How To Get Your First 100 Paying Customers – Ep 3 – Gaurav Agarwal

Gaurav Agarwal is the Vice President of growth at Molekule a leading air purification device manufacturer. He is also a mentor at the Alchemist accelerator and the Lean Startup Machine. In the past, Gaurav has also founded two startups – Medibeep and Vivify besides having worked across Asia in various roles at Barclays Investment Bank as an investment banker. He is an alumnus of IIT Kharagpur, India.

This article is an edited excerpt of Gaurav Agarwal ’s conversation with Team Alore. (Link to unabridged webinar recording at the end)


Gaurav’s story in his own words:

Gaurav Agarwal: When I was in my third year of college I was heavily involved in working with the non-profit sector. I did an internship with Aga Khan foundation, I worked with Mr.Anshu Gupta from Goonj, and was a part of Tata Jagriti Yatra. So I had a succession of events that gave me requisite exposure to the things happening at the ground level in rural India. It was during my internship with the Aga Khan foundation that I realized that tele-health services did not have enough impetus inspite of mobile phones proliferating in a big way. SMS was a great way to reach out to target audiences. I felt that most people in rural India were oblivious about vaccinations and the right time to get it put, so a public messaging platform was the best way to educate them wherein the district officials could SMS the villages about different vaccinations programmes taking place. So this was the germination of the idea, which was a great beginning for a larger vision. The go-to-market for this idea was quick and we could spread the message fairly quickly within a matter of a few weeks.

Gaurav on his first sale

Gaurav Agarwal: For  Medibeep, we were looking at having people give the birth dates of their children to a centralized number and the parents would get all the details about the child’s vaccination schedule & regular updates and alerts. We had NGO partners that we were working with who were ready to push our idea and see it through. So it wasn’t too tough to sell the idea as the product was much needed and in demand. We had a few channel partners or distribution partners who were willing to pilot the product for people to use it.

For Vivify what happened was that in my fourth year of college, I got the chance to go abroad for my internship. That’s when I saw that when you are traveling as a tourist you get an audio guide system at popular tourist destinations in cities. At the push of a button, these devices tell you about the painting or structure you’re standing in front of. When I came back, my friends and I decided to make our own automated RFID guide system that did not need you to press any button. All you needed to do was to stand in front of a painting or structure and it would do the rest. We did the initial distance calibration for technology using indoor GPS. Today, a lot of companies are coming up with indoor GPS solutions using NFC and RFID based on triangulation technology. We used a combination of RFID, NFC and Zigbee technology to accurately triangulate and establish the distance between artifact and device. The device then automatically played what was relevant based on your location.

We built this technology and piloted it at IIT Kharagpur, of which I am an alumnus. They offered us a small contract and agreed to introduce us to the science centers across the nation including Kolkata, which is the biggest. So we pitched the solution in Kolkata and they really liked it. We got a contract worth a few lakhs of rupees ( thousands of dollars) and that was our first big sale. We spoke to authorities at Calcutta Museum and the Science Museum in Calcutta about our product and its utility and once they were convinced they were willing to recommend us to other people.

On scaling up:

Gaurav Agarwal: Scaling up depends a lot on what kind of business you’re in and if you’re pre-product market fit stage or product market fit. For instance, if you’re in the pre-product-market fit, then you are not even trying to sell as much as you’re trying to validate if you’re really solving a need? Am I making something that creates a real tangible value for someone? Only once these are resolved do you think of monetizing the idea. However, a lot of start-ups fail due to lack of distribution channels or methods to get enough customers at a cost where the customer pays and business self-sustains. So many start-ups discount customer acquisition but later realize that their distribution channel was not sustainable because there are no channels or they are extremely difficult for a start-up to work with.

However, a bigger reason why start-ups don’t find distribution channels often or sustainable ways to reach customers is that of the size of the market. The market in question is very niche hence, it is small. So if you learn how to make that niche work for you, you will be able to monetize an increasing number of customers. The question to be asked, however, is if its worth all the time and attention?

We realized that our business was very niche and would not expand into a big business so venture capital money could not be used to scale up. It was a great small business that could have been scaled up to a few hundred thousand dollars but it would not be a VC funded start-up company. Also, we realized that if we have to go up to each Museum it would take about six to nine months to close each museum and even after we ship the product to them, we would have to continuously service them, provide them with more content. However, we would not be rewarded in equal terms. So each of our niche customers could get us more customers but the market was not big enough for us to focus on so that didn’t work for us.

I’m currently heading growth at Molekule, a consumer company producing air purifiers. I spend a lot of time here experimenting, figuring out and resolving mass distribution channels. We have channel partners bringing in an increasing number of subscribers to Molekule. We do not work on one channel alone. So if you are trying to acquire people who would want to buy air purifiers, try five or six very different channels, because not every channel will succeed. Not every channel will have the economics that you wanted to be. So you need to experiment with varied channels.

For instance, if you feel that newspaper ads are working really well, search engine marketing is not working and say partnerships are extremely slow, then you know that there is something about newspaper ads that are making people buy molecule, or at least that’s getting you the relevant traffic. So then you need to focus on that. In a B2B type of business, it’s really a game of how much can you wait, and if you can leverage your existing customers with case studies and then go after other people. It’s almost the same in B2C. The scale is important because your average order value is no different. Basically, to get as many customers as possible in that situation, it’s important that you try many different things, spread out wider nets and then check which are the channels and experiments that end up being successful.

Experience on Enterprise Sale

Gaurav Agarwal: When I moved to Singapore with Barclays, I worked as an investment banker and also had this business on the side. We realized that it was not just the acquisition of the idea and product but that trials and demos are also involved which could take eight to nine months with enterprise clients. Thus, both cash and effort have to be put in towards sales. The business required huge amounts of client servicing as well. So you need to do the math and see how much it takes to keep the client happy.

If you are not that big and you’re spending heavily on resources, customer acquisition, and client servicing, you need to see if this business model works for you. If not you need to change the model completely.

About time-frame for sticking to a business model

Gaurav Agarwal: This would be very individualistic and on a case by case basis. My way if functioning is that I like to project three scenarios in every state in the company – optimistic scenario, realistic scenario, and worst case scenario. After evaluating the three I make my decision. I’m very execution oriented and make decisions quickly and one of the reasons for it is that I have a clear understanding of what my worst case scenario is and what would be my realistic case. I would surely know if something is not happening correctly. If I hit my worst case a couple of times in succession I take a step back and revisit the framework on the project that I’m examining and see what am I estimating wrong.

Usually, people are unable to take a step back as they get emotionally involved in the project and want it desperately to work out. Of course, once you project something you need to constantly adjust it so keep doing it but also be honest with yourself. Have a prescribed burn rate and anything below it should make you stop working on the project. So in my mind in start-ups, it is a game of a survival and not so much a game about succeeding and thriving. If you keep surviving and the longer you can prolong your life you will eventually succeed. Try to see the light at the end of the tunnel but don’t lose sight of your goal.

About the journey of survival in the two projects

Gaurav Agarwal: Initially, when fresh out of college I confused my project to be a startup. I started working on it during college and it got traction and I was involved in the non-profit space at that time as well so the idea seemed great to me. However, at some point in time, it hit me that business sustainability for non-profit enterprises can be a challenge. Most of such organizations are dependent on the CSR budget from corporate companies to keep them afloat and that’s when I realized that I would want to do something that has tremendous scale and impact but at the same time, it is a sustainable business perspective. That’s when I realized that maybe the Medibeep project was more viable but it was less of a startup. There were less monetization opportunities and it would not be a business if it would not be sustainable on its own. Also, if the Government of India wanted to roll it out, they could do so very quickly. In fact, some states have state governments starting similar products. We served clients in India and then moved to Singapore.

With Vivify, while talking to a couple of museums in Singapore, we realized that the cost and the time taken to acquire them, and then the cost to service them is so huge that this is not a product startup. In fact, it is a mega-services startup where it takes a long time to acquire a customer or client and then you are involved in client servicing for a long time. Also, services startup generally don’t scale at the same rate as product startups because they are limited by the function of time. At that point, I realized that this is also not the startup that I would want to build for myself so we serviced one of the museums in Singapore but didn’t close the deal with them. We just stopped at that one.

Data never lies but nor does the gut as well. Often people tend to confuse what they want to do with what their instinct is telling them. They try to re-calibrate according to the trends the data is showing. And what you feel in your gut is often aligned with what the data shows. And if it’s not aligned and you trust your gut, keep finding data that either reinforces your feeling or disproves it. Whatever be the case, find that data and don’t keep shooting in the dark just because it gut tells you to.

On Gaurav’s biggest learning:

Gaurav Agarwal: I think the first learning is understanding the business model much more clearly. Next is understanding that B2B or enterprise systems do not only involve the purchase and customer acquisition but also client servicing. There is a very interesting blog on this I read which talks about “How do you get to a million dollar ARR or MRR” – You can either make something that you can sell for $10 to 100,000 customers or you can make something that you send to 10 customers $100,000 each. You really need to know what it is that you’re making and can get to that scale. If you’re making something that you can sell to only 10 customers and only charged them $20,000 and that’s not a good business to proceed.

On the framework to build and work upon:

Gaurav Agarwal: The first thing to do is to find distribution channels and achieve a product-market-fit followed by finding customers.(Its easier and quicker). The only problem is that people often don’t get into a mentality of A/B testing and get tunnel visioned into focusing on just one thing. For instance, an e-commerce company focuses on how to do digital advertising only, which hurts their sales as they assume that digital advertising is the only way to reach out to those customers. It is a flawed assumption because you really don’t know where your key customers are. So the framework I suggest is to set an experiment and find customers who are willing to buy from you. However, you need to set up tight guidelines about who the prospective customers are.You need to figure out very clearly who you are, your target demographic etc.  By doing that, what you have done is you have reduced the search exercise to a few focus groups.

The next step is that you ensure that the channels that you choose, or the personas that you choose for the experiments that you run are far off from each other. For instance, if you are an e-commerce company and digital advertising is your only medium then you should not only focus on Facebook or just Facebook and Pinterest because you are you’re trying channels that have similar dynamics. Instead, you should try channels that are far off from each other and when you find success, you explore that zone again.

The third important thing that most people get stuck on is when they are running two experiments, they start optimizing both the experiments right away. They create different landing pages for both the experiments and have different collateral for both the experiments. Also, if you are a consumer company, you will also create many expensive assets for both of the experiments. All this slows you down and drains your resources before you are entirely certain if this is your product market fit. The key is not to spend too much time or effort on customization.

For example, in Google banner ads, a different aspect ratio is used while in Facebook ads its different. Do the basic minimum that’s needed but do not get stuck up on message optimization yet. It is more important to figure out which distribution channel is going to work or where are you getting the results from and then optimize the message for it. So finally when you run the experiment discard the stuff that did not work for now. After you know which experiment worked for you, optimize it and do the muscle testing, landing page optimization. Repeat the whole process again with a very diverse group of assumptions. So step two and step three to not over complicate your experiments and chill experiments that are fun enough.

An example to explain this would be that lets say you’re making expensive bags. You know that these are $10,000 bags so you can automatically say

Step 1: I’m targeting top 10% by income females now ( assuming men won’t buy). This is a game of finding customers quickly once you find some success you can come back and say I want to target males who are super rich but you really need to lead with the best assumption first and that’s where you determine what your business is about. So once you figure that out.

Step 2: Decide your channels based on resources available and within those resources what are the very different promtion channels that you can choose. Let’s say you choose door to door sales versus reaching out through blog networks or Facebook or search engine marketing or billboards etc. . Don’t get stuck up on how do I make Facebook work because Facebook might not work for your business or maybe it’s not just Facebook that will work for your business model. Hence, you prepare a standard set of laterals and use them for all your experiments and see the results.

Gaurav’s suggested framework on “How to get your first 100 paying customers”

So in this hypothetical scenario, let’s assume that all your other channels flop but door to door works really well. There is an insight here that is much deeper, which is that product means a lot of hand-holding and face to face sales. That’s fine because now you understand that for your product to sell to your customer and your customer to buy you need a lot more face time versus just running an ad. Using this insight you prove your sales pitch and you figure out what are the other avenues for you to exploit. It could be setting up pop up stores in malls and as you keep doing this act of scaling that channel, repeat all the steps again and try and position your product in a different channel and see what happens. It is very important that you try very diverse ideas. The problem lies when people get stuck up and try very similar ideas. So this was a brief framework that I use and it has served me really well.

About finding distribution channels

Gaurav Agarwal: As a businessman, you have a portfolio of distribution channels of which some will eat cash or they will give you a revenue. You should use some of your resources to constantly experiment your thoughts. So, throughout this situation, if you found success in a single channel then you should go with full force and exhaust it. For example, if door to door sales for a woman works then you know that women are a key buying segment. Now you have found a buying segment and you need to know how to scale it up. Thereafter, you need to figure out what is the other segment to go after in this experiment. So basically, if you have found some success, and if you already know your persona, and if you found some success with some distribution channel to reach to that person, then exhaust that first option because now you have a cash machine that can find your step one. So ideally, we are scaling our current opportunity and also trying to target the personas. You should constantly try to find new channels and also new people to sell to.

How do you know that an experiment is successful or not? Is it dependent on cost, return on investment, time or on the distribution channel?

Gaurav Agarwal: Every channel has a different attribution window in which search engine marketing is at the bottom of the funnel. Content marketing, which is a common tactic in the B2B world takes a lot of time and even event marketing requires a lot of time before it becomes successful. So each of these channels consumes different resources and the time taken for any of these channels to give a data point of it working or not is extremely different. The problem now lies in judging and analyzing them in the same light. This requires you to understand your own business and your funnel. You have limited resources and hence, you can’t be waiting for a long time to decide which experiments are successful and which experiments will fail.

For example, if you’re using search engine marketing, you will measure the success based on how many sales were made say within 30 days. But if you are using an event strategy, then you will have to measure the success based on the number of leads. So using that information, extrapolate your sales information and see if the number makes sense or not. The first thing to understand that each strategy has a different lead time. After waiting for a year you need move to upper funnel metrics. It means that if you can’t wait from the bottom of the funnel metrics, move to the upper funnel metric. For instance, if you’re doing content marketing strategy you should not measure success by the number of people who visited your website but by how many people consumed your content and signed up. You need to use this to make decisions.

Talking about resources you need to allocate your resources wisely and know the channels you want to try out. Firstly, know the channels you can afford and then look at them under the same lens and lastly, calculate which can give you more sales and offer statistical significance. Data can be very misleading most of the times so if you can get statistical significance on anything that’s great.

Advice to new entrepreneurs in the first year of their business

Gaurav Agarwal: The most important thing to know is the product market fit. If your market is niche, you need to really ensure that your solution is differentiated and people are happy using your service. The product market fit should be at a level where customers are extremely passionate about your product and they cannot do without it. So if you have a product market fit that can fulfill this criterion you will always find success.

Best advice received :

Gaurav Agarwal: I look up to a few people for different things. However, one of the things that has really influenced me is people who are execution oriented. When you are a startup you need to take decisions fast or else your competitor will trample over you. Taking your time to come to a decision is fine but to procrastinate due to lack of clarity can be harmful to the business. I admire Jeff Bezos. He writes the annual shareholder letter and I would suggest everyone read his letters. They are extremely insightful. He says that you should be fine making decisions when you have 70% information because if you’re trying to get all the information then there is no risk and if there’s no risk, there’s no reward. If you are an entrepreneur you are playing a risky game and you can be on track if you move fast. So if you minimize unnecessary time spent on decision making you could use it towards execution.

One book that you would recommend:

Gaurav Agarwal: I read a lot of blogs but a few recommendations for those starting a free product market fit startup- “The Lean Startup”. It is the Bible for those starting a business. If you are working on post-product-market fit and expanding you must read- “Crossing the Chasm”.

About the startup world and startup founders

Gaurav Agarwal: I think if you find pleasure within pain and in moving fast, have a sense of autonomy on how you can do things and want to create something new, then a startup is meant for you. It is also a lot about the culture and the kind of work that you get to do in the startup space. I am an employee in the startup world and the reason I chose to do that is because of the work that I get to do. I am here trying to build a business of a billion dollars in the next three to four years. If I was to do the same in a corporate setup, it would have taken me 10-15 years. So if you’re looking at high impact, high value to be delivered quickly, a startup is your place.

I wanted to get back to a startup because I wanted to make an impact. Gone are the days where startups meant no money. Today, if you show concept and growth you get funding and that allows you to have a lesser salary but for a better impact. Also, the risk factor for startups is none or little because the investment isn’t much. You can always get back to a regular job. We tend to inflate the risk of working in a startup more than we should. We must instead enjoy the thrill of creating something of your own.

On the difference between B2B and B2C

Gaurav Agarwal: In B2B there is a lot of sales process. It involves hand-holding when the salespeople in the pipeline are introduced. It’s an extremely slow moving process and most often there isn’t enough data for new documents. It means the sales cycle is very long. On the other hand in B2C, it’s less of sales and more of marketing. So you cast a wider message and instead of trying to hand hold the person and then jump on a call with them. You tell a story at scale. It’s a lot like inbound marketing. In fact, B2B is also moving towards an inbound marketing way. You set up landing pages and content for every step in the funnel aiming to help people move to the next step.

This was Episode 3 of Alore’s 20 Episode series – “How to get your first 100 paying customers”

Previous Episodes:

Episode 1: Sidney Minassian, CEO and Founder, Contexti

Episode 2: Scott Sambucci, CEO and Founder SalesQualia

You can reach Gaurav Agarwal here

Share on facebook
Share on twitter
Share on linkedin

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.