That ideas are worth nothing without good execution is well demonstrated from this true story from way back in 2005. In a span of a few months, I independently came across the same compelling idea thrice.
The first time was while visiting the Bay Area, when I met my friend Sorav (now professor of computer science at IIT Delhi) at Stanford. Sorav and his buddies at Stanford had a kind of a startup club which met weekly to discuss new prospective business ideas. The week I was there, I got invited to that meeting. The idea that got discussed was of to develop a group messaging sms service. It was supposed to be like the yahoo groups of mobile phones so you could send out an sms and it would reach all your friends who could continue a group conversation using SMS. The idea excited everybody and I think we even continued to discuss it when I got back to India. But that was the end of it.
I heard something similar a second time when I met Saad around mid-2005. Saad and I had connected with each other via our blogs and decided to catch up and brainstorm ideas (in those days, Saad actually used to carry around a brainstorming kit, don’t know if he still has it!). Anyway, the idea was to see what we could do together. Saad mentioned that it would be cool if there was a way to share stuff in real time with rest of the world using the mobile phone. The specific example that Saad gave was, to quote him loosely, “Imagine if I could take a photograph of this room with my phone, and send out a message saying where I was, with whom and what we were doing”. It was supposed to be like a real time blog. The scenarios we discussed were sporting events or other situations where it would be cool or useful to be able to let the world know where we were and what we were doing. Both of us thought it was a really neat idea but nothing came out of it.
The third time I heard something similar was from Alok. We were discussing social networks and Alok mentioned that he felt that a mobile based social network would have lot of potential. After all, everybody’s social graph already exists in their phone book and leveraging that an interesting social networking concept could be developed. Once more, the idea sounded appealing but nothing came out of it.
Note that none of the three situations above were just drawing room conversations. I was in the business of building web based software and actively scouting for ideas. Technically, we could have actually accomplished what we had discussed and in fact a team already existed that could have executed any of these ideas. And of course, this was much before twitter came in to existence or became popular. All the three ideas above were similar to what twitter enabled eventually. The fact that I alone came across this idea thrice in that short span of time just shows that hundreds of people must have gone through a similar thought process at that time. It was obvious that mobile based social interactions were the next big thing. And yet, only one twitter emerged out of it.
So, the moral of the story is that if we could get a penny for our ideas, we would all be millionaires! We often give too much importance or credit for a good idea. But the real test lies in executing an idea, taking it to the market, refining it and building it into a success.
Oh, by the way, did I tell you that youtube was also my idea?
Let me explain the worst kind of business you can get in to. I have been through some not-so-perfect business models myself so I can say I have some insight in to this topic. There are three factors that typically describe a business:
1. How much does it cost for me to sign up a customer (cost of customer acquisition)?
2. How much does this customer pay for my products/services (pricing)?
3. How much will it cost to service this customer ?
Looking at the three factors above, its easy to figure out what would be the worst type of business model. It would be a business where signing up a new customer takes lot of time and money, the customer pays little for the services offered and finally it takes a really long time (and money) to actually service the customer.
Now this might look obvious, but it is worth mentioning because most companies actually fall in to this model doing business. This happens as we often look at the above three factors in isolation. The mindset in a startup is that “we need customers at any cost and we got to keep them happy because then they will give repeat business and also refer us to other prospects eventually leading to profitability and success”. In theory, it is practical. In practice, it is often not so simple!
Most companies start out by offering competitive pricing on their products. This is the easiest way to sell because pricing is a quantitative measure and all other things being equal (or too difficult to judge on), customers will choose the cheapest. At this point, two things can happen – your product has no takers even at a lower price point which is the end of story right there, or you end up signing customers and actually generate revenue. If the latter happens, then you have at your hands the task of servicing these customers but within limited resources since you are selling cheap. Now, again two things can happen – either you screw up on delivering to these customers which is the end of story right there, or you do manage to service them albeit with a lower margin. The side effect of having started selling at a lower price point is that you can never increase your pricing (worst, you even got your competitors to bring their pricing down!). So now you have a real business which has products, customers, revenues and possibly even profits. The profits are likely small in quantum because the margin per customer is low. So to become a big business, you need lots of customers, or in other words, you need to scale up. Now once more, two things can happen – either you will not manage to sign up large number of customers because your pricing was so low that it left no room for investing in to growth, in which case congratulations, you just ended up with the worst type of business model OR you might actually manage to sign up a huge number of customers. If the latter happens, you would be facing the final test – does your product or service scale up along with the growing customer base? Now, for the last time, two things can happen – your product doesn’t scale up and you end up with unhappy customers forcing you to further lower your pricing leading to ending up with the worst type of business model OR your product does indeed scale up and you end up with lots and lots of happy customers and the best type of business model!
The moral of the story is that it takes only one step in the wrong direction to start with an excellent business plan and end up with the worst kind of business model. From my own lessons, I think we must answer these three fundamental questions before venturing in to any new business:
1. Will the cost of acquiring a new customer increase, decrease or stay the same as our customer base grows?
2. Will the cost of servicing a customer decrease as the number of customers increase?
3. Will there be enough number of potential customers out there to enable us to achieve scale (should the above two questions have favorable answers)?
Five years ago, when I was a newbie entrepreneur (and in mid-20s as against in early 30s!), I thrived in “being busy”. Late nights in office used to be a benchmark of how well we must be doing as a company. I think I might have even sneered at some of the more wisened business owner friends who actually went home by 7 and didn’t shy away from delegating work. But for the cowboy entrepreneur inside me, “delegating” was a four letter word. “Those who can do, those who can’t delegate”, went the saying.
Well, five years down the road, I have a lot more grey hair and I hope a little more insight. Between all our businesses, there are over 300 people. We operate in two geographies (Middle-east being the the other one) and work on a very diverse set of technologies (travel technology, web 2.0, publishing workflows, mobile applications, .NET, php etc). I guess TBO doesn’t even qualify as a startup anymore!
That sounds exciting, and it is! So where is the problem? Well, my problem is that I have no time to think. As our businesses have grown, I have ended up with so much operational clutter on my desk, that each day is a constant battle against time. On any given day, I get over 300 genuine emails (over 2500 notification and system alert emails excluded) which require almost immediate response. I run out the battery on my blackberry with out fail by 6 PM. I go and up down approximately 600 stairs during the day (the only exercise I get, by the way). I clock about 200 KM of travel for meetings (excluding home to office and back) within the city in a week. I travel domestically about once a month and internationally about once in 45 days.
So, when I say I have no time to think, I mean it very literally. All my working hours go in reacting to email, answering the phone, handling crises, meeting customers and managing employees. All of this is important work and in a way this is what has contributed to our growth and success so far. But over the last few months I have realized that genuine innovation or groundbreaking stuff can not happen if the promoters of the company are just heads down in work all the time. I have been fortunate to have closely observed a few very successful and experienced entrepreneurs. All of them have a common trait – they have time! It sounds counter-intuitive but the fact is that these people have plenty of open slots on their calendar. They actually spend this time thinking, reading, observing and meeting new people. I am quite sure this is in fact the reason that they have been so successful in their businesses!
Time management is perhaps the most important factor building a successful enterprise. It is essential for leaders in a company to be able to set aside time to just stop, observe and see where the company is heading. Strategic decisions can be made only when day to day distractions are taken away. While I have realized this fact, I am still grappling with how to get out of the rut. Any thoughts or suggestions on how you manage your time would be most welcome!
TiEcon Delhi 2008 scheduled from October 22nd -24th is shaping up to be one of the most exciting events on the TiE Delhi calendar both in terms of scale ‘of the event and the rare opportunity to hear, interact and connect with industry leaders, entrepreneurs, investors, policy makers and academia.
TiECon is the one conference that I attend every year. I have had a very good time networking at TiE events and conferences. This is one conference which has a fairly equal mix of highly respected industry veterans, established VCs and new and wannabe entrepreneurs. I have made associations at TiECon which have lasted ever since and also generated business. So this is a must-attend conference for anybody in Delhi who is serious about entrepreneurship.
More information available at http://www.tiecondelhi2008.org. Hope to see you there!
Writing a book has been on my “TO-DO” list for several years. Perhaps because I am myself an avid reader, I have immense fascination with books and what goes in to writing them. My guess is that it takes lot of patience, perseverance and planning to write a decent book! I recently read the 700 page long “India after Gandhi” and it left me in complete awe of the author Ram Chandra Guha!
I have probably written a book’s worth of content in this blog itself. Yet, I have always considered writing an actual “book” as something different from just writing a bunch of disconnected articles. There has always been an inertia in my mind whenever I have contemplated writing an actual book. This inertia inevitable overpowers the desire to write!
However, just a few days back, I had a sudden realization – writing a book and getting it published are two distinct activities. In fact, simply writing a book has no entry barriers – nobody can stop you from doing that. Of course, getting it published is a different ball game. For that, you need to have credentials, good writing capabilities and at least one publisher who feels he can make money publishing your book. You also need to worry about cover design, promotions etc. But writing a book is just that – writing and nothing more.
So, I have decided that I shall write. Since I have already written a lot about entrepreneurship on this blog, my topic of choice would remain that. I don’t know how far I will go in the process, but I will be happy if I can churn out a couple of hundred pages over the next 6-8 months!
If you have written a book before, then I will be grateful if I can get some tips from you. If you would like to help me by reviewing drafts, then please do let me know. I can be contacted at gauravbhatnagar at gmail dot com.
Good news for all the food lovers in Delhi! Palak has recently launched her first internet venture – Cuisine Check.
Cuisine Check is a website dedicated to listing and reviewing food and entertainment options across all major Indian cities. Starting with Delhi/NCR, the website will allow the users to search and find several thousand restaurants, night clubs, bars, chaat stalls and caterers. The site features menus, photos, budgets for most big and small restaurants in the city. You can also look for the upcoming events happening around Delhi and NCR.
The idea came about from our own inability to find good eating out options in Delhi. Even though there are thousands of restaurants and night clubs in Delhi, there is no central place to go and find more information about them. Most of us end up depending on word of mouth recommendations of our friends. The hope is that Cuisine Check will solve this problem and will become an authoritative source of information on anything and everything related to food, eating out and entertainment.
You might notice that the site seems to be a mix of web 1.0 and web 2.0. So while there is use of UGC through user reviews and ratings, some other things like AJAX or web 2.0-ish UIs are missing. The idea was to keep the site functional and simple to use. Focus has been on providing an efficient search – hence the city has been divided in to several regions and localities to ensure granularity in search results.
Do check out www.cuisinecheck.in and send back your comments and feedback.
The current global financial crisis is our generation’s first brush with “reality”. Growing up in 90s, we read, heard and saw the great Indian dream coming true. We saw the cable TV revolution happen in front of our eyes. We stood in long queues to buy our first Mc-burgers and we ordered our first pizzas on the phone. We saw our elders jubliantly discuss the stock market which could only go in one direction – up! We read in newspapers about the fat pay checks the new “MNCs” were offering to kids fresh out of college. While ourselves in college, we learnt about this place called “Silicon Valley” which was apparently dominated by the Indians and “every third company there was started by an Indian”. Yes there was minor blip of a “dot com bubble” but we quickly forgot about it as we ourselves joined the hordes of young educated Indians who were going to shape the future of the country.
Life was good. In contrast to the socialist 60s, 70s and 80s, 90s and the current decade were all about capitalism. Capitalism brought with itself growth, oppurtunities and wealth. In terms of making money, the new generation started where their parents used to retire. So, in the context of all this, the current financial crisis and the breakdown of large captialistic economies can only leave the likes of myself confused and bewildered.
But having said that, I feel almost thankful that this crisis happened when it did. As the first generation that grew up wearing rose colored glasses, we are still young and nimble to adapt ourselves. Had the utopia of past 15 years lasted another 10 years, a lot of us might have found ourselves too entrenched to dig ourselves out. Secondly, the shake up of the financial world is likely to create a recession like environment for at least the next couple of years. This will be a great time to build new companies. This will be an excellent time to identify and recruit top notch talent at reasonable costs. While raising capital for new ventures will certainly be hard, it might actually get easier to raise money for existing businesses that are relatively safe and established.
Personally, now more than ever, I feel thankful that Tekriti is a cash flow positive business. Our choice of starting with a core services business was, in retrospect, very much correct. Our conscious decision to focus more on domestic business should help us in these times. For companies that are cash flow negative and will need to raise money to survive, things are going to be very hard. This turn of events is completely unexpected and almost no business could have foreseen it or be prepared for it. So, as all of us gear up for the things to come, I only hope that this down turn will not dampen the entrepreneurial spirit that has just started to grow in our country!
If Tech2 is to be believed, then my plans of retiring my good old N70 might have to be shelved. I have been waiting for the iPhone to launch in India for a while now but at at a reported price of Rs. 31,000 it is simply not worth it. I find it hard to believe that a product that sells for $200 in the US (with a phone plan) would cost 4 times more over here. If that indeed turns out to be true, then shame of Airtel and Vodafone for not coming up with a better price plan. I am pretty sure that the device will come with a service provider lock in. In the US and elsewhere, service providers usually give steep discounts on the price of the device in such situations because it effectively binds the customer to them for a long period of time. However, it looks like that the Indian service providers want to have their cake and eat it too!
It is conventional wisdom that bigger companies move slowly compared to smaller ones. Often, large successful companies completely miss out on an upcoming industry trend or opportunity. Consider the example of Microsoft in the mid-90s. For a while, they totally didn’t see the internet coming and it took Bill Gates himself to shake up the company and change course mid way. Similarly, when Google came out with its search engine, there were larger players already in that space. Obviously, by definition, big companies have the resources to put behind a new idea. They commission tons of market research so it is also not possible that they don’t know about the upcoming trends. They definitely have the money to hire the best and the brightest. So why is that many times we see a small little startup cause a disruption which in all likelihood should have come from the big industry leader who has been in that business for decades?
Busy protecting old turf
I think there are several reasons why this phenomenon happens. The first and foremost reason being that success is a very limiting thing. Most big companies grew big because they knew how to do one or two things very well and created a cash cow which sustained rapid growth. But having grown from the position of an upcoming challenger to the position of dominance, they now themselves had a turf to defend from even newer entrants. So as a company grows big, it spends more and more time in defending what it already has rather than building something new. Microsoft has fought hardest to fend off the threat from Linux or Open Office because Windows and Office are their two cash cows which they can’t afford to lose. Similarly, Google spends bulk of its efforts behind its contextual ads system. Closer home, Infosys works hard to continually improve its existing services business rather than venturing out in building packaged products. So, when a company wins in one game, it is forced to constantly continue to win against new challengers. It simply cannot afford to lose its position of dominance – even if it means not trying hard enough to win another battle elsewhere!
Short term focus – living quarter to quarter
Many large companies are publicly listed. Public listing is a great way to raise money for the business and provide liquidity to share holders. However, it also means that a company’s performance is monitored on a quarterly basis. Public companies must provide guidance on what results they hope to achieve in the next quarter. And if they miss their targets, it affects their stock price. Any piece of slightly negative news about the company can cause the stock price to fall. In such circumstances, it is natural that for publicly listed companies, a large amount of energy and effort goes in meeting quarterly targets and keeping the stock price healthy. In such circumstances, focusing on new opportunities which much might not yield any (or worse negative) results in the short to mid term is hard. This of course leaves the door open for smaller companies to come in and take the lead in a smaller niche within a big segment.
Lack of entrepreneurial drive
One might argue that even if it is true that large companies are busy defending what they already have and focused on short term targets, most of them still have enough resources to dedicate to new projects as well. In fact, they do often deploy several times more money and people on new ventures than what their startup challengers can. Starting a new greenfield project even within a big company is very much like doing a startup (albeit, a well funded one). And success of most startup ventures depends on the capabilities of the founders. When an entrepreneur is running a startup independently, she is likely to be really passionate about what she is doing and would have a very deep understanding of that space. In all probability, she must have given lot of thought to the venture before jumping in to it. Consider, on the other hand, how a new project would get staffed in a big company. The mandate for go or no-go on a new project would likely come from the top management or the board. Next, with a budget allocated to the project, the hiring exercise would begin. In such situations, often a successful manager from another part of company is deputed to lead the new effort. Or a key exec from a competitor might be pulled in. In either case, basically a job opening – likely with a fat pay check – is filled in. It’s not hard to see that the entrepreneur stands a fair chance against the big company in such situations. The entrepreneur has everything at stake as compared to a business head in a big company who could always move on to the next job. The entrepreneur is also doing what she is doing out of passion and genuinely belief in the opportunity as against the big company guy who might have been influenced by extraneous factors like pay package or company brand name.
I have made some obvious generalizations here. There are many large companies which are nimble and continue to succeed in many diverse territories. But no company every succeeded in everything that they did and smaller companies will always continue to challenge larger players. So if you have held back on implementing your ideas only because “a Google could also do it”, its time to give it another thought!
One of newer fads of our times seems to be starting a company! I say “fad” because its happening so much and so fast all around me that it doesn’t seem real. While it is great that the Indian mindset towards entrpreneurship has gone through a radical change of late, it also seems like a bubble. A few years back, most techies were extremely risk averse and content working at one of the big three IT companies but today I see many youngsters (some fresh out of college) leaving lucrative jobs to start up. Though I have always advocated my belief in entrepreneurship, I still feel certain amount of prudence is a must before taking the plunge. If too many people take this plunge without giving it sufficient thought, many of them will fail. This can have the effect of simply putting off others from starting up – which could burst our current startup bubble! So here is some food for thought for those trying to figure out if they are ready to start up.
1. How is your financial situation? This is first question you should ask yourself. Do you have enough money in the bank to sustain a decent life style for at least another year? Do you have any dependents? Is there a big EMI for a house or a car due every month? Can you really afford to deplete your bank account so much? You will need all your energy and concentration to have any chance of success in your startup. Worrying about how the bills will get paid is not going to help at all. This is one risk simply not worth taking. Save up before starting up!
2. Do you have a support system around yourself? Do people around you support your idea of starting up? How do your parents view your decision? Is your spouse ready to put up with what starting a new venture takes? Startups invariably go through ups and downs. During the “downs”, you will need complete support of your family and friends. If you are starting up in the face of opposition then there is a likelihood that every small failure will be met by a “I told you so” at home. That is not a good situation to be in. So get a buy in from those who matter.
3. Does your idea depend on external funding to survive? As a first time entrepreneur, it is not a good idea to depend on external funding to stay afloat. Your business plan might require external funds to grow, but it shouldn’t depend on external funds to stay afloat. Web startups should particularly take note of this. It always makes senese to build a business which starts bringing in revenue early on. Even if the revenue is small and not sufficient to meet the expenses, the fact that somebody is willing to pay money for your product or service is a good validation of your plan. Depending solely on future ad revenues or a buy out by a bigger company is not such a great idea because those things happen to maybe 1 out of 1000 web based startups out there. VCs don’t fund too many inexperienced first time entrepreneurs. So if the entire existence of your startup depends on convincing a VC, it might make sense to give it a second thought.
4. Do you have the right credentials? A new company is nothing more than its founders. Since there will not be a proven track record for your product or service, potential customers will judge it solely based on their perception of the founders. So if a mobile VAS startup is being run by people with no experience in mobile industry, selling will be that much harder for them. If an IT services company is founded by engineers fresh out of college, they will find it difficult to convince potential clients of their ability to deliver. So, while it is not essential that you startup in the space that you know well, it does hurt your chances of success if your credentials, background and experience can’t vouch for you.
5. Does somebody on your team know how to sell? Selling is an art and most of us techies have no clue about it. A team with complementary skills has a much higher chance of success. In particular, having somebody in your team who knows how to sell helps immensely. Building a product is one thing, being able to sell it another. Whether you like it or not, fact is that most companies became big and successful because they could sell better and not necessarily because they had the best product in the market.
6. And finally, do you understand what you are getting into? Have a frank talk with more experienced entrepreneurs about what they went through when they started up. Starting a new venture is very hard, especially for those doing it for the first time. It takes immense amount of hard work and sacrifice. It means having virtually no time outside of work. It means seening less of your friends and family. It means taking up the constant stress of managing cash flows. It means fretting about losing clients or people. When you look at it up close, it really isn’t that glamorous!
My intention of writing this article is obviously not to discourage future entrepreneurs! However, even the best of startups have very little chances of success. So it makes sense to maximize the factors that are in your control. Just a little bit of extra thought, planning and introspection before starting up can make the differnce between success and failure!