7 Lessons By Dheeraj Pandey That Every First-Time Founder Must Religiously Follow
Building a startup isn’t all sunshine and rainbows. While you do get to launch a unicorn and even go public eventually, starting up includes struggles that, if not faced with a calm mind and tact, can lead to irreversible mistakes.
Beyond the “higher the risk, higher the reward” attitude, being a founder entails some of the hardest decisions you’ll ever make in life — like laying people off when there’s no other option, negotiating through unreasonable yet inescapable demands, or deciding whether you want to get acquired today or go IPO in 10 years.
The journey is hard. However, 99 out of 100 times, the struggle you’re facing today, would have been once faced by another successful entrepreneur. And sometimes it’s just wiser to learn from someone who’s been there and done that, instead of making your own mistakes and reinventing the wheel.
In February 2022, at SaaSBOOMi’s The SaaS Landscape: India and the Valley event, Manav Garg, the CEO and founder of Eka Software Solutions, had the most mindful fireside chat with Dheeraj Pandey, the CEO and founder of DevRev, and the co-founder of the public-listed cloud computing company, Nutanix.
Although it’s tough to pack all those invaluable insights in a single blog, we’ve tried our best to curate the seven most honest and actionable lessons (that no founder talks about), from two-time successful founder Dheeraj Pandey’s startup journey, in his own words.
1. Love is the most important word in any business
“The word love is not used as much in business, but we did about 7 billion in revenue, in those 10 years. And we were doing a billion every year. And yet I felt like we could do so much more for customer love and employee love. What people appreciate in a business is all about human relationships. We tried to codify a lot of the business.
When you talk about B2B and B2C brands, it’s eventually the emotional connection that Apple makes with you, that Amazon makes with you.
The connection Tumi, Mercedes, and all these brands make with you. Some of this is very humble, like the sort of brands that have a no questions asked policy, ‘anything that you buy, we’ll return,’ it’s a very humble way of dealing with customers. People may say that this is the result, but it’s the input that they put into this, that is humility towards customers, that shows in the brand as well. So I think the word love is a very important thing that we learned at Nutanix.
So how the flywheel works, where you have enough existing customers who are happy, and you do net dollar expansion with them. You may lose a few of them, and then you put new customers in the mix. Those new customers become existing customers, and then you do an expansion for them.
At the end of the day, a lot of this is just about the emotion of your product and your customer service to your end-users and customers.
I think it’s really, really important and so, I think we have come to put a lot of numbers behind it, but at the end of the day, business is about emotions. So that’s one big lesson.”
2. Small is the new big
“We are well known for doing very, very large deals. I mean, we took like, two years to get tens of millions of dollars from a single customer, for just pure software- a subscription of over three years. But at some level, you begin to think of how you bring in digital efficiency, get inside sales, and so on. And I am just beginning to learn that because what I did that decade was just getting very large deals with large customers. I mean, out of the 7 billion, we got 80% of that revenue from 10% of the customer base. So you can imagine the kind of stuff that we had to do in terms of large deals.
But I feel that as the world is going more digital, small is the new big and I am yet to learn about doing lots of transactions at scale.
And this is a very important thing that’s happening in our industry as well. If you go back to why software has been so popular in the last 30 years, it is because a lot of atoms which are physical world things are becoming bits which is a different universe by itself.
So we’re going to go from the physical world of selling and marketing, physical events, field reps, field essays to many, many more things digitally. And I feel like that’s going to be a big lesson and a learning experience for me this decade as well. I’m looking forward to it.”
3. Make your advisors the soundboards your startup needs
“So there were some really good advisors and these advisors I wouldn’t go to them to ask what I should do. But they were great storytellers. These people just told stories about themselves and the first thing that it did was it normalized the stressful situation that I was in.
They’d say “let me tell you what I did. And you can figure out whether you want to use this or not.” So a lot of it comes down to normalizing the lows.
Like Mark Leslie was a great advisor to us. So in 2010, I’m sitting there in this university with Mark Leslie and he was like
“Yeah, don’t do that app because that means that Windows will not die. Windows will still end up in either the digital desktop, the virtual desktop is supposed to completely vanish because Apple and Android are here. So where is the room for the third operating system?”
So it was a very contrarian thing from our side to say, “Look, we’re going to stick our neck out and we think Windows is here to stay and will make for a killer app for our platform. And Mark was like, “No, I think my son was there for the longest time. Try doing this for three, four years. It’s not going to work.”
So even with an advisor, I think you’re bouncing things off and it forces you to think very hard and say okay, so what is he saying and how do we think about it?
I mean, that whole conversation ended up in months of thinking about what’s circular, and we ended up doing exactly that, because the whole world had come to say, “Windows is dead.” And we were here saying the opposite. So I think such brainstorming sessions where you end up in this place where you’re listening to yourself. I think it’s very important.”
4. Don’t rush your first round of funding
“We started our company when the recession was still on, during the global financial crisis. It’s a double-edged sword. We knew that the best companies started during recessions simply because the fight for talent was not as fluffy. So you end up getting a lot of people who are just heads down building building building, as opposed to what else is out there. ‘Am I missing something, their friends made some money?’ you get into very different frothy sort of situations, which is what’s happening right now.
So money was 1/10 in supply but the talent was available and it was good talent. Now you see, there’s a lot of tax and more supply of money. But there are also more froth and talented people who want a job in the transaction as opposed to a pure ‘I’m gonna build something’ kind of way. So we ended up raising money. I had a friend and this was his first VC job in a boutique 100 million dollar fund that he had joined after Oracle. And I’d just quit Oracle and was working at Aster data for two years.
To startup, we raised then and diluted enough because it was our first sort of gig and also it was recession time.
By the second round, I think the good thing was that we didn’t have to hustle a lot trying to raise money from a good pedigree and everything. But raising $10 million was expensive. In the first 13–14 million, we had given away half the company.
So, the first 2-to to 3 rounds are important.
Because you could save yourself from a lot of angst and dilution if you just are extremely focused and keep control of your destiny in the first few years of this because sometimes, once you know what you’re building and you have enough feedback from your customers, suddenly you realize that you have diluted half of your company.”
5. How to think about equity dilution when raising capital
“You can either invest time, get feedback from early users, or you say you’re just going to spend money and figure out what and how to mitigate risk, get more people to work for you and work with you, and stuff like that. I feel like people only look at investing money. And not investing time.
So if they could say ‘if I could give myself one more year, maybe I don’t ever dilute myself as much as I would right now, and I take only a third of the cash offered to me. And then I spend here and all of a sudden, my dilution will be a whole lot less and I think it’s important because it’s not about how much money a founder will make or early employees will make. I think it’s more about an assumption.
It’s more about how you will go through the highs and lows when you want to decide because any business undeniably will go through a lot of highs and a lot of lows as well.
So it’s less about dilution, and money-making and it’s more about, ‘do I want to have the staying power to last the lows of my business. And that is the only way to think about dilution.
And again, it’s not about voting rights. It’s not about any rules, it just means that you’re speaking with your own time and sweat equity and so on, as opposed to having to be at the mercy of, you know, to think about too much cash coming in.”
6. Pick a co-founder you trust unconditionally
“The formulas have not changed. Manoj (co-founder) and I go back to our dorms. We’ve known each other for 28–29 years now. I think it all comes down to trust. More than anything else, I mean, simple values of authenticity and the fact that you can complete each other’s sentences and the fact that you don’t have to look over each other’s shoulders and the fact that you’re the yin and yang of each other.
So it’s not supplemental, it’s complementary in many ways. And you cannot put words by what complementary means. Just know that you guys are complementary. It’s an intuitive understanding that you look for.
Many times the war comes inside your home and you’re being inefficient already but now you’re fighting a war and it gets much worse if you have to fight more with your spouse (in this case, co-founder) at home as well.”
7. It’s an era of PLG (Product-led-growth) — make everything customizable
“People at Google talk about this a lot. How do you go slow early on, to go fast later? And if you think of even the first 2–3 years of product-market fit, the fact that you spend some time the first year without diluting yourself too much, or building a little foundation that then when the customer feedback starts to come, you’re fast, you’re changing, you’re moving, as opposed to you building something and it was all kind of duct-taped together. And now the customer feedback is coming. You have to rewrite everything, maybe even hire a VP of engineering to get that done.
So I think it’s important to build some optionality into your portfolio. Customizable options, customizable workflows, because customizable objects are streamlined, hard to engineer so makes life easier when the customer feedback starts coming in.”
We hope Dheeraj’s pearls of wisdom help make your startup journey more comfortable and hopefully, highly successful. Onwards and upwards!