Dhruv Nath on The Dream Founder

Dhruv, all yours.

Dhruv Nath

Okay, thank you so much, Subhanjan. And good morning, good afternoon, good evening, wherever you are. I just want to mention a couple of things before I start. Subhanjan rightly mentioned, I have been a professor, but when you’re running late, the last person you want speaking on your show is a professor, ex-professor, because they know how to start, they don’t know how to stop. You’ll have to tell me when to stop. That’s one. I just want to mention one thing, in fact, in connection with what the earlier speaker, Amit, had mentioned. He talked about the one thing. In this book, The Dream Founder, and I don’t know if you can see this, I guess you can, I talk about when you’re making presentations to your clients or maybe you’re making a pitch for funding to your investors. Normally people just pack everything into their PowerPoint presentation, and the investor gets completely lost, so does the customer. I have tried to create a concept which I call WYKM, W-Y-K-M, which stands for What’s Your Key message? That key message has to come out again and again because that’s the key message you want the person who’s listening to remember.

It links up very well with what the previous speaker said. Just to give you an example, if you remember Barack Obama’s election speeches, he had a statement saying, “Yes, we can”. Repeatedly, he would say this. At the end, you may forget everything else he said. But you remember, Barack Obama said, “Yes, we can”. That you remember. What’s your key message? You have to decide what your key message is. Make sure that is communicated to the other side. Let me now start with my presentation. Actually, there are two books here. One is “The Dream Founder” and the other one is “Funding a Startup and Other Nightmares”. That’s the full title. The reason why I wrote these books was I spent a lot of time, in fact, I must have mentored maybe 200-plus startups. I realized that people are very confused about what they need to do to create a successful startup. Therefore, based on all the experience I had in mentoring these guys, what I tried to create, along with a close friend and co-author, Sushanto Mitra, we created a framework. That’s a framework which the founder can use to analyze his or her startup and therefore figure out whether it’s likely to succeed.

Similarly, the same framework is used by investors to figure out whether to invest in that company or not. This framework has become fairly popular now. I thought I’d share this here. There are parts of marketing in this, but it’s not only marketing.

It’s called the Persistent Framework. I’ll share this framework with the help of one story, and this is one of the startups that I have been personally involved in. It’s called SQRRL. Now, if you watch Squirrels in action, you’ll find that typically they hunt for food, and some food they eat and some food they save. Now, if you look at human beings, they also need to save, although it’s money and not food. But there is a very fundamental problem with saving, and that has to do with human nature. There are far too many temptations in life. You get a great new movie in town. You are trying to save, but you’ll go to that movie, you’ll go with your friends, you’ll have popcorn, you’ll have a cold drink or whatever, and to hell with savings. Anything that comes up is so tempting you tend to spend and therefore you don’t save.

What the founders of this company, SQRRL, did was they said, “Okay, let’s go back to our grandmother’s time and see how she saved and see if we can learn from that”. Your grandmother would have had, in India, we call it a gullak, but typically worldwide, it would be known as a piggy bank. This is a little box with a slot here where you can put in coins. Let’s see how this works. Let’s say your grandmother went to market and bought something worth, let’s say, $9.80, and she gave a $10 note and she got 20 cents back. That 20 cents went into the piggy bank. You can’t remove it because you have to break it. Similarly, tomorrow she spends, let’s say, $14 and 70 cents, and she gets 30 cents back, and that 30 cents goes in. Now, this approach to savings works very well, and I’m sure many of you have seen that. The reason why it worked extremely well was that it is painless. If you spend $9.80 or, in my currency, rupees and paise, if you spend 9.80, I mean, spending 10 rupees doesn’t hurt you. It’s only 20 paise extra. It is small change.

Put that into the piggy bank. There’s no problem. It’s painless. Because you are saving this small amount at a time, small change at a time, you don’t even notice it. It doesn’t hurt you. Correct? This works. The founders of this company decided, “Okay, we will actually automate this piggy bank because today you’re living in a digital world”. They created an app, and that app was called SQRRL. Now how does it work? SQRRL created an app and you have to download the app and register. Now, every time you spend money, except, of course, if you give cash, every time you spend money, whether it is a credit card or a debit card or online banking or whatever, it doesn’t matter, you get an SMS on your phone—and this is the way it works in India—which tells you how much you spent. When you registered on the app, you gave SQRRL permission to access these SMSes. So SQRRL knows how much you spent. Now, at the end of the week, it totals up your total expenses, rounds it up to the nearest 100 bucks. Let’s say you spent 1,590 bucks. It rounds it up to the nearest 100, which is 1,600. 10 Rupees is saved.

That’s how saving happens. It works very similar to the piggy bank, except that here it is automated, whereas in the case of a piggy bank, you could cheat. Your grandmother could have said, “Today, I don’t feel like saving, and therefore I won’t save”. Now, what these guys realize, and this is where key marketing issues come in, they try to figure out whether they could charge for this, and they realize, no, for the very simple reason that on the internet, every damn thing is free. People don’t believe in paying on the internet. You search on Google, you’re not paying. You’re on Facebook, you’re not paying. You’re on LinkedIn. Most people are not paying. Everything is free. They realized people would not be willing to pay for this service. But they said we will do it because it’s a service. It’s a free service. We get lots of people to use it. Once all these people have got hooked, then we will offer them other financial products and charge for them. For example, insurance, loans, mutual funds, financial planning, et cetera. Essentially, what SQRRL is providing is wealth management for the non-wealth, for the common man.

Basically, therefore, the one message I want to get across here is helping you save is not their product, it’s not their service. It’s a method of marketing to get people onboarded. Once you’re onboarded, after that, you’re offered these paid services. That’s the SQRRL story.

Now I’ll talk about the framework. This framework is called Persistent. By the way, it’s there in both books, “Funding a Startup” as well as “The Dream Founder”. Persistent is something. Let’s take a look at these letters one by one.

First of all, P stands for problem. You have to solve a problem. You have to solve a pain point because if you’re not solving a problem for the customer, sorry, you don’t have a business, you have to solve a problem. In this case, clearly, they were solving a problem because A, they were helping people to save, and B, they were helping people to buy other products from one single app, whether it is buying insurance products or by taking loans or helping in tax planning and so on. No problem. P is taken care of.

Next is the E, which is earnings model. Not only should you be solving a problem for the customer, you must also earn out of it. Because if it’s a free service, boss, you don’t have a business, you have a charity. Clearly, these guys were solving a problem and they were earning out of it because for the other services. Other than saving, people were willing to pay, so not a problem.

Third is what I call size of the market. Again, very, very important because when you’re creating a startup, if you have a market which is small, then at some stage, at a very early stage, your startup grows and ultimately stagnates at a very, very low level. Why? Because there’s no more market. Operating in a market which is large is extremely important. Now, this particular startup operated in India, and they were addressing what is called the middle class in India, which is non-rich but non-poor. That’s a huge number. It’s about 400 million. Huge number, bigger than any other country in the world, except possibly China. It’s a huge market. There is no problem at all. However, sometimes your market is very crowded. As sales guys, as marketing guys, many of us are faced this. You’re facing competition, lots of competition. When you have competition, everybody is going to offer discounts.

There are too many choices on the internet. Switching from one vendor to another is so easy. Therefore, it is never a great idea to operate in a market which is very, very crowded. What you do? What you do in very simple terms is within that large, crowded market, you try and identify a subset or what I call a niche, N-I-C-H-E, N, which is large enough but not crowded. That’s what SQRRL did. They identified a large enough, non-crowded niche, and that’s the N in persistent. What’s the niche? See, these guys realized that older customers, people above the age of about 25, 26, 27, most of these competitors were chasing such customers. Why? Because when they bought insurance policies, it could be big policy policies. When they took loans, it could be large loans. They were not interested in college students. They were not interested in young people in their first job at the age of maybe 21 or 20. They were not interested. That entire segment of people below the age of 24, 25, which is either college students or people in their first job, that’s the segment that was a virgin market. Nobody was really targeting it seriously.

SQRRL said, “This is what we’re going to target”. By the way, it’s a brilliant strategy because over time, these guys, once they become comfortable with SQRRL, they start earning more, at that stage, the value of the transactions they do also keeps increasing. It’s a great way to get people onboarded when they are young and grow with them as they grow. That’s the first four.

Then we have scalability— very, very, very important. In the internet world, it’s the faster guys who are going to succeed, the slower guys will get killed, and that I’m sure all of you are aware. Scalability means what? Scalability is the ability to grow big, but not only grow big, but to grow big fast. Why? Because if you don’t grow fast, the other guy will grow faster than you eat into your market share, take away your customers, and ultimately kill you. One very important thing that we realized when mentoring and investing in all these startups that we did was that scalability can actually very, very easily be figured out. I’ll take an example. You take a company like McKinsey. It’s a wonderful business, very highly profitable business, but it is not a scalable business.

No consulting business can be scalable because it is too heavily manpower dependent. It’s a manpower-oriented business. You want to double revenue, you’ve got to double your highly scaled consultants. Impossible. You can’t do that in one year, and therefore you can’t grow rapidly. On the other hand, if you are running a business which is tech-oriented, for example, an internet business such as, let’s say, Booking.com or Google or Amazon, they are very highly scalable because they are technology-based and not manpower-based. If you go back to SQRRL, it’s basically a tech business— internet-based, technology-based, very highly scalable.

Next issue— risks, and this is the R in persistent. Obviously, every business will have risks. One of the biggest risks is the risk of competition getting in, and therefore you need an entry barrier. Entry barrier would be what? For example, if you have a highly innovative solution, which is the I in Persistent, it’s a great entry barrier. If you have a wonderful brand like, for example, Apple, it’s a great entry barrier. If you have a very large client base and these are sticky clients, meaning they will find it difficult to leave you, it’s a great entry barrier. If you look at SQRRL, the entry barrier actually was very weak.

Because the moment one of these big guys who are competitors, who are in this college student space, realize that this was a good opportunity, they would jump in. It’s low. Over time, trust and brand to some extent would become the entry barrier, but not very great. One more reason to scale up rapidly. I talked about eight things here.

The last two. The team, which obviously starts with the founders— these were great founders. There were three of them, and they had a background in investment banking and therefore they understood what clients really wanted.

The last thing, what’s the final proof? You can have a wonderful earnings model, great entry barrier, terrific scalability. But what’s the final proof of the business? Are you getting customers? Traction. Are you getting revenues? Are these customers increasing month on month, quarter on quarter? Are the revenues increasing? Are they sticky customers? That is traction, and that’s the final proof.

This is the persistent model, 10 things. Increasingly, I find a lot of startups have begun to use this to evaluate their company. A lot of investors are also using it when they take a decision to invest. Final thing, before I conclude, what do investors look for?

Like I mentioned, it’s exactly the same thing. Because ultimately, whether it’s investors or founders, they’re on the same side of the table. Both of them are looking for companies which are successful, which ultimately become large and profitable, which are able to keep out competition, which have an entry barrier, which are scalable, and so on and so forth. Investors, founders alike, both of them would be looking at the PERSISTENT model. SQRRL, by the way, was able to raise a million dollars within one year of launch. Today, they have about one and a half million downloads and about half a million monthly active users within a period of about three years. They’ve been acquired by a very large NBFC. NBFC in India stands for a non-banking finance company— which wanted to diversify. All the investors and the founders got a profitable exit. That’s the wonderful story of SQRRL. Before I end, I just want to mention one thing, Subhanjan, you mentioned sense of humour. Since I had only 20 minutes, I couldn’t crack too many jokes. I’m sorry, but I’ll say one thing. You mentioned that I was a consultant to the Prime Minister of Namibia. You’re absolutely right.

But after that, he lost the election. You also mentioned that I was a consultant to the Chief Minister of Delhi. After that, she died. You guys have to decide whether you want to take my advice or not. One person lost the election, one person died. With that, thank you for persistently listening to me. By the way, PERSISTENT is not only an acronym. Very, very important thing that the founder needs to be is persistent. Keep on and on and on and on at it. You’ll have all kinds of problems. You’ll have COVID, you’ll have the Ukraine War, you’ll have all kinds of recession in the world. Keep on at it and somewhere hopefully you will succeed. I think with that, I’ll stop. Thank you for your patience.

Subhanjan Sarkar

Thank you, Dhruv. That was wonderful. I think it brings a different flavour to what we were talking since morning. I was very keen that you came and spoke about this. Because a lot of us are start-ups of one. I think the mindset that we take to sales needs a lot of these— may not be exactly in the way it is used in the start-up world, but being persistent or talking about a niche, this is all fundamental.

Thank you very much. I really appreciate it. And I look forward to more sessions in upcoming Litfests that we’ll do. Thank you so much.

Dhruv Nath

Thank you. Thank you, Subhanjan. Thank you, everyone. Bye-bye.

Subhanjan Sarkar

Thanks, guys. We’ll be back with the next session in a bit.

show less