TheRodinhoods

How I built a “1 crore a year” company and led it to bankruptcy

Vinayak Talukar

Awarded the “RodinStar” Post of the week!!

The title sounds weird?  Well, that’s exactly what I did.

I started a super cool company called IdeaFlask back in April 2011. With just 2 Lakhs in my pocket and absolutely zero business knowledge. It was never about money or stardom. I wanted to evolve the education system. Not the stuff that shows animated videos, but a system that could help every child be a better person. I started my journey in a small second tier city Belgaum, Karnataka. From there on I went to create a revenue of a little less than 1 Crore a year in 3 years. And went bankrupt a month ago from writing this post. We at IdeaFlask designed some awesome User Experiences for our clients. We also built 3 products, 1 dead and 2 just launched. A month ago I shutdown my dream company IdeaFlask. And now figuring out what to do next.

One thing we always did at IdeaFlask was we always strived to create something amazing and that was the best part of the journey, we loved what we did. This story is with twists, turns, tears, smiles and lots of lessons. And now I wanna share it with you guys, just so that the first time entrepreneurs among you do not do the mistakes I did.

My plan from day one was to execute few service projects, make some money and pour that into building a disruptive educational technology product.

The lonesome beginning

 

It was back in mid of 2008, me and 3 of my roommates started dreaming of a software development company. We had executed pretty awesome freelance work and had the confidence that we could successfully run a software development company. But then we didn’t have any money in our pockets. So we decided to work another 6 months, gather money, quit jobs and start a company. Well, 2.5 years passed but my roommates gathered neither the money nor the courage. So I decided it was enough.

It was in December 2010, one cold night in Chicago. I was walking on the Madison street after a few rounds of Black Dog, wondering what was I doing in USA? I was helping a potato chips manufacturing company predict how many packets will they sell next month. Was that even worth doing? Making people unhealthy. I was supposed to be in India, doing something for education. That was in my heart and mind. And still is. So I called up my would-be co-founders and told them, I am quitting. I am going do this with or without them. Well, they didn’t join. And I was frustrated that I kept waiting for them for 2.5 years.

On 1st of Jan 2011, I quit. Of course, there was this notice period at my employer. So had to work till March. And the day finally came, 4th April 2011, it was Ugadi. I remember it like yesterday. I started a User Experience design studio called IdeaFlask in Belgaum, with just 2 lakhs in my pocket. Well, honestly, I had no clue what I was going to do. I had no clue how I was going to get clients. And I always knew, not staying in a metro was going to be a challenge in terms of talent, business, clients, etc…

Yet, I felt like a Rambo, a one man army 😛 The guy, who can get it done single-handedly. This was going to be the worst mistake of my life.

Do what you LOVE, always.

 

One thing I always trusted, I loved design (User Experience). I did great designs at my employer’s. I had great rapport and reputation for my work. And design was niche, and still is. So I was counting on that. And sure it did work. The very next day of starting, my previous manager gave me an assignment to design his product, a startup that was on his mind. It was not big, just a 2 lakh project, but back then it was such a booster. I was like WOW !!! I hired two freshers, more for their character than talent. And sure they did not disappoint me. They were great hard working guys and we 3 were such a great team.

Six months into the company after doing smaller assignments, came a huge opportunity. One of my ex-managers now working abroad, gave me a call and asked if we could design a pharmacy application for a country-wide government hospital network. A large part of my career, I had worked on the healthcare industry and was quite capable of doing it. But the time was very less, just 3 months to execute the project. It was going to be a huge pressure on us 3. Me being the only designer had to soak up a bulk of that pressure. For over 4 months we worked day and night and even weekends. We used to come to office at 11 am and stay awake upto 4 AM. Then again back at 11 AM. We worked our our hearts out. And then came the paycheck, $50,000. I could not believe my eyes. I had never ever seen that amount of money.

It was 2012, we 3 were super pumped. I got brand new computers, a new car, a simple Tata Nano, raised my guys salaries and gave an equity of 5% each. Now was our time to take on the Education Industry and show them how it is done.


But then, we had no clue what we were supposed to do. We spent a couple of months trying to figure out how we are going to achieve our objective through technology. I being from a UX background, strongly believed in research before execution. We went talking to many teachers, professors and students. After a lot of careful thought, we came to a conclusion that the pedagogy (the method and practice of teaching, especially as an academic subject or theoretical concept) used in our education system is a big flaw and we should fix it.

So we started exploring more on different pedagogies and created a wonderful platform, we called it EduFlask. It was a platform where students could learn through comics. It truly was super cool, that not just we believed, we tested the prototypes on various students and they could grasp the concepts so well. It was like magic. Looked like we had a super recipe now. Our mission was to enter the market with Engineering education. Create this beautiful platform for colleges to enroll and all their students would get access to the courses. It was also a social platform for students and teachers to interact.

Build things that scale

 

By the end of 2012, we started feeling financial pressure. I thought of raising some angel money. I started interacting with many angel investors and accelerators. At one accelerator, we cleared all rounds of discussion and it looked very promising. I was asked to come down to the investment company’s office in Hyderabad for one final discussion and close the deal. As a typical investment, they had invited other entrepreneurs for the evaluation of our startup.

The others said it was a bad idea what we were doing. They said the sales cycle with educational institutes was very long and only had a conversion rate of less than 4%.

And the worst drawback of our platform was, creating such high quality content needed highly skilled people, imagine writing a course to teach C programming through comics !!! I was told, hiring such people will be a bottleneck.

Understand, thoroughly, how to build an MVP I was heartbroken.

I could not sleep a single minute in the bus that night.

When I went to office and spoke to people about it, we realized the flaws we had made. We never understood the concept of an MVP back then. In a month or so, we ran out of most of the money. I remember I had exactly Rs. 12/- in my bank account. Now we had no choice but to get a few more service projects. And yes, sure we got a big fish.

In early 2013, we got a huge healthcare project, but this time, there was a condition. We were supposed to work out of the client’s location at Bangalore for tighter coordination between us and the client team. With no choice, I accepted.

Healthcare is very sensitive domain. People’s lives are at stake. All my life, I have designed products to make people’s lives better. And here was a great opportunity to do that again. I hired a designer in Bangalore to work with me and there was a 4 member team in Belgaum to support the project. I had hired a couple of graphic designers and planned to scale them to UI / UX. Even they were interested. We kick-started the project and I spent around 3 months in research in the initial stages.

The single best resource your company has is YOU.

 

Back at my Belgaum office, there was no one to take care of the operations and the team was on their own. The newly hired designers needed guidance and mentor-ship from me, I was not there. I bought them courses online and hoped they would learn. That didn’t go well. So I started making frequent Bangalore-Belgaum trips. Lots of time wasted.

I started feeling the heat of not having a co-founder, the Rambo in me was taking a beating. Being in a 2nd tier city, I did not get any good experienced people. Operations were getting tougher.

If something does not fit your 5 year vision, don’t do it.

 

By this time we had got other projects too. We had partnered with a reputed auditor who specializes in ISO certification. He had a long list of clients and his vision was to create an ERP that would help his clients get ISO ready. We were his technology partners. The idea was his and he made the sales too. We were supposed to build him the ERP at a low cost, however the customizations if individual clients requested and support, were on our billing. That was a good deal. I hired more people. We already had become almost a team of 18 people. But my absence was killing the team.

If you are supposed to choose between money and ethics, choose ethics.

 

Back at my clients place in Bangalore, the projects wasn’t going well. Most of my proposals were rejected. The design was going in a wrong direction, we were risking the usability of the product and in turn the quality of care provided to the patients. I felt guilty. I quit the assignment. It was just not ethical for me.

By this time, I had to fire one of my initial hires. A guy whom I counted a lot on 🙁 It was a real sad day for me.

I got back to Belgaum and started spending more time with my team. Training them on UX and executing some really cool Enterprise Apps.

The ERP client, never paid us on time and we were a mammoth 18 member team with less revenue. So I knew I had to get a larger project to fill our appetite. And in less than a week, I got another huge large design project. For me, running the design studio was like being on a bed of roses, I never had scarcity of work. That is because we had built a beautiful niche for ourselves Enterprise User Experience. So far, I have never made a single marketing call or email. All work I have ever got was just through referrals. Do great work, people will spread the word.

Running services and building products at the same time, is a recipe for disaster.

Even this time the client wanted my presence at their location in Bangalore. The team was worried that in my absence things would go bad again. And sure they did go wrong. I handed over the responsibility of managing the team to a new hire. He was 3 years experienced. I counted on him and moved to Bangalore again.

I hired a designer there again, and executed this project brilliantly, the client was very happy. And we made their product pretty awesome. Sure this project was huge and we made good money along with other projects, in 2014 we almost hit the mark of 1 crore revenue.

In the early part of 2014, inspired by the difficulties I faced executing Enterprise Design Projects, an Idea of Usability Analytics started lingering in my mind. There was a real problem that all of my clients faced. And I knew exactly how to solve it. But then my team and I were so stuck up executing the services projects, we never found the time needed to build this product.

Celebrate, whenever you can 🙂

The year passed by and I celebrated this awesome year end by a road to Nepal from Bangalore and back. It was an amazing 6800 KMs drive. And from my previous experiences, I knew that blogging while traveling is a tedious task. And when I come back from travel, I won’t find enough time, I won’t remember the events and their time, and so on… And so we built a small travel blogging app for this purpose, there was no business behind it. It was just to solve a personal problem. I made a team of 3 people in the company and gave them this task. Well, we kept adding feature after feature to it. And build a super awesome travel blog, Firaa.me, that we never wanted to market 😀 Wasted 6-8 months behind this. And the reason it took so long was because I was not with the team. I was busy solving my customer’s problems.

Either my death or Niravana, had to happen in 2015. I decided that.

I was never a services guy, I always thought of being a product company. And then early in 2015, I realized, till now I was running a rat race to earn money for survival.

By now I realized doing services, I can never focus on products. And decided by the end of 2015 I need to build a self sustaining design team that will execute the projects and I will personally focus on building the products I have ideated.

In May 2015, we started building the Usability Analytics tool that I had thought of 1.5 years ago, UXgage . I got many design projects too. I moved some of my team members to Bengaluru, so that they could coordinate tightly with the clients. Spent quite a bit of money on the office and hiking my guys salaries according to Bengaluru standards. I had enough buffer money with me to survive for 6 months. I thought that is good enough time for the team to be self sustaining.

In June of 2015, I canceled the contract of the big project that kept feeding us for over 2 years. It was just killing too much of my time and none of my team was able to carry it forward  on their own. I could not even find a suitable replacement for myself. Then the plan was, I will start getting smaller projects, hand it over to the team. The team will execute, and I will only be the reviewer before the designs are sent to the client.

I started to focus more on products – we really built a cool Usabilty Analytics tool. We showcased our product in many startup events and we were show stealers wherever we presented. We also won an award at a start competition at Sandbox Startups. The travel blog that we built and just forgot about, we saw one fine day, there were tons of people actually creating stunning trips using it. All of a sudden the products were doing great.

But the service projects were in a pathetic shape. The team failed to execute even a single design project. My presence was always needed, they had major communication issues. I had to be involved even in writing an email or taking a call. They lacked in communication skills. But, they were super duper hard working, kick ass designers. I should be so lucky to have them. We were like a family, ready to sacrifice anything for eachother. But they lacked the exposure to execute these projects. They had failed to learn, despite all the resources. I had failed to teach them, inspite having this great team at hand. Since, we did not execute any project, we didn’t get paid at all for the last 7 months.

It was time to die.

In October, I ran out of my buffer money I had. I could not afford to pay anyone anymore. I could have got myself back onto to the service projects and get the company back on track. I definitely could have done that. But I didn’t want to. This time I wanted to avoid the trap of being in services vicious cycle. I wanted to only focus on building products. I realized, specialized services like UX, is not a scalable business, at least in India.

It was time to call it off. The toughest decision I have ever had to take. I was in Bengaluru with my 4 member team. I made a Skype call to the rest of the team in Belgaum. And told them, I am shutting this company down and letting everyone go. There were tears in the room. People could not believe we were in such a situation. And then, I heard something, that was worth more than anything money can buy.

At that point, being a millionaire or a billionaire was immaterial. I was so proud of myself. The team told me, they wanted to work without salary for the next 6 months. They told me, they had saved enough money and salary is not an issue. They told me, we have embarked on a mission to build 2 products, let’s do it. And that moment, I was spellbound. But I could not keep them without salary for sure. That was completely against my ethics, because I had no clue if these products would work or not. I did not want to risk their careers. So with tears in my eyes, I let them go. Thankfully, all have got good jobs now. They made me so proud.

And like classic IdeaFlask that celebrated every tear and smile, we celebrated our end. It was time for all of us to start a new journey, pursue a new dream.

Your friends are your biggest support

And then there were friends to my rescue. My friends bailed me out. I sent them a message saying exactly this “Dude, I am in deep trouble. I need money. But have no clue when I can return it. So please let me know if you can help me. Make sure you give me only what you can afford to, because I do not know when I can return.” I sent that to 10 people, and in no time I had Rs. 5,30,000/- in my account. I was like, WOW. I was so lucky to have such good friends.

BTW, that ERP client still owes me Rs. 10,00,000/-

On the last day at office, we spent time trying to analyze what the hell happened and we realized our top mistakes:

We recently vacated the office premises and trust me, I have never been heartbroken like this before. I felt the loneliest ever. I wept, oh yes, I did. The following will be the saddest before and after pics you will ever see.

Here are my learnings from my journey:

Right now, it’s just me and my current co-founder Siddharth. Yes, I have a co-founder now. We are trying to figure out the future. We are thinking of continuing working on UXgage.com and Firaa.me. Let’s see where the boat sails. Adventure 2 begins 🙂

What do you think we should have done better?
What do you think we should do now?

Let me know 🙂

If you have any specific question or just wanna say a hi, shoot me an email at  vinayak@uxgage.com or tweet me @vnayak

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Originally published on TRH on December 17, 2015

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