Want to build a successfull startup? Go for minimal/no funding.
These are great days to be at Mobisy. Today, I was reviewing our financial performance for year 2017-18. I realised we maintained our 3x year on year growth. But the most eye popping realisation was the fact that Bizom has more revenue than Grofers, UrbanClap and Snapbizz combined (all similar age businesses as Bizom)! We are profitable to boot with an awesome gross margin of 90% !!
While digesting this fact, I realized the reason for this is our razor sharp focus. My theory is that this happened since we were always short on cash (we raised only ~$600K in external funding so far).
So here is my reasoning on why Indian tech startups should not raise too much money especially if they want to be successful.
Inch wide, mile deep
Apparent lack of money to throw at scale, forced us to work on product market fit.
We call it, ‘inch wide mile deep’ strategy. In every geography or vertical we enter in, we aim to maximise our investments to get a good 20-30% market-share. This helps us to get more customers by word of mouth references based on better quality of delivery and RoI for customers. Which means we have to iterate on the product till it meets the customer needs.
If we had a lot of money, we would have tried to expand too far without establishing a product market fit first.
The fact that most of our revenue today is driven through channels and incoming leads is testimony to the fact that this works!
Highly motivated talent in core-team
In a company of 100 people we have about 15 member core-team which participates in key planning and decision making. All of these 15 member core-team are stock holders of Mobisy. All of these are entrepreneurs themselves.
While trying to get a product market fit, we needed the best quality team with no money in the bank to throw at the best possible talent. This forced us to ‘sell’ the product idea and market potential to all the possible hires.
Which meant that whoever joined us in early days were truly convinced about the business potential of Bizom and Distiman. I feel this is the best way to ‘hire’ for an early stage startup where the key employees are in business for long term potential not just the ‘salary’. The business needs to be on right footing to be able to convince so many of them to join your quest.. !!
When I see some startup metrics I find myself completely out of place. I can’t understand why entrepreneurs measure things like LTV (life time value) or Passthrough revenue or number of pilots at very early stages. Initial days, only metric we tracked was ‘cash in bank’ through collections. Even revenue / invoice raised was never a good enough metric cause it wouldn’t help pay bills !
As the business matured, other metrics we tracked were
- Month on month profitability (Helps us track invoicing hygiene and renewals on time)
- Monthly recurring revenue (Helps us understand sustainability of business by keeping it higher than expenses)
- Cost of customer acquisition payback period (Helps us keep cost of sales at less than 6 months making sure the quality of leads closed )
- Monthly recurring revenue churn (Helps us ensure customer satisfaction)
These are the metrics at the core of a sustainable business model with quick growth. Not vanity metrics created for funding.
DNA of hustling
Today when I see all of us trying to make the most of capital, I remember this story.
My colleague Abhi once lost his new swanky company smart phone. He did not want Mobisy to do a discretionary spend on another Rs 30K worth phone.
Bizom by then had given orders of approx 30,000 odd devices to a leading smartphone manufacturer who is also a partner of Bizom. With this, Abhi went to this manufacturer and asked them for a free high end smartphone for “testing and validation” The partner delivered it to him in 2 hours with a note of thanks ! Till date he uses this phone to show off his hustling prowess.
I am amazed how the lack of money forced us to “ask” for everything from free leads to free hosting credits. Lots of our possible expenses in travel and marketing are paid through co-creation with partners and customers. We just have this strong hustling DNA to ensure that cash in bank can go as far as humanly possible !
As we keep scaling year on year, we reach nearer to our stated goal of being India’s first Billion Dollar (in revenue) profitable startup, we are just reminded year on year on how our lack of funding has actually helped us stay on the course .
I wish the same to all of you budding entrepreneurs.