K Entrepreneurship Competition, the most coveted business plan competition in the world; a part of the inaugural MIT Founders’ Skills Accelerator (now GFSA), and even Startup Chile. We were able to get some funds from these accelerators to keep pushing product development.

Then in 2014, we raised a seed round of $1.1 Million from various investors across Australia, Taiwan, India, US and the UK.

What are the market opportunities for you in India?

India is a growing market, and the data revolution is just beginning here. Our product puts us in a very unique position vis-à-vis competitors. We are the only company to actually bridge online and offline retail. We have competitors doing solely online or offline work – no one does both. Hence, it won’t be an apple-to-apple comparison.

Have you attained profitability yet? If not, when do you hope to?

We have not achieved profitability yet, but with our current run rate and burn rate, we should be expecting to break even in the next couple of years.

How would you describe the eco-system for software product development in India? 

The software eco-system in India is still influenced by the services model. Product companies require a completely different mindset, especially when it comes to the programming workforce. 

Any plans to sell out or go public?

We have been really focused on building the company and the product, and haven’t focused on the exit. At the same time, we have had companies approach us for buying us out. We continue to keep our options open. 

Tell us about some of your customers in India and internationally.

Our clients in India include Croma Retail, a Tata Company, Trendin – an Aditya Birla Group company; Indianroots, an NDTV company and the Future Group, the world’s biggest media company, and one of USA’s largest retail giant are our customers.

What advice would you give to others about what you did right?

Perseverance and Just Do It. If you do not persevere through the storms, you will never be an entrepreneur. You will forever be a Wantrepeneur.

The Kayako culture – Startup lessons in building organisational values

How leaving our values unclear started breaking our culture at Kayako, how we fixed it and what we learned.

In the early days, a startup’s values and culture — the essence — is very much a reflection of the founding team. These values don’t need to be documented, they usually just are.

As new people join the team, the essence will transfer by osmosis. It’s in the air. The essence will be picked up through the sheer amount of time a small team will spend working on tough things together, and will evolve as new people contribute their own ideas and styles.

As the team grows larger and as things move faster, you can no longer rely on your values being passively picked up by others.

In this post we’ll talk about:

  • The problems we faced not capturing our values sooner.
  • What makes great company values great.
  • Our first attempt at capturing values using a “Mars Group” (fail!).
  • Our second attempt at capturing values (success?).
  • How we are applying and scaling our values today.

“We were late capturing our company values and the cracks started to show”

At Kayako, there’s now 145 of us. Three offices. A large remote team. Distilling our essence and finding a way to articulate it is something we should have done a long time ago.

We started to feel the pain of not distilling our essence into a clear and repeatable format in various ways, including:

  • Inconsistencies in style and attitudes between teams. With the absence of a clear and constant articulation of our core values, teams would incubate their own traits, which would trump the company’s.
  • Speaking a different language. With these inconsistencies, we realised friction emerging in how we communicated with each other, whether that’s how feedback was given or how feedback was taken.
  • Other people hiring the wrong kind of people. Without a crystal clear definition of what our values were, we were not equipping people to be able to hire consistently for values across the company.
  • Recognitions and rewards started turning opaque. Without a crystal clear definition of what our values were, it became less clear why certain people were being recognised, rewarded or promoted.

At this stage, these issues were starting to impact our performance.

But if we left it unchecked? Our work would become less fun and less meaningful. We wouldn’t be able to attract and retain great people. We wouldn’t be able to build a great company.

We needed to get everyone back to our roots and capture the core essence of what made Kayako, Kayako. ASAP.

Values for your values: What makes great company values great

We’ve all seen company values before. Some we respect (Moz, TAGFEE). Some revolutionize something (Zappos). Some are so empty you can only laugh (guess which company’s values included the word Integrity?).

But what makes some company values effective, and others not? Why do some company values turn into a religion, but some end up as little more than wall decoration?

We spent some time researching and talking through this question with others. We found that some of the best and most effective company values had the following traits:

1: Values should be memorable and concise. If your values aren’t memorable or concise, they’re already handicapped. Values should be easy to communicate, easy to remember and will then be easy to incubate.

2: Values should be what you do, not just what you say they are. It doesn’t matter what you write down — the only values truth is in what you do, day in and day out. Not just what sounds cool or what looks good on the wall. We really like Netflix’s definition of what makes a true company value:

Actual company values, as opposed to nice sounding values, are shown by who gets rewarded, promoted or let go.

Values should be lived and breathed in the literal sense.

3: Values set expectations. Values make clear who will get hired, and for what. They make clear who will get rewarded and promoted, and why. Values are like APIs for people and culture, and in that sense make communication easier. They ensure compatibility and fit, set clear expectations of each other and remain consistent as you scale.

Values are like APIs for people and culture. They ensure compatibility and fit, set clear expectations of one another and remain consistent as you scale.

4: Values should be weaponizable. As we grow, there will be various demons any startup will face: glut, inertia and complacency. Our values should arm everyone with the weapons to fight these culture-rotting forces before they set in.

We picked up a nice anecdote from the book How Google Works about how Google’s weaponizable values are used on the ground:

[Eric Schmidt] was in an executive meeting in which they were debating the merits of a change to the advertising system, one that had the potential to be quite lucrative for the company. One of the engineering leads pounded the table and said, “We can’t do that, it would be evil.” The room suddenly went got quiet; it was like a poker game in an old Western. […] A long, sometimes contentious discussion followed and ultimately the change did not go through.

We found that some of the best company values were great levellers in this respect. Google’s “Don’t be evil” value is felt deeply by its employees, who use it to check their moral compass when making decisions, and who are empowered to call others out — no matter what their pay grade (prepare to be called out using your own values.)

Values should act as a touchstone that helps everyone keep a check on whether they are doing the right thing the right way. As Rand Fishkin from Moz puts it, “[our values are] an architecture for decision making.”

Without getting too tactical at this stage, another thing we noticed was that the best weaponizable values were written in a way that they could slot into day to day vocabulary, like in the Google anecdote above, or like our favorite example from the Atlassian values:

Don’t #@!% the Customer.

This ability to use the values verbatim increased the likelihood that they would feature on the ground, in conversations and in slide decks.

5: Values should be strong as hell. Startups grow, and hopefully grow fast. New people will join with their own quirks and cultural backgrounds. New stakeholders with their own agendas will be added. New customers will be won, bringing new demands. New priorities will be loaded onto the company’s agenda.

These are really powerful forces. Without a strong set of values to build your company culture on, these competing forces will start to chip at your company culture.

Startups will go really tough times — it’s almost a statistical certainty. When reading Ben Horowitz’s book The Hard Thing About Hard Things, it seemed like Ben’s startups had it tougher than most. But it was their strong cultural foundations and value system that saved them (and boy, did those folks’ values have to be strong.)

What makes values strong? We generally found this links back to 1: Values are what you do, not just what you say they are. Strong values come through in the company culture built on top of them. Values are strengthened by how much trust and confidence the team has in those values. Without trust or confidence, values are empty words.

6: Values should (mainly) be motivational. Great company values motivate people to go beyond, to step outside of a comfort zone and to accomplish something different, just as much as they prevent something or head off a bad force. Together, all of a company’s values differentiate you from another company.

There isn’t much point in documenting the kind of things good people will default to doing anyway. However, there are some exceptions: Google didn’t really think anyone would be evil, but acknowledged the forces of running a huge business and maximizing profit may start to compromise instinctive good values, so while “Don’t be evil” mat not necessarily be motivational, it was there to head off potentially distracting forces in the future.

Capturing our values: Attempt one

We followed a commonly held ‘best practice’ for our first attempt: form a “Mars group” and get together in room (in retrospect, we don’t feel this practice is best — read on).

With a few founding members and a new senior hire, we kicked off an exercise to paint a picture of where we would like to be in the next 1–5 years.

To capture our company values, we then asked ourselves this: What kind of traits will get us there, and what kind of traits would hold us back?

Or in other words, what does a high performance culture look like to Kayako?

We ended up with a long list of opposites: the positive traits that would help us fulfil our vision and achieve a high performance culture, as well as the antonym of those traits — the things that would hold us back.

Our thinking was that we would assess this world of traits, and draw from it a set of values to reinforce the good traits and prevent us from straying into bad ones (good traits -> ??? -> profit!).

To make sure we were being representative of the whole company, we invited a cross-section of the team (~20 people in total) to prioritize the all the traits that they felt were either most true to us today or most needed.

Surely, this would give us a fully representative true essence of Kayako today, the essence that differentiates us?

Not even close.

Acumen, ownership, embracing change, curiosity, clarity, transparency, courage and passion.

Meh. Shrug.

We couldn’t disagree with these values. They’re generally true, they’re generally positive. But they didn’t hit any of the things we had identified as what makes great company values great. They didn’t resonate. They didn’t connect. They didn’t wake us up.

We managed to create a set of flat, lifeless and generic values. But how, with so much of us put into the process?

We identified three missteps:

  • The death-by committee approach. Great company values need raw passion, focus and emotion. By its nature, a committee compromises on all of these things. It turns out the “Mars Group” approach didn’t work.
  • Focused too much on our current problems and not on our ambitions. We were too busy firefighting to really see past problems and see what could be. As a result, we were all focused on the negative things — things that needed to fixed, right now. We compromised on ambition and as a result, they weren’t motivational.
  • We got too wrapped up in arguing what we were true to today, and what we weren’t true to. We spent a lot of time debating whether we could include values we weren’t particularly true to. We weren’t 100% transparent, so could we really make “transparency” one of our values?We realised it doesn’t matter, and in fact the values should guide everyone to be the kind of company you want to build, not just how things are today.

These were obvious missteps in hindsight — we had set ourselves up for failure. Time to rethink.

Capturing our values: Attempt two

This time, we did the opposite of a committee approach. We gave one person ownership of capturing our values. This was a leadership problem and needed leadership, not a committee.

Rather than getting everything on the wall — every possible positive value we currently do or would like to exhibit and narrowing things down from there — we took the time to sit back and really observe. Observe how we worked. How we problem solved. How we faced difficult situations. How we interacted with each other. What was there when things really worked out OK.

These are the questions we looked to answer, thinking that the answers would themselves capture our values:

  1. Why do people stay with Kayako and refer their friends to us?
  2. What are the traits and values we have been looking for — even if we weren’t actively aware of it — in people when hiring?
  3. When things haven’t worked out, why and what were the traits and values that were missing?
  4. When we’ve promoted people, why those people over others?
  5. When we really nailed something, what kind of values and traits were coming through?
  6. What kind of company do we want to be in the future?

We came up with lots of answers. Whatever came to mind when specifically answering these questions (ideally with plenty of colorful adjectives), we jotted down in a Hackpad.

We ❤ Hackpad. We haven’t found a better tool for thrashing something out and iterating on raw content

This process took about three weeks; enough time for enough scenarios and milestones to come up and go by, enough time to reflect and unpick things. I’m sure that if we were a smaller team, we could have accomplished this much more quickly.

These answers became our working collateral. The full universe of traits, behaviours and adjectives which we would now funnel and distil into our core values.

We iterated on these answers, reducing the various phrases into better, more concise phrases. With each iteration, we kept asking why: why did this trait come up? Why was it so material to success and tried to dig deep into the root.

Chris Moody blogged some key questions to ask when deciding whether avalue is worth capturing (or if it is more apart of your company’s vibe):

– Is this aspect of the company important to our long-term success?
– Does this aspect need to be maintained forever and is it sustainable?
– Does this aspect apply to all areas of the company and to all employees?
– Will establishing this aspect help us make important decisions in the future?

If the answer to yes is all of the above, you might have yourself a new value. If not, you’ve probably just observed a vibe in your company.

This process needs one person — ideally a founder, someone with your company’s core values in their gut — to be an all-absorbing sponge, and to take time out alone to reflect and apply a bit of creativity.

This really is a process of staring at a bunch of phrases and adjectives for a while, until a lightbulb lights up.

We distilled this language down into what became two of our values: Make it happen and Go big or go home.

We continued to iterate, simplify and refine the language we captured in our Hackpad. Shuffling things around, bucketing different phrases and traits together, etc.

We invited some select people to comment directly on the Hackpad with their interpretation of them after reading these early drafts. This was a very different approach to what we tried originally — we were getting feedback, but we were not forming committee. We continued this process until we got a consistent interpretation, which matched our original aim with the values.

We continued this process until the values clicked with all of us.

Here is what we came up with.

The Kayako Values

For each value, we chose not just a short memorable sentence or word, but also language describing how those values might be played out in real life.

We were inspired to use this ‘real life’ documentation of values style by the beautifully simple Buffer culture deck and the Genius.com “ISM”s. We felt it was important to provide real, concrete examples like this so that these values would be delivered clearly and with our ambiguity, across languages and functions.

Check them out on Slideshare:

Launching our company values

The first thing we did was prepare a slide deck, and not just because that is what the cool kids do. We needed to deliver these to the company and they needed to be delivered to everyone who joined Kayako.

It is critical to have editorial control over how the values were documented, paced and presented (to an extent). There needs to be a sense of occasion to them, if we are in agreement that the values are one of the most important institutions in your company.

The next thing we did was dedicate a company all-hands to these values.

Kayako All Hands
145 people. More than 10 locations.

Step by step, we took the company through the mental journey we had been through to capture these. The observations that we made, the lightbulbs that went off, the ideas we threw away and the ideas that made it in, and why.

We took everyone through how we were already demonstrating these values today, and where we had work to do.

For us, the process was just as important as the output. We wanted to take everyone on the same journey (just with a few shortcuts which we discovered along the way).

Results so far? It is too early to tell. We know that everyone is excited, we are on the same page and that’s enough to get going with.

Scaling culture with our values

We don’t anticipate the fundamentals of our values changing much over time, but we are not freezing them.

There’s a reason why we put a v1.1 at the end of “Kayako Values” (probably the same reason why Buffer has a v0.4). We may iterate on the language over time, but what we are really eager to do is capture what we learn as we reach new levels of growth.

For us at Kayako, there is catch-up and a bit of a course correction to do. We can’t sprinkle values like pixie dust and say job done. The job has just started. As a founding team, we are going to put a lot of effort into coaching others about these values: getting them in to every day vocabulary, getting them into our goal setting and feedback processes. Bringing everyone back onto the same page, and ensuring our values are being consistently lived and breathed.

We would like to start capturing more of the Kayako culture and Eau de Kayako in a similar way to how Netflix did with their culture deck and how Valve did with their handbook. We think these make magical and tangible on-boarding tools.

We’ll also be looking at how we can incorporate values into our recognitions system. 7geese, a goals and feedback management tool, has an interesting take on recognition-via-values.

We are also exploring ways of really weaving in these values to our everyday surroundings. We really like the idea of creating some artwork to capture some of the values, like Facebook does. We don’t want to spoil them, though. There is a fine line between powerful and cheesy.

The most important thing we have to do, though, will be letting our values dictate how we we hire, promote and let go. There is no better communication or embedding of values — everything else discussed in this section is just micro-optimization by comparison.

Key takeaways

  1. Do this sooner rather than later. You don’t have one shot at this, so create your Values 0.1 sooner rather than later. Leave it too late and people will start to fall off the same page. It is critical you hire with aligned values at all stages. The longer you leave it, the easier it is to defer, smaller issues like the odd ‘wrong hire’ will start to compound and ultimately, the harder it is to revisit.
  2. Too many cooks spoil the broth. This will vary from team to team. It seems obvious in hindsight, but for us, trying to approach our values by committee was a terrible idea. It took that collective thinking and discussion process and then time and a single owner to flesh them out creatively.
  3. Follow up and give your values some meat. Earlier, we identified that great values are what you do, not just what you say they are. Values and leadership in general won’t work if people don’t believe. The only way people will believe in our values is if we live and breath them: hire by our values, let go by our values and reward by our values. Anything else is a bullet in the head for your values.
  4. Get wordsmithing help. This is a skill that is difficult to master — if you can, get the help of an expert when it comes to the final stages of refining the language in your values.
  5. Get someone to own it. Give this to the person who believes in this the most and will find the time to make it happen. It really does need creative alone time to get it right.
  6. It doesn’t matter if you are not 100% true to your values today. Your values should be ambitious. They have to paint the picture of the kind of company you want to be in the future, just as much as how things are today. Of course, don’t call a value a value if you can’t back it up at all (see #3).
  7. Don’t muddle your values and your vibe. Chris Moody already put this brilliantly. Unfortunately we came across Chris’ post after we made the misstep of capturing too many things as values (and we struggled to narrow them down).

Resources that helped us

We cannot give enough credit to the following companies, authors and speakers that inspired us with their own cultures, values and advice.

This post was originally posted Medium. Follow the Life at Kayako series to learn more about working at Kayako, our values and our culture.

“Be Prepared to Move Very Fast” Mukund Mudras, CEO & Co-Founder of Heckyl #IfNotNowThenWhen

In conversation with Mukund Mudras – CEO and Co-Founder of Heckyl – winners of the UKTI ‘India’s Most Innovative Companies To Work With The Best of UK’ 2013. 

A brief about the company –

Heckyl is a real time data analytics company that brings news, price and fundamental analytics through a single platform called FIND (Financial in News and Data).

FIND can be used by a researcher, trader and an analyst for actionable insight from the universe of data.The platform brings real-time news, information and market data from companies, businesses and global markets along with brokers and analysts recommendations from around the world.

Founded in December 2010, Heckyl recognizes that mining information from Social Media and Open Data sources presents great insight and opportunity for investors, traders, researchers and analysts.

FIND is engineered in connecting these dots with its revolutionary technology in sentiment-tagging, news-clustering and discovery engine that present ready-to-use, actionable intelligence in a fast-moving market.

Heckyl

Why did you decide to set up base in the UK?

Heckyl was planning to grow its customer base to the higher end of the user spectrum, such as hedge funds and PE funds, whose presence in UK and the European markets is very high.

It was a strategic decision to establish an office in UK – the most sought after financial hub of the world.

What are your experiences in setting up the UK operations?

Setting up in UK was a good experience for us. We had won the coveted title of the “UKTI Calling India’s Most Innovative Companies To Work With The Best of UK” contest

– a competition organised by the UKTI, in association with British Airways and Yourstory.

The win provided us with the privilege of being backed by the UKTI, London. Under that, we were guided for registration and legal affairs of setting up business. We received a privileged office space at the famous Level 39, in the tech city of UK.

How has your business benefitted from setting up base in the UK? 

UK, being the financial hub of the world, opened up the doors of opportunity – whether it was networking with mentors, incubators and accelerators who have seen-it-all, or the proximity earned, to the financial sectors such as banks, brokerage houses or the hedge funds /PE funds – there is a lot to cater to in this market.

The UK proves to be a good fit for our business , as there is a lot of demand for smart analytics around open data and social media, in the financial domain such as ours, and that businesses in these parts are open to exploring something new. As such, we have recently won the responsibility of being the news and information analytics provider, for a leading data management company popular in the European markets.

The validation received from the UK business eco-system becomes a success story to share for potential markets in the rest of the world.

What assistance did you get from UKTI, and what advice would you give to companies considering a move to UK?

They guided us and helped hasten the process of registration, something which every entrepreneur knows can be a hurdle. We got an office space in Canary Wharf at Level 39. The address is a prestigious one, as most of the well renowned start-ups and accelerators are known to set up base there.

In the days of setting-up, we were shown around and introduced to the well-established mentors who showed us the way businesses are built in the UK. We were able to network with top investors and incubators of the region.

Our Advise to companies moving to UK would be to “Be Prepared to Move Very Fast”

What are some of the challenges that companies from India should keep in mind while considering a move to another country?

Connect with the accelerators and incubators who would be able to support and guide your way around setting up abroad.

Stay in touch for funding wherever possible. There could be resources from start-up platforms and communities that maybe used – such as legal contacts, office space co-ordinators etc.

Challenges are mostly common to any business and are not restricted to India. The critical points are – understanding the tax structure and registration rules and liabilities of the foreign country, decide accordingly where to register the business. An added point is of learning how to manage expenses and save money as much as possible.

Invest in a suitable and feasible human resources agency/platform to build a local team. You may choose to invest in learning the language of the city you are headed to. Network with mentors and peers in the industry, as much as you can.

Need the right data to make the right decision

Recently I read a blog post by Mr. Przyklenk, senior manager, digital insights, for TDBank Group. Big Data is the next “BIG” thing, but is this “BIG” thing applicable for everyone, is the “BIG question.

Let’s consider TDBank Group, the second largest financial institution in Canada.  They began re-evaluating their customer data when branch traffic declined without a significant increase in digital transactions. There are five major challenges referred as 5 S’s, the bank was facing while data analysis.

  • Siloed: multiple systems for different lines of business to connect to customers
  • Structured: several layers of data ownership, governance and access levels, requires vast institutional knowledge
  • Super-expensive: internal cost structures including chargeback models for processing time and bandwidth
  • Strange: systems are older than the analysts using them and the information generated is difficult to understand
  • Speed: financial institution mainframes offer faster processing speed but without structured data analysis cannot be effective.

A huge amount of unstructured data from multiple sources is dirty and data analytics cannot make sense of it.  Prospects and customers expect personalized and relevant offers based on behavioral and relationship data, which cannot be achieved with the above challenges.

Among customer data collection and analysis, enterprise should invest in centralized data warehouse, data management platform and customer journey mapping.

Centralized data warehouse will consolidate all the customer data which in turn will help marketers spend more time on launching campaigns rather than consolidating data.  This consolidated warehouse can also be integrated with other applications like CRM to make customer data available to all stakeholders. A data management platform and customer journey mapping will provide a single customer relationship across different lines of business with a personalized communication. Finally these changes in an organization will provide a 360 degree view of your customer.

Big data is needed to better understand the customer, but you need the right resources and equipment to fully understand it to generate results.

Reference

Britt, P. (2014, December 17). Forget Big Data; Focus on Relevant Data. Retrieved December 30, 2014.

“Bootstrapping is tough. Most of the time things take three times longer than what we think. The only way to enjoy this journey is to absolutely love what you do. That is what sustains you.” – Rushabh, ERPNext

Continuing our journey to bring to limelight bootstrapped entrepreneurs from India, we got a chance to speak with Rushabh Mehta, Founder of Web Notes Technologies, a software product company that publishes a free and open source web based ERP called ERPNext for small and medium businesses. Built by a small team of 8 people, ERPNext has more than 250 paying customers and has also been included in Winners List of BOSSIE (World’s best Open Source Applications of 2013) Awards. Here is the transcript from the interview:

Tell us more about the journey of starting ERPNext. 

I have been a software hobbyist, coding and developing software for fun since my school days. I graduated with a Masters in Industrial Engineering from Penn State University, US in 2004 and soon joined our family business. At that time the business was undergoing a transformation and we were trying to set up a custom ERP system to integrate Sales, Purchasing, Inventory and Accounting. I took ownership of the implementation and that experience gave me the first taste of ERP platforms.

Soon after that experience, I started a services company with a friend and delivered multiple software projects for clients but that journey didn’t continue for long as my heart was in building products. I shut down the venture and moved on to start Web Notes Technologies in 2008 to build a free and open source web based ERP product.

How did you fund the business while bootstrapping? Did you ever consider raising capital from investors? 

During the time when I was starting Web Notes, my family exited our family business and had some funds in hand. I borrowed some of those funds and that gave us the initial breathing space. We also delivered services for few initial years to keep us going.

Once we decided to focus only on building products, we took many measures to sustain ourselves financially. We brought our team size down from 18 to 5. It was a difficult move but was essential to ensure we don’t burn out quickly. We also removed sales and marketing and instead focused all our efforts on product development. We hired fresher graduates to keep the salary expenses under control.

I did try raising funds but due to the nature of business, was not very successful. ERPNext is a specific mission critical product and it was not that easy to find a good market fit in the start. Also there weren’t many companies in the same space to compare us with. All this made the business not seem that attractive to investors.

How did you build your team at a stage when revenues had not started flowing in yet? What motivated those people to join you? 

Most of our initial team joined us because of the work we were doing. We were building an open source product and that attracted people to join us as there weren’t many such opportunities available elsewhere. On a funny note, one person we interviewed also said that he checked our website and got an impression that we are a large firm! Probably having a good face online helped. Ha ha .

The initial years were quite difficult. We didn’t have any mentors and were not sure what to do next. We got all our feedback from customers and learnt how to build quality software. As Malcolm Gladwell says, success in any field comes when one invests 10,000 hours on it. As a team, we are walking through that journey of 10,000 hours and falling down and learning in the process. This journey is what keeps us together. Our initial 5 hires are still with us and that says a lot.

Marketing is another area that requires a lot of investment. You have reached 250+ paid customers with zero marketing and no sales team. Tell us more about how you managed marketing.

Information asymmetry is reducing fast. Now, there is no need to take the help of traditional media. If the product is good, word does go out. “Viral” is the new buzz word.

As a bootstrapping company, the marketing options are very less. In the initial days, we set up stalls and booths in different exhibitions and events to reach out to customers. We received our initial feedback from there and reworked on the product. It has been a slow and organic growth for us. But we were clear that we never wanted to push our products to customers. Once we gained some initial customers and delivered quality products, we got referred to new customers and the chain continued.

The open source aspect of our product also attracted many customers as there were not many open source ERP products in the market. Our competitive pricing was another attractive factor. ERPNext is available at 30,000 INR/ year and most customers usually have a budget 10 times that amount. Since we are focused on quantity i.e acquiring large number of customers, this low price strategy really helps us get the foot in the door.

Another advantage VCs bring in is the guidance on building the business. As a bootstrapped company, how did you make up for these? 

As a bootstrapped company, we are left on our own. Not having mentors was an issue. I do feel we lost a few years. However, I have been trying to learn from each and every source I get my hands on. I read blogs, hacker news and also learn from other companies. For example, we are highly inspired by the design, philosophy and writing of 37signals, not to mention their products which are just amazing. We think that they, and not SalesForce, are the true pioneers of web applications. We love the quality, reliability and technology of GitHub, which has re-invented the way Open Source software is written and shared on the Internet. We try to learn from the design, quality and vision of Apple. They have set the benchmark of engineering and we hope we can understand and use some of their focus and attention to detail. And last but not the least, WordPress (and Automattic, the company behind wordpress) has provided us with a template of how an Open Source business should be built. Whenever we are in doubt in terms of taking business decisions, we find asking ourselves, what WordPress would do. There is no dearth of inspiration. One just needs to look around. These and many such companies have been our mentors indirectly.

Looking back do you think you should have raised angel or VC capital instead of bootstrapping? In what way has bootstrapping worked in your favor and what opportunities do you think you missed out on because of not raising external capital? 

There is no right way to answer this. Both bootstrapping and raising external funds have their own advantages.

Because we followed a bootstrapped journey, our confidence is very high. We have gone through the whole process of transforming into a matured business. We are able to judge things better as we have seen the extremes. And we still have our independence.

On the other side, we do fell that as a bootstrapped business, we often miss out on the glitz and glamour that surrounds the well funded businesses. We also miss the whole package that comes with investors – the funds, contacts and advisory.

But at the end of it I feel that in the current world there is so much a single person can do without any external help. Take the example of Salman Khan of Khan Academy. It is so inspiring to see the way he has built his business single handedly. He did not employ an army of people to make his videos. He created close to 3000 videos, using his own personal skills and technology. Nowadays there are so many tools available that eventually capital driven growth might become irrelevant.

We are proud to say that over the last 3 years, we have been growing 100% every year in terms of revenue and we have reached this stage purely bootstrapping our way up.

ERPNextFrom your own experience, what advice do you have for start-ups who are currently bootstrapping? 

The key question one needs to ask themselves is how they are going to sustain themselves as they are clocking their 10,000 hours towards building their product.  It could take 3 years or could also take 7-8 years. Most of the time things take three times longer than what we think.  There is no magic bullet and one is not going to get discovered on their own. They need to take one step at a time.

The only way to enjoy this journey is to absolutely love what you do. That is what sustains you.

————————

As I spoke to Rushabh, I could sense his enthusiasm and passion towards his product. Their team sure is deriving their inspiration and learning from other companies but it is not very far when they are going to inspire others on how to bootstrap and build a successful business from scratch. ProductNation wishes Rushabh and his team a successful journey ahead.

 

Need 9 months to get baby out

One of the pressures and challenges of working on products is to get it out soon – the release. But I often recollect one of the leaders that I have worked with saying “need 9 months to get baby out”.

9monthBaby1

What’s the right time for a product release – Some Considerations?

Build for market, not a customer

9monthbaby2

Remember products are not built for one customer, its built for several of them, for a market. I highlight this as especially in India, we have abundant  services companies and people with great experience driving innovations and solutions for one customer, and often the release time for such delivery can be done in a shorter duration as we are working towards a specific requirement set.  Its different to build it for a market or many customers in mind.

Enough research time to iterate

9monthbaby3

The other key aspect of building a product is to spend good time on researching the market, understanding user problems and figuring out what to build, before start building it. In certain cases it could also be some initial prototypes to get the thinking process going. Often this time is ignored when building products.

9 moms cannot make 9 babies in 1 month

9monthbaby4

By getting more people assigned is not the solution to get the products out faster, actually it could be counter productive as there may not be enough components that can be built parallel and also could result in confusion on co-ordination.

It’s not just about development

Many software products fail primarily because they put all the time and effort only in engineering and developing the product and do not plan for an effective early adoption and go to market (including pricing) launch time planning. They consider this as lesser important task and often consider this as a post product release activity. But the market readiness and go to market should be planned well ahead, and enough time to be allocated to early adoption and launch cycle.  The other aspect that gets ignored many a times is user empathy and design for user interaction and interface.

Focus on quality, differentiators

9monthbabay5

Bugs are fine in software, can be fixed is the typical attitude in software industry. But depending on the mission critical nature of the products, quality is going to be key criteria. Thorough testing and quality is an important part and while dates can be compromised, quality should not be compromised as the word spreads if its buggy. Get it out with good quality.

9monthbaby6

Many products compromise on features and differentiators, to deliver a product in time. This again can be dangerous in the current extremely competitive world.

So usually the right time of the release should have key focus on quality and differentiators.

Alpha, Beta….

We come across examples of products that get released to market without alpha, beta cycles – without being taken to first few customers or users to try out. This can be dangerous, inspite of the time pressures or the brutal confidence that you may have about your products and self testing, there should be time allocated for alpha and beta trials.

Rapid release cycles

9monthbaby7

The other side consideration here is that while products have to be planned, it can’t take too long as well. Many of the established players get into this syndrome where they spend too much time planning and laying it out but by the time the product comes out, the market is lost or captured by some one else. This is where agile methodology comes in handy. Products should be planned in such a way that there is minimum viable scope covered coming in from the research and there is agility built into cover a rapid release cycle post the first launch, where more enhancements can be planned, based on customer adoption.

So if you started reading the blog hoping to get the answer on the right time for a product release, sorry for disappointing you. But from my experience where I have been involved with enterprise software products that were built in 3 months, 6 months, 1.5 years, 3 years etc. , some of the above points were the learnings for the success or failure of the product. Plan time for the ideation/research, design, development, thorough testing, beta and GTM launch planning before getting your baby out…

Share your experience or other considerations that I may have missed here…

Bootstrapping is certainly possible until and unless the business model requires exponential growth in a short span of time, Nikhil Nath – CEO, Knowcross #BootUpINDIA

Last week I got a chance to speak with Nikhil Nath, Founder and CEO of Knowcross that provides technology solutions to leading hotels of the world in over 30 countries. Started in 2002, Knowcross has built a range of smart and intelligent products that address specific problems of running Hotel operations. From systems that allow Hotel staff to quickly respond to complaints raised by guests through careful assignment and tracking to systems that turn the manual Housekeeping nightmare into a smooth process by mathematically calculating which room needs to be cleaned when based on real time data such as check-out time, expected check-in time, room moves etc. This product called Know Housekeeping was listed as one of the top seven mobility products in India after an exhaustive assessment by Frost & Sullivan. They also have a product that allows staff to make-up for services failures and missing guest expectations by alerting them in real time and giving them a chance to make a goodwill gesture and increase loyalty.

Each of the products Knowcross offers seems to be extremely well thought out and is solving real problems hotels face in their day to day operations. No wonder they boast of customers such as Kempinski, Hyatt, Oberoi, IHG, Hilton, Sofitel, Taj, Swissôtel, Shangri-La, Radisson, Rosewood, Dusit Thani, to name a few of their chain customers, and marquee independents like the Ritz Paris, Le Bristol Paris, and The Halkin London.

KnowcrossAfter the hour long interview, I was left completely inspired listening to the journey of starting and growing Knowcross. Here is the compilation of the interview for you learn more about Nikhil’s journey of building Knowcross.

Tell us about Knowcross.

At Knowcross, we offer a suite of products for the Hotel Industry.  We started in 2002 with our first product, a rapid response system to resolve guest complaints in time, every time. This was our main product until 3 years ago. As we thought of expanding our offerings, we had two choices – either to grow horizontally by offering the same solution to other industries or to go vertical by providing more solutions to the Hotel industry. We decided to go vertical as we had developed a deep expertise and understanding of the Hotel Industry and it made more sense to leverage that learning.

We looked for other problem areas in the Hotel industry and came up with three other products – that are now known as Know Housekeeping, Know Glitch, and Know Mobile. These products eliminate much of the manual communication and chaos that currently exists in hotel operations and have a direct impact on staff productivity and guest satisfaction.

Take us through your journey of starting Knowcross.

We started by accident. In my early teens I was an avid self-taught programmer – and honed by skills on Sinclair Spectrums, Commodores, and BBC Micros computers. However, I left this passion to pursue a more traditional Economics-MBA-Banking-Consulting career path…until life came full circle!  In 2002, a friend and I were doodling around and we put some developers together to work on different software projects. Because of the dotcom bust the market soon dried up. One of the projects we worked on was for a hotel. That experience got us interested in the space and we ended up developing a product. We created a few prototypes, went out to the market and got some positive early reactions. That gave us the encouragement we needed to continue in the space. In hindsight, I think we selectively saw the data we wanted to support our belief and desire to continue developing the product!

With a team of four, we built a product and started approaching potential customers. We implemented the product for a Radisson, an Intercontinental and Oberoi’s new property in Udaipur, Udaivilas. Those first few installs were crucial. We learnt a lot from those experiences and almost rebuilt the product from scratch.

From this point onwards it was a hotel by hotel pitching and negotiating game. Once we signed up 15 customers, we stopped bleeding month on month. Soon we hired someone from the Hospitality industry to bring in the knowledge and knowhow. We stretched our boundaries and pitched to international hotels as well. We won a customer in Dubai. The deal was $40K, equivalent of 4 Indian customers. That experience made us realize that the market outside India is much more interesting. We got to pitch to the Hyatt top brass in Chicago and signed up Grand Hyatt in Mumbai as the test property.

We continued to make a lot of mistakes and learned from the experiences. The worst time was between 2008 and 2010. By 2008, we had built quite a bit of momentum and the financial market collapse hurt us terribly because a lot of upcoming hotels lost their funding and stopped mid-way through construction. With all the developers we had hired, our burn rate was very high and we didn’t have anyone to sell our products to. In 2009-2010 we were almost about to go belly up. But I didn’t want to give up. I got the team size down and had to let go of many talented people. From there on we restarted the journey slowly and steadily and were able to recover from the near death experience.

I am happy to say that over the last three years, we have seen very good success and have been growing at about 75% year on year.

You have been mostly bootstrapping your venture except for the small angel round. Tell us more about your experience managing the venture without much external financing.

Though Knowcross has been mostly a bootstrapped venture, we did raise a small angel round of $500K in early 2006 from “Band of Angels” (now called Indian Angel Network) and a few other individual investors. We did think of raising a VC round in 2007 but eventually didn’t go ahead. As a result, we have grown the company through internal accruals.

In our most strained period, 2008 to 2010, one thing that became our lifeline was a credit line we managed to negotiate from an Indian public sector bank. This was against our receivables and gave us the cash flow to manage the business… Raising money from Angels and VCs is the not the only way..if you talk to bankers, they often come up with many ways of borrowing money…ultimately, equity is always more expensive than debt and an entrepreneur shouldn’t forget this.

Having said that, both bootstrapping and raising external capital have their own sets of pros and cons.

With a bootstrapped company, I am the majority shareholder and have a much tighter control over the company. The growth is organic and takes time but in the process we have built a strong foundation. We won’t get knocked out that easily even if finances dry up.

On the other side, having money in the bank allows one to think long term and build a business without cash flow concerns. For e.g, in our case, the angel investment allowed us to hire the right people even if we had to pay more. Underfunded companies can’t hire the right people. Having capital also provides some mental stability. There was a time when our revenues were way below our expenses and I had exhausted all my life savings. I was not taking any salary and was using just the minimal amount of money to sustain myself. This kind of situation is a real blow to one’s motivation.

One needs to decide for themselves what the right way to manage finances is. We were not in highly scalable dotcom type of business and just wanted to build a profitable company. We could bootstrap our way up. But this might not work for every type of business.

How did you build your team at a stage when revenues had not started flowing in yet? What motivated those people to join you?

We started with four people initially. The biggest motivation for people to join us has been the kind of work we are doing. The time when we started, there were hardly any product companies in India. Still the product industry is small but 10 years ago it was miniscule. The people who joined us were specifically looking for such opportunities and that aligned our needs.

Two of the key people who joined us in our early days are still working with us. One is an IIT graduate and other from Hyatt, Mumbai. We did have to shell out a lot in compensation to hire these talented individuals but that was money well spent. They are still part of our key team.

I must say that hiring was much easier 10 years ago. The market was smaller and quality of talent was better. We got more value for the money paid. Now hiring is much more difficult. There is a lot of competition especially from VC backed start-ups that have driven salaries up – in some cases, to levels that simply don’t make sense. At these levels, it is better for us to set up a development center in a first world country!

Marketing is another area that requires a lot of investment. Tell us more about how you managed marketing.

Historically, we didn’t spend much on marketing. In fact we didn’t even have a sales team until 3 years ago. Sales for us were a door to door exercise. We were quite limited in our resources. So we had to cut costs at every step. We would fly cheap and stay cheap. We would stay only for few days and setup a maximum number of meetings in those few days to get the most out of our visits. I remember the time when I travelled to London to pitch to some potential customers. I slept on a friend’s couch and would step out everyday like a travelling salesman.

It was a slow, tiring and arduous journey. But the hard work did pay off. We built the customer base organically with the biggest growth seen in last three years. We spent many years building our financial strength and now we are investing heavily in building a sales organization and in marketing to support the salespeople. We set up our US presence about a year ago and now have three people based there. We are also about to open an office in London to cover Europe.

Another advantage VCs bring in is the guidance on building the business, contacts, references etc. Your clients include some of the big names such as Kempinski, Hyatt, Oberoi, IHG, Hilton, Sofitel, Taj and many more. As a bootstrapped company, how did you build this clientele? Where did you get guidance on how to run the business?

Almost everyone has some initial resources to work with. People do want to help others. If you look out for help and people know you are trying hard, they would come forward to help. In our case too, we got a few lucky breaks. Some of my good friends shared some references and made some connections. As we signed few initial customers and delivered good work, others came by.

In hindsight, I would say that it is important to have mentors to guide a first time entrepreneur on things such as which clients to take, how to approach them, when to raise money etc. These decisions are often tricky and it helps if someone who has been there and done that can provide advice. Best would be to bring someone who has started a business before. Incentivize them with stock options. Irrespective of whether one has VCs or not, mentorship is required. Such mentorship can’t be provided by a board. One needs an individual like a friendly uncle. Chances of success would be much higher if quality mentoring is available to teams early on.

From your own experience, what advice do you have for start-ups who are currently bootstrapping?

Bootstrapping is certainly possible until and unless the business model requires exponential growth in a short span of time.

If bootstrapping, one needs to prepare well and think through it. How much can you starve yourself? How long can you manage the business without revenue? How long will your savings last? You should draw your limits and know when to stop as there is an opportunity cost and the same money can be put to some other use.

If you go on for many years without showing positive cash flow, then it is concerning as your business is not sustainable. Make a realistic assessment of your situation and add a buffer around it. Many people don’t think through all this and then hit a wall.