Startups Lessons Learnt from Investopresto : Should have focused on Marketing and Lesser Time on Development

[Editorial notes: Investopresto shutdown recently and while that has resulted in deep analysis of personal finance space in India, founder, Ashwini Anand shares the learnings, a hingsight analysis. In a very UnPluggd fashion. Kudos to Ashwini for being brave and open about it.]investopresto

People say that hindsight is 20/20 (vision, not cricket). And they are right. In hindsight, it seems as if we had made several mistakes. But, which startup doesn’t? Markets conditions are constantly changing, investor risk appetites are constantly changing and above all, the amount of information that an entrepreneur has, to base his decisions on, is very limited. The final triggers for our shut-down were the lack of interest of follow-on VCs in our venture and our inability to raise adequate follow on funding.

Could have done something differently?

As I said earlier, hindsight is 20/20. Had I known 2 years ago, what I now know, I would have done the following things differently.

We would have stuck to the Singapore/US markets. This would have given us access to customers who generate a whole lot more revenue than the ones in India. It would have allowed Singapore/US based funds to invest in us:

The Indian financial markets are very immature compared to the ones in developed economies like USA. Retail investor participation in the markets is very low and the lack of growth in this segment does not augur well for the long term future of the equity markets. This will probably change, going forward, but in hindsight, we entered this segment way too early. The best time to enter a market is when you don’t have to struggle to find a customer.

There are a lot of such sectors in India – insurance being one such sector. Over 50 million new insurance policies are sold every year. Compare this to the number of new stock trading accounts opened every year – barely 1 million. Most demat accounts are inactive and bring you no money.

We would have spent a lot less time and money on technology/ product development a whole lot more on marketing and market intelligence:

In hindsight, we spent way too much money on developing the product and did not launch early. This was the single biggest factor that led to our downfall. You can read more about this in the technology section.

We would have focused on 1 segment of the market and started charging from Day 1:

In hindsight, we tried to do too many things at the same time. The logic was – ‘ 1 user can use our social network, our virtual trading application, our forums, our news feeds, manage his investment portfolio, analyze his risk exposure, do his research and also trade on our portal’. This was partially right, but it was just not the right approach for a startup which had to constantly show growth to please incoming investors. This would have been a great approach if we had more money to spend and a little more time. Realization – “If you want to do something in this sector, you have to have more staying power aka cash to keep you going.”

Fundraising 

I can barely think of 3-5 investors here who even understand our domain well (personal finance/retail investing). This is a huge problem for us.  Investors here seem to like safe ventures or ventures “hot” areas e.g. cloud computing, big data/analytics etc. While this is true almost everywhere in the world, it is truer in India. In fact, I remember presenting to about 40 investors at an angel-group meeting. One of them asked me a question that gave me a huge insight into the general maturity levels of some of the investors here, “I see your gross profit numbers in the presentation.

The biggest mistake I made was to have the entire code re-written on Ruby on Rails.

Gross profit isn’t really profit. You should show your net profit numbers. What are your net profit numbers?” The fact that she didn’t appreciate the fact that financial projections are just order of magnitude estimates that are more like guidelines than anything else goes to show how much she really understood about startups.

Of all possible questions – about execution risks/ about market conditions/about the skill set that the team has, she asked a question about gross profit/net profit. That said it all.

Technology

We would not have had our codebase re-written

We had a pretty solid version of our product by June 2011. The problem with the product was that I had written the bulk of the code myself and focused on “getting it to work” rather than on making it scalable and pretty. The entire code-base was written on the .NET platform, which was rather out of vogue.

Most startups were migrating to Ruby or Python and kept extolling the benefits of the move.

The biggest mistake I made was to have the entire code re-written on Ruby on Rails. Do I have anything against the platform? Absolutely not! I like the platform and even appreciate the benefits that it offers programmers. However, the move was simply not worth the investment of time and effort. We finally released in May 2012 after re-writing the code base and adding new features to the product.

Test Driven Development

We would have never adopted Test Driven Development

What about TDD? It was a complete waste of time for us. The logic was – ‘This is a financial application. Quality is of paramount importance.  So, we need tests to make sure that everything works all the time.’ So, we did as the experts had suggested – we wrote tests and then wrote code after that. What was the problem? The requirements changed all time.

Ask any IT entrepreneur worth his salt and he will tell you that the details of the product change all time, almost every day. Hence, the existence of Continuous Integration (CI), Continuous Deployment (CD) etc. So, tests would keep breaking and we would keep re-writing them. This cut our speed by atleast 50%. Did the quality of the code improve? Not really! Tests can only check if your code can handle pre-defined cases. But when the requirements themselves change, your tests are useless.

We would have hired 2 top-notch developers rather than 7-8 mediocre developers.

The fact is that the quality of the developer-pool in India (that most startups have access to) leaves a LOT to be desired. Folks may not admit this openly, but they will agree in private. The cost levels are low, but so are the professionalism levels and quality levels.

Am I saying that there are no good developers in India? Of course not! But, I am saying that the developers that most startups have access to are not “up there”.

It is much better to pay 2 excellent developers 15 lakhs a year each and get work done, than to pay 5 mediocre developers 7 lakhs a year each and beat yourself up about slow progress or poor quality.

Hiring good devs is a HUGE challenge. We didn’t crack this problem well. We tried advertisements, HR consultants, agencies etc, but the only decent developers we got were through personal networks.

Regrets?

No regrets. We had the courage to take the plunge, raise close to half a million dollars, build a product that we are proud of, get over 20,000 users and to fight like hell. I would do it all over again!