How Success and Failure are dependent on each other and are also tangled with each other.
I had shared this brief thought on LinkedIn the other day, but due to their number of characters limit for the post (BTW, it’s 1300), I couldn’t explain the thought in detail. So expanding it here.
A few days ago, I met a founder, who was very smart both academically and intellectually, and had raised a solid Seed round from Valley’s top-notch VC firms, but after 2 years of execution, they had to shut down the company.
In her own words, they failed to achieve a product market fit. They had built an innovative solution, which was looking for a problem.
In her defense, it’s not that they didn’t know how to identify a problem. She had read everything about Lean Startup, Customer Development, Paul Graham’s Startup essays, etc. and had done extensive customer development interviews. Despite all of this, they still failed.
While it’s one thing to learn these things in theory, it’s a completely different ball game to follow it in practice.
Meanwhile, I kept thinking, did she really “fail”? And failed from what perspective?
If you consider her entire career span is just 2 years, then yes, probably she has failed.
But if she’s still early in her career, then in my opinion, this is just a setback. Her entrepreneurship journey is not done yet. She can come back again with a new venture and be successful next time.
You could argue that she failed to return investors’ money.
But again, if she had executed with her best effort and intent, then those investors will most likely back her again for her future venture, which could be wildly successful too.
Success and Failure — Dependent
The boundaries between success and failure are diminishing now.
Many times you become successful in future after you face a failure. And many times you fail in future because success goes too much in your head.
Success and failure are pretty much dependent on each other.
If you failed to achieve your desired objective, but keep the right attitude and rise up again, the chances are you have more drive and are better prepared to achieve it this time around than the first time.
In that founder’s case, if she keeps the positive mindset, and decide to start her next venture — (it need not be immediate as she could take a job somewhere and learn more skills as well), then a combination of her on-job training and her lessons learned from previous failure, she would be much better prepared for the next venture.
Similarly, as we’ve also seen in many cases for celebrity people, if you achieve too much success too early, chances are you will lose it all if the success goes too much in your head as with the success, your behavior, priorities, and expectations change.
I just saw this tweet from Alok Kejriwal on my Twitter timeline today morning — it’s very relevant and consistent to the point I’m making here –
Success and Failure — Tangled
On the other hand, we classify “failure” as if everything was lost and there was nothing to gain.
Failure can be absolutely devastating if you look at it from only one perspective.
But if you look at your journey to achieve any objective and the number of other things you gained before you failed in achieving your core objective, you will realize that it’s not a zero-sum game.
In that founder’s case, I could argue that while she failed in her core objective, she had achieved success in other areas like — learning lots of new personal and professional skills, building strong relationships and network, etc.
I’m not saying that we should take pride in failing and nonetheless celebrate it because we learned something.
In fact, I argue that you could be considered failure too from one’s perspective while you’re wildly successful from many’s perspectives.
I’ve known some people who’ve achieved great financial success, but at the cost of some health issues, family problems or some kind of personal sacrifice.
In that founder’s case, I could also argue that there are actually thousands of other people of her age who took more stable, less risky, high paid salaried career paths. So financially they are successful, but from one perspective, they could be considered as a failure too because they didn’t take the risky route she took and didn’t gain those valuable skills and relationships, etc.
So the best way is for us to confront these failures as much as possible early in our life as we do successes too.
And we should treat these failures as more of temporary setbacks in our journey than calling it an end.
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A framework to choose which problem you should solve
Yesterday I met few friends after many years. After everybody sharing their whereabouts, it was my turn to share what I’m working on. I explained I’m working on a new venture and also shared the details of the problem we’re solving. The first question one of the friends asked was — “why did you decide to solve this problem?”
It was a great question. As they say, as a startup founder, you should be able to answer these 3 questions with high clarity and conviction –
Why this? (Focuses on problem statement and opportunity)
Why now? (Focuses on market and technology landscape)
Why you? (Focuses on founding team)
The good part was, I had thought a lot about why I want to solve this problem from various perspectives, so it was easy to answer my friend’s question.
So I thought I should share a framework with you all that I used to decide which problem I want to solve.
I researched and brainstormed a couple of problems extensively, discussed it with other people too, and eventually decided to solve a problem that I faced every single day in my professional life as a knowledge worker, and is also applicable to pretty much most of the knowledge workers in the world.
I want to fix the productivity and information loss problem that happens during every “meeting” — the necessary evil of a corporate life.
While it was a simplistic overview of why I picked up the problem that I’m currently working on, here is a list of questions I used to choose the problem I want to solve and start my next business venture —
Do I personally face this problem? If yes, do I face this problem very frequently and how frequently?
Do other people also face this problem? If yes, how many such people exist? Is it a very large population?
Do I have the basic understanding of the problem and the solution domain?
Is there a lot of progress happening in the larger space of that domain?
Do I have initial thoughts on what will be the differentiation compared to competitors?
Is it a hard problem to solve such that it will not be easy for too many competitors to enter into this space?
If I make it affordable and at the same time deliver high value, will people pay? If yes, who will pay and how much will they pay?
Will a single user receive a value from this solution or will it require more people using this service (e.g. entire team or organization) to receive basic value?
How will I sell this solution? Can I sell this using bottom-up B2C2B model or will I need a typical top-down enterprise sales model?
How will I distribute this solution? Are there any viral/referral distribution opportunities? Are there any platforms/partners that I can integrate with to distribute this solution?
Do I believe by solving this problem, will I be making a positive impact in many people’s lives and the world a better place?
Finally, if I fail to solve this problem, will I learn something new that will prepare me for the next wave/demand in the technology space?
The current problem I’ve decided to solve met all above requirements and had very compelling answers for each of the question.
I hope this framework and a list of questions will be useful to you too to choose your next business venture.
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How I was wrong about some of the concepts of Product Market Fit and how Andy Rachleff clarified it.
I listened to this Mixergy podcast episode with Andy Rachleff, co-founder of Benchmark Capital and founder of Wealthfront. It is an exceptionally great episode. Normally most of the podcast episodes I listened to are great and I learn a lot — every single time. But this episode is special. It had some key nuggets that I had misconceptions or little different understandings. But the way Andy explained it, it made it crystal clear. So I felt compelled to share these nuggets with you in its entirety. Ideally, you should listen to the 1-hour episode, but if you’re running out of time, read the key nuggets here.
“Product/Market Fit” (PMF) is a common concept in the startup world. It is widely used in every conversation, especially in early stage startups.
Product/market fit means being in a good market with a product that can satisfy that market.
So the gist is — the best team with the best product will fail if the market is not there (using product and service interchangeably). So achieving PMF is “the only thing that matters” and that companies should strive obsessively to achieve it until they do.
So I was under impression finding a great (large and growing) market is the most important thing in finding a PMF. But as per Andy Rachleff –
In contrast to what most people think entrepreneurship is, which is evaluating a market to try to find the holes or the problems and developing solutions of those problems, that leads to very mundane outcomes.
The truly great technology companies are the exact opposite. They are the result of an inflection point in technology that allows the founder to conceive a new kind of product.
The question then is, “Who wants to buy my product?” So you start with the product and try to find the market as opposed to starting with the market to find the product.
PMF is also divided into two key concepts — i) Value Hypothesis and ii) Growth Hypothesis —
First you need to define and test your value hypothesis and then only once proven do you move on to what’s known as a growth hypothesis. The value hypothesis defines the what, the who and the how. What are you going to build? Who is desperate for it? What’s the business model you’re going to choose to deliver?
Until you prove your value hypothesis, you waste money to spend money trying to acquire customers. Unfortunately, most people try to get the growth before they prove the value hypothesis. You don’t want to get the cart ahead of the horse.
This is another big misconception I had — if you’re struggling to find a PMF, then you continue to iterate the product until you find it. But that’s plain wrong. As per Andy —
Now, within the value hypothesis, people think, “I should iterate on the product until I find something people want.” No. You stick with the product. You figure out if the first group I approach isn’t desperate, then I’ll try to find a different group that’s desperate.
Now, most people don’t do that. Most people just keep on trying more people to see somebody’s got to want it. The first class in my product market fit class I ask, “Should everyone like your initial idea?” The answer is absolutely not, because if they do, then the only reason they do is they’ve been conditioned to like it by someone else. Means people aren’t desperate for it because somebody else is serving it.
This is also a great advice on finding ideas.
Great ideas find you, you don’t find them. If you sit in a room trying to figure out, “What company should I start?” then by definition you’re starting with the market, trying to come up with the solution and that leads to mundane ideas.
Howard (Andy’s investment idol) describes the investment business with a two by two matrix. I think this matrix describes entrepreneurship as well.
On one dimension, you can either be wrong or right. On the other dimension, you can either be consensus or non-consensus. Clearly, if you’re wrong, you don’t make money. What most people don’t realize is if you’re right in consensus, you don’t make money because all the returns get arbitraged away. The only way to make outsized returns is to be right and non-consensus.
So starting with the market to try to find a problem, everybody can do that. That’s a right and consensus approach to entrepreneurship. Starting with an inflection point in technology which allows you to build a product and find a solution, that is non-consensus. If it works, it works big. That’s where the great venture capitalists all focus, back to the point I made earlier.
If I really want to summarize my understanding of PMF in one sentence is — finding a group of people who are desperate to use your product.
What do you uniquely offer that people desperately want because if they’re not desperate, there’s a good enough alternative. Let me tell you, if there’s a good enough alternative, you’re doomed. So, if you want to build a big business, an advantaged business, people need to be desperate.
Also, having a big vision to conquer a big market is great, but your strategy should be to start small in a niche and dominate it —
If you want to build a big business, you don’t go after the big market first, because those people only buy based on references, and you don’t have the references. You need to create a beachhead, a niche you can dominate. Through references, you grow from that niche of early adopters.
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Today is my birthday. Birthdays are generally a good milestone to start something new, to have new resolutions and goals, to reflect on the past and think about the future — very similar to the beginning of a new calendar year.
Today is that day for me. I’m starting a new chapter of my life — one of the most important chapters of my life for the next several years — I’m starting a new company.
A day before y’day, I resigned from my current employer, 7 and jumped off the cliff again to start a new venture.
4 years ago, my co-founder and I had sold our previous startup Shopalize to 7 Inc. As a part of the acquisition, I joined 7 and worked there for the past 4 years. During my stay there, many people (friends and acquaintances) used to ask me when am I starting my next startup?
As they say, once an entrepreneur, always an entrepreneur. So their question was quite valid. But I didn’t have a satisfactory answer. I knew it was not going to be “soon”. Very honestly, it was partly because we had some payouts over the period of 4 years, but largely also because I didn’t want to rush into a startup rat race for the sake of doing it and because it’s a fad.
While I had to wait there for 4 years for the full payout, I enjoyed every bit of this period on both work and personal fronts. Overall I had fun working at 7. I enjoyed working with some of the smartest people, built some great relationships, learned a lot of about Enterprise space, built some cutting edge innovative products, failed in getting traction for some of the products and made some mistakes too.
One of the most fulfilling reasons I enjoyed working at 7 is — I was able to contribute and make a direct impact in the company’s strategy and vision. It was a full package experience — I not only learned what to do in my next company but also learned what not to do. But overall, it was a great experience.
But for the past 6 months or so, I started feeling plateaued. I wasn’t able to make the progress I wanted. I wasn’t learning something new. And at that moment, the decision became stronger to start something new on my own and accelerate the learning process in pretty much everything.
Once it was clear I wanted to start my venture, I didn’t have a shortage of problems I wanted to solve. The question was — which problem should I pick to solve — and dedicate the next several years of my life for it.
For the past 3–4 months, I researched and brainstormed a couple of problems extensively, discussed it with other people too, and eventually decided to solve a problem that I faced every single day in my professional life as a knowledge worker, and is also applicable to pretty much most of the knowledge workers in the world.
I want to fix the productivity and information loss problem that happens during every “meeting” — the necessary evil of a corporate life.
I don’t hate meetings. In fact, I love them — but when they are productive. So much knowledge gets shared, so much progress is made, and so much alignment is achieved when you have good meetings.
But there is a downside to it the way how meetings are getting conducted today. So much of time is wasted and so much of knowledge that gets discussed in the meetings gets lost. And I hate that part. And that’s what I want to fix.
I’m teaming up with few other people who are equally passionate about solving this problem. It’s a hard problem and it will take many years until we achieve our final vision. But every attempt to reach towards that vision will be worth taking to make a positive impact in knowledge worker’s life.
We’re barely getting started, so the more details will get shared very soon and very frequently on this blog. So stay tuned…
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Recently, I had a couple of friends reaching out to me to discuss their startups’ progress and get some advice on how to take it to the next level. In all these interactions, there were some common patterns –
Most of the founders are smart engineers and some of them have worked with Google, Amazon, eBay, Oracle, etc.
They have a B2C (focused on consumer) product, which didn’t have any transactional (i.e. user paying in some form) business model
They have been working on it for over a year and have a working product or technology, but are struggling to get users and increase the engagement for their product
They are first-time entrepreneurs
What surprised me the most is — while there is so much content available on the internet today about how to start a startup, how to follow a lean methodology, how to do a customer validation, how to build viral hooks in your product, how to implement various growth hacks, etc. but still, these entrepreneurs are making the same mistakes that many entrepreneurs have made 10 years ago.
My hypothesis is —
These entrepreneurs are not investing enough time in learning as much as possible from others’ experiences by reading books, blogs or listening to podcasts and avoid some common mistakes
They are not able to let go who they are and what background they came from (engineering) and grow into a new role (founder), which is required to build a successful product and a company
To build a successful software company, there are 3 skills that are essential in the founding team —
Building a great technology
Building a great product
Growing your users/customers
After talking with these smart engineers I realized— they had largely focussed on #1 but weren’t giving enough attention and importance to #2 and #3.
If you are a great technologist and aspire to build a technology product company, then either you grow from an engineer to a product manager/designer, and eventually into a marketer/sales person based on if it’s a B2C (consumer) or B2B (SaaS or enterprise) product or have someone on the founding team who is specialized in these skills.
As an engineer, the technology innovations you’re doing are really admirable and absolutely essential for a startup. Being a smart engineer is the greatest asset you can have in this startup world. Every other “idea” guy wants you to be on their team to make their idea a reality. So by no means, I’m belittling the value and the need of having strong engineering members on the founding team.
But I want to emphasize the need of having someone with strong product sense and/or great marketing/sales skills as well.
If you don’t prefer to have someone with product design/management in your team, then you will need to play a role of a product manager/designer to truly understand your users/customers and build something they want and solves real problems.
And eventually, you will also need to become a marketer/sales person and reach out your target users/customers, talk to them and convince them to use/buy your product, and eventually know how to do it at scale and do it repeatedly.
Just because you are a great engineer or technologist, don’t assume you can build a great product.
And just because you are a great product manager, don’t assume you can build a viable business.
There is a difference between a technology and a product — most people confuses this. And there is also a difference between product and business.
Typically, technology is an applied science. We build new technologies using some of the breakthroughs in the science world to achieve some objectives — i.e. to make existing things (technologies) faster, cheaper or better (larger, smaller, last longer, etc.)
On the other hand, a product is an applied technology. We build products using multiple technologies to solve specific problems that a user faces or tasks she wants to do.
And in the end, a business is an applied product. You need to take your product and reach out to your target users/customers and have them use it, which helps you generate a sustainable economic value.
As an engineer, we gravitate towards building great technologies. Making that code run even faster, improving the performance and accuracy of that function, etc. And some engineers are really good at that. And that’s why they get hired at some of these great companies, who have built some of the greatest products for mass consumers. But just because these companies have shipped great products, the engineers who work at these great companies start believing that they can also build great products on their own.
While that’s absolutely possible, it doesn’t come handy without you putting any efforts towards achieving that goal. If you are a smart engineer and eventually want to build a great product too, then your existing technical skills are a great asset but are not sufficient. You will need to invest considerable time to achieve those product and business skills as well.
I would recommend learning these skills –
User experience design
Let’s dive into each one in detail –
If you aspire to build a product that is not only useful (solves a real pain point) and usable (effortless and intuitive to use) but also delightful (that creates happy emotions).
You will need to get into user’s head to understand what specific problem they want to solve and what specific outcome they want to achieve, what effort it takes for them to do that, what emotions they feel after they achieve that outcome, etc.
Once you understand the consumer psychology very well, you will nail the product that will resonate with them very well and chances of them using it actively and recommending it to their friends will increase drastically.
User experience design
As per Wikipedia, user experience design (UXD or UED) is the process of enhancing user satisfaction with a product by improving the usability, accessibility, and pleasure provided in the interaction with the product.
The last part is very important — “interaction with the product”.
This is the most common mistake engineering founders make — they confuse UX Design with UI Design (User Interface Design). UX Design is a more analytical and research oriented, while UI Design is largely about graphic and visual design. While both are crucial, nailing the UX design (usable) is more critical than the UI design (look and feel).
UX role is quite complex and challenging. It involves consumer analysis, competitor analysis, product strategy, content strategy, wireframing, prototyping, usability studies, etc. So I’m not suggesting you do this everything on your own and become an expert in this. But if you understand what each function does and practice some aspects of it, then it will go a long way.
At the minimum, to provide a great user experience, focus on the lifecycle of a consumer who wants to use your product. You need to understand what they do in their life before they use your product and after they use your product. And repeat that exercise few times. This will help you understand your target consumers’ life really well to build a product that fits into their lifecycle.
Another most important skill you will need to learn is — prioritization.
As a technologist, you get sucked into optimizing things that are not required on the day one. You tend to build advanced technologies in-house instead of leveraging off-the-shelf services from the 3rd party providers. You believe that that’s your core IP and needs to be built in-house. You argue that 3rd party providers are generic platforms and won’t be as effective solving your specific use case. While that all is true, it’s still a mistake to optimize for these things before you even have any product-market fit. You can always build advanced technologies in-house as you start scaling.
This is such a great prioritization framework that forces you to focus on delivering maximum value at minimal wastage. You will need to learn to be ruthless in your prioritization for all activities.
While this may sound very obvious and cliche, but written, verbal, and nonverbal communication skills are actually the most important traits you will need to master to gain credibility as an effective and trustworthy founder.
While you might be great at explaining technical details extremely well to your peers, now you will need to communicate the problem, the value and the benefits of your product to various different stakeholders — potential teammates, advisors, investors, prospects, clients, etc. You will need to wear a different hat every single time based on who is in front of you and communicate effectively in multiple languages — executive, development, strategic, tactical, etc.
Your written and spoken communication is going to be an absolutely crucial skill for your sales or marketing efforts. You will need to communicate what value your product delivers and able to align those benefits to the problems prospects have shared and eventually influence them to use or buy your product.
And don’t forget, you will need to be equally great at “listening”. Sometimes you’ll learn more when you’re actively listening as much as you are speaking or writing.
While this is a broad topic, having business acumen boils down having a minimum level of expertise in strategy, finance, operations, marketing, and sales. You may not need to be the expert in any one of these skills, but while communicating with advisors or investors, you will require some level of fluency and confidence in these business languages.
You will need to understand the basics like —
what’s the unit economics — how much it costs you to serve a customer?
what’s your business model — transactional, subscription, revenue-share, or ad-based?
how much does it cost to acquire a new user/customer (CAC)?
what’s the market opportunity — what’s the total available market (TAM) size, what’s the serviceable available market (SAM) size, etc.?
Now you might say, for a smart technologist by profession, learning all these skills means deviating from their core focus. While that may be true, the key question is — do you want to continue to stay only as a technologist or do you want to grow into a founder role?
There is nothing wrong with staying as a technologist throughout your startup, but then make sure you have someone on the founding team who has a great product sense and a strong business acumen.
But if all founders have technology background, then make sure at least you have someone in the founding team who wants to grow into a product manager and eventually into a business operations/marketing/sales role.
For the last few years that I’ve been blogging, I struggled about one thing — what should I call my blog? What should be its title? What should be its theme?
After thinking for a while, I realized what I really enjoy doing and want to do with my life — to make an impact in other people’s life.
Thus, I have a theme and the name for my blog — The Pursuit of Impact!
That’s how I want to live my life. I want to leave a legacy. I want to make some dent in the Universe. And since making an impact is not a one-time accomplishment, but rather is a continuous journey, it will be my an ongoing mission to make bigger and better impact in other people’s lives. And that’s the pursuit of impact!
To make an impact, I don’t need to be financially very wealthy or some kind of celebrity. The impact also need not be very large scale either. It could simply start making the slightest impact in just one person’s life. It also doesn’t mean that I need to give up my current life and be a full-time social activist or devote myself to a non-profit organization. I will continue to live my current life, it’s just that I’ll have a better purpose and goal for everything I’ll be doing.
The way I believe anyone can start making a disciplined impact in other people’s life is you start working with your circle of influence. Essentially the way circle of influence works is — the people you have the most influence on are at the center of the circle and the people you have the least influence on are at the periphery of the circle. So you start from the center and then start expanding outwards.
To begin with, I will simply start with my core family — my wife, kid, and parents. Giving them a better life from social and financial perspective is my responsibility. I don’t necessarily consider that as making any impact. But if I could influence and inspire my kids or wife with my thoughts, actions, and behavior, and if they could imbibe some of those lessons in their life for good, and achieve greater things, then I would assume I made some positive impact in their life.
Then the next set of people will be my extended family — my sisters, cousins, and their families. If I could inspire their kids to get higher education and achieve even higher heights through my blog, or if I could just help them in any ways to achieve their dreams — like providing tactical advice or financial help, then I would assume I made some positive impact in their life.
Then the next set of people will be my very close friends. If I could help them when they need it, support them in their endeavors, or push them to reach their full potential, or provide them honest feedback about their endeavors, or simply spending a good time with them to add some happy moments in their life, then I would assume I made some positive impact in their life.
Then it will start expanding to my larger friend circle, colleagues and acquaintances. If I could help them in their career aspirations by providing any specific advice, or get them better at what they do by sharing my experiences and learnings through this blog, or inspiring them through my actions, then I would assume I made some positive impact in their life.
Then it will be expanded to even larger reach — communities that I’m part of like the city where I live or the educational institutes I attended, etc. If I could give back to those communities in some way — either financially or through volunteering, then I would assume I made some positive impact in their life.
Lastly, it will be expanded to people that I don’t know today. If I could build a product or business that will provide tremendous value to thousands or millions of businesses or people and allows them to achieve something bigger, then I would assume I made some positive impact in their life.
Now I’m not saying anything here that’s new. Millions of people are already leading their life this way. They’re already making a tremendous impact in other people’s life. By writing these thoughts down, it’s just helping me to appreciate and recognize what others are doing, but it’s also reiterating what’s important to me and how I should spend my time and energy.
Today, I don’t do a lot of these things that I mentioned above. But it’s my wish to do as many things as possible. And I will continue to share my learnings and thoughts on this blog which essentially is also contributing in my pursuit of impact!
I try to read a lot — mostly blog articles, books, and even e-books. There is no doubt that reading helps you get smarter, improve your vocabulary, explore new ideas, etc. I mostly read about topics which are relevant to my personal and professional development and articles that add positive impact in my life, stories that inspire and motivate me to do something great. I avoid reading daily news about politics, entertainment, etc. unless it’s a really critical news. But since last year or two, in addition to reading, I’ve been addicted to listening podcasts too for my personal and professional development.
Podcasts are mainstream now
While podcasts have been around for about a decade, I personally experienced that they’re getting mainstream since last few years since they’re getting extremely convenient to consume. Podcasts are to the radio industry as blogs are to the mainstream media. Anyone who is expert and passionate about any topic can create a regularly updated content and publish a podcast. You can find thousands of podcasts which are well produced, inspirational, educational, and entertaining.
Unlike reading blog posts or watching videos, which require someone’s full attention, podcasts give listeners a flexibility of multi-tasking. Listeners can subscribe to specific podcasts, auto-download new episodes, and listen whenever it’s convenient for them on their smartphones while doing some other mundane chores. Every day, I listen to somewhere between 30–90 minutes podcasts while commuting to the office (25–35 minutes each way) and exercising (30–40 minutes).
The one overarching reason I listen to podcasts is I learn stuff. As they say, we’re influenced by what we see and hear. It’s a way of exposing myself to the influences of people who are smart and successful. I’ve found them highly inspirational and educational. I’ve learned how to form healthy habits, how to be more productive and efficient, how to start, run and grow a business, how to manage relationships, how to write better content, etc.
Don’t get me wrong — I’m not saying podcasts are a substitute for reading books or blogs. It’s just a different mode of consumption for a different kind of content. Podcasts don’t give visually rich experience if you want to put the faces in front of names, or see things in picture or action. So there are some things which I still prefer to read at my desk while some things which are better to consume while I’m driving.
Podcasts I listen to
So here are few podcasts that I listen to actively. These are my interests of topics, which are skewed to Entrepreneurship, Startups, Product Management, Part-time Businesses, etc. But you will find podcasts on pretty much any topic that interests you.
Hosted by Jason Calacanis, an entrepreneur turned investor interviews some of the most influential names in the entrepreneur and startup communities in order to provide inspiration and advice for aspiring entrepreneurs looking to grow their startup.
Every week this podcast chats with successful entrepreneurs on how to grow a startup — topics include self-funding, raising capital, product development, and customer acquisition. These podcasts are packed with informative content that every startup founder needs.
Unfiltered insights and actionable advice straight from the trenches of startup and business life. The show hosts, Steli Efti and Hiten Shah, are both serial entrepreneurs who have founded multi-million dollar SaaS startups.
Hosted by Nick Loper, this podcast is for part-time entrepreneurs who are looking for business ideas, actionable tips to start a business, and killer strategies on how to turn their side hustle dreams into a growing business.
On the Inside Intercom podcast, you will hear the team from Intercom interview makers and do-ers from the worlds of product management, design, startups, and marketing.
I hope you will find this resource useful.
Of course, I’ll continue to add more podcasts to my list as I discover interesting podcasts. If you have been listening to any great podcasts recently, and would like to recommend to me or my audience, then please share it in the comments area.
As mentioned previously, I was on a hiatus for more than two years and didn’t update the world what I was up to in that period. A week ago, I met my school friends after a long time and they also didn’t know about my whereabouts. I shared some of the details with them but thought I should share it with the larger audience — specifically not only what happened but also how it happened and what lessons I learned from that experience.
Two years ago, in March 2013, my co-founder Manish and I sold our two years old startup Shopalize, Inc to 7 Inc. It took four months to sell a two people company with a series of activities like talking on hour-long phone calls with advisors and lawyers, writing carefully worded emails, passing technical due-diligence hurdles, and negotiating tedious legal terms.
Every time someone learns that we sold our startup, the first question they ask is — “how did that happen?”. And most of the times, my answer is — “I got lucky!”.
Shopalize was started four years ago as a Social Marketing platform for eCommerce retailers. For the first year, I self-financed the company using my savings and working out of my home. I didn’t have the proper experience of building Web software applications, so learned it on the go while building it. Few friends helped me in the part-time, but it took me almost 9 months to launch the beta version of the product. My plan was to launch it in 6 months.
Once I had the beta version to show to people, I started getting more interest from potential co-founders, advisors, potential customers, etc. As they say — a picture is worth a thousand words, and a prototype is worth a thousand pictures. With the beta version ready, I was still searching for co-founders who could join me full-time. I met Kris (now a friend) in a startup meetup, who joined me full-time as a co-founder to help on the sales side. He helped to get the first customer and taught me how to run sales operations. With that first customer, we were officially launched.
Post launch, we got a dozen customers in the first couple months, but we still had not proved the product actually works and delivers the value as promised. The product lacked many things from the functionality, stability, and capability perspective. In fact, it was broken for a large set of users. There were many incidents where I was embarrassed as I didn’t know how to fix those issues and had to figure it out on the go.
Then almost a year into the business, Manish joined us as a third co-founder to accelerate the product development efforts so that Kris can focus on sales activities and I can focus on both customer success and product development activities.
With the team of 3 people, product in the beta stage, and few customers on board, we decided to raise an angel round. Our advisors invested some money and kicked off our fundraising. With that little financial help, we hired few contractors in India to help us accelerate the product development efforts.
Over the next few months, the product started getting better, we started showing results and ROI to our customers, and we started getting confidence in our product. Kris and I started closing more partnership opportunities, Sales leads, and overall we started seeing our customer base was growing. We had started making some revenue to cover our operations and contractors costs, but we were still not paying ourselves.
Meanwhile, we started seeing many competitors popped up in that space with seed funding raised. We were worried about growing competition and were struggling to get good attention for our fundraising efforts. We believed in what we were doing, but we didn’t have strong growth or product market fit yet, or substantial revenue to prove that we were onto something big that was in high demand.
We discussed other options and decided to halt the fundraising efforts and continue building the business by being scrappy and nimble. We decided to grow monthly revenue to $10K-$15K before raising a seed round. We knew that achieving that kind of revenue with small size customers was a long grind, so we decided to focus on mid-sized enterprises with the bigger deal size. We started getting good interest from few mid-size companies. We thought if we could get few such customers then we could bootstrap our business and could survive for some time.
But selling to mid-large enterprises means you have to invest more in product and technology from functionality, scalability, stability, and security perspective. We thought it was the right thing to do and worked even harder to make our product and platform better. On the other hand, it was taking a lot longer to close the enterprise deals and we were getting impatient as we were running out of money.
Meanwhile, Kris decided to pursue some other opportunity. It was a big loss both mentally and physically. We struggled for some time but eventually managed to get back on the track. I took the responsibility for sales and Manish took the responsibility for product development.
Sometime in November 2012, I received an email from our legal counsel that he wanted to meet me. He tried to understand what our business do in detail and then he suggested to introduce me to a CEO of 7 Inc to discuss some strategic opportunity. Apparently our legal counsel was also a legal counsel of 7 as well and he thought we could be a good fit into 7’s vision.
In general strategic opportunity always sounds exciting as it could be an acquisition offer or a partnership opportunity. But since I had not heard about this company before, I wasn’t sure what to expect out of this meeting. I looked at their website, read press releases and tried to understand what they do. I did not think that it could be an acquisition opportunity so ruled out that option. Now for partnership opportunities, in theory, a successful partnership with a larger company could help your company get more customers, but in reality, partnerships are rarely a real thing as either large company is buying your technology to sell to their customers or you are buying their distribution channel. But more importantly, in early days of startup, these things eat up your time and energy. So I wasn’t really sure what would be the outcome of that meeting, but I was looking forward to meeting and learning.
I met with the CEO and after quick initial introductions, the first thing he asked me was — “Do you know <one of our competitor’s name>?”. I said — “Yes”. Then he asked me — “How are you different?”. Normally, if this would have been a potential customer, I would have answered with my typical differentiation points, but I somehow I didn’t think this was about them buying our solution for their usage, so I responded — “Product wise, we’ve pretty much very similar offering. Company wise, they’re much larger, and we’re just 2 people company.”. He responded — “Ok, if you have a similar offering, then we would like to acquire you.”.
I was shocked. I wasn’t prepared for him to let the cat out of the bag so quickly. He hadn’t even looked at our product demo. On the other hand, I was impressed with the fact that he didn’t waste anytime in any irrelevant discussions and jumped on the main point straight away. He asked if we would be interested in selling the company. I said we would be open to offers but weren’t not actively looking to sell the company. Given that we were just getting started with the enterprise customers, we thought we had a revenue making potential ahead of us and there was no need to sell.
But I tried to understand in detail why they wanted to acquire us, what exactly they wanted to do with our product & technology, how did they see we fit into their company, etc. He explained everything and I was impressed with their vision and plans for using our technology. He also asked me about our future product plans, fundraising plans, etc. and asked us to demo the product to their larger team in the following week.
We were invited to demo our product to key execs from Product, Engineering, and Data Sciences departments. By this time in our business, I had given many product demos to potential customers, but this time though, it wasn’t only about selling the product, but it was also about selling the company, the people, the vision — pretty much everything.
Meanwhile, our advisors and investors coached and mentored me on how to present, what to emphasize, how to connect with executives, etc. It was a huge help. This shows the importance of having the right advisors on your board.
When we walked into the room, there were around 10 execs to hear it. A 30-minute demo turned into an hour or two hours discussion. During discussion, I kept questioning myself why the heck a 500+ people company wanted to acquire a 2 people company, and why they couldn’t build what we built in-house.
But based on their questions during the product demo, I realized that we were experts in our domain. We had data about our product, our customer engagement, what had worked, why it had worked, etc. They didn’t know all of that. And they didn’t want to waste their time in learning that from scratch.
In the end, I thought they were impressed with our product, our knowledge, and realized that we were also impressed with what they do and were excited about the future.
Post successful demo, I was invited in a following week to hear the financial details of an offer. The first offer was extremely low, so I pretty much declined right there without taking it to discuss with my advisors or co-founder. I had a certain range in my mind, so was not ready to sell Shopalize anything below that range.
After a few days, we got another revised offer, but it still wasn’t in the expected range, plus it also had some clauses. After few back and forth negotiations, we agreed on the financial terms and signed what’s known as a term sheet with the intent to purchase. Once a term sheet is signed, a deal is happening unless something horrible happens during due diligence.
The due diligence
7’s team sent over a list of hundreds of technical, legal, and business questions that we needed to answer for the deal to go through. What type of technology, libraries, database had we used? Had we used any open source softwares? Did we have IP assignments from every contractor who touched our code? How did our billing system work? How did we make money?
Tracking down document after document was really tedious work. And during this time, we had to keep our business running as normal, and keep the whole thing a secret from our contractors, friends, etc.
On the technology due diligence side, we had to integrate our product with their technology stack to prove that it could be easily integrated and deployed to their clients as it is with minimal changes once we come onboard. So we had to make quite a few changes on our side to make that happen. Luckily, we were smart enough to do only changes that we thought were anyways needed for us to make our product ready for the enterprise-grade customers, and we pushed back on all the changes that we thought were custom requirements for 7’s specific environment.
On the legal due diligence side, we had to do lot of negotiations on various different clauses, but after series of negotiations, heated exchanges, and counters, 7’s team was satisfied with our asks and we were satisfied with the terms of the deal and their plans post-acquisition.
In the end, our lawyers conferred with their lawyers. It was agreed that after months of due diligence, we had signed all required documents and all closing conditions had finally been met. Then money was officially transferred to our accounts and we were part of 7 Inc.
Overall, it was actually a great outcome for all of us involved in Shopalize. Specially for my co-founder and me it was a life-changing event. The financial rewards were great, and if I ever want to start another company, every piece of that process will be easier. Also, we had received a jump in our professional career in terms of roles and responsibilities. If we would have continued the same employment path instead of taking the leap in entrepreneurial journey, we would have never achieved what we’ve achieved today. My co-founder joined 7 as a Director of Engineering and I joined as a Director of Product Management.
Post acquisition, the one thing that I’d been planning for more than few weeks was how to announce the acquisition on Facebook with my friends and family members. I wanted to share with them that there is a hope in taking this crazy entrepreneurship route if you work hard (and get lucky), you can make your mark in the Silicon Valley’s startup stories. While writing it, more than announcing the outcome, I ended up thanking every single person who helped me in this journey starting from wife, co-founder, part-time helpers, advisors, etc. Without their support, guidance and trust, we would have not accomplished this outcome.
By no means, we had the greatest outcome compared to other Silicon Valley’s success stories. But my hope in sharing this story is that at least people who know me and follow my blog can relate themselves with me personally, and can believe that if I can do this, then they certainly can. With that belief, I hope more people will take the leap of faith to start more great companies and in the process they’ll become great leaders.
As a startup founder, I observed that there are really 4 core resources that I work with every single day –
Each one has different level of importance and value at different stage of the company. All these resources are associated with each other in some way. Sometimes one is dependent on the other, and sometimes they’re exclusive to each other. Here are few examples how they’re associated with each other –
You may spend more money to save time, or you spend more time to save money.
You spend more money to get more people, or you have less people since you can’t spend money.
You get more people to do things in less time, or you take more time to do things due to shortage of people.
You can do more things in less time if you’re knowledgeable about it, or you need more time to do things as you don’t have prior knowledge about it.
You need to spend time to acquire knowledge, or you don’t acquire knowledge since you don’t have time.
You got the idea.
The point is — you’re constantly making decisions between these 4 resources and trying to figure out which one is more important than the other at that given instance. Sometimes you take rational decisions, and sometimes you take it based on your gut. But as a founder, you need to master the art of prioritizing these resources and understanding the importance of each resource at the different stage of your company — and that’s what they call — “execution”.
I was discussing with one of my friends about our temptation about starting a startup in hot markets. Here are my brief thoughts on it –
In my opinion, at any given time, there are always more than 1 hot markets. “Real-time web” is one, so is “social-gaming”, and so is “iPhone apps”, and so there are many. The key is — you pick one market, and keep pushing your idea in that market. It’s easy to get distracted by other hot markets all the time. It’s very tempting to switch to other hot market just because few others became successful in that market. But when we notice such successes, and realize that it’s a hot market, there are many others who also notice it and realize that it’s a hot market. Also, after we switch to that market and before we really start making our impression into that market, it might be over competitive and too late, unless we’ve that kind of expertise and speed of execution.
I think the key to win based on hot market approach is — we need to be pioneers or early adopters of that market. We can’t be too late in the game. I think 2–3 years is late. But just being pioneers or early adopters of any hot market does not guarantee any success. It’s our relentless belief and persistence to stick into that market until people start believing that market might make us successful. We can’t just hop-around to hot markets before we really execute for long and well in one market.
On the other hand, I’m not saying we should completely ignore the trends of hot markets. The best strategy might be to see how can we leverage those trends for our existing idea and market. We need to see what we can learn from other hot markets, and how can we bring similar experience to current ideas. There would be more innovative opportunities on the intersection of two or more hot markets.