July 30, 2015
Facebook. Pinterest. Zenefits. Twitter. Jawbone. Uber. In the startup world, we are lead to to believe that unicorns are born in Silicon Valley. And in many cases, they are. Accelerators, incubators, meetups, and startup competitions all form part of a burgeoning ecosystem which relies on startups and the investors who invest in them. Last year alone CB Insights recorded $10.9 billion invested in 584 deals in San Francisco, making it the number one city in the USA in terms of investment. This year, that figure is likely to be even higher. But there is so much more to the startup world than Silicon Valley.
Founding without Funding
Despite all the money currently being poured into the tech industry worldwide, I often hear young people say that they can’t possibly found a company because they don’t have the capital to get started. I think the industry has been sending out the wrong messages to these young people. When I launched my company from my bedroom in Punjab, in the north of India, at the age of 17, my father point-blank refused to give me any seed funding to get started.
I spent 6 months building the first version of the product, and just needed $50 to register for a payment gateway to be able to start selling it. So I found my first customer on a forum who was prepared to register and pay for the payment gateway on my behalf in exchange for a license. A few months later, when I earned my first $1000 of revenue, I had a hard time convincing my parents that the money was real – but they did eventually believe me…although my dad still wasn’t keen on investing in my business!
When people talk about “startup culture”, they often mean lots of tech companies, with access to nice coffee shops and plenty of meetups. San Francisco’s vibrant tech city certainly has all of those things. But India also has a strong culture of innovation and entrepreneurship. My granddad came to India from Pakistan, he had a big family to support and grew his business from nothing. When my father took over the business, he grew it from the foundations laid by my grandfather. So luckily, I was brought up in an environment where I was taught the value of being resourceful.
India is also home to many high-growth tech companies, including Flipkart, InMobi, and Zomato. Some people have started referring to Bangalore as India’s Silicon Valley…but I grew up in Punjab, which is about 2,500km north of Bangalore.
Learn to crawl before you walk
Funding is a great way to accelerate growth. But we grew slowly and steadily, and I don’t regret choosing to do things that way.
For example, I ran the business from my bedroom for the first four years, so we didn’t open our first office until 2005, when we already had a revenue run rate of about $1.5 million. At that point, I had no people management skills, and I had no conflict resolution skills. Basically, I had no idea how to train employees because I was immature, and employees started leaving the company. Looking back, I’m so embarrassed to think that’s how I worked back then, but if we had already taken funding, my mistakes would have been so much more costly.
Necessity is the mother of invention
In the early days, the lack of funding led to some creative solutions. For example, without money it was impossible for me to buy a domain name. I asked around on the web hosting chat rooms I was a member of if anyone had a domain name that they didn’t need anymore. Someone offered me the domain kayako.com because he had parked it and only had a few months left until expired. So I not only got a domain, but a name for my company.
Being 100% focused on generating revenue whilst minimizing burn rate became almost an obsession – we didn’t spend a penny on marketing for the first 10 years. We used social media, SEO, and customer referrals to drive new business, including some clever tricks that I guess would now come under the banner of growth hacking.
A global game to play
In 2008, I traveled to a trade show in Hanover, Germany, which had a CRM arena full of exhibitors. The experience really opened my eyes – I saw companies from all over the world, many of them doing tens of millions of dollars of revenue, most of whom I had never heard of. It sounds stupid now, but until that point, I had just assumed that my potential market size was the same as my revenue. I realized that there was a global game to play – but in order to survive, we had to modernize and scale the business. That was the catalyst for establishing an office in New Delhi to house our growing engineering team. As we began adding customers from all over the world, I realized we had to be on the ground, and in the same timezone as them.
Many of our competitors, including Zendesk (founded in Denmark) and Freshdesk (founded in Chennai) chose to open their overseas headquarters in Silicon Valley. We chose to set up our first overseas office in London – we knew that we needed to be located in a global hub, so San Francisco, London’s Tech City, or a mainland European capital such as Berlin or Amsterdam were on our shortlist. I think that if securing funding had been higher on our agenda, then Silicon Valley would have won out, but London offered all the benefits of a thriving tech community with much more affordable rent. We really haven’t looked back since.
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