Why Investors Invest Together?

Most private equity investments see various investors part-investing with each other. One investor tends to be the lead investor while the others commit a certain amount in the round. Traditionally investors were seen as pure competitors. However, co-investing has become a norm today due to the various advantages it brings with it.

2 Brains are Better Than 1 – Different investors look at different businesses in their own ways. One may look at the scaling potential while the other may be more focused on profitability. Co-investing ensures that more aspects of the business are analysed well before making any monetary commitments.

Division of Risk – Since the amount raised is divided between investors, the risk is also divided.

More Skills on the Table – Different investors bring different skills and resources to the table. Some may have better technology skills with them while others may be more focused on marketing. Some may have a better network for follow on investments. The more the investors, the more skills which are brought to the table.

Less Competition – Since investors are co-investing, it reduces competition and the risk of these investors investing in competitor companies. This works out better for investors and entrepreneurs.

Emotional Comfort – Other than the tangible benefits mentioned above, investors also have an intangible benefit of getting in other investors. If any investment goes wrong, an investor gets comfort in the fact that there were other investors as well who believed in the business.

Co-investing is hence a trend which benefits both investors and entrepreneurs. Investors can support each other and bring more to the table. Entrepreneurs tend to benefit as well as a result.

Halllp Needs a Mentor

I have previously highlighted the importance of getting a mentor (link) and I feel Halllp is in a stage where we need one.

First time building a classifieds business – Since I do not have experience of building a startup in this space, the role of mentor is very important in giving direction to the startup.

New geography; culture, marketing methods – Both my previous startups have been targeted to India and hence this would be a very different market and experience for me.

Building a scalable model – Help with building sustainability and scalability in my business model is key.

Confirming validity of idea – Having someone with experience in this domain give feedback can prove very beneficial for us.

Tech co founder – I am looking for a Tech co-founder. A mentor can help me in connecting to some potential co-founders in his/her network.

The Cost of a Mistake

We all make mistakes in life. Making a mistake is part and parcel of life. Be it in personal or professional life, we make a lot of wrong decisions which cost us in some way or the other. So if this is true, how should you minimize the loss suffered by you due to these mistakes?

Every mistake has a cost. So we should look at minimizing this cost. The cost of making a mistake rises exponentially with time. The longer you keep making a mistake, the more it will hurt you.

This is the exact philosophy behind what we say ‘Going Lean’. Keep assessing your actions so that you can figure out quickly when you have made a mistake. Making the same mistake for long can seriously affect some part of your life. In your business, a long duration mistake will have accelerated actual and opportunity costs attached to it. In personal relationships, the longer the mistake, the bigger the dent it leaves. The same goes for any addiction as well. The longer you are addicted to anything harmful, the effects keep on getting accelerated over time.

Making mistakes is not wrong. Making them for very long is!

The Biggest Threat for a Growing Company

A company is as good as the people behind it. Hence I feel that the biggest threat any growing business faces is that of Talent Acquisition & Retention. Getting smart people to join who are a good fit for the business is a must to drive growth. This is one factor which I feel is not highlighted enough and where a lot of large startups also fail.

Why even the best fail at this?

Google is the World’s most valuable company (as on May 12,2016). That being said, even the startup has not been very successful in retaining talent as well as acquiring the smartest guys lately.  Most of the new products at Google have been acquired and not developed in house. And the interesting thing here is that a lot of ex-Googlers have developed these products. A few examples of these would be Youtube, Doubleclick, Android, Blogger etc.

I believe to deal with this, one needs to understand answer the following questions:

- What is the culture of the company I am trying to build?

- To build that, what type of people do I need to recruit? Also how do I assess whether my existing workforce is maintaining and growing the culture?

- Is the culture I envision there in my company? If not, where are we going wrong?

Google has always been known to be a very innovative company with a focus on rolling out innovative and scalable solutions for customer problems. Google has been known to hire the best engineering talent. However to build scalable solutions, the business side of these solutions is where I feel the gap exists. To maintain or further enhance its growth, Google must address this gap and look at insourcing a lot of the innovative products it intends to offer its users in the future.

The Right Way to Startup

Stay-at-Home Budding Entrepreneurs

I see a lot of people who want to start some business but are not able to owing to some obstacle or the other. For instance, in India, a lot of societies are still not open to women going outside the house and working. Also a lot of women cannot go out to work because they have new-borns to raise.I believe if a person really wants to do something, he/she can find a way of working around these issues.

Look Internally- Look at your daily routine and see if there is something you are doing well, which can be done within what you are allowed to do. For instance, if you cook really well and cannot leave the house because of some problem, why not start a catering business from home. A mother who has raised children can advise other mommies on the best practices and so on.

Identify & Build Skill Sets – If you cannot identify any skill set which can be monetized, build on some. Figure out what you like doing and start reading and learning more about it. Once you feel more confident, work out a business model wherein you can work comfortably within the limitations you have.

Role of Venture Capital in the World Today

When you think of Venture Capital, you think of investors simply putting money into businesses to generate a higher than normal return. Yes, profit is definitely the primary motive of a Venture Capitalist, however Venture Capital as such has a much bigger role in the world order today.

Creating a Level Playing Field – If it wasn’t for Venture Capital, the balance in the world would further get skewed. The rich would get richer as they would be the only ones who could build big businesses. People with great ideas but no money would not be able to create businesses to compete with the bigger companies.

Creating Businesses & Jobs – Without risk capital, business growth would be limited and hence job creation would be much slower than what we see today.

Improving Human Life – A sustainable business is one which helps solve a problem. Venture capital tries to identify such businesses and helps them grow, thereby solving real life problems faced by us and hence improving overall human life.

The Web Based Startup

Most budding entrepreneurs look towards the web to build a business. So why is this? Is it because it’s a fad or is it because the web is going through a very high growth phase? Maybe a bit of both, but the main reasons are different and listed below.

Low Initial Investment – One of the advantages the web has is that the initial investment to launch your business is very low as compared to more asset heavy businesses. Entrepreneurs can invest a little bit of money, go live, get market feedback and decide the fate of the business, which is very difficult to do in non-web based businesses.

Reach – Being on the web means that you instantly have a global reach. This is probably the biggest advantage of the web. Though you will be required to promote your business on the web as well, a customer sitting in any part of the world can use your service (though this depends on the business model of the startup). Note: This might actually also work against the business at times as the web is one big, uniform space where all businesses compete. Hence a new startup will end up competing with the bigger players in the same space from day 1 itself.

Human Behavior – Slowly people are moving to the web for all their needs. This trend favors businesses which are web based.

Startup Model – The User Recommendation Engine

THE MODEL: A platform where users can search for and read about the best places to go, best things to do and experience to enjoy. Users can share and read reviews and recommendations of local establishments like restaurants, bars, plays etc.

STARTUP: ScoutDat (Indian startup)

WHAT I LIKE

Core Idea – A discovery cum recommendation tool for local restaurants, venues and experiences. With social proofing emerging as an important tool in the buying process, getting recommendations are increasingly becoming important for businesses.

Gamification – Users are incentivized for actions on the app. This is the key challenge any customer review based startup. Users will need to be given the right incentives to be able to interest them to engage with the app.

CONCERNS

Competition – Though there might not be too many players in this space in India at the moment, the startup will need to compete with sector specific portals offering reviews and more to users. For example, a Zomato gives customers an option to discover, book and read about restaurants. This might prove to be very challenging for ScoutDat.

Speak At The Right Time!

A Million Dollar Idea Always Needs a Billion Dollar Market!

'A Weird Business Idea'

A lot of times budding entrepreneurs ask me how a weird business idea was able to become successful. Initially even I used to start thinking how this happens. One day, I realized that defining what weird means may have the answer to this dilemma.

An idea can be weird in the following 2 ways.

Addressing a Weird Need – So in most cases, weird startups are actually ones which are addressing a weird need. The business model used might actually be very standard and successful in other spaces. Users may actually this inherent need which such startups are able to target and fulfill. I feel Snapchat, when it started, would fall under this category.

Delivery of Product/Service – The other case is when the need is a standard one but the delivery of the product or service is innovative or weird. Courier companies offering free travel for users just to send their parcels along was a weird but successful concept.

From my understanding, weird is actually a more crude way of saying innovative. These ‘weird startups’ have actually created a niche which did not exist before and were able to scale extremely well, just like an innovative company would do. And once these scale up, the weirdness of the idea is actually re-addressed as a ‘new normal” :).

The Online Review Business Model

A lot of entrepreneurs have tried to start online review websites but have failed more often than not. As customers, we all would like to read genuine reviews before making any purchase decision. So why are startups not able to sustain themselves?

Some points I can think of are listed below.

Gamification – This, or the lack of it, is the primary reason for online review startups not being able to generate user traction. Getting a user to write a review without offering an incentive is a far-fetched idea. Users need to be given the right incentives to come onto the website and write a review.

Revenue Visibility – Getting user traction through incentives tends to burn a lot of money. On the other hand, building a revenue model if difficult and revenue would generally take a lot of time to start rolling in. For this reason, a lot of investors are vary of investing in pure online review websites.

Competition – The biggest competition such websites face are from different websites selling products and services or offering users different services in different niches. These competitors provide some greater value to the user (such as ecommerce, bookings, information discovery etc.) along with user reviews. Hence a pure play review service finds it very difficult to get users to use it and get hooked onto it.

Raipur – The Capital of Chattisgarh

My wife is from Raipur, Chattisgarh, and I have personally been there a few times in the last couple of years. I have seen the city growing every time I go there and with a population of 4+ million, the opportunities for entrepreneurs are growing as well.

Education – Though there are now a lot of top schools in Raipur, there is a gap in the private college space there. Most students leave for other cities (Pune, Delhi etc.) to pursue higher studies and end up getting jobs there and settling there.

Retail – The purchasing power of people is going up and retail probably holds the biggest potential. All majors brands are slowly establishing their presence in this fast growing market. Even premium brands are now getting attracted towards the city.

The Services Sector  - Raipur and nearby areas are known predominantly for the Iron & Steel & Rice Industries. I feel that with a young and upwardly mobile population, private companies offering services are required to keep the youth from moving out. For this, probably a better education system will need to develop first so that trained youth can be hired by companies who wish to set up in the city.

Entertainment & Wellness – The city needs more outlets like gyms, restaurants, bars etc. catering to its young population.

Your Business Card

Your business card is important since it is responsible for creating an early impression on people who you give it to. Though a lot of us consider it be trivial and unimportant, a ‘good’ business card can go a long way in starting the relationship you wish to build with the other person.

Design – The design and layout tend to suggest a lot about your approach towards things in life. Also if you are representing a company, the business card speaks about the culture of the company. Too much text can suggest a diligent culture, a lot of designing a creative culture and very little of both can suggest a to the point culture with a focus on direction.

Content – Content also speaks a lot about you. The amount of content and the way of expressing it are key.

So now that we know why a business card is important, how do we design one for ourselves. I feel there are 2 factors we should consider before designing one.

The Target Receiver – A business card is given to all the people we meet and hence we might think there is not specific target receiver. However, there is. If you are a B2B business, clients are. If you are a B2C startup, probably investors and mentors are. Try to identify who your prioritized receivers are and make a card which would appeal to them.

Goal – Once you know the target receiver for the card, you should know what the card should do for you. For instance, if you are approaching clients, your card should speak about things they would value. Maybe things like year established in or number of clients served etc. can be mentioned without cluttering it too much.

Have Belief in Your Goals

Use-Case Marketing

Since a customer is exposed to innumerable marketing messages today, it becomes very important for a marketer to send out a message which can attract the attention of the customer and retain it for some time. A good way to do this is through ‘Use-Case Marketing’.

Using different use-cases in marketing messages has the following impact:

Grabs Attention – Some use cases might be relevant for the customer and he/she might have a similar need at that point in time. Once this happens, the customer tends to read more about the product and how it can be used to satisfy the need.

Creates Startup’s Utility – Now since the customer has read the use case he/she might be interested in and how the startup can help, the customer knows what the startup can be used for.

In ever increasing competition for customer eyeballs, I feel Use-Case Marketing should be part of the marketing strategy of every business.

In fact, for Halllp, I am relying heavily on it. I have tried to develop several potential use cases for the startup and will be pushing these through different channels like Email, Social Media etc.

Some sample use-cases are given below:

Manish Hada - The Brand

Time and again, it is a good exercise to self introspect and know what you are doing, where you stand and where you see yourself potentially moving in the future. The idea is to assess and analyse ‘Your Personal Brand’.

I did such an exercise yesterday and the following is what I could come up with.

MY QUALITIES

Bubbling with ideas – I tend to see potential business ideas all around me.

Serious when working – I am a serious guy when it comes to work. However I truly believe that all work and no pay makes one dull and burn out faster.

Motivated through people around – I am a people’s person and need people around me to get the best out of me.

Look for long term solutions – I only believe in looking for long term solutions and projects. The shorter term for me is just an intermediate period which we need to cross to reach the longer term vision.

Take responsibilities – I like taking responsibility.

The smartest should lead – I believe that the smartest person in the room should lead a business and everyone should learn from everyone around.

Can’t see a wrong decision being implemented – I just cannot see a decision being implemented which I believe is detrimental. I believe that the onus should be on the person suggesting this decision to prove clearly how it would be beneficial before proceeding.

MY STRENGTHS

Strong startup experience – I have started up a couple of times and feel that the learning I have got from these is amazing and immense.

Bootstrapping experience – Since both my startups were bootstrapped for a long period, I have learnt how to stretch my money to get the maximum return from it.

Managed teams – Maybe not big teams but I have gotten opportunities to manage smaller teams mainly focusing on operations.

Idea Generation & Modeling – I see ideas around me and can build models for converting them into businesses. I have experience of modeling startups in the e-retail and e-advertisement spaces.

Growth hacking – I believe that it is very crucial for every business, no matter what stage, to get the best return on any spending.

Worked across industries – I have experience of working in Hospitality, Education & Retail.

MY WEAKNESSES

Jack of all trades – This is a problem entrepreneurs face. They tend to be jack of all trades and masters of none. This tends to affect their employability.

MY ACHIEVEMENTS

Start ups –

Bitequest: scaled well; became market leader; good idea

Beveragewala: scaled well; good sales in short period; idea not sustainable

Other experience –

Meenakshi Group of Schools: set up systems; built a brand

MY GOALS

Be it my own startup or any other company I work for, my goals are consistent. And I genuinely mean this. I believe doing ‘good work’ is important with good people around you and it doesn’t really matter whether the company is owned by you or not.

Good work would include the following for me

-     : Scaling a business

-     : Creating a market leadership position

-     : Creating a cohesive, young and vibrant team

: Creating value in and enjoying whatever I do

This may not be very comprehensive but gives an idea about who I am, what I've done so far and what I am looking to do going forward in life. Building your brand is a continuous process and hence if you guys have any feedback, would love to get it. Please mail me on manishhada@gmail.com.

Leaving Your Country & Starting All Over in a New One

Just a month left before I move to the Netherlands for my MBA. I am very excited but at the same time am nervous as well. The thought of leaving the space where you have grown up and learnt whatever you have to move to a totally new place where you will need to establish everything from scratch is a scary one.

Moving to Netherlands really excites me for the following reasons.

A New Start – I have tried a lot of things in the past decade and have been experimenting with various things. Now I seek a new start and a new approach to me life. I am very excited to go to a new place, meet new people and start building my life and career from scratch.

Better Lifestyle – I am really forward to living in a place with less pollution, traffic and one where I can live a better and fitter lifestyle.

More Developed Country – Since Netherlands is at a more advanced stage as far as economic and social development is concerned, I feel the learning I can get living and working in such a country will be more. I am hoping to get exposed to better processes and systems I can learn from.

On the flip side, there are various anxieties I have about moving to a new country.

The ‘Outsider’ Effect – I feel that for a long time in the immediate future, I might face this. Being an immigrant, getting accepted into the local society might be a challenge.

Biases – People tend to brand other people based on their country of origin. Having an existing bias tends to affect and distort any new relationship.

Expensive – Expenses will be a big concern for me, especially till I am not engaged professionally.

Learning – Though I am excited about experiencing life there, this will be a challenge for me and will require me to learn and grasp the lifestyle and policies of a new country as fast as I can.

Key Metrics in an Ecommerce Business

Having started up in ecommerce, I feel that it is a very complex business which requires a lot of effort, resources and patience to become sustainable.

The business is a lot about tracking key metrics and how they evolve with the growth of the business.

Customer Acquisition Cost – The CAC is a key metric to check whether the business is spending more on acquiring customers than what it is making from them. This involves minimizing the cost of acquiring website traffic and optimizing conversion rates.

Ticket Size – Since most ecommerce businesses lose money on smaller orders, increasing ticket size is a strategy used by most ecommerce players to become profitable.

Operating Profit – This is the key metric which is tracked to see when and how the business will become profitable and sustainable. Ecommerce in India has matured from an Industry which is focused on growth to one which is now focused on sustainable growth.

The Startup Reproduction Cycle

The Startup Reproduction Cycle is similar to the Human Reproduction Cycle. It may not necessarily last 9 months but has 9 phases which require the founders to mentally strong and physically active.

Phase 1 – The Seed Stage (happens instantly)

This when a person comes across a gap or a problem in a market which he/she starts thinking about. This problem may not be necessarily faced by that person.

Phase 2 – Idea Finalization (takes between 1-2 weeks)

Research is done to validate whether the idea is strong enough, the market is big enough and to judge how much competition exists.

Phase 3 – Building a Team (can happen soon or take forever)

The search for people having the passion and skill sets begins. This is very crucial as the founding team has a big role in a startup’s success or failure.

Phase 4 – Build Prototype (can take between 2-4 months based on the product’s complexity)

If a prototype can be built in house, great. Else vendors are sought to help with this stage.

Phase 5 – Register a Company & Get Other Licenses (in India, it can take up to 1 month currently)

Phase 6 – Make a Business Plan (can take between 1-3 months)

This is the deck which shows the long term vision of the startup. It is comprehensive and can be used to show to any big stakeholders or investors who might be interested in it. Tips on building a deck can be found here.

Phase 7 – Make a Short Term Plan for Launch (takes up to 2 weeks)

This is a detailed plan for launch where all operations and marketing strategies are laid out for a short time period (generally 6 months).

Phase 8 – Hire Resources & People for Launch (can take up to 1 month)

Based on the launch strategy, the necessary arrangements and hiring is done.

Phase 9 – Launch!

A lot of the phases above are carried out simultaneously. Generally the entire process takes between 3-6 months before a startup is born :).

Tackling a Problem in Life & in Business

We are faced with problems in life and in our work on a regular basis. I have a framework which I use to tackle problems which I face in my life. Having a framework is important as it gives you a way to approach the problem at hand.

Step 1: Identify the problem very clearly. It should be defined concisely in 1 sentence. For example, a problem for a business can be “Low customer conversions”.

Step 2: Define clearly all keywords in your problem statement. Here targets are also defined. Taking the above example, state what low means, i.e. what the current rate is. Define your target for the same. After this, define customers very clearly and comprehensively. Who your customers are, the demographics, the source etc. Lastly, define what conversion means. This could be a sale, a sign up, a subscription etc.

Step 3: Work out a solution. Using tools like surveys, feedback and opinions, try to identify why this problem exists and what can be done to overcome it. For example, a business can try a free trial business model to make customers try out the service before purchasing. This creates customer trust and could lead to higher conversions.

Step 4: Implement the change you think can solve the problem. Try to highlight the same so that is clear and visible.

Step 5: Assess the developments. This is the step most of us tend to ignore/forget. It is crucial to assess and identify without any bias whether the problem has been solved. If yes, congratulations, if no, go back to Step 3 and keep reiterating till it does.

Setting a Price in Advertisement-Based Business Models

I was asked this on Quora and it got me thinking. How should one set a price in advertisement based business models?

I figure that the following factors should be considered to arrive at a pricing level.

Traffic Demographics & Engagement – The business must analyse the traffic it gets; whether it is premium or mass, male or female, coming from bigger cities or smaller ones etc. Since a customer’s demographics can be used to assess the average spending of the customer, pricing should adjusted based on it.

Relevance – If the startup caters to a niche or a very limited audience based on an interest, demographic etc., the pricing tends to go up as an advertiser can reach out to a more focused audience.

Comparables – As the market for advertisements is very competitive, every business must keep an eye on competition before setting their pricing levels. An advertiser’s budget is limited. Hence a business has to assess all possible options the advertiser has and must not restrict to only competitors which directly compete with it.

The Female Entrepreneur

Women pursuing full time professional careers is very common now, even in developing countries like India. They are emerging as equal contenders to men and are even preffered in a lot of career paths today. Entrepreneurship is one path where I feel more women need to enter owing to the advantages they have over men.

Emotional Connect – Women have a higher emotional quotient than men. Hence startups run by women will probably be able to establish a better emotional connect with their customers.

Decision Makers – In a lot of purchasing decisions, especially for B2C startups, women tend to be have more say than men. Hence a woman entrepreneur would be able to understand the customer better on average.

Better Communication – Based on my experience, women tend to be better at communication than men. Good communication within the organization and with customers is a must for building a healthy and growth oriented atmosphere.

On thinking about it further, I feel the reasons which have limited the growth of female entrepreneurs are the following.

Family Responsibility – After marriage and especially after having children, the responsibilities on a woman makes it difficult for her to commit to a career as much as she needs to.

Emotions vs. Practicality – Having a stronger EQ can work against you as well. In business decisions, relying too much on emotions can prove detrimental for the business.

Fair Chance – No matter how far we have come, in a lot of cultures and countries, women are supposed to only look after their families and children. A fair chance has not been given to women to pursue careers of their choice.

Entrepreneurs Don't Think, They Do

(source: https://www.pinterest.com/iebusiness/entrepreneurship/)

Failure is the Best Teacher!