First Day, First Rejection.
We were rejected by the first Venture Capital firm, who reviewed the WhiteHat Jr pitch. They didn’t invest in new categories created from India. You require infinite time and capital for creating a new category, they said.
I think the exact opposite is true.
You can create a completely new category stronger, faster, than being the 10th player to replicate a global category, all of whom are battling for the same users, talent and technology.
How do you create a new category from scratch rapidly?
I hope these learnings are useful for those looking to make their ideas for new worlds a reality. And for other would-be founders, who have ideas but hesitate to take the plunge as they ask themselves:
“Is my idea big enough?”
Instead the right question is
“How big can I make my idea?”
Here are some ways to make your new-to-the-world category big:
1. Build a 10x Experience versus the Alternative World
Our second rejection came the very next day from a reputed VC firm. A Principal in the firm thought the idea was small. His analyst had done a thorough Google Keyword search and no one was searching “coding for kids”.
It was the wrong search term.
I should’ve demonstrated the alternate world better in the pitch deck.
Parents engaged their kids after school with neighborhood playdates, ballet classes, art projects, Vedic mathematics, and such in early childhood.
Parents didn’t know yet they wanted coding for kids. But they wanted their kids to be deeply absorbed in a learning activity that the kids enjoyed. Right then, kids were just being dragged from activity to activity.
We just had to create a 10x post-school experience for the kids.
Until then, we survived on “Ramen” noodles¹.
Without a 10x product, there was nothing to scale. We knew no revenue would come in to offset expenses so we kept our team and costs unforgivingly low. We didn’t even pay for AC on the weekends! A 7-member team doesn’t need air conditioning 🙂
The moment we built a product where the kids could experience “flow”, be challenged by a live teacher to solve a logical problem, and create a joyful, tangible outcome like a spaceship with code, we knew we had a 10x alternative to the fragmented co-curricular market in India.
Then, we scaled.
What is your product’s alternative world?
Know the alternative world well. Then, be obsessively detail oriented to build a 10x experience compared to the alternative. You’ll create both a new category and new meaning in the world.
And survive on noodles until then so you can use all your funding for the next point!
Ramen Profitability Concept Credit Paul Graham
2. Communicate the Highest Human Needs Your 10x Product Offers
“Indian masses won’t pay for online music classes. It’s not core.”
I heard the same feedback when we launched music as I’d heard for coding. All these cliches miss out on one fundamental human reality.
We’re all living our stories.
We’re looking to survive, thrive, grow, and find the deepest meaning of why we’re here. It doesn’t matter if we’re rich or poor, metro or non-metro, urban or not.
I interviewed and hired our first couple of hundred sales folks myself. And mathematically, I always saw that our highest performing salespeople were the ones who were most convinced about the mission of the company. They talked unapologetically with users about kids becoming creators for life with Coding. And the touch of beauty Music brought to a child’s soul.
They did well in the US–and they did well in India.
The Indian masses cared as much about creation and beauty as the Americans.
How does your product help meet your users’ deepest human yearning of surviving, thriving, growing, and finding meaning?²
You’ll have an obvious answer if you have a 10x product. Just articulate that to users uninhibitedly, without reservation. Then, scale the process for hundreds of team members to do the same. Anything less won’t build a category.
I regret the times in WhiteHat Jr where I sold the mission only “functionally” as ‘coding is an important skill for the future etc.’, to investors or users, which may have been true but was not the highest truth.
Users will only embrace your highest truth.
² Recommended Read to articulate your story-helped me strengthen my views on above: Donald Miller’s Building a StoryBrand
3. Measure your category creation point mathematically to blitzscale-or our 50,50, 50 rule.
A large education player poached our teachers and knocked off our exact curriculum, down to the curriculum PDF formatting.
I complained to our common investors. It wasn’t fair. We had created the category after all.
I was wrong.
No one cares. It’s an open market.
You have to blitzscale the moment you know you’ve created a category. Anything less is a lack of conviction.
We had defined a “50-50-50” rule based on our detailed business model as the point at which we would deem the category as being successfully created.
- 50% Net Promoter Score (User product satisfaction was high)
- 50% Revenue from Referrals (Users were telling other users so new acquisition costs were low).
- 50% Renewal Rate (Users long-term value was high, creating a recurring revenue stream).
What are your exact metrics when you know you’ve created a category?
Define them precisely. Else you may get too late to scale the category you created.
Startups at early stages live in days, not decades.
Scale 1 month too early-and you’ll lose your money since your product is not ready.
1 month too late and players with 10x your funding enter and make you redundant in the category you created.
But if you’re on the right time, you’ll create a new category. And new meaning in the world. That’s why a successful startup has extreme “ramen” patience in the beginning to create a 10x product, then extreme “10x” impatience to scale it.
How big can you make your idea?
Let no one tell you you’re in a “marginal niche” or “Indians or Americans or Africans don’t pay for X,Y, Z”. Is your product meeting a deep, fundamental human yearning? Then, you can create a category, just keep your ambitions large and your timing fast!
Was this framework useful? Would you use any of these steps above for existing products you’re working on as well? Or for the new category you’re working on? Do drop me a note in the comments below. I would love to hear from you!
Companion Piece: What is the true chance of StartUp Success and Should You Do It?
Watch this <7 minute video to know your mathematical probability of startup success in the All-New YT Channel! https://www.youtube.com/watch?v=YsEy-KfWRhs
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