My Startup Story Series – Ali on Building a Business without Investors

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In this series of posts, we will be asking entrepreneurs to share their startup stories — the ups, downs, failures and successes. Particularly, what they actually learnt about business from doing this.

Send me your startup story at osama at greenwhite.org — the more we share, the more success stories this industry creates, and the more investment we can all attract. Simple, right? Just remember to point your VCs to our startup success stories here.

The First Startup CEO’s story – Ali on his startup 

I’ll share my experience here. It may be quite interesting for aspiring entrepreneurs.

We started in LUMS as six partners. We were working on a product
which we thought would fix all problems of electricity theft, power
losses and billing in Pakistan. We built a proof-of-concept and went to
some of the ‘biggest’ business men in Pakistan (don’t wanna take
names). We estimated that we need 1.2 million rupees to start with and
that should be enough to fund us (we won’t take any salaries etc.)

So anyway, these big businessmen treated us like kids, smiled a bit and said best of luck.

We then built a prototype set-top box and went to CTI (Carrier
telephony industries) to build it as a product and market it. They were
interested but the boss’s son was my class fellow but obviously nothing
came out of it. It was quite exciting though, meeting people, trying to
sell the idea etc.

Then we got a project from one of the friend of a professor at LUMS
(related to image processing). Then we got another.. then another..

Then we moved out and got an apartment (we ate, slept, and worked on
the same desks) and hired a couple of our batch mates as part time
programmers. Then we hired a few full time developers and then the
apartment turned out to be too small and we moved in to a bigger
location.

Because we were quite a few people so there was no direction and
eventually we got stagnant. At that point one of my partners joined a
big MNC (think of the comparisons drawn between us and our class
fellows making more than 80k and us struggling to run the business),
another one joined his dad’s business, and another one started his own
startup … and then we started focusing on improving the firm…

To cut the long story short, 3 years down the line we are now a teamof 50+ with more than around million $ revenues (growing fast) and offices in europe and pakistan. Bottom line – you can build a startup without an investor as well!

Regarding investors, i personally wouldn’t wanna give you 1.2
million rupees. That’s such a small amount that you can get it from
your family. In any case, investors know you can’t do much with 1.2
million rupees and you’ll be back for more. If you need a million $
then they’ll talk. I know VCs in Germany as well as the US, and i know
for a fact not many people are interested in small investments, simply
because small investments yield small returns. If you are a building a
business, any serious investor would like to see a proof of concept, a
marketing and sales plan, a competition review and how you’d make money
(sell out or whatever). If you don’t have all of this, you should
probably take a loan from friends and family.

Just my humble opinion and story :)

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12 Comments

  • This is indeed a great series, this will surely help me and all others reading this blog. i have few questions for Ali Naqi.

    1. You started right after graduation? from what i see on Uraan website you worked for Mentor Graphics?

    2. Share about your experience like Why you choose to start a new startup rather than working for some CMMI’s/MNC companies?

    3. Your views on Partnership vs. Single Owner?

  • Why not think big and start small (through small investments i mean), example: Google.

  • Hey there Osama,

    Great idea on starting this series. But this article is plain bad ;-(

    I’m not sure who Ali is but sounds like one of the folks at Parvaaz. Ali doesn’t really say why the initial idea never really worked out. Why the CTI deal didn’t work even though they had a close link in the company? What was wrong with the whole business plan? 1.2 million seems like a really small amount to be practical.

    How did Ali’s company survive after that with no money? I’m sure a few of the partners pulled in some money, albeit small; the projects might have brought in more money but the article is just hazy on that.

    Once the startup’s first product fizzles out and they don’t come back with another product but instead they start picking up on projects here and there (like it is in Pakistan en masse); you are no longer a startup. (see wikipedia’s entry on Startups en.wikipedia.org/wiki/Startup_company). I’m guilty of it as well but if I could go back and do it all over again; I would *not* advice young entrepreneurs to go into the service industry. Esp in Pakistan where that’s always the escape plan. I would advise them to stay committed to their product and push it hard where ever they can and sell it hard. The most important thing is persistence. The one who stands longest is more likely to be more successful.

    just my $0.02

  • Sorry, Uraan not Parvaaz :)

  • Nash,

    Ali would be able to perhaps provide more details as he’s promised me he would.

    Generally though, I think the gist of this article is that if your goal is to make money, have respect and have a infrastructure ready to try new innovative ideas, then its possible to make one without investors.

    I guess Ali’s in a much safer “cushier” place to try product ideas compared to where he was a while ago — maybe its taken him a few years to get there but atleast this time there is a foundation to build on top of.

    On the other hand, I agree with you that you shouldn’t enter into the services business as a fall-back of a product company; be one of the two, because managing both distracts you away from your core business too much (generally speaking. Exceptions liek Alchemy exist).

  • Interesting indeed. Before Ali’s questions I think I will try to answer some of Nash’s questions (though I will not go in details because of lack of time, Osama, I’m keeping my promise :)).

    Initial idea: It didn’t work out because it required a lot of production, there was only a few government agencies which could be our clients (high risk from sales point of view), there were existing bigger players in the market, our experience with hardware was limited not to mention we couldn’t get good engineers who would turn a prototype into an industrial-grade product. Simply put the idea was good but over our heads. Regarding budget, 1.2 million is obviously very small amount but the way we planned was that we kept all expenses extremely small (in my opinion, now that i can look back and evaluate – it was downright infeasible do it the way we were planning – but we were only in the university at that time :)).

    CTI deal, it was never meant to work out. CTI was negotiating with Seimens for a take over at that point in time, they listened to us only because of our contacts. After that the entire management was changed. Also CTI was not an efficiently run organization (as you can expect from any government organization) so they didn’t really want to innovate, come up with new products or be competitive in the market.

    Okay, now how did we make money :) I hate to say this, but we were all pretty good technically and otherwise (our ideas didn’t always synchronize, but we were all good). We thought we’d fund all our products ourself and to fund it we’ll just start taking up projects. In our first year i.e. 2003, we made over 5 million rupees and spent it all on infrastructure, hiring etc. WE also did a lot of experimentation with different products starting from biometrics to different software applications (a/v conferencing apps).

    Unlike what most people think, business is not about creating that next killer application – it’s about revenues, profits and creating value for your customers. You can’t just live in a perfect world and say that I’ve the best product idea and I’ll work my bottom off on it and we’ll be next google – it simply doesn’t work like that. Some people do succeed but most people don’t. You have to have a steady means of revenue (either your dad or your services – your choice; in our case, our parents didn’t even know what until we started making money we were doing because we were still in univ).

    Lastly, I totally disagree with “one who stands longest is more likely to be more successful”, it’s not a competition where we’re talking about who’ll be the next tough guy/gal who stood against all odds and made this killer product that revolutionized the industry. It’s simply business. You make profit that can justify your hard-work and is sustainable – you win, otherwise you’re a loser!

    Just to let you know, we are still working on our products some of which are quite successful. Like i said the core value is to create profit and add value for our customers and partners; we are not attached to any particular product idea or business strategy.

    PS: my article is bound to be hazy, it wasn’t meant to be an autobiography :) – it was just a comment to another article on enterpreneurship. I wanted to show two things:
    a. You can create a successful business without external investments.
    b. Some of our local universities are producing quite a few successful startups which are generating foreign revenue as well as creating jobs in Pakistan (this was in reference to a remark of Jehan regarding our business school’s contribution to enterpreneurship).

  • Just one last thing:

    “How did Ali’s company survive after that with no money?”

    When we moved out of hostels/lums labs into our first office, we were already quite profitable and did have a small cash reserve (enough for renovations and hiring).

  • Naveed Malik

    For products vs services, please see an interesting article here:

    http://www.resourcepad.com/blog/2007/07/05/products-or-services-whats-the-winning-strategy/

  • Ali, how are you? maybe you don;t remember me but i do (Maybe due to the unusual screen/fonts you used while writing code) :) from Mentor Days. Good to hear your story.

    For all of you readers out there who doubted that coding is not a good way to start a career (When we said other wise). I would like to mention that Ali was a hell of a programmer even in his school and early professional life days . so you can be successful and even run a company one day if you start by that road. you don’t have to be hired as a project manager to do that.

  • Thanks Qazi. How’re you doing? Thanks for the comments – didn’t know people still remember me at mentor :)

    I didn’t know greenwhite would become a social network as well! Osama, I think you should remove the blog and upload a proper web portal.

    Also, I promised Osama that i’ll answer all questions if he ensures privacy concerns :), so as per the promise I have to answer Ali’s questions above:

    1. I joined Mentor while in the junior year. Worked for around six months and then left while i was in the senior year. This was totally unplanned.

    2. I never thought I’d start my own business. Things just worked out that way. Also when all my class fellows were applying in MNCs, we were busy with our company and things were pretty exciting as you can expect.

    3. Single owner can work if you are really good i.e., you are good technically (you know your domain), you are a good project manager, good operations manager (HR, Accounts etc.), good in sales and a tough negotiator – as you have to wear lots caps during the initial stages.

    Partnership – you can’t have too many partners. Ideal number is 2 (IMHO). More than that, and you are bound to breakup (as we did), and breakups are always messy no matter how close friends you are. But this is subjective :)

  • Ali Naqi, stop spending your time on blog forums and start working on that parallel implementation of Matlab!!!

  • Naveed, i still don’t have the 50% of 50k euros :)

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