NRI startup guru Munjal Shah survived dotcom, health scare to script a success story.
Bengaluru, India | Red Newswire | Source: ET Bureau | Nov 18 2015 03:44 AM IST.
Munjal Shah was as angry as he was scared–maybe more angry than scared. An unusual mixture of emotions for someone who’d just sold his company to Google for more than $100 million the previous day.
In the middle of pounding his way through a 10 km race in San Francisco, Shah developed severe chest pains and had to be rushed to the emergency room.
“I was like–Oh my god, all my life I’ve been wanting to get to this milestone of success and now I’m going to die? This sucks,” he recalls telling himself in the ER.
That was in 2010. It was a scare that would plant the germ of yet another startup idea in Shah’s mind. Now 41, he runs HealthIQ, which aims to become a new-age insurance company, encouraging users to become fit by working on their conscience.
Relatively unknown among Indian-American entrepreneurs, Shah has had more than his fair share of wins in the startup ecosystem. Top of the list are two exits–one to Google and the second to a company that was eventually acquired by Alibaba.
Second, in an age when funding is a glorified milestone, Shah stands out for having survived through the dotcom bubble of 2000 and the financial meltdown of 2008.
Rob Hayes, one of the first investors in taxi hailing-app Uber, calls Shah a “consummate entrepreneur.” “The current generation of entrepreneurs has not seen even a single economic downturn. He’s building a company that lasts through multiple business cycles,” said Hayes, who has known Shah for a decade and backed two of his companies.
At a time when the lifespan of the average startup is notoriously short, Shah’s journey offers important lessons on what to do when funds dry up, mass layoffs ensue and how to treat customers.
His entrepreneurial journey began in 1999 with Andale, a software tool for sellers on online marketplaces. Shah entered software-as-a-service before the concept went mainstream.
He raised about $50 million that year. A year later came the dotcom bust.
“It was truly a great experience, but it almost crushed me,” said Shah. He was forced to sack 180 people, reducing staffing to skeletal levels to remain afloat. “At 26, you are not ready to run a company, you are certainly not ready to figure out how to do layoffs, you don’t understand how to do it nicely.”
But he soldiered on, and four years later, the company broke even, having lifted employee levels to about 200, about 180 of whom were based in Bengaluru.
He then began the process of selling the firm, finding a buyer in Vendio, which eventually got sold to Alibaba. After six months of brainstorming with AngelList cofounder Naval Ravikant during long walks in the Bay Area, he hit upon the idea of Riya, an image-recognition tool that automatically recognised pictures and tagged friends. Even as everyone, including the press, became enamoured with Riya, Shah remained laser-focused on the numbers. His constant refrain was this: Are customers using the product?
When the numbers said otherwise, he shifted focus to ecommerce sites instead of individual customers. “Everybody pivots when they have six months of cash flow. I pivoted when we had three years of cash flow,” Shah said.
He was ultra-conservative in his strategy. He consistently hired fewer people than needed, raised less money than required and spent frugally, despite having sound revenues.
By 2008, things were looking good for Like.com, the price comparison website set up by Riya. But just as the company closed its Series C funding round, the financial crisis hit.
“And I was like, oh my god, this happened again. Sequoia (issued) this famous memo back then. ‘The world is ending. It is not going to be the same again.’ I was like—no! You invest when everybody else does not invest.” Sure enough, by the time the situation had revived somewhat, Shah had a brand new product ready and found himself being wooed by Google.
“Ultimately, running a company is like a chess game, where you have to plan ahead for all problems. Munjal is phenomenal at that,” said Vineet Buch, a cofounder of Like.com and now a director of product management at Google.
Shah worked for sometime at the search giant and before long, he found himself being pulled into the deep waters of starting up.
His former colleagues describe him to be intense, ruthlessly focused on execution. He often jokes, but in the British style: a combination of sarcasm and self-deprecation, delivered with a deadpan expression.
“You dont have to be serious to be taken seriously,” said Gaurav Suri, cofounder of HealthIQ, who worked with Shah at Like.com (the new version of Riya) and led the deal for Google.
Suri was one those who followed Shah when he quit Google to start off a new venture. Shah and his band of believers took up some office space at a VC firm to brainstorm their next idea.
Between long walks in the park, and gym sessions in Silicon Valley, the team would pick topics they are interested in, prepare a presentation and pitch it to the group, forcing each one to become subject matter experts in the topic they chose. It was a mix of structured and unstructured brainstorming, but brainstorming nonetheless.
“He is merciless and iterates till he finds the right idea. I don’t know anybody who works harder than him in that aspect,” said Hayes, of First Round Capital, who put his money in Like.com.
Amid dire warnings of a bubble inflating in the startup ecosystem, Shah, a survivor of two downturns, said it’s important to identify which businesses will work and which won’t. He puts high-valued companies into two categories–ones with revenue and those without. The second group is the one to be wary of, he suggests.
“I call this an ‘echo bubble’ because the reverberations from the first set are forcing up the valuations of the second but the echo companies are not quite like the first set,” said Shah.
As for the state of the Indian startup ecosystem, he thinks many are simply imitating US models and aren’t creative enough.
“It’s like I’m doing what this US company is doing but I’m doing it in India. Some blame it on school systems, I say baloney! The same people who studied there, come here and come up with the same idea,” said Shah. “There needs to be grandeur.”