Author: Shyam Somanadh

Change The Contract

The contract between the state and its citizens is one that is primarily punitive in India. It promotes (and thrives) on fear and attempts to use that fear towards getting people to comply.
Consequently, the average citizen is not invested in helping the state prosper as there is no correlation between the well-being of the state and its citizens. The well-being of the state is considered just an unavoidable cost of living in the country.
A state that is not in the service of its citizens has its citizens preferring to avoid any contact with it (police, courts, offices), if they can help it. The exceptions to this are few. Nearly all interactions are driven from desperation; or are interactions led by the state.
What makes it worse is that the state does not incentivize good behavior. As a bad person, as long as you don’t get caught, you are much better off than the people who behave well. Meanwhile, doing the straight and narrow does not get you anything better than the ones who don’t do the same. In a lot of cases it gets you far less than the ones who don’t go by the book.
This, in turn, incentivizes people towards cutting corners and finding workarounds; turning a whole lot of the population into reluctant crooks. Income tax is a major example of this as for those who pay their taxes honestly, there is an increased risk of scrutiny. On the other hand, the risk:reward ratio makes it worth it for the privileged as the rewards are much higher for them than the less-privileged to dodge taxes.
Incentivizing good behavior is not an approach without its flaws. Every system will be gamed, especially in a country like India. But a gamed system that doesn’t benefit the deserving is far more flawed, compared to a system that benefits the vast majority of people who do the right thing while some still game the system.
If India has to stand any chance to transform itself into a developed country the contract between the government and its citizens has to change. The citizens need to stop fearing the state and know that the state has their welfare as the most important thing.
Anything else — war-on-corruption, cashless economy, poverty alleviation etc. — are small ideas that doesn’t address the core issue. They are just nice themes to rally around, while the rot at the core remains the same.

Filed under: India, Politics

A New Domain

Most of 2016 has been a blur, due to varying levels of chaos on both the personal and professional front. The strange coincidence has been that healthcare and various aspects related to it has featured prominently on both fronts.
Healthcare, on the work front, has been a discovery. It is a complex, slow-moving beast with so many different angles to it. The technology itself is fascinating. Some of it predates even early versions of what power the modern web. Encoding formats that are separated by pipes and information systems that are still, by default, operate in silos and contained within facilities.
The technology aspect alone is massive opportunity. It is not an easy opportunity because of numerous entrenched players and, healthcare, being a necessity, is ridiculously prone to opaque pricing and cost structures. But, even the smallest positive change that can be made in the domain will touch tens of thousands of lives for the better and that is an attraction like nothing else.
Every aspect of health — from wellness to allergies to chronic conditions — technology can play a major part in improving how we live and how we can fight diseases. The enabling of it all, though, is a different ballgame. Things take years to come together at a basic level and it is a highly-regulated industry.
Which go on to show the size of the opportunity again; that even with such high levels of regulation, the lopsided demand-supply equation ensures that the sector remains a big draw for anyone looking to make quick money by providing magical cures and quick fixes.
The road ahead is going to be a long and arduous one.

Filed under: Projects

There And Back Again; To Windows

After three long years with the Acer Aspire V5-431 it was time to get a new laptop for me. The Acer was a wonderful companion and it has travelled everywhere with me and survived everything from 50 degrees Celsius to -23 degree Celsius, plenty of dust, moisture and whatnot.
It was also starting to show its age and with a processor that was really under-powered, it was starting to get in the way of work. Additionally, it had a severe limitation of being only a 32-bit laptop, even though the CPU was 64-bit. Acer, in all their wisdom, decided this was a perfectly brilliant thing to do and made life miserable for people like me.
The age of 32-bit computers are rapidly coming to an end. Google has pulled support for Chrome on 32-bit for Linux a while ago. With the state of security online these days, running an unmaintained browser is begging for trouble.
Additionally, there is a host of software these days (Docker is a prime example), that don’t have officially supported 32-bit versions. It is far easier to move to a proper 64-bit computing environment than lose your hair trying to get oddball 32-bit ports of these things working.
The replacement laptop is an Acer again, this time the Aspire V13 (V3-372T-5051). It is a nice lightweight laptop with a great display, good battery life, 256 GB SSD drive and has the ability to take a maximum of 16 GB of RAM. That last detail is very important for couple of reasons as we’ll get to see soon.
Back To Windows
The laptop came pre-installed with Windows 10. For the past three years, I have been using the really nice ElementaryOS and had been quite happy with it. My usage of a computer in the past 3-years has also changed considerably to far lesser development work and more of text and various other kinds of documents. This meant that Linux was not really required for me as must-have to do development work and the little that I had seen of Windows 10, I quite liked it. It has the right amount of bling without going overboard with it as OS X has done in recent years.
While the idea was to always dual boot and use Linux as my primary device, having used only Windows in the past couple of days, I have come around to the idea of using only Windows. For most of my development needs, there is Vagrant and Docker (which is where the 16 GB RAM will come in quite handy) and other things that I am tinkering with on tech (Rust and Go) have officially-supported Windows builds.

Filed under: Technology

About Unicorns And Related Things

Monday morning brings with it a post laying out the new ‘strangeness’ in the universe of the Indian unicorns by my former boss, Haresh Chawla. Some of the points, especially the one on doing due diligence, are ones that have bothered me for a while. I mean, even as an outsider, without access to the P&L statements of the companies it is not too difficult to mock up a hypothetical model of the business the investors are putting money into. So, why is it that the landscape seems to be littered with what seems to be strange moves by all parts of the ecosystem, unicorn or otherwise?
Be warned, what is to follow is a mix of personal experience, anecdotal information and lots of conjecture.
The crux of my argument is based on the factors that play an important role in the India story.
This is the ability of a team, enabled with capital, to execute a product/platform. It means that things work as advertised, as a norm. Whatever does not work is quickly fixed and the state of the system is such that edge-cases are minimal.
In some markets, this ability is determined by the team’s chops at quickly setting up a product operations, in other markets, it means primarily how enabled is the team towards closing key alliances, leads and relationships. In India this factor is particularly important because who you know can make a significant difference in being able to close a deal than the outright finesse of the product of the state of the finances of the start-up.
Market Size Validation
The truly gifted salesman can sell an ice cream to an Eskimo, but not even the most gifted salesman cannot build a big business selling ice creams to Eskimos. Every early-stage business and market makes assumptions about the size of the market it is selling to. The gap between starting a business and the business hitting escape velocity is often marked by the time spent in validating the market size and the long-term margins that can be accrued in selling to that market.
Market Growth Potential
Some markets start small, but given the right conditions, it can grow into substantial ones. A classic case of this is mobiles in India. 15-years-ago, this is a market that barely existed. Today, it is a multi-billion dollar industry. Given the right conditions, can a market grow like this?
Path To Opening Up Market
A market that is large enough or one that has enough potential to grow a lot alone does not mean that you can open up that market. Some will require a lot of capital to acquire users (deep discounting and CoD that did this for Indian e-commerce), others will require regulatory roadblocks to be lifted. There are various paths to getting this done, some are feasible, others are not.
Ease Of Access To Capital
Every business needs money to run and most early stage businesses will always spend more than what they earn. Which means that they need money in the bank to cover for expenses till the tide turns and they can turn at least cashflow positive. Easy access to capital means a lot of undeserving ideas/companies will also get funded, but a lack of it means a lot of good ideas/companies will never get funded.
Operational Efficiency
Operational metrics is key to measuring the health of a company. A company that does not manage to make at least a couple of operational metrics more efficient as the years go by is a big stonking red flag that everyone needs to take notice of.  If you keep needing more and more to do less and less and at some stage the ability to acquire the more is going to run out.
Capital Efficiency
This one is self-explanatory and the classic “how much do you make on your dollar?” question.
Exits, M&A
Investors and founders (especially the former), need an eventual big payday for all the risk and effort they have put into the start-up. A healthy ecosystem needs a regular supply of exits (through IPOs, M&A) for the payoff and also to correct over-leveraged players. Not all exits are of the sexy kind, where founders and investors make lots of money. But even fire sales are necessary to let the early risk takers cap losses. An ecosystem where exits are far and few in-between will struggle to sustain itself in the long run.

The Indian ecosystem, seen through the prism of the above factors, has gone through two cycles so far. For the sake of convenience I will ignore the smaller cycles (the 2008 meltdown, for instance).
 The First Stage (1997 – 2005)

  • Execution was terrible
  • Market size unknown
  • Market growth abysmal
  • Path to opening up market unknown
  • Lack of easy growth capital
  • Operationally inefficient
  • Capital inefficient
  • Unit Economics Is Bad
  • Very few exits, M&A

The Second Stage (2005 – 2015)

  • Execution has improved significantly
  • Market size has been validated
  • Market growth has picked up
  • Path to opening up market is known
  • Plenty of easy growth capital
  • Operational inefficiencies have skyrocketed
  • Capital inefficiency has skyrocketed
  • Unit economics has worsened
  • Exits and M&A has picked up

The key to unlocking the value in the Indian ecosystem is to get all the points to go green. We have improved significantly in execution, validating the size of the market and figuring out how to open up that market. But the two key factors — of improving operational and capital efficiency — are key to the long term well-being of the ecosystem and we are far from being able to crack open those two fronts. It is imperative that we figure out how to do that in the next stage at least.
Through 2015, I had the opportunity to see up close some of the e-commerce operations struggle with extreme inefficiencies. These operations can easily improve margins significantly if they can reduce inefficiencies. But that is easier said than done.
Some of the reasons behind the inefficiencies:
A System That Monetizes Inefficiency
Our famous ‘jugaad’ system ensures that people who can navigate around that can quickly acquire wealth and a significant number of people benefit from the existence of that inefficiency. A component of an ecosystem that brings itself into play in the ecosystem because of its complexity will always strive to increase the complexity in the system as a matter of survival.
Most of the e-commerce companies deal with problems on a daily basis that are in place because of this inefficiency. We have varying tax codes, local laws and levies. Till we get in place an administration that has the political willpower to remove these inefficiencies, it is anyone’s guess when that point in time will arrive when the people who benefit most from the inefficiency will stand to benefit more from an efficient and predictable system.
No Standardization
You would assume that after so many years into the e-commerce revolution in India, there would be a standardized framework of addressing pin codes in India. The funny fact is that there is not one. There are numerous ways of doing this and some of the courier companies even make up their own pin codes. Even where the pin codes are the same, the areas they consider under coverage of a pin code can vary from company to company. There is no standardization on buckets of weights or measurements either.
All this leads to an environment where an apple is not the same apple for everyone. An apple can be various kinds of apples and each shipment of apple takes a conversation with all stakeholders which results in disagreements, disputes etc.
No Experience In Large Scale Retail
The scale of e-commerce possible in India requires prior experience at the scale of what retail is like in North America, where it has been refined to a fine art with decades of experience driving logistics, pricing and marketing. The largest Indian operation on that front, which comes closest is a Big Bazaar, which is tiny compared to the large American retailing operations.
The lack of this experience has resulted in a bonanza for the same sellers across the platforms, while for the customers there is not much in terms of differentiation other than price. Our discounting is also not well thought through, because we don’t understand discounting as well as we should.

All this results in the current strangeness of the Indian unicorn ecosystem. From the investor side, most of the money being put into the market is just what the investors have to put in during each round to stay in the game. There is little to guide them, even in these times, to show what is possibly a good bet. The market is such that someone can easily outspend the top player into a position of dominance as there are really no moats that cannot be overcome with money.
This also leads to the overemphasis on founding teams than pure product in India. A good team in India that can move the wheels faster is always likely to win more than a great product with an inexperienced/not-so-well-connected team.

Filed under: Business, India, Start-ups

Set A Different public_path for Laravel applications on Webfaction

In a previous post, we had covered the issue how to get a Laravel application running on Webfaction.
While the approach worked well enough, the idea of symlinking to the ‘public’ directory was not a good one as every newly created file would have to be symlinked to make it available in the ‘webapps/appname’ folder. An Envoy task could easily accomplish this, but it just won’t scale on any website that has user uploaded files that has to be shown on the site.
Thankfully, Laravel provides an easy fix to this, which is to use the IoC container to bind the value of of public_path() to a different location. Since we don’t have this problem on the local setup, it is also a good idea to throw in environment detection into the mix.
All you have to do is open your bindings.php file (saved as app/bindings.php and included from app/start/global.php) and add the following lines:
if (\App::environment(‘production’))
\App::bind(‘path.public’, function()
return ‘/home/{{username}}/webapps/{{appname}}’;

Filed under: TechnologyTagged with: ,

Do Yourself A Favour; Don't Secure That Server

Shellshock should come as a timely reminder to every person who is connected directly or indirectly to a device that is accessible from the public internet. And that footprint will most likely cover almost every living person in the world today, though most of us won’t have the faintest idea how it affects all of us.
But, the point of this post is not to educate you about the vulnerability. The point of this post is that even I can’t, at this time, say with any degree of certainty that I have a good handle on the attack surface of the problem on the servers that I run. I have been dealing with servers for close to 15-years now and used to run my own stack for a long time, but I no longer do that.
Keeping even a single public-facing server secure these days is not a simple job. It is not good enough to be even somewhat well-versed in security issues anymore. Security is a full-time job and if you are not a specialist, you are exposing your business and your users to risk that you don’t have any idea of.
Incidents like the story of Codespaces serve as a frightful introduction to how badly all of this can go wrong. Even so, I don’t see much improvement in the approach most companies take towards the issue of security, trying to cut corners by not involving specialists for the job.
Every couple of weeks, I am asked to help out a start-up or a big company who has some problem or the other in their infrastructure. A good number of these cases, it is a given that the security is either lax or non-existent. A recent case involved a start-up that had zero instrumentation in place other than the high-level overview that the AWS reporting interface provides.
The great thing about the cloud revolution is that it has made access to quality infrastructure and the cost of that access easy and ridiculously cheap. I can spin up a server, on a public IP with 16GB RAM, in a minute. Which also means that an idiot like me can get root on a fairly powerful machine without having enough knowledge or ability to properly secure it.
That ease, increasingly, is becoming a huge problem.
While it is true that everyone has to start learning somewhere before they get really good at anything, the fact is that this growing universe of servers that are not properly secured now represents a nice pool for the numerous number of bad actors who thrive on these things. As a result, I gave up managing servers on my own a while ago (the incredibly complex iptables rules on a well-secured sever quickly demonstrated how out of my depth I was on the topic) and don’t recommend self-managed services to clients either.
Even so, in most cases, clients wind up going the AWS route, trying to handle the serves on their own without having a good enough team in place to secure them or they try to cut corners in the worst possible manner and go for the cheapest deal out there. In either case, a couple of months down the line they are hit with performance or security issues that they can’t fathom. And in the worst case scenario, their servers are broken into and they have no idea that they have been compromised.
By the time the realization happens that something is wrong, reputations (in the case of data theft) are destroyed or the ability to grow the business is curtailed due to infrastructure issues. In trying to save the market salary of one good IT professional, organizations wind up giving up many times that number in terms of lost revenue.
If you are a decision maker in any organization, I urge you to get in place some professional help sooner than later. This is a problem that will only grow as more and more devices become accessible from the internet. Don’t wait for that big break in before scampering around to fix the problem.

Filed under: Uncategorized

Deploying A Laravel App to Webfaction Using BitBucket

It is not uncommon to use a shared host to run a Laravel application and I have been doing that for a while on my preferred choice of shared host, Webfaction. This post will help you do the same without having to modify much about your application.
The first problem you will face is that default PHP on Webfaction is still 5.2.x. This is not a problem when you are using the webapp itself, as the .htaccess file that is used by Webfaction will ensure that you use PHP 5.5.x, if you chose that as the app profile when you set it up.
The problem arises when you have to run artisan commands either directly or as scripts from Composer. These will pick up the default PHP in /usr/local/bin/php than /usr/local/bin/php55, which is the correct one for our purposes.
To get around this you need to do a couple of things.
First is to symlink /usr/local/bin/php55 to /home/username/bin/php
Second is to download a copy of composer to /home/username/bin/composer
Once these two steps are done, add /home/username/bin to your path.
Now we will install the Laravel app. I usually choose the location for this as /home/username/app since /home/username/webapp is controlled by Webfaction’s setup.
This post won’t cover how to set up a Bitbucket Git repo. There are plenty of great resources that will allow you to that, but I will make the following assumptions:
1. Git will be set up to be accessed using SSH on Bitbucket.
2. You have set-up key-based SSH access on your Webfaction account to Bitbucket.
3. Your Laravel application has been properly pushed into the repo.
These are the last few steps to be followed:
1. Clone your Laravel app into /home/username/apps/appname.
git clone /home/username/apps/appname
2. Run Composer update to pull in all the dependencies.
/home/username/bin/php /home/username/bin/composer update
3. Remove the .htaccess file in /home/username/webapps/webapp_name/
4. Symlink the public folder to the webapp folder.
ln -s /home/username/apps/appname/public/* /home/username/webapps/webapp_name/
5. Edit the .htaccess file in the public folder to add the following lines:
Action php55-cgi /php55.cgi
<FilesMatch \.php$>
SetHandler php55-cgi
You are pretty much good to go after that. One thing you need to keep in mind that if you check in other folders or files into the public folder, you will have to symlink the new files.
For a much more convenient two-step deployment, you can use Envoy to manage everything on the server.
My workflow is mostly:
1. Push code into Bitbucket.
2. Run an Envoy task that pulls the changes into the server, runs composer dump-autoload and gets going from there.

Filed under: TechnologyTagged with: , , ,

Big Move Of The Year: Migrating Team-BHP To E2E Networks

It is always a great feeling to bring together two good organizations together and that has certainly been the case for me with Team-BHP and E2E Networks. Team-BHP is arguably one of the biggest automobile forums on the internet, run by a bunch of really passionate petrolheads, with an audience that even with a restricted membership is massive by any standards. E2E is the spiffy young hosting provider on the block, especially for sites that have a big chunk of their traffic originating from India, run by a bunch of geeks who make everyone’s life much easier by knowing, better than anyone else, what they are talking about when it comes to hosting infrastructure.
The Background
I had already done two projects with Team-BHP, both dealing with custom development of certain new features on the site. They have been one of the best clients I have worked with, being meticulous in what they do and most importantly, they know exactly what they want to do get done, which makes a vendor/consultant’s job a breeze, compared to the usual one-line brief that we often get to work with. The site had been hosted with WiredTree since 2009 and it had largely been a good experience, but things had slipped in recent times with the growing requirements, so they were on the lookout for a new home, which was preferably in India as the majority of the traffic for the site originates from here.
Decisions about infrastructure at this scale is never straight forward. There are numerous factors to be taken into consideration, some of which are:

  1. Level of support (managed or un-managed?)
  2. Cost of bandwidth
  3. Hardware SLAs.
  4. Application-level support.
  5. Traffic mix (is it equally geographically spread or largely local?)
  6. Connectivity at the service provider’s end.

Taking an informed decision about this is often not possible for most organizations as it requires both experience and knowledge that is usually quite specialized and not readily available within organizations. This a the crucial gap bridged by a consultant like me. Moreover, a property that is the size of a Team-BHP would normally have been in operation for at least 4-5 years, meaning the application stack often has a lot of legacy issues and complicated dependencies to handle. They have to be taken into account and best practices have to be rolled out where it is possible, without disrupting existing operations.
The Big Move
After evaluating various options, we decided to go with E2E Networks. They were already doing managed services for some substantial online properties from India and were also hosting some of the properties of the companies I knew personally and the feedback had never been anything short of spectacular. I am also very partial towards top management in infrastructure providers who are reachable on the phone and know what exactly are they doing and Tarun from E2E is a prime example of that. What helped was also the fact that they went out of their way earlier, before signing up with E2E, to fix a major problem that was bringing down the site while on WiredTree. It is not often that you get to see something like that in the industry.
Finally, after much testing and some delays (caused by the rather ill-timed Heartbleed bug and a DNS reflection attack), we started moving the sites late this week and the final piece of the puzzle (the main forum) was moved to E2E today. As things stand they look quite good and stable and hopefully both Team-BHP and E2E Networks will have a long and fruitful association.
Why Not AWS?
An important question in this regard that I often face is, “why not AWS and a CDN?”. For one, AWS is not cheap, especially when you have to get decent, hands-off managed support for it. Insecure public-facing web servers are the bane of the cloud hosting world and unfortunately a staggering number of companies learn about this the wrong (and often costly manner) way in the end. A poorly secured box with multiple cores, 10+ GB of RAM and a 100 Mbit unrestricted port is any hacker’s wet dream. And there are just way too many of them out there.
In the case of a CDN, it is not a panacea for site delivery. The effectiveness of a CDN depends on a variety of factors. For one, other than Akamai and Bitgravity, the other CDNs don’t have POPs in India. Which means that your Indian traffic will be served by routing it out of the country. Secondly, they are quite expensive and don’t make sense till you push incredible amounts of traffic, which not many sites actually do. One of the reasons why we chose E2E was that they had decent peering (via Netmagic) to all the major networks in India, which made it a faster option compared to most CDNs.
Edit: As pointed out by Manu J on Twitter both Cachefly and Cloudfront now have POPs in India.
The Ideal Infrastructure: Seamless Develop, Test & Depoly
In today’s world, most parts of developing, testing and deploying a website can be automated in a cost-effective manner. While the initial process to get this in place can be complicated and time-consuming, the long-term benefits of having this in place will save any organization time and money in the long run. Done right, this can also be aligned well with an organization’s business objectives. While it used to be really costly and difficult to accomplish this seamless process even five years ago, it is no longer that hard or expensive anymore.
If you want to explore rolling this out in your organization, do get in touch and I’d be more than happy to help you out.

Filed under: Clients, Frontiernxt

Google's Mobile Woes: The Search Bar

With the exception of transactions, discovery is one of the best aspects of any business to get into. While both discovery and transaction are intermediary plays, the former tends to push much more volumes compared to the latter. Perfect examples of such companies are Paypal (transactions) and Google (discovery), with Paypal representing the transaction piece, while Google represents the discovery piece when it comes to information.
It is always interesting to watch people use a computer, more for the manner in which even really tuned-in folks use Google as a quasi-DNS service. Vast majority of users I have observed refuse to use the address bar in the browser (leveraging the browser history and suggestions) and will open up a Google search page and enter the domain name there. This places a disproportionate level of power in the hands of Google and it is also one of the reasons why the company is so powerful in the information game.
The problem for Google is that they can’t replicate that one-stop-shop experience on the mobile. Even on an Android phone, searching is not an activity that is done easily. On a computer, a good chunk of time is spent inside a browser. On a mobile, phone very little time is spent in a browser and vertical apps have little reason to include a generic search feature. In fact, it would be considered antithetical to how mobile apps are meant to be used.
It is not that Google has not tried. There is a persistent search bar in most Android devices and then there is the Google Now, but neither lends itself to extensive searching compared to what users do on a desktop. There’s also the mobile version of Chrome, which is an excellent little browser, but it needs some serious firepower (processing & network speeds) to do its magic and the experience is awful on lower-end phones. Considering all of that and looking at the manner in which mobile usage is skyrocketing, eclipsing the laptop/desktop usage growth, mobile search volumes must be considerable concern at Mountain View.
The problem is also that the mobile experience itself not a singular one, but one of groups of silos and is heavily push-oriented. Computers tend to be devices where you have to provide the context for the usage. Compared to mobiles, it is a very pull-driven experience. On the other hand, mobiles tend to push the context at you and the apps are increasingly becoming self-contained silos. It is almost like having a separate browser on the computer for each site you want to visit and almost none of them provide an easy way to search using Google from within the app. And therein lies the problem for Google.
As if none of these issues were not a problem already, the newer markets where mobiles growth is most explosive are where Google has little influence as an intermediary. There are hordes of people in countries like India where, for many, the first experience of the internet is not on a computer, but on a mobile device. And as it happens, this first experience also tends to be a WhatsApp or Facebook, cutting Google entirely out of the equation.
Thus, the problem for Google on mobile is not that vertical search will somehow eclipse horizontal search, but that access to horizontal search is a problem that is not going to go away. Mind you, this is the case when Google practically owns the mobile OS with the largest market share out there. What must be even more worrying for Google is that there is no easy way out of this problem. A user who spends 90% of her/his time on Line/Facebook/WhatsApp, won’t start searching in a browser for something as the context switch (apps than tabs) is inherently more expensive on mobile.
In a way, the tables are getting turned on Google on mobile as the app that gets the user’s attention majority of the time will hold all the cards in this game. Eventually, Google will have to wind up doing deals with the top 20 or more apps in each market to establish the distribution for search on mobile as it successfully has done on the desktop. Which can only mean one thing for app makers — more money in the days to come.

Filed under: Android, Mobile

Understanding Ramp-Up, Burn And Other Key Business Metrics

One of the common mistakes seen in business plans and projections is that entrepreneurs treat various key business metrics as big aggregate numbers. While this approach makes the plan easier to understand (example: addressable market of 3,000 units per year, convert 10% in year 1 at average revenue of 100 per unit), it also glosses over significant complexities involved in acquiring customers, factoring in churn and other factors that play a key role in determining how far the business can go.
While it is true that there is no 100% accurate plan or projection that is possible, it is foolhardy to not make projections that can at least help organizations be prepared for the various scenarios than be caught confused when faced with various eventualities. This post is based on a template that I normally use to model similar things. It is nowhere close to being detailed, nor is the scenario that it portrays a realistic one, but it is one that should give you a good idea how to go about creating your own model. Consider it more a template than a finished model.

Acme Corp Offerings

The table above describes the key offerings of our hypothetical company (Acme Corp). The company has five offerings, of which two are products and three are services. There is no particular reason why this mix is there other than that I wanted a decent spread of offerings. Of the lot, Service C is a big ticket item, which sells the least, while Service A, being the cheapest, sells the most. Again, for the sake of convenience, I’m not taking into account the addressable market for each offering, which is not a smart thing to do, but for now, we have to make do with it. We are also assuming that the company is being started with a 100,000 investment.


Acme Corp Ramp-Up

The table above shows the ramp-up scenario we have in mind for the company. The cheaper offerings are predicted to grow in a somewhat linear manner, while the expensive ones are erratic in how they grow. We are taking major liberties with factoring in churn here, as we are working backward from the total unit sales for the year than to consider how a customer’s actual lifecycle impacts the system. There are also no volume or pre-payment discounts taken into account, all for the sake of simplicity again.


Acme Corp Expenditure

The expenditure table is the one that sees the maximum liberties taken with numbers. The dead giveaway is the ‘Average S’ (average salary) figure. In a realistic scenario, it never stays constant over a 12-month period as the headcount grows. Same is the case with rent. There are also a raft of other costs like connectivity, travel, legal etc. that is not taken into account into the picture. Make sure you make those changes and represent them accurately, if this exercise has to be of any real use.


When you plot all those numbers in a graph, what shows up is that the most critical time period for the company is the 6-9 moth period. Even though the organization has its first positive cash flow month in month four, it is only during month six that it starts a streak of positive cash flow months and it is not until month nine that it actually turns in a profit, even though it is a tiny one. For the 12-month period the organization turns in a profit of 17,38,500. But this profit won’t be realized if the company cannot survive beyond the first six months.

This first six months is the period where angel/seed rounds are critical. The cash flow situation for the organization is negative through that time period and even for the extremely cheerful model presented in this post, the company would go under in five months (or less) if it can’t raise anything above 310,000 during that time. The capital raised at this time only allows for basic validation that a market exists for the product/service at the price levels they are being sold at.

Breaking down the ramp-up to this level allows us to estimate which product or service is the one that we should look to grow. A high ticket value service/product has a different sales cycle and support requirements compared to a low ticket value one. What complicates matters is also the fact that these days disruption happens through pricing which mandates larger scale and also considerably lengthen the road to profitability.

To conclude, what I will stress again on is that what is presented in this post is an oversimplified picture, but it does give us an idea about what is a good starting point to do projections and figure out the kind of ramp-up that is required over time to make the organization a sustainable and profitable one.

Filed under: Business, Start-ups