Marketing, Sales

A new trend in pricing pages at SaaS applications

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<Wordpress has eaten up 4 versions of this post, so I am removing all images and only providing links, apologies>.

The pricing and signup page of any SaaS application is the most critical part, which is the main reason companies spend weeks and months, A/B testing and validating pricing, options and packages.

A new trend I have noticed in 2 particular websites – Highrise and GetBallPark is something very different from most websites.

If you did not go to the links above and notice the change – they have put their highest priced offering on the left and the least priced offering on the right.

This was counterintuitive to me at first, since “everyone else” does the exact opposite. Progressively expensive options should go from left to right.

Most website heatmap track research suggests users read from top to bottom and left to right. So, I guess there are higher chances of getting someone to sign up for your highest priced offering if you put it on the left.

Any other reason others might think of designing the price offerings the “opposite” way?

Entrepreneurship

Great convocation speeches (graduation speeches) to read again and again

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I was trying to collect great convocation / graduation speeches so I could share it with my daughter. Here are the 5 best I have read so far.

Don’t work. Be hated. Love someone.

Steve Jobs with Be hungry. Be foolish.

J K Rowling and the fringe benefits of failure and the importance of imagination.

Bill Gates and improving your odds doesn’t guarantee success.

Larry Page and finding a path to make your dreams real.

Entrepreneurship

Usage matters more than distribution; Or why every startup will start to hire “psychology majors”

The usual challenges that entrepreneurs face with a new idea is first the execution of the idea itself. I.e. come up with a product / service that solves a problem or does something new and different.

Then the problems of gaining customers (or users) becomes top of mind. “How do I increase awareness of our product?” is the irst big question. Which is why most potential investors ask questions around “marketing & distribution” model, which primarily is a way to find out how are customers going to a) find out about and b) gain access to the product.

Awareness is still a large challenge for most companies, but digital marketing (SEO, paid search, facebook advertising, etc.) helps solve that problem for most startups in a way that can scale.

For companies who target audiences who are not primarily on the Internet (which is rare, but still those audiences do exist) their options are still old school (newspaper ads, radio, etc.)

Distribution typically becomes the next challenge after awareness. Now that people are made aware of your product, how do they consume it? Channels help solve the problem in some ways. E.g. If you are building a smartphone application, app stores are a great way to ensure your customer’s can access the product via the store. Now the only challenge is back to awareness, which can be solved by the mechanisms mentioned before.

The new age challenge though is all about usage or “customer engagement”. Assuming awareness and distribution are solved, the problem is purely one of getting people to use your product.

Which is why with most new products the selling starts after the sale is done.

After a customer buys and downloads or signs up for your product, you have to get them to use it. Which although is within your control, is a huge issue. Why?

Primarily because there are way too many things competing for the users attention.

The best ways companies have solved this “usage and engagement” problem is to focus on answering the question – how can I make the product a natural fit into the users “habit loop” – which is cue, routine, reward.

I think going into the future every startup will start to have a psychology or human sciences major to understand how to deeply ingrain their product into users natural habits.

Other

The myth that too much money is chasing too few entrepreneurs in India

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There is a self perpetuating myth in the Indian startup ecosystem that too much money is chasing too few opportunities. There are variations of this myth including there are “too few quality entrepreneurs” and “too few good deals to be had”.

I admit, even I was convinced about this myth until recently, so I decided to do some digging.

Since 2007 there’s been between $3 Billion and $5 Billion  (till 2011) in seed, early and growth stage (I know its a large band, but there’s really no other dependable source. (source, and another source). The number of  “deals” in these stages for the 4 years is about 400. This money does not include friends & family rounds.

The total money in all stages (PIPE, PE, included) is 4-5 times that number.

IT and ITES has been growing part of the early and growth stage, currently at about 16% – 23% of the early stage.

The total number of companies that are being started annually according to the MCA numbers is 20,000 of which technology (its a broader term than IT and ITES) is about 2800 (source). There’s a 10-20% variance unfortunately, but I am confident I am in the range.

Lets say 2500 per year, so 4 years totals 10,000 companies.

In India over the last 4 years out of 10,000 companies, about 500 got funded by an institutional investor, or about 4%.

Yes at the high level that seems high. Very high.

Especially given that US has seen between 600 to 1500 companies get funded EACH year in IT and ITES from 2007 to 2011. Out of a total of of 3800+ companies each year in IT or ITES. (source).

Lets say 3500 per year, so 4 years totals 14,000 companies.

In the last 4 years, out of 14,000 companies, 3000 got funded by an institutional investor or about 20%.

Lets assume the numbers are inflated 50% (I doubt it, but hey we are doing some mental mas*r*b*tion anyway. Still 10% or twice the % of companies get funded in US than India.

Lets say that’s typical of India – same numbers probably hold true for IIT and also Harvard University. Its a lot more competitive in India.

I can attribute this to the fact that markets in India are not a large or mature. Which is why I suggest Indian entrepreneurs should disrupt US markets.

The second myth is that Indian entrepreneurs are not of high quality OR that Indian entrepreneurs in India are not of high quality since when they go abroad they do very well. I plan to dispel this with more data in my next post.

Dont buy the myth. Either as an entrepreneur or as an investor.

Above all, be a force of good.

Marketing

Why developers will make the best marketers in this and the next decade

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When you have a hammer everything is a nail. Imagine you are a developer (or higher form being – a hacker). Every problem is a script or a tool or a side project you can build (including marketing or sales problems). That’s because that’s how developers think. Which is awesome since the focus is on creating something “useful” that prospects will use. When you can develop a tool or a script which consumer / customers can use instead of just read or consume you engage them more actively.

The next two decades (and quite possibly beyond) is all about being an engaging marketer.

So how does one become a marketer that “engages” their audience or consumer?

Some background: For the longest time, marketing meant advertising. So the “ad guy” who was a two-martini lunch, cigar smoking, creative director would come up with this brilliant “idea” and execute the TV ad, Print Ad and Radio ad. Accolades will follow. The ad campaigns that bomb would be forgotten.

The trouble with TV, radio and newspaper is that they are “passive” mediums for the consumer / user. They are recipients of marketing messages or propaganda.

Consumers were required to consume useful content (sitcoms, music, news) and interruption content (ads) with not much ability to ignore the interruption content.

Then came the Internet. Suddenly the consumer was more “active”. They were not waiting and passively looking at what was being fed, but were active in seeking useful content and equally active in ignoring interruption content. Note I am not saying useless content (some ads are useful, but they still are an interruption).

To actively engage a consumer or user, you have multiple choices but the biggest of those right now is gaming. This includes useful consumer tools, games, contests, polls, etc.

Although “content marketing” is being touted as a key part of inbound marketing, it is still “passive”. Content marketing is no different than newspapers. Imagine content strategy = editorial calendar, content producers = editors and content = news / editorial.

Here are some examples of how developers are building marketing tools by adding value to their prospect / consumer / user.

a) Website Grader tool is a useful tool, (but very complicated) that tells you how good your website is on multiple factors. (link)

b) Look at many opensource versions of hosted products (one of the companies I have invested in Plivo is an example) which are “free” to use and still provide marketing. (link)

c) Free starter versions of hosted products (such as Mailchimp) are also a form of marketing.

I could give you a lot more examples, but you get the point.

Developers need to think about their user / consumer, figure out what tool they can build which will make their life user’s easier and still keep their users engaged (as opposed to passive observers).

This is absolutely easier said than done, but its an easier bridge to cross than getting a “marketer” to build tools.

Entrepreneurship, Tips

Being a tough negotiator is overrated, be articulate at convincing instead

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Early in my entrepreneurial journey I would hear a lot of Silicon Valley folklore about certain founding CEO’s (Larry Ellison and Scott McNealy’s name would come up a lot) who were “tough as nails negotiators”.

The other thing I head from the guy I bought my first car from (yes, I would take advice from anyone) was a pithy “You never earn what you deserve, you only get what you negotiate”.

I resolved to be a bad-a** negotiator and wanted to cultivate a fearless reputation as being difficult to crack under pressure.

I even signed up for one of those negotiation training seminars, which you see in the center-fold of airline magazines.

Boy was I ever more wrong. (Actually I have been more wrong consistently, but that’s another series of blog posts).

Here’s the deal. As an entrepreneur you rarely have the position to have the “upper hand in any negotiation”. Realize that quickly and you’ll be more humble and have less chutzpah.

There are 3 main constituents you have to deal with to negotiate frequently – customers, investors and employees. Realize that when you are small and new they have all the leverage and you have, well, your vision, energy and some potential stock which may or may not be valuable.

When I founded my first company, I had a prospect we were chasing for several months. Eventually after a lot of effort we got to the “negotiating table” after the technical team had given us the go ahead, and asked us to “hammer out the details” with their finance and procurement team.

I was adamant on price, which we believed we deserved a premium for, because we were “proven”, so there were 4-5 clauses we were negotiating. One of them was being a reference, second was payment terms and some others were inclusion of maintenance and support for the first year (it was 19% of the license sale).

After multiple phone calls and getting nowhere, they and I realized we were stuck and I pulled the “I am going back to the technical champion and tell him we cant work out a deal”. I was seriously under the assumption that they had no alternative solution so I could “throw my weight around”. I was willing to give on some parts of the negotiations, but was deemed as inflexible by the procurement guy at the other end.

Well I did go back to the technical champion and he asked me to go back to the procurement person else they would “build it in house”.

This time the procurement person was even more inflexible and suggested a 15% discount on top of our negotiated price. I stuck to the price and focused on the other terms, only to find that the entire deal was up for renegotiation. Every term and clause was up in the air.

My intention to be a “hard negotiator” lost us 6 weeks of payment and cost us 8% discount on prices.

After the deal, the procurement person (a much older and smart individual) gave me a tip on the “Japanese way of negotiating”. He said, first admit that you have little negotiating leverage (this is totally opposite to what most entrepreneurs in the valley will tell you) and then have them work with to give you want they want and you have the ability to give them what they want. Then mention to them that here are the 3-4 things they need and ask them for the 3-4 things they need from the deal. Then it becomes more of a convincing opportunity as to why you need those 3-4 things as opposed to a confrontational hard negotiation.

Its a different technique (and there are several I admit) that works very well for the party that does not have much leverage in a negotiation.

Angel investing, Entrepreneurship, India, Sales

The “two speed” state of Indian market adoption

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I have been watching / following 7 startups (3 in eCommerce, 2 in SaaS and 2 in consumer Internet) that target the Indian market over the last 14-18 months. All the entrepreneurs approached me with an intent to get seed funding so I had a chance to go over their traction, progress and future projections.

I have formulated a theory of market adoption of products / high technology products in India which I have tested with these and other companies and also with several venture investors.

For background please read “Diffusion of innovations” by Everett Rogers and Crossing the chasm by Geoffrey Moore. Don’t worry, I have only linked to their Wikipedia page, so it wont cost you anything.

Diffusion of innovations

At the top of the consumption (and monthly income) pyramid in India are what economists and marketing people call the SEC A and B class who have enough disposable income to spend on innovative new products. For the purposes of this blog post I am going to use 10 Mill (SEC A) + 20 Million (SEC B) households as the target.

The Innovators (less than 1 % of the population or 12 Million individuals) in India (entrepreneurs mostly) who conceive and develop these products for the Indian market and the early adopters (less than 5% of population or approx 60 Million individuals) together make up the entire “early adopter” category. Unfortunately less than 30% of them have both the interest, and the desire to be early adopters of technology.

Indian markets do not follow traditional diffusion characteristics when first innovators buy, then early adopters, then the early majority, and then the late majority and finally the laggards.

My theory on how diffusion of innovations works in the Indian context is as follows.

In India there are only 2 market adopters – those that are early and those that are not.

Abhijeet calls it the “low hanging fruit” and then everyone else.

So lets look at the implications of this observation / theory.

So what does that mean for entrepreneurs?

You will see a “headfake” of adoption and then a taper off.

E.g. The B2B SaaS company will quickly (within 3-6 months) get 10+ customers and over 30 in the pipeline, only to find the next 50 and the next 100 or the next 1000 are either non-existent or will come in 3-6 years.

E.g. The eCommerce company will see 1 -3 Million “registered” users and 1000’s of transactions within 12 months and find that the next 1000, 5000 and 10,000 transactions take 4-5 times as long.

E.g. You will see an initial 20,000 users for your mobile application for social TV extremely quick (within 3-6 months) and the next 50,000 or 100,000 take you the next 3-6 years.

I have seen these numbers play out again and again to know there are exceptions but those are rare.

These numbers are also dramatically different than those of companies targeting US or other markets.

When should you (as the entrepreneur) raise money?

You should raise it at the peak of inflated expectations. I.e. After you have some traction, which the investors think will be long lasting, steady and rapid. You will get the best valuation for the company at that time. Once your investor has some “skin in the game”, they are in to get their money back and then some, so they will do all it takes to make you successful.

 

Trough of disillusionment

What does this mean for investors?

The best time to invest is either very early (starting to build a company, idea and team stage) OR at the trough of disillusionment stage.

If they are early, you will get the bump from the initial adoption, so the value of the company increases many fold before the next round (which you should help the company raise at the peak of inflated expectations.

If you are post the trough, then you benefit from a growth stage.

What makes you go over the trough to the slope of enlightenment?

In my experience:

TIME

Nothing else.

You may think I am being facetious, but I am serious.

This may be a cultural thing, but in India, over time if you have the ability, patience and willingness to survive, you will reach the plateau of productivity.

Anecdotal evidence over several sales transactions also suggests to me that once people in India see you around for 2-3 years, they think “Okay, this company / person is for real. We should give her / the product a shot”.

Big thanks to Abhijeet and Shekhar for helping me with their data points to reinforce my theory.

India

Book review: Making breakthrough innovation happen by Porus Munshi

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I had a chance to meet author Porus Munshi at the SAP Innovation meetup with the CMO of SAP, Jonathan Becher. Big thanks to my friend, Amarinder for inviting me to be a part of that event.

Porus Munshi book

Its a breezy 234 page read with 11 stories from Indian companies that innovated on product (ITC eChoupal), marketing (Dainik Bhaskar) and process (Aravind Hospitals).

To make “orbit changing” innovation happen his recommendation is to set a BHAG (Big Hairy Audacious Goal) and question every assumption. The second part is to come up with an “insight” that brings the innovation to life.

E.g. The BHAG for Aravind hospitals was to “Eliminate unnecessary blindness worldwide”. This requires operating on 24 Million people. Any eye surgeon can operate on 10-15 a day, so that’s a lot of eye specialists required.

The insight the obtained was from McDonalds where the entire “process” was streamlined as a manufacturing assembly unit with no compromises on quality.

So Aravind hospitals redefined the operating process and made it similar to an assembly line, which enables their doctors to operate on 3 times the number of patients possible, with no compromise on quality.

There are many other stories including innovations at city of Surat, Trichy police, Cavin Kare, etc.

I finished the book in under 3 hours, so its not a textbook, but more like a case study compilation.

If you are in Bangalore and want the book to read (you can pass it on to someone else after you finish), drop me an email and I can have it delivered. Or if you want to pick it up, my office is at Cunningham Road.

Other

How Indian entrepreneurs can really disrupt American markets

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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.

Entrepreneurship, India

The startup ecosystem in India is schizopherenic

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Okay now that I have your attention with that ridiculous headline, let me define a few things first.

Schizophrenia is a complex mental disorder that makes it difficult to:

  • Tell the difference between real and unreal experiences
  • Think logically
  • Have normal emotional responses,
  • Behave normally in social situations

Lets try and list all the players in this ecosystem. I have provided this list sorted by the importance of the player to the ecosystem (obviously this is my opinion and hence biased).

1. Entrepreneurs – the heart and soul of the ecosystem

2. Talent for the entrepreneurs (meaning people to hire)

3. The early adopters (Both consumer and businesses)

4. Investors – Angels and Venture Capitalists

5. Incubators and Accelerators

6. Universities & research institutions

7.  Advisors, mentors, coaches

8. Startup communities, media and events organizations

9. Service providers – lawyers, accountants, etc.

10. Larger companies for partnerships, distribution and marketing

11. (Dare I say) Government – yes for things such as incorporation, taxes, etc.

12. Cheerleaders and poster girls (or pinup guys if you like).

13. Successful startups and successful / failed entrepreneurs

14. Associations, government liaisons and trade organizations

15. Interested public

Do I have an exhaustive list? Probably not, but this is a good enough start.

Every player has something unique they bring to the table and has a perspective on what’s good and bad about our Indian startup ecosystem.

Even if we mostly stick to the technology space, we say one thing and do the exact opposite.

No wonder most entrepreneurs get confused.

1. We want more innovative product companies but we end up funding mostly me-too eCommerce companies.

2. We want to build the next facebook and Google and yet most entrepreneurs have a “consulting / services” company on the side to make money.

3. We want to work on cutting-edge technologies, but end up picking yesterday’s tech stack since “there’s a lack of talent’.

4. We want to encourage the government to participate, but end up bad-mouthing them at every event (One panel member even suggested they were out to kill startups).

5. We want to have a clean incorporation, but still choose the cheapest service provider to incorporate the company (a lawyer even told me yesterday, he has to turn down 2 companies a week who want his services for free).

6. We want to be first to try a new piece of technology but are unwilling to pay to be an early adopter.

7. We want to encourage more entrepreneurs to participate in an incubator, but keep ridiculous anti-dilution clauses to maximize upside.

I could go on, but you get my point.

Is this an India thing alone? No, I have seen many of the same in Silicon Valley as well.

But at the center of the valley is an entrepreneur with an idea who wants to change something and everyone else is rooting for her.

In India I dont believe we quite know who’s at the center. We make rock stars of our VC’s, large company CEO’s and Government officials.

So if you are part of this ecosystem I would request you to please keep only one question in mind when you have to make choices:

” Will this help more entrepreneurs get excited about starting a company in India?”.

Then please do the right thing and don’t just say the right thing.

The personal blog of Mukund Mohan