Saturday 13 April 2024

You will "feel" the PMF when it happens.

During the early phases of building your startup, if there is one thing that really matters, it is Product/Market Fit (PMF). I see early-stage founders spending time talking to investors, participating in events, and hackathons, applying for Forbes 30U30, and whatnot!

That's not how it works. When you haven't achieved PMF, these things don't matter. Most of the time, you don't need too much upfront capital to achieve PMF. Feedback from Hackathon judges doesn't matter. Validation from Forbes is pointless at this stage.

Talk to actual prospects and they will give you the right feedback. Their feedback is all that matters. Here is a structured process to achieve PMF (my experience is focused on B2B SaaS):

1. Fixate on a Market. When evaluating startup ideas/problem statements, avoid hopping markets otherwise all your learnings from the initial conversations will have to be dumped when you decide to pursue a different market.

2. Talk to a minimum of 10 - 15 prospects from that market and ask them for their top 2 - 3 priorities over the next few quarters. Ask them if they've finalized the Service Provider to implement these upcoming projects. This way, you'd be able to understand where the market is heading and what are the gaps.

3. Pick one of the gaps and build an MVP. Creating the MVP should not take you more than a week. If it takes you more than 2 weeks, you probably don't have a Technical co-founder. Or you need a better Technical co-founder.

4. Get feedback from the prospects on your MVP. See if they are interested in learning more and possibly exploring a pilot with you. If a few of them have shown positive interest and want to evaluate further - Congratulations! You just validated the problem statement.

5. Now heads down and iterate. Work with these early prospects to convert them into a paying customer. In cycles of ~1 week, implement the feedback you've collected; show it to the prospects and gather the feedback again.

6. Within 2 or a maximum of 3 cycles, you should be able to get some of your prospects to sign up for a paid plan. If none of them agrees to proceed forward, then it means that the problem statement was not important for them or, you did not do a great job with your MVP.

7. Within 3 months, you should be able to get a sense of whether you should pursue the idea further or not. You will "feel" the PMF when it happens. Prospects will give you time. Some of them will call you and suggest features. A few of them might be interested in investing in your company. Some might refer you to someone else.

8. As a corollary, you should also be able to gauge that you have not achieved PMF. 3 months have passed - not many people have shown interest. Prospects who were earlier interested are no longer picking up your calls - a clear sign that you are building something unimportant to them. Time to work on something else.

Sunday 7 April 2024

My 7 streams of income

My 7 streams of income

Back in college (2013 - 2017), I made a good amount of money, doing a lot of things. I made over Rs. 50 lakhs in the 4 years of college. In today's terms, that's more than $60k. This earning was from a combination of a lot of things including:
  • Freelance Content Writing: Wrote articles on technology-related topics and Test preparation (mainly JEE Advanced/Main).
  • Internships: 1 in the US, 1 in Germany and 2 remote
  • Affiliate Marketing: Sold books from my blog and made some money there.
  • Selling e-books: Sold a JEE preparation guide via my blog.
  • Selling courses online: Courses on Python, AWS, Machine Learning, Django, etc.
  • Teaching Assistant: I was a TA at IITB.
  • Solving JEE Questions for Edtech startups: Worked for Toppr and Plancess.
  • Website Development/Freelancing: Made some money here.
I used to do a lot of these activities in college and also parallel to my startup Cogno AI in 2018. Harshita and I were running this "mini-freelancing business" together. All of this combined helped both of us earn Rs. 50+ lakhs in college and 1 year out of college. Not bad for sure.

Harshita was spending most of her time on this. My role was mainly on the customer acquisition and process-building side because I was running my Startup Cogno AI with my co-founder. So I could not give a lot of time to the execution work, which was mainly taken up by Harshita.

Abruptly, in August 2018, my cofounder at Cogno AI left. That's when I requested Harshita to join me as a co-founder of Cogno AI. When she joined, we had an important decision to make - should we continue our mini-freelancing business that generated like Rs. 2.5 - 3 lakhs of monthly profit? Or should we shut it down and fully focus on Cogno AI.

It was a lot of money and the natural instinct was to let it run on the side while the major focus could be on Cogno AI. However, we took a difficult call to sunset that business and focus fully on Cogno AI, giving our 100% there.

Fast forward to March 2021 (2.5 years after our decision) - Cogno AI crossed $1M in annual revenues, which was Rs. 7.25 crores at that time. Towards the end of the same year, Cogno AI was acquired in a multi-million dollar transaction by Exotel, turning us into millionaires at the age of 26.

We couldn't have imagined making so much money from our mini-felancing business. Of course, we could have scaled it beyond Rs. 2.5 - 3 lakhs a month. However, the probability of making millions of dollars out of that business would have been close to 0. It was a pure services business with nothing special about it.

The difficult decision of sunsetting that business paid off really well eventually. We could focus all our time and energy on building Cogno AI and taking it to a decent scale that made us a suitable acquisition target. Contrary to the most common advice of diversifying, we actually put all our eggs in 1 basket and took a big bet. The bet paid off really well.

This is in complete contrast with what today's finfluencers advise - "have multiple streams of income". I have the complete opposite view. I feel that one should take a large and concentrated bet to make a lot of money, especially when you are young (in your 20s). Diversification and having multiple streams of income help you reduce your risk. For example, if you are an employee and get laid off from your company, your passive income will help you survive the tough times.

However, remember that diversification also limits your growth potential. Lesser risk almost always comes with a lesser reward. There is nothing that has a low risk and high reward, otherwise everyone would only be doing that.

My suggestion to people in their early 20s - take concentrated bets. If you are an entrepreneur, just focus on your core business and drop everything else.

If you are an employee, give your 100% to your organization. Of course, if you are in the wrong organization, you may end up giving your 100% but the organization, in return, might not help you with your growth, which is bad.

However, I don't know anyone who became successful by not giving their 100% to their organization. Your best bet is to work hard and hope that you are a part of the right organization which will eventually reward your efforts. If not, move on and go elsewhere where your efforts are more appreciated and continue giving your 100%. Your chances of making more money are higher this way.

Summary: I don't have 7 streams of income. I always focus on having 1 major stream of income and betting everything on that and doing whatever it takes to make that bet right.

There are no failures till you choose to quit

In my 7 years of building startups, I have learned an important ingredient for success - "there are no failures till you choose to quit".

In an entrepreneur's journey, there is no straightforward well-defined path that could be followed. You have to discover and build your own path. Naturally, in such uncertain situations, you are bound to make mistakes.

You may end up making some decisions that might lead to 0 or even negative output. And it happens so many times. The key to success is to identify what worked and what didn't and then do a course correction from there.

Built something that customers are not buying? Talk to them, get feedback and build the version of Product that they want. Made a wrong hire? Help them find a new job and hire a replacement.

Almost always, the wrong decisions can be fixed if you are vigilant enough to spot them and agile enough to fix them.

As long as you keep moving and correcting your course, you will succeed. You fail only when you decide to quit.

Thursday 4 April 2024

Quitting is not an option

One large win can cover up for a hundred failures.

Entrepreneurship is hard. There are so many unknowns that can go wrong and they do go wrong. Your Product may not be needed by the market. Investors may not want to fund your company. That 10x engineer who accepted your offer letter might back out 2 days before joining. Your cofounder might exit.

There are just too many things that can go wrong.

When all of this turmoil is going on in your life, your friends working at FAANG companies would be enjoying their vacation in Europe and you'd feel like - "What am I doing with my life?"

There is a natural desire to quit.

I went through this multiple times at my previous venture, especially during my early days. My cofounder abruptly left. I almost went bankrupt. Customers got to know about this, so they held back their contracts with us. Things became worse. I had gotten into a downward spiral.

I too could have quit. But then I would not be telling this story here.

After a lot of deliberation with myself, I decided that I would not quit - quitting was never an option. I convinced Harshita to leave her job and join me as a co-founder. We distributed our roles and responsibilities. I took charge of the customers and spent all my time with them, talking about our Product and convincing them to use it. Harshita spent all her time building the Product and the Technology behind it.

That one decision to convince Harshita to join me as a co-founder changed everything. From an almost bankrupt business, we went to over $1M in revenue in just 2.5 years and after 6 more months, we got acquired in a multi-million dollar transaction. All of this when we were merely 26 years old.

In life and business, you will face such moments where you will feel desperate and would want to quit. Remember, you are 1 decision away from a completely different life/business. That 1 win can completely change the trajectory. The Power Law applies here. 99 of your decisions combined will not make that big of an impact on the output. But that 1 right decision will have 100 times more impact.

To find that decision, all you need to do is to ensure that you keep going and not quit.