Startups are HARD. Building an organization is even harder.
The most important aspect of achieving a goal is having clarity. Finding an answer to ‘Why are we doing this?’ can be a long, confusing and frustrating process. It may take many ups and downs and dead-ends before we start getting some real understanding. While mentors, investors, and elders can provide you advice and information, more often than not, this clarity has to come from within.
This is the story of how HyperVerge team, went through frustration, failure, acquisition offers, and fatigue to finally find some insight about our purpose.
The last 12 months have been a massive transformation for HyperVerge. The team went through a very difficult phase with our survival in question. For quite some time, we had no clue of what would come next. Finally amidst all this chaos, we finally found what we as a team care about and are willing to strive for.
Hope our learning helps you in the process of building your own company/career.
The struggle with consumer apps
Photo/Video apps, especially, have managed to reach massive number of users and in many ways lead the path with success stories such as Facebook, Instagram, Snapchat, Youtube, etc.The apps we built such as Silver and Magic Share, were focused on helping people share memories (photos) / relive memories. Simply put — helping users get more joy out of photos they click. We built out an extraordinary amount of technology — automatic categorization of photos using face recognition that works even on 2G networks, zero cost and seamless offline photo sharing between multiple devices, AI based summarization of large albums into 30 best photos, etc. However, all of this was not sufficient to succeed in the world of consumer apps.
None of our apps saw real viral growth. The path to high growth seemed impossible without spending marketing dollars. Even the paid users that we on-boarded did not convert into daily active users. It was challenging but we learnt a lot in the process
- While building an app, there are two crucial problems that need to be solved — Virality and Product Market Fit
- Users cannot tell you what they want. You have to understand it by doing experiments and by observing their behaviour
- It is not simple or intuitive. Most of the intuitive ideas do not work. Sometimes the most weird, outrageous ones may work
- A lot of social apps need to depend on college users for early traction and network effects. College users live in the world of Musical.ly, Snapchat, 9GAG, Youtube videos and many other apps that mainly focus on Instant Gratification. This means that apart from doing its job, your app has to give those quick hits of dopamine :)
- Most importantly, it is very difficult to create a business in the consumer space that makes money or is sustainable, at least in the short term (2–4 years)
Needless to say, we struggled. Though our work started out as a technology focused play on deep-learning, it soon started veering into efforts such as developing face masks, troll effects, etc. Finally, after almost 12 months of doing everything trying to woo users, we came back to the fundamental question — “Whose life are we trying to change here and how?” There was no answer. What started out as a very well intentioned effort had quickly become something that was an effort to hooking the user by doing whatever it took.
Why? Because it is your user coming back to the app again and again that gets you the next round of funding.
Are we done here?
After almost 2 years of slogging, 2 rounds of funding and no real success in the consumer market, the future looked quite unclear. There were many ideas for new consumer apps, but no real excitement in the team. There was a lot of fatigue. Around the same time, ocassional conversations of possible acquisition targets began. Some big names and their M&A teams started reaching out. While consumer traction had been elusive, HyperVerge had created extremely valuable technology. The Team + Technology was worth a double digit million dollars. Most companies in the deep learning space faced the same challenge. There is a lot of excitement and hype, but no revenue or real traction. Except for a handful of companies, everyone else has been acquired. For a funded startup, once the M&A conversations begin, there is no turning back. You have to keep at it till you reach an outcome. The process takes a lot of your time and usually sucks in most of your attention. You have to make a clear decision even before you begin.
At this juncture, we had to make a difficult choice — Are we done here? We decided to spend a week together. All the work was stopped. This was a time for difficult conversations.
From the very early days of HyperVerge, it was always clear why we were building this company. Almost everyone had left a possibly cozy job to do this, names like — Goldman Sachs, Microsoft, Qualcomm, Paypal, Schlumberger and more. A majority of our team never sat for placements at IIT Madras. They joined us in our journey without ever asking what the opportunity cost was. I always wondered what brought such a talented team together and more importantly what kept us together through all the difficult times. We were underpaid, overworked and for a big part of our journey did not see any real success from the market, but the team kept striving on. Few of the reasons that kept us going were:
We enjoyed working on challenging problems
We enjoyed working with each other
But the biggest reason that held us all together took some introspection. For most of us, our personal ambitions of maybe having a good house, a great car, good family, comfortable life, international vacations would work out no matter what. As long as we did not mess up, we would all get there. An important question to ask was — if we already knew that we would be reasonably successful in the future, then what did we want to do with our lives? The only answer we could find was this.
Not everyone around us is as fortunate as we are. If we really want to go beyond our personal success and build something that can make the lives of others better, then we really need to work together as a team.
As we dug deeper, we realized that everyone wanted to build a meaningful company that contributes to people. That was the primary reason for people still sticking around. We all wanted to go at this one more time. Knowing that was a huge relief for all of us. The next big question was — How do we do it?
Being frugal on spending from Day 1 had ensured that we had time and money. As always, we reached out to many advisers for clarity. Venky Harinarayan has been my mentor though most of our tough times. In spite of being an investor in HyperVerge, he is always someone who has given us the right clarity, keeping aside his own financial interests. Venky gave the following insights that changed our perspective
- To make a fundamental impact in this world, you need time. Education, health and so many other areas are not inefficient because of the lack of technology. There is a lot of static/inertia that you need to overcome to change things. That needs time. Example — Even if you bring the most advanced curriculum and practical learning in any country’s education system, it still takes a considerable amount of time before the status quo changes. Static elements include — local job opportunities and the mindset of recruiters, teachers, parents, students, budgets, etc.
- Startups do not have that kind of time
- If you cannot stand the test of time, your impact will be limited
The interpretation of the conversation was loud and clear. If you really need to contribute in a big way, you need to stand the test of time. Your survival is the most important priority. The first step towards survival is
“Learn how to make money.”
Consumers these days do not want to pay for anything that is just software. Most AI softwares are free — Google Photos, Alexa, Siri, etc. Venky clarified that targeting enterprises was the way to go if we need revenues. We needed to figure out quickly how our technology can help large companies.
Sometime in February, we ended up speaking to Sridhar Vembu of Zoho. For those who are unaware, Zoho is a bootstrapped company that employs 5000 people and competes with Microsoft, Google, Salesforce in various products such as Zoho CRM, Email, Documents, Books and pretty much everything a business needs as must-have software across different functions. As a result, they also make a modest few hundred million dollars in revenue :)
The conversation with Vembu was a very honest one. We told him we need to make money and we do not know how. His reply for simple
“You need to make half a million dollars this year and some part of it can come from Zoho. Relentlessly focus on surviving on your revenues”.
Our complex situation was transformed into a simple near-term objective — Make more money than you burn.
The real breakthrough for me though was in understanding the impact Zoho has made through Zoho University.
Status Quo — An engineering student in Tamil Nadu can easily end up spending Rs. 8–10 lacs in becoming an engineer. Since an engineering degree is considered as a basic requirement for most IT jobs, every parent, be it a farmer, a land labourer, a metal worker, is striving to make sure that his child becomes an engineer. The end result is a loan of 8–10 lacs that most families take up. The sad part of this story though is that most of our engineers are not employable and have to end up joining jobs that could pay as low as INR 6–8k.
For its hiring, instead of depending on Tier 1, Tier 2 engineering colleges, Zoho decided to focus on the overlooked colleges and towns/villages for its talent. Through this effort was born Zoho University. Zoho University takes in students from rural Tamil Nadu after their 12th standard examination. They arrange for food, stay and a stipend while the student studies. At the end of 12–18 months these students start working with teams within Zoho. Most of the successful students end up joining Zoho at a good compensation.
A student that would have been under the burden of a Rs.10 lac loan or would have never taken up engineering due to financial constraints, today is maybe a team lead at Zoho. There is no loan to be paid. More importantly, she/he has been contributing to the family income from when they were 18.
This for us exemplified the contribution we always dreamt about. I am sure that same is the story of many organizations which have stood the test of time and have consciously worked towards contributing to the lives of those around. All of them are profitable organizations, very likely the leaders in their space, silently going about their job, and over a period of time making immeasurable contributions to the community around.
A New Beginning
Post this realization, we have not looked back. We decided to focus on being a company that to begin with knows how to stand on its own feet. We decided to open out our AI Engines to enterprises. Revenue now had a clear purpose. The team worked hard to produce AI engines, most of which hold among the top 5 accuracies in world. Sridhar kept his promise and happily so, Zoho became our first paying customer. Today, many top brands such as DNV GL, TCS COIN, Digital Globe, FE Credit, Bajaj and more are partners and paying customers.
In the Apr-Jun quarter of 2017, we became cash flow positive.
Following our learning from Zoho University, the first investment we made with our surplus income was buying GPU infrastructure that we plan to make available to college students who want to learn deep learning.
I hope that we as a team will remember these valuable lessons in good times and challenging ones. A huge thanks to all our mentors, friends, family members, investors and well-wishers for supporting us through this year. Diwali is the festival of lights, one of new beginnings. As we step into a new beginning at HyperVerge, we look forward to a year of more awareness and clarity (not to forget — timely and recurring baksheesh from our clients 😃 )