How making money changed my perspective on startup ideas [Founder's Exp.]

In Entrepreneurship by Guest Author14 Comments

[Guest author Paras Chopra was the founder of Kroomsa and is now working on his second venture, Wingify. He shares his insights on why he thinks Kroomsa had to shut shop.]

I admit it: my previous (so called) “startup” Kroomsa was a failure. Back when I was starting up, I remember how game changing I thought it was. We wanted to revolutionize Indian music scene by inserting audio advertisements into music. We also vowed to donate 20% of proceeds from advertisements to a charity organization. Do you see how cool the idea was? Though this business, we combated piracy of music, made money for independent bands and helped society by supporting charities. All at once!

Except that we never made a penny out of the venture. First mistake: none of the team members was doing it full time. Second mistake: none of the team members had any experience in music industry. Third and biggest mistake: the idea was “cool”. To my hacker brain, this crazy business model was like dope. I distinctly remember being on a high for several days when I initially thought of that idea.

According to my then interpretation of “execution is important than the idea”, I started implementing the business model without doing any reality check at all. I built the music platform, roped in friends to help me, contacted a few initial music bands, uploaded music and added a dummy advertisement in songs! Before I realized my project was a startup. As time passed, I realized:

  • Nobody likes to listen to advertisements in songs. In fact, people hated it. Lack of basic market research.
  • Nobody in India likes to pay for music, let alone for independent rock music. Market was tiny.
  • With no experience in music or corporate industry, we had no clue how to bring in advertisers. Lack of business and marketing plan.
  • Finding good bands and signing them up was a non-scalable, extremely laborious task. So, our inventory of music was small. That meant even if we found an advertiser, our reach wasn’t so appealing. The chicken-and-egg problem.

Eventually we gave up on the startup when we realized: a) although we got covered in national newspaper because of the coolness of idea, it wasn’t exactly a startup; b) even theoretically, it will never grow big enough as a business (because market didn’t exist). In fact, even after months we hadn’t made even a single penny and there was no hope how it will make money.

In the process, my then 18-year old version learned the importance of business idea being grounded in reality. All this was extremely helpful when I founded Wingify last year. The first product is Visual Website Optimizer, an A/B split testing tool. Even though there are (or should I say inspite of) established companies in the market, the startup is making money and the revenues are steadily growing month-after-month.

Why is Visual Website Optimizer making money while Kroomsa didn’t? I think it boils down this:

The idea isn’t sexy. I am not going to change the world with it. But I am now solving a real pain-point in a big-enough market validated by presence of competitors. Since people are already paying for what I intend to offer, mine just needs to be easier, better or cheaper and the startup will make money and get customers. In short: I am making things that people want to pay for.

Yes, the phrase “make things that people to pay for” is worth repeating twice. Because I have now started making money with Visual Website Optimizer, my perspective on startup ideas has changed completely. A few years ago, my first reaction on getting a startup idea would be “Oh wow, this could be next Google. How do I get started implementing it?” Now my first reaction is on the lines of:

How will this make money? Who will pay for it? Is market big enough? And most importantly: do competitors exist?

So, next time you get a startup idea, ask yourself if established competitors (not other startups) exist in the market. If not, you better think twice because it could be an indication that the market doesn’t (or cannot) exist and you will never be able to make money in it.

Good luck with your startup ideas!

Cross posted from author’s blog

[Naman is a startup enthusiast and has worked with couple of Indian startups as Product Manager. He writes at The Inspire Blog]

Comments

  1. Kasi

    Good learning past on to the new entrants.

    Your websites reflects the opposite. First one looks like you are making a killer business and second one is calm and quite … but from your words the opposite is true.

    1. Paras Chopra

      As I said, I am keen at building a business first, no matter how traditional looking it may appear. Appearances can be deceiving.

  2. Vishi

    Good one Paras.

    One more point to add – I have often come across entrepreneurs who say “Market was not ready for my model”.. it should be the other way round “My model was not ready for the market”

  3. Abheek

    Paras, it is indeed a good read and insightful.

    The keywords you have put in are it easier, better and cheaper. I am certain that to achieve all these three we need significant efforts and cannot be done in a day

    However, I must also state that as start-up founders – we should look into innovations seriously. Ideas may not always work out – but we must not stop to bring in new (and cool) ideas

    I sincerely hope you (now with more experience and resources) will be able to re-visit your earlier idea and make a successful biz out of it

    Thanks for your insights and good luck

    1. Paras Chopra

      For an innovation to exist, a market should be there. For Google, search market was huge. They did NOT create a new search engine, they instead made a much better one.

      In only rare cases, one can innovate which creates a completely new market. It sounds ambitious but chances of success are lower.

  4. Reader

    Good Read. However, Bad Advice.

    Care substantiate your advice on “next time you get a startup idea, ask yourself if established competitors (not other startups) exist in the market. If not, you better think twice because it could be an indication that the market doesn’t (or cannot) exist and you will never be able to make money in it” with the following examples of products or companies?

    1. Twitter (they had a competitor? They figured out how customers would pay?)
    2. iPhone (they had a competitor? Certainly, they figured out how customers would pay … but they ventured into untested markets)
    3. last.fm (they had competitors? They figured out the business plan at first?)

    If there is no market, it might be that others haven’t thought or haven’t dared to test the market yet. Yes, completely possible, and has happened n number of times.

    1. Paras Chopra

      > 1. Twitter (they had a competitor? They figured out how customers would pay?)

      I wouldn’t call them successful at this moment precisely for the reason they couldn’t figure out how to get money out of their customers pockets.

      > 2. iPhone (they had a competitor? Certainly, they figured out how customers would pay … but they ventured into untested markets)

      Wow, they ventured into untested markets? They innovated inside a market that clearly existed for years: mobile phones.

      > 3. last.fm (they had competitors? They figured out the business plan at first?)

      Not sure about their story.

  5. krishna

    Good read , but i too feel it is a bad advice ..

    “Nobody likes to listen to advertisements in songs. In fact, people hated it. Lack of basic market research.” This is the only main reason for ur failure .

  6. ashish

    Good Read and actually there is no advice as such. Its just an observation and should be seen in the right perspective. Twitter probably didn’t start with earth shattering dreams . ditto with google and facebook and as opportunity presented itself with the hard work they did…they just got bigger.

  7. Roycerus

    I think what he means is that it would be easier to create something useful in an existing market than to create a new market. Sorry, but not everyone is Steve jobs or Jack Dorsey.

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