WHY SOME FOUNDERS LOVE STARTING FROM SCRATCH
Entrepreneurs who have successfully sold startups
are on to their second innings, inspired by the joy of building a new venture.
They’re raising funding faster than they did the first time around
What is Binny going to do next?
This has been one of the most discussed questions in the
domestic startup ecosystem in the fortnight since Binny Bansal stepped down
suddenly from Flipkart, the e-commerce major he co-founded over a decade ago.
The controversy around his hasty departure notwithstanding, many
of Bansal’s contemporaries are already rolling out their next ventures with
significant capital right from the start. These entrepreneurs have successfully
exited ventures and have moved on to their second innings.
Prominent in this club is Kunal Shah, who sold Freecharge to
Snapdeal in a $400 million deal in 2015, one of the largest deals of the time
in India’s internet economy. Shah, famously a college dropout, formally
launched his new financial services venture Cred this week with $25 million
from marquee investors, including Sequoia.
Shah is not alone. Earlier this year, Aprameya Radhakrishna,
former co-founder of TaxiForSure that was acquired by Ola Cabs in 2015, started
Vokal, a voice-based knowledge sharing platform, with funding from new and old
investors of TaxiForSure. Similarly, Ashish Kashyap, who started online travel
firm Ibibo Group — which was acquired by bigger rival MakeMyTrip two years ago
— is starting a new wealth management and advisory platform. Kashyap is getting
$30 million in the bank as he looks to start the new venture. Myntra founder
Mukesh Bansal has been working on his second venture, CureFit, for about two
years, having raised over $150 million from investors. Again, investors from
Myntra like Accel and IDG Ventures (now known as Chiratae) backed Bansal when
he started CureFit.
What drives them to start again, especially when one has made
significant money from previous ventures? In fact, Shah and Radhakrishna have
been active angel investors in several startups, clear indication of the
adequate personal capital they have.
Shah, 38, said it is perhaps the uncertainty when one is
building a new business that keeps him going instead of things being certain in
a day-to-day job. To be sure, the pressure is much more for these founders this
time around as expectations are higher, from customers, fellow founders and, of
course, investors.
“The pressure is ten times more this time around (starting Cred)
but the joy of building something from scratch is a thousand times more than
taking an established business and leading it,” Shah said. He’s still pulling
all-nighters for Cred.
Radhakrishna echoed this: “The rewards of building a new business
from zero are special. That’s what keeps me going.” His many investments in
startups kept him abreast of what was happening in the domestic startup space
and that helped him firming up on his idea for Vokal, he said.
What changes in the new venture? Experience is a big difference
and maturity of the ecosystem too, Kashyap said as he gets ready for his next
venture. “I am one of the first generation entrepreneurs and when I compare
building Goibibo to now, many things are easier now. I build my current team in
2-3 months but the same took much longer when I was building Goibibo. The pool
of tech-talent is much wider now and it is easy to convince people to join a
new venture,” he said.
Kashyap noted that overall cost of failure needs to come down in
India if more founders are expected to follow cue. Shah mentioned globally the
success rate of a second or third time founder is higher than first time
founders. India’s venture capital funds have largely played it safe by backing
entrepreneurs who have shown some success with their previous businesses as
against founders who might have failed couple of times early in their startups
and are trying to start again. “That might not be entirely true but one must
also see the gradual maturity cycle a startup ecosystem goes through before it
starts producing several second or third time entrepreneurs,” Vinod Murali,
founding partner of Alteria Capital said.
Karthik Reddy, managing partner at Blume Ventures, said there is
a clear premium to second time founders who have given certain scale of exit to
their first ventures. “It is easier to work with someone you already know has
proven himself/herself and the rapport is there. It works out smoothly on
hiring, strategy and other needs of the new startup, given they have done exits
of close to half a billion,” Reddy said, adding that investors also have bigger
expectations on their potential returns while backing a second time founder.
This, of course, is part of what creates all that extra
pressure. “It’s a healthy pressure though,” Kashyap said. Another advantage for
founders is they typically would dilute less of their holding in the company
while raising an amount like $30 million in one go compared to when they raised
some money in a combination of seed, series-A and series-B round.
It is well established by now that raising capital for people
like Shah and others is easier but Radhakrishna sounded a note of caution that
a “brand or name” only helps raise initial capital; eventually it’s the idea
and the product-market fit has to be sound.
The second innings does prepare one and help avoid mistakes. “It
also makes you paranoid about details. You tend to invest more in certain
aspects of your business, having learned from past mistakes. For instance, with
Cred, we have worked on security of the user data for months and months,” Shah
said. He feels the level of scrutiny one-weekold Cred is facing is as much as
Freecharge dealt with a few years in. Radhakrishna said there are new mistakes
waiting to happen. “Being frugal is key. This is one major learning I have had
and I am taking it to my new venture also,” Kashyap said.
Both investors and founders TOI spoke to feel
that team-building is core to a startup’s success and it makes visible
difference working with serial entrepreneurs. For founders too, it is critical
to get right set of people early on while building the business and experienced
executives are more likely to join an established founder than a rookie. For
now, the likes of Shah and Kashyap are trying to script a new chapter for
themselves and for India’s startup story. Will they succeed? Will others follow
their cue?
Digbijay.Mishra@timesgroup.com
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