'Startups don’t fail because of market or scale, but founder equations' says Darwinbox founder

For any startup that harbours long-term ambitions, surviving the first year of operations and coming out unscathed is the key. The first year brings with it self-doubts, human resource challenges, issues with co-founders if there are multiple partners, financial crunches, and market challenges. Tiding over these difficulties and surviving to tell the story by making it to the second year takes guts and perseverance, and only a few are blessed with it. YourStory is happy to present a new series of articles as part of the series Survival Instinct that tracks how leading startups battled the demons and survived the first year of their operations. Today we bring to you Darwinbox.

In the first year of operations, Darwinbox focussed on building a product the market needed without over-engineering it.

“The three of us are different people. My strength is product, Jayant is ops, and Rohith is sales and ops. Our boundaries are well defined and we respect each other. Startups in the initial days don’t fail because of the market or scale, but because of founder equations,” says Chaitanya Peddi, co-founder of Darwinbox.

And in that one sentence, he sums up one of the biggest challenges a startup can face.

Enterprise businesses are tough, especially if one is focussed on human resource management, and have no startup background to speak of. What worked in Darwinbox co-founders Jayant Paleti, Rohit Chennamaneni and Chaitanya’s favour was a four-year stint understanding corporate dynamics.

“The corporate to entrepreneurship transition isn’t fancy or romantic as it is shown to be. It is tough and takes up all of your time. You have to be sure of what you are doing before you take the plunge,” says Chaitanya. “You need to be prepared to do everything, and not worry about it being a part of your job or not,” he explains.

The trio had got together to build a platform that could make HR intelligent and strategic, rather than a function. They unified every solution into their product, such as payroll, hiring, candidate sourcing, referral management, employee management with easy documents and analytics.

Learning when to stop

Darwinbox claims to have clocked $2 million in revenue, and has raised $4.5 million in funding in a span of two years. What worked for the company’s founders is that they got the minimum viable product (MVP) right.

MVP, says Chaitanya, can be the strongest, or the weakest, link for a startup.

The first step was to talk to as many people as possible. While the trio came from corporate background, and had worked on several B2B product projects, they felt it was important to understand what each company needed in terms of HR management.

This meant meeting over 200 HR managers and speaking to a few hundred end users. While they got several details on what the market wanted, the trio had to decide what to build and what not to build in the first version of the product.

“Most tech founders don’t know where to stop. We always want to keep adding feature after feature; prioritising what is important and stopping is very difficult. It was something even we faced in the first year,” says Chaitanya.

You need to be absolutely clear of what is the first version you are taking to the market. Basis what the team heard from the market, they decided to work on several factors that needed immediate attention.

He adds that often, products are built and then taken to the user. To this, he suggests a better approach would be to probably start with feedback, refine the hypothesis, and validate if the challenge you perceive is really there or not.

Sell. Sell. Sell.

“In the first few months, we focussed on the sales pitches. We began with first getting the wire-frames and designs right and showing that to our potential clients. Consciously choosing not to over-engineer was the best thing,” says Chaitanya.

The problem, however, was the actual convincing and selling. Being a new product, and company, many were sceptical. The founders add that many were interested in the product but just wouldn’t sign them on as they were an unknown brand.

“Enterprise companies are very particular on who they sign on. Especially when it comes to something like employee information and data,” says Chaitanya.

This is where the founders’ pedigree is an important factor. The first set of clients often come through purely on the network you’ve been able to build. “That is why I believe it is good if founders have some kind of background in the sector you’re working - especially with enterprise products, because there always is an element of risk associated with it,” says Chaitnaya.

It was the trio’s McKinsey and Google backgrounds that helped them talk to their former clients and network. They started with smaller companies with one or two features.

The first breakthrough that helped them get more clients was acquiring Delhivery as a client. Delhivery asked for integrated tools like self-evaluation, which larger companies did not deliver at the desired cost, and which were not readily deployable. Then they came across Darwinbox.

The founders were able to quickly understand Delhivery's needs, and in six months of meeting, closed a deal to deploy HR for 16,000 of its employees.

A mixed bag

The composition of the founding team also plays a vital role, they need to compliment each other’s skills, says Chaitnaya. He adds in a word of caution though - many times it is easy to find people similar to you, and even aligned with the vision of your startup, but it need not necessarily work.