WATBlog Panel @ Proto 5 – Lessons learnt from failure of startups

The WATBlog Panel hosted by Rajiv Dhingra of WATBlog.com was awesome and insightful. The panel consisted of Rohit Agarwal of techTribe, Suresh Sambandam of OrangeScape, Ganapathy Subramanian of Mydunia Networks and Santosh Dawara of BookEazy now founder of Lipikaar. More details about the panel here.

Below are my notes from the event and it’s pretty lengthy but filled with insights.

Suresh: I felt I started off a little too early. (at 19)

Rohit: Started techTribe 3 years ago and had worked on 5 startups before this. (Explained a bit about how they stumbled upon the techTribe idea.) It was to be a collaborative knowledge management site where people are motivated to learn in a collaborative environment. From day 1 it had thought of referral based recruiting as it’s business model. They had to shutdown techTribe and even reject investor money since it didn’t make sense to accept it when the model hadn’t been proven even after 3 years. Rohit found out that it wouldn’t scale with tech but it needed to scale with people. Since collaborating and building people base really aren’t his strengths, he decided to call it ends. There were 2 indications which made the writing clear on the wall:

1. Curves: Alexa, Comscore, etc., site stats were headed in wrong direction.

2. Money wasn’t easily coming even with a good branding. techTribe brand was successful.

Ganapathy: He told about his 15 years long journey, with 6 years as a VC and 6 years as an entrepreneur.

Santosh: They started a movie ticketing startup to facilitate easy booking in Pune. They were loved by their users and 1st year was great for them with about 60,000 tickets being sold. However, things started changing from then on… There were massive changes in how multiplexes dealth with their partners and how they distributed and sold their tickets to. This didn’t resonate well with the BookEazy team and an alternate project they were working on called Lipikaar was seeming more attractive. So they eventually had to make the tough decision and shut down BookEazy.

Q: What should an entrepreneur be weary of?

• Suresh: Need to use the experience of others who have failed.
• Ganapathy: Lack of integrity (i.e., truthfulness) The fundamental reason is the founders get too obsessed with their ideas and refuse to see reality. You need to check every quarter and check with your users about your drift.
• Rohit: It’s like a marriage. You have wife, then buy a house, have kids, etc., It gets messier as it progresses. So check early and at each supposed milestones if you are doing well and quit early if it’s really not working out. You have to accept reality. You can try some more, but when you have lost the belief, it’s better to quit.

Audience: VCs look for tags like “Serial Entrepreneur” and if someone tells they have failed in their last 2 startups, then whats the general perception?

Ans: It the current idea and execution that matters.

Audience comment: It’s like a bad marriage. You stay put because you don’t want a “divorce” tag. Entrepreneurs get stuck and don’t want to go work for a company again.

Q: What were the scars and learning due to these failures?

• Suresh: Need to specialise in something, which helps you to understand issues involved at a great depth.
• Santosh: Lots of their users weren’t happy with their decision to shutdown.

Rajiv: In startups, entrepreneurs try to do everything / too much.

Suresh: On a related note, conversely, they also tend to think that somebody else will crack the “go-to-market” strategy for them, which is a mistake. Tech guys think business isn’t their domain and that they can find someone else to handle that aspect. But in an year you’ll learn that you have to learn it the hard way.

Communication aspects:

Ganapathy: It evolves over time and the conversations are ongoing. Depends on the history and chemistry they share with the VC.

Rohit: This is something that techTribe did right. The investors, senior management and top execs were always in the know of what was happening on a daily basis. So the eventual decision to shutdown wasn’t really a surprise.

Rohit: VCs usually spend around 80%-90% of there time hunting for new deals. However, right now it’s 50% reserved for their portfolio companies and 50% for new deals… On the other hand, an entrepreneur spends aroudn 10% of his time thinking about money. So who should be chasing who? Why are startups worried about VC validation? If the product is doing good, then the VCs will definitely come to you. There is no reason to believe otherwise. If there aren’t any ethical issues, then past failures doesn’t count much and it’s all about current idea and execution.

to VC or not to VC:

Ganapathy: If you understand the kind of projects VCs tend to fund, then you’ll understand the kind of projects for which you have to approach a VC. (some VC stats). So, if you can show VC that there could be about 10 times returns, then those tend to get funded.

Audience question: Do owners loose control when they take VC money?

Everyone nodded in unison: NO.

Suresh: Of all VC investments, 20% successfully exit and 60% tend to be lifestyle business.

Audience: Whats a lifestyle business?

Suresh: Businesses that enhance the founder’s lifestyle

Ganapathy: Don’t expect too much from a VC. It’s only one of the aspects which can help you succeed. But it’s entirely on your shoulders.

Rohit: I have an exactly opposite experience. Our VC helped with changing and evolving our models and were almost like cofounders in early stages. They would even make calls to their contacts on our behalf. So, select a right VC.

Ganapathy: Don’t count on VCs to get things done. You have to handle the things yourself.

Rohit nods in agreement.

Ganapathy: If they were so smart, they would be building the company themselves.

Suresh brought up the topic of accepting Strategic money and everyone thought it was a bad idea. Alok from Games2Win explained how it would be be difficult to make any meaningful decisions on your own once you accepted strategic money.

Session ended.

Hope you found these discussions insightful. Share your thoughts on any of these topics being discussed.