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Service Oriented Startups

Last week a very interesting free e-book called “Software Paradox” was trending on Hacker News. The premise of the Service Oriented Startupsbook is, that the value of software as a product is diminishing, but the value of software as an enableris rising. Pure play software companies such as Microsoft and Oracle are fading in comparison to rising stars such as Google, Facebook, Apple, Amazon and newer ones like Uber, Dropbox, GitHub, AirBnB and others. None of the new age companies sell “software”. They all sell a service (or devices, in case of Apple).

The book goes on to argue that companies even prefer giving away their software innovations as open source so that they can get the respect of the developer community that they desperately want to attract. Apple’s operating systems are based on an open source flavour of Unix, GitHub has built a social layer on git, a version control system created by Linus Torvalds and Facebook is a leader in new age open source web development tools. So there is a clear trend of companies collaborating on an infrastructure and tool level and yet being able to create a lot of value in the services they provide.

They book suggests what pure-play software product companies should do in order to survive this next wave. There are a lot of great options described which range from moving to a subscription model to becoming a full-stack startup (doing very deep vertical integration in the markets they operate). In the context of pure play software product companies, where do we in India stand?

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A defining moment in the first episode of the new YouTube drama TVF Pitchers, an Indian take on the popular and brilliant series from HBO, “Silicon Valley”, is when the protagonist is about to dump his entrepreneurial dream and continue with an overseas posting. On his way to the airport, he sees large advertisements of Housing.com and Snapdeal and decides that his calling is a startup. On a side note, it is interesting to observe that the innovation described in TVF Pitchers is a “B-plan”, whereas the innovation on which HBO Silicon Valley is based, is a hypothetical “algorithm”.

My conclusion is that India has already leapfrogged to “Service-Oriented Startups”. The number of new startups and deals in the e-commerce and classified marketplaces domains greatly out numbers startups that have a technological innovation at the heart of the business. The aspiration of the entrepreneur who starts up today is to build the next Flipkart, not the next Google.

This is something we all will have to learn to accept. Like so many modern innovations we love using today are ones we did not invent, software is something we will rather use. Innovating on technology requires an intellectual rigour and ecosystem support that will probably never reach a critical mass in India. But amidst all this gloom, I still have hope that at least a few of the 3 million software developers out there will prove me wrong.

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Before you start with Growth Hacking

Building a product startup is exciting. Most startups look to raise capital early and investors look no other measure but traction to take their bets. This need for traction puts immense pressure on the founding team to grow their startup. That leads to implementing multiple tips and tricks to improve the key product metrics – most importantly to show traction to investors. Founders get into the so called ‘growth hacking’ mode.

Growth hacking is the new buzzword in the startup town. There is nothing wrong with ‘hacking growth’ – most of the tricks attempted in this phase end up being short-term techniques. They might work for a while, bring traction for a while (which might lead you to raise investments) but these techniques don’t help in long term and the growth is not sustainable and quickly falls off.

Startups tend to neglect the simplest rules of product management before starting with growth hacking. According to me, here are the 5 Basic Rules of Product Management:

  1. User Engagement > Growth Hacking
  2. Retention > Acquisition
  3. Context > Activity
  4. Own growth channels > External channels
  5. Being Valuable > Being Social

A. User Engagement > Growth Hacking
Remember startups like BranchOut, Glassdoor, Viddy, Socialcam – that famously hacked growth through Facebook Dialog Feeds? Though they showed amazing growth curve initially, it soon fell off. Most users dropped off the product as quickly as they signed up never to return again. Reason – zero engagement on the product. Ensure that there are enough engagement loops on the product before you do any sort of ‘growth hacking’.

B. Retention > Acquisition
Acquiring users is the simplest thing to do, retaining them is the key. Any user acquisition technique should retain a good percentage of acquired users. Not just that., over a period of time the users who dropped off should be reactivated – there should be enough methods to pull them back – emailers / network effects / and so on. If the product has strong engagement features, retention is a easy task.

C. Context > Activity
Most products undermine the importance of context. In today’s world – anything that is not context is considered spam. The finest examples of a context driven product is Quora that lets you follow topics of your interest and helps you discover relevant content. Also important are products like Twitter (that lets you follow users) and Pinterest (that lets you follow boards) to build a information stream in context thats relevant to you. Think of context when you build features.

D. Own Channels > External Channels
Many startups focus on external channels for growth. Branchout was focussed on Facebook Dialog Feeds, Zynga was focused on Facebook Activity Wall, Viddy was focussed on Facebook Open Graph. Perfectly fine – if there are enough engagement loops and good retention strategy. However depending on external channels might not be sustainable – many startups hacked the Facebook Open Graph to get significant users – this led to users complaining about to the noise on Facebook wall, Facebook in return built many approvals / controls to prevent applications from spamming the users and giving users ease to block spam applications.

Large startups like Facebook, Dropbox, WhatsApp were completely focussed on driving growth through channels owned by self and had very little or no external dependence for growth. Don’t depend too much on external platforms like Facebook, Twitter, Google (SEO) for growth – build our own channels. Facebook’s journey of growth hacking is well documented. Also Dropbox as mentioned in next point.

E. Being Valuable > Being Social
There are also startups that focus on building ‘too-many’ social sharing features, expecting users to share almost everything and anything on to their social profiles (Facebook, Twitter, etc). Users are smart – they don’t fall in this trap and founders keep wondering why no social sharing happens. Instead of trying to be forceful on social, focus on being valuable.

Example –  Dropbox, it was a very valuable product that had super methods to hack growth – by connecting FB or Twitter account with Dropbox and providing users additional storage space by asking them to spread a message to their social circle or invite email contacts.

Concluding Notes:
Can you hack growth first and implement these rules later? No. There are startups that hacked user acquisition and raised initial investment on traction., and later things did not go according to the plan. Not just startups, that leaves even investors wondering what went wrong after the initial impressive growth metrics.

Startups are about growth, no doubt. Getting Techcrunche’d (PR release), top position on Hacker News or Video that goes viral might bring one-time traffic boost / user sign-ups. You can get good amount of traffic by integrating with Facebook Open Graph, optimizing site for Google (SEO) or even paid user acquisition – but make sure that the product has enough engagement, retention loops, value and context to sustain the users you are acquiring!

You may hack growth., but you can’t hack success. Building the next billion dollar company is a big deal!

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ParaBlu: Store, Sync, Share, Stream, Search

ProductNation interviewed Kameswaran Subramanian, Founder of ParaBlu Systems, which focuses on helping its customers take their business to the cloud. ParaBlu offers cloud storage solution with emphasis on privacy and control.

Learn more about how Kamesh and his team built a world-class product from India.

What was the motivation to start ParaBlu?

I love bringing new products to market. I have been doing that for over a decade now with other MNC’s and startups. ParaBlu is my second startup. I was technical partner of another Switzerland based startup where we developed products for Swiss Banks. The fundamental premise of starting ParaBlu is to start a global company from India.

Digital Privacy and Security is of paramount importance.  I have tons of data and tried using many major offerings. But if you dig deep enough, we can realize that all of them have poor-to-none full user privacy. The recent revelation about NSA/Prism is only the tip of the iceberg. We wanted to provide a solution that can be used by enterprises in a manner they deem fit.

How did you zero in on offering Storage as a service to your customers?

The original idea was to provide a simple mechanism for people to seamlessly synchronize data (photos, videos, digital files, folders etc.) across all devices for an individual or family. We were developing the product for consumer market and lot of emphasis has been given on user design and simplicity of usage. We wanted to bring the cloud-storage into individual’s home. Towards end of last year, we saw an opportunity in the enterprise market. After piloting the product with businesses, we quickly realized that there is a market-fit and moved into SaaS model. We are now offering multiple variants of our products. 

What is so unique and differentiated in your offering compared to others in the same space?

People think about Google Drive, Microsoft Sky Drive, Apple iCloud or Dropbox when we talk about Cloud Storage. They are public cloud storage and we are fundamentally different from them. For example, if you put a document in Google Drive, Google can read, create derivative works, publicly display and distribute the content. These are not entirely apt for businesses.

We offer private cloud storage to our customers with clear understanding that they own the data. ParaBlu offerings bring you the all familiar cloud storage, sync, share, stream and collaboration facilities with privacy and control that ensures that none of your files, media and assets are lost.

From technology perspective, we have had tons of breakthroughs and some key differentiators are mini-clouds (Cloud within a cloud), content search, end-to-end encryption, etc. We are also coming out with a plug-and-play hardware offering.

Key differentiators, which our customers love, are not from technology 🙂 They love our extremely dedicated-customer support, simple and intuitive design, installation within 60 seconds, lowest total-cost-of-ownership in our space and ability to use a technology product without having to even have an IT admin. The most liked feature for an SME about our offerings is the ability for the management to see the entire company information (Engineering, Planning, Production, Sales, Marketing, etc.) with detailed auditing in a single place from anywhere in the globe.

Can you throw light on the interactions with your initial customers? What have you learnt from them?

A Lot! We spent a lot of time with our customers understanding how their business works. We spoke to 100+ SME’s during our pilot stage. Many of our features were driven by market. We use LEAF – Listen to our customers, Evaluate the idea with other customers, Analyze the results and then convert them into a product Feature.

For Indian businesses, technology is a means of achieving their business productivity.  Their major questions are about how the product increases productivity, impact on bottom line and ROI. If a product genuinely solves their pain point, then they are ready to accept an IT solution. There is a dearth of high-quality cost-effective solutions for the SME sector in India. That is both a market opportunity and a saddening fact that mainly “service” and “outsourced” companies crowd Indian technology space.

Some examples of our learning:

  • Many SME’s operate on low bandwidth Internet connection and we had to go-back and optimize data-transfer and network usage for them.
  • Businesses don’t care if we use 128-bit or 256-bit encryption. They trust us to take care of their digital security. There is a huge onus on us!
  • Customer support is extremely important. It doesn’t matter what your contract or SLA says – they need to speak to someone who can answer their questions, anytime of the day.
  • What is obvious to engineers need not be obvious to users. Understanding customers’ psyche and working pattern is important. We ran usability sessions to make our product features easier to use.
  • Customers found use cases for our product. We would have never thought about it!

Indian SME customers are known to be averse to embracing cloud-based solutions. They also harbor doubts about security of any offering, which is outside their organization. How have you dealt with these perceptions? 

It is true that a large section of this segment is currently skeptical about working with something that is outside their physical organizational boundaries. However, I see that there is a rapid reversal of this tendency. This has primarily been due to the adoption of cloud by some early movers in the same clusters. As the fence sitting potential customer listens and understands the value and the precautions taken to safeguard the privacy and security of their data through another colleague who has embraced our solution – the acceptance levels increase.

Our offering actually provides more security to business – since its architecture was built keeping the retail consumers in mind. When you think of devising a solution that any end user could use, naturally you would place more emphasis on the access privileges, backup options, and data storage and synchronization aspects.   Most of our customers are via referrals from other customers and it has become easier. For extremely paranoid customers or where there are specific requirements, we also offer on-premise installation of our server.

How helpful has the channels route been to work with your customers?

Working with channel partners is a new experience. If you can ensure that entry barriers to use your offering are minimal – such that value can be shown in minutes, and if the post deployment maintenance is negligible – both these factors form a very compelling value proposition for any channel partner to sell your offering.  

We are also looking for new channel partners for expanding our product reach.

I notice that you have leading industry veterans as your mentors. Can you describe how having them on board has benefited you?

They have been of invaluable source of strength, inspiration and support. Nagendra Satyan has tremendous experience in growing enterprises and has done it successfully across many companies including EMC2 India. Anand Prahlad is currently MD of McAfee India and has experience of taking a startup to an IPO in US. Startup is like a maze and it is very helpful to have people who have done it before. It is necessary to bounce ideas off somebody. They have played a crucial part in multiple aspects – from refining the product, helping in acquiring pilot customers, industry connect, and so on.

I would recommend that all budding entrepreneurs, specially the first time entrepreneurs to have experienced mentors on board.

What are the three takeaways that you would provide for your fellow product entrepreneurs operating out of India? 

First, get your family’s buy-in prior to venturing into product development space, especially when you operate out of India.  Running a startup is like having a kid. There are no off-days or even off-hours. Everything else will take a back seat. Startups are not easy and are NOT for everyone.

Be very passionate about the idea. Startups do not succeed over-night. There will be too many distractions that will come your way and there will be times where it will be easier to give up and get back to work with an MNC. It takes passion to keep going.

Finally, like I stated earlier, get advisors and mentors early on. They will act as a rudder to your ship and will help you navigate the ship in case you land in chopping waters.

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Where is Dropbox headed?

Having started in September 2008, Dropbox today is a leading cloud storage provider (CSP). It has over a 100 million signed free users and about 4 million paid users (4% conversion rate as quoted often by Houston). Assuming the lowest payment tier (100GB at $99 per year), this translates into annual revenue of about $400 million. Based on Amazon S3 costing and estimates of Dropbox employee costs, the EBITDA works out to $250 million. Its costs are always going down and its revenues are always going up. The company is valued at $ 4 billion. Dropbox is making money hand over fist. Right? But consider this –

It now has more than ten competitors several with deep pockets e.g., Amazon CloudDrive, Apple iCloud, Google GoogleDrive, Microsoft Skydrive, Box, Spideroak, Ubuntu One, MediaFire, Mega.  Its other competitors, purely in enterprise space include HP Cloud Objects, Rackspace etc.

Dropbox offers the smallest free quota – 2GB plus referral bonus. All its competitors offer 5GB or more (Skydrive -7GB, MediaFire and Mega – 50 GB).

Dropbox pricing is probably the highest ($99 for 100GB). For same capacity, competitor prices are much lower –CloudDrive ($50), GoogleDrive ($60), Skydrive ($50). Box ($480), iCloud ($160). Spideroak ($100) have a higher pricing but have more powerful features (see below).

Dropbox is merely a folder service. Its competitors have other value-adds and lock-in mechanisms. For example, iCloud allows streaming of music, apps, books, and TV shows you purchase from the iTunes store, Google and Microsoft have GoogleDocs and Office WebApps respectively. Documents created through these apps do not count towards the drive quota. Box is designed more as a business-collaboration and work-flow solution that a CSP. SpiderOak is the only service that offers data encryption before your data hits their servers. Perhaps, acquisition of AudioGalaxy should enable Dropbox with music streaming feature.

The  giants like Apple, Google, Amazon and Microsoft see storage as a way to lure customers into their respective cloud and then “upsell” them on higher-level and more profitable services that they have in the portfolio. They have been aggressive in launching or responding to price cuts from competitors. Dropbox cannot win against these Goliaths in the theatre of feature and price wars.

The Dropbox differentiator was the near seamless experience backing up and syncing files to cloud on multiple platforms. That differentiator is rapidly evaporating with the competitors catching up. Moreover, what happens if all your files are already in the cloud for example music (iCloud, Spotify), Documents (GoogleDocs, Office 365), Pictures (Instagram) and so on. There are umpteen such scenarios that make Dropbox redundant.

I am sure Dropbox product managers are having sleepless nights. Do you have a product strategy and roadmap for Dropbox’s future?

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Lessons on Pricing for Product Startups – Consumer and Enterprise!

Since the time Philip Kotler wrote his valuable tome on Marketing, technology has evolved so much that new pricing models like Freemium pricing are possible for both Consumer-oriented and Enterprise-oriented product startups. In addition, Free Trial pricing models and conversion to paid ones are common in both. In a price-conscious society like India, pricing can mean all the difference between a successful company and one that is not!

What have been some valuable lessons learned by companies in the recent past using all of these pricing models? If you were a product startup, what would be some of the pitfalls to watch out for?

Main lessons from using a Freemium Pricing Model for Consumer Internet Businesses

First, here are a few YouTube videos of Drew Houston presenting DropBox’s use of Freemium pricing with consumers, the lessons they have learned, and the pitfalls they encountered.

  • Use of SEO for lining up free users is very expensive
  • Affiliate Marketing is also expensive and does not work very well
  • Make sure that there are enough Paid Users that can support Free Users and you can still make money! Make sure that the Long Term Value (LTV) of Paid Users > Customer Acquisition Costs (CAC) of all users. Otherwise, the more users you line up, the more you lose!
  • Build as many tools that help your free and paid users do viral and word of mouth marketing for you as you are building features!
  • Once you have given something for free, it is very difficult to take it back! But it can be done, as the videos show!

Drew Houston : Freemium for Consumer Internet Businesses, Part 1

Drew Houston: Freemium for Consumer Internet Businesses, Part 2

Drew Houston: Freemium for Consumer Internet Businesses, Part 3

Main lessons from using a Freemium Pricing Model for Enterrprise Businesses

First here are a couple of YouTube videos of Aaron Levie presenting Box.Net’s use of Freemium pricing with an enterprise product, the lessons they have learned, and the pitfalls they encountered. Their product is an enterprise collaborative portal that competes with Microsoft Sharepoint Portal but is hosted by Box.Net.

  • Tomorrow’s Enterprise decisions are made by today’s free users. So keep them happy! They are your marketers inside the company.
  • Sell enterprise freemium models to end users, not IT.
  • Unlike other models, Inside Sales will be taking calls from already existing free users – no need to prospect them. They come already qualified!
  • Conversion is key and is harder in enterprise freemium. This is purely because of the sheer larger numbers in the consumer space as compared to enterprises.
  • Understanding the difference between a “Free Trial” customer and a “Freemium” customer! Freemium customers stay on long after Free Trial customers are gone because their trial period ran out!

Aaron Levie: Freemium and the Enterprise, Part 1

Aaron Levie: Freemium and the Enterprise, Part 2

Dumb Pricing Mistakes

Here is an interesting video on dumb mistakes that people make in pricing, especially multiple tiers with different sets of features. And how to fix them!

Pricing Strategies: The dumb pricing mistake people make (and how to fix it)

Price is what you pay. Value is what you get – Warren Buffett

 

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Destination Vs. Distribution: Why your Product should be where your users are!

User acquisition is a prerequisite to startup success. Startups often see user acquisition as an act of sourcing traffic to a destination and converting traffic to users.

Almost every web business has a destination: a website, an app etc. The destination is often seen as the product in its entirety. Talk to a startup about their product and they will often think of it as a website or an app that the user goes to.

However, the destination is just one manifestation of the product.

DESTINATION VS. DISTRIBUTION

An internet service can be delivered to users in two broad ways. It’s often important to think through both the routes to figure out how your user will best interact with your service. The two modes are characterized as follows:

Destination: How do the users get to where the product is?

Distribution: How does the product get to where the users are?

Any service can be delivered as a combination of these two.

DESTINATIONS

What are they? 

Destinations are the online address of the product that users remember and visit.

Manifestations?

Most common forms of destinations are websites, mobile apps and downloaded software (that syncs with the cloud).

Important because…

This is the go-to place for users to interact with the product. Whenever you think of Facebook, you have a site or an app to go to to use the product.

But…

  • Destinations are not always available in the context of the users. For example, Flickr is a great photo hosting service but it wasn’t available at the point of photo capture for a long time. A user had to click a picture and then undertake another series of actions to upload the picture on to Flickr.com. In contrast, Instagram’s service could be accessed right at the time of photo capture.
  • Destinations, by definition, require users to come to where the product is and this brings with it the challenge of user acquisition.

DISTRIBUTION

What are they? 

Distribution delivers product functionalities in the context of the user making it easy for the user to interact with the product.

Manifestations?

Most common forms of distribution include widgets (Yelp), code embeds (Quora, YouTube), API provisioning , browser extensions as well as apps (especially apps that deliver you a feed from a product, for consumption).

Important because…

  • The product is available where the users are. Hence, it helps direct traffic back to the destination. Yelp used widgets very effectively to gain users by allowing users to showcase widgets on their blog. YouTube gained traction by allowing users to embed videos on their MySpace profile and directing traffic back to the destination. Flickr, similarly, gained traction by allowing users to embed pictures in their blog posts.
  • The product is available in the context of the user. This is especially true in the case of ‘curation as creation’ tools like ScoopIt. ScoopIt allows anyone to create a magazine by combining a set of links. The creator can either create the magazine by visiting the ScoopIt destination and manually adding all the links to the magazine or she can install a browser extension that plucks the web page she is visiting and adds it to the magazine. In the second case, the user never needs to leave her context to use the product. Evernote uses a similar extension. Social sharing buttons work on a similar dynamic and allow the user to share content without having to visit the actual social media destination.
  • Distribution helps engage the user and encourage repeat visits. Email updates have been used since the early days of the web to bring back users to the destination. In recent times, this tactic worked especially well for Groupon.

But…

More often than not, distribution is limited to certain functionalities. A news feed delivered to the user or a browser extension to capture a web page exhibit only a slice of the functionality that the product offers. However, that is the exact slice of functionality that is needed in the context of the user.

THE OVERLAP

Ultimately, destination and distribution are determined not by their physical manifestations (although that helps understand the difference) but by the use case.

Destination requires the user to move into the context of the product. Distribution enables the user to use the product in his active context.

While the two are different, there is an overlap between the two as well. For example, the Instagram app acts as a destination in consumption mode where a user can view photos and participate in discussions but it also fits into the context of the user (using the phone as a camera) in production mode. An offline downloaded software (e.g. Dropbox, Evernote)  that syncs with the cloud serves as a destination (user specifically opens a software and uses the product within that context) as well as distribution (the native context of the product is geared towards online usage but the offline piece fits into the user context who might not have access to the internet at that point.

As shown by these examples, the manifestations overlap but the use cases are different. Hence, it is important to think through possible use cases and identify usage contexts where a destination makes more sense than distribution or vice versa.

In summary, when planning an internet product, it is important to consider the mix of Distribution and Destination that it requires:

  1. List out the use cases. How will the user use it in production mode? How will she use it in consumption mode? It helps to separate the production and consumption modes because user contexts are very different in the two modes.
  2. Are any of the use cases best satisfied in the existing context of the user?
  3. For every action, are you making the user do extra work by coming to a destination?
  4. Can Distribution direct traffic to Destination?

Often, distribution can be the difference between a product that is convenient and engaging and a product that is difficult to use.

How have you split your product across distribution and destination? If you haven’t do you feel some distribution touch points could help improve product usage?

The post first appeared on platformed.info
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And You thought Friday was just a Day of the Week…

What happens when six engineers with cushy corporate jobs decide to invest? And that too in a Whiteboard and an imported Smartphone. Yes, they grow up into mobile entrepreneurs creating android apps that millions the World over love. If you are reading this on an Android device, quickly search for “Friday” on the Play Store.

Today, we hear their story in an interview with the Chief Executive of Dexetra – Narayan Babu.

ProductNation: Welcome to Product Nation. We are really looking forward to hear your story. So please share all the excitement and emotion that you have gone through in your journey as a product entrepreneur.
Narayan: I was mentored by my Dad. My father used to be a CDAC Scientist (it was called ER&DCI then) and a member of the team that created Param – The First Supercomputer from India. So, Binary and Boolean Logic all came to me at an early age.

When I came into college after school, I realized that I could do technical stuff well. I could code and program, but I had no people skills for a startup. But I always wanted to do a startup like my father. So this startup was always playing at the back of my mind. While at college, I did create a portfolio of websites and apps (they were called applications then) but never made money as I hesitated to ask.

After college, I joined Bosch as an engineer. Bosch had an amazing culture and it gave me a nice view of the Corporate World. But it is a great place for the 9 to 6 crowd. The only problem – I did not find the work challenging enough. In three years at Bosch, I also found a good team. And it dawned on us that we better do something before growing old. So I pulled in two hackers from my college and two others from Bosch.

At that point in time, there was no idea. But we were all excited about doing a startup. So we began thinking, what to do?

Luckily, at that time Android was just announced. Incidentally, I was working on the WinCE and few other mobile platforms at Bosch. The platform was unwieldy and so I began experimenting with Android. The Android interface and features were just fascinating. At that time, Google conducted the android app developer contest and giving away US $ 100,000 as prize. We could not participate in the first edition, but it was a fascinating entry into the world of apps. We saw very simple apps being awarded US $ 50k and US $ 100k. We found it pretty cool and thought that we should do something around Smartphones.

Our first investment was in a Whiteboard, to brainstorm what all could be done on a smartphone. So, we listed down all the features of the smartphone and we realized that there were 7 – 8 data point sensors on a smartphone compared to almost no features in a desktop computer. And then in an “Aha” moment we thought we could do something using all those sensors – A diary of one’s life maybe. We really went crazy with the possibilities. Crazy because at that moment neither we had any smartphone nor there was any android phone available in the market.

Coming back to our senses, we decided to create a basic version and participate in the next Google App Developer contest. We only had a month and we were able to put together a crude version of it, and eventually we didn’t submit our app. When the winners were announced, we saw that most of the apps were very basic and not as grand as what we were thinking. This made us think if our idea was too grandiose. But, we worked on it and after two months of effort, we felt that we could pull it off.

ProductNation: What was the name you gave to this initial app?

Narayan: First, we called it Chrone (for chronology) and then owing to the confusion with the Google product, we called it “Instinct”.

ProductNation: Ok. Please continue
Narayan: So, it was end of 2009 and we got our first android phone. It was an HTC phone with a 3.5 inch screen – a rare feature then. We ordered it from the US and specially took leave from office to receive the courier. And when tried running our app on it, it crashed. That is when we realized that emulator and the phone were different. So we had to work on the app, again.

Meanwhile, the android app marketplace had reached thousand apps or so. We decided to try something simpler. An android game which was a cross between pacman and Mario. We called it tintumon. And we launched that game. The app became popular, got 10,000 download and qualified for the Google Nexus One phone prize. It went on to do about 60,000 downloads. This was a big morale booster. That was when we started thinking about leaving our jobs and doing this full time. I had support from home and my other team members though concerned were way too excited about starting up.

This is when things got serious and we got our 6th founder. I reached out to one of our college mate who had done his MS and asked him to help us raise some money so that we could move into a place and leave our jobs. Basically he was the business guy we wanted in our tech team. He spoke about the app to a number of people and then finally an Investor who used to do only investments in rubber estates got really excited about it and put twenty lakhs into the business. So we quit our jobs and started Dexetra in April, 2010.

For a couple of months, we played around with all the mobile platforms – iOS, Blackberry, Android. We used to make apps, sell them for Free and also some for paid. One of our iOS games apps became the top 50 paid app in the App store. It was exciting. But it was time to focus on the main idea – Friday.

In the end of 2010, we shut down everything else and just focused on Friday. In two months we released the Alpha version and the users loved it. It was like SIRI but almost a year before SIRI. We got covered by Techcrunch and it was good fun speaking to all who covered us.

In this version, all the data was being collected locally on the phone. So the next step was to move all this data to the cloud. And we started working on the Friday cloud part. Quickly we realized that we had to build for scale. Since, we had been in a startup mode for close to a year, we understood issues of scale. So we consumed lot of information on scalable architecture to put it all together.

This was the time we met Vijay (Founder – One97). He instantly liked the cloud first version and the next day he signed the term sheet and put in a crore of rupees. This way we could recruit a couple of more guys into the team. Around this moment, the product was a little more than fifty percent ready. But in cases like this it is the last 20% that really takes the time.

ProductNation: Was that time when the Apple SIRI came by? Tell us about it and the eight hour SIRI bet.
Narayan: Yes. It was October 2012 when Apple launched SIRI. The World was touting it as the next big thing. We were irritated as we had been trying to put something together since 2009. And SIRI was not even close to what we had planned for Friday. But yes, conceptually similar.
Internally, we took up a bet to create an app exactly like SIRI in 8 hours flat. We managed a version and called it IRIS. It wasn’t for the public marketplace, but a tweet was picked up and it went viral. So we released it into the public marketplace. It got a million downloads in the first month, two million the next. Then, Micromax Aisha also leveraged IRIS.

IRIS becoming a sort of distraction and it was becoming hard to manage two entities. After spending a couple of man months, the team gathered itself and decided to focus most of its efforts into Friday. And it made good sense since we were just ten people then.

ProductNation: What prompted your team not to pursue IRIS?
Narayan:  One, we were occupied with Friday. Second, for IRIS to scale, it needed a strong content pipeline. This would have entailed partnering with a number of content providers. All this meant a different set of skill sets. That doesn’t mean we gave up on iris, just that we put most of our tech energy behind Friday.

ProductNation: So, you guys got back to Friday.
Narayan: Yes. February 2012 end, we launched Friday beta on a closed basis. After four months of improvisation based on user feedback, we released it into the Android marketplace in July, 2012. Friday sees about 100 million documents in the cloud with a 30% daily user engagement.

ProductNation: What should we expect from Friday, going forward?
Narayan: We are focusing on making smartphones intelligent. We are making efforts to put context into smartphones with powerful software. e.g. your smartphone instead of showing “recently dialed numbers” should prompt you with the names of people depending on the context of location or time.

Those are the things we are working on. Plus we are working on building the UX as well. You would soon see a major new release on Friday.

ProductNation: Are you doing the UX internally?
Narayan: I am doing it myself, internally. It is challenging to get external UX guys working on a consistent basis. And UX needs sharp focus. And it has been painful to source UX guys. I have tried freelancers and outsourcing it to experts overseas. The problem of getting UX done outside the team, is to really get the job done. The creative guys are a different set altogether and they have a challenge adhering to timelines. Also, the external guys are not able to experience first-hand what is happening with the product. So, you need a UX person internally who can feel what’s happening.

ProductNation: Narayan, why the name Friday? Do you guys take off that day, is it?
Narayan: We wanted a simple one word name. We started with Chrone that came too close to Google Chrome. We tried Instinct. Then we hit upon Friday. It sounded crazy, it sounded bizarre, so it sounded good. ‘Friday’ sounded happy and it went well with the established meaning of “Man Friday”. And above all, it was easy to remember unlike the names of other apps, which you struggle to recollect at the right time.

ProductNation: What has been your learning’s during this journey? What would you like to share with an entrepreneur?
Narayan: We went all in. There was no plan B. We went all in with one plan. Many people ask us quizzically that you spent two years just building an app. But we did that and survived well too. It just makes sense to sell out to one meaningful idea.

I like the quote by Drew Houston, the founder of Dropbox – “It is better to fail than building a mediocre product”.

ProductNation: Before we let you go, would you like to share the complexity of your six-member founding team?
Narayan: Yeah. Investors used to express shock on the size of our founding team. Fortunately, inspite of having different backgrounds and personalities, all of us were excited about the startup. We do have differences but is mostly around the product. And most powerful bonding force is that all differences apart, we all want to build something really praiseworthy. This single thought ties all our efforts together.

ProductNation: Narayan, thank you for talking to Product Nation.
We wish the entire Dexetra team many more million downloads soon.

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The Product Business is Like the Movie Business

I read the cover story in Forbes on the success of Dropbox, which is set to do about $240 million in sales in 2011, with only 70 employees. As Forbes points out, that is about 3x the revenue per employee of Google, which is no slouch in the revenue per employee department itself. First, congratulations, Dropbox! This is the type of breathtaking number that makes the ordinarily successful companies like, well, Zoho, to wonder “What are we doing wrong?”

In our 15 year history in Zoho Corporation – which is bigger than the Zoho product suite itself – we have shipped over 70 products, of which we would say about 30 have been successful in the sense of being nicely profitable. Yet, even with that group of 30 products, we have seen the 10x effect: a set of two products that have taken approximately the same amount of effort to build, by similarly situated teams, yet one of them does 10x the sales of the other, with both of them being profitable. Of course the 10-bagger is much more profitable but the key point is that both of them could be counted as successful in the sense of being profitable. We have even seen 100x difference for approximately the same effort, but in our case, that is the difference between doing only $100K a year in sales vs $10 million a year, and I would not count that as 100x because the $100K product either grows up or we would eventually discontinue it because it is not profitable.

Dropbox is a logical extension of this phenomenon, where a product does 100x the sales, without taking much more by way of engineering effort than a profitable 1x product. And then the grand daddy of them all – Google search, which in its heyday reached $1 billion in sales, on not much more than the effort of a single engineering team – the headcount gets added later to diversify the company but the original search was a small team. I believe there has only been one Google search so far, so the ordinarily successful (ahem!) shouldn’t feel too bad.

Y Combinator, which has funded over 300 companies so far, is a perfect illustration. All these teams are similarly situated, with similar founder profiles and they all get similar initial funding, and they spend similar initial effort. If we consider only the universe of profitable YC companies, my guess is that so far there is only one 100-bagger i.e Dropbox, in the YC portfolio. Based on Zoho experience, I would estimate YC has about ten 10-baggers, and about fifty one-baggers (i.e just about profitable).

Welcome to the product business, which looks very much like the movie business!