I co-founded my first product company way back in 2009 during my final year of engineering. We were initially a team of two, eventually growing to 20, of which four joined us as co-founders. After 1.5 years and $100,000, we shut down operations since we could not figure out a viable revenue model. This was much before the frenzy of ‘do anything to get consumers on board and monetise them later’, in which most of the new-born startups are functioning today. We had all the ingredients of a successful company – a great team, a large untapped market, and audacious dreams of identifying sports talent across every nook and cranny of India, using analytics and technology – but still couldn’t prosper.
Following a short stint at a boutique analytics firm, I co-founded a services startup in January 2012, focused on operations and marketing analytics. This startup took off really well, and we recorded a growth rate of 100% year-of-year in the past 3.5 years of operation, with a 15+ member team from premier colleges serving Indian and South Asian clients.
While the operations at this startup stabilised, the bug of ‘being uncomfortable in the comfort zone’ bit me again and I took a sabbatical to start off a product company with another audacious dream, but this time ‘to digitally enable people to save money efficiently using analytics in the background’.
Along with being a test of one’s grit and perseverance, entrepreneurship is a philosophical journey for an individual with a lot of unlearning and learning. Along the journey from a product to services and back again to a product startup, I realised some key pointers a young entrepreneur who is just starting should keep in mind. I believe that if one understands the differences well, it will help choose between the two types intelligently and cope with the stress of everyday ups and downs.
Every startup by definition requires a certain amount of patience in day-to-day operations; however, product startups require founders to be patience personified. In services, you can generate revenue from day one and keep improving steadily based on client feedback, which is usually one-on-one, especially if you share a good rapport. But in the case of products, you will start believing that Murphy’s Law was created just for people like you! It requires a significant amount of time to build a product; even more time to get it to your target market; and then some more time to incorporate feedback from hundreds of users. It’s a truly herculean task! Let’s also not forget that in services, the deliverables are meant for a client or two, whereas with a product, there can be thousands of users! It’s nerve racking at its best.
Services startups usually are a set of individuals who specialise in one service, such as SEO, analytics etc. If they are diversifying, they will add services with similar objectives in their portfolio. For example, a SEO service provider can diversify to full-fledged digital marketing, but it will be difficult for them to add, say, marketing analytics in their offering unless a founder or a key employee specialises in this area.
Product startups, on the other hand, require a founder to be the jack-of-all-trades and master of some, especially in early stages. If you are bootstrapping and don’t have millions of dollars to hire the best specialised person out there, then you’ll probably have to learn the art yourself. For instance, a great UI/UX designer costs about $60-70 an hour and requires a minimum commitment of 100 hours. You can either spend money on the specialist (and eat at your friends home for next six months!) or you learn Google Material Design; understand why a button has to be a certain way and why to choose one colour over another; and you can collaborate with an in-house designer to develop your designs. The same goes for developing UI, a customer support team, a logistics team etc. The list can be endless.
To maintain relationships in a service startup, one needs to be a great listener and flexible to adapt to a client’s point of view and include it in your deliverable. Yes, there are times when you might disagree with the changes but usually you’ll have to give in, as your work has a larger audience within the client’s organisation and it has to be aligned politically.
To the above, a product entrepreneur would react as “*$@# that!” Politics should not find any place in their dictionary. Yes, they have to be extremely patient, great listeners too and absorb ideas/feedback from multiple people but, in the end, they have to be bull headed and follow their gut – of course ensuring that stakeholders are aligned as much as possible!
All startups are inherently risky but then there is ‘measured risky’ and ‘stupid risky’. Service startups are usually the measured ones, as you can understand a client’s response to your offering fairly quickly and tweak it to match their expectations. Usually, you will get more than one chance to get the business. In the case of product startups, you will be extremely lucky to get even one full chance. You are mostly one step away from disaster all the time. Yes, you can launch your product and tweak it as per customer feedback but the tweaking will be minimal (10-20% at best), but what if you get your whole premise wrong? This is one question that never lets the product entrepreneurs sleep – because no one, and absolutely no one, knows the answer to the question beforehand as to what exactly a consumer wants!
However, usually returns also vary significantly between the two. Many service startups are usually able to scale-up to a respectable level, but the level of scale one can attain with a product startup is beyond comparison – this honour rests with very few, e.g. Flipkart, Ola, Zomato and Practo in India. In contrast, examples of big service startups are very few and are usually exceptions, e.g. Mu Sigma.
There is no one mantra of success in the startup world. Many talented people have tried different things. Many have failed and few have succeeded. In my humble opinion, it is advisable for a young entrepreneur to gather perspectives of running a business in India by being in services and then hop on to the product side and aim higher, for it is always easier to figure out things when you have exposure and experience. Good luck!
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)