Prime Mailbag: A special episode for you where we answer your questions on startups and entrepreneurship. We have Amit Somani & Sanjay Swamy , Managing Partners Prime Venture Partners , answering your questions. And if you have a question that you’d like us to answer in next episode you can submit here

Listen to the podcast to learn about

00:50 - Investing in Pre-Revenue Startups

06:00 - Building and Evolving Startup Culture

13:09 - Finding Product-Market Fit

21:30 - Balancing Product and Distribution

26:10 - Saying “no” to Investors

28:34 - Maintaining Financial Discipline Post-Funding

31:25 - Avoiding Bad Hiring Decisions

35:50 - The Importance of Building in Public

Read the complete transcript below

Shikhar Prateek 00:20

Hey. Hi. Hello everyone. Welcome to another episode of Prime Venture Partners Podcast. This is your host Shikhar. Today we’re introducing a new format based on your feedback, where we’ll be answering your questions. We ask you to share your burning questions about startups and entrepreneurship. And of the many we received, we handpicked a few.

And if you do have an unanswered question, email me at shikhar@primevp.in and we’ll answer them in future episodes. Today I have with me two partners of Prime, who will be answering these questions, Amit and Sanjay.

So I’ll pick the first question that people have asked: in the current conservative times, do VCs still feel comfortable investing in pre-revenue companies? And if yes, what is the evaluation or framework used to identify such a company?

Sanjay Swamy 01:05

Hi everyone, this is Sanjay. Let me take a stab at that. At Prime of course, we are an early stage investor and so we are very comfortable in general investing in pre-revenue companies. But broadly, I think we look at five areas. Clearly, we look at the team itself and their experience, expertise, passion for solving the particular problem that they’ve chosen, team, tam, timing, product and differentiation. I think those end up being the biggest dimensions on which we evaluate the opportunity.

And if the team is outstanding in terms of its expertise, in terms of its passion, understanding of the problem, if the problem seems large enough that it’s worth building up a solution for, this of course has to be validated with a lot of discussions with prospective customers.

If the timing feels right, where some, I would say non-linear change has happened either at the technology level or the adoption of technology, that feels like the timing might just be around the corner.

And if the team has a really deep understanding of what product differentiation should look like, how they perhaps could… Maybe they’ll build prototypes or maybe they’ve got customers that are doing pilots, although these might not be paid pilots. I think these are the four or five things we look for.

And ultimately if we feel there is an opportunity for a step function transformation of a very large industry, we are very happy to jump in with both feet and partner with such founders.

Shikhar Prateek 02:55

Got it. Thanks, and Amit, would love to hear your thoughts as well.

Amit Somani 03:00

Yeah, so just to add on to what Sanjay said, one of the things we look for a lot and would encourage a lot of early stage founders to think about, is really getting a deep understanding of the customers. So revenue is the ultimate proxy for that.

But even short of that, if you’ve spent time in that area, working in that area, building for that area or meeting dozens, if not, then maybe if not hundreds of customers, then that comes out quite clearly when you are pitching investors or you are doing your early build or trying to get to PMF.

So spend a lot of time on customer discovery before you pitch, especially if you’re doing a pre-revenue stage startup ‘cause that serves as a good proxy for your understanding of the market.

Shikhar Prateek 03:45

Got it. Thanks. So next one, next question. Why do VCs seem to care about competition? How should one respond to the investors about competition?

Amit Somani 03:55

Sure. So I think Peter Thiel has written this amazing book called Zero to One, and in fact there is a very provocative quote in there saying, “Competition is for losers.” I don’t think competition is for losers. Competition proves that there is a large enough market with a real problem that customers are willing to pay for. And often this is also called a red ocean market.

There’s a lot of demand, but there’s a lot of competition and therefore there’ll be a lot of cost of customer acquisition. You’ll have a lot of feature differentiation, et cetera.

So I think there are plenty of good companies that are built in the ‘red oceans’ which is that big market, big customer pool. How do you solve that? So you obviously have to have a much better mouse-trap, a much better solution and some secret sauce on distribution and customer traction and customer love.

On the flip side, and again this is the kind of companies we love at Prime Ventures. Is there are blue ocean startups where you’re imagining something new. Obviously, there has to be some proxy for customer demand, but where you are imagining a new way of doing things. Where you’re imagining a new solution perhaps to an age old problem, it’s not like problems are new, right? Age old problems for businesses or of consumers.

So I think it is very important because for venture investors, they’re not investing for an equity investor for six months or a year or even two years. We are investing for eight to 10 years, maybe longer.

And therefore it’s very important for us to realize whether the team that you have and the problem statement and the area that you’re working on is something that you can build defensibly over a long period of time.

So both defensibility and differentiation are really, really critical. So anyway, I would encourage you to think very strongly about why is it that you’re unique and different and is it more importantly relevant to the customer segment that you’re trying to solve for?

Shikhar Prateek 05:55

So from competition to culture. So the next question is, how do you figure out culture for a startup and what is a good time to think about it?

Amit Somani 06:00

So a culture is defined by what the 10th employee or the 50th employee or the 500th employee in your startup experiences culture is, right? So it’s not defined by what you, the founder or the CXO or the founder minus one says what it is.

So it has to be done very conscientiously, very deliberately, very thoughtfully. And obviously as a young early stage founder you are just worried about survivability and about making money or revenue or about fundraising or about getting to product market fit.

So it’s often an afterthought. And what we have learned after backing companies for over 10 years and having some great successes, is that the best founders think about culture consciously, deliberately, and constantly.

So you have to first define what your culture is, which is to say how do decisions get made, what gets rewarded, what gets reprimanded, how people get hired, how people get fired, whatever, what have you.

And then discuss and debate with the organization if they feel like that’s exactly how it is or it isn’t. And involve your employees no matter how small the team is. And then over time, I mean you have to evolve the culture. It’s not to say that it’s like the Constitution or Bill of Rights that you made it once and it’s never going to change, culture is a living document.

But I think the core tenets of how you behave with people, how you behave with customers, how you deal with investors, how do you deal with innovation?

Most of those things, at least in our observation, doesn’t change all that much. It evolves nominally. So my recommendation is think about it earlier, way earlier than later, number one.

And number two, be conscious and deliberate about it and be transparent about it and talk to your investors, talk to your founders. I mean, or other employees talk to, potentially even other peers, as you go about building and expressing your culture.

Shikhar Prateek 08:00

Got it. And even Constitutions don’t remain constant. There are amendments and there are new bills introduced I think. It is a dynamic thing. So next from culture to opportunities. So can startups be about creating new opportunities as opposed to solving current problems?

Sanjay Swamy 08:15

So I think people would like to believe that that is the case. For the most part, they found that there is a problem, a new solution might emerge to this problem.

And so if you take an example of a company like My Gate, technology reached a certain level of adoption and maturity, whereas smartphones could be used by a security guard at the gate and by all residents that transform that industry from a paper register and an intercom to a smartphone based real time dynamic application. Which then leads to a lot more possibilities.

So if that was a case where it was creating a new category of solutions to a problem that had never been solved in that particular way. But the problem did exist in its own right. I’ll give another example of a company in our portfolio, which is Dozee that is doing remote vitals monitoring and also measuring blood pressure in a contactless manner.

That is the first time something like that has been done anywhere on the planet. But it’s not like people didn’t realize that they needed an easy way to measure blood pressure. It’s just that technology wise, it was not possible in a contactless manner and that’s the only thing that makes it practical.

So every now and then you will run into these step function transformations or leaps that happen in technology. And obviously the smartphone has been a big catalyst in that. That has made certain types of solutions to problems possible.

And so it might appear that you’re creating a new opportunity but really it’s some major shift happened that made either two impossible solutions suddenly viable and practical. So generally my feeling is those are what we are seeing as a category creating opportunities where the problem existed, but the solution set is completely new and that’s triggered by some development in technology.

And so that’s where I feel you’re really creating opportunities. Now in some of those cases, the opportunity to commercialize this might still be a few years away. And that’s where there is always a risk of being caught on the bleeding edge instead of on the leading edge.

And that could happen and I’ve experienced that as an entrepreneur, with mChek, for example. We’re probably five years too early with mobile payments, but eventually the problem did get solved.

So those are of course higher risk, higher reward situations that entrepreneurs play for. And unfortunately in many of those cases you only find out whether it was a leading edge or bleeding edge post facto. It’s very hard to predict it upfront and that’s what makes entrepreneurship so exciting as well.

But if you’re a founder that’s working on an idea like that, other than talking to us, I think the best advice I would give is whatever you’re doing, stay in touch with the customer and really understand if you’re solving a problem that as difficult as it may be, when people will actually want the solution, if you’re able to pull it off and really be ultra frugal. These are companies that are built over long periods of time and running out of capital is not an option. Yeah. So that’s my view. I’m sure Amit has some thoughts on this as well.

Amit Somani 11:45

Yeah, I completely agree with you Sanjay, that technology disruptions are the biggest thing everybody’s probably hearing now about language learning models and ChatGPT or about artificial intelligence or maybe about five, seven years about mobile internet, at least in the Indian context.

So that for sure if you’re doing something in the tech space, you got to keep an eye on that ‘cause they just leapfrog typically once in a decade, if not more frequently. The other twist I would add is consumer behavior change. So what is happening even if the technology is unchained but people are suddenly, for example, post UPI coming about or QR codes coming about or mobile internet coming about or videos becoming more popular.

In what way has that consumer behavior change has lend itself to new opportunities? So that’s the other area that I would look for solving interesting new problems or problems in new ways.

Shikhar Prateek 12:40

And so next is from, opportunities to startups are for long term gain. So our next question is from Arina Husk. So with us, how can startup realize they are built for the long term until profits are made? For example, in public equities, profits, ROCE serve as validation. But what serves as validation for a loss making startup?

Amit Somani 13:05

Yeah, a great question and a tough one. So obviously there are many different markers to figuring out if a startup is getting product market fit and eventually has some defensibility and some moat. My simplest very almost naive metric is organic traction.

Are you getting organic traction without having to pay the likes of Google and Amazon and Meta to get distribution? That’s one very good indicator. Why is that a good indicator? Because it means that the customers are pulling your product, it means that you’ve really built something that people want and you don’t have to market it per se. And I know it’s a bit of a nirvana or a dream.

So there can be some rules of thumb… So typically, for a consumer startup, if you can get 50% organic traction, you’re probably in the top decile if not the top 5% in the world. If you’re getting that. For a B2B startup, perhaps similar, right? Depends.

And this is not an absolute rule, it matters how long you’ve been in the market, whether your category is a little bit established or not, but I think organic traction is one very good one. A close second I would say, but to somewhat related and particularly more so B2B is referrals.

So what percentage of your customer book is coming from referrals? It’s also true in consumers where it takes time to build a brand. So that’s one very, very important one.

And third which a lot of founders shy away from particularly, I would say a little bit sadly in the Indian ecosystem is pricing. So Warren Buffet has this beautiful quote that, “The best powerful brands have the ability to raise pricing without having customer attrition.”

And so our third partner, Shripati has a beautiful blog on this as well and something to the tune of keep raising pricing till it hurts and our founders typically keep discounting till it hurts.

So I think the point is if you can raise pricing and the customers are still willing to pay for it, that means you have some brand promise you’re delivering, that means you have some real customer value prop that you’re delivering. That means you have a superior product compared to competitors so that other people are willing to offer stuff. But it’s a harder question at an early stage. I admit that Avinash.

Sanjay Swamy 15:30

I’ll add a couple of examples too. Amit, that we had one company in our portfolio that I can’t name right now, that had a product which was sold on the per user basis and they were initially charging 50 rupees per user per month.

And then we said let’s do some experiments and see how far we can push it. And rather than waiting, we said to every customer we meet, we are going to double the price and see where we get pushback. And went to 100 rupees and went to 200 rupees. We had no pushback at all.

And then when we tried 400 rupees a month, that’s when we did get some pushback. So that’s how we settled at 200 rupees. And then the next week we said, what if we tried a 10 user minimum and now you saw the ACV going very quickly from 50 rupees a month to 2000 rupees a month.

So I think founders are scared sometimes to push the lever of pricing and that’s the blog Amit was referring to and sometimes feel that they need to prove their worth but they’re not realizing what the value is to the customers and most important to understand what the value is to the customer.

And if, for example, that company had seen pushback at say the 100 rupee level, it would’ve been clear that it probably didn’t have a viable business. And so it’s very important for founders also to establish early in their journey that they do have at scale, a viable business. Even though in the beginning they might be having a high cost of sales, for example.

So that is one part and to give you a very extreme example from my days in Silicon Valley. I was in a large sales meeting, we were discussing a million dollar contract and the customer kept going back and comparing the competition and the VP of engineering just blurted out saying, “If the price was $1, would you buy our product?”

And we were just negotiating a million dollar plus contract and the customer was stunned and said, “Of course.” But what we established by that question was, okay, you want our product not the competition. So the moment that was established and we said, “Okay, now we are only talking about pricing,” we eliminated the competition from this discussion.

So I think founders should very early validate, are we winning and what’s the value to the customer? And then after that pricing settles itself very quickly.

Shikhar Prateek 17:50

So the next is the perfect question to balance this one. So how do we discount towards, for example, if you’re selling item for X and a big player comes in and launches similar product, 90%. So how does a startup compete with them without getting bankrupt?

Sanjay Swamy 18:05

Or the big player comes in, offers to buy your customers out and pays the customer a lot of money to get you out of there, right? We see all of those things. Personally, my view is that you just have to ignore it.

If you have a really good product and really good value to the customer and if it’s a large opportunity, there is space for everyone. At least certainly in B2B environments. I think in consumer space… Amit will probably be better suited.

But I think businesses at least make decisions on a variety of reasons, not just cost. And I think as long as you’re scoring very highly in all of those factors, you’ll build a successful company.

Amit Somani 18:50

Yeah. So I was going to just say that look, another thing you need to do very early in the journey is doing your customer discovery and your ideal customer profile. So are you clearly adding value to that customer to be able to… For whatever quality that you’re adding, whatever quality of customer service, quality of product, et cetera, that they’re willing to pay that pricing.

There’s a beautiful framework on pricing, although it’s becoming a pricing episode, but it’s relevant, which is that at what price does the customer feel like this is great value? At what point do they feel like this is too cheap almost and too discounted and therefore not really sure of what you’re going to get and vice versa?

At what point is it too expensive that they would never pay for it. To Sanjay’s example of the million dollars versus $1 or $10 million for that same enterprise software.

So I would say that just doing that discovery is very important and there are times when if you get a heavy duty competitor who is extremely well capitalized and is out to just burn the bridges or the boats that you may have to find another spot of customers or another kind of quality of offering.

So you might go mid-market, you might go enterprise, you might go… There’s a particular niche because competition is always going to be there, especially if you’re in a market where your product is not that dramatically differentiated. So I would say you shouldn’t hesitate. I mean there’s no way you should try to compete on pricing in my opinion.

But at the same time, I think you should also not be afraid to notionally walk away from certain segments of the market because not all revenue is good revenue.

So if your customer just took you in a flippant tray and all they really cared about pricing but not really whatever your USP was, then you are already going to fail the pricing test, the Warren Buffet test and can you keep increasing pricing every year and customers will pay for it? So I think the answer will be a little bit mixed that sometimes you do have to go to find new customers and sometimes you have to let customers go.

Shikhar Prateek 21:00

Good. So enough about pricing, we move to product and distribution. So the next question is, SaaS companies invest equal amount in product and distribution during the initial years, but when does the company focus on distribution? Give a popular name that first time founders focus on product and second time founder focus on distribution?

Amit Somani 21:10

So there’s this beautiful quote that I heard somewhere, I think it’s… I forget who it is from. I think it’s Alex Rampell from Andresen Horowitz, when he was doing his startup, which is that the journey of startups is can you get distribution before the incumbent gets innovation?

So let me repeat that, can you get distribution as a startup before the incumbent gets innovation? And I feel that by and large we tend to grossly under-invest in distribution and over-invest in product. Now of course that’s a very broad generalization and as Mark Twain said, “All generalizations are generally wrong,” so please take it as a grain of salt. But I would say a lot of this depends on your DNA. If you’re an engineer or a product manager, you’ll typically tend to want to just build, build, iterate, add features, whatever.

If you’re a sales marketing business type of founder, you might just want to sell, sell, sell and forget about building. So the right answer as everything else is to have a balance. I think the days of just building product or just doing sales and marketing are over.

And you can see those lines blurring. This whole notion of product led growth, this whole notion of being customer first, doing customer discovery, even the whole lean startup movement which started 10, 15 years ago is all around the fact that do customer discoveries spend enough on distribution, spend enough? We’ve already covered enough today on pricing and potentially packaging.

So I would say just having a balance is very important. Just do your self assessment, are you indexing on product or are you over indexing on distribution and just do a little bit of counterbalance because very rarely is it the case that… And by the way it does happen, right? There’s no doubt that it does happen, where you only invest in product and it works like wildfire.

That’s the exception that proves the rule and vice versa, that you’re only looking at distribution but have no product, no business model, no unit economics, et cetera, and then you’ll be successful. So I would say 50, 50 is a dream, but I would definitely say most startups will probably be 90, 10 or 80, 20. Figure out which side you’re over indexed on and then balance with the other.

Sanjay Swamy 23:20

I’ll give an example of Quizizz, which is a company now with 60, 70 million monthly active users and we were privileged investors in this company when it had less than a thousand users.

So that was a company over the last five years that just grew just by building an amazing product. The net promoter score rarely dropped below 80. And every time we would meet them they were growing 30% week on week at some point or at one point. So those are some situations where you get the dream product right at the beginning.

It doesn’t happen quite often and when it does, you should enjoy the journey. But I have to say that I have never heard of their servers going down, for example. So it was not just that the customer experience was great, that the product was delightful, that it appealed to people. It just worked.

And I think one of the most important things here is that you have to have a very robust product and it has to do what it claims to be doing. When you get to B2B, especially in SaaS, very important that people don’t buy products, they buy relationships.

So businesses are looking at you as a way to become their operating system for their business, for the next several years. And so they have to trust you as a founder that you are going to do right by them over a period of time. That’s what they’re buying.

So in some ways product and distribution, as Amit said earlier, are very intertwined here. Because what you have is definitely not exactly what they need in its entirety, but there’s a promise that if I partner with this company, they are over a period of time…I can trust them to solve my problem and really deliver the right solution over a period of time.

So that’s where again this whole distribution, customer relationship, engagement and product have got to work. It’s sort of two steps that you… You can’t just go forward with your left foot, you have to also advance, right foot and they’re in lockstep with each other.

Shikhar Prateek 25:30

Got it. Next here, Puja asked a couple of questions on fundraising. The first one is, How to say no to few potential investors when your fund raise is oversubscribed?

Sanjay Swamy 25:45

I say you never say no to investors, especially in this time and age. Take all the money you can get. I think it’s important that investors also are pragmatic people. They understand dilution for founders is a sensitive matter and have to be pragmatic about it. Yet at the same time I think look at… On a more serious answer to that question is, look at what is this person bringing beyond just the capital?

And if you think this person, yes your round is oversubscribed, but there is this amazing investor who has very specific knowledge about the domain, it is somebody that you think you can learn a lot from, that can add a lot of value to you, then making room for them on the cap table to accommodate them is more than just a financial decision. So I think that’s what I would suggest, make room based on whether it’s financial. If it’s just for the money, probably not.

But if there are a lot more intangibles, then it’s worth keeping that investor on your cap table. The other thing is while companies raise rounds to get to certain milestones and get to the next stage of growth, you don’t have to wait till you’re out of money before you raise the next round.

So you could raise a round and then let’s say there’s this amazing investor that comes, you could as you start progressing, decide to accelerate your growth and then go back to them. So staying engaged with them is probably the best way to keep them in your orbit without necessarily having to take their money immediately.

Amit Somani 27:20

No, I would completely double click on the last thing that Sanjay said that just maintain the relationship. You may genuinely not be able to accommodate everybody in a particular round, especially if you’re doing something great and have a lot of interest.

But I think maintaining relationships across rounds is very important. ‘Cause you don’t know how the market changes, dynamic changes, you may want to partner with one of their other portfolio companies, et cetera. So I think you should find a way to stay engaged past this transaction.

Shikhar Prateek 27:55

Good. So next we have a post-funding question. And the question is how can founders practice financial discipline in running the company and managing people’s expectations after a large fundraise?

Amit Somani 28:10

I think the answer to the question is what happens before the fundraise and back to a little bit of the culture question we discussed earlier. So I think if you’re all building for the long term and for building a large defensible company, for building a large company that’s going to change and have an impact in the universe, I think people understand that a large fundraise is fueled to accelerate that growth and not necessarily money to distribute for salaries or nice offsites or fancier new office digs, whatever.

Some of that is fine too, but I think that just setting the vision early on to say, “Hey look, what is our ultimate goal? What are we trying to get to?” Not to over index on our portfolio company, but Quizizz… they want to get to a billion monthly active users. Now if you are in that Quizizz team and you are everyday thinking and dreaming that we need to get a billion users and be one of the few things in the world, which are at a billion users, maybe less than a couple of handful or certainly maybe a couple of dozen…

Then yeah, even if you do a large fundraiser, the first thing is not like, okay, can you triple my salary or double my salary or can we get a fancier new building or whatever it is.

So that would be one thing. I know it’s a little cliched or whatever. See, the other thing is also depends on the culture you’re building. What is the level of transparency, right? Because these days you want startups to have at least three years of runway as opposed to the usual 18 to 24 months so you know that you won’t have to go through unreal times, whether it comes to layoffs or pay cuts or whatever. So you don’t want to overinflate your payroll book in terms of either number of employees or whatever and just still continue to be lean as a startup.

So I think to summarize, I would say be transparent, ensure that everybody’s aligned to the long-term vision of what you’re doing and what this new fuel that you’re raising, where are you planning to deploy it both on the offensive side in terms of expanding your charter and growing and so on. And on the defensive side to make sure you have enough runway. And I think most employees who choose to work in startups who are really aligned for the longer term wealth creation and the longer term impact rather than any near term immediate gratification, if I may say so.

Sanjay Swamy 30:30

I’ll just add one sentence there. I found that most of the companies that have raised large rounds suddenly end up being ultra frugal right after that. So that’s a good sign in general.

Shikhar Prateek 30:45

The next question is how to avoid bad hiring decisions?

Amit Somani 30:50

Yeah, I would say that by and large people do a good job of hiring and scrutinizing and pruning and understanding for skills, which is what is your core competence, what are your skill sets? Does that work? Whether you’re a good engineer or a marketing manager or social media person or whatever. I suspect a lot of people don’t spend enough time on the culture fit. This is not the only mode of failure.

There are many, but this is one that comes to top of mind that how much time are you really spending trying to get to know them and whether they fit your culture and a few tips, unsolicited, hang out with them in a social setting, hang out with them even if they’re going to be a manager or an AVP or a VP. Have them meet with people that are going to report to them, which is deemed to be very hara-kiri and almost non-intuitive, but it actually works amazingly.

So if your culture is that of being more egalitarian and inclusive and there’s somebody with a big chip on their shoulder, maybe they won’t fit, maybe they’ll manage upwards well, but they won’t be able to manage the team and take them along.

So I think just spending a lot of time on culture fit on the values and really, you can’t ask somebody like, “Hey, do you believe in inclusiveness?” Of course you believe in this, right. You have to really probe. And that is one and the other, that I think is a pet peeve that I see, even at a unicorn level of hiring, this is particularly more relevant for senior leaders, but I think it would be true for all levels of the org is that people do a very lousy job of ref checks.

So once you’ve done all the hard work and skill saying, “Oh, Shikhar is a great person and seems to have good references and it was nice to have a meal with them and go for a walk,” this is done now. But you know what, you could really fake it in an interview or you could be off, you could be having an off day in terms of your six senses.

And so, I personally don’t delegate any ref checks and I would encourage at least founders, I mean, I think there’s no reason to delegate anything until we are 2, 3, 400, 500 people. But especially for CXO, I don’t think you’ll ever delegate it for senior leaders. So you need to do at least two, three to five ref checks and don’t delegate it to ‘HR or talent acquisition.’ So those are two things I would say. But these are not the only modes. That’s a great question.

Sanjay Swamy 33:10

I’ll add a couple of things that happened post the hire, especially for senior hires. So obviously you want to do the best job coming in, but the fact is there will be hiring mistakes and hiring mistakes actually hurt both parties, not just the company but also the employee, right?

Because they’re just in the wrong place and it’s just not working out. I encourage all founders to always bring their senior hires at the latest, the second board meeting after they join the company and have them present to the board. That gives a good… First of all, it gives them a lot of confidence that their work is being recognized and appreciated, not just by the management team but also at the board level.

And secondly, the board might identify sometimes certain challenges with the person perhaps in terms of their expertise, perhaps in terms of how big they’re thinking. And there might still be an opportunity to correct that or it might just be the wrong hire. So I think waiting too long and hoping that somebody… Frankly, I think if people don’t hit the ground running at senior levels in a startup, it’s a problem.

And definitely if in four to six months you’re not convinced, it is time to part ways. So it might sound harsh, but it’s actually right for that person and of course right from the startup. So these are things that again, people should not be scared to make difficult decisions and yet at the same time obviously not be trigger happy to make these decisions.

Shikhar Prateek 34:45

Great, thanks Sanjay for the answer. Next we’ll move to the last question of the day, which is a very… Question of the times. How important is building in public for founders today, and any tips on that?

Amit Somani 34:55

Yeah, so I think it’s a great idea and obviously it’ll not work for every company and every startup. If you’re doing something in deep tech or genuinely some kind of stealth reason in terms of you have a distribution hack or something that you don’t want to share, that’s fine.

By and large, there is a lot of camaraderie and support, not just from the entrepreneurs but also investors like ourselves and our fellow investors in the ecosystem. So we are constantly looking for any signal from all the noise that is out there. I mean, obviously social media is inundated with too much gyaan.

But I think there’s… Unfortunately, I think very little gyaan about actually building and learning. And one of the things we look for a lot, at least for when we are investing in entrepreneurs is what is your learning loop? What is your iteration loop? What is your launch speed? What is your iteration speed? So if you’re building in public, a lot of that is out there in the public, right? It’s not a static resume on LinkedIn, if you were to take a hiring analogy. So I’m seeing, okay, what did you try? What worked, what didn’t work? What have you adapted to, what have you done, what mistakes have you made, et cetera. That is priceless.

That will not come out in a 2,3,5 hour dating process or two, three meetings over a couple of weeks to make a decision. So I would encourage it, obviously, like I said with caveats that if there are still things that you really don’t want to share or don’t share, that’s okay. I think that’s totally fine. So yeah, I mean my broad recommendation is do consider it and you’ll be surprised at how much input you get.

By the way, sometimes even the negative or the constructively critical input you get can be very helpful. This is the whole religion of open source, things like Linux and Android and others are built on this. Because somebody else sees something, you’re doing something absolutely wrong, saying, “Hey, this is not the way to do ESOPs for employees ‘cause you’ll get stuck with this tax later.” Or if you’re flipping a company from India to US or US to India, “Hey, have you thought of this? Or do you know that other challenge that happened?”

So you might actually get constructive critical feedback, which is not just ra, ra, Shikhar, you’re doing a great job. But this is crap. This is not going to work. Then you’re better now than later. Like I said, this is the open source movement, which is worth hundreds of billions of dollars now. So anyway…

Sanjay Swamy 37:20

Yeah, I think my view on that is it’s really… You can’t change the DNA of the founders. So if you’re fundamentally an introverted founder, who’s more of a thinker who doesn’t like to socialize a lot, you’re going to be completely out of your comfort zone trying to build in public and you suddenly share everything, which you consider proprietary IP.

So you can’t fundamentally change the DNA of the founders too much. And I think to each his own, we have seen some of the largest companies in our portfolio and these companies have got to monster scale and have never done a single press release or any PR about themselves. And yet at the same time, you have companies which are very, very young, but that are building out in public. They’re talking about everything they’re doing, getting feedback from the audience and actually building their product with the feedback loop.

So there is no right or wrong here, but most importantly, stick to what you are comfortable with as a founder. Push yourselves a little bit, but don’t fundamentally change what you are doing because that’s too risky an experiment.

Shikhar Prateek 38:35

Got it. So that’s us. That’s all from the episode today. Thanks Amit and Sanjay for joining us today. And thanks to you listener for tuning in and if you have any questions about startup and entrepreneurship that you want us to cover in the future episode, you can write to me shikhar@primevp.in And we’ll cover it in future episodes. And you can also find the link in the show notes. You can post a question there. Thanks for tuning in. See you next time.

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