StartupCentral

With India’s GDP growing at the rate of 7-8 per cent, it’s very difficult for startups to hire the right talent to ensure their success. The young generation of today has the choice of working for multinational companies and established Indian companies that offer good infrastructure and a comfortable working environment. On the other hand, startups run on shoestring budgets to maintain low operational costs. Startups, therefore, have the 4Ps to bank on for hiring success.

Purpose

The founding team has to sell hard to recruit the first 15 or 20 employees. Therefore, purpose – the problem that the startup is trying to solve – drive passion and enthusiasm among the first set of hires during the initial years. Social enterprises thrive in this aspect because of the nature of the problem and the ability to impact several lives through the solution.

People

Almost all recruits do look for a high energy founding team/ management to guide them during the early days. Since startups work extra long hours to compete with established companies (60-hour work weeks are not uncommon), the work culture plays a significant role in ensuring productivity. Though it’s a cliché, it’s true that great people are five times as valuable as good people.

Initial hiring is best done through referrals. Also it’s important to focus on hiring people with an entrepreneurial mindset rather than job seekers. Product specifications/ customer requirements are very dynamic during the early days of every startup, and teams that are flexible or agile create momentum faster than their competitors.

Pay

Startups find it very difficult to offer huge cash compensation in the initial years of their journey. Almost every new venture sells the value of equity to its first few employees. Unlike the US Silicon Valley, there aren’t many case studies in India where employees have realized an upside through their stock holding. Transparency about valuation step ups or flat rounds ( where the valuation remains the same in follow-on rounds of financing) and secondary sales by management teams play a great role in creating trust and comfort in the minds of employees.

Progress

The single most important factor that decides startups’ ability to retain good talent is progress. Without business progress, new companies wouldn’t be able to pay market salaries to its hires. Equity (value) appreciation stalls unless milestones are achieved. Employees show less enthusiasm to accept lower than market compensation without ESOP upsides. Fast growing startups that attain leadership status do create fatigue/hopelessness and disenchantment in the minds of the employees of their competitors.

So, Purpose to begin with, Progress at a later date, People and Pay are very critical for successful hiring. Startups need to get three out of four right to ensure they are on the right track in terms of building a winning team.

About the columnist: Sateesh Andra is a venture partner with Draper Fisher Jurvetson India. His investments include Live Media, Gingersoft Media, TopChalks and Cleartrip. Prior to Draper, Andra founded IT management software startup Euclid in the US. He has also earlier invested in US/India venture capital funds.

• Service businesses by offering huge initial discounts can only make money if they are able to convert new customers to loyal customers (repeat transactions are a must)
• A critical mass of customers (in and around a location) have to be part of the group buying company’s mailing list for it to make money on each of the campaigns
• If viral doesn’t work, coupon marketing costs will cut into margins

1. Reach for each of the promotion (coupon sale) on a daily basis within a location
2. Conversion percentage (how many coupons they are able to sell)
3. Commission (percentage points) offered by merchants on a typical deal
4. Marketing costs for each of the campaigns (Is it viral mainly using Facebook/Twitter etc. or do they have to spend money in marketing a deal?)
5. Customer acquisition cost and long-term monetization of a customer (repeat purchases)

Just like many other consumer Internet business models, group buying will also be winner take ALL environment.

About the columnist: Sateesh Andra is a venture partner with Draper Fisher Jurvetson India. His investments include Live Media, Gingersoft Media, TopChalks and Cleartrip. Prior to Draper, Andra founded IT management software startup Euclid in the US. He has also earlier invested in US/India venture capital funds.

In the last few months there has been lot of activity in the ecommerce space. New startups have got funded and several of the existing ones have morphed their business models ‘just in time’, to focus on e-commerce.

Previously, in terms of market share, the e-commerce market has been dominated by online travel (Makemytrip, Cleartrip, etc.), ticketing (Bookmyshow) and classifieds (Naukri, Carwale). Emerging e-commerce or e-tailing categories include apparel and accessories (Yebhi), fashion (FashionandYou, Exclusivity) mobiles and computers (Letsbuy) and consumer electronics, books, music and videos (Flipkart).

As per IAMAI, the size of the e-tailing market is estimated at around $600 million currently and growing at 30 per cent year-on-year. To scale and grow into real businesses, such startups will require:

• Ability to assess or predict product demand accurately
• Cost effective customer acquisition strategy
• High click-2-conversion ratio
• Repeat sales and loyal customers

‘Deep Customer Profiles’ are a must to achieve all of the above.

I am sure that even scrappy startups will have to spend serious amounts of cash (tens of millions of dollars) to address business critical issues such as inventory financing, logistics and customer support. With brand penetration, the availability of mature mobile payment systems, improved logistics/delivery to third and fourth tier towns and broadband Internet user growth, e-commerce in India will grow at a healthy pace.

About the columnist: Sateesh Andra is a venture partner with Draper Fisher Jurvetson India. His investments include Live Media, Gingersoft Media, TopChalks and Cleartrip. Prior to Draper, Andra founded IT management software startup Euclid in the US. He has also earlier invested in US/India venture capital funds.

I’m picking this up about a month late, but it is worth writing about anyway. The second edition of the DFJ and Cisco Global Business Plan Competition concluded on June 29. This year’s winner is Ambiq Micro, a ubiquitous computing startup incubated at the University of Michigan, US. The company is developing next generation, energy efficient micro-controllers. Their prize is seed money worth $250,000. Read more about them here.

Also read about last year’s winners, Husk Power Systems, here. Last I checked, they are going great guns and picked up additional funding this year. The company closed a $1.25 million Series A funding from Acumen Fund, Oasis Fund and others and $350,000 from IFC.  Read the full story

Komli Media, a Mumbai-based advertising network startup, has picked up $6 million in Series B funding from existing investors Nexus Venture Partners, Helion Venture Partners and Draper Fisher Jurvetson. The fresh funds will be used to grow the company’s presence in the Asia Pacific region.

The funding follows Komli’s acquisition of PostClick in Australia last month, as part of its Asia Pacific expansion strategy. The company claims 1,500 sites on its network including Facebook, Expedia and Bloomberg, and 30 million unique users.

The company raised $7 million in its Series A round in 2008. It currently employs 90 people in India and overseas and was founded in 2006 by Amar Goel, CEO, who earlier led sales and services at Microsoft.

(Source: Press Release)