Dear Startups, What are you actually selling?

A question comes to my mind which I always want to ask to all startups.

Dear Startups,

What are you really selling? Is it a product or a service? Or your own company ?!

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When I was a child, I never knew what a start up was. I only new business, businessman, customer, buy, sell, expenses, income.

Today’s jazzy world has come up with fancy names for everything. To start with, some of them are: Entrepreneur, Startups, Meetups, B2B, B2C, VC, Angel Investors etc and what not! A mere Google would reveal hundreds of them. Look for yourself : http://www.forbes.com/sites/kateharrison/2014/08/29/40-start-up-jargon-words-you-need-to-know-to-raise-money/

I said to myself: wow, People have so much energy to bash around the jargon lingo, I wonder if they put the same into customer relationships and better service!

Honestly, until a few years ago, I didn’t know what was B2B and B2C – I guess I am only a third generation businessman ( My father being second and grandfather being the first generation ). I am yet to learn the tricks of 4th gen kids!

Almost all big companies in today’s world have a customer care. We as a consumer just hate their template based replies, don’t we ? Why not focus your energy on building something beautiful and substantial. There’s no marketing better than word of mouth. Look at Google, do they need to market their search engine ? Any kid learning the internet goes to Google as his first website! Word of mouth peeps!

“Many business people focus on what is static, black and white. Yet great algorithms can be rewritten. A business process can be defined better. A business model can be copied. But the speed of execution is dynamic within you and can never be copied. When you have an idea, figure out the pieces you need quickly, go to the market, believe in it, and continue to iterate.”

Wise words from Gurbaksh Chahal, the founder of Radium One – but sadly, I do not find many startups paying much heed to it. People sit on perfectly good business ideas for too long, and are then in a mad, mad rat race to outsmart its ‘perceived’ rivals. And then, when their startups start moving south, they wonder – “Where did we go wrong?” Well, Sir and Madam, plenty of points.

Today’s startups are more about fundraising than actual work. What’s the big hullabaloo over ‘raising X million dollars’ via IPO?

Why as a customer I should worry about how much money you make. This is a false psychology built up in the mind of the customer. New reports like X company raised Y million dollars makes the public think “wow, they raised so much money, they might be a good idea”.

Rather focus on your core strengths. I don’t say marketing is wrong, but excess marketing without a firm backbone will leave you in a lurch.

Get this – you are not Jack Ma (you might become one day, but that day is not now), and no one is interested in knowing how much your startup has managed to raise. Stop showing off with such flaky announcements – and instead, try to focus on building a stronger base first. You may ask me that for building a stronger base – You need investment – Well, you’re right – You do need investment, but now a days where is most of the investment going? Not all funding are bad or should be avoided but its just that the hype now a days is just overrated!

“You need to know where you stand in a business at all times. Measure everything, because everything that is measured and watched improves.”

                                                                                — Bob Parsons (Founder, Go Daddy)

But, dear startup owners, most of you are too fond of over-analyzing things. As unpleasant as it sounds, for a company in its nascent stage – advanced accounting concepts like ‘valuation’ and ‘payback period’ and ‘MVP’ and ‘discounted payoff’ really do not matter. Even if you spend (read: waste) your time and resources to calculate them, the figures would be a fraction of that of the market-leaders. Why bother?

There is a simple saying – Don’t count your chicken’s before they hatch. Right now you not only count your chickens, but also count the chickens from the chickens! You’re just overdoing it guys!

I am not suggesting that business figures and metrics need not be monitored though. When you are gradually building up a company from scratch, estimate the following two figures:

  • Cost of Acquisition (COA)
  • Lifetime Value of Acquisition (LVA)

(And yes, put all the other complex calculations on the back-burner).

Accept projects for which LVA > COA, and run a mile from those for which the reverse is true. Bit by bit, your profit figures will grow, and after a few years, you can turn your attentions to more in-depth indicators of your company’s accounting health.

Next up, what’s with the overwhelming urge to go out of your way to please customers? Don’t for a minute think that I am saying customer-satisfaction is not important (it is THE most critical factor), but do not go about providing free service to everyone under the sun. As a startup, you simply cannot afford to spend time, money and man-hours on a project, and not get paid in return. If a client does not ‘show you the money’, do not be at pains to show him/her your expertise.

Case in point: Xmarks, which offered free service for four years, and then went kaput – because it could no longer pay for its hosting expenses, and even failed to pay out salaries to employees. Don’t get into such a sticky mess.

Another example: There was a company called “Caltiger” which offered free internet in Calcutta in 1999-2000. Went for a toss when the model failed. What do we have to say about all the money lost?

Why I personally hate VCs ?

I simply hate VCs – Sorry but I do, but not all of them, there is a cattle class of VCs whom I dislike particularly. In my story, I once approached a VC who failed to look beyond. Honestly, VCs are bunch of people who don’t bother about anything than money. It doesn’t matter to them if the product / service is right or wrong. VCs are not businessmen, they are just opportunists. They have no interest in your company to nurture them. In my honest opinion, they are guys with lot of extra cash and have no plan what to do with it and hence look out for ideas of others and slowly suck everything out from it.

About 8 years ago, I was presenting my company to a bunch of investors/VCs. There were 100 other companies in that event doing the same. The VCs present there had immediate funding options. My pitch was rejected outright because they didn’t understand what I was doing! A blessing in disguise. About 5 companies were chosen for funding that day. I didn’t have any reactions at that time but now when I search for those company which got funded are all shut down and  have no presence. And about 5 odd companies are still alive from those 100 companies and I’m proud to say our company is one of them. Now when I look back, I think to myself – Those VCs weren’t actually smart enough.

The point being- Startups now a days aren’t selling anything like a service or a product really. The end product or service is just a bait to actually sell their own company. The commodity is their own company rather than a product. The name of the product is just a sham and this I simply cannot approve it! Not in my business ethics. A company is like your child and it makes no sense for me to sell it if its already doing good business. Dear startups, would you sell your child? Or is it that you’ve started a new business of producing children and selling them ?

Business is not just about making money. Its about who is making it and how dedicated and how passionate they are about it.

Startups like Nouncer whine about how ‘Twitter/Facebook stole their thunder’. Strangely though, there is no dearth of startup companies which do not think beyond getting acquired by a big, well-established company. They will, in all probability, lose their identity (sigh, Nokia, sigh!) – and disturbingly, they are not bothered about it at all. Dear startups, if you lose your brand name…you lose everything!

About a year back, the world of business was all abuzz about the $19 billion acquisition of  WhatsApp by Facebook. With all due respect to Mark Zuckerberg and his tremendous business acumen – was this acquisition a good thing for WhatsApp? On a personal front, I do not think so, since being viewed as ‘a Facebook product’ would hardly do WhatsApp any favor (except, perhaps, expand its reach globally).

The ease with which Yahoo’s Marissa Mayer is snapping up startups left, right and center seems even more weird. I mean, Ms. Mayer is strengthening the base of her company, but why are so many startups readily agreeing for the acquisitions? The fat paychecks from these deals have started a new trend – entrepreneurs are launching startups SOLELY TO COME TO THE NOTICE OF THE BIG PLAYERS – and selling them off for a nice, big sum. If this continues, that day won’t be far when the entire concept of ‘startups’ will get obliterated. Totally.

So, what is the right way to go about? For starters, resist the temptation (and the shortcut) of creating a company only for the sake of selling it. No one in the world can become a millionaire at 30 years of age, and remain so, only by selling his/her company to a big fish. Do not make products that impress the big-shot in your industry – and focus on customer preferences instead. The initial years will be difficult for a small fish in a big pond, but if you stick to your guns, your company can emerge as one of the big fishes.

“Do you want to be a small fish in a BIG POND, or a BIG FISH in a small pond?” – take a stand on this very, very carefully.

Although Coca Cola is one of the biggest companies in the world, there is a lot to learn for startups from it too. Just think – if the much-hyped and universally-hated ‘New Coke’ had not been withdrawn within 90-odd days – the company probably would not have survived till now. The key takeaway from this is, the makers were flexible and clever enough to understand that they had made an error. Coke Classic returned, and all was hunky-dory again.

“A good idea is not enough. Business aren’t just about ideas, businesses are about execution. Don’t get too enamored with your own idea.”

— Brian Sharples (Co-founder, HomeAway).

Strangely, this willingness to accept an error is lacking in many startup owners. Most newfangled entrepreneurs feel that their ideas are the best on earth – even when the chinks and cracks become apparent. Money is spent, resources are wasted, and employees are heckled, to run after impractical, unfeasible dreams. Every corporate leader makes mistakes – but only those who are smart enough to own up to them survive. Got my point?

As a startup owner, you can also face a myriad of other problems – ranging right from incompetent employees, lethargic partners and workplace conflicts, to unforeseen cash outflows, unfulfilled sales projections and competition from already well-established rivals. I would love to see you guys put up a fight, stay committed to your startup company – and you never know when you will be standing at the cusp of success.

“If you are doing something that has a universal, timeless need, then you need to think of the company in a timeless way.”

— Scott Heiferman (Co-founder, Meetup)

Bottom line? Any good act gets recognized, no matter how small it is. Keep doing your good work, focus on the things you really have to rather than getting attracted to do something large start with something small and one day you will definitely be rewarded !

Keep going, folks!

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