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funding your start up #startup
Recruiting Freshers with Greymeter
Dear budding entrepreneur, have you ever tried to recruit freshen If you haven't, we'd like to share the experience of a young HR executive from a software company. Incidentally, it could easily be a company in a different field-we've just raken software as an example. And let's assume that she has 400 résumés, from which she needs to recruit twenty programmers. First of all, she needs to figure out which of these candidates to shortlist for the preliminary interview. The question is, by looking at the résumés, how do you figure out who the good programmers are? Are they the ones with the best grades? Not necessarily. Are they the ones who have done the largest number of software projects? Once again, not necessarily. So what is the criteria for shortlisting these youngsters?
Tough question, isn't it? And it becomes even tougher when you extend the logic to jobs in sales or operations, or other such jobs that do not require any academic inputs. Now, our young friend would obviously not want to miss out on good candidates, so she plays it safe and shortlists 200--the ones with the best grades.Was that the right decision? We don't know, but let's take the story further. These 200 candidates will now need to go through a preliminary interview. Assuming half an hour per interview, that makes it a hundred hours, or about fifteen days spent by perhaps two people one from HR and one with a technical background. And what have we got at the end of this process? Further shortlisted candidates who still need to go through a couple of more rounds What a criminal waste of time!
Ladies and gentlemen, with this build-up you begin to realize what. Aman Garg was thinking when he launched Greymeter. Aman realized that this was a major problem most recruiters faced, which naturally meant that it was a major opportunity. What if he were to test the programming skills of freshers, before putting them up to companies for recruitment? What a tremendous saving of time it would be! And surely companies would be willing to pay him for this service.
The more Aman thought about it, the more he warmed to the idea. This was brilliant. He could actually test skill levels in different programming languages such as Java, C++ and Python. And then recruiters would get candidates with skills in whichever language they wanted. In fact, he could go far beyond programming. He could check out written as well as verbal communication levels for companies wanting these skills perhaps for their sales or customer support executives. He could also ask freshers wanting a sales executive's job to conduct a short market survey, based on which he could shortlist them. Aman began to think big. He saw himself as the pioneer in entry-level recruitment in the country. He could even recruitm go international. Companies would be queuing up for his services He even figured out which five-star hotel he would have his office in. The dream became more and more real
And then he came down to earth. First of all, he needed partners. For which he spoke to four of his classmates from college. Fortunately, they were equally excited. So with a lot of fanfare, including the inevitable guzzling of beer accompanied by a combination of chicken and paneer tikkas, Greymeter was born.The Next Steps
The first thing to do was to figure out how they would test skill levels. The founders were clear that they were in an online business that was the only way in which they could scale up rapidly, even into towns where they did not exist. Now checking a candidate's programming skills was relatively easy. They simply put up short programming assignments on their portal and asked him to write programs for them. And, at least initially, the grading would be done by one of the Greymeter team members. However, over time, in the interest of scalability, they would need to get freelancers to do the grading and get paid on actuals. After all, they couldn't have such a large number of permanent employees-the fixed costs would be just too high.
And then there was the issue of checking communication skills. Written communication was relatively easy-the candidate would be asked to write a passage on some topic and this would once again be graded by a freelancer. Verbal communication was a bit tougher, but even this was possible by getting the candidate to record a video on some given topic and upload it. And so on...
Now, at this stage, Aman and his co-founders took a very sensible decision. They applied to an accelerator in Gurgaon and were accepted. Which meant that they were able to get some basic level funding, as well as mentoring. And, most importantly, they got contacts in companies that could be tapped for recruitment.
With this money, the five young men got down to creating a database of assignments. The idea was to let the candidates work on these assignments, depending on their area of interest. They searched all over the Internet and, wherever necessary, created their own. Now, at this stage, something really interesting happened. so please read carefully. Gradually, a new idea began to take shapein their collective heads. Why should they restrict themselves only to testing candidates for selection? Why not use these assignments to get them to actually build their skills, so that their chances of selection improved? The more the young men thought about it, the more excited they became. And therefore, even before the launch of Greymeter, the next version was born. They would not only help in shortlisting candidates, but also help them improve their skills by getting them to go through multiple assignments. They also decided on an interesting name for these assignments-they called them micro-internships'. After all, if a candidate's résumé were to say that he had worked on several micro-internships, it would sound impressive, wouldn't it?
The next step was to figure out how to reach out to potential freshers. Advertising, even on the Internet, would be frightfully expensive. But our young friends realized that students in colleges whether in their final year or even earlier-would be far easier and cheaper to reach. All they needed to do was approach the placement cell of each college. And that worked brilliantly. Both the officials as well as the students running this cell were delighted to partner with Greymeter. Anything to help their students get placements. Of course, our founders did not go to A-grade colleges such as the IITs. Instead, they went to the next-level college campuses- both engineering as well as non-engineering. They had rightly figured out that these were the colleges where placement would be an issue and. therefore, students here would be more receptive to the idea.
And then they had another bright idea (this one was over chhola bhatura at a local halwai-it was strange how digestive juices sharpened their thinking faculties, don't you think?). They realized that it was important to get students to register themselves on the Greymeter website. However, it was equally important for them to attempt the micro-internships, so that they could be rated on specific
skills, as well as help the candidates improve upon them. Now, dear reader, we'd like to ask you one question, and the least we expect is an honest answer. What did you focus on duringyour college days? Was it academics? Come on, be truthful. Or was it girlfriends or boyfriends? Was it music clubs, cricket and generally loitering around in the college cafeteria, chilling? If you happened to be in the latter category, you were probably part of 95 per cent of humanity the sensible part, of course. Now what would you have done if someone told you they could help you improve your skill to make you more job-ready? Would you immediately dump your guitar and girlfriend, and frantically start working on micro-internships?
Come on. What a silly question. Obviously not. So you can see the problem our young founders faced. They could not get students to work on improving their skills. But they were smart and had a solution ready. They decided to gamify the whole process. A kind of loyalty programme was introduced. Every time a student attempted a micro-internship, he would earn a few 'Grey coins'. If he did well, he would get more Grey coins. And this 'virtual currency would keep getting accumulated. At any stage, the student could exchange his accumulated Grey coins for goodies such as phone covers or key chains, or if they had earned enough, even things such as footballs and table tennis bats. Great idea, wasn't it? Entice students into doing more and more micro-internships, and get them to win attractive prizes.
One minor detail. What was their revenue model? After all, it was a business, not philanthropy. Simple-charge the companies for each actual recruitment. And for the students it was absolutely free. Similar to the revenue model followed by most placement consultants. In fact, they also tied up with some placement consultants on a fe sharing basis to make their database of students available for potential recruitment.
By now, the excitement had reached fever pitch. The Greymeter website was created and launched with a lot of fanfare. And our young founders started fanning out and visiting colleges. The idea was cool and they were able to partner with ten colleges in and around Delhi alone. In parallel, two of the founders also began tochuse companies that planned to recruit freshers. They even started an e-mail campaign where they would send an appropriate mail to the HR department of companies. And the students started pouring in Gradually, Greymeter built up a sizeable database of around 50,000 students. And looking at this large student base, recruiters started showing interest. Things were definitely looking up.
But of course, they now reached the inevitable roadblock. The funding they had got from the accelerator ran out. And they needed more. Much more. So they approached angel investors....
The Pitch and After
The angels around the table were impressed. These young men had latched on to something big. This was a problem waiting to be solved. Many of the investors had themselves wasted huge amounts of time in shortlisting students for recruitment, and they fully appreciated the problem. They also realized that students from second- and third-rung colleges found it extremely difficult to get jobs. This was an idea waiting to explode, and Greymeter could be a market leader in the space.
They also realized a couple of other things. This was a business that had a potentially strong entry barrier. The addition of more and more micro-internships would create a large bank, and any new entrant would need to match it. Further, given the power of social media, the Greymeter brand could actually spread like wildfire among young people.
They were also extremely impressed with Aman, who was the CEO, His enthusiasm was infectious, and he was obviously both passionate and persuasive. Most of all, the angels were impressed with his vision. The only niggling worry was that revenues had barely started coming in. But given the positives, it seemed only a matter of time. And so the investors made up their minds. This was a great opportunity and they were going to fund it. Mentally, they started figuring out which foreign holiday to postpone to raise money...As you can imagine, Greymeter was able to raise a amount of funding from the angels, as well as a couple of micro VC funds-over a crore, in fact. Using this money, they recruited additional people to take care of sales to companies, as well as one person whose job was to add more campuses. They also recruited software developers to enhance their website. And finally, they added a couple of people to create-or search for-more and more micro internships. Of course, some of the funding was also required for operational expenses such as travel. decent
Interestingly, their network of campuses grew rapidly and reached a figure of thirty. Consequently, the students in their database also grew to a healthy 1.5 lakh in just over a year. So numbers did not seem to be an issue. There were, however, two issues that t company faced-interesting from our point of view but extremely frustrating from the point of view of the founders. First of all, they realized that the mass recruiters of freshers were mainly the large and medium-size software companies. And they found perhaps too late that these companies wanted bright young people but didn't really care too much about their skill levels. Because they would put these youngsters through four- to six-month-long training programmes, where they would pick up all the skills required for the job. And therefore they were not willing to pay for the candidates they had recruited through Greymeter. In other words, Greymeter was left with the smaller companies that did not have the ability to train people not as big a market as they had earlier thought. And. of course, scaling up within such a fragmented market was going to be tough.
Secondly, they found that students were quite happy to register on their site but were unwilling to go through the micro internships those wonderful micro-internships that our young founders had put together with so much love and affection. And this, in spite of the attractive Grey coins they could earn. Quite naturally, the founders were perplexed. Here were students who were unlikely to get placed at the end of their degrees. All they haddo was my out a few micro-internships, and their chances of ing a job would improve. But no, they wouldn't. Some of them y out a couple of the micro-internships, but that was it. Not gh to rate them on those skills, and certainly not enough to improve their skill levels. The Greymeter team coaxed and cajoled the students, they sent e-mails that upped the goodies that they ald buy with the Grey coins, but the students stubbornly refused me the line. As a consequence, there weren't enough students to place and the expected revenues did not come in. In other words, even within the smaller market they found themselves in, they arald not grow.
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ily and hat the In life and in business, there are times when you really don't know what's going on. And this was certainly one of them. Till nd, the founders are not quite sure what went wrong with their idea. The most plausible explanation was what we have abad mentioned earlier in this story. Namely that these students were more keen on enjoying their college life rather than pursuing an. If this were true, it actually suggested an interesting pivot to the business model. Remember, placement was extremely tough for these students. Now, as students, they probably didn't care, hur once they passed out, pressure would build on them. Starting, of course, with their family. 'Ladka kuchh nahin kar raha hai? Abhi tak naukri nahin mili? (You mean your son is doing nothing? Hain't he got a job yet?) Tch, tch.' You can, of course, imagine the rest. For girls the problem was likely to be somewhat different. Shaadi kara do ji (Get her married)' is what the aunts were likely to say. And once the pressure built up, the young students actually ex-students now-would be likely to become more and more desperate for jobs. And this was where Greymeter could be the saviour!
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So what should the founders have done? Probably onboarded mtudents when they were students, and kept them engaged with other exciting activities such as games, chats and other interesting titbits. They could have focused on jobs and skills, only after these studentshad passed out of college, when their neighbours tongues began to wag. That's the time when these youngsters would be more likely to attempt the micro-internships and, therefore, get ready for the job market. Yes, it would not be as huge a business as they had earlier thought, but it could certainly have become a viable one.
However, this also meant that the company needed to survive for some more time without any revenue. Already their funds had come down to rock bottom, and, without revenues, investors wete not willing to put in more funds. And so our young friends decided with a heavy heart to shut down the business and distribute whateve meagre funds were left to their existing investors. A sad end to a very promising story!
Shut the company they did, but you can imagine the terrific learning our young friends took away from this experience. It's good idea to see what Aman has to say on the subject:
One of our biggest learnings has been that we need to understand the thinking of investors what they are looking for and what their objectives and time frames are. These must align with the business. We realized that most investors look for three things:
a) Are you solving a real problem?
b) Is there a large enough market size? c) Can you scale up rapidly within this market size and give
us an exit?
In our case, we realized that the market size was large but not really huge, because the mass recruiters-typically the large IT companies were not looking for too many skills in the freshers they took in. Therefore, they were unwilling to pay. Secondly, the students we were targeting were not willing to put in the effort, so even within the smaller recruiter community, we were unable to grow.To summarize, our venture did not provide either the i huge market size or the rapid scaling that our investors wanted. And my sincere advice to anyone building a start-up is. Do your market research before you launch, and definitely before you go to your investors.
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Yo the company did close down, but based on their learning in Greymeret, all the founders are now doing well in their respective Selds. For instance, our friend Aman has started a new venture called Fruitish. Essentially a branded chain of outlets for hygienic and healthy drinks-fruit juice, shakes, mocktails and the like. It's very popular-we have been there ourselves and tried out his offerings. It's not a huge business and therefore he doesn't need investors, at least as of now but it is profitable. At this point, he has outlets in Noida and Gurgaon, but we're sure he will come to your city some day. We strongly believe that he will make a success of this venture. And as angels, we would be happy to invest in him once again. Wouldn't you?
Analysis
This was the story of a start-up that had many things going for it. There was most certainly a PROBLEM waiting to be solved and recruiters were likely to pay for it. The SIZE OF THE MARKET was huge-after all, just imagine the number of youngsters entering the job market every year. SCALABILITY was not an issue, since everything was online. The founders definitely had and INNOVATIVE solution to the placement problem. Further, a largel bank of micro-internships would provide the much-needed ENTRY BARRIER. And the TEAM was headed by a founder who was pushy, dear-headed and enthusiastic. After all, what more could investors
expect from a start-up? But no-things clearly didn't work out. Simply because students were not willing to put in the effort required to build upor even check out their skills. In hindsight, this was the big RISK in the entire project, but only in hindsight. Initially no one could eve have imagined that students would have this kind of attitude. And where did this show up? In the TRACTION, of course! Or rather, the lack of it. And therefore, in the lack of a proven EARNINGS MODEL. The investors got caught up in the excitement of a grex business idea and ignored this extremely important issue. Of course, they also learnt in the process, and are now far more careful. We doubt if they will invest in any start-up without seeing sufficient TRACTION first.
The Impact of the Coronavirus or Any Other Crisis
Now this is really interesting. You would know that the COVID-19 crisis has had a major negative impact on several industries. And therefore on the number of jobs in these industries. Which mean that the number of candidates competing for the same job goes up And that means...
That's right. Candidates need to enhance their skill levels to increase their chances of getting a job. But isn't that exactly what Greymeter was doing? Further, education and training are going increasingly online in today's world. Once again, that's what Greymeter did. In other words, had Greymeter been launched in the post-COVID-19 world, it could potentially have boomed.
Now can you smell an opportunity here? Of course you can. If your start-up is doing anything in the area of skill enhancement or placement, you are in great shape. And if you're doing this online, so much the better. Investors are on the lookout for such start-ups and funding is going to be a lot easier. Remember, my friend, every crisis brings along its share of opportunities. And it's up to you to grabLet's Meet Deep Kalra, Founder and Executive Chairman, MakeMy Trip
Who hasn't heard of MakeMyTrip? The famous market leader in anything to do with travel-whether it is booking flights, hotels taxis, buses or just about anything else. And its equally well-known founder and Executive Chairman, Deep Kalra. Deep has successfully built a travel juggernaut and listed it on the prestigious NASDAQ stock exchange. When we requested Deep to share his experiences for the benefit of the readers of this book, he was more than willing And this is what he had say:
To be a successful entrepreneur, you must have a good idea. An idea that solves the customer's pain point and not just something that is nice to have. "Be an Anacin and not a vitamin for the customer. However, a good idea is definitely not the end of the story. Please remember, most good ideas are not new. The have probably occurred to people, and most of them have been converted into businesses. So you've got to figure out how you can do it better than the others. And at scale. And that is what investors look for a good idea that solves the customer's pain point, does it better than competitors and is able to scale up.And now the next question-do you really need funding? Fist of all, if you are developing a product, you definitely need funding, because your revenue will kick in only after the product is ready. If you are in a digital B2C business, you certainly do. Because you need to build your brand quickly, and for that you need money. Very few companies can build such a brand without money. On the other hand, if you are in a B2B business, you may be able to delay the funding, because these businesses depend on good old sales. One caveat--even in a B2B business, you may still require finding to get working capital. Because B2B sales cycles are typically long, and even after you have made the sale, your receivables are likely to be high. But, in a case, try and ger funding from your friends and family first because they will not impose the stringent terms and conditions that external investors will.
Okay, so you've got funding from friends and family, and you've stretched it as far as you could. And now you need to go to external investors. The fundamental issue you must understand ir What do investors look for in an entrepreneur? First of all, conviction in the business is critical. The founder may not give out the magic sauce as yet-after all, he is probably talking to multiple investors and doesn't know who will ultimately come on board. But he himself must carry that conviction. Flexibility is also important-most start-ups will need to pivot several times in their lifetime, and smart entrepreneurs have the ability to pivot.
And now the same question in reverse: What should you at the entrepreneur look for in investors before you take their money? Please remember, who you get the money from is as important if not more than the actual money. After all, you don't want the investor to be breathing down your neck all the time asking for an exit, do you? So look for investors for whom this is 'play money'. In other words, money that hasbeen written off, where he is willing to take a risk and doesn' espect quick returns
So how do you start? Let me give you a suggested proces First of all, write a document about your business. Not a PPT a detailed document of perhaps six to eight pages. you can write this, you have a concept. This, by the way, is your teaser or the trailer of your movie, if you prefer. Get your friends or family to read it. Does it excite them? If it doesn't you probably need to go back to the drawing board. But if it does, go in for the next step-which is to make an hone plan. I say honest because far too many entrepreneurs make grand plans that even they do not feel they can achieve. Again, share this plan with your family and friends, and try and gr them break it. you get through this round, create a longer, more detailed version. Finally, you get down to the actual presentation. Make your PPT, record your talk and play it back. Perhaps share it with friends. You will be surprised at how bad it is the first time. Ask for candid feedback, and keep on modifying it till you are satisfied.
Remember, fundraising is a time-consuming process-and it takes your focus away from growing your business. In the early rounds, you would be going to angels and angel networks But in the later rounds, when you need to go to VCs, try and go to those where the likelihood of getting money is higher. Or engage an adviser or investment banker. They will do the first level of selling for you, and incidentally they have great contacts. They will also get honest answers from VCs, which you, as the entrepreneur, might not-and that can help you significantly. And finally, they do a great job of 'dressing up the bride. Let them take their 3 per cent-believe me, it's worth it to get the balance 97 per cent.
One last piece of advice. Building a company demands patience. You will often be in tough, frustrating situations. Remember, it takes at least five-six years to build yourcompany, and maybe ten years for it to become really solid.. It is certainly not an overnight affair. So my advice to all would-be entrepreneurs is: Just hang in there. Be patient and keep focusing on the business, and you'll be able to live through the ups and downs. Just remember, don't focus on becoming a unicorn-focus on your business. Valuations will happen. So all the best to all budding entrepreneurs reading this book.
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