Startup Lesson: Co-founders, Scaling up, Traction & Fund Raising

How do you find a co-Founder? When should you do a start up?  What is the meaning of traction? And challenges of fund raising. Here is your direct access point to minds of successful entrepreneurs and VCs like Phani Sama (RedBus), Roopak Saluja (Bang Bang Films) Vijay Shekhar Sharma (One97), Kunal Shah (FreeCharge) Vivek Wadhwa and Rahul Khanna (Canaan Partners)

by TiE Mumbai
1 year, 11 months ago

“There are things that you know, things that you don’t know and things that you don’t know that you don’t know”

“When you are choosing a co-founder, there is notion of motivation, risk-taking apatite, their life stage, how hungry are they. If you ask them to quit their day job, will they come on board? Look for the signs of motivation” Rahul

“Uncertainty is part of being an entrepreneur; you will never have all the information. You will have take that leap of faith and if it goes wrong fix it quickly” Rahul 

“When we started it was simple all three founders had 1/3 stake. However when we raised funds and got our terms sheet it got formalized in a manner that works for the funders and company.” Sama

“There is also a case for solo founders from the perspective that being a single founder allows you freedom to take decisions and run the company the way you want. You can always reward the contributions of fellow workers through stock options”

“In a startup everyone is equal; to attract talent it’s important to have an open environment that works. It’s good to have worked in a large established company before you start rather than starting out of campus because these one/two years exposes you to all aspects of organizational operations” Phani

“In life of an entrepreneur; the first company should never get funded, you need to learn revenue – cost = Profit, second you have to build something for a good exit, something that gives you enough to go out and start again. The third company is the one that should get funded because by now you know how build a company for non linear growth”

“The assumption that some bright kids at YC ware able to build some companies to flip everyone can do it is wrong. Those kids at YC have an unfair advantage, because the whole system is biased; in Silicon Valley mafia rules and they can give some kids an unfair advantage and make them succeed. And everyone thinks that the way to go. One should finish education, get some real word exposure and then only start” Vivek

“Average age of our CEO is early to mid thirties. VC’s don’t have the luxury for companies to make mistake on their time so we love it if you have made those mistakes before we write you a cheque. You need a guy who knows to run a P&L, hire people, motivate people and keep the organization growing" Rahul

On the odds raising money as a single founder, in 60% cases we back one guy, in 30% cases it’s to and in exceptional 10% cases it’s three.” Rahul

TiE Entrepreneurial Summit 2012 Smashup Chambers Part 1 'Fundraising, Starting up, Scaling up, Sales & Marketing ...
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"Sales is function of footfall, conversions and average ticket size and you can’t really control conversions and footfall. Only thing that you can manipulate is footfall. Free charge was a great product to increase footfall” Kunal

“Indians don’t buy online because they are not used to self-service, we have to be pampered and assisted. While western markets ware already trained for self-service. Concepts like ‘add to cart’ and “checkout’ are still not known in India. The concepts of ecommerce needs to localized for India” Kunal

"Don’t spend your dollars to acquire customer because than you are not getting your business model right" Kunal

“The eCommerce is either range or reach. We backed a company, where   fundamental proposition was to  get product to customers who can’t come to big cities. The company new gets 80% of its business from small cities. They work with Indian postal dept. to deliver the products. Even Amazon used the US postal service” Rahul

"US have evolved to the notion of shopping as experience. The things that are happening are can you marry shopping with experience; can you marry curation with social so there are things like eBay for luxury merchandise. India is about 5 to 7 years behind in terms of consumer behavior and we need to build for Indian consumers" Rahul
TiE Entrepreneurial Summit 2012 Smashup Chambers Part 1 'Fundraising, Starting up, Scaling up, Sales & Marketing ...
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"After getting one thing write the entrepreneurs get the skill of seeing problems n defining problems better and they can marry two or three different things. Therefor it needs a lot of conditioning for entrepreneurs not to get tempted to do ten other things, which may make sense" Kunal

"In India we have 300 million debit cards only 10 million of these are ever used outside of ATM’s. Each time you transect on ATM it’s a cost to bank while when used at a merchants it earns money for the bank. Here is an opportunity to create a product that can bring debit cards out of ATMs. Consumer awareness is very essential and solutions need to be simple. Kunal

Rahul on what is traction? 

On the enterprise side we are much more focused on what fundamental problem is the startup solving in the business context and can you get the business buy into your solution. So the focus is how much to charge? How will you sell it? What will your channel look like? And can you show that people are willing to pay?

On the consumer side the focus is not on unit economics from day one. It’s more on fundamentally can you drive adoption without spending money on it. So go to com-score and look at top 50 sites and start benchmark your business and ask yourselves does 10k move the needle? does a million move the needle? Basically at seed stage what is relevant what we are looking for ‘is it a great experience’

Traction at early stage can also mean that some of the assumptions have proven at some reasonable level of predictability and weather they can be replicated in the next level.

"Traction is a relative term and we need to create our own benchmark, say relative growth to previous month or quarter is the function of traction second, how are you grow relative to market" Kunal

"In investment decisions we are always over weight on who we are writing the cheque for and thee is no magic formula to know that person without spending time. And it works both ways; do not take money from the first guy who makes an offer" Rahul 

Our love for the original idea is dangerous. Business has to pivot at the right time. There is no choice, the business has to pivot, the timing is a matter of skill of the entrepreneur. Kunal

                                        "Entrepreneur should be paranoid"
For more Entrepreneurial insights follow topic TiE Summit Lessons.
TiE Entrepreneurial Summit 2012 Smashup Chambers Part 1 'Fundraising, Starting up, Scaling up, Sales & Marketing ...
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1. Starting up Challenges
2. eCommerce in India
3. Traction & Fund Raising
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