Episode I – Harsh Shah, Co-founder of Fynd

Glad to have Harsh Shah as the first entrepreneur on #DamaniTalks, and I couldn’t have asked for a better founder to get us kicked off! Here’s our conversation below. You can catch the interview on IGTV.

Summary of topics:

  • Harsh’s history and the Fynd journey
  • Being acquired by Reliance Jio
  • Harsh’s monthly ‘newsletter’ updates
  • Being transparent with investors about failures
  • Different types of investors in Fynd
  • How has COVID affected Fynd
  • Fynd’s business model in a nutshell
  • How has being a part of Jio been different
  • Is it restrictive or empowering to have one investor
  • Tips for entrepreneurs who want to get acquired
  • Harsh’s personal interests
  • Being a founder investing in other founders
  • Recapping a round of funding with investors
  • Going from the idea phase to execution
  • Rapid Fire Round

Transcription

 

Anirudh: Hi everybody, welcome to the first edition of DamaniTalks (every Thursday at 9:00 pm on IG Live). It’s always been my thought that most VC events talk about raising money, but very few people talk about what happens after you raise money. I’ve (thankfully) been a part of the Fynd journey with Harsh for almost 5 years now. Let’s talk about your history and experience for a minute.

Harsh: It’s great to be here as well, aD! I did my engineering from IIT Bombay, worked for a couple of years in consulting and then analytics. In college, I was a part of the Entrepreneurship cell, and I had a startup in my final year, but I joined a consulting company. My co-founder and I quit our jobs in July 2012, came back to Bombay and started the Fynd journey. It’s been eight years, and I don’t think the journey is anywhere close to completion. Our focus has always been to work with technology in the retail space. Since then (touch wood), the 3 of us have been lumbering on together. 

Anirudh: I’m guessing part of having each other shoulders would also be smacking each other’s backs when you got the Reliance acquisition in August 2019.

Harsh: It’s been almost 10 months since the transaction, and initially we thought “that moment” would be when you sign, or when the money is wired to your account. It’s a much longer process that took 5 months to go through the whole transaction, and at the end of that, the main feeling was not happiness, it was relief. 

Anirudh: One of the things I like about the kind of entrepreneurs you were, was the monthly updates you would voluntarily send us. What inspired that “newsletter?”

Harsh: Firstly, a big thanks to Sakshat, who ingrained this is us. When he asked us for updates, we started with ppts, but quickly figured out that we also need to tell our investors what we required from them. At that point, we had around 20 investors, and since we wanted to give them all an update, the “newsletter” was born. We thought it was essential to get their thoughts and feedback on how we were running Fynd. No matter how many shares you owned in Fynd, you would get our update. 

Anirudh: You were also very transparent and candid about your failures in the updates. Did you ever feel like this could hurt you, and maybe you shouldn’t? 

Harsh: I always believed that our investors were on our side of the ring. All I thought was, “here’s a bunch of people who are working with us to make the company better.” We were doing this for the first time, and we can always use the help. Hiding failures would be more detrimental to us than just being honest. 

Anirudh: How has the journey been different from the different sets of investors you’ve had? 

Harsh: The insight of our investors on how to run a company at every stage was brilliant. We had 86 investors, three founders, and some ESOP holders before we got acquired by Reliance. Overall, I would categorize my investors into five categories:

  1. The angel investors and founders knew us personally, so the mindset going into those investments was they thought we could do something interesting and decided to back us. 
  2. The family offices like Artha are patient investors, who just made sure that things were going well. 
  3. Google told us that they thought Fynd’s problem was a tough one and understood that we didn’t scale up in the best way. But they believed in our idea and its long-lasting strategic value. 
  4. Jio has been different from every other investor. Their questions are similar to early-stage investors. They want to know how fast we can grow and scale-up, and only when we scale the idea, x1000 was it worth talking about it to them.

Anirudh: Let’s talk about current events. There’s an exit in August 2019, 4 months later a pandemic, another 4 months, and we’re in lockdown. What’s been happening at Fynd at that time? 

Harsh: We’ve been continuing with our roadmap, and now we have a partner who can give us access to an extensive use case, especially within retail. Our focus has always been to bring technology to retail, and now we have access to these doors to test out a lot of the ideas we were building. Before Jio, our focus has almost always been towards Fashion & Lifestyle, but we’ve been looking at other categories as well. Our top line and the number of transactions came down by a significant margin because of COVID, but the company and services we built received a massive demand. Many brands have pulled the trigger, saying that they want Fynd’s omnichannel platform to help them power their web stores, marketplace listings, etc. As a team, we’ve been super overworked, COVID has shaken us into accepting this reality immediately. 

Anirudh: What does Fynd do from a consumer angle as well as a brand angle? 

Harsh: Fynd provides a technology platform for brands to merge their offline and online channels. Our B2C business is most accessible to consumers, which has been used by around 20 million users. Funnily enough, that’s the smallest part of our business. As we started building websites for brands, we realized that many features could be made to be modular. The vision is that brands come to us; we build their store and give them the tools to build an ecommerce store and have it running within 4-5 days. And Fynd manages all the payments and logistics for sellers as well. 

Anirudh: What’s it like to be part of something as massive as Reliance Jio, and is it everything it’s made out to be?

Harsh: When we were in talks with Jio, everyone told us we would get lost and pushed around by the conglomerate, but kudos to Reliance, we’ve been quite happy. They respected our capabilities in what we’ve done and what we can do. They recognized what we brought to the table and how we built our company and culture. They want us to remain in that high-performing comfort zone, as long as our goals and interests were aligned. We talk to them often, and apart from being an investor, they play a significant role as a client too.

Anirudh: Now, you’ve gone from managing 86 investors to 1. Does that change the way things are right now – is it constrictive, or is it more creatively empowering? 

Harsh: I’d say it’s more creatively empowering since they’ve given us the independence to do things our way. We have a fairly large playground to experiment in. If an idea doesn’t work, we can go back to the drawing board, but if it works, then we have the resources to scale up massively. 

Anirudh: I’m glad we finally have someone in India willing to acquire entrepreneurs and let them be. What are some tips for entrepreneurs who want to get acquired by companies like Jio?

Harsh: None of us founders were looking to sell when Jio acquired our investors’ shares (87%). As a founder, if you’re just looking to get sold, that’s probably not the right mindset.

Anirudh: There’s a common misconception that entrepreneurs should always be thinking about their business. I did some research and learned that you’re an advanced open water diver, an avid reader, you travel, and you’re also into running.

Harsh: Haha, I went diving in the Galapagos in December, and my co-founder, Farouq, introduced me to it. Luckily, my wife and our friends are also into diving. It was magical to be inside the water where you hear nothing but the sound of your bubbles, and you can just forget about everything. 

Anirudh: That’s true, every time you go underwater, it’s just you, the surroundings and your bubbles and you’re one of the fishes. 

Now, you, too, are a founder investing in other founders. We’re about to close investing in one of the deals you referred to us. What was your inspiration to start investing, and what are some of your investments? 

Harsh: I don’t have any specific sector or typecast founder. It started as payback; I didn’t think about making money or returns. I respected the help I got from Zishan, Gagan Goel, Rohit and Kunal, Ramakant Sharma, etc. At some point, I decided that I’d love to be a part of the journey and put my money where my mouth is. I have about 16 investments right now, which are sourced through our networks of juniors, seniors, etc. in the industry. It’s about backing a founder who has ambition combined with the potential and capability. If you want to pitch to me, you can connect with me at harsh@fynd.com.

Anirudh: How did you go from building a business plan to getting that show on the road? When do you stop doing the research and start the execution? 

 Harsh: I think you do research continually on the market, but you should mainly focus on the problem and the competition. I think the moment you have identified a problem; then you can build a solution or a product. Don’t try to do anything too fast – take your time to perfect the product. Don’t overthink it; the product will keep changing. 

Anirudh: There’s a lean startup mentality – you go to market, then you learn and then build further. 

Harsh: You are never going to stop building. There is no version 0.5. Your product keeps changing! So just start making a lot of version 1’s.

Anirudh: What are 3 pieces of advice that you could think of that were beneficial to you? 

Harsh

  1. Kunal once said, “Know the organization you are trying to build – build it in line with your personality.” You need to think about the kind of organization you want to build at what scale, and how you’re going to develop that.  

 

  1. Vikram, currently the CEO of NSE, told me, “Maintain an organization chart and reassess your team at every stage.” He helped reorganize and gave us a meticulous structure and told us what we need to follow. We experimented with what he said, and his ideas made us a better company.  

 

  1. Sasha said, “It’s okay to pivot away from what you’ve got, even if it’s successful and profitable but not growing.” He shares many stories about different startups he’s worked with. Before we pivoted away from Shopsense, he said don’t give me my money back – come back in 3 months and tell us what you would do instead. 

 

Anirudh: What are 2 pieces of advice that you got that you thought was initially brilliant, but have now realized its non-sense?  

 Harsh

  1. Hey, this is happening in China – you guys should do it.  
  2. Just figure out growth, revenue can come later  

 

Anirudh: Fynd, at one point, has taken a hit on your evaluation but convinced your investors to recap. Investors gave equity back but were still willing to continue backing your efforts. What was that like? 

Harsh: In conversation with Abhishek – He suggested asking K Capital if they were okay with doing a recap; even Artha did this. We would rather do this than see our money go down the drain. The hit could be less than a write-off. They were never in the dark – the communication lines were always open. We shared a live dashboard with our investors instead of a presentation to see what was going on anytime they wanted.

Anirudh: Have your work hours changed since Reliance has acquired you? 

Harsh: Not really, but since Reliance works at a different timezone, there are more late-night calls. We’re the early risers who get into office at 8 am and out by 4/4:30. I still work 6 days a week, 7 days mentally, but the advantage now is I’ve got free time in the afternoon to spend time with my wife or nap. 

Anirudh: What’s a book you are currently reading?  

Harsh: Being a massive history buff, I’m reading ‘A Little History Of the World.’ I would also recommend ‘Range’ by David Epstein, which talks about how generalists can win in a specialized world. I look at myself as a generalist, which helped me figure out whether I’m doing something right or not.  

Anirudh: Revenue vs. Valuation?  

Harsh: Revenue comes first, except when you’re raising funds – then valuation comes first.  

 

Anirudh: What was the feeling like when the exit was done? Now the journey at least with these investors is over?  

Harsh: Some Investors wanted to continue, and almost all the investors asked us why we were selling. I think all the investors were making decent returns as investors – the lowest IRR was 30% – Artha made 62%. People wanted to stay invested, but we had to do the right thing for the company – if there was a better option, we would have taken it. It was one of the proudest moments of our lives when we were able to give back positive returns to our investors. The fact that we were able to give back the trust they put in us was very satisfying. When we first got our money – we put the money back in our company to pay salaries, etc. We went for dinner to celebrate, and then we started figuring out how to save on capital gain stats.

Anirudh: One piece of advice you would like to give to any Entrepreneur?

Harsh: Figure out how to make profits – what are the moving pieces that help you make returns. Figure out the equation and factors that are going to make you profitable. If you have already figured that out – then great, read a book! 

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