1. Be HUMBLE
I asked Housing.com (perhaps rudely) a question on why their hoardings media strategy made no sense to me as a media observer. The CEO of Housing – Rahul Yadav jumped in and his reply was insulting, mocking and most intriguingly supportive of his team members vandalising my personal Wikipedia page as revenge!
His vanity and pride was bewildering! I mean he was young bright startup guy who had just got started. Where was the arrogance coming from?
Just a few weeks later, Rahul Yadav was fired from his own Company and it’s public knowledge that housing.com is in semi-comatose state and will very soon be ‘gifted’ away in a so-called ‘acquisition’. In short, the Company is destroyed.
Lesson – BE HUMBLE. Just because you are an IIT grad doesn’t mean that people who are twice your age and 3 times more experienced have no brains. Learn to listen.
2. Money doesn’t grow on trees nor multiplies like mating rabbits.
The collapse of FoodTech points to the madness that has always followed ‘Investment Frenzies’ from time immemorial. From Tulip Mania to the South Sea Bubble to FoodTech Poisoning, the theme always remains the same – Investors don’t usually want to understand business. They love hype. They put money behind hype because they assume it will bring them extraordinary returns.
Lesson – Returns are rarely extraordinary. Anything of value takes years to create. So if you want to create value and enjoy the warmth of that satisfaction, don’t get lured by ‘free money’ to do silly things. You will land up being locked up in a conference room for 2 days without food or water by your own employees.
3. Don’t follow the leader. He may be Pied Piper.
After Flipkart and its sis Myntra went ‘all app’, everyone followed them blindly like Pied Piper. It was as if Moses had pronounced that all things would only be app; and desktop & mobile web would vanish from our lives faster than Arnab Goswami could interrupt your speech.
Alas, that ‘vision’ turned out to have a bit of glaucoma and everyone suffered. Winding and unwinding critical consumer experiences turned out to be brutal and consumers lost faith and trust forever. So many consumers I know abandoned many ‘karts’ and never came back to them because they were forced to go app on mobile!
Lesson – Follow your own path. If you have a fashion portal, you KNOW that garments will look best on a desktop. Then why compress it into a chintu mintu APP screen just because some nerds dreamt of that thought sitting on a pot?
4. The Big Western Brands can’t be wished away and will have unimaginable resources.
When Amazon entered India, lots of martyrs phoo phooed them and said, “They will never last…They don’t understand India… India is uniquely desi…” blah blue blee…
A couple of years later, they couldn’t have been more wrong.
Amazon is the Big Bad Gorilla in Indian E-Com and is eating up its competition for breakfast, lunch and dinner. Also, it’s NOT a regular VC funded business and hence its business dynamics are different. Amazon generates mountains of cash via its Cloud Hosting business and sprays some of that largesse in India. (Read detailed note produced later)
Lesson – The Web Mobile Startup world has no boundaries. There are no passports required to play. The biggest brands in the world WILL compete with you and try to make you gaajar ka halwa. Get used to that!
5. But Davids will always be there to fight Goliaths!
Ola is India’s David fighting the mighty US Goliath called Uber. They are a pain in the neck for them. Actually more like spondylitis.
This just proves that while the big and mighty of the West can come and spray their might around, if you have technology, INSIGHT (Ola started so many firsts that have been copied by Uber like pay in cash, etc.) and the drive to fight, you will become a very fierce opponent to a digital global brand.
Whatever the outcome, Ola has created massive value. And it will reap massive rewards.
Lesson – Be Innovative not just a great copycat. Sometimes the innovator even beats the inventor!
6. Don’t build a business on a VC thesis. Make your thesis get funded by a VC instead.
VCs dominated the ‘Investment Theme’ in 2015. First it was “X of Y billion people will buy online so let’s invest in e-com and SPEND money in getting consumers – everything else we can take care of later”. A bit later came “Fashion is the best bet for e-com”. Then came hyper local, local hyper, etc. After that, everyone who owned a wallet got funded. Then suddenly VCs realized that Indians will buy cars online and hence car portals should get funded. The year ended with everyone in the Rooms for Rent space looking more delicious than Marwari Dal Baati.
Very few of these theses will play out, and many will not. There is a famous VC who told me on a panel, “I will fund anything that exactly copies a business that is successful in China”. We saw what happened to the OOH media screens business as a result (copied directly from Focus Media China).
Lesson – If you agree to build a business basis a VC thesis, be prepared to be orphaned when that thesis changes. Like Baskin-Robbins’ “flavor of the month”, VCs change their choice of investment idea. Make sure you are not left holding a melting ice cream cone!
7. Valuations mean nothing. It’s a ‘Curse of Vanity’.
2015 has been a crazy year. The non-stop news mill was about super stratospheric valuations and how much startups were worth. The term ‘Unicorn’ seemed to be invented in this year.
Valuations don’t mean anything especially at the ‘raise’ point (the moment of getting invested). In fact, it’s a curse – the higher valuations you demand, the more deadly your terms will be (higher liquidation preference, guaranteed returns, etc)… which you will be forced to sign.
The challenge is that when valuations crumble, a lot more damage occurs vs. if you raised money at lower than expected valuations. The morale of the founding team gets destroyed. The value of ESOPs evaporate. Ratcheting (see my potha on this) kicks in. The next round and its valuation become even more unpredictable. The folding up of Komli Media into an Agency is a great example of lofty valuations being beaten to pulp and the ensuing pain that follows.
(Click to expand my comic below 🙂
Lesson – Be happy raising money at the RIGHT TERMS and for the RIGHT AMOUNT. Get greedy about growing your business – not about how large the zeros look on your paper valuation.
8. Make profits not excel sheets.
99.8 % of all pitches I see make no BUSINESS sense. They have no concept of sustainable revenues BUT have all the ideas of possible expenses. The rocket science-laced excel sheets these wannabe entrepreneurs make would make Bill Gates and Steve Ballmer (the inventors of Excel) begin to sweat and shudder.
How can such businesses survive? Consider the much fancied ‘Fashion E-Com Business’. The margins in this industry are now emerging to be -30-45% (see last statements of Jabong, etc). Now imagine, if you are running out of money in 6 months and need to make your fashion portal profitable, how will you move margins from -45% to +15%? THAT’S A SWING OF 60% !
Imagine going to your favorite restaurant and paying 60% more all of a sudden! Would you pay? This is exactly the reason why most top funded startups are facing ‘cost optimization’ instructions from their VCs and are furiously figuring out how to make money.
Lesson – Build Business Plans UPSIDE DOWN. First plan profits and then figure out the cost and scale to build that business. This is exactly how Coke, Pfizer and GE got built. They modeled themselves for PROFIT not for BURN.
9. Innovations RULE
When I heard of the “Free Charge” business a few years back I was mildly impressed. I mean, how long and how sustainable was this thing? I had run contests2win.com before and had experienced that concept that lures consumers with freebies slowly fades from their delight factor.
Come 2015, Freecharge was acquired by Snapdeal for US$ 400 Million! Now who cares how much was cash/equity – the point was this was no small change! A GREAT INNOVATIVE idea had been nurtured, polished and SCALED – something I could not do at contests2win.com!
The same was with Paytm. I mean who thought of an ‘App Wallet’ as an answer to solve for the mental block Indians have for paying online via a credit card?
Lesson: Innovations will always be highly and amazingly rewarding. As long as you can put a few years of utmost sweat, blood and tears behind a great idea, it will give you extraordinary return!
10. Don’t Cheat – you will get caught and your reputation will be ruined
The Volkswagen Diesel scandal erupted in full glory this year and captivated the world. I mean who would have thought that a GERMAN Car Maker of the scale and size of VW would actually instrument a device to be inserted into the exhaust pipes of their cars ONLY to fool the Pollution Authorities?
Cheating as a strategy is barbaric. It will destroy you, your reputation and all people associated with you. I think you will agree when I say that no one today would like to join the Sahara Group because of its tainted reputation. Sure, they have palaces in Lucknow, but who resides in them? Only the ghosts of regret.
11. Advertising is the girl that flirts but ditches you
The ultimate ‘honey trap’ of 2015 was startups getting lured by the false promise of ‘Advertising will make your Company succeed’.
I would encourage you to read a note of mine produced below and if you don’t have the time, just remember this:
YOUR PRODUCT OR SERVICE HAS TO BE GOLD. Your consumers will become your marketers and make you and your brand famous. Consider for example, Whatsapp that has stormed into our lives. When did you see a Whatsapp ad on TV or a hoarding or those ‘bus handles’ that dangle in your face when you take a ride from the terminal to the plane (sometimes longer than the flight itself)?
Whatsapp has 300+ MILLION users in India and is exploding.
Now consider ‘Hike’ – a chat app by a rich and famous kid who thought advertising and some gimmickry laden ‘stickers’ would beat Whatsapp. Where is Hike now? They are still advertising ‘weird’ reasons to use their app (on bus shelters!!) but I have not met anyone in the past 6 months who uses Hike. Hike has gone for a hike…
Advertising DOES work when you have to expand your category (naukri.com ads in India 5 years back to get people to use online. Or when you have to influence a target audience who is NOT online but will use your service when influenced – shaadi.com where parents add biodatas of their kids in the hope of getting them married).
Lesson – Build Product, Product, Product, Product, Product until it SCREAMS at you with perfection. The next morning when you will wake up, you will be more famous than Elvis.
12. CX (and Love) can change the world
Have you used Tinder? Nervous because you are married/engaged/committed/mentally committed/emotionally committed?
Don’t be a moron.
Use the app and see for yourself how with JUST A CHANGE IN CX (Consumer Experience = UI (User Interface) + UX (User Experience) changed the dating scene forever! Just one change of presentation disrupted a 15 year old mature business!
Instagram did the same with photos – I am not sure if you know but in 2015, the most popular kids’ names in America are based on the names of Instagram filters 🙂
Lesson – Focus on Consumer Experience and test your product on your enemy, your dog, your watchman, your Uber driver and your local Shiv Sena goon. If they ALL ‘get it’, you are home. Then it’s all about riding a Lamborghini to the bank!
12.5. Dreams do come alive
I was a jobber in my father’s factory just 17 years ago and worked with my hands on socks knitting machines. A couple of weeks ago, I was shaking hands with the President of India and discussing Tech Ideas for India at the Rashtrapati Bhavan.
How did this happen? Only via the spirit of entrepreneurship. I dreamt of ‘doing something’ bigger and better than making socks for the rest of my life and the Gods and Gurus favored me. But I can also tell you that I slogged like a dog to achieve the little success that I have found.
Lesson? Anything is possible, anytime and to anyone. You have to JUST KEEP ON TRYING.
Have a great 2016!
What were your lessons in 2015? Please add them as comments!
Suggested reading –
First Published on: Dec 31, 2015