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Posts Tagged ‘Venture Capital’

Snapdeal Saga- This is the first step towards Snapdeal’s merger with PayTM

February 23, 2017 Leave a comment

paytm-snapdeal

Snapdeal laying off 600 people and the two founders forgoing their salaries has been dominating the startup news headlines since Wednesday. Although a lot of people took the news as a surprise, but had one been following the incidents that led to yesterday’s email from the founders, this should have been expected.

Lets see what happened in last couple of months. 

Jason Kothari was brought in to clean the toxic elements created during the tenure of Rahul Yadav as the Founder-CEO of Housing. To his credit, Jason de-toxified Housing to make it attractive enough for PropTiger to bite in for an ‘all stock deal’- which means peanuts.

Within a couple of days of the Housing-PropTiger deal, Jason was announced as the Chief Strategy & Investment officer at Snapdeal.

‘Strategy’ and ‘Investment’. 

Snapdeal along with Flikart has been finding it tough to get the right valuation for raising the next round of funds that both of them want to raise. While Kalyan Krishnamurthy has been tasked with cleaning up Flipkart, Jason has been brought in to clean up Snapdeal of the toxins and make it attractive enough for investors. Most of the money losing initiatives have either been shut down or are in the process of being shut down. The founders, in their email also stressed on the renewed focus on ‘core’ business and strengths. The ‘core’ here being e-commerce.

SoftBank- The thread that binds Housing and Snapdeal. 

SoftBank was the biggest investor in Housing. It is also a very significant investor in Alibaba too. Alibaba has been flirting with the idea of buying into or buying out Snapdeal for long now. Alibaba also has been the biggest investor in PayTM. And, to make things complex, PayTM also has an e-commerce arm. Alibaba would never like to invest in two competing companies (it might have done so in 2014-15, but today the story is different). Sometime back, PayTM did spin off its e-commerce platform into separate business from its payments business (or vice-versa).

Opportunity for Alibaba, SoftBank, PayTM & Snapdeal.

The current situation presents a ripe opportunity for all the parties involved. Snapdeal has an opportunity to set its house in order, Alibaba has a wonderful opportunity to enter one of the biggest e-commerce markets in the world via PayTM investment and set up a head-on clash with Amazon for the long pending battle of ‘South-East-Asia’ between Amazon and Alibaba (Alibaba has already started digging in its heels in the SEA market with the Lazada investment).

Not an Insider News. Not even a rumour. My own views.

All the events discussed above are either factual and have led to where we are today or logical and plausible extension of the same into the future. I strongly feel the events in the future will go the way I have spelled out. If not, the involved parties might want to use this article as a food-for-thought for chalking out their strategy.

 

Grind Your Axe. Often!

February 9, 2017 Leave a comment

 

Harshdeep Rapal

 

Last evening I was sitting with my team (mostly comprising of your just-out-of-college grads) at a bar near our office. One topic led to another and we started discussing on how important it is for someone in today’s world to keep updating and polishing his/her skills. The discussion reminded me of a story I heard a long time ago. Thought of sharing it here with the readers.

This is a story of a young lad who starts his career as a lumberjack. No, not the lumberjacks we have these days with chainsaws and all other machines, but with a modest axe- yes like in the good old days.

Like any another youngster, he was full of energy and bursting to seams with enthusiasm on his first day at work. He wanted to work hard, work long and make a lot of money. The lad started his first day by working 8 hours and chopping four large trees. For every tree chopped, he got $10.

“40 dollars a day are not going to take me anywhere, I need to earn much more than this” he thought.

Next day, he started early and worked till late. Working 12 hours, he chopped six trees. “60 dollars is good, but still not what I am looking for. I need to work harder and longer”.

Third day, the young lad started even before sun had risen and worked till there were stars in the sky. He managed to chop eight trees.

“Damn! 80 dollars are day are good, but not for me. I definitely want more!”

So, to achieve more, next day he started even earlier and worked 16 hours straight. To his surprise and shock, he could chop no more than eight trees! Next day he tried even harder, but was again stuck at eight. He tried even harder the next day, his number was still stuck at 8!

Dejected and confused the young lumberjack was walking his way home. On the way he met an older lumberjack who had been in the trade since last 25 years. On asking what the matter was, the young lad told his story. “I am working so hard, working really long hours, still not able to increase the number of trees cut beyond 8”.

“So, you work for 14-16 hours straight, still stuck at 8 trees a day. Ever thought of taking an hour’s time to grind your axe?” said the experienced lumberjack and walked away.

End of the story.

Almost every one from my team looked at smiled at me. Hope, now they understand the importance of continuously upgrading, sharpening and polishing their skills. Every one, including me should!

This Entrepreneur Sold His Business for $1.25 Million in 10 Minutes!

February 3, 2017 1 comment

Jeff Stroope had been a fireman for 15 years before he invented a revolutionary fire hose connection that saves a lot of time and trouble for connecting the hose to the water pipeline in the time of a fire tragedy when every second counts.

Jeff came on Shark Tank and did a demo for his product. Not only did the Sharks like the product but he got an offer from Mark Cuban to sell off his whole company for $1.25 million plus a three year job contract at $100,000 per year and a royalty on every product sold by the company.

Here is the amazing pitch.

 

F*ck The Unicorns and Cockroaches, become a Business First!

December 2, 2016 Leave a comment

 

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Two years ago, everyone wanted to become a ‘Unicorn’ (the term that is used to refer to a rare mythical creature in general and to a billion dollar company in the startup world). Every morning there was news of one more startup raising a few or a few hundred million dollars in funding at a valuation, which you would have never heard of earlier. Fast-forward to 2016, the funding freeze has set in and there are people advising on how to become a cockroach startup. Scores of articles have been written on how to survive the funding winter till the sun rises again and investors start showering you with millions- not sure if that is going to happen anytime soon.

As a founder of two ventures earlier where I did not have any funding and then having led a venture of where I had a few million dollars at my disposal from Rocket Internet and now again when I am building a seed-funded startup, I have been through the grind. These few years spent in building startups have given me a perspective of how important it is to create a business out of an idea.

There would be millions of businesses across the globe. The range of size of these businesses in terms of revenues and employees would be astonishing. There are businesses run by the single-man show of a roadside street-food vendor and then there are the likes of Coca Cola and Boeing. How many of them have raised funds? The answer is – A negligible minority. One thing they all have in common is that they focused on creating sustainable businesses. I consider an idea to transform into a business when there are people willing to pay for your service or product and this number, at a certain size, can help run the business profitably.

As I mentioned earlier, I am currently running a venture that is seed funded since January 2016. At the outset, with my previous experience, I was clear to create a business and not a unicorn or a cockroach. Since last six months we have customers who pay form the service we provide and although we are small, we will turn operationally profitable I next two to three months. This does not mean that we do not want to become a hundred million or a billion dollar company- we do want to, but in a planned manner. Now that we have converted out idea into a business, there is confidence in the team, the seed investor and also the prospective investors on the growth path of the venture.

My advice to fellow startup enthusiasts and entrepreneurs is to have a plan to convert the idea in to business, focus on execution and then utilize funding to scale the operations. Do not startup just with the sole aim of raising funds. In the past many have done so, have even succeeded in raising millions but failed to survive- just because they could not turn into a business even after raising millions.

Forget the unicorns and cockroaches, let’s build businesses and enjoy the exciting journey as we do it!

[The writer is the co-founder and CEO of Feelance Co. and has been involved with the Indian StartUp ecosystem since 2009. He can be reached at harshdeep.rapal@feelance.co or harshdeep.singh.rapal@gmail.com ]

Learnings From AskMeBazaar Shut Down


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Today morning I woke up to the news of AskMe shutting down its services leaving thousands of its employees and lakhs of its vendors and partners in quandary. It is not unusual for startups to stumble and fail. Globally more than 95% of the startups shut down.

AskMe was a different care altogether. The startup had raised $119m from Astro Holdings and other investors and were in talks to raise another $200m at a valuation of $1b. But then Astro decided not to participate in the next round. Things came to a dead end when Astro skipped the last Board meeting and AskMe wrote a letter to Registrar of Companies not to let Astro wind up their operations before clearing their dues (Approx Rs300 Cr).

I was surprised why it came to such a situation that the company had to shut overnight and lay off all its employees. The reason I found out was that Astro Holdings owned a whooping 98.5 % stake in the company. Let that sink in.

I am not sure what the founder were thinking while raising funds, but this is an insane amount of stake to be offered to a single investor. It does not leave room for other investors to have their say. In this case Astro did not want to participate in the next round of funding and I am sure the legal formalities would have got messed up for bringing in new investors of raising funds from other minority investors (if any).

The biggest learnings that the other entrepreneurs should learn from this incident are:

  1. Never have one single investor own an insanely large chunk of your company. 98.5%….never!
  2. When you get money in the bank, try working out the unit economics rather than burning the money at an insane rate. AskMe spend a large chunk of money hiring Bollywood brand ambassadors for TVCs. The same would have given much better ROI had the amount been spent on online marketing.
  3. In case such a situation arises, take care of your people. They trusted the startup ecosystem and toiled for your venture day in and day out. Never leave them high and dray by wrapping up operations overnight. I am sure the founders would have known the situations months ago. They should have told the truth to the employees and held them in faith to turn around things. Now the employees will not only lose the faith in the founders, but also the Indian startup ecosystem.

Real-Time Data from the Biggest Tech Companies

February 7, 2016 1 comment

Check out this wonderful platform for the real-time per second data from some of the biggest tech companies of the world.

Revenue & Profit:

Data  Stats:

Let’s face it: Neutrality does not exist for start-ups.


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There have been a lot of heated arguments going on against the telco’s plan to encroach on net-neutrality in India (and the world). Last couple of weeks, the internet was up in arms against the telcos and their internet partners. So much so that the likes of Flipkart faces a social media crisis and pulled out of the infamous AirTel Zero platform. One of the arguments being given was that it will be difficult, or rather impossible, for startups to compete against the big boys. Point taken.

But neutrality never existed for startups. Let’s face it.

Take the case of e-commerce startups in India. Majority of the big players are in losses. Huge losses. In e-commerce today, one of the major factors for survival is that how much loss one can bear. And, the loss bearing capacity depends on how much funding one has. The kind of money funded startups can spend on advertising, discounts and partnerships, the boot-strapped or self-funded can’t. Discounts and marketing is just one area. The funded startups can spend a lot of money on the best of the systems, can hire the best talent from the market and can create best of the workplaces for this talent.

Eve the internet today is not as ‘free’ or ‘neutral’ as we assume it to be.On the internet, we donot see what we want to see. We see what is shown to us. Organisations spend a lot of money on Facebook and Google ads to reach out to the customers. Again, the company with deeper pockets is ‘seen’ more.

The path for a new startup has never been easy and will continue to be so. Startups have always been innovating to beat the big boys. Some are able to, some don’t. That’s how it will be always.

Alibaba Planning to Snap-a-Deal: Indian e-Retail getting hotter

September 18, 2014 Leave a comment

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The news of Alibaba, which has sales more than Amazon and eBay combined, looking for a share of the e-retail industry in India is definitely a great news for the e-retail industry in the country. The already hot industry scene is about to get even hotter.

The industry as such has been attracting large size investments from across the globe. But, this investment is different. Flipkart and Amazon have been considered Snapdeal’s biggest competitors till date. Where as Flipkart has been able to in crease its valuation to about $6 billion (with the last investment round of $ 1 billion), Snapdeal is still around $1 billion in valuation. Close on the heels of Flipkart announcing the closure of $1 billion investment round, Amazon announced an investment of $2 billion in its India operations. With these two announcements from Flipkart and Amazon, Snapdeal had started to look a shade pale. But, the news of Alibaba making an investment of $300 million in Snapdeal does bring it back into the game. Although, $300 million might look small in comparison to the investments Flipkart and Amazon have announced, the name Alibaba itself lends an lot of weight to Snapdeal.

Although no one is clear on how Alibaba will leverage its Indian investment, but one thing is for sure, it will definitely give a lot of competition to the other two giants.

Rise of the Angels- Why are Angel Investors so important today?


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Before the arrival of the computers and later internet, most of the enterprises were either based on manufacturing, trading or providing services. It took a good amount of money and time to take the idea from the drawing board into the hands of the first customer. Back then, a start-up could easily employ 20-50 employees even before getting its first customer. Even when the computers came, it was still very costly to acquire or lease a computer and build a team to work on it.

The last 15 years have seen the computers becoming affordable, internet reach wider and tools to ‘build’ the idea cheaper. The affordability of the computers and the internet, has drastically reduced the cost of creating a prototype and building a small team.

Venture Capitalists generally are process driven and have a long ‘Due Diligence’ process and like to invest an amount which falls in their ‘investing range’ and also would want a ‘Board Seat’. A start-up which requires just a 4 member team and softwares worth a couple of hundred dollars and a small place to work for a couple of months to create a prototype or ‘start-up’, might not want to go through the due diligence process or offer a board seat. And, yeas, the amount of money required to start-up and scale might not be that large.

Enter the Angels!

The Angel Investors generally invest much lesser amounts per start-up than the VCs. Angel investors are typically well-connected, wealthy individuals. The lesser amounts of initial funding required these days to start-up (which means a lesser risk to the investor in case the start-up fails to take off), has induced more investors in the start-up ecosystem. They have a much shorter or no due diligence process. For a start-up looking for small yet quick investment, Angel Investors become the automatic choice.

So, Angels are here. And, they are here to stay. The lesser amounts of money required to invest in start-ups today and the bigger risk appetite of the Angels, has made them very important to the start-up eco-system. They are the ones who germinate the seeds of entrepreneurship.

So what makes Start-ups prefer Angel investors over VCs?

There is no hard and fixed rule which separate the Angela and the VCs. Vcs behave like Angels and vice-versa all the time. Sometimes the investor participates in one or both the funding rounds- As an Angel or a VC. So, if you are ‘starting-up’ and are looking for investment, just check on the intentions of the investor.

Company vs the Product: Where as VCs come with a bigger investment, they are more committed to the creation of the company and guiding the entrepreneurs, the Angel Investor helps developing the product, or, as we say- prototyping the idea. So, if someone is looking for scale and growth, VCs are the ‘to go’ investors. The VCs also bring in their experience, contacts and also the early adopter customers. The Angels will just give you the money and generally do not involve in mentoring. So, take your pick. Carefully!

An advice for Flipkart (and other start-ups)

January 20, 2013 Leave a comment

flipkart

Flipkart established its name as an online bookstore. Although it has ventured into many more product categories in recent years, it has been only moderately successful in establishing its name as an online retailer and grow beyond the ‘bookseller’ tag. One reason for the same is customer satisfaction beyond delivering books. I had a first hand experience of a major flaw in their delivery network last week.

I have been using Flipkart for order books for more than two years now and they never gave me a chance to complain. The service was just perfect.

On 13th Jan ’13 I ordered some fitness equipment and was assured of delivery within 3-4 days. I got a call from delivery boy on 17th Jan morning that he will be delivering the package at my address in next 30 mins. I waited till evening and no one came. I called the guy in the evening to enquire about my package, he assured me that the same will be delivered next morning. I waited whole day, no package came. In the evening I called up the Flipkar helpline and on enquiring the status of my ordered was told that the order was cancelled (although the Flipkart website still showed me the status ‘approved’). On enquiring further, the call center agent told me that the delivery boy could not find the address and cancelled my order. I was astonished to know that the order was cancelled- that too without informing me! I protested to the call center agent that how can you guys cancel my order that too without my permission and without caring to inform me? The agent squarely blamed the ‘Blue Dart’ courier guys on the fiasco and told me if I still want the item, I’ll have to place a fresh order.

And how were the books delivered to me on the same address? The agent told me the books and small items are delivered by their own delivery boys and for other items, they use Blue Dart.

Here is a perfect example of choosing your partners in business. For a customer like me, who was very satisfied with the services of Flipkart, the expectation was to match the expectations they had managed to set with me. But, itwas not the case. Why? because on all the earlier occasions, the delivery was done by Flipkart itself and on this last occasion they entrusted the responsibility to Blue Dart and messed it up. Even though Flipkart have been able to set high standards of service delivery for their own delivery staff, but the same lacks in their partner- Blue Dart. For a customer like me, I don’t care whether the package is being delivered by Flipkart or someone else, I expect Flipkart to own the responsibility.

May be, this is the reason that Flipkart is not able to go beyond being a very good ‘online bookseller’ to becoming a full fledged ‘online retailer’.

A lesson for all start-ups (and other businesses as well) on how an improper partner can derail your long term goals and business strategy.