eCommerce

Thoughts on Flipkart acquisition of LetsBuy

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In case you missed it, Flipkart acquired Letsbuy for ~$20 Million in stock and cash.

I think its a very smart move by Flipkart and the investors (Accel and Tiger Global in particular).

Flipkart is doing about 50 Cr (About $10 Million) per month in sales (approximate, from multiple sources).

Letsbuy was doing about 15 Cr (About $3 Million) per month in sales (also approx).

Flipkart can already do an IPO (I think) in NASDAQ by 2012. But with $150 Million run rate (rather than $120 million), they have accelerated that by about 3 months – 6 months.

So flipkart’s good. They got a good price, they bought some revenues and have a few folks who are category experts (or better experts than their in house ones).

The two companies share 2 investors (Accel and Tiger Global) – who just yesterday announced an investment in Myntra.

So I can easily see a discussion at Accel and Tiger where both Letsbuy and Myntra come up for follow on rounds. They would first have asked Letsbuy to get funding from other VC’s – they apparently did try Sequoia and Matrix, but could not get the deal done.

Letsbuy goes back to Accel and Tiger who realize that Myntra is in a category (apparel, which is a lot more complicated than electronics) which Flipkart will take a long time to get to, but in electronics, Flipkart is mostly there.

So they chose to fund Myntra and consolidate their position with a “clear winner” by getting Flipkart to buy LetsBuy.

I consider Hitesh of Letsbuy a friend, so I may be biased on this one, but I think this is a good outcome for them too. Better to have tried to reach for the stars and climb Kilimanjaro than aim to climb Vindhyas and end up at Nandi Hills.

Angel investing

5 traits of a great angel investor

Over a startup event Bangalore a few weeks ago, I had the chance to talk to over 50 budding entrepreneurs about the seed funding scenario in India. It is well known that there is a lot more demand for investments at the seed stage than there is supply. The number of angel investors in India is estimated around 500 (informal estimate) and the number of active investors is less than 50. The number of new technology companies alone in India (software & services) total over 500 every year. I have personally talked to several high net-worth individuals (HNI) about looking at investing in new entrepreneurs and believe it will be only a matter of time (2-4 years) before investing at the seed stage becomes more prevalent.

The top 3 reasons for not investing, I hear from most HNI is the lack of exits, better or equal returns at lower risk with other asset classes or their desire to “invest in their own business than someone else’s”.

What will increase the number of angel investors in India is simple – more people making big money (I can easily see another 15-20 employees of Flipkart, Snapdeal and InMobi becoming angel investors in 2-3 years) and specifically more entrepreneurs themselves having exists.

So if you are a HNI and are looking to help young entrepreneurs become successful, what else would make you an ideal angel investor that entrepreneurs seek out for money?

  1. Relevant experience and knowledge of the space that entrepreneurs are looking to build companies in. This is the biggest value add you can provide, more than the money. If you have built a company in the same space, the value that you bring to the table is a lot more than any “dumb” money. In fact one could argue that your experiences are nearly worth twice the money you put into the startup.
  2. Network and connections. Great angel investors don’t just write a check and disappear. Once you put your money in, there’s a responsibility to commit to the success of the company. The bevy of lawyers, accountants, bankers, marketers and other connections you have made in your career are worth their weight in gold. That’s an amazingly attractive incentive for any entrepreneur to rather take money from you than other investors.
  3. Willingness to learn as much as you are willing to teach. Being an angel investor is more a lesson in learning than in teaching. I am pleasantly surprised with the insights I hear on hiring techniques, investor / board management and online marketing from young startup founders.
  4. Ability to provide time and empathy during the tough times. Every startup goes through a sine-curve of emotions. In fact if you have been an entrepreneur you know the experience well. Besides requiring a flash report on sales, hiring plan, product strategy and other company related metrics, the angel investor has to be available to his entrepreneurs. This does not mean having to spend 10 hours a week on the startup, but being available for that call or having a cup of coffee with the entrepreneur when you have a moment helps go a long way.
  5. Long range thinking. Angel investing is certainly not for the faint of heart. Market timing rarely works so most good investors I know invest the same amount every year for 5-10 years before they are able to spot patterns and obtain exits. The thrills of helping young entrepreneurs succeed though, more than makes up for the short term uncertainty.
Entrepreneurship, Tips

How can a hacker ask for startup advice so they get the most value?

The last few weeks I had the opportunity to talk and chat with several (engineer) entrepreneurs who were in various stages of their company. While most entrepreneurs are fairly clear and specific on the problems they are facing, a few are unable to clearly articulate where they could use help or advice. There are several “categories” of  questions and issues that an entrepreneur has. Some questions are procedural – “how do I do this”, others are “introduction”, still others are “transaction-al”.

The most difficult ones for both parties are the “What should I do?”.

Any mentor / advisor will not have enough context (regardless of how much time they spend with your company) to help you by giving the “right answer”.

For these class of questions there is really no right answer.

The right answer does not exist because it comes down to what the entrepreneur wants to do. What she is comfortable with, what her biases are and what her motivation is.

The only thing a good advisor can do is to provide a “framework” for your question.

The only other thing an advisor can do is to give the entrepreneur confidence in herself so she can best utilize the framework to her benefit.

A simple way to think about the “framework” is a set /series of “if-then-else” statements, with <then> and <else> colored with the advisor’s experiences.

E.g. When faced with this issue like <a>, I responded with <b>, but the alternative is <c>.

So, if <you believe “a” is true> and <you also think “b” will happen> then <you should do “c”> else <the other thing you can do is “d”>

The framework is not just one if-then-else. Its a series of them.

Can it be that simplistic you ask?

Yes. That’s it.

The best advisors / mentors listen and ask a lot of questions, with each answer leading to more questions. The questions are to help the entrepreneur think, not for the advisor to assess.

So the next time, as a hacker you are looking for some advice on a question “What do I do?”, then remember to keep a note of the conditional construct.

P.S. For those that know me as a hard-core sales guy and nothing else, I did study DES based cryptography algorithms under Dr. Sherman, who I am sure is absolutely disappointed that I ended up a sales guy in a tech company.

Marketing

Facebook open graph API and new apps

After facebook timeline we now have apps on the timeline, which leverage open graph API to post actions that you performed on other websites to your profile. Here is a complete list of apps (60) that are participating in the facebook timeline capability.

“Once you’ve added an app, you can begin updating your timeline with your activities as they happen.”

I personally have 6 apps that I have used / authorized and most of them post to facebook (twitter, wordpress, etc.)

I dont really use any of the other apps. Dont see a need yet. But this might just make me change my mind. (Deep sarcasm).

Do you use any apps? I am curious which apps are really used by other entrepreneurs.

Entrepreneurship

When there’s so much conflicting startup advice, why even bother reading?

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For every piece of startup advice I have read, I have also read a counterpoint.

Mark Cuban says dont hire a PR firm. Paul Graham says hiring a PR firm was good.

Naval says find a passion market fit. HBR says passion is overrated.

Raise money from VC’s. Only bootstrap.

And I could go on.

So if you are looking for an “answer” you are going to be disappointed.

The best you can do is treat these posts and advice as a guideline or a recommendation.

No one knows your situation as well as you do. No one understand the intricacies of your business, challenges and customers as you will. So, the best advice I have ever heard (I unfortunately forget who told me this) was to develop a set of filters.

1. People filter – This filter applies to who you think is your “role model” or “ideal advisor” or mentor. This filter applies to both people you want to listen to and those you dont. So if you are looking for a mentor or advisor, apply this filter first and get people who you think you can take advice from without second-guessing their intent. You can get second opinions on their advice, but questioning their advice at every step will be counter-productive.

2. Expertise filter – This filter is for specific advice on topics – legal, finance, fund raising, etc. Get advice on these items from “experts”.

3. Context filter: This filter applies to how to apply which advice based on your context or situation. This is best done with folks within your company.

Most advice though, however well meaning is specific to the situation and a guideline. After all if you dont apply your own expertise, know-how or values to them, what good is that advice?

Entrepreneurship

Startup Idea validation: How many people; how long before your idea’s worth pursuing?

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Lets say I have an idea. Actually 3 different ideas I want to pursue. My next step is to get validation of that idea. The top 5 questions that I am looking to answer are (not necessarily in order):

1. Is this a real problem? (Pain point validation)

2. Is what I am trying to do solving the problem? (Product – market fit validation)

3. How much of a problem is this for the person who I am providing this solution for? (Customer validation)

4. Will people pay to have this problem solved? If so how much? (Pricing validation)

5. Is the problem big enough that I can make a large company out of solving this problem? (Market size validation)?

So the question is how much do you have to get validation for these questions until you decide to pursue it?

One approach is to actually develop, have customers pay and let the market validate your idea.Which is what was suggested by a user at HN.

The approach I am going to suggest is more measured and less expensive than actually developing the solution before you figure out if that’s the right idea for you to pursue. It involves talking to customers / prospects or even putting together a simple SEM campaign to test the idea out. I think many might say that’s not a new idea, but I dont see over 80% of startups doing this.

That’s way cheaper than time or resources to build your idea to a real product. At some time you have to build a real product and there no denying that.

First I would make a target list of 20 people – 10 who are potential customers who have the same title of the person you believe has the problem you are trying to validate. If you are a consumer startup, that might be the target audience of users who might want the product / service you are building. If you are an B2B company, look for the right title of buyer.

The list should include 5 potential industry experts, who might understand the nuts and bolts better and 5 “laymen”,  or those that have not much of an idea about the intricacies.

Is the number 20 enough? Maybe, not, but its a start.

Then prepare a one paragraph elevator pitch explaining what the problem is, and how you are going to solve it. Email it to your list and track their feedback.

Then try and get prospect validation. This is because people who know you might either a) not want to discourage you, and so give invalid answers, or b) might not understand the solution well enough to provide valid feedback.

I would setup Google adwords campaign for the keywords you think people will most likely click on. If you buy a domain and hosting from Godaddy or some other providers you even get $100 adwords credit, so there’s no excuse.

Create 3 different pages with your multiple campaigns and call to actions, and have a signup sheet (this is your call to action) for each. Track and categorize results. In each of these pages, provide a screenshot of your product / service you are trying to develop.

Wait, you think, wont this give my idea away and attract more competition. Sure, I think it might, but more likely, there’s competition already and you are just not aware of it yet is my answer. Or if there’s no competition, is that not a signal anyway?

Other

The difference between visible and invisible elements of a startup ecosystem

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I was on the plane with Dr. Anurava Goswami of Indian Statistical Institute the other day. He is a very well accomplished scientist with a deep background in bio-mathematics and has multiple degrees from Harvard, and other institutions. He mentioned a very interesting remark on the state of “infrastructure” in Indian research organizations and their lack of “invisible” infrastructure.

His point was he could pay money to have big buildings, large labs and a great campus in India – these according to him were “visible” infrastructure. What was still missing was “invisible” infrastructure. The particular example he gave was the Fedex person who delivered at Harvard, samples of live cultures and he would be at the office at 6 am sharp with his package, knowing fully well how important that time was to the scientists. The Fedex delivery person was part of what he called “invisible” infrastructure.

I wanted to draw some parallels to the startup ecosystem.

The startup community and ecosystem in Silicon Valley is extremely well revered. Its speed of innovation, the consistent “hits” and the unparalleled dynamism of ideas is worth applauding. The visible elements of the startup ecosystem – dynamic entrepreneurs, indulgent venture capital and seasoned mentors are what I call “visible infrastructure”. I would definitely include things that make the US extremely easy to do business in such as setting up your company, bank account, labor laws etc. Those are the table stakes and the easy parts that every startup friendly ecosystem in the world is trying to emulate.

Imagine entrepreneurship is a cult and Silicon valley the “Mecca” or the “Holy land”. Something amazing happens to the converted when they visit the holy land. Yes, they are still religious and follow the “rituals” of entrepreneurship elsewhere, but when they meet other converted in the hallowed ground, they get an almost “born again” fervor.

I was at University Cafe a few months ago, waiting for a friend, when I was sitting next to a table of 2 young entrepreneurs talking rather loudly to another individual (you could say I was eavesdropping, but they were so loud I could hear them at the Apple store, a few blocks away, if I was sitting there instead). They were trying to convince the other individual to join them and it was a full on “change the world, ding in the universe, pitch”. Their excitement and enthusiasm for what I gathered was a “mobile application to tag users by keywords instead of social networks” was nothing short of hubris, but to them that was the only thing in the world and they gave it their best shot. I call it  “invisible attitude”.

At Ramona’s a few days later, there was an open “60 second demo” of developers to a group of their peers. I happened to listen to one developer who had a pretty awful time with the mic, then his app crashed two times and the projector resolution sucked so much we couldn’t really see his app at all. But post his “pitch”, he said “please download the app and give me feedback”, with a kinda sad look in his face. Within 10 minutes, during which time most folks were grabbing their beers, his app was apparently downloaded “30 times” and 5 people took time to review drop him a comment on his blog about what features they would like to see on his app. I call this  “invisible encouragement“.

Here’s my point. I know India does not have many great mentors willing to give time, and I am acutely aware of the lack of many early adopters and also the dismal seed capital availability. At the end of the day though, only the converted help other converts.

It is up to us entrepreneurs to help other entrepreneurs.

Forget about the government, venture capitalists, larger companies and experienced mentors.

Forget for a moment that you are competing with multiple other startups and entrepreneurs for your time under the sun.

Go out of your way to help other entrepreneurs.

If its helping figure out scaling php on the cloud OR if you have figured out how to setup your company in the US, with a subsidiary in India OR if you have figured out the best source of organic traffic for your B2B SaaS company OR if its taking 15 min to buy online something you would offline even it costs 5 bucks more, OR if its downloading a new beta app and providing feedback.

Help other entrepreneurs, with no intention of getting anything back. 

I assure you, it will surprise you back with its generosity.

User Interface

The end of the keyboard, and what it means for software applications

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Imagine a future without the keyboard. Imagine we spend 80% of our time on a tablet and the mobile phone. I am sure there are set of functions (developers, finance, etc) that will continue to use the traditional laptop or desktop but imagine that number is stagnant or reducing.

In our current usage paradigm there are creators and the consumers of content. We are all creators at some point and consumers for most of the time. As consumers we dont quite need the keyboard as much. The typical use of consumption is point and click – primarily using the mouse or the touch interface.

I wanted to speculate on what would happen if the keyboard were to go away and what would be the changes would result in the way we build we applications?

1. The text box would mostly go away. I already see lots of companies asking you to login using Facebook or Twitter instead of entering a user name, email and password.

2. If the text box exists, I imagine auto complete would be the default option for all text boxes, which dramatically reduces typos.

3. The text box would be mostly replaced by drop down lists. This makes it relatively easy for users to consume, or input data and reduces errors dramatically.

4. The simple radio box is rather painful in both a mobile form factor and too small for fat fingers on a tablet. I suspect it will just be done with and more designers and developers will stop using it.

5. Replacement of lots of text with “tag cloud” picks. When you have to get users to write a short description about themselves, say their bio, then writing a bunch of stuff is just painful. I imagine the bio will get replaced with large tags which the user can click on to add or a small text box to add a new tag which did not exist.

India

What a delayed flight told me about newspaper consumption in India

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BIAL Airport

Last week I was to head out to Coimbatore on a early 8 am flight from Bangalore. Dense fog and over scheduling of takeoffs meant the flight I was supposed to be on was delayed by 2 hours. That’s a recipe for disaster at Bangalore airport. Its relatively small seating space, fairly crowded food court and non existent power plugs, meant I had to resort to crowd-watching.

The airport (besides hotels I think in India) is probably one of the last places that still offers free newspapers. Tons of them actually. There are about 5 newsstands that offer over 15 dailies, tabloids and financial broadsheets for no price at all. Its a fascinating study in “Say one thing, do another” that’s typical of most of us.

There are 3-4 racks in each stand and each rack displays 5 newspapers – Times of India (TOI), Financial Times, Business Standard, Deccan Herald, DNA (Daily News and Analysis) Deccan Chronicle, Hindu, Hindu Business Line, Mint, Financial Chronicle, Mid-Day, Bangalore Mirror and 2 Kannada dailies were on display at the Bangalore airport last week.

The refined, cultured and educated Indian apparently thinks of TOI as a sensational tabloid at best. At least that’s what the digitarie would have you believe.

The average person picks up 2 newspapers (hey, its free, why not? seemed to be the norm). There were a few that picked up 3 or more, but that’s the “long flight to Delhi, individual.

Older men (over 30+), (who were most of the travelers), invariably took a copy of TOI and Mint, which were the first two that each stand ran out off. DNA and Deccan Chronicle were the next that were finished. Finally Financial Times and Business Standard were no more on the stand, followed by several copies of The Hindu and other newspapers.

Surprisingly many folks who came by the stand after all the copies of TOI ran out, preferred to go and pick up a used copy of the Times than pick up any of the others. Eventually (in about 40 minutes) the whole set of newspapers ran out.

I asked the person that does stock them and he claimed the stand gets refreshed every 1 hour in the morning from 630 am to 930 and relatively less frequently after that.

The Times is the #1 English broadsheet in India & Bangalore, so that’s to be expected, but the Mint and the Hindu surprised me. I expected Financial times to disappear faster than Mint for sure and I also thought the Hindu was fairly popular in the South. Turns out Deccan Chronicle is only popular in Hyderabad and the Hindu in Chennai.

Personally I dont get a physical copy of the newspaper daily and most of my reading is done online with Google news. I have customized it to ignore Politics, Entertainment, Health.

What do you read in the morning daily?

Other

How much time should you give your startup space/industry before you move on?

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I had an acquaintance who sent me a note a few days ago. He had built a beta product and we were customers along with a 2 others. After 3-4 months of working to get the product ready, and seeing some traction (limited I presume) he decided that the effort was not going to give him the “ROI” he desired and was not pivoting to a few other ideas that he was considering.

The new ideas were totally unrelated to what he was doing before. So an essential restart.

I see a lot more of these “projects” that developer-entrepreneurs take on, which they term as their idea / space, only to find that either the market they chose is not big enough or the traction they got was limited or they did not really care about the market or the product in the first place. Brings into question the entire passion and desire for the space and area they wanted to spend solving problems.

Side note: First thing that I would highly recommend is to find out why you want to be an entrepreneur and also what you want to do. Just saying I want be an entrepreneur because its fun (its actually not fun most of the time) or because I want to be my own boss does not suffice.

The rest of this post is mostly for those entrepreneurs who dont know a space fairly well or have worked in any industry for a long time. This is for those who decided to build a mobile app because its cool and the new thing to do after working at a medical equipment company (IT organization as a developer) for 5 years. Or the fresh out of college grad who wants to build an eCommerce company as an example.

I dont have a scientific reason to give you a number, just some experience from having done a few startups.

It takes 2 years for you to understand a space well.

That’s the minimum time you have to give it before you can make an impact.

For the first 3 months you are mostly trying to learn the landscape, understand which events to attend, who the key people are in the industry, and what are the white spaces or “major problem areas”. You may have some ideas, but validating them with these and other people takes time. Especially if they are at a big company, since they are mostly travelling and cant give you appointments for 2-3 weeks out.

The next 3-6 months pass by amazingly quickly. You are either building your product, talking to a lot of customers, or meeting suppliers (eCommerce needs a ton of patience BTW with vendors) or showing demos to potential prospects.This is also the time you are trying out how to position the product, trying out your elevator pitch, etc.

The next 3 months all you are doing is trying to make your alpha product a real beta or your beta product a version 1. Getting feedback from customers, acting on them, etc.

Real productivity hits you in year 2. And traction, momentum and impact only hit a year later.

So choose the space and industry carefully before you decided to jump into building a company, because if you decide to change the idea or space, the clock starts again. It will take you two years from that point to understand that new space and make an impact.

This however drops to a year if you already have worked for a company in that space before. E.g. You were at an eCommerce company selling toys online and you decide to start an eCommerce company after 2 years being at that company. Your new company will benefit from that experience, but I would now put the time required for you to get productive as 1 year. After all, it takes a long time to be an overnight success.

The personal blog of Mukund Mohan