STARTUP STORIES

DONE DEALS CELEBRITY SPOTTINGIn March 2016, 29 million videos

were uploaded to YouTube by 7 million creators, generating 50

billion views. The result is a shift in who young people

identify as celebrities. Musicians and actors are no longer ‘it’. Instead, digital celebrities are the new influencers. And a wave of early-stage startups are emerging to connect them

to brands for opportunities ranging from content

partnerships to sponsorships and product placement. Here

are some global startups in the influencer marketing space

FINDING THE NEWONLINE STARS

Funding ($M) Influencer Platforms

REELIOHelps brands build and maintain rosters of YouTube talent

NaritivNetwork connecting brands and advertisers with Snapchat influencers

InstaBrandMarketplace connecting advertisers and individuals with large mobile social followings

MuseFindMarketplace connecting influencers to brand marketing opportunities

Captiv8SaaS-based analytics platform and influencer-brand marketplace

Grapevine LogicMarketplace connecting brand sponsorship opportunities and YouTube channels

The Influential NetworkMobile-first marketplace matching select influencers with brands

FameBitMarketplace connecting brands with creators across various social networks

7.1 3.92.5

1.7

1.5

3

5 Facebook, Twitter, Instagram, Vine, YouTube, Pinterest

Facebook, Instagram, Tumblr, Vine, Tumblr, Instagram, YouTube

Vine, Instagram, Snapchat, YouTube, Facebook, Twitter

Instagram, Vine, Snapchat, YouTube, Facebook,

Twitter

Snapchat

Instagram, VineInstagram, Vine

Source: Tracxn!

OYO Rooms, GurgaonMarketplace for budget hotel accommodation;

$100mnfrom Softbank, Lightspeed

Venture Partners, DSG Consumer Partners

Ritesh Agarwal

Founder

MagicX, Bengaluru; AI-enabled chat based personal assistant app; founded by Pratyush Prasanna and Arun Kumar; $1 million from Ranjan Pai, Kris Gopalakrishnan and others

LegalRaasta, Delhi; Online legal services provider; founded by Himanshu Jain and Pulkit Jain; $1 million from individuals

Kredx, Bengaluru; Online invoice discounting platform for SMEs; founded by Puneet Jain, Manish Kumar & Anurag Jain; $750,000 from Prime Venture Partners

HyPR BrandsSocial influencer analytics and marketplace

Source: CB Insights

The sight of them usually makes one shudder, but in the startup world, cockroach-

es are being seen as hardy, resil-ient creatures that live through any disaster, unlike the more flighty, mythical unicorn.

Last year, investors threw money at unicorns — companies valued at $1 billion or more — but this year, it seems to be the turn of the cockroach, startups that scale slowly with sound funda-mentals and strong business models. In other words, startups that can survive anything.

India’s largest unicorns, Flipkart and Snapdeal, have struggled in recent times to raise funding at their high valu-ations. “It is not about lack of money but whether these com-panies are ready for lower valu-ation. Otherwise, you should grow your revenues to match your valuation,” says Mohan Kumar, director, Norwest Ven-ture Partners.

Most investors say sectors like education and healthcare will provide sustainable mod-els and create lasting compa-nies even if these industries do not spawn unicorns. Serial

entrepreneur K Ganesh, an early investor in Bigbasket and Portea, says: “Unicorn is a status valuation but educa-tion and healthcare are ever-green sectors, apart from be-ing recession proof.”

The consensus in the start-up ecosystem is that many software as a service (SaaS) companies will survive down-turns. “If they raise funds, they will grow faster, but even if they don’t, they will contin-ue to create value,” says angel investor Sunil Kalra, adding that companies building strong intellectual property will turn valuable when people figure out how to monetize them.

Sharad Sharma, an angel investor and co-founder of software product think tank iSpirt, says that companies focusing on serving rural/semi-urban, poor and lower middle class groups will be sustainable businesses.

Kumar Shiralagi, manag-ing director at Kalaari Capi-tal, says it is wise for all companies to hunker down until money becomes avail-able. His question: “In the end, can a cockroach turn into a unicorn?”

IT’S COCKROACHVS UNICORN

Investors Are Looking For Startups That Can Survive Anything, Much Like Roaches, Rather Than Those With Mythical Valuations

EUREKA MOMENTS

I t was her job that inspired IIM-A alumnus Falguni Nayyar to start her own company. During the 20 years she spent as an

investment banker at Kotak Mahindra, she helped countless companies start from scratch and grow to the IPO stage. So, she wanted to experience entrepreneurship for herself. During her many visits to the US, Nayyar would buy Sephora products, a popular UK makeup brand, and wished it was available in India. With an idea, and her children off to college, “it was the perfect time to start up”. She founded Nykaa, as an online multi-brand retail store for cosmet-ics in 2011. “My friends in the US shopped online for various rea-sons — some didn’t have time, some were cost conscious, oth-ers wanted the best products. So, I believed a website was the best bet,” she says. With a team of 200 and `80 crore in funding, Nykaa gets 5 million visitors a month, she says.

V iswanath Ramachandran calls himself an “experienced entrepreneur”, having eight years in Silicon Valley and

with two startups under his belt. After graduat-ing from IIT-Bombay and getting a PhD from Brown University in the US, he started his own company Webaroo (later GupShup) in 2004 to

solve web search problems for mobile. When he decided to start his second company in 2012,

his inspiration wasn’t too far away — it was in his wife’s closet. “My wife loves to shop and I realized her closet was a discovery

engine for fashion for her friends. There was a shoe to go with each dress, and it made them really happy,” he says. Keeping that in mind, he started Hip-

pily as a shopping app for customers to discover fashion in 2013. It recently raised $250,000 in seed funding. “We match each person’s personal style and try to make them live hippily ever after,” he says.

HELPING STARTUPS AS AN INVESTMENT BANKER MADE ME WANT TO GO IT ALONE

MY WIFE’S CUPBOARD FULL OF SHOES AND CLOTHES WAS MY INSPIRATION

HIPPILY EVER AFTER: VISWANATH RAMACHANDRAN

BUSINESS WITHOUT A BLEMISH: FALGUNI NAYAR

FOUNDERS | Girish Mathrubootham & Shan Krishnasamy (2010)

FUNDING | $94 million from Accel Partners, Tiger Global and Google Capital

WHAT MAKES IT A COCKROACH | When Accel Partners represented by Shekhar Kirani first visited the Freshdesk office in Chennai, the startup was in a non-descript suburb in a small office with mixed furniture but all employees had Macs. At that moment, Shekhar knew Freshdesk had its priorities right and would spend on the right things.

TURNING POINT | The $5 million round in January 2012 from Lee Fixel (Tiger Global) just a few months after it closed a $1M round. Suddenly Freshdesk’s biggest constraint was not at all a constraint. Most of the money was spent on hiring and building the product. In 2012 when they could not afford to pay a lot and did not have the brand value they enjoy now, Freshdesk did not compete with other startups rushing to IITs and IIMs. Instead, they hired talented freshers from other colleges and Girish proudly says it has all worked out great.

DAILYHUNT | Aggregates content from 100 news sources

FOUNDER | Virendra Gupta (2007)

FUNDING | $58 million from Falcon Edge, Omdiyar, Matrix Partners and Sequoia Capital

WHAT MAKES IT A COCKROACH | Activating business in an area which is difficult while being capital efficient. Dailyhunt has healthy revenue and is growing 100% year-on-year. With a good audience engagement, experts

think Dailyhunt can ride the wave smoothly without any falls.

TURNING POINT | It focused on small towns. More than 95% of Dailyhunt’s news is in 12 local languages. At a time when the top 10 daily papers have 24 million readers, it has 26 million readers, and readership is increasing by 2 million every month

MSWIPE | Mobile point of sale solution provider used for card payments, works with smartphones, tablets

FOUNDER | Manish Patel (2012)

FUNDING | In June 2015, it raised $25 million, the biggest round so far, from US hedge fund Falcon Edge Capital, investment company Meru Capital and ride hailing app Ola

WHAT MAKES IT A COCKROACH | Ability to survive without any capital infusion. Mswipe places importance on unit economics

and has made sure that services are profitable at every level. According to investors, it has taken pains to build the foundation for a long-term business with a clear model,

equal focus on investment, capex and revenues.

TURNING POINT |Patel says Mswipe stayed away from the

over-inflated wages that were being paid in

the startup world. It took them longer to find like-minded people but it helped the company grow in the long run. Mswipe looks to break even this financial year.

E2E NETWORKS | Infrastructure as a service

FOUNDERS | Tarun Dua and Mohamed Imran (2009)

FUNDING | $500,000 in equity from Blume Ventures, family, friends, $1 million debt from SIDBI, Intellegrow, Bajaj Finance

WHAT MAKES IT A COCKROACH | “For the first four years, we worked with less than $100,000 by being super-frugal and ploughing every penny earned back into revenue growth,” says Dua. He

stresses on a non-negotiable focus on unit economics and strong customer orientation. “E2E has proven it can build a $4 million biz simply by bootstrapping with $250,000 of

equity and leveraging it with debt, which is the right way to scale,” said Karthik Reddy of Blume Ventures.

TURNING POINT:“When our largest data

centre partner (Tulip) died due to its financial woes, we migrated our servers to our current partner (Netmagic) with our customer base entirely intact,” Dua says.

KWENCH | Provides em-ployee engagement solutions, including an online library

FOUNDERS | Sunder Nookala, Krishnan Madhabhushi, Mitesh Damania and Prashant John (2008)

FUNDING | 5crore from angel investors

WHAT MAKES IT A COCKROACH |“The solid founding team has survived the worst and built a robust business without wasting any money or time and are growing quarter on quarter. They serve a large market and have never lost a customer,” says Sunil Kalra, one of the investors. Kwench’s clients include Nestle, Citibank, HCL, Godrej and Hindustan Unilever.

TURNING POINT: Nookala met VC investors in 2011, and returned empty-handed. Undeterred, he went to Sidbi, a government bank that lends to small and medium businesses, and got a loan.

The company has enough money now to buyback the shares of angel investors who want to stay put. “We plan to explore the overseas market if we take VC money,” says Nookala, who aims to touch turnover of `100 crore next fiscal.

FRESHDESKCloud-based customer support platform for 70,000 customers worldwide

K Ganesh, Sunil Kalra, Karan Mohla, Mohandas Pai, Shailendra Singh, Vikram Vaidyanathan, Mohan Kumar, Sharad Sharma, Rajesh Sawhney, Karthik ReddyEXPERTS WHO HELPED PICK THE SAMPLE

THREADSOL | Owns Intel-loCut, material planning and optimi-sation software for garment industry

FOUNDERS | Manasij Ganguli, Mausmi Ambastha, Abhishek Srivastava & Bratish Goswami (2012)

FUNDING | $200,000 from Blume Ventures and angel investors in 2014

WHAT MAKES IT A COCKROACH |“Threadsol ensured this with multiple products for our customers in 12 countries. We were profitable from the first quarter,” says

Ambastha. Karthik Reddy of Blume Ventures adds: “We’ve been witness to the power of a great product-market fit and a passionate founding team that can build with little.”

TURNING POINT | They focused on mature garment markets such as Sri Lanka, Bangladesh and Turkey. “Penetrating the Indian market was difficult and global markets were receptive,” says Ambastha. “We have shown that building a cross-border enterprise SaaS business with barely any capital is possible.”

CAPILLARY TECHNOLOGIES |Helps retailers with solu-tions to increase same store sales

FOUNDERS | Aneesh Reddy and Krishna Mehra (2008)

FUNDING | $79 million from investors, including Sequoia Capital and Norwest Venture Partners

WHAT MAKES IT A COCKROACH | Capillary was founded in the middle of the 2008 slowdown and so Reddy and Mehra focused on sustainability from Day 1. Reddy says that the best part about the company is that it got more clients during the slowdown. “The product is a painkiller and not a vitamin. Being an enterprise software product, the margins are high and we are growing at 80%

year on year,” he says

TURNING POINT | When Capillary found that western markets were very competitive, it shut operations in those countries and focused on Asian markets instead. It plans to go for an IPO in three years when revenues are expected to touch $100 million. “They never had to discount or burn cash. Their unit economics were always positive,” says Mohan Kumar, director at Norwest Venture Partners

Anand J & Sujit John | TNN

Within months of retir-ing from Infosys in 2014, co-founders Kris Gopalakrishnan and S

D Shibulal got together again to found a startup accelerator, Axilor. Shibulal talks about the inspiration for the venture and the challenges of Indian entrepreneurship.

You and Kris could have chosen to be angel investors, but you preferred to start an accelerator programme…India is in the early stage of entre-preneurial development. The num-ber of people who have gone through this journey are few. Kris and I have built scale and know how to do it. We also realized that we need to support bottom-of-the-pyr-amid startups, lest the quality of the pipeline gets choked. A diverse set of experiences is required to help these startups grow and im-prove the odds of success. Most people fail during the first 24 months. That’s when mentorship is most required. This is why we thought we should be an institu-tional angel helping startups through this period.

You have a special focus on education and healthcare...What Kumari (his wife) and I have learnt is that the only way to change one’s life is through education. We grew up in small towns. My wife was the first one from her village to go to college. So when we want to transform lives, we believe that (education) is the way. Many of the children we have supported

(through their NGO) have gone on to get higher education. My father was a doctor. He wanted me to be a doctor. So it has been a subject close to my heart and this is an opportu-nity to work in the sector.

Axilor is planning targeted innovation initiatives, and you’ve started one for diabetes. What’s the objective?There are a lot of healthcare issues in our country, including affordabil-ity and access. The number of start-ups outside of aggregation or dis-covery in healthcare is minimal. You need scientists, who usually have ideas to start up, but would not because of capital access issues. VCs are not interested in this space. These are long gestation projects and need for lots of capital. You have to train scientists to think like entrepreneurs. So we think this requires attention. If we support a good number of initiatives, a few may emerge as breakthrough in-novations. There’s a science to bringing an idea out of universi-ties/labs to market and making it big. We decided to start with diabe-tes because it is reaching epidemic proportions.

What are some of the other challenges in entrepreneurship?I see three major challenges. One is the need for simplification. En-trepreneurship is all about ex-perimentation and many ideas may fail. So starting a venture and shutting it down must be simple. But in our country, there’s still a lot of friction in this space. The second is that for a country of our

size, we need diversification. The number of applications to our ac-celerator has gone up from 80 in the first batch to 170 in the second batch to 240 in the third. But majority of them tend to be in the e-commerce and online consumer internet space. We have enormous require-ments in healthcare, education, clean technology. Those are not showing up, and that’s the reason for our targeted initiatives. The

third is institutionalization which I talked about earlier. On our own, we can support only so many found-ers. But if we can institutionalize support, it can have a multiplier effect. We like to think of ourselves as a new-age institutional angel.

Compared to the time when you started Infosys or even a decade ago, are founders complacent about money?Our model is built on capital being a constraint and not a replacement for customers. We focus on the burn rate and how long cash will last. We help to them focus, advise on re-cruitment — one wrong recruit-ment can turn out to be expensive.

Do founders come with the attitude of making money through exits?It is not a bad thing. We also want exits. We know a 22-year-old who is doing his third startup now. He failed and lost money in the first, made good money in the second. Think of the experience he brings to the table at his age; in that short

period, he gets the wisdom of 20 years in a corporate.

There’s a science to bringing ideas out of universities, making them big

Dairies decide to milk online demand for organic produce

S tanding in the basement of a meatpack-ing plant in Chicago, a 35-year-old start-up founder named Travis Pyykkonen

conjured up a wholesome vision that was al-most bucolic. In one corner, he imagined a milk bar where customers could add banana-almond butter to fresh milk pasteurized on site. Over by some filing cabinets, he saw a case for yogurt parfaits and house-made ice creams. “We’re a microdairy. Like a microbrewery.” His com-pany, 1871 Dairy, supplies grass-fed cow’s milk to Chicago’s top restaurants.

Add milk to the long list of traditional foods that are being rediscovered by young entrepre-neurs and reintroduced in small-batch — and often high-priced — form. The advent of high-end milk is about more than just a fashionable business venture. As low milk prices leave many mom-and-pop farmers struggling, some are choosing to ride the wave of new food awareness. They are eschewing the traditional model of selling to commercial processors, instead bottling their own milk, ice cream and yogurt and selling directly to customers. They are heralding the ways it may be different from conventional milk — whether unhomogenized, organic, from grass-fed cows or locally pro-duced. Many restaurant menus cite the prov-enance of their dairy products in the same way they boast of grass-fed rib-eyes and hydro-ponic tomatoes. And consumers are willing to spend more for boutique milk at farmers’ mar-kets and upscale grocers. At Whole Foods Mar-kets, sales of grass-fed cow’s milk have experi-enced “high double-digit growth during the past two years and will likely increase in 2016,” said Julie Blubaugh, manager of local prod-ucts. But those who attest to the small dairies’ new popularity say a key factor is nostalgia. Manhattan Milk, a small distributor in New York City, evokes the days of the milkman, de-livering glass bottles of grass-fed, organic milk.

In the same way that chefs have leveraged television and social media, Pyykkonen hopes dairy farmers and milk processors can become well-known brands — or at least less anony-mous. NYT

S D SHIBULAL, 61Founder: Axilor startup accelerator

Axilor has supported 24 startups; 17% of

entrepreneurs are women

Past experience: One of the seven co-founders of Infosys; was MD & CEO of Infosys

from April 2011 to July 2014

ON OUR OWN, WE CAN SUPPORT ONLY SO MANY

FOUNDERS. BUT IF WE CAN INSTITUTIONALIZE SUPPORT, IT CAN HAVE A MULTIPLIER EFFECT. WE LIKE TO THINK OF OURSELVES AS A NEW-AGE INSTITUTIONAL ANGEL

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SUNDAY TIMES OF INDIA, NEW DELHIAPRIL 17, 201620