2/ Objective is to share these views with the founders and get perspectives from them. Would love you to comment - and keep this thread interactive. Please note that this thread doesn’t talk about non-market specific founder nuances.
3/ Let's start with EdTech. Some prominent companies have been built over the last few years in K12 and test prep. These companies have either tried to replace the traditional spend made on additional books /content (eg. RD Sharma) OR on after-school offline tuition or coaching.
4/ Long term success of these models IMO will rely on delivering learning outcomes. Outcomes which are materially better than that provided by available offline counterparts. These outcomes would be also reflected in improved school marks, board exam scores, test prep ranks etc.
5/ Given this belief, my view is that a founder who’s been a star educator, and has delivered learning outcomes in the past is more likely to succeed - than who hasn’t. This could very well be in an offline setup or through a Youtube channel.
6/ But the learning curve associated with delivering outcomes to a variety of students is invaluable. Founder’s problem now reduces to - mirroring the (already proven) offline experience to online. And thinking about using online tools /AI to fundamentally enhance the online exp.
7/ Needless to say for an online model - he needs to partner up with co-founder(s) who have expertise in building tech products and GTM. But strong hold on ‘pedagogy’ is a must IMO. There are always exceptions - just like in anything - but my 2 cents on founder-market fit broadly
8/ Now, let's look at bottom-up successful founder examples to validate this. While it's hard to define ‘successful’ - looking at some prominent EdTech cos and their founders' profiles, 2 patterns stand out: (a) founders, often the CEO, have been a star educator in the past.
9/ (b) Founder, often the CEO, is a repeat founder. And having run an offline coaching /tuition centre counts as one. Now, this has the risk of being a mere correlation (v/s causation), or a small sample bias, or the buyer’s bias (i.e. that of EdTech investors) too.
10/ Though how does one explain the repeat founder pattern? Is EdTech fundamentally a tough business to scale and execute? Would love for present and past EdTech founders to comment and share perspectives.
11/ Let's talk about InsurTech next. I believe to build a large co. in InsurTech - one either has to be a manufacturer or a distributor. This market has many nuances, namely: (a) Market is highly regulated by the regulator (IRDA) and needs licenses to run either of the above two.
12/ These licenses have requirements of min paid up equity, which are hard for your typical founder to meet. Then every product construct needs to be approved by the regulator, there is reinsurance, for ads - regulator guidelines have to be followed as so on.
13/ Not that the founder can’t learn, but likelihood of success increases if the expertise /knowledge already rests with the founder; (b) This market has nuances (in underwriting, claims, pricing, compliance, line items in P&L) which lie with a few individuals in the industry.
14/ It’s hard for the founder to appreciate the nuances in a mere few conversations with the industry or by reading IRDA's annual reports. Easier to appreciate them when you’ve worked in the industry for long and have been in action.
15/ Exceptions aside, for a tech-enabled manufacturing business, I believe founders with expertise on compliance, underwriting and claims will have a major edge - against those who don’t. This has to be supplemented though by expertise in building tech products.
16/ Similarly, for a tech-enabled distribution business, the founder having been part of the distribution team of an insurer for a long period - has an edge. There are nuances like commission back-channeling, channels not sharing customer details in fear of losing renewals etc.
17/ Looking at the founder profiles of prominent InsurTech startups also conveys the above assertion. For almost all, one founder has worked in the industry, often holding a leadership post with an insurer, for a long period. This runs risk of being a circular argument though.
18/ On the other hand, if we talk about markets like Online Travel /Recruitment - my belief is that any founder can start and there are no deep market nuances one can not learn. In some cases, past exp. also has a risk of serving as baggage - not allowing founder to think afresh.
19/ However, if we talk about AgriTech - that’s by and large a tough market with - long gestation periods, high ops intensity and hard to relate to - for founders in urban HHs. Most actors in market are still far from transacting online DIY en-masse - inspite of smartphones /data
20/ Assisted commerce, human-led advisory, and logistics to the deepest pin codes in the country - makes it high on operation intensity. Likely that Agri businesses will take longer to build. And the founder needs to be passionate enough to grind it out for that much longer.
21/ Needless to say the founder needs to have a strong understanding of pain points of various actors, and a strong farmer empathy. These are hard to build unless you come from a farming family or have been meaningfully exposed to this sector.
22/ I see 2 patterns when I look at founder profiles of some prominent AgriTech startups: (a) most founder(s) were exposed to Agri sector in the past - either as a farmer, or as an agri input (seed etc) manufacturer /distributor, or being a part of a fund which invested in Agri.
23/ (b) many founders are non-engineers and often not from a tier 1 school - which is very unlike founder profiles in most other markets - as one would have expected too because of the aforesaid reasons.
24/ I will end here. And hope this was useful to founders who’re looking to start up - and hope it causes them to think harder as to why they are best positioned to attack a certain market or not. Look forward to everybody’s comments. <end>
