No matter how good the business idea, it usually requires raising capital to become a viable business.
In a world where venture capitalists are becoming risk averse and increasingly behaving like private equity firms, it should come as no surprise that there has been a dramatic decline in seed funding.
Two and a half years ago, I attended a conference in Boston. There, one of the investors on the panel told the audience that raising money is tough. Many entrepreneurs who dont fit a VC profile have a harder time getting the funding.
If you are a women or an entrepreneur of color or above the age of 40, or from a certain geography (not in the Silicon Valley), you are certainly at a disadvantage.
I thought to myself, Well, I am a woman of color, a first-generation immigrant, a first time entrepreneur, and in two years I will be 40. Thanks for the encouraging talk.
But I was up for the challenge.
Identifying the need
My career began almost a decade ago when I founded a digital marketing agency in Boston.
Our young company relied heavily on talent working entirely online sometimes from the other side of the globe that helped us serve customers including Harvard, cloud data company EMC and the state of Massachusetts.
We weren’t alone. Breakthrough technological advances, cost pressures, globalization, changing mindsets, 24/7 business cycles, and instant communication all continued to fuel the emergence of freelance marketplacesUpwork (formerly Elance and Odesk before their merger) and Freelancer being the two largest ones.
These marketplaces, however, have failed to serve large companies, which are unwilling to take risks with non-vetted talent. Our own experiences usually ended with hiring 4 or 5 people before finding the one who could actually perform the given job.
On the other end of the spectrum, my co-founder Harpreet Singh a Harvard-trained PhD who began his career on Wall Street had his eyes open to the inefficiencies of traditional consulting firms. These consultancies would often leave behind junior talent that possessed little or no domain expertise to solve the problem at hand. It was not uncommon for clients to pay six-figures for a deck that was presented to the executive management with great fanfare but lacked sufficient depth to operationalize.
So two and a half years ago, driven by the idea of disrupting the way both consulting and freelancing works, Harpreet and I embarked on a mission to create a vetted and curated big data marketplace that connects companies with consultants, academics and difficult-to-find domain experts for consulting engagements.
And here are just a few things we learned throughout our journey.
Start narrow with a beachhead
Begin with your big idea, but narrow it down to its most focused point before you start any research.
We began with the idea of building a consulting marketplace but there was one problem: exactly where should we begin?
Marketplaces in general are the hardest to build. For businesses, customer acquisition is the main challenge but for a two-sided marketplace, hitting liquidity requires building both the customer side and the supplier side.
Eventually we began building the platform, while simultaneously doing research on our beachhead market and positioning.
Do your research
Research lays the groundwork for your entire business. Be sure you are thorough. Think of every scenario that could possibly take place and then think of more.
To validate our idea and choose our beachhead, we ran a survey of 150 large companies asking them about their current need for external consultants. We spoke to business executives in almost all industry sectors from high tech, healthcare, and financial services to consumer goods and retail.
We even met with Gerson Lehrman Group the largest offline expert network to understand their business model. After spending 3 to 4 months talking to people and researching, there was no doubt that there was a huge supply and demand imbalance and fragmentation in the big data, analytics, and market intelligence sector.
We then worked tirelessly on creating a platform that we envisioned to be a de facto Mecca for all data professionals: a place to collaborate and find work’ a place where smaller companies could outshine larger companies with the power of specialization and utilization of senior-level resources; a place three to five times faster and three to five times more cost efficient without compromise in quality.
We couldnt hope to run a platform in stealth mode and expect everyone to join.
So we compiled a list of 500 reporters who covered big data or marketplaces and started cold-emailing them. The moment we got a yes from Forbes, everyone started taking us seriously. Our story in Mashable got more than 4,000 shares. TechCrunch branded us as a McKinsey in the Cloud for Big Data Consulting and these news articles led to the influx of applications from experts all over the world.
And whats more, only those who knew what it took to be a data scientist and expert applied to join our platform. In short, the media gave us a jumpstart.
Raise money either before launching (if you can) or after gaining traction
For those already with a track record, VC firms are willing to invest in their ideas before any sort of a concrete launch because their past experience serves as a data point.
For first-time entrepreneurs, such luxury is hard to come by.
After the media stirred up interest in our company, many top-tier VC firms approached us, but there was an issue. We had only just launched and thus had very few data points related to the number of projects and data scientists on board. It didnt take long for us to realize that we were too early for the VC game.
Word of advice: these firms want the entrepreneur and angel investors to assume all of the risk; proceed with caution.
Know when to say no
Sure, it may hurt a little, but if the investor doesnt have your companys best interest, turn down the money. There is more out there.
In the first 3 to 4 months after our launch we got an offer of $1M from an investor. It was quite an enticing bid considering that both my co-founder and I had exhausted all of our resources, were living on maxed out credit cards, and were under a lot of stress.
We carried out our due diligence and found out that another entrepreneur had been badly burned by this investor, who took control of the company. Despite our pressing need for funds, we declined the offer.
When things are not working, step back and reassess
If multiple investors are coming back with the same message and giving you the same feedback, take a break from fundraising.
Perhaps, you need to tweak your pitch or take a break from fundraising. We stepped back and decided to build upon the business instead of fundraising. Raising capital is a full-time job in and of itself. We decided to spend the same effort on building our client base.
You only need one person to believe in you
It isnt like you have to convince everyone you meet that you are worth the investment.
Keep your goal in sight and persevere until you find that one investor who really gets it. We could see that our marketplace model was working. People were posting projects and experts were responding with detailed proposals. We had what no one else possessed data scientists and engineers with experience working for companies like Google, Facebook, Deloitte, Accenture, and Wal-Mart Labs, to name a few.
The only thing holding us back was zero money in the bank. We had no doubt in our minds that we could build a successful business by bootstrapping and growing it organically, but we also needed to pay our own bills.
Then something remarkable happened. We took a trip to the West Coast and received tremendous interest from investors. One of them was Peter Diamandis, a thought leader who passionately believes in the efficacy of emerging technologies. He was named in Forbes 2014 Top 50 World Leader list and serves as the Chairman and CEO of XPRIZE.
Every year Peter hosts a conference called Abundance 360 in Beverly Hills, and his team had decided to test the expertise of our talent by posting a project to build a conference matching algorithm that recommended ten people that attendees should meet at the conference. Impressed by the results, they invited us to be one of the showcase companies for 2015 conference. There, we were given the chance to pitch in front of an audience of 250 people, consisting mostly of CEOs and owners of mid-size companies.
We received a warm reception from the crowd and were able to raise the bulk of our seed round just from that audience. Whats more, VCs who have passed on us before started tracking our progress.
No doubt, there still is a long road ahead. However, I have persevered until now and will stay resilient throughout. And most importantly, I have stayed and will stay true to my entrepreneurial purpose.
Then, truly at this point, no one cares what you are. And now I think to myself, I am a woman of color, a first-generation immigrant, a first-time entrepreneur, and I have already passed 40.
Sarabjot Kaur is founder and co-CEO, of Experfy. She drives the overall product vision, strategy and growth for facilitating engagements between big data talent and enterprises. Kaur is passionate about disrupting traditional models of engagement used today in a deeply fragmented analytics and BI market. Sarabjot draws upon fifteen years of experience in creating enterprise value; innovating new business models; brand positioning, UX design, marketing; and using technology to translate business complexities into actionable strategic solutions.