BackA tribe of founders who have one another's backs in hard times
Where media focus is usually on millions of dollars in funding, a few months of working capital may sound like a rounding error, but it’s a life-jacket to a drowning startup
PremiumThis is a story of an experiment. Of how people react to others’ troubles when they’re facing difficult times themselves during the current covid-19 pandemic. Is generosity a virtue reserved only for times when there’s plenty to go around? Will it be each-man-for-himself as soon as resources get scarce?
The prevalent image of humanity is one of selfishness. If you are an entrepreneur, you are defined by a hunger to get ahead, come what may. Most business stories we read cement these notions. But this small experiment in Bengaluru proves the contrary.
Three weeks ago, a bunch of early stage SaaS (software-as-a-service) startups took a hard look at their balance sheets. Some had less than three months’ runway because the revenue on which they depend had dried up. Some would be forced to shut even if they had promising products.
That’s when an idea floated that startups facing imminent closure could get a working capital lifeline from others who were slightly better off. These were all SaaS founders from an accelerator community with shared values—they call themselves the Upekkha Tribe. Think of it as the SaaS version of a commune.
Gagandeep Singh Josan is the co-founder of Bengaluru-based Nittio Learn, whose SaaS product provides a microlearning platform for a distributed workforce. For example, an e-commerce company can use it to train technicians and sales people.
Slow payments
While the usage of the product actually rose during the lockdowns, because the need for online training increased, payments slowed from affected sectors like retail. Josan sat down with co-founder Aravindan RS to take stock. After factoring cost cuts, including forgoing their own salaries, they figured they had a runway of seven months. “At least then your mind gets freed up to focus on what to do," says Josan.
But they weren’t thinking only about their startup. They looked at others in the ‘tribe’ who had taken a bigger hit from covid-19 and had just one or two months of runway. Mumbai-based Classpro, for example, provides software to manage coaching classes, which were suddenly in limbo.
Josan and Aravindan decided to give up one month of their own runway to provide that working capital to Classpro, at zero interest and repayable in 18 months, based on trust without a formal agreement. “We felt one month of runway is not going to make or break us. But it could help Classpro to survive and grow," says Josan. “That was rational thinking in a way. The emotional part is the glue keeping us together."
He hadn’t met the Classpro founder, but could relate to somebody in the edtech SaaS space from the same accelerator that was helping him.
Classpro has shut one of its offices and negotiated a deferment of rent for the remaining office. Half of all salaries are being held back till the crisis abates. And it has launched a product for online classes which is showing promise. The lifeline from Nittio Learn might help it survive long enough for cash flow to pick up again.
“From less than one month, our runway has extended to three months. That will give us time to figure out how to extend it by another few months," says Jayesh Gopalan, co-founder of Classpro. “We were ready to give 15% interest, but the Upekkha tribe decided to keep the loan founder-friendly. We had earlier talked to working capital loan providers, but it was coming to 22% interest in a repayment-from-revenue model, which was more than we could afford."
Harishanker Kannan is the co-founder of Pune-based ProMobi, whose product Scalefusion provides software to enterprises for mobile device management. For example, logistics, healthcare and financial services need to manage communication and data protection on devices of their employees out in the field.
Recovery mode
Scalefusion took a 40% revenue hit with lockdowns, but new use cases emerged in work-from-home scenarios and the startup began to recover. “Being a six-year-old bootstrapped company, we had a pool of money for rainy days. When we got to know of other, younger startups in Upekkha in a tougher situation, we decided to give relief from our pool," says Kannan.
ProMobi’s relief went to accounting software provider Gimbooks and another startup, which is building analytical products for fleet management.
“We built Upekkha as a tribe where founders have each other’s backs, and not just a portfolio of startups," says Shekar Nair, co-founder of Upekkha.
The modern idea of an individual may be coloured by selfishness but the quality of being humane is still what makes us human. Where media focus is usually on millions of dollars in funding, a few months of working capital may sound like a rounding error, but it’s a life-jacket to a drowning startup.
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