Author Archive for Andy Narayanan

Criticality of getting product roadmap right in early stage ventures

This is a cross post from my blog. Thought it might be relevant to share it in this forum. 

It is common knowledge that the success or failure for a new venture is primarily dependent on three factors – market, product and team. Entrepreneurs are traditionally good at identifying a market need and hence the two potential areas of fatal failure that one should watch out for are team and product.  In this post, I discuss the importance of getting the product roadmap right.  

Many of us would have heard of or had experience with ventures that collapsed because they ran out of funding before they could complete product development or released an over-complicated product that users could not understand or, released products that fell way short. The common underlying cause for failure might not always be the product itself, but rather the way it was rolled out and its inability to meet user expectations specifically at the time of its launch or release.

User expectations from a product are always dynamic and continuously changes with time.  In fact, one could draw a chart on how a user expectation varies with time. Initially, users (typically a small number) expect the product to address their core ‘pain points’ along with some ‘nice to have’ features, while taking into consideration any constraints that they might have. With time, expectation increases significantly (with more number of users) with need for more ‘nice to have’ features.  I call this the expanding ‘band of user expectations’.

To be successful, it is critical that the product roadmap be aligned with the band of user expectations (like Company B indicated by the green line). Deviating from it spells potential doom. In the example above, Company A attempts to deliver a complete product at a very early stage and ends up over engineering its product and potentially leaving its users confused. Considering that startups have limited resources, it unlikely that a company like this would have enough funds left in the bank to develop the next version. Company C on the other hand adopts a ‘throw it and see if it sticks’ approach and falls way short of user expectations. Both are not helpful scenarios.  

Companies that successfully align their product roadmap against the band of user expectations typically adopt a hypothesis-driven approach to product development. They test which features are desirable for their users, and aggressively seek feedback about their product and its features.  They also constantly iterate on development to ensure that their product fits well within the band of user expectations. Of course, there might be some companies like Apple that will exceptions to this kind of an approach, and are well capable of telling their users what they need. But 99.9% of the startups would be well advised to take structured approach to product roadmap.

I look forward to hearing your thoughts and experiences on this topic.

Potential of Mobile as a platform for new ventures

In December 2009, mobile data traffic (surfing the net, checking email, exploring social networks etc.) officially exceeded the volume of voice calls across the world’s wireless networks for the first time.  Global data traffic has nearly tripled in each of the last few years with some 400 million mobile broadband subscribers generating more traffic than 4.6 Billion voice subscribers. Mobile data usage has been primarily fueled through the increased market penetration of smartphones which increased its market share from 11% in 2008 to 17% in 2009, and the rise in social media access via mobile phones. 3G phone ownership increased from 32% to 43% from 2008 to 2009.

As expected, Indian and Chinese consumers are expected to lead growth in this sector, with mobile users in India expected to increase from 600 Million to over 1 Billion by 2014.  Even assuming a modest penetration of 15% for smartphones in the Indian market by 2015, that would mean 150 Million mobile subscribers eagerly consuming data traffic. Worldwide mobile data usage is expected to double each year as better smartphones become available and better networks are built and it should be no different in India.  The fact that more Indian mobile users are likely to embrace mobile as a platform for uses beyond just making phone calls, opens up a great number of venture opportunities. To me, the mobile platform offers the same type of opportunities to businesses that the internet provided in 1990s. It has the potential to spawn new businesses and differentiated business models, open up new channels for web services, online, as well as brick and mortar companies and could provide huge efficiencies and improvements in business operations and employee productivity.

Here are some thoughts. There are opportunities for greenfield mobile product startups that make everyday life easier for people on the go – read iPhone or Android apps. One could also think of a mobile centric product strategy for web services and online internet based businesses leveraging the true potential of the mobile platform (location based services, push technology, availability of mobile storage space etc.). Mobile could be used as a platform for brick and mortar businesses – e.g. online coupons, mobile marketing for retailers and CPG companies, mobile payment platforms etc. By no means is this an exhaustive list, but the key point here is that there is a great opportunity for entrepreneurs to create a new ecosystem of businesses using mobile as a platform. The infrastructure (3G) is being built, the market exists and consumers are asking for it.

Would love to hear your thoughts on venture opportunities in the mobile space in India – what ideas will work, what won’t and why? Have a great weekend.

Angel Funding Framework – some additional viewpoints

There is general consensus that entrepreneurship is on the rise in India, even though it is one of the most difficult propositions. Compared to their counterparts in other regions in the world, Indian entrepreneurs face more challenges that are ingrained in the social and economic conditions that are unique to India. One of the big challenges is the lack of availability of early stage funding from angel investor groups.

Several reasons have been given for why it is the way it is – lack of capital, lack of quality ventures etc. But in my opinion, the absence of a sound angel investment framework/structure relevant for Indian conditions might be the underlying problem. I say that for two reasons. One, there has been a shift in investor mindset across venture stages. VCs have moved up and very few play in seed stage funding and angel investor groups of yesterday are the new seed investors. Hence, angel investing frameworks of the past might not be relevant for the increased size and scope of investments required for today. Two, the range of angel investments being made today is very broad, between 10 lacs to 2 crores. The investment economics and risks are totally different at the two ends and I am not sure if the existing framework is scalable across the entire range. Traditional terms like investment multiple in equity ownership etc, that work in the west, will have to be adapted.

I had a few thoughts that I wanted to share with the group here and get feedback. First of all, the range of early stage investment (10 lacs to 2 crores) is too broad and needs to be broken down. A clear distinction between very early stage bootstrapping and angel group funding is required. Capital requirements under, say ‘x’ lacs should be done through boot strapping with friends and family and funding requirements above ‘x’ from angel groups (I personally think ‘x’ should be 40-50 lacs, but I am curious to hear other opinions). I think this is necessary because, only then the effort and cost associated with raising capital through angel groups would be justified along with return expectations for the angels themselves. Angels would also draw comfort from the fact that the entrepreneur has persevered to get the company off to a decent start before seeking funding and this reduces investment risk.

Second, the funding framework needs to change to address typical concerns that potential angel investors have. In my opinion, Alok’s framework which includes convertible debt instruments is a great starting point and could be a win-win. Ventures that need and are looking to raise a reasonable amount of seed capital (> 50 lacs) will be amenable to the debt terms in the framework, while the angel group ponies up a larger investment, but gets better terms on the deal at a lower risk. I think this could be a model that could attract more high net worth individuals to become angel investors and potentially increase investment size as well. Entrepreneurs will benefit from availability of increased capital and bigger funding size.

I understand that the above model still does not address the capital needs of entrepreneurs who need 10 lacs or so to get their company of the ground. But I am hoping that over time as the angel investing becomes attractive and the angel community grows, it would encourage a new breed of angels to take a higher risk in investing in “idea stage” companies with lesser capital. Comments and critiques are welcome.