Friday, 10 January 2014

Why are we running for the Exits?

Few in the start-up community talk like Jason of 37 Signals or Sridhar Vembu of Zoho.  Our role models seem to be serial entrepreneurs who have sold multiple start-ups in short span of time and investors who have expertise in getting Exits for start-ups. When someone starts traditional business ‘Exit’ or closing shop used be the last thing one would want to do. The focus would be on staying in the business and growing for decades. Ever wondered why Sam Walton of WallMart never tried to find an exit for his first store in 2-3 years but invested 95% of his income to start the first WallMart store after 12 years for persistence. If you try to do a start-up where you try to build a sustainable business you will be termed a “lifestyle” business and not many of the investors would like to see that. Investors would rather want you to sell them a powerpoint showing billion dollar growth in next 2-3 years, take the investment and then try to run for the nearest possible start-up exit.
In long term business loyal customer base, happy employees and sustainable growth are the focus. Hyper growth based on bubble will burst sooner or later. Investors who truly want to enable start-ups should if they can stick with start-up for longer term maybe slow but sustained growth rather than push trying for an early hyper growth and exit. A lot of money gets pumped into giving freebies on unsustainable business. This sets an expectation form customers that a XYZ service should generally be free. Any service provided of value should come at a cost. No one want’s to run a taxi service or saloon completely for free based on some ad stickers that they have put up. Providing quality service at cost will help provide better service to customers and a healthy start-up ecosystem.

I only hope we come out of the current craze of selling start-up ‘Exits’ and focus more on selling service of value to customers for decades to come….

Tuesday, 3 December 2013

Is the cost of acquisition justified?

Interesting article on what a start-up tried and the high cost of acquisition on various channels. There are a lot of services that will promise you ‘guaranteed’ leads in short term. You can spend a lot of $$ on Google Adwords, Zillow and CPC on other social media channels. As your competitors also enter the market the cost of acquisition of a customer becomes higher and higher. Marketplaces like Google, Zillow will use game theory to get people to bid the maximum amount and they will get most $$ of leads you get from them. Also in a lot of these networks when ad's are displayed on 3rd party sites there are a lot of bogus clicks which never translate into leads.
What is required in a longer term is a strong brand of yours that gets inbound leads rather than you purchasing them. Like in the case of real estate agents the question is how many homebuyers know about you even without you putting up Ad’s on these services to get leads.
Building a brand with longer term vision requires a lot of work but that is the only thing that will differentiate you from the others in the crowded marketplace. Do you have a strong online & social presence where you directly get the inbound leads from? If you have provided the best service to a customer have you made sure their testimonials and referrals are reflected in the brand you are promoting? If someone in your client’s network is looking for a home will they look for you over others? A strong brand comes with not only an exceptional customer service but also long term visibility to others from their network.
For services which are localized you don’t have to spend the same effort or budget as a big national services. You just have to be known as the best in your location even without putting up an Ad.  Even the budget you spend around lead generation should help you around brand building. Inbound leads are high quality and come for free. Purchased ones are costly and not sustainable as a differentiator.
Though marketplaces look like a quick way to put money and get leads if you know it others know it too. Over time the cost of acquisition will go up. If you are not working on building your brand, If people in your location don’t know about you without putting up a Ad, If you are not getting referral business from your network, think are you doing the right thing’s to build your brand?

Wednesday, 27 November 2013

Where is a bubble? SnapChat is very reasonable ...


Forbes says value of user on Facebook is 90$,  on LinkedIn is 131$, on Google is 200$ etc. Average cost of each user in these services is around 100$.

A lot of companies valuations are going up by similar calculation (SnapChat is valued 4bn, Pinterest 8Bn) though they have no revenue. That way if I add up the 20 free services or  popular games I have signed up to including Facebook, Twitter, LinkedIn, Pintrest, Whastup, Snapchat, Dropbox, AngryBird, Evernote etc I am worth more than 20 * 100 = 2000$ in the online world.

These services are promising revenue of 15-20$ per user with clicks on Ads in their app. That is going to be 300-400$ worth of Ad clicks every year across these 20 services per user (also growing at 20+% every year to keep the Wall Street happy).

Let’s assume on average business putting up Ad on this services is willing to spend 10% of their product cost on marketing and get me to buy something. With an Ad spend of 400$ over me it means that I am buying 4000$ worth of goods/services every year after clicking on ads on these services.

If the valuations of Facebook or Google etc is true 1 billion people across the world are clicking and buying goods/services worth 4000$ every year.  That is  a total of 4 Trillion USD worth of transactions going to be happening by clicking on Ads in these services/tools.

This mean 1/4th US GDP or half of China’s GDP worth transactions are happening by clicking on Ads in these services. Looks feasible if countries have started purchasing Oil & Jet engines by clicking on Ads on Facebook or there is a bubble building somewhere J.

 

Monday, 25 November 2013

Internet of Things (IoT) - What is in it for consumers this time around

There has been a lot of buzz around Internet of Things (IoT) with companies like SalesForce talking about taking big bets on it. There are suddenly so many stories floating around how there is going to be transformation from Internet of People to Internet of Things. What fundamentally changed in the ecosystem that things look different this time around?
The revolution that never happened
This is not been the first time that we have heard how smart fridge at home will automatically notify you about grocery to buy or other intelligent connected gadgets simplifying our life’s. But the large scale adoption of smart devices never took off in the consumer front, expect for few instances like IR sensors powering toilet flushes or Bluetooth headsets connected to mobile!  
Apps & Protocol that are never compatible
I always had Bluetooth enabled smartphone phone of Noika but would never be able to talk to one of devices of other manufactures though both claimed support. Everyone had their own variation of the protocol and apps that would never work with each other. I would spent more time trying to import a VCard over these than typing it out manually. There was no standardization for developers to build on and even with standards each vendor managed to introduce their incompatible variations
Tags that no-one can read
I worked closely with RFID team members at Microsoft years back where there were stories of how supply chain or inventory management would be redefined. I still did not see people being able to kill those barcodes and make business adopt smarter technologies powered by RFID tags.
In case of NFC there seems to be so much fragmentation even within Android devices that one version of the tag is not readable by next version of the device. iPhone does not have the support and Windows phones keep doing flip flops on NFC support.
Is the Problem with the devices or with the software?
There were no dearth of sensors, tagging, readers etc even before the sudden buzz around IoT. A quick search on Ebay will give you thousands of sensors for motion detection to NFC tags that you can purchase of the shelf. The problem is with so much fragmentation that as an application developer even after spending significant effort you don’t find a customer + device segment that you can target easily. Until someone with the setup like Apple who has the complete ecosystem of device, app and developers brings in a standard consumer story around the IoT might be no different than what happened multiple times before.
The scenario that each individual requires the smart devices to solve is different. Once the right ecosystems for developers is in place and there is a decent non fragmented market we will see the applications flowing in that cater to people’s needs. Without an iPhone there was never an App revolution on mobile. Without the App that solved problem that I was interested in ‘smart’ phones were not that compelling.
I keep dabbling with prototypes on new technologies that come out. I am still an eternal fan fed on stories of R2D2 and C3PO and know that IoT scenarios are so compelling that it has to happen someday.  But when the day will be and who is the Steve Jobs who will enable this for us is something to watch out for.
Hari Krishnan is Co-Founder at Techyard working on BizKinetic which is trying to re-define the way Real Estate Agents engage homebuyers  & Cloudgust, a unique SaaS backend powering their apps.
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Thursday, 21 November 2013

Who is using those Andriod Tables ?

When analyzing device usage behavior @BizKinetic there were some interesting data around iOS vs. Android and phone vs. tablet usage. We found more than 50% of the clients were frequently using mobile/tablets at work.
There was a divide of around 60-40 for iOS to Android device users. This largely varies on geography though. It might not be completely related to cost factor as Android customers have devices at cost where they could have easily afforded iOS device.
The tablets themselves have an interesting story though.  The penetration of Android tablets for work related usage seems to be very low compared to the iPads. It might be due do Android users using phoblet kind of devices like Samsung Note which covers dual purpose. Either ways the usage of Android tablets among the mobile workers seems to be very low. It might time for Google to rethink what is the purpose of Android tablets likes Nexus 7.
With so many options for mobile information workers, it’s going to be interesting to watch out if combination of mobile & tablet or a single large “phoblet” device is going to be the device of choice. I will leave the speculation on how wearable devices could change usage patterns to another blog! Please do share your insights or findings.
Hari Krishnan is Co-Founder at Techyard working on BizKinetic which is trying to re-define the way Real Estate Agents engage homebuyers  & Cloudgust, a unique SaaS backend powering their apps.

Tuesday, 19 November 2013

What to build & when to Pivot - Some learnings @BizKinetic


In any startup things don’t magically work the first time. Any problem space that is chosen requires quite a bit of course correction before you start getting some traction. Knowing when to pivot and by how much is art. Do you throw away everything or you spend more time with course corrections? Is there no market for what you are building or you are building a product that does not even meet the MVP bar?

Below I am sharing some of our learning’s we have had so far at @BizKinetic:

1.       Start by identifying a customer and problem need fix for. Look for similar customer who require the fix. ‘Similar Customers’ also has be understood based on size, role, geography etc.

2.       It is important to get a gauge of how critical the solution to this problem is for the customer. It is very easy to get lost with non-critical list of feature items. Customers will say yes for any new feature you list but check will they pay for it?

2.       There will be always 10+ companies working in similar/overlapping problem space.  There was always smartphone before iPhone and search portals before Google.  Keeping the focus on the pain point of the customer and solving it in the best possible way is important.

3.       Platforms/Frameworks don’t sell especially for startups. You have to provide working solutions to end customers. A good platform backing your solution is required, but it is not what you can sell.

4.       Once you have product in hand there is the pipeline of converging Marketing – Sign Ups – Active Users – Paying Customers that has to be optimized continually. Anything stage could be causing drop offs. Continuous A/B testing is critical on each of them to see what works.

5.       It is good to be time bound on what you are planning to try and what you expect to see as results. Be realistic on what your goals are.

6.       Have some plans of how you will make money and what is the target market. It will keep changing over time but is important to have a number & plan to get there.

7.       Customer will not magically discover your offering. Find the right channels to make sure customer know about your product.

8.       You’re bound to get both good & bad feedback initially. Any feedback is good as it helps improve the product.

We are still in early stages of iterating on the above and learning but have seen that focused iteration helps in healthy increase in customer adoption. It is very easy to get sidetracked by the noise around but it’s critical to keep the focus on the customer and the problem that is being solved.
 

Hari Krishnan is Co-Founder at Techyard working on BizKinetic which is trying to re-define the way Real Estate Agents engage homebuyers  & Cloudgust, a unique SaaS backend powering their apps.

 

Startup Incubators - Do they help?


There are a quite a few start-up incubators that are coming up in India. Some even promise the moon! We decided to setup in the IIIT-H CIE incubator in Hyderabad. Does the incubator does it really help? Here is some of our experiences @Techyard:

1. Keeping home and office separate is always good especially if you have 4+ members. It helps you switch context between home & work.
 
2.  Infrastructure of network, power etc already ready. You can focus on what to build.
 
3.  Some startups that sit next door can give you insights or be your potential customers/partners.
 
4.  Since we were part of incubator inside at reputed institute also helps with interns/hiring at times
 
5.  Incubators charge startups on rent or equity model. Choose what makes sense for your startup
 
6. Keep your expectations realistic on what you will get out of help with business or mentorship
 
7. You get some help with connect to Angels or VC’s if required

Many incubators help with infrastructure & basic networking/connect. Go for it if you get the right deal.

Hari Krishnan is Co-Founder at Techyard working on BizKinetic which is trying to re-define the way Real Estate Agents engage homebuyers  & Cloudgust, a unique SaaS backend powering their apps.