My Startup Story Series… Alchemy Associates

This is the second in the “My Startup Story Series” posts. The first was on Ali, and this one covers Alchemy Associates.

Year One. On 1st January 2003, I came back home to Karachi. I had 16,000 dollars in credit card debt (from venture number one, Avicena), an asthmatic three year old, another one in beta (we were expecting Salwa) and an IBM Thinkpad T-30, that I had bought with the last two thousand dollars in my bank account. Over the phone in Virginia I had received two semi firm offers and three solid introductions that I hoped would lead to decent interviews in the city. After three failed attempts at making my millions with technology, I had promised myself and Fawzia a job that would lead to plush retirement and a pension in a firm full of the undead (Freudian slip, I meant the unGeek).

So much so for promises…

I founded Alchemy on 27th January 2003 to make a point. Yes I was broke, in debt, with no idea or a plan, but the point was that I was still better off on my own. To be fair, as a family we had a number of advantages. We had two sets of grandparents, a roof on our head, only one kid in the school going age bracket and no immediate pressure to support our parents as well as a total absence of embarrassment or shame on moving in with them in their old age so that they could support us and our kids. To the day that was four and a half years ago.

The first five months were brutal. Maybe that is too harsh. Let me put it this way. Our total billing in our first five months of existence was 800 US$. It funded the budget for letter heads and our first part time employee. Money wasn’t the issue. I would hijack my father’s car (an old beat up 1988 Toyota sprinter on CNG), borrow his color deskjet printer, eat his food, and scrounge 1000 rupee (15$) loans. And this was on top of the money I would borrow from Fawzia who thankfully, unlike her insane husband, was gainfully employed. The brutality came from building the pipeline from scratch and from hearing no’s. It wasn’t that it stopped after five months. It’s just that after five months I got used to it.

There are three important lessons that you should take away from the above paragraph. The most important investment you can make as an entrepreneur is to have a considerate family and a spouse with short term memory who will lend you money despite the billions of dollars you have borrowed from them and blown up to date. The second important lesson is that building a pipeline or flow from scratch is the most painful experience you will ever go through in life. Even if it doesn’t kill you, it will make you bitter, rude, mean and abusive. And the third and final lesson is that after facing five months of bitter, rude, mean and abusive behavior, you will get used to pretty much everything.

In the sixth month a few things happened. A mutual friend did an introduction with Mahmood. Mahmood is a colleague from my days at Sidat Hyder who for some reason remembered me as a solid professional and had a much higher opinion of myself than I had of myself even on good days. He was in the process of expanding his practice and thought that having a firm of consulting actuaries on board will create a better, possibly fuller product offering for his customers. The deal was a very simple handshake. Office space and friendship for an understanding of pitching jointly for work. I didn’t realize it then but this was one of the luckiest breaks in a series of lucky breaks that we were blessed with at Alchemy. With Mahmood came Ali and Nasir Bhai, Mujtaba (yes, my current partner in crime), Kashif, Masood, Sikander, Rashid and many other friends. But more importantly with Mahmood came a platform (Mahmood, Masood, Idrees and Company), a network and much needed work.

Year Two. With active support of this network, our billing jumped from 800 dollars in our first five months to $37,000 in the next 13 months. Beyond that, as our practice and employees grew, Nasir Bhai, (a senior partner in the firm) was gracious enough to give us his office space (3000 sqft) for next two years on a rent free basis. Mujtaba on the other hand was audacious (some would say shameless) enough to ask for it. Arif Rasool joined Mujtaba and myself at our new offices as the third partner in crime.

Having this group as a partner also helped us protect from the hassles of running an office. The first time an excise and taxation officer came asking for a bribe, we just sent him to Ali Bhai’s room and that was the last we heard of it. I think the next two years really defined us as a firm and without Ali Bhai, Nasir Bhai and Mahmood we would not be who we are or even where we are. It wasn’t just alliance or space or protection… It was mentoring, support (monetary and non-monetary), at times a shoulder to cry on, on occasions someone to share really big news with, but more often than not, companionship and comfort on good days and bad.

There is only one lesson you can learn from the above material. It’s just dumb luck. Irrespective of how hard you really work, in the end fate, destiny, karma, or some combination of the three will put you on the cross roads with well wishers and supporters who will do everything for you and not ask for anything in return. Given a choice between luck and smarts, opt for luck.

With hindsight, there is possibly one more lesson in there. Your best deals will be deals done on a handshake. You may or may not document them. Just make sure that you honor the trust shown in you.

Alchemy Risk Manager (Year Three and Year Four). Towards the beginning of year two we seriously started looking at building a product that our customers kept asking us for. To the first three we said no, but when the fourth one walked in and said, what will it take for you to build this?, we had a change of heart. Alchemy Risk Manager was initially conceived as a market risk management toolkit. Three years later, it has now evolved into an Enterprise Risk reporting platform that takes care of Basel II requirement for Credit, Market and Op Risk, Asset Liability Management, Stress Testing, Local Regulatory reporting and a derivative pricing engine. As a product it is reasonably successful and it became the driver that took our revenues to $70,000 in year three and $150,000 in year four.

I think the shift from a services based consulting setup to a product based technology company changed the profile and outlook of Alchemy. It was an even more profound change because I had written myself off being a geek or a technology guy immediately after Avicena (circa 2001). I am still in denial about this being a technology company, or us being a member of PASHA

Alchemy Today. Four and a half years after its founding, Alchemy today employs 40 people. Growth has slowed down from the blazing triple digits a year to the mere double digits (80% year on year this year) but will spike again as we launch two more risk products and close on our first deals in Thailand and Dubai. For a company started on a beach chair, a thinkpad and multiple 15 dollar loans from my retired father, by the grace of God, we have come a long way.

I still answer my own phone, drive my own car, open my own doors and carry my own bags. I am ruder, meaner, leaner and more abusive than I was in January 2003. I am also fatter (200 lbs) and balder (more surface area to catch sun light to encourage circulation in my hard at work brain).

It wasn’t me. It was just dumb luck. Don’t take my word for it. Google Nassim Taleb and read his two cents on the topic. Fooled by Randomness and the Black Swan.

Over and out.