iSPIRT works to transform India into a hub for new generation software products, by addressing crucial government policy, creating market catalysts and grow the maturity of product entrepreneurs. Welcome to the Official Insights!
Starting nine years ago, Aadhaar, eKYC, UPI and the rest of India Stack laid the foundation for a formalization of the Indian MSME sector. With the introduction of Aadhaar for Business and the unlocking of GST data for lenders, we are poised to see an explosion in flow-based lending to MSMEs, ultimately having a multiplier effect on jobs and economic growth. This is great news for MSME focused digital lenders and the product startups serving them. Therefore, a significant digital dividend for the Bharat economy is finally in sight.
It is heartening to see government adopt the same digital-first approach when it comes to health and education. While this is a great start, much work remains. Laying the policy foundation alongside an India Stack inspired technology spine will ensure the rise of the Bharat focused tech-entrepreneur.We need India’s entrepreneurs to lift outcomes for patients and students not adequately served by our existing system.
On the startup and investor fronts, this budget is a missed opportunity to address the important near-term issues. We had hoped to see the resolution for Angel Tax and other such Stay-in-India Checklist issues. Slapping a Long-Term Capital Gains Tax on the previously untaxed sale of listed equities will adversely affect the List-in-India initiative. Additionally, the compliance overhang of listing will no longer be tempered by the promise of tax-free gains. The promised tax regime must incentivize and protect foundational (angel and domestic investors) as opposed to fleeting capital.
While well-intentioned, this budget falls short of our expectations. India’s complexity and diversity call for a much more responsive and action-oriented policy-making approach. Only then can we harness our entrepreneurial energy to address India’s most pressing challenges.
About iSPIRT iSPIRT is a non-profit technology think tank that builds public goods for Indian product startup to thrive and grow. Learn more: www.ispirt.in
Sanjay Jain, Nakul Saxena, Sudhir Singh andSanjay Khan Nagra Fellows from our policy team have issued a press release on 1st February 2018, a copy of it is here. Reach out to Sanjay Jain in case you would like to know more details.
Special thanks to our volunteers Sharad Sharma, Siddarth Pai, Tanuj Bhojwani, Sarika Mendu, Anukriti Chaudhari, Karthik KS.
It’s been two years since the fateful 2016 budget which recognised “Startups” as a separate breed of companies unto themselves, demanding bespoke treatment from the government and authorities. The clarity brought forth helped quell the nerves of both companies and investors, who had to otherwise resort to exotic exercises, supplementary structures, and platoons of professionals to keep their entrepreneurial dreams alive.
As we all await with bated breath for the slew of reforms expected of the Finance Minister, it behoves us to see how far we’ve come and how much further we need to proceed so that a billion dreams may become a reality.
This article is the first part of a two-part series which explores how Startup India has eased the friction in the Startup ecosystem so far, from an investor’s perspective with the second part talking about the next step of reforms which would have a multiplier effect on the ecosystem.
Flywheel of Funding
More often than not, any coverage about fundraising covers the journey of startups and entrepreneurs and the travails of raising their multimillion dollar rounds. But there exists another dimension to this story, that of fund managers raising their own funds. A large section of the investor community was elated that the government recognised this oft-ignored story and created the Rs 10,000 Cr (USD 1.5 billion) Fund of Funds managed by SIDBI which invests into SEBI registered AIFs and Venture Capital Funds.
This approach seeks to galvanise an ecosystem through a flywheel effect, instead of gardening it via direct intervention. The 10,000 Cr corpus can help seed AIFs worth Rs 60,000 Cr in India, which when fully deployed, is estimated to foment 18 lakh jobs and fund thousands of Indian startups. By contributing a maximum of 20% of the corpus of a fund, many fund managers can hasten they fundraise and concentrate more on helping their portfolio companies raise, instead of competing with them.
The Fund of Funds has invested into 88 AIFs so far, thus galvanising more than 5,600 Cr (USD 873 million) worth of investments into 472 Startups.
Bringing back tax breaks, not a back-breaking Tax
The Government’s support of Indian investors found its way into the Income Tax Act, with several measures to incentivise investments into the Indian Startup ecosystem, such as:
Insertion of Section 54 EE, which exempts Long-Term Capital Gains up to Rs 50 lakhs provided it has been invested in the units of a SEBI registered AIF
Insertion of section 54GB, which exempts Long-Term Capital Gains of up to Rs 50 lakhs provided it been invested into the shares of a Startup which qualifies for section 80IAC
Clarifying that the conversion of debentures or preference shares to equity shares will not be considered as a transfer and thus subject to capital gains at the point of conversion (the entire Venture Capital industry is based on convertible debentures and preference shares and this move has settled long-standing disputes regarding the instruments of investments)
Issuing a notification that the dreaded angel tax will not apply to shares issued at a premium to domestic investors by those startups who qualify under the DIPP scheme (although the scope of this needs to be extended to rid the spectre of angel tax that haunts various investors and entrepreneurs)
Clarifying that the stance of the assessee in categorising the sale of listed securities held for more than 1 year as Capital Gains or Income from Business can’t be questioned by the taxman
Changing the definition of a capital asset to include any securities held by a Foreign Portfolio Investor, thus removing the friction arising from asset classification (a similar provision is sorely needed for domestic hedge funds and Category III AIFs)
Capital without Borders
The Startup India scheme over the past few years has rolled out the red carpet to foreign investors while rolling back the red tape. The success of this is evidenced by the percentage of funding foreign capital represents in the Indian startup ecosystem, which is 9 times higher than domestic capital investment.
Some of the initiatives include:
Liberalising Foreign Direct Investment into most sectors including financial services, single brand retail, pharma, media and a host of other sectors up to 100% in most areas
Abolishment of the Foreign Investment Promotion Board
Relaxation of External Commercial Borrowings (ECBs) for Startups for up to USD 3 million
Allowing for issue of shares for non-cash consideration to non-residents under the automatic route
Marshalling foreign investment into Indian entities primarily for the purpose of investing in other Indian entities has been brought under the automatic route as opposed to the previous government approval route
Dismantling the approval mechanism for the transfer of securities by a Foreign Venture Capital fund to an Indian resident
Moving most of the filings (FCGPR, FCTRS, etc) to an online window managed by the RBI (ebiz.gov.in)
Well begun is half done
The government’s efforts to improve life for Startups in investors have begun to bear fruit in tangible ways as evidenced by the reduction in the number of companies seeking to have a Delaware entity with Indian operations. The recent leapfrog in the “Ease of Business” rankings also stands testament to this.
The Government must now seek to consolidate all these gains and clarify its stance and the stance of the tax department on long pending issues which have been a bane to all startups. While we have miles to go before we sleep, we must look back and take note of what we’ve achieved before we seek to scale greater heights.
Section 56(2)(viib) of the Income Tax Act, 1961, or the dreaded “Angel Tax” was inserted by the Finance Act, 2012 to tax any capital raised by a closely held company which is above its Fair Market Value (FMV) as income from other sources, with Rule 11UA(2) stipulating the following two methods for determining the Fair Market Value:
Net Asset Value (NAV) Method
Discounted Free Cashflow (DCF) Method
However, the Fair Market Value in section 56(2)(viib) is defined as the value
(i) as may be determined in accordance with such method as may be prescribed (Rule 11UA(2));
(ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature,
whichever is higher;
This section, in particular, has been a bane to small businesses, startups, and investors as it seeks to tax any amounts invested by a resident individual into a privately held company. In the sections below, we will explore the problems with the sections that govern the Angel Tax issue as well as the remedies that have been actioned by the government.
With a few more recommended clarifications and modifications, the entire issue can be resolved to incentivise the ecosystem and reward good behaviour.
Analysis of Section 56(2)(viib)
The reason why 56(2)(viib) evokes such fear in the hearts of startups and investors is that it bestows significant discretionary powers in the hands of the Assessing Officer (AO), goes against the principles of the DCF method, and until recently, discriminated against individuals on the basis of residency.
There are four major issues with this section which causes significant problems to Indian startups.
1. Lack of Enforcement of the Law:
56(2)(viib) clearly states that the FMV shall be the higher of:
— Value as per NAV or DCF (Rule 11UA(2)) OR
— Value to the satisfaction of the AO based on the value of the company as of the date of issue of shares
From a plain reading of the section, it can evident that even if the AO is unsatisfied about the value of the Company or believes the value to be lower, the disjunctive OR allows for the higher value to be the Fair Market Value (FMV).
Ideally, the Assessing Officer should not have the discretionary power to disregard a valuation acceptable to the entrepreneurs and a group of sophisticated investors and arrived at by a professional in the form of a qualified Chartered Accountant or a Category I Merchant Banker. Many startups have faced a challenge whereby the AO takes the lower value as the FMV and taxes the entire premium as income in the hands of the companies. This results in the law not being fully enforced, leading to consistent bias against the companies.
2. Discretionary powers of the IT Officer:
The valuation arrived at by the Company is on the basis of a Valuation Report given by a qualified Chartered Accountant or Category I Merchant Banker, is based on the inputs of the management and is acceptable to sophisticated investors. However, it has the additional criterion of being to the satisfaction of the Assessing Officer. This subjective interpretation often goes against the objective valuation methodologies specified in the Income Tax Act.
For tech entrepreneurs or ventures with long gestation cycles, this hampers the flow of invaluable capital needed to scale their businesses and causes a lot of them to flee to other countries like Singapore or the United States of America to escape this requirement to satisfy the AO.
This imputes significant discretionary powers in the hands of the IT Officers and exposes startups to the tender mercies of the taxman. It also takes away from the very basic tenets of finance, as shown below.
3. Projections vs Perfection
The principle of a DCF valuation is to encapsulate the present value of possible future cash flows. These are based on a Business Plan prepared by the entrepreneur to the best of their abilities and subject to various risk factors, market conditions, etc.
To penalise an entrepreneur for failing to exactly reach their projections by comparing it to their financials on a later date vitiates against the very premise of DCF and robs of the uncertainty inherent in it.
The market penalises failure by making future funding harder to come by, an erosion of brand value, of morale, etc. — but adding the risk of a massive tax liability for assuming that the future is certain will cripple the entrepreneurial mindset of venturing forth in spite of deviations from ideal plans.
The law states that the FMV is based on the valuation methodology adopted as of today, but takes into consideration what the future may hold. However, 56(2)(viib)(ii) flips this on its very head, as shown below.
4. Present Tense, Future Uncertain
56(2)(viib)(ii) states that the Company needs to satisfy the Assessing Officer based on the value of the Company as of the date of the fundraise, whereas the valuation methodologies (56(2)(viib)(i), which leads to Rule 11UAA), allow for you to discount future cash flows as of today.
These contradict each other as the value as of today will always be less than the value in the future.
This allows for the complete disregard of the DCF methodology by the AO, leading to taxation on the basis of the present Net Asset Value instead of the probable future value.
The Added Dread of Section 68
In addition to the challenges with 56(2)(viib), Section 68 of the Income Tax Act, 1961 adds another dimension to these issues. Section 68 states that any sum credited to the books of accounts of an assessee can be charged to tax if:
The assessee is unable to explain the source of the credit;
The explanation is not to the satisfaction of the Assessing Officer
Several startups, who have faced off with the sword of section 56(2)(viib), also have to contend with section 68, which again allows for significant discretionary powers in the hands of the Assessing Officer compounded by the discretionary powers already afforded by section 56(2)(viib).
This tag-team reminds one of the chants that haunted the English cricket team during the 1974–75 Ashes tour of Australia-
Ashes to Ashes, dust to dust, if Thomson don’t get ya, Lillee must.
Given a choice, several entrepreneurs would rather brave the danger of the speedsters than the discretion of the taxman.
Remedies Already Enforced
The government has taken several proactive steps to protect and nurture the startup ecosystem in India. But this Sword of Damocles still dangles over the head of every entrepreneur. Until it is sheathed for good, there will always be fear about these issues.
On June 14th, 2016, the CBDT released a notification stating that for any company registered as a “Startup” and recognised by the Department of Industrial Policy & Planning (DIPP), any amount raised from an Indian tax resident will be outside the scope of section 56(2)(viib). The total list of exemptions to this section are:
Any funds received from a Venture Capital Fund or Venture Capital Company
Any class of people as notified by the Central Government, such as:
— From June 14th, 2016 — for a company registered as a “startup” under the Startup India Scheme — any resident
While this goes a long way in helping future companies, those who raised money in assessment years 2015–16 and prior are still exposed to this section even if they are startups.
With a few more additions and clarifications to these sections, the last vestiges of doubt can be quickly addressed to help the startup ecosystem proceed forward with clarity and confidence.
If a company has a valid valuation report in accordance with the law, the tax authorities should not be able to question if the valuation is justified based on prospective information
If any entity qualified to be a startup from June 14th, 2016 onwards, 56(2)(viib) should not apply for any funds raised at a premium from the date of their incorporation
The exemption under 56(2)(viib) offered to a startup shouldn’t be denied on the technical failure of not applying to become a startup if they qualified to become recognised
The PAN details of the Investors should be sufficient explanation of the nature of the cash credit for Section 68 and for the Assessing Officer to decide, based on the investors past tax filings, if the source of income can be substantiated or not
Out of the USD 10 Billion of investment into the Indian startup ecosystem last year, only 10% of it came from domestic investors. If the inspirational Make in India and Startup India visions of the government are to be achieved and the true value of the ecosystem is to be unlocked, the government must focus on encouraging domestic investment instead of penalising it. Domestic investors shouldn’t be discriminated against and treated sub-par to foreign investors in terms of the legitimacy of their money, which is the current status quo under 56(2)(viib).
Quick Update: We have submitted our response on 30 January 2018. You can find it on this link
It is widely known that the amount of data generated daily worldwide is rising at an incredibly exponential rate. Yet, what remains shrouded is how this data, particularly those data types concerning or generated by us, as individuals, are being used and stored by both the public and private sector. As we move into a data-driven world, it is crucial that the laws developed around Data center on the premise of both empowering and protecting the individual. In fact, the main purpose of the 4th layer of India Stack, the “consent layer”, is just this: to provide for a set of tools and utilities, as part of the Data Empowerment and Protection Architecture (DEPA), that empower citizens to assert control over their data.
The Justice Srikrishna led committee of experts has released a White Paper articulating their provisional thoughts on the Data Protection Framework, and are seeking public comments on the subject. iSPIRT will be submitting a formal response to the White Paper. This blog post lays out our current views regarding Data Protection and we seek suggestions and comments from the larger iSPIRT community as we finalize these into iSPIRT views.
We want the community members who are keen to contribute on the topic. If you have any feedback or you’re interested in contributing to the response, please reach out to us at [email protected]
Restoring balance between the individual and data controller
From social media platforms to online loan applications, to ride-sharing apps, many of the services we access regularly require mandatory data collection from the individual to the data controller, either on a one-time but often on a recurring basis. Data collected by data controllers often gets used in ways far outside the stated purpose. This in turn automatically places the individual at a data-disadvantage, so to speak. We believe that this current industry practice is an anomaly and data collected must be used only for the purpose it was collected for and nothing else. The law should work towards enforcing this principle and aim to restore balance across all elements of the privacy construct i.e consent, notice, choice, etc.
In addition, the use cases for data are also rapidly evolving. Without empowering the individual, in addition to restoring the balance, a data protection law cannot be considered complete; bringing us to the second core principle.
Data should be used to empower and not for harm
Indians will be data rich before they are economically rich. They must be empowered to use their data for their own benefit. For example, I must have access to a secure mechanism to share my financial information with a personal finance application such that I may easily track my spending and get intelligent recommendations on where to invest.
Progress in the area of data sharing is evident as in February 2017, the Digital Locker Framework was proposed as a national standard for aggregation. Along with it, an Electronic Consent Framework for enabling consent for sharing of data has also been released.
Yet, what about the vast amounts of personal data that have already been collected under various legal frameworks? Under new norms, individuals can be empowered by being given an option to “opt-out.” Where this is not feasible, the law should favour the rights of the individual, placing the higher onus on the data collector.
Individuals have Rights over their Data
When consent models were first implemented in the 1980s, data was largely static in nature. The opposite is true today with data being tracked, processed, and correlated in a multitude of forms, from the trends of our online shopping choices to the timing of our financial transactions. This transformation calls for a move away from the antiquated “consent-based model” to a “rights-based model” for data protection. The proposed rights model can be guided by three principles: accountability, autonomy, and security. Together these principles will ensure that individuals are provided a right to fair treatment, right to information, right against processing, and right to the security of his/her data. For additional information on the rights-based model, the Takshashila Institution has released a Discussion Document on this very paradigm.
The White Paper stays away from the word ‘ownership’ completely and instead opts to create rights which are always with the individual. The individual has a right to each piece of data that relates to her, and she can exercise this right to accomplish everything all that she needs. The data controller does not have any rights to this data other than those granted by the individual. We (iSPIRT) need to come to a conclusion as to whether this language is sufficient from our perspective.
Data controllers must be accountable
Data controllers are typically organisations (including non-profits, governments) and hence much more powerful than individuals. While consent is important from an empowerment standpoint, we are also aware of the practical shortcomings of this approach. Many users do not or can not know enough to make a truly ‘informed’ choice. The data controller, on the other hand, has been entrusted this data by the user for a specific purpose – it is a very conscious act, and they must be held responsible for how this data is used. This is a fiduciary responsibility, and the controller must keep the data secure, ensuring that the user does not come to any harm from their possession or handling of the data.
This accountability needs to be enabled and enforced by multi-dimensional checks & balances through an independent Data Protection Authority and appropriate adjudication process that will process dispute resolution when situations involving privacy harms have occurred.
Times of disruptive change require agile regulators
Successful businesses today must have the ability to evolve rapidly. Operating in this environment will require regulators to be agile and provide timely intervention. The law must also recognise that these changes are accelerating and that it will be impossible, at this time, to cover everything. Thus the law should empower regulators by providing a framework with a set of principles which are timeless, along with a mechanism that can change with the times and a context to provide suitable intervention.
Leveraging technology for enforcement
Data is no longer the imperative of a few industries, but fast becoming a utility across industries. Therefore, unlike other regulators for Savings, Lending, Banking or Telecom, the Data regulator will have to deal with at least 10,000x the number of entities. Every company deals with the data of its employees, shareholders, customers, vendors, etc., which may fall under the supervision of this regulator. In such an operating environment, it makes it imperative for the enforcement of the law on data to leverage modern technology tools to drive compliance, investigation, etc.
For example, the authority could create a technological framework for enforcement (such as data audits, logging, etc.) to minimise the effort required and only needs to regulate the exceptions or data breach notification could have the objective of helping mitigate the consequences of a breach and to serve as notice for an incident.
Balancing India’s needs for privacy, transparency, and development
Balance is a universal aspiration in all aspects of life and an essential requirement for smooth, sustained and predictable growth. If the balance between privacy and development is not maintained, we may end up with a scenario where an individual may not be able to use their personal data, sitting with one data controller (say tax authority) for a beneficial service from another authority (eg new loan). Similarly, the balance between privacy and transparency is also essential, especially for scenarios involving the utilisation of public resources i.e. a PDS shop refuses to provide details of beneficiary it services under the garb of privacy and is thus able to misuse the system to create ghost beneficiaries.
The law should encourage concepts such as anonymised open datasets and democratised access to other datasets that serve the public interest, paving the way for data to become a public good. The UK’s Biobank & RBI’s effort to create a Public Credit Registry are good examples of data becoming a public good.
There is also a need for balance in the efforts and action of the state and private organisation on surveillance and related activities. With newer technologies making access to data easier and cheaper, it becomes even more important to tread the path of balance more carefully. History has proven, time and again, how surveillance will be misused for personal benefit. Therefore, the law should explicitly call out principles to prevent misuse of surveillance.
In addition, the new law must harmonise various existing laws, particularly, the Information Technology Act, 2000, Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, and Right to Information Act, 2005, which directly or indirectly touch upon the issue of data protection.
Overall, the law should strive to create a balance between protecting personal privacy, providing transparency and accountability for institutions (including government), and ensuring development, growth, and empowerment for the individual and other market participants.
Innovations: Trust Score & Consent Dashboard
It is refreshing to see the White Paper bring out new concepts for consideration like the Trust Score and Consent Dashboard.
The innovation of a Trust Score could also provide a means to empower users by assigning every data controller a score based on the robustness of their data protection and data use practices. At a minimum, this would create a red-flag in the mind of the user, versus the black-box that users currently manage, prior to sharing personal information.
Having said that, the actual design of the Trust Score will be critical. It is easy to understand that the score will punish past incidents of data misuse, but we must also decide what behaviour to reward. Should the score be decided by a centralized authority or through decentralized feedback from end-users, audit agencies, etc.? iSPIRT welcomes views on designing such a Trust Score.
A Consent Dashboard could help individuals easily view to which organisations they have provided consent to process their personal information and how that information has been used.
The Consent Collector entity, part of MeitY’s Electronic Consent Framework, may be extended to perform the function of a Consent Dashboard. Through the consent dashboard, businesses may capture and log user consent, provide users with the ability to see what data has been collected, give users the ability to revoke their consent and erase their data, be able to notify users in a timely manner in the event of a data breach, and most importantly give users the ability to easily port their data to another data controller.
The Consent Dashboard could be designed in a manner such that it only generates and tracks an individual’s consent for collection and sharing of data. However, the data could be directly sent from the Data Provider to the Data Controller (and Data Processor) without passing through the Consent Dashboard. In this way, the Consent Dashboard could just be a registered entity, not a regulated entity, and be maintained by a third party instead of the government.
We request your thought/comments on the principles above, and in helping to add/subtract to the list. The final principles will guide and inform iSPIRT’s response to the Sri Krishna Committee White Paper. If you wish to engage more deeply on this topic of Data Empowerment & Protection and help us frame the response, please let us know by reaching out at [email protected]. The feedback submission on the White Paper is Jan. 31st 2018, thus we request all responses by Jan. 20th 2018 to receive consideration.
Update : We have submitted our response. You can find it on this link.
This post has been co-authored by Shrikant Karwa and Sarika Mendu.
We are happy to present the iSPIRT Volunteer Handbook.
The volunteer model that underpins iSPIRT has been around since 2009. Every three years we write about our volunteer model so that others can learn from it and build their own volunteer networks.
There are many kinds of volunteer networks. iSPIRT is a volunteer network that builds public goods. Therefore we take inspiration from Linux, Wikipedia, and others. Over the years we have found that no two volunteer networks are alike. Each has its own personality, its own way of resolving disputes and driving excellence. In fact, we find that heterogeneity across volunteer networks is increasing. At the same time, they are becoming more homogenous on the inside. Keep this in mind when you look to replicate some of the practices and values of iSPIRT in your own volunteer network.
In contrast to our 2014 update, this time our self-reflection about the volunteer model is in the form of a Volunteer Handbook. By explaining the inner workings of iSPIRT more clearly, we hope to make our current and future volunteers more effective. We are always looking for high-quality volunteers. In case you’re interested in volunteering, please reach out to one of the existing volunteers or write to us at [email protected].
Are you ready for the product teardown roundtable in your city
As Diwali marks a Joyous celebration and heralds a Prosperous New Year for all, we kick off a series of Product Teardown Roundtables to help our SaaS startups prepare for a successful year ahead. This series of PlaybookRT will focus on Guiding the customer journey from Discovery to Signup & Onboarding. The teardowns are being planned across our startup cities in quick succession (see tentative schedule below). We kickoff with a teardown RT in Chennai which will be facilitated by Suresh Sambandan (KiSSFLOW), Bharat Balasubramanian (FreshWorks).
Why are product teardowns important? For Explosive Growth!
Explosive growth is a common pain point for founders across startup stages, be it an early stage startup or a late stage startup. One key attribute to explosive growth is to make your customers market for you. Quoting from the article Six attributes of Explosive Growth Startups,
Nothing parallels word-of-mouth marketing
Why? Because the customers do this work for the startup. If this is to happen for your product it is important for your customers to have a clear-cut understanding of your product proposition, discovering it’s ROI and a WOW no-brainer experience of signing up and using it.
Our product teardown session is focused on exactly this evaluation for your product. Using our community of peers and leading practitioners, you would go through an intense journey and visualize how your potential customer discovers, understands, signs up and connects the product proposition and ROI to their needs. If you do a damn good job about this, you gain a big advantage because you don’t have to work so hard for marketing leads, getting you further on the path to explosive growth.
The teardown model
In this playbook series, we look at how to get your messaging right, and building a website and signup/on-boarding flow that converts with very little human intervention. This roundtable would begin with a deep dive into the company’s Idea, Discovery Process and navigate through the Landing Page, Sign Up, and its “Wow” experience. The format of the playbook is built around quick 10 minute demos, followed by peer-feedback moderated by SAAS founders & experts who have already built successful SAAS businesses.
You can read some of the previous teardown experiences from the founders who participated.
If you are keen to attend this RoundTable, do let us know by filling in your details here. We will confirm your seat subject to availability. All RoundTables are conducted pro-bono. The only payment you have to make is to provide your undivided attention and active involvement in the process. Playbook-RoundTables are a dialogue and there’s no monologue. None!
These are founder invite only events. Date, Time & Venue details will be sent along with the confirmation. Since there are limited seats, we would request you to kindly apply at the earliest.
Playbook-RoundTable is one of the most sought after community events of iSPIRT. It’s a gathering of 12 like-minded product startups who are beyond the early stage. RoundTables are facilitated by an iSPIRT maven who is an accomplished practitioner of that Round-Table theme.
iSPIRT works to transform India into a hub for new generation software products, by addressing crucial government policy, creating market catalysts, building societal platforms, and assisting product entrepreneurs evolve into the next role. It’s a think-tank with an emphasis on following up our ideas with great execution. This is where you come in.
Over the past 2 years, we’ve developed the Data Empowerment and Protection Architecture (DEPA) as the final layer of the India Stack. The DEPA empowers users with freedom and choice to actualize their data in a way that benefits them.
This includes a new technology for managing user consent and for authorizing data flows, as well as a new federated architecture for efficiently sharing user data from multiple data sources to multiple destinations (referred to as the digital locker framework). Banks and other big institutions are now beginning to deploy DEPA tools to enable consented data sharing by users. You can deep dive into DEPA here
In alignment with RBI’s NBFC-AA Directive, we wish to develop a reference data architecture for Banks and NBFCs based on DEPA so that they can introduce new products and services to accelerate Financial Inclusion in India. You will help develop, design and evangelize this new architecture with anyone and everyone in the market. If the job description seems vague, it is because this is uncharted territory and largely, you will decide where the work takes you. What we promise you is a world-class support system and a platform to actualize those ideas.
iSPIRT also has room for a lot of other volunteers with a variety of skillsets. Even if your expertise is not technology, but want to contribute to the mission with your unique skills, do fill the form below.
Our volunteers pay-forward for a variety of reasons. Some do it for iSPIRT’s mission and cause. Others, find self-actualization in building public goods. Yet others do it to be in the company of world-class techies and entrepreneurs. You can learn more about iSPIRT from its Intro Presentation and its 2017 Annual Letter. We’d be happy to discuss what is in your future, and how volunteering with iSPIRT can get you closer to that goal. Though, we have found that many of our volunteers have gone on to unexpected pathways, as they kept an open mind through the journey.
How To Apply
Interested? Please fill out this simple Google form and we shall get back to you:
The Product Market Fit or PMF in short is one of the first holy grails that every entrepreneur strives to achieve. The second Holy Grail is also another “P” – Profits, which I will deal with in a blog post later.
I will share my learnings of what constitutes a Product Market Fit for an Enterprise Healthcare product, based on my journey of building HealthMacro’s DiagSmart product that is focused towards Diagnostics Labs and Radiology Centers.
I have travelled across 5-6 states spanning several cities, meeting hundreds of Diagnostic & Radiology Lab owners to come to this understanding.
An ideal product-market fit has the following characteristics:
Timeline : Usually for an enterprise product, it does take time (somewhere from 1.5 yrs to 2 years) to achieve a market fit after the product launch. Once one has achieved this, it means the following.
Strong understanding of customer needs, budget and value chain : Once you meet a customer, you know where he/she fits in the Price Chain. You have deep knowledge of his customers, his competition, his pain areas, his revenues, and his annual budget.
Acceptable across multiple segments : Usually we build the first product with more features, and then realize customers do not want all or are not willing to pay for all features. So you segment it. Segment it based on # of users or # of features to make it affordable for a wide market. We segmented it as DiagSmart Mini (lower end) to Basic (Value Product) with Enterprise and DiagSmart Premium models for top end customers. Each model has differentiating values based on the price customer is willing to pay.
Strong understanding of your competitors’ strength and weakness: Deep knowledge of your competitor’s strength and weakness, w.r.t Features and pricing is key. You need to respect your competitor as you still discuss with customer why they will benefit from your offering. In one instance, we had to segment the Product as a DiagSmart Mini to fend off competition with a lower price range model.
Acceptable across regions: In a country like ours, where there are no healthcare standards, in every region there will be local players who will have dominated the market with their product. Selling in newer regions and winning there is one important trait. For our lab product, adherence to existing NABL lab format reports was the key to driving acceptance.
Clear Value Proposition: Your demo should do the work of showing how financially beneficial the product is to the prospect. You do not explain much. User experience is key here. Ensuring a flawless demo, where various customer stakeholders (owner, lab staff, Finance, Front desk…) finds their needs met is key in the demo meeting.
Your rate chart should explain the cost in a simple manner and the customer chooses what he needs based on his budget.
Other Guidelines to ensure Successful Product Market Fit :
Single Code Base : Once you allow a customization for a particular customer, it no longer remains a product. It becomes a project. You end up with multiple versions, resulting in larger teams to maintain it.
Hence, a single code base is critical. There should be options turn on/off certain features/customizations, based on customer budget/needs.
You take inputs from the customer to the product, and based on the value to the product, you decide to add it to road map or not. All customers have one code base.
Customer Care : You have a efficient Customer Care or Post-Sales Support team to take care of all their needs, with a clearly tracked process. Customers know how to reach you and what to expect as turnaround time.
You should be able to support new cities/regions without having a local office/support center.
Strong Engagement : Customers get monthly newsletters informing them of the progress of the product and the company. They respond with their feedback, inputs.
Strong Testimonials and Referrals : You should start getting strong testimonials from customers explaining how your product or Service has helped them. They do not hesitate to recommend you.
Water tight agreement with customers : You have strong water tight agreements with customers protecting your business. There are clear descriptions of services, costs and timelines, termination clauses leaving nothing open ended.
Clear mapping of the entire Business Process : All processes Pre-Sales, Sales, Sales to Engineering handoff, Customer On-boarding process, Customer Care process are clearly defined. All process are documented, clear training plans when you hire new folks. All members follow same process.
In summary, you lead the customer/prospect overall in all aspects of business. You are not dependent on few customers for their inputs/business. Customers respect you and trust you.
That’s when you have achieved “The Product Market Fit…”
“Be the change that you wish to see in the world” – Mahatma Gandhi
When I was invited to attend Niti Aayog’s event held recently with our Honourable Prime Minister, Narendra Modi, for a two-day focussed discussion on creating ideas for a ‘New India by 2022,’ I wasn’t entirely sure as to what to expect. But, I went with an open mind and armed myself with a presentation.
Well, I couldn’t be more surprised. The event had an overwhelming participation from some of the leading figures in the tech-corporate world in India, cabinet ministers and secretaries, all brought together with one intent – to enable ‘Change.’
Enough has been written and spoken about the event on social media and news channels alike. I’m writing this post to list down some of my own observations on how I foresee things changing in India from a business point of view:
Domestic market will come-of-age: I grew up in India in a small town of Punjab called Moga. Like many other people in my time, I grew up wanting to do something for my country, but career prospects took me outside. I returned to India 14 years ago to create a global product company and eventually realising the “Make in India” dream from Bangalore. Although, most of our opportunities still came from other markets. With the Indian government rewiring the regulatory and policy framework and through its other related initiatives, things are set to change. Besides creating an environment that will ease up doing business here, the domestic market will open-up substantially with opportunities stemming from some of the major sectors of Indian economy such as agriculture, small and medium businesses (SMBs), energy, infrastructure and mobility – all focussed on improving efficiency and raising productivity. The increased focus on sustainable and inclusive development will also present opportunities to come up with solutions that will help address some of the more fundamental problems namely sanitation, affordable housing and such.
Technology will be the key driver for India’s transformation: Digital India will get real. The speed at which people have adopted tech-applications has been remarkable, its impact profound. Cashless transaction is just the beginning, technology will redefine the way businesses are conducted across sectors. Agriculture will get more connected and farmers will get unique IDs thus enabling credit scoring for loans and classification for subsidies, energy metering will get smarter, and Indian SMBs will drive demand for enterprise software. Technology will play a key role in driving opportunities across all these sectors. The rise in tech-prevalence will bring down the adoption barriers significantly. This will further lead to more opportunities for entrepreneurs to come up with solutions that are unique to the Indian market.
Prepare for global competition and collaboration in the home turf: All this will make India an attractive destination for domestic and international players alike – giving rise to competition and as well as opportunities for collaboration. To make most of this opportunity in the coming years, entrepreneurs in India need to start thinking scale.
This is where the Indian tech-community gets to play a key role. We need to leverage the power of its collective experience in conquering global markets and its understanding of the Indian markets, merge them and arrive at a playbook (figuratively speaking) on building a sustainable and a scalable business in India. This will require conscious efforts towards build leadership, training executive talent and sharing best practices in this area.
Unless we achieve excellence in executing at scale, we will not be able to make most of the opportunities that change will bring with itself in India.
The Indian tech industry evolved from being predominantly services oriented to taking ownership of building products from scratch. Despite several flaws and hurdles in the system, it has made an indelible mark on the world map.
The new India is going to present exciting opportunities. I’m confident, Indian entrepreneurs will win as they will be prepared, stay focused and execute at scale.
Since conception, the India Stack has always been presented as having 4 layers. The first 3, paperless, presence-less and cashless, would essentially combat the price of doing transactions. Whether government to consumer or business to consumer, these layers significantly drive down the cost of interacting with your end consumer. With reduced cost, came increased access. Sachetization of services was possible, and we started seeing more and more businesses target India-2 and India-3, making them data rich.
Slide Showing the 4 layers of the India Stack
The 4th layer, that was nicknamed the “consent layer” was different, and hasn’t received much attention thus far. Unlike, the other 3 layers, it does not seek to drive down the cost of delivering services, but is a tool to, as Nandan Nilekani puts it, “invert the data”. That means that it allows the user to assert ownership over the data, and exercise certain choices in how it is used. The Data Empowerment & Protection Architecture (DEPA) brings us closer to achieving a Data Democracy, where the user can share his data with service providers. The slides attached here, present iSPIRT’s outlook on what DEPA is, what it does and most importantly, how does it empower the user.
Before we get into details of Data Empowerment, it is useful to acknowledge that Data is not a homogeneous commodity. There is a hierarchy within Data, and not all forms of Data can be treated equally.
The five types of Data that needs regulation
In the table above, as we go from left to right, data goes from more intimate, to more public. Even in today’s muddled regulatory framework around Data, non-shareable data such as biometrics, or passwords is seen as user-owned and a big no-no to share. But as we move towards the right, where ownership of the user ends, and that of the Data Controller begins, is murky at best.
Second, as you go reverse from right to left, the data becomes more individualistic. Anonymous Datasets, and Public Datasets are clearly about group data, whereas the rest are coupled with one or more individuals. Generated Data on e-commerce marketplaces, for example, may involve 3 or even 4 parties. Non-shareable data is typically intimate to a single user
Everything that we talk about in this post or the slides that follow, focus on the shareable middle of this chart, highlighted in yellow. At a principle level, we assert that any data, that has an individual identifier to it, is co-owned by every individual whose identifier is present in the data set. This may not give you complete rights over your data, but it gives you two rights, that DEPA enshrines in technology.
The first right, is that you can ask for access to your data from the data provider where this data originated, in a machine-readable format. The second right, is to share with user consent, your personal, generated or derived data with any other service provider you wish. To be clear, this is a right to consented sharing, and not consented collection. The right to what data is collected is a tricky issue, and requires policy, legal & regulatory clarity, before we can build tools to protect it. But we believe that the right for a user to claim stake on collected, generated or derived data about themselves has clear legal and moral precedent.
DEPA engages with Consent to Collect, not Consent to Share
How do we enshrine these rights in technology? The Electronic Data Consent. But before we introduce the hero, I’d like to get into a little back story to set the stage.
When UIDAI first issued Aadhaar cards, it noticed that despite it’s portable, digital nature, people used Aadhaar cards as Proof of Identity in the same way they used other IDs, through self-attested photocopies. Most of the time, these photocopies would not contain the explicit purpose of why they were photocopied. These photocopies were impossible to manage, and inadvertently some bad actors would steal say PAN or Aadhaar xeroxes, and use them as paper identity documents for fraudulent transactions.
So the UIDAI launched eKYC. The premise was simple, UIDAI could authenticate the identity of the individual. Combined with explicit consent of the user to share their data, the encrypted data would go directly to the service provider, digitally signed from UIDAI. This copy of the KYC document was safer, more trustworthy as well as faster and cheaper.
So the basic equation became :
The eKYC equation
But this thinking was pretty powerful, and the MeitY decided to abstract it and create the Digital Locker Ecosystem. Where instead of only one source of truth (UIDAI), any government or private entity can become an issuer of documents. Authentication was also abstracted and need not be tied to Aadhaar. You could retrieve marksheets linked to your roll number, or mobile bills linked to your mobile number. This lead to the following equation :
The Digital Locker System Equation
If you’ve been following this so far, you’ll realize there’s a pretty big missing piece in these equations so far. The “User Consent to Share” bit doesn’t seem to have the same sort of granularity as the other two parts of the equation. Consent is more nuanced than a simple yes or no. By forcing consent into a binary, data providers reduce their offerings to a “take it” or “leave it” choice. This is a meaningless choice for the consumer.
To really capture user intent, we must expand our understanding of consent. We must try to capture the granularity of the customer’s intent to consent. Does the customer consent to sharing of his data forever or for a limited period of time? Does the customer consent to further downstream sharing of the data, or does he not want his data to leave the service provider? This is where the hero we mentioned earlier enters.
Sample Flows of Data and Consent under EDC
Introducing Electronic Data Consent (EDC). It is a mechanism to abstract consent flows, from data flows. Which means, that you can capture the user’s intent to consent in bits, digitally signed by the user for authenticity, and share it with other providers to retrieve user data seamlessly.
Flowing through the pipes of EDC is an open, extensible XML file called the Consent Artefact. The Consent Artefact has some pretty cool features. It captures all the parties involved in the transaction, it explicitly states what data is being shared and for how long. There are options for the user to decide if the data consumer is allowed storage and further sharing of this data. Also, all parties are immediately notified to any updates in the consent and all changes are logged. This facilitates data audits, not just for regulators, but also to enhance trust between Data Providers and Consumers, and unlock the data economy.
The Consent Artefact enables differential privacy measures such as Virtual Data Rooms. For e.g., a lending startup could know if your income in the bank account matches the one on your salary slip, without having to hand over your entire financial transaction history from your bank to the NBFC. It can just raise a query to your bank “Is income > x?”, and get a simple yes/no in return. The Consent Artefact’s logging and notice, can enable newer ways of pricing and doing business on data. The Consent Artefact deserves another post just for itself, and you will get one, in the next couple of weeks.
But to summarize, the EDC abstracts consent flows, from data flows. It allows for collection, management and audit of granular consent to share data in an open XML file called the Consent Artefact. Now, time for the big question. So What?
Well, today you can open a Bank Account instantly with eKYC. You can get your bank statements on a digital locker without lifting a finger, if the bank is enrolled as an issuer on a digital locker. But to get a personalized flow-based loan, you need EDC. Electronic consent unlocks the value of your data sitting in multiple databases of multiple service providers and gives you granular control over who gets to see what. Together these 3 tools give us a stack for Consented Data Sharing that we call Data Empowerment & Protection Architecture. DEPA opens up whole new models for Privacy Protection and Auditing Data flows while keeping the user in the center. More tools will be added to this Architecture that encourage the unlocking of value in disparate data sources, such as the healthcare combiner.
The 3 Tools that make up DEPA. Upcoming tools such as the Health Record Combiner will be introduced in another blog post.
We believe that the 4th layer of the India Stack is the most critical. While the other 3 were useful operationally, the consent layer is useful strategically. It forces you to think about how best to align Data for the empowerment of the user. By opening up the data, it removes all monopoly value attached to the Data, whilst still retaining the inherent value of the Data. Innovation moves away from who can hoard the most user Data, to who can make the best use of the Data for the user.
If you’re curious to see EDC in action, please do have a look at the talk by Sanjay Jain & team here. The slides used in that talk are shared here.
When we launched iKen two years ago, (The Way of Successful Entrepreneurs and Launching Pre Entrepreneur Program) we weren’t sure if a “reality-focussed”, “deep-dive format”, “away from jingoism”, bootcamp would have many takers. More importantly we weren’t sure of the impact that we would have. This was after all a side project for everyone involved.
Two years hence, this is a post looking back at that journey. We have covered quite a distance and have some great wins and have undergone few reality checks as well.
First the good news.
We have three chapters (Bangalore, Pune Atlanta), have given talks on iKen in four countries (USA, France, Nepal, India) and ten cities(and counting). More than hundred participants (from 10 batches) and more than 6000 impressions (people who attended iKen talks). And most important metric of all, we have fifteen+ revenue making companies. Some have taken the investment route and have raised seed funds.
30% of the folks decided to temporarily park the idea and went back to jobs but continue to attend iKen sessions at regular intervals.
While we are immensely proud of what we have accomplished, however there are certain targets, which we did miss by a wide margin.
First lets look at the genesis. The model we had in mind was that of a toastmaster. Peer supported skill building bootcamp with a rigorous structure of tasks.
The idea is to provide the following :
Learn entrepreneurial decision models (primarily effectuation but we also have lean components (business canvas) used in certain sections)
A space for deep and contextual discussions on entrepreneurship for early enterpreneurs (people who want to startup) as early enterpreneurs are either ignored or misguided(sometimes even taken for a ride).
Antidote for the sensational, shallow and sometimes wrong information spread by media.
Enable co-creation and collaboration and build the space and environment for that to happen.
A neutral space (as opposed to cheerleading skeptical or derisive) where people are comfortable in deciding even not to do a startup.
Roadblocks with Peer-to-Peer Models
Trust or lack of it is the major factor for failure of peer to peer learning. Lack of trust is actually two fold, one is doubt in capability and other is of trust in intentions and focus on control. The prevalent thought process that someone more knowledgeable and powerful (read mentor) will show the right way also contributes to devaluing what one has around them.
We have created the some tasks and rituals for participants to get over that habit but it has been hard. The teacher student model becomes more prevalent as you navigate away from Bangalore. However as they graduate and continue to attend the chapter the peer to peer collaboration has been immense.
Unlearning the Predictive Behaviour
One of the common patterns across all the cohorts is this belief that there is a way to game this “Startup” journey. Its almost like the cracking the interview; originality doesn’t matter, there are some packaged right answers and one needs to learn them.
I remember this one time in Sikkim where I spent an hour and half explaining why “starting with investors” is not the right way to think about a startup in early stages. The first question I got asked after the talk was “What is the right way to write the business plan so that I get funded ?”
Effectuation and iKen is nothing but intellectual support for common sense, but sometimes the power of accumulated “knowledge” is hard to ignore or wipe away.
Chapter’s Growth and Format
We expected at least 50% people to continue to attend the sessions even after completion of mandatory the 6-8 weeks. But that is reduced to one or two per cohort i.e 10%. There are two-three reasons why this is happening :
Folks do not see the value in continued attendance as the focus shifts to the new batch.
People who have not started their ventures are shy of attending.
People don’t understand the value of agenda less networking.
The last one is really important and most people undervalue it. The trust is built overtime and we have seen incredible examples of camaraderie and trust built amongst the folks (mostly anchors but few regular attendees too) who attend at least two session in a month.
We have also realised the chapter’s success is dependent largely on the geographic location and the first few champions that get involved in the Chapter. Inorganic growth doesn’t get the right people and often dies away. Self-selected stake holders are the way to go in growing chapters and that takes time.
iSPIRT does not fit into known mental model for many folks, they often ask what exactly is it? Few say it is hard to pin it inside a known category or even describe it in words.
The 2017 annual letter contains thoughts on what iSPIRT stands for. Some more explanation below on the why who and the how of iSPIRT.
Folks involved with iSPIRT are people with a passion for seeing “India as a Product Nation”. It is a grand vision of seeing the Indian product industry to be at least five times the size of the IT services industry.
The why and the what.
India’s answer to global product winner may get shaped through two siblings. The fist is in Saas (Software as Service), India will be for global Saas what Israel is for cyber security. The second is that “India 2″ also known Bharat market will be the envy of the world.
In either case winning the battle of platforms and ecosystems ie essential. Additionally, a new mindset to help win in the global rules of the game is critical. iSPIRT efforts affect both.
Difference between historically ace sprinters Jesse Owens and Usain Bolt of 14 strides is in the ecosystem where they ran.
Amiya Malik had the potential and the ecosystem support to be an Usain Bolt. But he declared victory too early in his mind by not having an underdog mindset.
Think tank, 30 year architect
Most apt technical description of iSPIRT is that it is a think tank. Which mean it is not an association, not a trade body, not a lobbyist group, or not academia.
A think tank is best understood as “university without students”. It takes the necessary long-term time scale view to solving hard problems.
iSPIRT works with all ecosystem stakeholders for the necessary influence of change. Yet it stands for the product founder who is the man in the arena.
Four pillars of public goods
All iSPIRT initiatives fall under one of the four pillars of public goods generated.
Public technology platform that can create local markets,
Policy work to educate and remove irritants of doing product business.
Market access program that brings buyers and sellers together who have not met before. Indian startups & Global Corporates for example.
Playbook for product business skill so that as an ecosystem we make newer mistakes.
Initiatives are levers that are stage dependent
Volunteer Engine, Belief, Credo keep us together
iSPIRT while is a think tank has a heavy bias for action. Several people volunteer and ‘pay it forward’ through time, donation and other contribution.
The operating model is inspired by Wikipedia. Two broad type of volunteers, the ones who lead an initiative called as Fellows. Other contributors have different names based intiatives Saarthi, Maven, Policy Sherpa etc.
Currently there are 24 Fellows and ~195 contributors. Volunteers sign a code of conduct to help address any conflict of interest while creating the public goods.
To put in a tweet-size “iSPIRT is like the Olympic Gold Quest for India’s Product Winners”
Customer feedback is gradually becoming the cornerstone of growth initiatives.
A new research published in the Harvard Business Review found that the act of just asking for customer feedback in itself is enough to help keep customers satisfied and coming back for more — even when they do not respond to your request.
Several theories of consumer psychology point to the fact that even a simple satisfaction survey appeals to your customers’ desire to be coddled, reinforcing the positive feelings they might already have about your product, and making them more likely to buy from you.
The very process of asking questions or seeking opinions induces people to form judgments that otherwise wouldn’t occur to them. They might not consciously realize that they love a feature unless you seek feedback about it.
Customer feedback has become one of the primary drivers for long term growth. Present day organizations jump at every opportunity to talk to the customer or learn about them. Businesses are spending millions of dollars on setting up feedback channels: emails, reviews, surveys, website analytics.
The pertinent question now is: how do you utilize these channels to actually learn from the feedback? Before you establish the viability of a channel, it is crucial to develop a clear picture of WHY you are collecting feedback.
Are you seeking first-hand advice on product improvement? Are you building a new feature for which you’re seeking the users’ inputs? Have you been receiving a lot of complaints? Once you have the end goal clear, proceed to the tactical part: how do you collect feedback?
There is no one-size-fits-all tactic to gain information from your users. Different situations require different methods of collecting customer feedback. For example, a survey form sent to an already disgruntled user will only make matters worse; a phone call works better here.
Let’s find out what are the best methods of collecting customer feedback:
THE BEST WAYS TO COLLECT CUSTOMER FEEDBACK
There are hundreds of ways to collect feedback from customers. The ones we’ll talk about here are the most popular — they are the most effective too.
1. Long form-based surveys
These most common way of collecting customer feedback are survey forms with a set of questions that are usually sent in an email.
The one thing you have to always keep in mind here is to not get carried away and ask too many questions.
QuickTapSurvey states that the connection between the number of questions and the time spent answering each question is not linear. The more questions your survey has, the less time your respondents spend, on an average, answering each.
In other words, the more questions you ask your respondents, the more likely they will “speed” through it, and the quality and reliability of your data will suffer:
It is clear from the above table that the longer the survey, the less time will the respondents spend on each question. The takeaway is to make the survey as short as possible.
There is, however, no ‘ideal’ length for a survey. A few experts do say that anything between 5 and 10 questions is a decent number.
To keep your surveys short, a good rule of thumb to keep in mind is: only ask questions that fulfill your end goal. Ensure that every question serves a clear purpose. If you do not intend to use the information, do not ask that question. The aim is to collect customer feedback and not to have them write an essay.
For example: If you are surveying a customer who has just exited your paid plan, there is no point asking them if the onboarding was easy! Your only aim should be to understand why they are leaving and what can you do to prevent that.
It is also important to start with open-ended questions. Let your customers surprise you. Multiple choice questions will give you answers based on your own assumptions. If you really want to know what the customer is thinking, give them an open-ended question.
A great open-ended question is: What do you love the most about the product. It is also a great hook to have your respondents start the survey on a positive note.
When to use form-based surveys to collect customer feedback
The best place to use this is when we want detailed inputs and have some open-ended questions to ask. This should only be sent to an engaged user, who you’re sure would like to take the time to provide feedback to you.
One way we used this in Hiver was to understand from our users which integrations we should build. We asked customers open-ended questions about how they use Hiver. Then asked them which integration they’d like to see, which was an MCQ, followed by another open-ended question about how they’d like to put the integration to use.
2. Short in-app surveys
Customers are constantly thinking of ways your product can work better for them. Maybe parts of your app do not have what they are looking for, or maybe the design could look a little better, or maybe they found something that is broken.
More often than not, they will not reach out to you on your support address. That happens only when the problem is big. But for the minor lapses, your users will just give up and walk away slightly frustrated.
A great idea is to offer a survey while your customer is using your app. The survey can be prompted the moment a user has finished interacting with a particular feature in the app. Since the user is already in the process of using that feature, it is very likely that their feedback will be very precise and to the point, and not ambiguous.
Remember: Your users are on the app for a certain purpose, it is not a great idea to throw a long survey at them. Keep it to two to three questions that are relevant to the page that it’s being displayed on.
Intercom.io is a fantastic tool to trigger in-app surveys in your app. For example, the moment a user finishes using a particular feature, a quick question like the one below is a great way to get their ideas about improving it.
When to use In-app surveys to collect customer feedback
When you want a quick feedback from someone who has performed a certain action. Timing is of the essence here — you have to trigger the survey at the very moment a transaction ends.
The questions should be specific to what the user is using or has just used, and NOT about the product in general.
3. Phone calls
It’s said that if you truly want to understand someone, you will have to talk to them.
The surveys and tests will give you tons of data but they can never tell you what a person truly feels about your product. This is when you need to reach out to your users through the phone. It is a personalized and proactive method that generates the best responses.
Hearing a person’s voice and tone is the best way to sense what they actually feel about your product.
A call will help you tell the features that get users excited, features that really make their lives easier.
The key here is that the person calling the user should genuinely want to understand their problem and offer solutions. Do not do it because you have to do it. Do it because you care. This is not a sales call.
The second factor to keep in mind is the time when you call. Studies have shown that customers are more likely to respond between 8 am and 9 am, and between 4 pm and 5 pm. Lunchtime, between 1 pm and 2 pm is the absolute worst time to reach out to anyone.
When to use phone calls to collect customer feedback
Scheduling calls with your users, talking to them, and making sense of feedback which is not as structured as entries in a form is a lot of hard work. The key here is to focus on the users who can give you the best feedback to improve your product or service.
It makes sense to do phone calls only with the users who are avid users, have deep knowledge about the area you operate in and can give you actionable feedback.
This is not a good avenue when you want to reach out to a lot of people at the same time.
4. Transactional emails
Transactional emails are the ones that you receive right after signing up for a new service, or upgrading to a new plan, and so on. Basically, these are emails triggered by a certain interaction between the user and your app.
More often than not, transactional emails are treated like a necessary notice and companies would not put much effort in creating a dialogue with the customer. These emails often lack the aesthetic appeal of the website and the newsletters and deliver an inconsistent customer experience — that’s a shame.
Contrary to this popular practice, transactional emails can be used as a powerful weapon to foster a dialogue with customers. If we look at email open rates, these emails do better than all other emails, says an Experian report. The reason is that people actually want to receive these emails — for instance, they want to know if an upgrade went through or not. Asking the right feedback question in these emails will certainly get good responses.
Viking does a great job at it by asking users to rate their delivery right after they have delivered a product:
In situations when you do not have a question to ask, it’s a good idea to give your users a very easy way of getting in touch with you. Buffer does it neatly:
Interestingly, the peak-end rule states that ‘our memory of past experience does not correspond to an average level of positive or negative feelings but to the most extreme point and the end of the episode’.
Say a user receives a transactional email just after they’ve upgraded — asking a question at that juncture would evoke positive feelings about the product and set them on the path to loyalty.
When to use transactional emails to collect customer feedback
When a user does something significant: signs up, upgrades to or exits a plan, and so on. You can send them a quick one-liner question or a short multiple choice question. The key is to gain an insight at the right time without burdening them with too many questions.
5. Net Promoter Score Surveys
It’s the simplest question you can ask your customers: ‘’how likely are you to recommend us to a friend or colleague?’’ It is, basically, a method to measure your customers’ sentiment about your product.
People who rate you 0 through 6 are known as “Detractors”, those who rate you 7 or 8 are known as “Passives”, and those who give you a 9 or 10 are known as “Promoters”, as illustrated here:
Net Promoter Score (NPS) = Percent Promoters — Percent Detractors
Let’s take an example. Say there are 100 respondents.
10 responses were in the range 0 to 6 (Detractors)
40 responses were in the range 7 to 8 (Passives)
50 responses were in the range 9 to 10 (Promoters)
NPS: [(50/100)*100] minus [(10/100)*100] = 40
The worst score you can get is -100 and the best score you can get is +100.
Apple uses NPS surveys to find detractors and improve their retail store experience. Whether a customer made a purchase or scheduled an appointment to try on an Apple Watch, they e-mail a survey to rate the in-store experience.
Remember: Any score above zero is good, anything above +50 is excellent, and over +70 is considered world-class.
The greatest advantage of NPS is its simplicity and ease of use. It can be set up in minutes and is easily understood by everyone in the organization. It also makes it very easy to compare yourself with the industry standards.
When to use NPS to collect customer feedback
When you want to understand the general sentiment of your users about a transaction. You can use NPS for any of the touchpoints that the customer might have with a team: sales, customer support, etc. For example, it is a good practice to send an NPS survey after a support query is resolved.
6. Suggestion boards
Suggestion boards take collecting feedback a notch up: it allows users to collaborate on ideas with not just the company, but also with other users.
These boards allow users to create feedback posts which can be upvoted or commented by other users. Top posts that have been upvoted or highly commented can help you discover what the majority of your users need.
The best thing about suggestion boards is that ideas that had been suggested by some customers became popular ideas among others who hadn’t thought of the benefits those ideas could bring.
Aha.io is a wonderful tool for creating these boards.
It is important to make the board very easy to navigate. Users should be able to add new posts with ease. Creating categories, allowing your customers to view the most popular ideas, and making it searchable are key.
Results will take some time to develop. Feedback will not be accumulated immediately. Wait till your users leave enough feedback so that you can determine which ones are popular to your entire base as a whole.
When to use suggestion boards to collect customer feedback
When you are looking for new ideas from your users. You should start with inviting the extensive users first — they know your product well and will be in a better position to suggest improvements or new features.
After you have a few ideas on the board, you can start inviting more users — they can upvote or comment others’ ideas even if they do not have one.
Once you’ve collected the feedback you want to pay attention to, the next step is to analyze the data and take actual steps to make things better for all stakeholders.
WHAT TO DO WITH THE FEEDBACK YOU’VE COLLECTED
“Every day, companies solicit feedback from customers, yet only a few translate that feedback into meaning. An even smaller fraction of companies actually take action or close the loop with the customer, to let them know their voice was heard,” says Whitney Wood, managing partner of the Phelon Group.
If you handle it right, the dialogue between you and your customers can become the biggest growth driver for your business.
The only way to reward your vocal and consultative customers is to roll with the punches and bring in actual changes.
Let’s talk about taking the feedback data to actual use:
1. Identify product improvement areas
More often than not, your loyal users would have developed an expertise of your product features; some of our users understand the product as much as our product managers do.
The standup product improvement meetings can only take you so far — the real insight comes from the ones who use your product regularly.
No matter how hard you try to empathize with them and put yourself in their shoes, your users will always have some exciting ideas that you did not think of.
So, stop brainstorming and start following the advice your customers give you. Not only will your customers appreciate your willingness to listen and implement their ideas, but you will set yourself apart from your competitors, as a business that genuinely cares.
LEGO Ideas is quite possibly one of the best examples of how customer insight can be used for product development. Enthusiasts can easily submit their own designs on this mini site. The projects gathering more than 10,000 votes from the community undergo LEGO review and are turned into new sets if the review is favorable.
2. Feed it into your product roadmap
Nobody understands the pain points of the product as well as the customers. If companies are able to incorporate customer feedback into the product roadmap successfully, they have certainly come very close to the ideal market-fit.
It is crucial to classify feedback into improvements and game changers. Let’s take a couple of examples from Hiver itself.
A few of our customers thought shared labels can have different colors as that would help them manage their inboxes better. Now, this is a product improvement — we added it to our ‘task manager’ and had implemented in almost no time!
After we built the shared mailbox, a few customers suggested we implement automation that will allow emails to be assigned based on a few pre-set conditions. Now, this is a game changer as it would significantly reduce the time people spend on task assignment. We added it to our ‘brainstorming session’ and discussed the pros and cons of doing it. It took us a few weeks to build it, but it’s been worth it.
The biggest challenge is to get your customers to suggest. Would they really bother to spend time suggesting a feature?
Fitbit implemented the suggestion boards and noticed that even the ones who did not have a suggestion were either upvoting and downvoting. Ideas suggested by other customers became popular among others who hadn’t thought of benefits those ideas could bring.
3. Find your niche
Most companies are not a hundred percent sure about the verticals they should focus on. It is never an exact science and companies end up spending huge amounts on trial and experimentation.
Customer feedback can be a good way to find out where you belong.
During the process of analyzing feedback from customers from a broad spectrum of verticals, you will begin to see patterns as to where do the majority of your happy customers come from.
Once you have discovered the verticals where the majority of your happy customers exist, start working on strengthening the relations you already have with them. Strive to make them your advocates and seek recommendations.
4. Prevent customer churn
Are you stuck with the principle that negative feedback should be swept under the rug and kept silent? It is a clear indication that you have set your customer success goal to a low ‘simply meeting customer expectations’. It is crucial to use feedback to improve customer service.
A customer who has taken the effort to call you is a lot more likely to tell their friend about the same problem — ignoring the negative feedback will have a compounding effect.
Contrary to what most businesses think, a negative feedback is an opportunity to prevent customer churn and foster a long-term relationship with the customer. These are the guys who’d need a little extra work: call them, understand their problem and ensure you do your best to make them happy. Ensure that you check on them regularly — make them feel ‘cared’. Showing that you care goes a long way in building a healthy business relationship.
By keeping the two-way conversation open and building trust gradually, you can turn these problem customers into raging evangelists.
Remember: they have taken the time out to give you a feedback when they could have just switched to another product. Any feedback is a display of interest in your product. Be wise and use feedback to improve customer service.
5. Discover potential advocates and nurture them
Customer satisfaction is the primary indicator of how happy they are with your product. Gathering feedback will help you quickly identify the happiest of your users.
The next step is to nurture them into advocates. Get them sufficiently excited to rave about your product and recommend it to friends and colleagues. Monetary rewards do not motivate advocates. Do simple things — thank you notes is a great idea.
HEX is one cool company that attributes a lot of their success to the handwritten notes they send to their customers.
Here are some great ideas to turn your customers into advocates.
Imagine the world where most of your new customers came from business referrals. This can be achieved only when you know who your advocates are.
6. Motivate your team
Customer feedback can act as a secret driver to motivate employees.
Say you’ve been hearing praise about a feature — pass compliments directly to the person who built the feature, and ensure the team knows it too. It is a good way to encourage healthy competition among your team members.
Say you’ve been getting some brickbats about a certain feature — pass it to the person who built the feature and let them talk to the irate customer directly. It makes them feel in charge of that feature and they will be ready to take more ownership in the future.
Share conversations that are interesting and come up with new ideas about the product (improvements or game changers) with the whole team. It would help everyone understand the larger picture.
Wrapping Up: Feedback matters
A startling truth about most SaaS companies: your support team always understands more about what the customer needs than your product team.
It is time you start discussing your product roadmap with the support team as well — they are the ones who know about the ‘actual’ problems your customers face.
Building a good product and marketing it well is the job only half done. A lasting commitment to evangelizing a customer-centric culture, followed by a fierce commitment to gathering, analyzing, and sharing the feedback across the company plays a vital role in propelling your product and the business forward.
Always go back to your users and tell them you implemented something they suggested — this is a solid step in building a long term relation with them.
Originally published by Niraj Ranjan Rout at hiverhq.com on April 5, 2017.
Recently was having a conversation with a Private Equity friend and was trying to explain the challenge that has captured my imagination and full attention, ie exits for software product startups in India. He felt that the data about the exit structural deficit that I was trying to point out felt too bearish to be true. My counter argument was that my intent is not to sound bearish but instead be a realist, after all acknowledgement of a problem is first step to solving one. Post that conversation I thought should put this data out publicly so that through crowdsourcing can at the very least improve my understanding if it is off by wide margins.
Above data indicates that Israel was able to generate 1.8X of the money that went in while in India in the same period it was 0.2X. The right comparison is exits from 2012-2016 with VC investments from 2005-2009, iSPIRT report does that comparison but results are even less encouraging.
Exits follow a power law distribution, however in India it seems like a power law’s power law.
Not only is the volume of exit a challenge but also the structure, any ecosystem exits follow a typical power law. For every $1 bn exit, there are ten $100m deal, for every $100m there are hundred $10m deals.
Top 7 deals in India account for ~$2.5b of the $4b in exit. About 250 of 391 deals total a deal volume of $97m which means the size of an acqui hire i.e in long tail is about 0.5m, which is inadequate even for an angel investor (in other ecosystem long tail is >$10 m, hence being referred to as power’s law power law). Lack of many $10-100m deal means there is a missing middle of the long tail.
TiE Nagpur and iSPIRT – two iconic initiatives, committed to building a great startup ecosystem for startups in India, came together to create magic at the Nagpur Innofest on the 5th of March 2017. Innofest is a platform where innovators can connect with enablers, experts, mentors to build, create, connect, improvise & explore. It’s a movement on ‘Innovation’ in India.
The first Innofest of 2017 was held at Nagpur, with over 150 slated to attend the event. However, the organisers were pleasantly surprised to cater to over 250 people that eventually attended the event. The keynote addresses were made by Sharad Sharma, Co-Founder iSPIRT and Nagaprakasham, who is an investor. There were multiple workshops during the entire day.
Over 10 interesting hardware products were showcased at the event. Right from a 3D printing machine, collision-detecting devices, IoT based tracking devices, ultrasonic sensors, drone technology to the very unique e-funnel.
Nagaprakasham talked about the trend of creating copycat technologies and emphasized how innovation must ensure that newer technologies are able to touch more and more Indian lives. India’s strength lies in its humongous manpower, ample farmers, cheap labour and last but not the least, its vast natural beauty. And they all must be leveraged for innovation.
Subinder Khurana, held a session on Product innovation, where he talked about the essential ingredients of innovation. He pointed out that every venture must have a story of its own that is inspiring enough for not only the customers, but also family, friends, investors and other collateral stakeholders.
On the concept of disruption, he clarified that breaking something is easy, but it must be done creatively. Has some new technology being leveraged? Is there a good story around it? Is some equilibrium being challenged, which will add value to the customers?
Sharad Sharma spoke about IndiaStack and why it will be a critical step in helping creating new innovations for Bharath, he also explained about the building blocks as part of IndiaStack which include Aadhaar. He also spoke about how SAAS will be for India as Cyber Security is for Israel. He spoke so passionately that later during an audience interaction, Shashikant Choudhary, TiE Nagpur President felt that the entire stage was shaking and the podium would fall off. We had Radhesh Kanumury, Country Lead, Global Entrepreneur Program, IBM India Ltd having a fire side chat with Prajakt Raut. Radhesh spoke on the various technology trends giving good insights about them along with examples of innovative Startups working on those areas.
Another session, led by Prajakt Raut was on creating Business Plans. According to him b-plans are critical indicators of the real status of the business as it gives us a framework for assessing the business. The plans give us early warning signals of something that is not going right. It is important for every Founder to know the answers to these questions: What problem or opportunity are we addressing? (The market/ target audience). How are we addressing it?
How are we planning to do it? (Organisations & operations planning) what skills are required? (What are the competencies that are required to handle the business). Why are you doing it?
We also held the iKen Workshop which was facilitated by Rakesh Debur and Kavita Arora of Bangalore Makerspaces joined us to mentor the innovators. This entire activity was possible because of the support of TiE Nagpur and the people of Nagpur who joined us on a Sunday.
Some of the innovations showcased…
Traxafe is an advanced, tiny IOT based tracking device for kids, elders and cars. It’s based on GPS, GSM and BEACON technology connected with a user-friendly app to keep track of your loved ones.
E-Funnel is an electronic fluid gauging device. It measures any quantum of fluid flowing through it. All the information information of every fluid filling can be accessed through a mobile app or through our website on your desktop. It will be available for different variants of diesel generators, trucks and buses.
ISCREAM is a device which can perform numerous operations from detecting vehicle
collision to analysing the vehicle analytics.i-Scream is assisted with our IoT-based crash sensor and emergency response software which helps us to both keep a track on you and make you feel safe at the same time.