Triple Shot Saturday - Edition 4
Three of the highest signal-to-noise ratio snippets from the startup/tech podcasts for founders/operators.
Hey there,
Here are the three snippets from startup/tech podcasts for this week.
#1: Krithika Muthukumar (VP of Marketing at OpenAI, ex-Stripe, Retool, Dropbox, Google) on the In Depth Podcast by First Round Capital with Brett Berson. She speaks about how to win the hearts and minds of developers/designers as customers.
Invest in quality, even if it delays launch. Developers and designers have low tolerance for poorly designed products. OTOH, a quirky design can elevate their engagement and experience multifold. For instance, Stripe once pushed back a page launch by six weeks to perfect a design element:
"We delayed the launch of that page by almost a month and a half because our design team wanted to implement the game of life in the background, in the header background of that page. And that sounds crazy. It's like, why would you delay the launch of that by six weeks? But what happened was it went viral. Like the design community took a look at that page because they saw that interesting kind of animation in the background. The developer community took a look at it and saw the craftsmanship and the importance that we placed on the design and the aesthetics of the page of. And I think it speaks a lot to then the craftsmanship that we place on our product."
Strip out the marketing speak and share knowledge freely.
"And so that meant kind of stripping out anything fluffy from our marketing, really thinking through, you know, the right ways to reach them that wouldn't alienate developers. So if we put out content, it wasn't behind a gate wall where you had to put in your email address. If we had a campaign that we were running or like a brand campaign that we were running, we were very intentional about making sure that we were using very clean spoken language that would resonate with developers. It wasn't fluffy or over the top, and a lot of it was just knowledge sharing for the sake of it. Our engineering blog got a lot of traction because we were taking learnings as developers ourselves and then putting that out there."
Get creative with engagement. For instance, Stripe's "capture the flag" tournament for developers was a hit.
"We launched a capture the flag tournament at stripe, and that's typically for, you know, infosec researchers and black hat type of areas of security research. And we did that at the payments domain and we had no expectations of how many developers would participate. But at its peak, we had about 10,000 people go through the entire five different levels of the capture the flag challenge, and many of them, actually many of the victors turned into strike engineers in the future."
#2: Kaushik Mudda, co-founder and CEO of Ethereal Machines, a deeptech startup, on making the pivot from selling machines to selling machining-as-a-service on the Forbes Deep Tech Conversations.
Even though Ethereal was ahead of the curve, there were adoption challenges, with customers being shaky about usage and payments.
Kaushik explains. "...what customers started telling us is why don't you give us the machine and then we will run it for a year and then we will pay afterwards. And that was a really hard time because remember, we just raised $1 M at that point in time. And we've survived for four and a half, five years. Doing multiple iterations on hardware and software and then I need to get this company off the ground."
Instead of agreeing to these terms, Kaushik suggested a different solution to the customers.
"So at that point I said, you know what, I cannot give you a machine and wait for the money to come in for a year. So if you have some components, why don't I look at it? So in late 2022 I decided I am going to start with one machine on my own shop floor and I'm going to turn out some components and see what. Happens. And that is a point from which we've never had to look back."
The success of this model prompted Ethereal to pivot its business model to "Machining as a Service" which has led to Ethereal scaling 5X in just one year!
"So to give you an idea in the last 12 months, our revenues have grown 5X. Now we don't sell our machines. So what we do is we have a battery of. machines that are running 24 by 7. It's a lights out factory. We run 24 by 7. No pause, no stoppage. No matter what. We're completely booked out for the next like three to four months. We are adding two to three machines every month on our shop floor. Our revenue has grown 5X like I said in the last 12 months and in the next 12 months I'm seeing we have to grow another 10X on here."
#3: Sajith Pai, partner at Blume Ventures on Making Markets podcast (part of Colossus Network of podcasts) with Eric Golden. Sajith speaks about the two types of venture-backed companies - hyperscalers and compounders.
Hyperscalers: The Rocket Ships
Sajith defines hyperscalers as companies that can absorb and effectively use large amounts of capital to fuel rapid growth. He explains:
"As a founder, you got to -- I'm a hyperscaler. I am like a Zomato, Swiggy, Flipkart, Zepto which can take a large amount of capital and continue to reinvest in it. So my market is not 10 million people in India One or 20 million people in India One. My market is perhaps India One and India Two."
These companies target a vast market, potentially serving hundreds of millions of customers across different economic segments in India. Sajith elaborates on the market size for hyperscalers,
"Just to unpack India One, India One was about 10% of the country per capita income of $15,000, so think of Mexico. India Two is 20 million households. So 100 million people in India One, 300 million people in India Two."
For hyperscalers, the strategy is clear: "Then please take gobs of capital. Keep investing in it."
Compounders: The Steady Growers
On the other hand, compounders are businesses with a more limited target market. Sajith advises:
"But if you're only going to serve a thin sliver of India One, where your customer base is not that large, then growth in a compounded way. So grow steadily every year, don't raise a lot of capital and see if you can go for an IPO in five to seven years."
For these companies, Sajith suggests a more conservative approach:
"If necessary, go to the small bourses. There's an SMB bourse, it's called, and sort of the over-the-counter exchange in the U.S. Go there, don't raise a lot of capital because you won't be able to use it well. And that will come back, too, in the back later."
Understanding whether you're building a hyperscaler or a compounder is crucial for setting appropriate expectations, making informed decisions about capital allocation, and charting a suitable path to success in the complex Indian startup ecosystem.
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See you next week.
Rohit