Chayanika Sen – Dutch Uncles

How Investors Read Your Financial Statements, And Why Should You Master Them for Successful Fundraising?

Chayanika Sen — Fri, 02 Jul 2021 14:16:20 +0000

Starting up a business is not easy. And with limited resources and budget, you need to wear several hats throughout the day. You need to manage the day-to-day operations, admin tasks, marketing your products, manage sales, and keep a tab on your finances. As a new business owner, you might not be familiar with keeping accounts of your financial statements. While hiring a professional accountant is always a great idea, it is not so difficult to do it on your own in the initial days. No matter what, remember that you need to keep your accounts clean. The key is to keep accounts of every transaction you made, not just for you to know how your business is performing, but in the long run, if you need to raise funds for the growth of your business, that’s what the investors are going to look at. So, make it a habit of keeping track of your financial records from Day 1. Maintaining proper financial records also ensures that you are compliant with statutory compliance. It enables you to create budgets, financial projections, and better investment decisions.

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The key is to keep accounts of every transaction you made, not just for you to know how your business is performing, but in the long run, if you need to raise funds for the growth of your business, that’s what the investors are going to look at.

How to master creating financial statements that investors will love:

Start with a business bank account:

No matter how small your business is, always maintain a separate financial record for your business and don’t mix it with your accounts. Establishing a business bank account is a good idea that allows you to keep track of all your business transactions. So, if you’re setting up a business, have a separate bank account for your business as a rule of thumb.

Avoid cash transactions:

Cash transactions may seem to be convenient, especially for small amounts like a food bill or a travel expense for business, but it makes it challenging to keep a tab on the financial transactions of your business. When you deal with cash, you tend to forget the transaction and thus miss out on entering it in your logbook later. Instead, it is recommended to use business credit or debit cards to do any financial transaction. This way, you will have a record trail, and everything will go into your audit book. When you use cash, you could also potentially miss out on taking advantage of write-offs since there won’t be any documentation of the transaction. If there is no other way to deal with a particular transaction other than using cash, use an ATM card to withdraw money, and make a note on the receipt with the purpose of the withdrawal. That way, you will always have a record, and you can put it up in your record book. Needless to say, your future investors will love it when they see how meticulously you have recorded all the data from day 1.

Invest in good accounting software:

At the beginning of your business, you might be sceptical about making investments, but investing in good accounting software is something you would like to ponder. Accounting software can help you access your accounting information anywhere if you have an internet connection. This makes it easier to access your files if you are hiring an accountant. Additionally, accounting software comes with cloud storage, so you don’t need to maintain physical files and tons of paper. An online program will continually back up your files on the cloud as you progress. However, it is recommended that you still maintain a hard copy of all the files, just in case there is an emergency.

Have a schedule:

Managing an account is a time taking task. And you need to be regular and consistent to have your financial statements clean. Thus, it makes a lot of sense to maintain a schedule or a routine to manage your books. For example, the first hour of the morning can be an excellent time to update your accounts when your mind is fresh. Having a schedule makes it easier for you to be consistent and stay on top of things. Your future investors will acknowledge and admire this habit because they know that the amount you are fundraising would have clear spending records. Letting your expenses pile up can become challenging when you have to do year-end tax planning. Also, keep a tab on important deadlines like VAT, insurance premium payment, corporation tax, etc., because late payment can attract heavy penalties, something your future investors wouldn’t like to see on your financial statements. When you keep accounts up-to-date, you will know what you owe and what you need to pay. So, it would be easier to keep track of all your dues.

Leverage the power of data:

Keeping a tab on all your financial records is not just to impress your investors or understand your revenue. An up-to-date financial statement can give you a lot of useful insights if you’re paying close attention to it. The real advantage of maintaining an account record is much more than that. It can give you real insights into how much revenue you are making and how much you are losing, and where your business is going. Accordingly, it can help you tweak your model. And your investors will definitely acknowledge it when they invest in your company.

Training helps:

If you are a first-time business owner, training will help master your financial statement. In your early days, it is worth investing in training so that you can make the most of your accounting software. While most people think that the software can do everything, well, you need the knowledge to operate it to reap maximum benefits.

Ask for help:

Accounting and maintaining books is no easy job. It is not uncommon to feel overwhelmed, especially when you are managing the entire business operations on your own. Reaching out for help from professionals at early stages will always save you from later troubles.

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It is essential that you keep your financial statements clean and up-to-date from the first day of your business.

Being at par with your tax obligations:

One thing that your future investors would like to see in your financial statement is your tax obligations. This is no brainer that you need to be clear on your debts if you have future plans to fundraise. No one would like to spend money on a business that has bad credits. So be sure to meet all your tax obligations and file your tax returns regularly. Avoid paying penalties for late payment fees. Keep records of all the tax returns. If you have employees on your payroll, you will need to enroll for payroll tax and remit on a monthly basis. If you are dealing in vatable goods, then ensure to fill your value added tax (VAT) returns too. Having reliable accounting software can be a valuable asset, so consider investing in one. It can help you to streamline and automate the business process.

Reconciling your bank statement:

Matching information on your bank account to the transaction history is one of the most crucial parts of maintaining account records and bookkeeping. Automating the process can fully prove that all income and expenditures are accounted for. For example, accounting software can pull your bank statement and tally it against each of the spending. You can see what has been added and whatnot, so you can amend manually. Making it a practice from your early days will definitely help you to maintain a clear account. And when you reach out to investors for fundraising in the future, this will certainly help you win some brownie points.

Don’t miss out on the invoices:

Late payments can affect your cash flows. You need to spend extra time following up on the payment. So, it is critical that you keep constant vigilance on the invoices and follow up if there is a default. It is also a good idea to add a default fee in case of late payments. You can also take advice from your accountant on how to implement these. Having a late fee attached will ensure you stay on top of payment collection against your invoices.

Apart from keeping your financial records up-to-date, your investors may also want to see some documents to verify. Certain documents that you should maintain a record of include:

Invoices and receipts that you provide and receive for your business and service
Invoices for goods, services, or other business purchases for your business
Bank account and credit card statements
Records of stock purchases at the end of the financial year and asset register
Filing of business tax returns proof
All financial statements related to your business. These may include profit and loss statements, and balance sheets
Records of payments made to employees plus payroll source deductions submitted on behalf of employees

What will investors look into?

Apart from maintaining a detailed record of all your transactions, there are some parameters that investors will check before considering you for giving funds. So, keep a tab on the following while growing your business:

Net profit: Net profit is an important parameter to determine the financial health of a company. Investors pay a lot of attention to this. So, ensure you have a stable profit. Losses can be good if you’re on track to profitability as you grow. Ensure to have a good understanding and vision about our net profit.
Sales: No matter how attractive your business model, the one thing your investor will pay attention to is how much sales you have. So, focus on setting up an exemplary sales record before approaching an investor. Remember, investors also like to see sales growth. Are you showing an upward trend, or the initial excitement is going to fizzle out soon? Clear your grounds before making a pitch.
Cash flow is the king: A sign of sustainable operation is free cash flow or the amount of money left in your account after you meet all the overheads. Investors like to see if you have steady cash flow so that you can invest in new opportunities or fight any unannounced problems.
Break event point: Short-term losses are often acceptable by investors, but they would like to see that they can earn a profit by investing in your company. The break-even point would help them understand that. A break-even point can be a sales target that can help you pay all the overheads and make some profit. A break-even point can also be built on other assumptions like increased production, optimised marketing, economies of scale, etc.

While many other factors that an investor may consider, a strong financial statement will help you earn some extra points. Even if you are not considering approaching an investor at the moment, you may want to reconsider it in the long run when you want to grow your business. So, it is essential that you keep your financial statements clean and up-to-date from the first day of your business.

Expert Connect

Chinmay Ananda
Business Storyteller, Financial Educator Finance Academy
Connect with our expert to analyse your financial statements and evaluate the risks and potential of your business

The post How Investors Read Your Financial Statements, And Why Should You Master Them for Successful Fundraising? appeared first on Dutch Uncles.

What to learn from the financial statements of your competitors?

Chayanika Sen — Fri, 25 Jun 2021 15:02:33 +0000

It’s great that you want to grow your business. But how do you ensure you are on the right path? Probably you have heard the phrase “If you don’t know where you’re going, you might not get there.” Well, it holds true for businesses too. And hence you need to know and learn from your competitor’s financial statements for your own financial benchmarking. As a business, you need to understand where you stand in terms of finances with respect to your competitors. Financial benchmarking can help you set internal goals, find new market opportunities, identify your strength and your competitor’s weakness to shine through. Financial benchmarking has many other benefits too.

Where do you find the financial statements of your competitors?

If you were a large enterprise, it would have been easy and fairly simple. You would hire a consulting firm, subscribe to a huge database, and ask the consulting firm to find the problem, analyse them, and send you a solution.

But as a new business or as a start-up, this is out of the question. It is expensive and most likely out of your budget. So how can you go about digging in such information? Thankfully, there are few inexpensive ways to find this information.

Identify your competitions and gather data. Try to identify companies that are of your size and preferably in your geography.
Choose the right industry that closely represents your business.
Choose the source carefully so that there is a lot of data and not a skew done by a handful of companies.
For sources, check out your industry association. They are the best source for the information you are looking for.
The annual report is another source to dig in information for public companies.
If you have an established banking relationship, your banker can be an invaluable resource to gather inputs about your competitors. A banker looks at ratio analysis data all the time, so they can always share some noteworthy inputs with you.
You may also gather financial statements from companies like Dun & Bradstreet. This company offers individual company data on sales, nature of financing, creditworthiness, balance sheet, income statement, public filings, lawsuits, etc.
You may also seek inputs from your management accountant. They are specialised in this area and are professionally equipped to guide you on improving your ratios and how you can make your business more profitable.

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If you don’t know where you’re going, you might not get there.

Become familiar with reading financial statements

Now that you have gathered the information about your competitors’ financial statements, it is important to learn how to read them. Only when you can make meaningful interpretations and analyse the balance sheets can you significantly learn from it.

However, financial reporting is a complex matter and diverse too. So, here are some tips to get started.

Financial statements are filled with financial jargon. It can be overwhelming to understand everything, but an excellent financial dictionary can help you a lot.
Read the accompanying notes. Every financial statement is provided with some accompanying notes. Pay attention to them to understand the financial statement properly.
The financial statement of a company reflects the company’s financial stability. However, these numbers become easier to understand and more meaningful when you can understand the underlying realities and fundamentals. For example, it is important to understand what the company does, its products, and its business model before you delve into the numbers.
Know that no financial statements are made in a single mold. There are different reporting patterns that each company follows. Also, know that the diverse nature of business activities leads to a diverse set of financial statements. So don’t feel overwhelmed with a diverse reporting structure. Instead, take your time to get familiarized with it.
A financial statement also has several nonfinancial information. For example, you may find information on the state of the economy, competitive considerations, market forces, introduction of new technologies, workforce, etc. Although these are not directly reflected in a company’s financial statements, they play a larger role in how those financial statements look. How do you compare the competitor’s data with yours?
You may come across something called a consolidated statement while studying the financial statements of your competitors. A consolidated statement of a parent company and its subsidiaries means it represents its separate legal entities. You may consider a consolidated statement as one entity rather than considering separate statements for different entities.

So, you have the data, and you have learned how to read them. The next step is to determine how you can compare the competitors’ data with yours? For example, if you have a 15 percent net profit, is that good or bad? How would you determine that? It depends on a lot of things like the history of your business and the industry you are in, and how your competitors are doing. To evaluate your business against your competitors, you would need data like gross profit ratio, current ratio, net profit ratio, etc. Although there is much other data to consider, it is always good to begin it simple and not make it too overwhelming.

Here are some of the key ones

Net profit ratio: You need to calculate this by taking your gross profit less your overhead expenses to arrive at the net profit value. Now divide this amount by your sales income to give you your net profit ratio.

Current ratio: Take your current assets and divide them with your current debt. This will help you determine if your business is liquid. For example, are your liquid assets enough to pay your short-term obligations?

Gross profit ratio: You calculate your gross profit ratio by taking your income less your direct materials and costs of goods sold. You then need to divide it by your total sales to get your gross profit ratio.

Three important financial ratios that every founder should know

A financial ratio is an important marker for qualitative analysis of your business. It also helps you to do an accurate comparative analysis with your competitors. Here are three important financial ratios that you should know.

Profitability

Profitability is another ratio that calculates how much profit the competitors are making by selling their services or products. The most common profitability ratio is the gross profit margin calculation. So, what is the gross profit margin? You can calculate gross profit margin by subtracting the cost of goods sold from sales and dividing by sales. The profitability ratio is a good indicator for businesses to understand their income on aggregated sales of a particular product line. While a high percentage ratio indicates that companies are making good money, a low percentage means they are not making enough.

Liquidity

If you are keen to learn your competitor’s ability to meet their short-term financial obligations, liquidity ratios would be the ones that you need to check out. This is a great indicator to determine how well a company is performing under its short-term economic conditions. Liquidity ratio analysis includes the current and quick ratios.

To get the current ratio, you need to divide current assets by current liabilities. If you find the ratio high, you need to understand that the business finances with its cash. It also indicates that the company can withstand short-term economic downturns.

On the other hand, to determine the quick ratio, you need to subtract between the current assets and inventory divided by current liabilities. This ratio is an indicator of how a competitor is doing to pay current liabilities without selling its inventory. A high quick ratio is always preferable by businesses, just like the current ratio.

Financial leverage

This ratio can help you calculate the company’s long-term solvency. This ratio can help you gauge and understand how well your competitors are using debt and equity financing for business operations. Know that the debt ratio and debt to equity ratio are the two most popular financial leverage ratios that you should be knowing.

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While checking the financial statements of your competition, pay special attention to essential numbers like gross margins, operating and net profit margins, etc.

Debt ratio

When you divide the total debt by your total assets, you get your debt ratio. A debt ratio empowers you with vital information like how much debt your competitors are investing in acquiring business assets. It is usually calculated as a percentage where a low percentage means the company is financing its business operations with cash rather than debt. A higher debt ratio means it’s the other way.

On the other hand, a debt-to-equity ratio is the value of total debt divided by total equity. This ratio helps you determine how much money your competitors are receiving from private investors or the founder’s investment. It is usually expressed in a percentage.

Price Strategy Matters

You may be tempted to compare your price strategy with your competitor’s while doing a financial statement analysis. But know that competitor-based pricing works well only when the market is saturated, and it is a well-researched market. Often competitors overstate their pricing abilities. Thus only 8-15% of all businesses can do value-based pricing based on customer’s ability and willingness to pay. If you are doing strategic pricing (pricing based on a competitor’s pricing model), know that you can risk a price war that can lead to a huge loss for everyone. Ultimately a business has to be profitable, and you should not compromise on that.

What to learn from the competitor’s finances?

Understanding your competition is the first step that every business should take to strengthen its foothold in the market. While there are several benefits of understanding the competitors, checking up on the financial statement of the competition is probably the best way to benchmark your strategy. While checking the financial statements of your competition, pay special attention to essential numbers like gross margins, operating and net profit margins, etc. Also, check the salaries and compensations the competitor is offering to its employees. This is another important parameter to keep a tab on. Don’t miss to check out their sales and profitability trends too. This is a significant indicator to help you understand how your competitors are doing. Check on their marketing trends and marketing budgets too. It is essential to check their marketing expenses as a percentage of their revenue and note the differences in your financials. Try to understand what are the factors that are causing this discrepancy. Do the discrepancies need your attention? Is there anything you can do about it?

Another aspect that you need to check is how your competition is using the money. Are they using it more effectively than yours? What can you do to turn the tables?

The key takeaways

There is a lot to learn from the financial statements of your competitors. And when you implement the positives of the findings in your business, you are better positioned to turn the table and set a stronger foothold in the market.

Expert Connect

Chinmay Ananda
Business Storyteller, Financial Educator Finance Academy
Connect with our expert to analyse your financial statements and evaluate the risks and potential of your business

The post What to learn from the financial statements of your competitors? appeared first on Dutch Uncles.

How the Best Pricing and Costing Practices Can Help You Achieve Great Unit Economics

Chayanika Sen — Fri, 11 Jun 2021 10:35:09 +0000

Unit economics is a term that is loosely used a lot, but often startup owners do not pay much attention to it. This could be a real mistake. But what is unit economics, anyway?

In simple terms, unit economics means measuring the profitability of selling goods, products, or services. For example, suppose you are a widget-making company. In that case, your unit economics will be the relationship between the revenue you receive from selling the widget versus expenses you bear for producing, marketing, and selling the widget. If you’re a service offering company like Uber, your unit economics will be the relationship between the revenue you earn from your services (for example, one ride of one passenger) versus the cost associated with marketing and offering the service to the customer.

Unit economics considers the direct revenues and costs connected with the essential elements of a company’s business model. In other words, it can be said that with this data, one can predict how profitable or not profitable a company can be and when it can reach the profitability state. And if you care about profitability, you can’t ignore to know about unit economics.

To understand unit economics, your first task will be to understand your basic unit. It is the most fundamental thing that reflects how you operate. Once you know the basic unit, you need to do the calculation in the next step. This will tell you how much revenue you will earn and what cost you need to pay to achieve that revenue.

In this context, it is essential to know about LTV or lifetime value which denotes how much revenue you can expect to earn from a single customer account during the entire lifetime of that account with you. To calculate LTV, you need to know the gross margin, how much each customer spends every month, and your monthly churn percentage. Mathematically, it can be represented as:

Lifetime Value = Gross Margin % X (1 / Monthly Churn) X Avg. Monthly Subscription Revenue per Customer

Coming to the cost side, the most frequently used term that you should know about is customer acquisition cost or CAC. It is determined by subtracting all the costs from the total sales and marketing costs to acquire a single customer. Representing mathematically,

Cost to Acquire a Customer = Sales and Marketing Costs / New Customers Won

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If you’re spending more to acquire a customer than its lifetime value, you won't survive in the business for long.

Why Is It Essential to Understand Unit Economics?

“If you can’t measure it, you can’t improve it.” – Peter Drucker.

Understanding and determining your unit economics is extremely crucial for early-stage startups to establish a healthy growth curve. Often, startup owners are so engrossed with their product ideas that they fail to recognize the importance of product-market fit, pricing strategy, cost structure, etc. which is why many startups fail to survive their initial days. But, knowing your unit economics from an early stage can help you make long-term financial projections. And the more accurate your financial predictions are, the more accurately you can predict your revenue trajectory.

How to Calculate Unit Economics?

Before we start calculating, we need to understand what a unit is. A unit can be anything depending on your business model. But as long as you are not mixing your units, your calculation will be impactful.

Customer as a unit

If you have a subscription-based model, every subscription you sell or get a new subscriber, a subscriber (customer) can be one unit.

Units as products sold

This model is more standard for manufacturing business where there is some cost attached to manufacturing a product. However, if you are a SaaS business, then customers as a unit would be more of interest to you than units as products sold.

The easiest way to calculate unit economics is to find the revenue per customer and then divide it by the costs associated with the customer. However, remember since no two businesses are the same, how you derive those values and what you determine as a unit will largely depend upon your business model. For example, for a SaaS business model, unit economics is usually LTV divided by CAC. However, for a more accurate future prediction, you need to consider other metrics, too, as simply LTV metric might not be sufficient. If you’re a new business, a startup, or have a new product launch, using a flexible LTV calculation makes more sense. Whatever you choose, you need to divide the result by CAC to get the unit economics.

Predictive LTV

This formula helps to avoid a sudden and unexpected drop-off in sales by considering how customer preferences change over time.

Flexible LTV

The predictive LTV works better for established companies. But if you’re starting, a flexible LTV would be more helpful to you.

Why Do You Need to Track It?

Unit economics is an efficient tool to determine if the cost of acquiring a customer exceeds or not the lifetime value of a customer. If you’re spending more to acquire a customer than its lifetime value, you won’t survive in the business for long. However, there are some other benefits too of tracking your unit economics.

A tool to measure early success

This is an important metric that often gets ignored by startups. It helps you determine how much you can spend on acquisition and how much you can expect in return. In short, it is an important metric to help you gauge the financial stability and financial health of your business in the long run.

Tool to tweak your model

Unit metrics are helpful as a yardstick to measure and determine if you need to tweak your pricing model, marketing budget, sales approach, or any other parameters that can help you earn more revenues.

Efficient financial planning

By combining your unit economics with your acquisition rate, you will be in a better position to do effective financial planning for your business. So, unit economics is a measure of growth for your business.

Evaluate the changes

Unit economics enables you to evaluate the changes you make to your pricing structure, marketing budget, or any other parameter. Simply determining if sales would increase or not is not as effective as understanding the LTV to CAC ratio. If there is an unfavourable change in the ratio, you need to reconsider your tactics. Thus, it can be safe to say that unit economics helps you to make an informed business decision.

Unit Economics as a Lever of Growth

Unit economics can be considered as a lever of growth or a tool to foresee if any hindrances are coming. It is that yardstick that you can use to your benefit to determine the health of your business. Keeping track of the LTV to CAC ratio is thus very important. Because if you are spending more, your business can get into serious trouble if not intervened early.

It is also easy to predict the growth of your business using unit economics. If your LTV is higher than the CAC, you are making profit from the existing customer base. If you’re able to maintain your LTV and CAC ratio, while expanding your customer base, your business is on a growth trajectory.

While unit economics helps you perfect your business growth, it also enables you to foresee any possible failure. While there can be occasional incidents where you can bear additional expenses, you can’t afford to make it a regular affair of throwing away money just for the sake of acquiring customers. At the same time, you don’t have much business traction, if you’re not acquiring customers and if your CAC value is increasing at a fast rate reaching closer to your LTV rate. Well, a failure is almost inevitable.

When you start a business or launch a new product, you need to hit a certain amount of profit when you can break even. Determining your LTV and CAC early can give you an idea of when you would be able to hit the break even. And not just that, if your units are correct, and if you track it diligently, you will also be able to predict accurately if you are in the right direction or your business decisions need some tweaks.

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An estimated unit economics measure can help you gauge how fast and how much you can spend on the marketing budget before you run out of all the funds.

Best Practices to Keep Your Unit Accurate

Unit economics is a powerful metric to help your business grow, but it won’t be of much use if you are using all the wrong metrics or if your metrics are calculated incorrectly. If you want to predict your profitability accurately, you need to be accurate with your metrics and, if required, recalculate it often.

Here are some examples to give you a better idea

Change of price

It is easy to keep track of your LTV; however, if you have done any updates in your unit economics and forget to update your unit economic calculation, then your LTV to CAC ratio will change because your LTV will be impacted. This can mislead you as your calculations will be incorrect. So, whenever you are making changes to your pricing structure, remember to feed it back to your unit economics calculation.

Capital expenditure

When you are just starting, you need to do more expenses to see growth in your business. However, an estimated unit economics measure can help you gauge how fast and how much you can spend on the marketing budget before you run out of all the funds.

Recalculate whenever costs change

Just like pricing change can affect your LTV change, similarly, when your cost changes, your CAC gets impacted too. This means if you are not feeding back the updates in your unit economics calculations, your CAC value will be impacted. To avoid any faulty calculations, make it a habit to immediately calculate any change in the cost to your unit economics. This way, there will never be a miss, and you will always be using the most up-to-date data.

Improving your unit economics

There are two ways to improve your unit economics. The first option is to cut down your sales and marketing budget. However, this can impact the growth of your business. But at times when your CAC and LTV ratio is too out of balance, cutting down the expenditure budget is a more appropriate measure.

However, it is always desirable to improve your unit economics by increasing the LTV value. You can achieve this by optimizing your pricing and reducing churn, and ensuring the customer stays for a longer time.

The Key Takeaways

Being aware of direct revenues, best pricing and costing prices, and knowing your unit economics is a must for any early-stage startup. By knowing your unit economics depending upon your business model, early-stage startups can better understand and plan their growth trajectory. Giving importance to unit economics can help identify opportunities, take care of a healthy cash flow, and overcome some of the challenges of scaling up your business.

Expert Connect

Chinmay Ananda
Business Storyteller, Financial Educator Finance Academy
Connect with our expert to assess your unit economics and plan your growth trajectory

The post How the Best Pricing and Costing Practices Can Help You Achieve Great Unit Economics appeared first on Dutch Uncles.

Newly Minted Start-up Unicorns in a Hiring Spree

Chayanika Sen — Thu, 15 Apr 2021 10:35:03 +0000

While the world is going through a pandemic and the second surge of Covid-19 is slowing down business and the economy as a whole, India’s start-up scenario is quite different. After bouncing back from last year’s slowdown post the lockdown, most start-ups in India are expecting a hiring uptick. 72% of founders have mentioned that there would be a rapid increase in recruitment in the start-up sector in a survey conducted by InnoVenCapital. Logistics, digital media, e-commerce, and deep tech are the most prominent industries that are going to be more aggressive in their hiring strategy, the report mentioned. With the change in customer behaviour, the “digital-first consumer focus business model” has become the top priority for most companies.

While the pandemic forced some companies and industries to take tough calls like realigning team size, pay cuts, and job loss, the pandemic also added muscles to specific industries like EdTech, fintech, health tech, epharmacy, and they are expected to hire with a high vigour this year. For example, Ascent Health & Wellness Solutions is looking to hire 4,000-5,000 people this year and expand their current pharmacy tie-ups from 50,000 to over one lakh.

Investors are also investing a lot in tech-enabled business ideas post the pandemic, which is also giving birth to many new tech innovation start-ups in India at a rapid pace. In 2020, the start-up growth rate was 20% more in India compared to 2019. And the momentum will be continuing in 2021 too. However, the biggest challenge for start-ups is finding the right talent. 52% of the founders mentioned in a report that hiring right has been their biggest challenge.

The rise of the Indian Unicorn in 2021 and 2020

After the aftermath of the pandemic, several start-ups have managed to mint fresh funding and forecasting a solid growth trajectory. Many start-ups are now looking to hire, especially in crucial technology and leadership roles. Amidst all others, EdTech, fintech, software as a service (SaaS), and eCommerce have significant hiring spree.

In 2020, eleven Indian start-ups became unicorns reaching the much-coveted $1 billion valuations. These eleven Indian start-ups include Unacademy, Pine Labs, Nykaa, Postman, FirstCry, Zenoti, Razorpay, Cars24, Zerodha, Dailyhunt, and Glance. Not just that, 2021 Q1 saw a record highest seed funding deals since 2018. India witnessed the first health tech, social commerce, and e-pharmacy unicorn this year. The six start-ups that entered the unicorn status within six days are fintech start-ups CRED, social media start-up ShareChat, wealth management company Groww, messaging platform Gupshup, social commerce start-up Meesho, and epharmacy PharmEasy. It is projected that at this rate, India is about to have more than 100 unicorns by the end of 2021.

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With the change in customer behaviour, the “digital-first consumer focus business model” has become the top priority for most companies

The hiring spree of Indian start-ups

Byju, the EdTech start-up, is planning to hire 6,000-8,000 employees in the next year. With schools yet to reopen, online learning is on the boom. While students are focusing on utilizing their time to the maximum for test preparation, this EdTech start-up is looking to hire for technical and nontechnical roles along with top-level executive positions to spearhead its growth. For an entry-level Business Development Associate role, the stipend is ten lakhs per annum.

On the other hand, the fintech farm, Bengaluru-based Razorpay, is looking to hire 500 odd employees. After raising $100 Mn in its Series D round, the company achieved unicorn status, led by GIC and Sequoia Capital India. The start-up’s most of the hiring will be for their engineering and product teams to boost new solutions as the company aims to build new banking solutions and payment methods for small and mid-size businesses. The company is also looking to hire its customer experience team, finance team, sales, and operations team. Founded by Shashank Kumar and Harshil Mathur, Razorpay is a payment gateway service that currently powers digital payments for over 200K small and large businesses. Among these, some of the prominent names include Airtel, BookMyShow, IRCTC, Aditya Birla Capital, NSE, etc.

The next unicorn that is looking to bolster its headcount is Pine Labs. The Noida-headquartered company has announced to hire 300 employees in sales and tech roles after becoming the first unicorn of 2020. Founded in 1998 by Lokvir Kapoor, Pine Labs served 100K merchants in 3700 cities and towns across India. The company has decided to bolster its digital payment offerings across the United Arab Emirates, India, and Malaysia, where it has already established its footprints. The company also plans to venture into new markets in South East Asia. As the aftermath of the COVID-19, digital payments will continue to see a more excel rapid lent adaptation. Thus, the company is determined to invest in its tech and sales workforce to enable them to take its products to the larger masses. Pine Labs helps online and offline transactions and claims to process $30Bn payments per year. In March 2019, Google Pay collaborated with Pine Labs to allow offline transactions on Google Pay through Pine Labs’ Unified Payments Interface (UPI)-based digital payments product.

US-headquartered spa and salon software product company Zenoti has recently become a unicorn after raising $160 Mn in a Series D funding round led by Advent International through Advent Tech and Sunley House Capital. The start-up now is also looking to add over 400 new hires to its headcount. While the company is looking to add most of its headcount in India, the rest will be added in Seattle, Australia, and United Kingdom. The company currently has about 550 employees and is planning to add headcounts for new product development and create additional products to cater to the industry. The company also has a market expansion plan for sales and marketing as well. It is to be noted that Zenoti is the first vertical SaaS start-up that could enter India’s unicorn club. Vertical SaaS start-ups cater to niche customers as compared to horizontal SaaS start-ups.

Founded in 2010, Zenoti is an all-in-one cloud-based software salon, spa, and medispas. It has various capabilities, including appointment scheduling, billing, built-in marketing, CRM, loyalty features, inventory management, online booking, etc. The founders are Sudheer Koneru and Dheeraj Koneru.

Another unicorn that is looking to bolster its employee base is Postman. The company plans to hire critical leaders across various departments, including product, engineering, and design.

Glance, which achieved unicorn status in December 2020, is looking to ramp up its headcount by 30-40%. The current employee base is 400. The company plans to ramp up headcount to strengthen its capabilities in artificial intelligence, technology and product development, and international market expansion. The company is a part of InMobi Group and plans to expand in the global markets in Southeast Asia, Latin America, and the US.

Top Indian start-ups that are hiring and should be watched out

UpGrad

Founded in 2015, UpGrad is headquartered in Mumbai. The most common skills they look for are digital marketing, customer relationship management, and SQL. With online education continuing, they are on a hiring spree.

Cred

Headquartered in Bengaluru, Cred is a credit card reward platform. They hire actively for engineering, support, art, and design.

Unschool

Another E-learning startup based out of Hyderabad was among the top startups in 2020 in India. Their most considerable job functions include operations, marketing, and business development. They work on intensive and gamified models. The most common skills they look for are Digital marketing, C, and Python.

Unacademy

Headquartered in Bengaluru, Unacademy is another top start-up in India that constantly scouts for skills including C, C++, and customer relationship management. Their largest hiring departments include education, business development, and marketing. It is also the second e-learning startup to enter the unicorn club.

Whatfix

Another Bengaluru-based startup, Whatfix, is a SaaS company. It helps businesses to drive digital adoption and elevate user experience across enterprise applications. Their largest job functions include Engineering, support and sales.

Razorpay

Razorpay, another Bengaluru-based startup, look out for different departments, including engineering, business development, and sales, after launching a slew of products for small business owners, freelancers, and end consumers.

Zigram

This Gurugram based startup has the most significant functions across research, business development, and engineering. It works in the fields of digital transformation, risk management, and enhanced data asset quality. It works towards building and managing data assets for customers and has been hiring actively.

Yellow Messenger

Founded in 2016, this Bengaluru-based startup has the most significant job functions across engineering, business development, and sales. It offers conversational automation across different channels, including WhatsApp, Google assistant. As brands look to go direct to customers, the startup has been actively hiring and expanding its operations.

Pee Safe

Pee Safe hires graphic designers, product development, and sales management. Based in Gurugram, PeeSafe has disrupted the female hygiene segment with its innovative offering. Apart from female hygiene products, they also have surface disinfectants, sanitizers, and face masks. The company has been seen a rise in online sales since the onset of the pandemic. Their largest job functions are sales, arts and design, and marketing.

Urban Company

This Gurugram based startup has gained momentum after the pandemic. It is a home-based grooming, appliance repair, and maintenance service that actively hires in marketing, engineering, operations, and data analysis roles.

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Emerging skills in 2021 lie in cybersecurity, cloud computing, DevOps, AI, and Machine learning, augmented reality and virtual reality, and blockchain

Few more start-ups that are actively hiring:

SigTuple Technologies: Hiring across engineering and operations.
Open Financial Technologies: This fintech is actively hiring for a designer, engineering, marketing, operations, product, and sales roles.
Meesho: This e-commerce reseller network is actively hiring for engineering and marketing roles.
DailyNinja: Is hiring for engineering roles.
ClearTax: Is hiring for product, marketing, engineering, and designer roles.
Alt Digital Media Entertainment: Is hiring for supply chain management, technology, and logistics roles.

2021 start-up salaries

Some of the start-ups and unicorns are paying handsomely in 2021. While 2020 had been a bad year for the salaried employees, 2021 looks different. AON’s survey across 1050 organizations across 20 sectors revealed that there would be a 7.3% salary increment in 2021 while the hike in 2020 was 6.1%. The survey further revealed that companies are genuinely going to offer increments, and it is not an alternative to previous salary cuts. The report also highlights that companies have not changed the compensation structure, although employees continue to work from home. Instead, many companies offer internet connections and ergonomic office furniture so that employees can continue to work without much hassle. Hi-tech, IT-enabled services, life sciences, Information Technology, and e-commerce remain some of the highest paying sectors.

Most demand skills in 2021

As the pandemic influence consumer behaviour and how businesses are operating, some of the emerging skills in 2021 lie in cybersecurity, cloud computing, DevOps, AI, and Machine learning, augmented reality and virtual reality, and blockchain. Start-ups that work in these domains are willing to pay lucrative salaries even for entry-level and key leadership roles.

Takeaway

As start-ups are coming up with new business models in the pandemic hit world, they are ramping up their hiring. Moreover, the start-ups that have recently received funding from investors and have achieved unicorn status are aggressively expanding their operations and thus are in a hiring spree. If you have some of the most in-demand skills, you are sure to land up a dream job in some of the most promising start-ups.

The post Newly Minted Start-up Unicorns in a Hiring Spree appeared first on Dutch Uncles.

How Do Small Businesses Recruit?

Chayanika Sen — Fri, 09 Apr 2021 10:29:41 +0000

Small businesses have to compete with large enterprises on many fronts. Hiring and recruiting is definitely one of them. Unlike corporate giants, small businesses do not have the luxury to hire a recruitment agency or have an internal recruitment team to fill up the positions quickly. Additionally, they are yet to build their employer brand that can attract top talents. However, there are many positives to working in small businesses. You work as a closely-knit family where each person is heard and works collaboratively to make the business successful. Small companies can adopt several tools and strategies to entice candidates, but before that, let’s take a look at small businesses’ growth plans in recent times.

Growth plans of small businesses in the recent time

There has been tremendous growth of small businesses in recent times. It is the second-largest employer in India after agriculture. With the government’s promotion of initiatives like vocal for local and offering different schemes to support small business owners, there has been a rapid surge of small businesses. Many of the businesses are already doing well and are looking to ramp up their teams. If you are one such small business owner, then here are some ideas to help you recruit better for your small business.

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As a part of your hiring strategy, make it a point to show candidates that you are a safe place to work

Small business surviving Covid-19 and hiring

2020 has been a tough year for everyone, especially small businesses. While many small businesses had to shut shop, some are still crippling back to normalcy. As businesses are opening up, small business owners focus on rehiring their old employees who were laid off during the lockdown period. Some business owners are busy looking for replacements for employees who do not wish to return. Amidst all of these, there is a requirement for new hires to take care of the safety measurements to stay protected from the virus. It is only natural for candidates to feel sceptical and scared to join a new workplace. So, as a part of your hiring strategy, make it a point to show candidates that you are a safe place to work. Mention in your recruitment copies what all safety protocols you are putting in place. Include them in all your branding material, website, career pages. Share and follow all the Covid-19 protocols during the interview. If possible, conduct virtual interviews. This will ensure your candidate that your workplace is safe to join.

If not anything else, the virus has certainly taught us that life is unpredictable. So, keep your hiring plans flexible. In an Addison Group survey conducted in 2020, 500 hiring managers were interviewed. 56% of the respondents said they have performed hiring activities remotely, whereas 21% said that virtual interviewing would become a permanent arrangement for their hiring processes. So, prepare your employees for virtual onboarding and training and get ready for the new normal.

How to know you are ready to hire

Did you ever imagine that you will be expanding and having employees on board when you started your business for the first time? But now that your business is growing, are you sure this is the right time to hire? It’s not just you but the dilemmas of many small business owners. The most significant indicator is your company’s growth forecast. While it may seem an obvious argument that “growth first” and “hire second”, know that hiring may take up to a year to find the right candidate, have them on board, and let them acclimatize with your work culture. Many experts recommend mapping your business growth milestones. It is important to stay realistic when mapping goals. Once you are done with the mapping process, start with the hiring process at least eight months before the resource is needed. This way, you can have your talent pipeline ready and have the right talent at the right time.

The next obvious sign is when you see your employees are swamped with work throughout the week. If you notice that your employees are staying “really busy”, the next step is to gauge the elevated work levels’ sustainability. If you are sure that the boom will last, it is time to hire. If you think the boom is seasonal or periodical, hiring a part-time or a freelancer can also solve your problem.

CEOs of small businesses and start-ups take pride in being a jack of all trades. From accounting to operations, you might be handling everything all alone. But if you are finding yourself bogged down by operational tasks, it is probably time to hire someone to take things off your plate. Let the new recruits manage operations while you can focus on business development and lead generation.

Listen to your customers too. Are they repeatedly asking for services that you don’t provide? Are you declining large orders just because it’s beyond your production capacity? Communicate with your customers regularly and keep track of all the requirements to know when is the right time to hire. All these checkpoints will help you determine the right time to hire.

Some of the tools used by a small business for recruitment

As LinkedIn mentions in a 2019 report, some of the top tools that small businesses rely upon are:

Referrals from current or former employees: 49%
Recruiters: 42%
College and graduate schools: 41%
Referrals from the personal network: 40%
Online job site: 38%
Referrals from partners, advisers, investors: 36%
Local newspaper: 30%
Social networks: 18%
Company websites: 19%

Quick hacks used by fastest-growing SMBs

The most successful small businesses are using a mix of different channels to keep their candidate pipeline growing. Some of the top strategies that these small businesses are following include:

Top talent at colleges: 53% and trade schools: 30%
Using current or former employee network to tap talent: 45%
Seek reference from peers, advisors, partners, investors: 41%

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Referrals are a great way to screen potential candidates even before the interview process

Some of the biggest hiring challenges of SMBs and how to overcome

Hiring the right candidate is no easy job, and small businesses have their share of challenges. Let’s look at some of the most common challenges and understand how you can overcome them.

The number one challenge for small businesses regarding hiring is finding the right candidate and building a pipeline of future candidates. To keep the future job pipeline ready, small businesses can leverage a mix of hiring resources like online job sites, social networking platforms like LinkedIn, and referrals from your existing employees. You can even tap your former colleagues, employees, and peers to keep your referral pipeline flowing. Finally, you can always leverage the non-digital and traditional approaches like newspaper ads to keep your hiring pipeline ready. A LinkedIn survey found that 43% of small businesses in the retail and wholesale industry have relied on newspapers for hiring in the last 12 months. In contrast, the manufacturing industry used newspapers only 21%. Thus, it is also essential to understand where your potential candidates are spending their maximum time before making your move.

Small businesses are sprouting like never before, which means you have to face tremendous market competition to acquire customers and hire the top talents. In such a scenario, when everyone finds new ways to entice the candidates, try to build a rapport with the prospective candidates by telling your story. Don’t hesitate to emphasize the benefits of working in your company. An excellent place to start is interviewing your existing employees and finding out what they like about working in your company. Highlight these points when you approach your potential candidates.

The wrong hire is another challenge that small businesses face often. How do you ensure you are hiring the right candidate? To ensure you are not making a hiring mistake, have a compelling and detailed job description handy. Set up a standardised interview process so that your hiring process is uniform.

How to hire quickly

Often small businesses need to hire quickly, which is also one of its biggest challenges. While a hiring strategy depends a lot on the nature of your business and operating style, here are some of the quick hacks that most small business owners rely upon. These include:

Utilising referrals

Check with your existing employees or network for referrals. Referrals are a great way to screen potential candidates even before the interview process. While you can’t be sure about the work ethic and work style when you hire a stranger, hiring a referred candidate can give you some sense of security in terms of work ethics, working style, learning capabilities, etc. But to ensure your referral program work, ensure you have some incentives. You can also tie a portion of the incentive with the performance of the new hire. This model can keep everyone motivated to put their best foot forward.

Niche job site

While it is easy to put the open positions on any job boards like LinkedIn, Naukri, or Monster, there are chances that your job ad would get lost amidst the sea of available applications. Niche job sites do wonder in such cases, and you end up hiring better. For example, if you are looking to hire a part-time employee, Flexijobs is a great portal to look for.

Hire on a trial basis

Hiring a freelancer or on a trial basis is absolutely a risk-free way to test the talent of the employee before you hire them full time. Let the candidate work with your team for a few projects on a trial basis, and if you find him/her suitable for your needs, you can go ahead and hire full-time.

What kind of hirer are you? Time to introspect

Now that you are armed with the different hiring tools and strategies to explore let’s take a peek inside and introspect. What kind of hiring manager are you? Do you prefer a quick hire, or are you a medium or slow hirer?

Fast hirers take less than a month to fill up an open position. Fast hirers rely more on referrals, online job sites, and colleges to pick up candidates. A fast hirer will ask for referrals from existing employees, participate in campus hiring or recruiting fairs, and look upon online job sites like LinkedIn, Indeed, Monster, etc.

Medium hirers take between one and two months to recruit a candidate for any open position. Apart from a referral from existing employees and online job portals, medium hirers also rely on recruiters, referrals from personal networks, colleges, etc.

Slow hirers can take up to three months to hire. They mostly rely on colleges, job sites, job posts, a referral from the personal network, etc. In short, they have a longer hiring process and the entire process costs them a lot.

So, introspect and understand what your recruitment style and strategy are. Are you a slow hirer or a fast hirer? Depending on your business needs, you can either be a slow, fast or medium hirer.

Time to take actions

Now that you know how small businesses are hiring and recruiting talent, it is time to put your knowledge into action.

The post How Do Small Businesses Recruit? appeared first on Dutch Uncles.

What Is Proof of Concept?

Chayanika Sen — Wed, 31 Mar 2021 10:35:05 +0000

Would you invest in anything without ensuring that there will be some return on investment? No, right? That’s what proof of concept is. It may sound like a simple idea, but it is actually an essential and fundamental concept. An effective proof of concept proves that the proposed project is viable, and if invested in, will be a success. The core focus of proof of concept is to test the feasibility of the actual project, and hence it is not associated with any deliverables. A proof of concept ensures that the project will have a real-world application.

The value of a proof of concept helps a project manager gauge if any interventions are needed that can improve the possibility of success for the project. It also helps garner feedback from all the stakeholders involved in the project, thus mitigating the unforeseen risks. Although proof of concept sounds more like a prototype, there are significant differences between the two. We will talk about it in the next section.

What are the benefits of proof of concept?

Proof of concept has many benefits. Let’s see them one by one.

When you theorize, you consider an ideal condition and keep adding features that might not be feasible in a real-life scenario. It helps to visualize what is practically feasible even if it is conducted in a limited time.

The worst that can happen to any founder or entrepreneur is a flop product or a business idea. A proof of concept helps to determine if you have enough resources to develop an Minimum Viable Product. It also helps to understand if your investment would be worth it or not.

An effective proof of concept helps project managers to find out potential risks and obstacles. This is a huge benefit because project managers need not wait till the last moment and get caught in some last-minute surprises during implementation. They can intervene and take necessary measures before it is too late.

It also helps project managers to understand if the idea is scalable. So, along with feasibility, a proof of concept also helps gauge if it can be scaled immediately or over time. Further, it also gives insight into scope creep (if the product requirement is going to multiply or escalate over time) during the project lifecycle.

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Before you start creating your proof of concept, it is important to define your proof of concept goals.

When does your business need proof of concept?

Every year 6.5 million start-ups are born, 10 % of which fail. While there are several reasons for the failures, the product not fitting with the market need because the founders had a poor envision of the market is one of the common reasons for startup failures. Proof of concept would be immensely helpful in such scenarios.

If you plan to launch a greenfield project, where there is no similar product in the market, a proof of concept is the only way out.

Key differences between proof of concept and prototype

As already discussed, a proof of concept is needed to validate a product idea’s functional and technical aspects before it is launched. It addresses whether the product can be built or not, whereas prototyping addresses how to build the product.

It aims to test an idea, whereas prototyping brings that idea to life through a working interactive model. You proceed to the next step of building a prototype only when there is a functional and technical validation of the product.

As compared with a proof of concept, a prototype is more concrete in shape. You create a prototype which is a simplified version of your product for testing purposes. A prototype based on user feedback to find the most suitable UI and UX for your product.

A proof of concept is a theoretical demo of the idea, while the prototype is the physical demo of how the actual product will look like.

How to create a proof of concept in 2021

You may find it tempting to jump into launching your recently conceived idea, but it is essential to build a proof of concept to test the viability. Here are a few ways to create it.

Define your proof of concept goals

Before you start creating your proof of concept, it is important to define your proof of concept goals. What do you want it to achieve? A typical proof of concept goal can be to verify the approach or specific tools under certain circumstances.

Identify the right set of people

It makes a lot of sense to involve the right set of people while planning. Remember, the success of your proof of concept depends on various factors, including technical knowledge, business knowledge, experience in different modeling techniques and methodologies, along with moderation skills and analytical skills. So, finding the right set of people with different skillsets is important.

Plan the technical environment

Consider a simple local developer’s environment for the testing and integrating environment. This would help you save time. In case you still need to access a system interface, build a test system that you can quickly use and verify.

Steps to create a proof of concept

Prove the need

Identify the problem that you want to solve. Is there a problem at all? Do your target audience really need a product to solve that problem? The first stage for creating a proof of concept is identifying the need, the problem that you want to solve. Define the pain points and gauge if this is something worth investing time in.

Start with having conversations with your target audience

As discussed above, the first step of building a proof of concept is to prove that there is a market need for your product or solution. To do that, seek answers to these specific questions.
Is there really a need for the product?
The people (target audience) have realized that they have a need?
Are they facing any pain points that the product can solve?
Is the pain enough for the people to take any action? Do they really need the product? Can they still live without the product?
While there are different market analysis tools and surveys, talking to your target audience is the best way to gauge their requirements. Try to understand how much the pain is causing trouble for them and how they are trying to solve it. All these insights will help you to build your case.

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A proof of concept helps founders and entrepreneurs see if their product idea is viable or not for its target audience.

Map the pain points with solutions

Once you identify the pain points, map each of the pain points with your solution. Once you have jotted down all solutions against each of the pain points, evaluate the technological feasibility, cost and time demand, unique value proposition, etc., The outcome of this exercise should be to list all the identified solutions for pain points. Each of the solutions should be useful and feasible to qualify for the final product.

Don’t underestimate the power of feedback

Once you gather enough inputs about the pain points, you come up with a solution that will curb the target audience’s pain points. But how can you be sure that the solution you have is actually going to help the target audience? Instead of relying on assumptions, it is always a good idea to ask for feedback.
Ask specific questions like which is the most difficult part of the problem? When was the last time it happened? Why was it difficult, and how the person tried solving the problem?

Include all the practical details

Once you find the right solution that your target audience has approved, it is time to check all the practical details. So far, you have seen the product from the user’s perspective. Now it is time to check for the technical feasibilities. Is the product going to be financially sustainable? Think about the resources you need to build the product. Do you have the skillset in-house, or do you need to hire? How would the pricing be? What would be the revenue sources? These are some practical aspects that you need to consider at this step.

Work on a prototype

Armed with all the customer insights, it is now time to build a rudimentary product or a prototype. The prototype should have the basic features and your desired UI/UX. Test your prototype and incorporate the feedbacks before you pitch it to the investors. Your prototype feedback should include insights into the user experience. Did they really enjoy using the product? Does your product address their pain points? Did the users find the interface intuitive? Are you missing any key functionalities?

Engage

Finally, it is time to create an engaging roadmap for a launchable product. You need to build a step-by-step map that will intrigue your investors. Remember to communicate through storytelling, don’t make it boring by adding too much jargon, incorporate your user persona so that the reader can envision the product better, finally build engagement through personal connections.

A case study

Consider you want to create an e-learning app for high school students through which students can learn coding. You think this is a great idea to engage the kids during this trying time. But is there a need for such an app? For this, you need to create a proof of concept to test the viability of the idea.

You would tie-up with a few reputed schools in a selected few city and let the students try your idea for free. Let the students and their parents log in to the system to experience it. At the end of the free session, you can gather feedback from the students and the parents to see if they found the idea useful. Is it really going to engage the kids? Are parents willing to invest in such an app and let their kids try their hands-on coding? Once you have positive feedback, start working on the UX and design the prototype.

Here is a quick checklist for an effective proof of concept

Define the problem
Define the scope
Identify resources
Develop a detailed plan

Proof of concept best practices

While proof of concept is good for one or two concepts, they are not the alternative of implementations. In fact, they can delay your implementations. Hence, limit the scope of the proof of concept to fasten the process.

Use cases are always impactful. So as a best practice, create use cases with your desired end state solution.

Allocate enough time for the proof of concept so that you can collect target audience feedback and make adjustments to your idea if needed.

Key takeaways

A proof of concept helps founders and entrepreneurs see if their product idea is viable or not for its target audience. Through a proof of concept, entrepreneurs, founders, and project managers can explore the product’s technical and financial feasibilities and if the company has enough skills and resources to make the product happen. Thus, a company can assess its readiness to implement the idea and make a successful product.

The post What Is Proof of Concept? appeared first on Dutch Uncles.

Ready to Scale: Growth Marketing Explained

Chayanika Sen — Mon, 29 Mar 2021 10:35:06 +0000

Do you know that India is at number three in creating new companies? A survey reports that there has been a staggering 80 percent increase in new companies from 70,000 in 2014 to 1,24,000 in 2018. But have you ever wondered how a company thrives in such a crowded marketplace? Amidst such noise, it is absolutely crucial for companies to strategize a compelling marketing strategy that helps them cut through all the competitions and stand apart. A marketing strategy of 2021 is not just meant for customer acquisition but a breeding ground for organic growth, virality and word-of-mouth. This new-age powerful way of marketing has got a name too – growth marketing.

What is growth marketing?

Growth marketing has its foundation in traditional marketing with layers of A/B testing, data-driven approaches, and analyzing every aspect of user experience. All the insights gathered from such measures are then analyzed and implemented back for sustainable growth.

Growth-making has a newer approach that adds value at every stage of the marketing funnel. Unlike traditional marketing that works through expensive marketing budgets and hopes for the best result, growth marketing ensures attracting users, engaging with them, retaining them, and finally turning them into loyal customers.

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Before you jump in with your growth marketing strategy, observe and study the trends.

Important metrics of growth marketing

The most critical aspect of growth marketing is tracking and analysing metrics.

Awareness

The first step of entering the marketing funnel is awareness. How much are your potential customers aware of the brand? Therefore, growth marketers need to use different analytics tools, surveys and measure web traffic to determine brand awareness.

Acquisition

While awareness drives customers to the sales funnel, the actual purchase journey begins with customer acquisition. Growth marketers need to work here and go down deeper to increase the volume, which can lead to more sales later. The numbers can be improved by experimenting with A/B testing, website copy, landing pages, chatbots, trial offers, etc.

Activation

At this stage, growth marketers need to ensure that the customers are using the product and having a positive experience with it. Customer retention and success begin here, so growth marketers need to keep an eye here.

Revenue

Experimenting with different pricing models is another important role that growth marketers need to play. Since every bit of testing comes with a cost, it is important to pay attention to the revenue part.

Retention

Growth marketers need to pay attention to customer retention too. If you’re in eCommerce, this can be done by measuring returning customers. In other sectors, it can be a percentage of renewals or product usage. Since repeat customers don’t need the customer acquisition cost, they are the most valuable customers, and growth marketers couldn’t afford to ignore them.

Why your business needs growth marketing in 2021

While the traditional mode of marketing still exists, when you ask today’s CEOs and CMOs, you will see that most of them heavily rely on growth marketing for their data-driven approach. It is more reliable, predictable, and scalable for revenue growth. Moreover, businesses today face tremendous competition. With new technology inventions and startups disrupting the business models, marketers have huge responsibilities to help their companies stand out. While there is no doubt that innovative products and great customer services are the basis of successful businesses, marketers need to find new ways to entice their customers. While traditional marketing techniques still play an important role, marketers need innovative marketing strategies to cut through the noise. Growth marketing is definitely the way forward today.

Growth marketing is a dynamic approach that is driven by creativity and innovation. It is iterative, experimental, and depends heavily on metrics and results. Note that growth marketing is not a replacement for traditional marketing. It still uses the purchase funnel. However, instead of focusing only on the top funnel, growth marketing focuses on every stage of the funnel.

What growth marketers actually do

Growth marketers look into data and results, and their decisions are all data-driven. Today almost all startups look for growth marketers because they need to rise above the competition in this crowded marketplace. So, what exactly a growth marketer does?

The overarching goals of a growth marketer are to retain existing clients, increase revenue for the company, and acquire new customers. A growth marketer experiments with various ideas, implements them, measures the success, tweaks them, and reiterates. Growth marketers are process-based, and some of the processes include:

Evaluating results
Creating a structured procedure
Prioritizing experiments
Executing MVTs
Identifying challenges
Prioritization

In short, growth marketers lookout for opportunities to grow their companies. From email marketing to SEO to videos, growth marketers leverage every opportunity that comes their way.

Should you hire a growth marketer?

Not just startups but some of the billion-dollar companies like Airbnb, Facebook, Goole, Uber all have a solid growth marketing team to help them grow. So, if you have a product-market fit, then you should hire a great growth marketer if you have not already. Hiring a growth marketer will ensure that your customers stick around and create a bridge between the gaps.

How to hire a growth marketer?

If you’re about to hire your first growth marketer, here are some quick tips to help you hire the best.

Look for growth marketers who have experience working with different marketing tools like Google Analytics and Excel. These are some of the basic foundational tools that every growth marketer works with. They should also be familiar with other tools like A/B testing, social media, BI, email, paid search. Apart from this technical knowledge, a good growth marketer should have worked with a product team. There is a huge benefit to find candidates with experience of working in a product team because he/she is already aware how to sympathize with the audience. The person will work on the full funnel and not just the marketing funnel. You should also be looking into if the candidate understands how to create value, is familiar with different growth marketing tactics, knows how to build business cases, a marketing wizard, and finally understands human behavior.

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Growth marketing has its foundation in traditional marketing with layers of A/B testing, data-driven approaches, and analyzing every aspect of user experience.

How to build a successful growth marketing strategy?

As HubSpot rightly mentions, “a concrete growth strategy is more than a marketing strategy.” According to the Bureau of LaborStatistics, approximately 20% of new businesses fail during the first two years of being open, while 60% fail during the first 10 years. A concrete growth strategy helps businesses to expand by adding new locations, expanding product lines, investing in new customer acquisition, selling products both online and offline, and more. Here are a few growth marketing strategies to implement in your business.

Notice and analyze the current trend

Before you jump in with your growth marketing strategy, observe and study the trends. Taking a cue from market intelligence can help you understand if there is a shift in consumer behavior and preferences. While you can study trends intermittently or before launching a new idea, it is always recommended to make trend analysis a regular part of your growth marketing strategy. Spend time on social media where your target audience spends time, talk to key influencers, and you will be armed with a wealth of useful insight that can help shape your growth marketing strategy.

Know your audience

Creating your audience persona is the first step towards building a strong foundation for your growth marketing strategy. Knowing your target audience means you are in a better position to gauge what they are thinking on their purchase journey. For example, if you know about their pain point and what triggered the purchasing decision, you can communicate better and develop better products in the future.

Should you be omnipresent?

It is natural to think that you need to be present on all the channels and social media platforms to engage with your audience. But, instead of being omnipresent, find where your audience hangs out mostly. Do they seek information from search engines or social media channels? Are there any specific social media channels? Knowing such details can help you focus on selectively, which would be more effective.

Fix your budget

The more tactics you want to implement, the higher budget you need. While it is good to have everything you want, it is not possible to implement everything. So set your budget and optimize it for maximum return.

It’s always quality over quantity

Set your measurement metrics to understand if your tactics are really helping to improve your business. Have measurable metrics in place that you can measure using different marketing analytics tools. For example, your measurement metrics can be the number of subscribers per month or views of your videos per week, and so on. Remember, your metrics should be based on quality over quantity. So, instead of focusing on several subscribers, focus on how many subscribers are actually engaging and reading your newsletter.

Mix your marketing tactics

Instead of repeating the same growth marketing initiatives month on month, create a mix of your marketing tactics. For example, you can try live streaming video and chatbots for one quarter and machine learning and mobile video for another quarter. See which combination works best.

How to succeed with your growth marketing efforts

Growth marketing is no rocket science, and there is no quick success. But if you are up for sustainable growth, growth marketing is for you. Here are some of the tried and tested growth marketing best practices that growth marketers rely upon to succeed in their growth marketing efforts. These are spread across different phases, including preparation, execution, analysis, and revision.

Define your goals

Define your goals because it is important to know where you want to go or else you will never reach there. Be flexible with your goals and measure them from time to time and tweak them when necessary.

Open to experiment

One of the biggest assets of growth marketers is their experimenting and risk-taking abilities. Diversify your budget and efforts among various growth marketing techniques to see what works for you best. Remember, there is no one formula, and each tactic may work differently from company to company.

Customer retention is the key

Focus on retaining your customers. While it is important to attract new customers, you cannot afford to neglect your existing customers. As the famous Silicon Valley investor and founder of Ycombinator, Paul Graham, argues, “It’s better to have 100 people that love you than a million people that sort of like your product.”

So, focus on having at least 100 loyal fans instead of chasing millions of downloads or views and scale up from there.

Admit failure

Fail, learn, and move on. Growth marketers need to admit failure but don’t sit and sulk on it. Learn from the findings and move on.

Key Takeaways

Growth marketing is not an alternative to traditional marketing but works in tandem with traditional marketing by adding a few layers. Growth marketing focuses largely on data so you can have predictable and scalable growth. In today’s competitive market, most startups and businesses leverage growth marketing to standout and shine in the competitive marketplace. Growth marketers focus on every marketing funnel stage, unlike traditional marketing that focuses only on the funnel’s top stage. An effective growth marketer should be able to work with different marketing tools, is data driven and has the risk taking experimenting capabilities.

The post Ready to Scale: Growth Marketing Explained appeared first on Dutch Uncles.

The Toughest Question During Ideation: What Product You Want to Make and What Industry You Want to Be In?

Chayanika Sen — Fri, 26 Mar 2021 10:35:05 +0000

Ideation is the most vital part of any business. It is a process where you think about problems and ideate solutions to solve those problems. Ideation can be done through a series of ideation techniques like sketching, brainwriting, brainstorming, prototyping, worst possible ideas, and so on.

Ideation is the most interesting and challenging phase for any startup. It is interesting because you can explore different avenues and develop a wide range of options that you can explore. At the same time, it is challenging because you need to narrow down your choices to come up with the most viable product.

According to d.school, ‘An Introduction to Design Thinking PROCESS GUIDE’, “Ideation is the mode of the design process in which you concentrate on idea generation. Mentally it represents a process of ‘going wide’ in terms of concepts and outcomes. Ideation provides both the fuel and also the source material for building prototypes and getting innovative solutions into the hands of your users.”

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Mentally, ideation represents a process of ‘going wide’ in terms of concepts and outcomes.

Why is ideation important?

Ideation is a critical phase that helps you to:

Ask the right question with the focus on your users to innovate solutions that your users will absolutely love.

Get past the obvious questions, drive your team to focus beyond the obvious.

You have a large number of quality ideas to choose from.

Each team member gets the opportunity to bring out his/her perspective so that you have a large variety of innovative options.

Do we really need ideation?

Don Norman, the Grand Old Man of User Experience, takes us a step backward and helps us think about why we need to challenge assumptions. He reinforces us to ask stupid questions and provoke our present understanding. He mentions that it is not at all stupid to ask stupid questions.

“You ideate to transition from identifying problems to creating solutions for your users. Ideation is your chance to combine the understanding you have of the problem space and people you are designing for with your imagination to generate solution concepts. Particularly early in a design project, ideation is about pushing for the widest possible range of ideas from which you can select, not simply finding a single, best solution.”

What questions to ask during an ideation session?

Ideation is the most critical phase for any startup, and every startup needs to start with this phase when you ask what product you want to make and what industry you want to be in. This is the toughest question to answer during your ideation process.

Know that you want to build a product and enter into a new market not because you think you have a great product but because your customers absolutely love it. Remember, your solution is going to solve someone’s frustrations at once.

Deciding the industry and the product you want to build

Most startup founders think that they have an amazing product idea, and once they make the product, people will come and turn into loyal customers or users. But unfortunately, that is not the case. First, you need to identify if there is really a need for your product? Here is a quote from a failed founder. “I realized that essentially we had no customers because we were working to make a doctor’s office amazing, while all the doctors wanted were more patients.”

Thus, for your startup to succeed, you need to identify your target market. Do you know that most startups fail because the founders created a product that had no market need? So, it is necessary to identify the market you want to be in. How do you decide which markets you want to be in? Here are some deciding factors that would help you to get started asking the right questions.

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Ideation is about pushing for the widest possible range of ideas from which you can select, not simply finding a single, best solution.

Start by asking who?

Ask who is your target audience to better profile your target audience. Remember, you are asking them questions to better profile your target audience. So, your who questions need not be restricted to only the obvious questions like gender, age, or marital status, especially if these parameters are not going to affect the product usage. You can leverage web analytics, surveys, and interviews to find the answer to your question.

The next question to ask is what?

The ‘what’ question is super effective in identifying the target market. For example, what is the purchasing motivation of your product? Or, what are the frustrations they face? Answering such questions would help you narrow down your search.

When?

Knowing ‘when’ helps you to determine some important factors, especially if your product is seasonal or time-dependent. For example, if you’re into SaaS – B2B industry, the decision-makers might be interested in speaking to you before and at the end of Q4. If your target audience is students, session time can play some important role, and so on.

Where?

Where are your potential customers? Where are they looking for solutions? Needless to say, customers are no longer looking for solutions only in the physical space. So, it is important to know where are your potential customers spending most of their time? Is it social media, search engines, forums, or online shopping platforms?

The most important of all – the why

Answering the why question is often the most difficult one, but knowing the answer to ‘why can help you build the most profitable and scalable business.

Know your competitors

It is rare for startups to come up with a product or solution that is not there already. While your idea might be unique, know that you will be a part of an existing industry. So, you need to understand how you will position your industry, what your differentiator will be. To know this, it is important to analyze your competitors and understand what they are doing.

Connect with people

While making assumptions and competitor analysis can give you some ideas, it is important to understand what people are actually thinking. Connecting and talking to people can help you get first-hand insight. Interviews and focus group discussions are some good ways to get started with connecting with people.

Promising ideas in the Post-Covid era

The novel Coronavirus has wrecked enough havoc on the lives of millions of people across the globe. The pandemic has completely changed the business scenario and how work was done. As the vaccine drive is on and businesses are slowly limping back to normalcy, several businesses are thriving because they found opportunities amidst challenges. If you’re planning to start your startup, now is the best time to do so. Here are some ideas that are going to flourish in the post-pandemic world.

Ecommerce

The pandemic has completely changed the retail scenario. As the adoption of the internet has seen a rapid rise in the country, more consumers prefer online shopping. Be it food, groceries, medicine, people are relying more on online platforms. So, if you are into the doorstep delivery business, you can see a lot of traction in the coming days.

OTT Platforms and Online Gaming

Since the lockdown started in the country and social distancing has become the new normal, over the top media or OTT platforms are gaining high popularity. As other physical recreational hubs stay close for an indefinite period, online gaming fills the vacant. So, this is another area that you can ponder on.

EdTech

Online education has been the only mode of education for the last year. Although there is no replacement of schools and colleges, online education has been the need for hours when everyone is speaking about practicing social distancing. Amidst this chaos, the Ed-Tech industry sees a surge in India, and it is a good time to forge in this segment.

Health and wellness

With a worldwide health emergency, many startups are investing in this industry. Be it online medicine delivery, eHealth, online consultation, there are different business ideas to explore in this field.

FinTech

As consumers and B2B companies move towards cloud-based solutions, Fin-Tech sees a good amount of traction in the post-covid world. In fact, a new report by Fleishman Hillard predicts that Fin-Tech is going to be instrumental in the global economic recovery.

SaaS and Remote Working Tools

As remote working is becoming the new normal, the SaaS industry sees a high surge. Different SaaS tools and remote working tools are seeing high traction in this volatile market.

What product do you want to build?

Once you know your target market and what industry you want to be in, the next obvious question is which product to build. For example, if you have decided to explore the eCommerce industry, what will be your offering? Once you decide on the industry you want to be in, identify your target audience’s problem. Understand their frustrations and think about how you can solve their problem with your unique solution.

Market research is an investment

Simply put, market research helps you to gather the information that you can use to make the most desirable product. It also helps to identify a specific section of the market that you want to target. Market research also helps to identify the geographical areas where you want to launch your product. It gives you enough information about the industry, the industry’s growth, what technological developments are affecting the industry, what areas are declining, and so on. The market research also helps you gain insight into what the consumer is behaving like, the purchasing power, and how much sales volume you can expect. The market research also gives you insights into your competition.

Know the market trend

Knowing the industry you want to venture into, is not enough. You need to understand the current market trend and if the users will desire your product. For example, if you want to enter the eCommerce industry, you need to sell products already in demand. For example, if you’re into fashion, then peel-off face mask is a product that sees a rise in sales across Google Trends and Amazon in 2021.

According to search data from Keywords Everywhere, the term “peel-off face mask” received 30,000 searches per month, with the phrase “face peel” receiving another 27,100 searches per month, variant “charcoal face mask” receiving 41,000 searches per month, and “facial mask” 81,000 per month. Now, isn’t that amazing to be armed with such data to make an informed decision?

Key takeaways

Identifying what product you want to make and what industry you want to be in is a long way. While making assumptions, you need to gather concrete data from multiple sources to understand if your assumption is correct. Once you are convinced, apply your inputs to launch your idea into a product or solution. But your task doesn’t end there. You need to review it constantly and be open to change if the need be.

The post The Toughest Question During Ideation: What Product You Want to Make and What Industry You Want to Be In? appeared first on Dutch Uncles.

What do Start-ups Need to Do Right to Gain the Initial Business Traction?

Chayanika Sen — Fri, 19 Mar 2021 12:35:04 +0000

The biggest challenge for any start-up is to make sales. No matter how awesome your product is or how innovative your service is, if people are not aware of you, no one will come to you. Plus, with a limited budget, start-ups cannot afford to spend much on expensive and fancy advertisements. But, one good news is, all start-ups have been in your position at some point in time, and they have all figured out different ways to gain initial business traction. And if they can, you can too. In this article, we have highlighted some tips to help you make your first few sales.

Why initial business traction is important

Business traction for start-ups means to gain momentum, which leads to sales. When there is no traction, your sales are about to dry out. Know that traction does not necessarily mean profit. You can have traction and still see no profit. Companies like Tesla, Uber, Amazon always have traction but see only sporadic profitability. Knowing if your company has traction has immense importance not only to the founders and the employees but also to investors. Investors are likely to get more attracted to start-ups that have more traction than those that don’t.

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The biggest challenge for any start-up is to make sales. No matter how awesome your product is or how innovative your service is, if people are not aware of you, no one will come to you.

Tips to get business traction

Ensure you have a product-market fit

Before anything else, you need to ensure that you have a product that the market absolutely loves it. To achieve the product-market fit, you need to have the right funnel and tweak it at each level.

Amazing product

If you can build an amazing product, half of your job is done. While some packaging and customer satisfaction elements help to get an edge, a great product is what you need to focus on. For example, Nest completely redesigned the outdated home thermostat. Overnight something boring and outdated became desirable and beautiful. Or remember the Coin card product video that generated over 5000 pre-orders in less than 24 hours? So, focus on developing an awesome product so that you can align your marketing and sales towards it with a long-term vision. Another example is Tesla. Their cars are insanely better than any cars in the market, which makes the brand so desirable.

Pre-launch campaign

Kickstart your momentum with a well-planned pre-launch campaign. When you already have a group of people interested to know more about your products, your job will get easier. Your pre-launch campaign can be as simple as a single announcement or a series of teasers to build up the interests. Remember, you need to have a plan in place, so you know what exactly you want to do here. You can send actionable emails to your list of subscribers and give them nuggets of information about your product. You can also create a Facebook custom audience list and send customized ads to the audience. It is always a great idea to share special offers that they find hard to refuse or limited-time access to certain features. These are effective ways to drive returning customers to your product. Encourage your audience to refer to their friends and families. Design some attractive offers around referral programs. Finally, build some excitement with a launch competition where customers can win some of your products to drive initial customers to your business.

Build and engage with a community

If you want to grow your business, you need to build your community—a community of people who will trust you and align with your business idea. It would help if you started building your audience at least six months before your product launch in an ideal world. But if it is not possible, there is still time to work on it now. If you prefer to write, start a blog, or leverage YouTube to create videos. Know that creating a community is not enough, but you need to engage with your community too. Interact with them, ask questions, or answer their queries. Remember to be authentic when you interact with your community. Having a strong community helps to go a long way, so start now.

Build a brand

When you talk about branding, the first few things that come to your mind are a logo, brand colours, slick website, the voice and tone, and social media presence. But the brand is more than that. Your brand is the experience that you deliver to your customers. And when you do that, every customer who uses your product or service becomes your brand advocate. When you deliver an amazing brand experience, your users spread the word among their friends and families, bringing in more revenue for you. For example, consider Uber. The company offers an incredible experience that is hard to replace. The company has an operational executive in every city where Uber operates. These executives work closely with the local customers and the local drivers.

Influencer marketing

Influencer marketing helps to get initial business traction, especially to start-ups. To do it successfully, you need to reach out to influencers in your community or industry. You can do this either by sending out cold emails, interacting with them on social media, or enticing them with lucrative offers. For example, Yelp, a bay area-based start-up, reached out to influential bloggers and reviewers to talk about them and honoured these elite influencers by showcasing them on their home page. If your budget is tight, micro influences in your domain can be of great help too. Micro-influencers are social media users who have between 1000-10000 followers. They recommend products just as normal people do. While choosing micro influencers, it is natural to choose influencers who have more followers. But know that influencers who have a highly engaged audience sell better products because their audience trusts them. Do your own research to choose the right influencer who wants to work with your brand before approaching them. That way, you can find the right influencers.

7. Partnering with other brands

Many start-ups manage to gain initial traction by partnering with other highly influential brands. It is a great way to garner some traction by leveraging the customer base of an already established brand. Partnerships can be of four types.

Syndication: This is a common way of partnership where two brands combine their products and expose them to their respective audience. For example, Cloud-based security provider Silver Sky became a syndication partner with Office 365.
API: If a brand has built a platform, you can leverage the brand’s platform to display your product. For example, Uber has done with other brands like Starbucks, TripAdvisor, etc.
Integration: Two brands work together to improve the features of both the brands.
Referral: Referral can be either an affiliate, reseller, or organization that already uses your product. For example, Dropbox offers one of the most popular referral programs to offer 500 MB of space for both the recipient and sender.

Create and promote original content

Being original makes a lot of difference. Whether you write a blog post or create a social media post, share original quality content. Content plays an important role for start-ups — it helps them build their brand, spread awareness, become an authoritative figure in the industry, educate your audience, and finally help search engines find you and generate more traffic to your website.

Think out of the box

Finally, there is always a scope to think out of the box and get creative. While these tips would help you get started and gain some initial business traction, you can always try something yourself. Unique marketing campaigns and publicity stunts can always help get some traction in your business’s initial days.

Things to remember for beginning with business traction

Start with a clear goal

Science has proven that when you are clear of your goals, you tend to achieve higher. First, begin writing down your goals and visit them at regular intervals to understand how you are doing. Instead of having vague goals like “I want to grow my business,” make it more specific and time bonus. When goals are measurable, you know where exactly you are standing and what you need to do to achieve that goal. For example, a measurable goal can be “I want to grow my subscriber list by ten subscribers every week”. Specific goals can help guide you to make your actions and decisions, ensuring you are having Specific, Measurable, Attainable, Relevant, and Time Based (SMART) goals.

Pre-launch email list

One of the most important things you need to build for your start-up is your own email list. Perhaps you would argue that why have an email list when you are already working towards building your social media followers? Think this way. Suppose you have a huge follower on Facebook, but suddenly Facebook decides to close. Or think about what happened with TikTok in India? If you don’t have any other way to stay in touch with your followers, you are going to lose a huge chunk of your followers, right? That is exactly why you should work towards building your own subscriber list. With email subscribers, you own your data, and unless you decide to remove them, no one else can. You can use different targeting landing pages to build your subscriber list. Start working on your email list before you launch your product. That way, by the time you have your product ready, you will already have a curious bunch of audience to pitch in your product.

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In freemium model, you offer a free version of your product with limited features for a fixed period of time.

Offer a free version or a free product

A freemium model works great for initial business traction. In this model, you offer a free version of your product with limited features for a fixed period of time. This is a super-effective way to build your user base. The model works so well because a user has nothing to lose from it. It is free, so they don’t need to pay anything for trying it out. And it is easy to remove or delete it if they don’t like it. You can also use it with an advertisement model as an additional source of income. For example, Spotify displays ads and plays an advertisement as well after playing a few songs. And once you upgrade to a paid version, all the ads are removed, and you can enjoy it without any interruptions. Another great example is Slack, the popular chatting app. Slack has a very generous free model, which many businesses use without even upgrading it. This model can work for any kind of app.

Key takeaways

Initial business traction is crucial for start-ups because it brings in sales and attracts investors, and helps grow interests among customers. These are some tips that would help you gain the initial business traction for your start-ups.

The post What do Start-ups Need to Do Right to Gain the Initial Business Traction? appeared first on Dutch Uncles.

Decoding Start-up Unicorns and the Pace of Recruitment in 2021

Chayanika Sen — Wed, 17 Mar 2021 10:35:05 +0000

The COVID-19 pandemic and the global lockdown have led to mass hysteria, growing unemployment, and liquidity crunch across the world. While the job loss wave has hit India too, the scene is quite different in the Indian startup ecosystem. Amidst the pandemic, in 2020, several Indian startups like Nykaa, Razorpay, Postman, Zerodha, Unacademy achieved the Unicorn status reaching the coveted $1 billion dollar in valuation mark. In fact, it has been projected that the Indian Unicorn club is expected to grow steadily through 2021. By 2025, India is expected to have 100 unicorns. As India embraces digital acceleration and deep tech adoption more so, after the COVID-19, the country has seen a rapid growth trajectory, especially in the tech startup space. A recent joint report titled “Indian Tech Start-Up Ecosystem – On the March to Trillion Dollar Economy” published by the National Association of Software and Services Companies (NASSCOM) and Zinnov, global management and strategy consulting firm, revealed that 2020 saw 1600 tech startups with a record number of 12 new unicorns added in 2020. The year-on-year growth for tech startup over the last year has been 8-10%.

The COVID-19 pandemic played a major role in the digital adoption and shift to the internet in the country. This has created new business opportunities and tech startups are leveraging these areas, especially in SaaS based solutions. The NASSCOM report further mentions that 19% of the tech startups are leveraging deep tech solutions to build unique products suited for market expansions. The deep tech space is thus seeing a tremendous growth momentum, which is also attracting a lot of Venture Capitalists (VC) to invest in these startups. While 14% of the total investment is in the deep tech area, 87% of all the deep tech investments are in the Artificial Intelligence and Machine Learning area.

The seed-stage investments are also recovering at a faster rate. The seed-stage funding has recovered more than 90% from 2019 to 2020. For the first time funding, Banking, Financial Services and Insurance (BFSI), Edtech, and AgriTech industries are seeing positive growth.

Amidst the pandemic, the Indian tech startups not only managed to stay afloat, but they are actively identifying the opportunities and thus converting the crisis to opportunity. Interestingly, the digital maturity of India has jumped from 34% to 55% over the last couple of years. While job loss became a major concern in the last year, Indian tech startups are actively looking to recruit skilled candidates and fill the quickly growing demand for specialized skill sets.

Startups that became a unicorn in 2020 are now all set to ramp up their hiring across domains, including data science teams, tech, product, sales, marketing, operations, engineering, etc. Recent news mentions that these companies that became $1 billion in valuation in 2020 are now hungry for growth and are looking to recruit 10-100% to drive market expansion as well as invest in product development.

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While job loss became a major concern in the last year, Indian tech startups are actively looking to recruit skilled candidates and fill the quickly growing demand for specialized skill sets.

Startup Unicorns Which Are Planning to Recruit

Razorpay

Razorpay is a Fintech company that became a unicorn in 2020 amidst the pandemic. The company is likely to recruit over 500 odd employees, mostly across engineering and product teams, as the company focuses on building solutions for small and mid-size businesses.

Zenoti

The homegrown multinational company that is the other unicorn to get added to the unicorn club, is Zenoti. This software product company is looking to add over 400 employees to its headcount. While the company is looking to recruit most of the talent in India, they are also looking out candidates for Seattle, Australia, and the United Kingdom. The present strength of the company is 550. The company is planning to hire for new product development as well as for market expansion and looking for candidates in different areas, including sales and marketing roles.

PineLabs

The other unicorn looking to hire is PineLabs. PineLabs became the first unicorn of 2020, where the funding round was pegged at $100-$150 dollar. Founded in 1998, this Noida based startup is a merchant platform and makes software for point of sale (PoS) machines. The company serves close to 140,000 merchants across 450,000 network points. The company is actively hiring and has stated to add 300 more employees to its existing employee base. The roles are majorly in the sales and tech space. The company has different digital payment offerings for its users.

Postman

The Bengaluru based SaaS startup provides a platform to software developers to accelerate the development process. The platform lets developers collaborate with different stakeholders. Postman is known to be the fastest SaaS startup that has reached the unicorn status. The company caters to more than 500,000 companies globally and is used by 98% of the Fortune 500 companies. The company is now looking to double its team size this year. It is now aiming to hire leaders across engineering, products, and design. The company’s hiring strategy will be focused on strengthening its artificial intelligence, product development, technology, engineering etc.

Glance

The other company recently added to the unicorn club and has reached $1 billion in valuation and is looking to expand its team base. The company’s current headcount is 400, and it is looking to hire 30-40% of its current headcount.

Cars24

Another unicorn is looking to increase its employee strength by 10-20%. The used car segment is seeing strong tailwinds after the pandemic, and the company is looking to add more headcounts to its 3000 members strong team. However, recruitment would be more cautious.

People are relying more on online medicine delivery after the coronavirus outbreak, and the e-pharmacy sector had seen some major traction last year. This sector is booming well, and companies like Ascent Health and Wellness Solutions are looking to hire more candidates this year. In a news report, the company CEO mentioned that they are planning to hire 4,000-5,000 people this year as they continue to expand their pharmacy business. The company plans to continue its tie ups with pharmacies which is projected at 1 lakh. Currently, the company has 50,000 tie ups.

Other Unicorns to Watch out: Who Else Might Recruit in 2021?

Although these startups are being recently added to the unicorn list, their hiring plans are undisclosed at the time of writing this article. However, it would be worth watching out for.

Nykaa

It is an online lifestyle and beauty marketplace and is looking for a $3 billion IPO this year.

FirstCry

After a decade of its inception, FirstCry earned unicorn status in 2020. The company had raised $400 in funding from SoftBank in February 2020. Although there is no update for its hiring plan for 2021, it would be exciting to watch its growth in terms of recruitment.

Zerodha

Started as a bootstrapped startup, Zerodha has now reached the unicorn status with a valuation of $3 billion. Zerodha, a technology – based brokerage firm, has recorded tremendous growth in 2020, doubling its average monthly user addition from the pre covid times.

Unacademy

A well-known brand in the edtech space has made five acquisitions last year and is committed to growth this year. This comes as no wonder because among the few industries that are seeing excess growth as the aftermath of the covid-19 is edtech. The industry has attracted $4.9 billion already last year in investment and looking at the prospect of the edtech industry, we can expect to see hiring here.

Daily Hunt

Although we are not confirmed, it is not hard to guess that the company definitely has some growth plans, even though not only through hiring because this is one of the 30 companies that received funding from Google’s Digitization India Fund.

Along with these unicorns of 2020, Digit Insurance became India’s first unicorn for 2021. Valued at $1.9 billion to enter the unicorn club in 2021, this Bengaluru-based startup offers a user-friendly platform that leverages technology to make the process of buying insurance a seamless one. Jyoti Bansal’s B2B startup, Harness, also earned unicorn status with a $1.7 billion valuation after raising $115M. Experts have projected that India is all poised to have at least 50 unicorns by 2025, and it would be great to watch how the startups shape their hiring strategies in the coming months.

Expected Pay Package

While the salary varies to a great extent depending on the role and seniority level, the average salary package one can expect is between INR 15 lakhs – INR 60 lakhs per annum. The pay package can go higher to crores for senior leadership roles. A survey done on 1050 organizations across 20 sectors suggest a salary hike of 7.3% in 2021. The survey further revealed that hi-tech, IT, IT-enabled services, life sciences, professional services, e-commerce, and chemical industries are going to see the highest rise in salaries.

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72% of the startups founders revealed that they are likely to increase their recruitment this year.

Major Challenges Startups Face to Recruit

While investments are coming in and startups are looking to recruit, the challenge that is poised now is finding the right talent. In a survey, 52% of the founders mentioned that hiring right is the biggest challenge for them. While high growth companies attract the talent pool, since the talent pool is limited, getting them onboard gets difficult. Time is another challenge for startups when it comes to hiring. While still in the stage of defining the buyer persona, looking for partners to test your MVP, working on a pitch deck, you also need to make your hiring strategy and recruit the right candidate, it definitely poises the startup in a challenging situation. Another major challenge for startups is building their brand identity. Since not many people know about the brand, candidates may feel sceptical about joining. Hence brands need to work on their digital presence and work actively on their employer branding to attract the talent pool.

The Takeaway

Overall, hiring in startups has grown significantly since 2019. Even when job loss is on the rise, Indian startups are likely to see hiring picking up this year as startups bounce back in business improving their revenues. The growth now is tremendous, and some are seeing growth more than the pre covid times. In a survey conducted by InnoVen Capital, 72% of the startups founders revealed that they are likely to increase their recruitment this year. While some companies had to take harsher measures like cut down on jobs and salaries to recover from the hit, they are now back in the market and ready to ramp up their teams. While edtech, fintech, health tech hiring was seized last year, startups operating in these industries are expected to see an increase in recruitment in 2021. It would be interesting to keep a tab on the job market and watch how these startups perform in hiring in the coming months.

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