No paper ideas please. Build, iterate, sell, sell and sell! Takeaways from TechSparks Hyderabad panel discussion
The Hyderabad edition of TechSparks held at Katriya Hotel yesterday was an event to remember. The queues at the registration desk were long, the hall was packed to its capacity and the Hyderabadi entrepreneurs were present in full spirit. Along with the lessons from Apalya’s journey told by Vamshi Reddy, a hearty account of Manohar Reddy’s journey from startup to exit of Gallop Technologies and learnings from Silicon Valley shared by Shradha Sharma, the panel discussion was a highlight of the day.
The panel discussion moderated by Shradha Sharma constituted of Gautam Mago of Sequoia Capital, Vamshi Reddy of Apalya Technologies, Ramesh Loganathan of Progress Software, Srini Koppolu – an industry veteran and angel investor, Srikant Karnakota of Microsoft, Nibhrant Shah of Themis Consulting and Shiva Kumar of CISCO. For all of you who were not in Hyderabad yesterday, here is an account of what experts had to say about challenges of fund raising, product market fit and the importance of selling for Indian startups.
Shradha : How do you see the startup eco-system evolving in Hyderabad?
Panel : Vamshi admitted that there are challenges on the investment front but Hyderabad is the cheapest place to start a company. He added, ”you just have to travel a little more, eco-system is present though Hyderabad is not at the heart of it”. Srini was of the view that there is a lack of design & marketing talent and a pain point is the absence of a platform that showcases entrepreneurs or an active forum where Hyderabad startup action can be found.
Shradha : What are some general traits of successful entrepreneur?
Panel : Gautam Mago opined that “every successful entrepreneur has their own capabilities and its trivial to generalize.” He stated that 3 things that are generally necessary for an entrepreneur to keep in mind to be successful.
1) You can't do great in just 3-4 years, you have to be ready to persevere through at least 7-8 years.
2) You should have a deep connection to what you are trying to do. If you think its kind of a whitespace and you startup, it does not help.
3) Always sell – sell to your customers, sell to your employees and sell to your investors. We are culturally shy to sell and we need to overcome it.
Nibhrant echoed to Gautam’s view wittily – “sell even to your neighbour’s dog, you never know how someone related is interested in your offering.” He pointed out that entrepreneurs definitely need to believe in their product but on the flip side they should be ready to be flexible as market changes with time.
Srikant quoted 2 examples - of how they cracked a very big deal and how an almost closed deal got cancelled - reflecting how a seller’s conviction about the product makes the biggest difference.
Ramesh said, “It is not about who is selling, it’s the story behind the product that sells. Don’t add the noise and impedance to the story and it will sell.”
Shradha : What are some common mistakes that early stage startups make? And why investors/VCs reject them?
Gautam stated that VCs just have their point of view but every rule has an exception. He stated 4 points very clearly
1) There exists a “doing too much problem.” Startups should do a small thing and do that well, think of scaling up after that.
2) Founders who are doing things part time and say, “invest in me and I will leave my job,” never works.
3) “VCs care about large markets,” which does not mean that the market has to be large in size today but entrepreneurs need understanding of their markets.
4) The other problem is “listening to too many people.” Founders know their products the best, “we don’t know s**t.”The end objective must not be to raise money, it has to be building your product right.
From his extensive sales experience to startups and SMEs, Shiva told that he had seen a tendency to use money when it is available for various infrastructures. He posited that the investment which early stage startups get should be used to build infrastructure only to enable your business and not on other activities.
Coming from an angel investor point of view, Srini added that angels see if the founder has the ability to take the idea/product forward. He also said that “a good sense of unit economics,” really helps.
Shradha : How do early stage startups figure out the right product-market fit? A lot of dissonance is generally seen when it comes to getting it right.
Vamshi answered this very clearly by saying, “you can’t tame the market, any product goes through transition. You start with something in mind but you also evolve.” He added that product market fit should be looked at from a sustainability point of view. “Start up with the current market but have a long term vision. See 15 years down the road.”
Gautam said that product market fit is like a crystal ball, it is like a fountain of youth kind of idea. But he was very crisp in answering – “iterate till you find the right fit and iterate fast.”
Ramesh opined, “Product-market fit is like setting up experiments. You need to validate the current situation and then decide if you need to change or kill the product.”
Nibhrant advised the entrepreneurs to look out for what their customers really need right now. Keep adding the pieces to your puzzle as you grow.
Shradha : Everybody gives a lot of hype to funding. Is funding the only validation of a startup’s potential success?
Vamshi, who has raised 3 rounds of funding for Apalya Technologies said, “funding is a validation of you idea and efforts” but there are 2 things which I learnt at a later stage.
1) “You need to keep getting money. Period.” There is no other way and you need to keep the money flowing and be sustainable.
2) Funding gives reassurance but when things get bad the entrepreneur must have faith even when he is being rejected any capital.
Shiva urged the entrepreneurs to look at the overall growth strategy than just the funding.
Gautam was of the view that entrepreneurs should raise capital when they have a vision for their business that can’t move forward without raising funds. Attendees agreed and applauded Gautam’s saying, “Being an entrepreneur is a really lonely job. If you have a co-founder, at least you both are lonely together. Being a VC is also very lonely job. Believe in yourself no matter what.”
About the lonely entrepreneur – lonely VC/investor equation, he said, “Someone else believing in your idea to put their money in you is heartening but you need to be clear that you are choosing a partner. Funding is a 2 way thing.”
Srini advised early stage startups – “If you get the money take it.” It is not just about the money, you will get a mentor with whom you can discuss and brainstorm and the mentorship will add more value than the money.
Shradha : What would be the one thing you would say to early stage startups?
Ramesh started by saying that if you are moonlighting, people know you are not serious. If you say,”Ia am thinking about this, nobody wants to meet you.”
Srini advised not to spend time on paper ideas but to go ahead and build something. He also emphasized the importance of tracking various relevant metrics of your product.
Srikant reiterated the importance of tenacity and perseverance by saying that one should keep pushing to make an impact.
Gautam was of the view that in the coming 10 years, world’s big tech companies will come from India. He made it clear for startups that they “don’t invest in paper ideas or presentations. We invest in products.”
The open panel had enthusiastic entrepreneurs asking the panel’s view on various aspects of startups and entrepreneurship. Here are the two of those questions which compelled discussion:
Q : Is there any litmus test that your company/product is failing or is it that you burn the capital and you die?
Panel : Gautam said that you can know how you are fairing by “what data is saying and what qualitative feedback customers are telling you.”
Srikant spoke from experience citing examples where entrepreneurs have ignored their sales team or any other employee’s feedback. He advises that when your team says what is not working out, validate the feedback; don’t completely ignore it. Don’t shun it off by thinking that they don’t know how to sell or they just don’t get it. When you know what is not working, you will also get know what will work. You can be successful starting from that point.
Ramesh said that sometimes stopping to change your strategy or even to pivot is fine. Just don’t give up as of now.
Q : Finding a co-founder or core team is like a love marriage – you are in with love with the idea, with the product. But finding an investor or VC is like an arranged one. What are the qualities in investors/VCs that entrepreneurs should look out for?
Panel : Vamshi said wittily that we are a society of arranged marriages. Of his own personal experience with investors, he said, “every investor has been different and each one has added a lot of value to the company. If I can talk about finance and startup eco-system today is because I learnt it from them. They give you financial prudence.”
Gautam said, “As in arranged marriages, you have to get along with someone. See a VC as your partner for 8 – 10 years.” He also advised entrepreneurs that they should be clear about what they are getting into and must ask questions. Always ask, “What other help you will be getting apart from capital.”
Three focus points for startups that stood out overall were –
1) Sell, sell, sell and sell
2) VCs/investors can be much more than just a source of capital. Have them as a partner and build a strong relationship.
3) The only people who may care about paper ideas are incubators. Nobody else does. Go out and build a basic prototype at least to start with.
After covering 3 cities on out TechSparks journey, we have 3 more exciting stops. Delhi, see you next - 13th July at India Habitat Centre! Book your tickets here.
Catch up all the action from TechSparks Hyderabad in photos.
Disclaimer: Sequoia Capital, Microsoft, Intel, Cisco, Verisign and CNBC TV18 and GigaOM are our sponsors for TechSparks 2013