Category Archives: Business in India

How to Build a Startup in India – Complete Guide

In last 4 years, I have built 3 startups and multiple products, some did well, some didn’t. Currently I am building AeroLeads which is a prospect generation software, before this, I built InBoundio and before it WorkMonk (now shut down). In between, I took few short and one long break (of one year). With all this experience, I have learnt a lot about how to build a business, about technology, marketing, sales and finances.

When I was starting, I made lot of mistakes and wasted lot of time in doing things which were counter productive or didn’t align with building and growing a business. I also made lot of mistakes from technology and hiring people too. So I thought to write a Complete Guide on How to Build a Startup in India. I am sharing all what I have seen and learnt from my mistakes and what you can do to avoid them.

1. Idea and What to build

Do what you want to do. I am a firm believer in this as the startups require lot of hard work and if you are not having fun and doing what you find it exciting, you will soon lose motivation.

Ideally you want to start from a pain point and see what solution you can build. It will be good if that is a problem faced by many as this will determine your market size. There is also “sell Antibiotic and Not Vitamins” concept as people only pay for antibiotics, not for vitamins.

Almost all the startups (at least the successful ones) are built around a solution for a problem. Do not create artificial problems as it is easy to have tunnel vision as a startup founder.

Also almost always people start with something else and end up building something else after few failures and iterations.

2. Team

Going solo is stupid and suicidal. I know because I am a single founder. Always have a co-founder who will share pain, expenses, problems and work load. Normally college friends become the best co-founders. Founding team of 2-3 is best. I have seen teams which are too big often split up later and ends up as 2-3 founder company anyway. You can have your brother/spouse as co-founder too but make sure he/she shares the responsibility. Way too many people add directors/co-founders for name sake which creates false illusion of someone being there.

Build your core team based on character and not on skills since skills can be build easily, character can’t. Make sure you like these people and enjoy working with them since you will be spending 50% of your awake time with them.

3. How to start

You are better of starting from your home. Don’t jump taking office, furniture, startup branding material, forming company etc. These things are not important initially. Way too too many startup founders make this mistake and loses focus. When time and money are at scarcity, use it wisely.

Spend all your time and resources on building and selling. Don’t bother about fancy office, furniture, stationery, t-shirts and even registering company. These can be dealt with later.

Whether to register a private limited company or not is your choice. My opinion on it keeps on changing but I feels if there are multiple co-founders and partners, you should register a private limited company. You can get it done for around 20k. Do get proper partnership agreements done too.

Initially you may want to pool some money and keep it in your bank account say 5 lakh which can use to pay bills too. Such buffer amount is needed so you don’t have to keep using your personal funds which will make tracking expenses difficult.

4. Technology

One of the founder has to understand technology. Way too many startups fail because of bad technical decision specially choosing wrong technology stack (I have done it). Ask others what is the best option for you. As few more people. This is one thing which has huge cost of failure involved. Don’t just chose something because this is all you know. You can spend 3 months learning something which will be far more beneficial so be open for it.

Also do not do premature scaling. Don’t buy costly servers and start talking about scaling with you have few hundred records and your product don’t even need that. Don’t use technology just because it is cool. Using AWS, angular, node.js is fine but may be overkill if all you need is $10/month hosting and a web framework which supports crud operation.

Do explore all the options and do keep things like how easy it is to find developers, in what salary range, what kind of support is available, how active is the developer community etc. Never chose a technology stack just because it is cool.

4. How to Hire ?

There is no silver bullet, the best of the best I have seen makes hiring mistakes. Ideally you want to do inbound hiring. Let people come to you by hearing about you and your startup. This often brings ownership and commitment.

I have rarely seen finding your core members from Naukri or Monster working out for any startup. HasJobs, Startup Facebook Groups, LinkedIn/Twitter, Company career page on the hand has worked much better for me and others.

Don’t go for the resume screening too. Just talk to them and look what they can bring now and in future as well. Always prefer character over skill as skill can be build in few months, character can’t. Hiring a wrong person will be a huge liability in terms of time, money and resources invested, not to mention asking someone to leave is never easy for anyone so be very careful in hiring and always keep 3-6 months screening/trial period.

5. How to Raise Funding ?

Back in 2011, I had spent 3 months trying to raise funding. There wasn’t really much to show, there was no product or team and I was extremely hyper. I wasn’t sure how much I wanted to raise and the number kept on fluctuating from $200k to $1M on daily basis.

Needless to say, I couldn’t raise anything but still I did learnt some very valuable lessons by getting rejected from every VC and angel investors of India. DO NOT chase them, let them chase you. There are plenty of associates hanging out on linkedIn and who reads YourStory and NextBigWhat so if you are doing good, they will contact you. Raising Funding is a two sided market and investors values good startups and will quick to jump on to you if they see value.

From what I have seen, do not raise anything below 50 lakh. It is not worth diluting or going through the hassle of issuing stocks for small amounts. Normally with just 6-8 people, your burn rate will be 5 lakh per month at least so 50 lakh is a minimum (this is what I have seen in Bangalore). If you can raise more initially, even better as raising money is a huge pain and sucks time and energy.

Don’t be attached too many feelings and emotions with funding though, some of the biggest and successful tech product companies in India are bootstrapped and there are businesses which are family run. If you are not able to to make things move in 3 months, move on. Raising money is not your primary job, building a business is.

6. Finances

If you are running a private limited company, make sure you keep your finances clean. All the data for private limited companies are publicly available with directors name so you don’t want to default anything as as a director. Your name may get blacklisted if you don’t audit and file returns. Hire a good friendly CA (not a firm, they are only there to make money) who will give you good advice too.

Ideally one of the core founding team member should manage finances as money is oxygen for startups. It is also important if you want to raise funding in future too. I have tried to use various software but somehow never got used to them as I found them clumsy, I anyway don’t run a big company in terms of people so for me netbanking + excel file works. Find the best option for you and stick to it.

7. Sales and Marketing

Make sure you grow organically initially. Nothing is better than growing without sales and marketing teams and zero budget and growing by word of mouth. Lets the users find you as this will validate your business model too.

Avoid hiring too many sales and marketing people initially. Premature hiring specially of sales and marketing team will burn your cash really fast. Also I have seen people being casual in hiring sales and marketing people as compared to developers (often because the founders understand technology so can screen the people better as compared to sales and marketing) which often leads to wrong hiree.

If you don’t understand sales and marketing, it is good to learn by doing things yourself. Sales and Marketing will take more time and resources than technology and is integral part of busienss growht.

8. Relationship, Health, Life and Fun.

Every startup founder is a dreamer and wants to make it big but it is stupid to do it at the cost of relationship, health, life and fun. I think its OK to work 14 hours a day, living on top ramen and your startup being the center of your life for some time but you can’t do it for years. In fact this means you are making wrong decisions running your startup too as this is why you are not able to find the right work life balance. I can write a lot on this from my past mistakes but I feels if you are reading this, you can easily connect the dots and make the decisions for yourself. Take care of your health and relationships (parents, brother/sister, spouse, friends) since you can’t buy it with money, success and fame. Also keep learning and having fun in life and have it today, don’t wait for tomorrow.

I am very sure on this – You will spend your whole life ignoring everything, only working and making 100 million dollars and when you die, Times of India will goof up and miss out printing 2 digits.

If you have any questions or if you think I can help you in some way, feel free to contact me through comments, on linkedIn, twitter or through email.

When Should you Raise Money and When to Bootstrap your startup in India ?

I am following Startup ecosystem for 4-5 years now, both Indian one and Silicon valley one and most of the first time entrepreneur struggles to figure out if they should bootstrap or raise money. Raising money is very lucrative and sounds great for first timers, all the million dollars investments which we read on startup blogs often make entrepreneurs think that there is lot of easy money or the best way to build the business is to raise money. Unfortunately this is NOT the complete picture. VC money comes with lot of strings attached and often ends up founders losing control and in worst case (which often happens), founder making very less or no money.

This is what I can suggest

When to Bootstrap

1. If you have some of your own money to invest or the initial team can complete the whole sales cycle form development to sale. So if you can be profitable without any external funding, don’t raise money. If you wait, you will get much higher valuation.

2. If you love your freedom, keep bootstrapping. I am bootstrapping because i love freedom over money and some how will feel suffocated if I become an employee.

3. When you are unsure about your path – by going slow, it gives you more time to learn. It is well known fact that first you learn, then you earn. By building a strong base, you can build a much stronger company which eventually will have more value.

When to Raise Money

1. If you don’t have any money – I personally feels if you don’t have any money, you are better of raising some money. There is no point in taking extreme risk. Living on Ramen noodles and working 18 hours ignoring family and health is extremely stupid. Just give up 20% of the company and raise some money. Ideally you want to raise minimum 50 lakh as even very small 5-6 companies can have burn rate of 5 lakh per month.

2. If you think you have figure out the business model, growing but need more money to speed growth – normally this phase after 2 years and more running operations.

3. Any India centric business will eventually become operations based business meaning you will be needing hundreds of employees and offices in various cities. Even if your offices are just based out of one metro, your expenses will be huge and you will be needing external funding. I don’t think it is possible to build a big business now without VC funding as the cost of running a business has become huge, it has become extremely easy to copy business models and there is lot of easy money available relatively.

 

There is Nothing Great about taking your startup to USA from India, stop fooling yourself

I never understood the fascination of Indian startups and the founders to move to US to run their company. There is nothing wrong in taking your startup from India to USA if you see the value and it has worked really well for few but there is also nothing great about it either.

I have seen way too many Indian startups and founder getting excited with the prospect of moving to US or to get their company registered there (mostly Delaware) hoping for either easy funding or easy clients. I can’t say how easy it is to get funded (I am sure it is easier as compared to India) but there are certainly no easy clients or easy money. You have to work equally hard to get US clients while being in US as compared to India and for web based SaaS startups, it is suicidal to go to US as even a 10 people company can have a burn rate of one million dollars.

There is also one major problem in running your business from USA, you loses out on cost arbitrage. Some of the India’s biggest self funded software companies like Directi and Fusioncharts make so much money because of cost arbitrage, you earn in US dollars and pay expenses in Indian rupees.

There is also huge cultural difference, India will be India, USA will not be India :) There are no friends or family around you, just people, business and money. Once the excitement of doing business in USA while being in USA dies down, the hard reality hits which takes away lot of positive energy and steam from the startups. Building a business whether in India or USA is a long term game so make sure you know what you are doing. Success in business is all about making less mistakes than your competitors.

How to lose a Client, the Hyderabad House way

This happened last sunday. For those of you, who are not aware, Hyderabad House is a food chain in south India, mostly based in Hyderabad but has also branches in other cities too.

I tried to order one veg biryani from them (they are about 1 KM from our office) at 7:30 PM and they said, No, we won’t do it. I said, wait, last week you had done it and few weeks before that too but that guy firmly said, No, we won’t do this time unless the minimum order is Rs 150 (my order was of Rs 98 including the delivery charges). It seems, whether they will deliver it or not depends highly on who is attending the call and what mood he is in. The person in charge also failed to figure it out that the delivery boy in any case will pass from our office (it is on main road) to deliver to others so effectively by repeatedly asking me to make a minimum order rather then being flexible, Hyderabad house lost a customer (I am assuming their margins are above 50% so they lost the money too by not taking my order).

Businesses in India, specially non online, needs to understand the importance of converting every call to sale irrespective of profit margins.

The Single biggest problem with Indian Micro Companies is …

They don’t know how to sell.

This is the email I got today (I get 3 such emails daily)

Hello,
I am Priyanka Marketing Executive. (what?)

We have a SEO discount offer going for the following package: -

**Long list of some random stuff**

Our Best rates for this: – USD XXX per month per project at beginning of every month.

This Discount is Valid till August 31th 2011 (well but today is 5th September, Do’h)

Please let us know in case you are interested.

Warm Regards,
Priyanka

So Priyanka just copy/pasted the email without even reading it whether it is even making any sense. now since the email was sent from priyankaseoxx@gmail.com, I am assuming priyanka (or priyank) is sending these mails manually which is such a huge waste of time considering I can bet s(h)e is not going to get a single reply with these emails. This is not even spray and prey, this is just “begging and prey”

So the question is, what such people and such micro companies of India can do to look more presentable and acceptable to potential client ? The answer is simple, Think from the Clients Point of View (it is common sense but everyone fails to do this as we think we are smarter then the client and knows best for him). If you see the above mail, the person is just hard selling it without even realizing what he is selling and whether the recipients even need it ? the price also seems to be ridiculous (you should never mention the price in such emails, nor should write such lengthy unsolicited emails). And last but not the least, never send a business mail from gmail id, you are not running an online B2B business if you are using free service providers.

Type of Busness Ideas which will work on Indian web space

Normally I write in a flow and don’t reread the post so my apologies in advance if the post lacks continuity or has spelling mistakes.

In this post, I am going to write down what I feels, types of Ideas which are/will work in India. This is a casually written post with no research done and is based on my 7 years “hardcore” net knowledge :)

In India, we can categories successful web companies into 4 categories and I feels for next few years, all new successful ventures will come only in these 4 categories

1. Aggregators i.e. those sites who are aggregating information
2. Copy ideas from US web space (or from any other country)
3. Get offline to Online
4. Classified content like matrimony, jobs, buy/sale cars, houses etc
5. Solving some real problem (very painful to implement + not much money)

1. It is something which we are all seeing on Indian spaces, specially in travel industry. Aggregation works so well in India because Indian we space is still very immature and content is very fragmented, even the well organized site like nic.in seems to be very fragmented to me, lot of information but scattered, so if you can offer a service which aggregates useful data and information, the company can be huge success. Few ideas are, Government inquiries, PAN Card/passport/ration card, Exam results, Reviews etc

2. People are copying each other from the beginning of Internet, anything which works in USA normally gets copied to UK, Australia, India, South America and other european countries. A business model which is already tested in other country will always be successful in any other part of the world provided it is web based. Here is what I feels, Indians should look into other countries too to copy ideas, specially countries which have similar economy and people, for e.g. Brazil and China can be perfect countries from where Indian entrepreneurs can “take” ideas as the ideas from US normally gets copied very soon. I had explored China market in 2009-10 for brief period though couldn’t find much to implement in India, though I will highly advice people to look into China, Brazil, Korean, Russian and Mexican market for ideas.

3. Coupons, all kind of ticket booking, ecommerce and everything which is happening offline can be bring Online. I strongly feels, “anything which Internet has not touched will be eventually get touched by internet for good” (I read this on cdixon.org’s blog, please please read all his blog posts, its all gold!) so in India, find the pain points, things which people hate to do but are still compelled to do because of lack of online option and implement that.

Personally, I love these kind of ideas most as they are solving some pain which means you never have to spend much on marketing, Indians love to talk and will talk about your service if it is good. Paying online bills is a great idea which I wanted to do but this has alrady been done by ICICI in 2000 though done very poorly.

4. From 2000 onwards, all the classified sections were moved to the web, Matrimony, Vacancy/Jobs, Buy/sale cars/vehicles/houses etc. This was very natural thing and I feels now there is nothing much from classified which can be moved to web, may be very narrow niches like “services” and “Rent”, these are being done by sulekha but still there is a good scope for launching a vertical business, specially on Rent.

5. I love businesses which come in this category, the problem is, there are not too many, due to over complexity and low returns. I wanted (and still do) to solve the problem of waste in India, we all know this is Local municipality’s responsibility but they are too numb towards this, the problem is, I realized that this is a very big thing and I don’t have the resources and will/”balls” to do it. There is not much money in it either so just like every Indian, I too want to see the change but don’t want to do it myself *sigh*. Some great ideas can be giving small loans, education, hospitals, vaccination, houses etc

Business Model of Titan Eye

Alright, so a concerned friend suggested me to go to Titan eye to get high quality frames, I did some online search and found that Titan eye is a chain of stores by Titan Group claiming to launch first of its kind stores where they will offer high quality frames and glasses. I read in an online review that the starting price is Rs 375, fair enough!

So I went to Titan Eye, Jayanagar, Bangalore, spent 5 mins, liked a frame and asked the price, they said 26,000! Wait what ? how much, 26,000 + for glasses, 11,000 so overall it will cost you Rs 36,000.

Now for someone whose budget was 6,000 (not that I can’t buy costlier frames/glasses, it is just that I feels like it is not worth it, 6k is also not a small amount), there is no way I am going to pay 36,000. I have no idea about the built quality of the frame nor about the company (I had never heard about that company anyway) but paying 26k for a frame is ridiculous, unless it is made of real gold and diamond, something which it wasn’t.

So I politely said, I will think about it and came back.

Now while coming back, I was just thinking of Business model of Titan Eye. I saw some reviews of it on the web which were not that good, everyone was complaining about the pricing that nothing is less than 10,000 there. I am also very sure that the manager and employees there are on payroll (unlike on earn when you sell, something which typical optician follows).

One thing is sure, Titan Eye is looking to target the upper class segment, those who won’t look at the prices and will happily pay 25k for a frame which probably costed 10k to titan eye but the question is, how many such people are there in India and are they that stupid ? well the answers is, the number is way higher then you think and yes. :) In metros, there are tons of people with loads of money to burn which is the target market for Titan. Though I would love to see a similar store for Indian upper middle class but then, won’t be competing with the local opticians stores, which offers personalization ?

Internet Should be Free in India

I have always thought about this and wondered why can’t Internet be free in India ? Broadband companies are already offering Rs 250 minimum plan and they can easily make it free by offering some value added services to the plan like installing their own browsing software which can show ads or they can show their own products as advertisement, like Airtel can push their mobile services or their set top box, infact Airtel can offer free internet if people buy their set top box or take their mobile connection.

I don’t see why this can not be done, the problem is lack of will from the big companies of India. They are like to follow rather then lead and unfortunately innovation takes the backseat when it comes to growth.

Back in 2000, when the mobile war started, all the companies focussed on mobiles as compared to broadband because it had the real money and growth potential, and they were right, but the problem now is you can’t go any cheaper then what they are offering, Mobiles have very much become a commodity now and mobile companies can’t play with the price. All the growth is now organic and the market growth saturated.

I think its a great time to start a broadband war to do something what reliance did in 2000 with their Monsoon Hungama offer, they started offering mobiles for Rs 500 which made people go crazy for it, now only if Airtel or Reliance can start offering Internet for free (BSNL is hopeless), they can offer a package like 256kbps speed + 1 GB for free per month and you have to install their software to browse the net. For bigger plans, they can also cut the prices to half and look to play the “volume” game which they know really well.

It doesn’t take a genius to figure it out, once people get used to internet like buying train tickets online and seeing online exam results, there is no way they will be going back and if the bigger plans are going to cost Rs 250 (512 kbps + 5 GB), they will happily opt for it.

But the problem is, as usual, companies don’t know the depth of water and everyone will wait for some one else to make the move and in this “you first” “you first” attitude, the train will be “gone”

The singlemost biggest Problem with these Retail Chains in India is -

Horrible and Unprofessional Staff

It seems all these Vishal Mega Mart and Big Bazaar find the most incompetent people who have no desire to help customers/shoppers and put them to manage everything. I know they are underpaid (probably 3k to 6k per month) and that their work do not require any skill but this doesn’t mean they don’t have to do anything. Most of the time when I go to nearby vishal mega mart, I never get straight answer from anyone, most of the answers are like “mujhe nahi pata” (I don’t know) or “ask someone else”.

This is where local shop score over these big retailers, there is personalization. The local shopwala knows his customers, call them by name, doesn’t mind getting paid later and suggests you new products.

Another problem with these big retail chains is that they are looking to grow way too fast without really too much thinking about the existing customers, ideally they should be focusing 80% time/resources on what they have currently and to make it better and stronger and the rest 20% time/resources on starting new stores and doing new thing but I think it is otheway around.

Why can’t the staff of retail marts act like staff of mcdonalds, they are also not that well paid but they are told to help their customers and talk to them nicely which do it pretty well.