Lessons from Bigbasket co-founder Hari Menon
I read somewhere that the average age of founders is 28.5 years. That is not Hari Menon. In fact, he defies all stereotypes about successful founders. Not just in personal characteristics, but also in the boldness with which he chose to attempt a taboo sector. When a lot of money is poured into a problem and the business turns out to be a colossal failure, it is difficult to find believers to invest in your idea and follow on.
For Kstart Institute (an invite-only program for the Kstart portfolio), we wanted the voice of someone who can authentically connect with young founders. We requested Hari to be our guest. He readily and graciously agreed to share his knowledge and his time.
For 45 minutes, he held everyone in rapt attention with an easy-going style of explaining the choices and rationale that provided the path to his success, with a particular focus on fundraising.
Fundraising is a make-or-break for your venture. Raising money, a little too late or too early, may change your venture’s destiny. The right amount of capital from the right investors is crucial for your venture success. However, many product-driven entrepreneurs dread fundraising and the process. But entrepreneurship is about mastering and controlling many aspects you may or may not enjoy doing. Hari shared candid nuggets of wisdom from his own journey, which I think can also benefit the larger community.
These are a few key takeaways from Hari.
Get your pitch right
During the BigBasket early fundraising days, the first slide in their deck was always about WebVan.
Hari: “I anticipated that the big question investors would have would be about Webvan’s failure. I wanted to address it upfront and kill the question before it even came up. I talked about why BigBasket would not be a repeat of Webvan, and why we would succeed given the Indian market conditions. This helped build credibility at the very beginning. After every meeting I would refine my pitch. I would take feedback from investor meetings and change my pitch real-time. This was an iterative process. Within a couple of months, we raised our Series A.”
VK: Many times I see entrepreneurs avoid tough questions in the pitch. I agree with Hari that being candid and addressing tough aspects upfront will help tremendously in building credibility in your pitching process.
Align with your board
Hari: “If people who have invested in your company are not aligned with your business and strategy, you are completely screwed. In the initial days of BigBasket, we used to conduct meetings with board monthly. This continued for about 18 months, after which we have moved the meetings to once a month. Even though this process is time-consuming, it was crucial to our success.”
“When engagement and alignment with the board is good, investors always try and ensure that promoters/founders have a skin in the game in spite of high dilution in the initial phases, by allotting some shares during subsequent investment rounds. We have seen it happen, proactively, by investors.”
VK: Sometimes companies think that they need to manage board and treat them not as partners, avoiding constructive engagements and healthy dialogue. It’s important to understand that your board is on your side and wants you to succeed. Involving them deeply in your journey is the right thing to do for all the stakeholders and your company’s growth”
Raise more than you need, and raise sooner than later
Hari: “Start your fundraising early. Start the process 6 months in advance. Fundraising is also dependent on external factors such as market fluxes and investor sentiments. You cannot predict these Black Swan events. It’s important for you to factor in delays and start your fundraising process much earlier than you think. Especially, if you are a consumer business, it’s important to have enough runway. For us, the goal was to have 3 years of runway. Capital is the single biggest worry for entrepreneurs. Hence I would recommend that you raise more than you need.”
VK: Hari mentioned that Runway is way more important than Ownership. He emphasized on not worrying too much about ownership and dilution, which is a common mistake that young entrepreneurs make. He rather urged the entrepreneurs to raise the amount that is needed to keep your business going.
I wish this message were emphasized more often. Over-optimizing the fundraising process towards a mythical valuation is one of the common mistakes I see. Entrepreneurs obsess over their desired ownership. Hari is a rare entrepreneur who is extremely open about sharing his views, and learning with budding entrepreneurs. I hope his tribe continues to grow in the Indian ecosystem.
bigbasket.com (Innovative Retail Concepts Private Limited) is India’s largest online food and grocery store. Their catalog includes over 18,000 products ranging across every category ranging from fresh produce to cleaning accessories. The company has been a disruptive force in the online grocery retail industry in India, and have massively shaped the way the country approaches the otherwise-mundane task of grocery shopping.
As per the findings of the 2016 edition of the India Food Report, the food and grocery retail market is expected to reach Rs 109,00,000 crore by 2025, with a growth rate of 15 per cent per annum. According to a recent Forbes report, the average Indian household spends about 34% of their income on groceries and related household needs.