It’s late, and an idea hits you. You give it some thought and determine it could be the next ample business opportunity. You quickly scribble it on a napkin and set it down. You’re pumped at the idea of transforming an industry. You wake up the following day, look at your idea, and realize it’s impractical. You know the industry but don’t have the experience or capital necessary to move forward. You mull it over and, after much consideration, decide it’s unwise to move forward. You toss the napkin in the trash and continue with your life.
Beerud Sheth, the man behind Elance, which later merged with oDesk to become Upwork, pioneered the freelancing gig economy with nothing but an idea and grit back in the late ’90s. Growing up in India, Sheth attended IIT Bombay, one of the top technical schools around, before studying at MIT. Although his education provided him with the specialized experience necessary to succeed, he found himself wanting to gain firsthand business experience, which led to a brief stint on Wall Street.
“The internet happened” during this time, Sheth notes. “Netscape went public, Amazon, eBay, and Yahoo were all scaling up too. So, I was keen to have this sort of entrepreneurial age, if you will, to do something and have an impact,” he explains. While the power of the internet and its ability to connect people worldwide is evident now, this wasn’t always the case. The power of the internet was a novel concept in the late ’90s, especially its scale and scope. “Having worked on Wall Street, I knew that you could create these marketplaces to figure out the price of illiquid securities,” Sheth adds.
Early on, Elance didn’t have much capital. However, like most young entrepreneurs, Sheth was filled with ambition, excitement, adrenaline, and so much enthusiasm that obstacles in his path seemed small. Struggling with capital, he relied on his alumni network to find investors who believed in Elance’s visionary objective and were willing to risk a few bucks. Between Elance’s initial capital raise and its merger with oDesk, Sheth encountered countless experiences and developed tried and true methods for building a world-class business. He then applied these methods to his current venture, Gupshup.
Gupshup is a messaging platform powering over six billion messages monthly. After Elance, around 2004 or 2005, a worldwide mobile revolution took place. At the time, the only way to reach billions of users around the globe was through SMS. Sheth and his co-founders saw the power of SMS as a platform that enabled them to reach people who were previously inactive in the digital space. They determined that if they’d be able to introduce users to some new services, they could get them hooked and scale up their business. There was a considerable business opportunity at the time as this was completely uncharted territory.
One thing Sheth’s entrepreneurial track record demonstrates is his ability to think strategically and in a manner that transforms businesses into successful businesses. First, Sheth developed his methods when facing industries that didn’t exist. Then, he refined and validated his strategies as others have raced down the path he helped pave. As a result, Sheth’s tried and true methods can enable entrepreneurs to understand their businesses better and determine what actions they should be taking and why.
Do Startups Spend Too Much Unnecessary Capital?
According to Sheth, the only reality that matters is the customer’s reality. As an entrepreneur, it’s not just your perspective that matters. Whether it’s your business idea or the idea for your product, you need to evaluate and understand it from different perspectives. Does it solve the problem you’re attempting to solve? If so, does it solve it efficiently? Is it better than the alternatives? Is it cheaper than the alternatives? Is it faster than the alternatives? What behavior changes must take place for your solution to work? Once you answer each of these questions, you begin to understand whether you’re spending capital unnecessarily. Sometimes, as was the case with Sheth’s company, Gupshup, you need to spend money or else the user experience will suffer.
How Can Entrepreneurs Successfully Transform Their Ideas Into Successful Businesses?
Sheth says, “it’s about two or three major milestones. Finding that product-market fit is key. First, you go from an idea to a product, from a product to revenue, and then from revenue to scale. Then you’re a real business. So that first stage is going from an idea to product and by product, I mean a successful product that customers want, use, and like. That’s how you find the product-market fit.”
“Then, there’s another concept that’s known as the founder-market fit. With this, you evaluate whether you have the right person who knows and understands the domain, can relate to and think about an idea, and find the right solution. If you’ve never been in the space in which you’re looking to solve a problem, and you can’t relate to your customers, it’ll be a lot harder to be successful.”
“When it comes to testing your product, there are many testing models. One method is watching consumers as they use your products. Another method is A/B testing. However, A/B testing helps more with refinement and doesn’t help too much with version one. These are the tools of the trade to get your product to a point where you can make sure it fits within your market. Now, of course, this assumes that the idea you began with is in a real market. Your customer might say, ‘okay, it’s nice,’ but they don’t spend any time with it. Or they don’t use it in a meaningful way. Or maybe a small number of people do use it meaningfully, but you can’t scale or generalize it to more people.”
“That’s the first stage. Then, after that, you want to sell a painkiller and not a vitamin. Your solution should be essential and address a real pain point. Those are the ways to get through the first stage. Usually, if you follow these steps, you begin to build momentum and start moving through successive stages.”
What Should Entrepreneurs Who Seek To Fundraise Do Beforehand?
According to Sheth, you need to think about it not only from your perspective but also from the perspective of prospective investors. It all boils down to your story and how it, along with your execution, is backed by facts
If you’re trying to raise money for your startup, you should be networking and talking to people who are connected. It’s wise to find advisors who’ve been through the fundraising process before and can help you to refine your idea before an investor ever sees it. In addition, your advisor should be able to help you think through and polish your position. There’s so much capital floating around for new ideas and innovation these days. Sheth notes that finding investors shouldn’t be a massive problem if you do everything right.
Likewise, turning away an investor isn’t a huge problem either. For example, if you share your idea with someone who then wants to invest in your business, but you feel you don’t need the money, politely turning them away isn’t going to burn the bridge. Actual investors will respect your decision and will likely want to keep in contact so they can have the opportunity to invest available to them when the time is right.
Building an Empowering and Productive Company
Sheth’s position is clear: all growth happens at the intersection of both the company’s needs and what the employees need. When working with employees in a startup situation, there needs to be a balance between what the company needs the employees to do and how they want to approach their work. Serving only the company’s needs or only the employee’s needs will get the company nowhere. For example, if an employee wants to be more creative, you’ve got to embrace their creativity in a way that both serves the employee’s desires and furthers the company’s goals. Working within a startup, Sheth notes, enables you to give employees the flexibility, choice, and option to work on projects about which they’re passionate.
“If you’ve done the right kind of hiring, you’ll have these versatile and mature people who don’t get hung up on titles, roles, boundaries, or sandboxes, and things like that. They just show up to work every day, looking to make an impact. If you’ve hired the right kind of people, most employees will be flexible and versatile enough to add the type of value the startup needs. In some sense, that’s empowerment. That’s something you can only get at startups and rarely at a large company,” Sheth adds.
Beerud Sheth’s Top Five Identifying Traits of a Disruptive Product or Service
1) You should be in a large market so that if things go wrong, or if something doesn’t work, you have enough space to wiggle around and maneuver your way through it.
2) Your business and idea should be based on a critical insight you know and others don’t know. Your insight should be a different perspective that others aren’t following.
3) Your product or service shouldn’t be easy or trivial to replicate. It may be that initially, but over time, as it scales up, it should become more challenging to replicate.
4) It should be easy to test and validate the hypothesis of your idea. You should be able to validate your hypothesis very quickly or iteratively. It shouldn’t take long to develop.
5) You should be selling a painkiller and not a vitamin. Even if it doesn’t provide an immediate benefit, the more significant point is that there better be a headache that you’re fixing in the first place.
Does a Product or Service Need To Be Perfect?
No. Perfection is based on the individual looking at the product or service through their unique lens and experiences. Perfection for you as an entrepreneur may be wholly different and overkill for a customer. Customers might see a basic version of your product or service as perfect because it provides the solution they need. Sheth notes that perfection needs to be seen and felt from the customer’s perspective. Perfection, from the customer’s standpoint, is something that comes out quickly. Customers won’t tell you to do research for ten years and come back with something. They want a solution, and they want it yesterday, which is why being able to validate your hypothesis either quickly or iteratively is critical.
Sheth’s experiences and strategic frameworks provide absolute gold when building a startup from the ground up. From beginning to end, his processes and ways of thinking can enable your business to go from nothing to something. So use this information wisely and begin taking your idea or startup to the next level.
View this article in the September 2021 issue of MP.