I am very impressed by the ingenuity and resourcefulness of Indian entrepreneurs. Having invested in 20+ companies in Silicon Valley and 7 here, I believe great entrepreneurs exist in both locations. Notwithstanding all the inherent challenges (smaller markets, lots of red-tape, insufficient infrastructure, etc.) of the Indian ecosystem, the founders in India go through a ton of “useless time-wasting nonsense” to build their ventures.

Let me first mention this post is not about Indian entrepreneurs VS. American ones. Its about how Indian entrepreneurs can create as lasting institutions as American entrepreneurs have done targeting American markets.

There are 3 things that cause startup success according to Marc Andreessen:

three core elements of each startup — team, product, and market.

Most entrepreneurial teams in India are arguably (I believe you can debate this, but both sides of the argument will be valid) of equal caliber to those in America.

Product to me is a function of ideas and insights that meet a market need or problem. Which I think Indian entrepreneurs can do better, but are pretty good at. Notice the number of US startups that have either built parts or all of their product with Indian talent.

There’s one thing inherently missing that Indian entrepreneurs lack that hurts them more than anything else.

Lack of market knowledge.

What is market knowledge? In my own terms it comprises of 3 things:

1. Information about size, landscape, key players (existing vendors, customers, partners, etc.) and the inherent workings of any market.

2. Relationships with key landscape players that will help obtain more “inside working information” – not illegal information, just the inner workings which anyone who’s been in an industry or market knows more than outsiders.

3. Problems or inherent issues with that market. Customers of that industry or market know what works and what does not. Any company that wants to disrupt that market, needs to understand the problems of existing solutions and envision what a future solution might look like.

These 3 items of the American market (or any other market other than India) are largely unavailable to Indian entrepreneurs.

Which is why I keep seeing good ideas to very small problems (lets fix auto rickshaw meters with a GPS enabled smart phone, or we want to sell provide certification training to vocational education trainers) within the Indian market.

If Indian entrepreneurs had knowledge and information about world markets as well as they did about Indian ones, they have both the talent (team, caliber) and product development knowledge to disrupt external economies. I am sure the argument holds true even for other entrepreneurs in other countries. If they did have the knowledge they can come up with ideas to solve those problems.

So what’s the solution?

Curated Market Knowledge.

The solution is not a series of whitepapers, books, PPT presentations or blog posts.

The information part alone can be shared by Indian entrepreneurs learning from Indians in America. Lets pick about 10 vertical industries we wish to participate in (Besides IT outsourcing, which we are disrupting with cost arbitrage alone) and have as many people in those markets share their inner workings with us.

Of the 3 items I mentioned about the market earlier, relationships are the hardest. That problem though, exists even for American entrepreneurs. The average young American entrepreneur has no more or less relationships in American than the average Indian entrepreneur in those markets. So we are on a level playing field.

The problems part of the market requires both knowledge and time / patience to understand. We in India call this “a mindset issue”. We are willing and able to live with small “jugaad” or the “lets adjust” mindset to many problems. We should not.

If you are a young entrepreneur I urge you to seek out your friends who have moved to America and keep talking about the market they are in, what the landscape looks like and how you can innovate or make a new product to fit the market need.

The key advantage we do have is our relative cost structure. Its still 2-3 times less expensive to build a prototype or version 1 product here in India than in America. Be willing to experiment, fail and go back to experimenting again.

I also think there’s a big need for a community event, exchange of ideas and an ongoing series of discussions with Indian Americans and Indian entrepreneurs, who can help learn and teach this market knowledge.

The government of India has a Pravasi Bharati Divas which connects Indian diaspora with India. I dont think its the government’s responsibility to teach market knowledge to entrepreneurs, but a day or two after that day could be a great time to start.

Why?

The Indian diaspora is already in India and I am sure we can convince them to stay for a few days more to help the Indian entrepreneur ecosystem.

Merchant of Venice

Act I. Scene III.

Shylock: …

Still have I borne it with a patient shrug,

For sufferance is the badge of all our tribe…

I am pretty sure Shylock was referring to the “entrepreneurs” tribe. 

We all suffer daily cuts, wounds, bruises and nicks.

We go on for long and short periods being misunderstood.

Every entrepreneur suffers those bouts of self doubt, lack of self belief and emotional distress.

So remind yourself this:

Have you praised an entrepreneur lately?

If not, pick up the phone and do it. Dont email.

Just call her and ask her out for a coffee to chat about other stuff like books, movies, sports, music. 

She (and all of us) go through ups and downs daily.

As part of my research on website design and marketing approaches by yCombinator companies to come up with best practices, I looked at over 145 companies that have been funded by them. Of that list, 53 were B2B companies and rest were B2C (consumer Internet).

My goal was to understand the approaches they took, what they highlighted (navigation, call to action) and what their strategy towards building their website was. I fundamentally believe your website is the #1 marketing investment you can make, so I judge most companies by how good / bad their web presence is.

<Background>

According to Wikipedia (through AMA)

Marketing is used to identify the customer, satisfy the customer, and keep the customer.

Lets drill down on the “identify” part of the definition and understand that after you segment and target your customer, you will have to offer them something they want.

Lets make an assumption for this post that this definition is slightly dated and “satisfied” customers are insufficient, and you need to “delight” them.

Finally if you delight the customer consistently, then “keeping” them is less of a challenge.

The best sales people (in my book) are those that understand the buying process well and do everything to fit into that process.

The best marketing people do the same. They understand what really motivates the “heart, mind and the wallet” – emotion & logic and position their products in that context.

</Background>

On the web (with inbound marketing included), marketing emotion and passion is hard. Its not impossible, but hard.

Any number of focus group studies and A/B testing of your website and SaaS offering will only appeal to the customer’s wallet and mind.

Appealing to their heart is an altogether different beast.

Which is why in the list of yCombinator companies, most have 3 top pages – pricing (wallet), features / product tour (mind) and sign up (call to action).

The “heart” part of these websites is filled with

a) customer testimonials (people like you buy from us!),

b) demo videos (its really easy!)

c) funky about us pages (we’re regular guys like you or we are rockstars so please buy!)

d) blog (hear from us!) and

e) contact (since our website can’t sell as well as we can, please call us!).

I am not sure how well these companies are doing, so I cannot comment on their conversion ratios, their incoming traffic etc. but I can gather that they are looking to A/B test that.

Here are the top 3 things I learned.

1. Stick to 1 call to action per page. Except 4 companies, all the others had only one call to action (A bright colored “Sign up”.

2. More than 3-5 navigation links on the top makes people think you are a “corporate” and not a “startup”. Use the fact that you are a “startup” to your advantage.

3. Use your interactions with customers (phone, face-to-face meetings) to really understand how to appeal to your customer’s heart, since I fundamentally believe you cannot A/B test it.

I think facebook is trying to be a country NOT a company. Therein lies its huge valuation.

1. A country with over 800 Million citizens that are all over the world.

2. A country which is rolling out its own passport called verified IDs.

3. A country with its own currency called Facebook credits.

4. A country which has citizens (users) who dont pay any tax to access any of its services or infrastructure.

5. A country where every corporation (Zynga, etc.) that wants to sell to the citizens who buy virtual goods pay a flat 30% tax on every purchase by a user – so yes the user indirectly pays.

6. A country whose benevolent dictator wants its citizens to know its social mission.

7. A country is very business friendly and is increasingly becoming more useful to them.

8. A country with privacy issues with its users to deal with.

The Truth: There’s no easy answer. It all depends on your situation. I dont know the answer, but that does not stop me from offering an opinion 🙂

My bias is always to bootstrap. Bootstrapping helps you get creative, it forces you to validate your idea and execution plan well and it teaches you many intricacies of finance that most entrepreneurs dont bother to learn.

That said I read an interesting post brought to my attention that had me thinking about when one should go to a VC (or angel investor for funding).

Lets assume there are 2 options ahead of you:

1. Stay bootstrapped: Which means (by and large) grow slowly with accruals, be cautious on expenses and grow as you need. The upside is you own the company, the direction and the future. Lets call this the “Vembu way” after Zoho CEO Sridhar.

2. Get funded (either with angels or Venture Capital) and scale really fast and quick. This means you are focusing on growth (initially). Lets call this the “Bahl” way after Snapdeal CEO Kunal.

Neither approach is wrong or “better” fortunately. It all boils down to how you want to answer these questions:

1. How big is your market / idea? Bigger markets require more capital usually (But Zoho’s going after a huge market you say. Yes, he’s a rare breed).  Hypothetically, if you build a company that has $100 Million in revenues in 5 years, and you are valued at say $500 Million (5 times revenue), and at exit (due to dilution) you own 15% of the company, you will be worth $75 Million. If however you bootstrap, and your company does $25 million in revenue in the same time, is valued at $75 Million (3 times revenue) , you potentially are worth the same if you took venture funding.

Generally VC’s dont invest in companies that address small markets (i.e less than $1 Billion) because the time and effort to help build a company is the same, they might as well go after a large market and have the potential to have a huge return.

2. How quickly do you think the market will develop? If you believe the market for your product or service is going to be large very quickly, then you’ll need external funding.

3. How quickly do you need to scale? If the market demands that you need to scale quickly and need to invest money before to meet the potential demand, then you’ll need financing to help you invest before (or just before) the demand.

Unfortunately, there are only 1 in 20-50 (depending on VC firm) companies that meet all the criteria for VC investment – a) addressing large market, b) quick growth & fast to scale, and c) exit in 5-7 years. Most VC firms invest in not more than 10-15 companies a year out of over 200-500 (or more) they look at. So even if you believe you need the funds, if you dont meet the a, b and c, together, you’ll likely not get funded by a VC.

P.S. I admire Sridhar, so I may be biased on this one, and I really respect Kunal too, so I really mean it when I say there’s not a right or wrong way. They are different guys with different ambitions. Who do you guys admire?

Update: a relevant article and a pertinent quote:

” At the end of the day, there is a fairly narrow band in the total spectrum of business opportunities that are venture fundable (though that band still represents infinite opportunities). If through whatever process of filtering, coaching and pivoting, the resulting companies don’t represent an opportunity for plausible venture returns, then by definition those companies will not get funded.”

tldr: When the problem you set out to solve has changed, first focus on getting the internal communication right to your own team, before investors, customers or anyone else. That’s the first step towards your pivot.

—

“Why is our customer clicking on these links that lead to other what they most recently said on twitter instead of their contact info?”.

“I thought you said the primary difference was that the heart of our system was the individual, not the social media post?”

“We just moved from a tab based UI to tiles and you want us to move again to a news feed UI? Do we even know what the customer wants?”

All these were the questions that I got within the first 4 minutes of talking to my team about changing our product direction (it was not fashionable to call it a pivot at that time).

We were cruising towards alpha in Sep after a few glitches when I scheduled a call with 5 of our early customers, most of whom were on the East coast. The call and demo was scheduled at 7 pm IST and about 930 am Eastern. I was going to go over the demo with Paul Dunay, who at that time was at Bearing Point. Paul was one of our early champions and a very astute guy who understood what we were trying to build. I was at the office with my CTO and friend Giridhar who was listening intently to what Paul had to say about the product. It was as much his sweat and tears as mine so he was hanging on every word. It took us about 3 minutes to finish the demo. The product was in its alpha so there wasn’t much to show I thought. After what seemed like a really long pause, Paul said “Well its good to see the progress guys, but I think you’re a little ways off from when we can use it for Bearing Point”.

That set off a series of questions to understand why we missed the mark. Even before the days MVP (Minimum viable product) was a sexy term, we thought that’s what we had. Turns out the problem that we were initially thinking we had to solve had changed.

Dramatically.

In less than 3 months.

The new problem required a solution that had to first have us change our data model, our user interface (new wireframes, too) and finally required access to data sources which we had not planned on acquiring. So basically a “total rewrite” as Giridhar put it.

Problems change. The perception of the problem changes. The customer’s needs change. When you are on the cutting edge of an unsolved problem you ought to expect that.

So what did we do?

We had to get buy-in first from our engineering team. There’s one way that worked and 3 ways that did not work.

The things that I tried that did not work:

1. Showed them a few competitors applications and told them about what the new problem is – big fail. Most engineers I worked with really did not care much about the competition. They were convinced no one was solving the problem the way we defined it.

2. Put together a wireframe, complete user interaction scenarios and use case description. Interesting, but they were not convinced we had the “new” problem nailed, since they felt we were grasping the last available straw.

3. Took them all out to lunch to detail why all the 5 beta customers were logging in, clicking on all the “wrong links” and then logging out within 50-58 seconds.They felt the customers still did not know where to click.

What worked:

We scheduled a call with our beta customers – Ross Mayfield, Paul Dunay, Mike Prosceno and did a remote record as each user went through the application one screen at a time. We made sure all of our 3 engineers were both on the call and also looked at the entire 9-10 min video recording of each customer’s interaction with our application.

Its an old adage – “Seeing is believing”.

When you have your engineers hear and see customers struggling and clicking on the wrong part of the application looking to find what they were hoping to, they get religion.