[Original air date: 9/10/18]
Atlanta continues to be a hotbed for technology start-ups with Atlanta ranking fourth best tech hub in the U.S. by InfoWorld. Joining us today is Sanjay Parekh. Sanjay is a serial technology entrepreneur. He is a co-founder of Prototype Prime, a start-up incubator based here in northern Atlanta metro. He’s also the co-host of Tech Talk Y’all, a podcast covering technology with a southern flair. Sanjay is also quietly working on his third start-up with a co-founder.
Jim Fitzpatrick: Sanjay, welcome to the Atlanta Small Business Show. So glad that you’re here.
Sanjay Parekh: Yeah, thanks for having me.
Jim Fitzpatrick: Yeah. Talk to us, you have such a rich history in tech start-up scene here in Atlanta. Tell us a little bit about your background and what got you to this point.
Sanjay Parekh: The thing that really kind of kicked it off for me was in the dot com days. I came up with an idea, back then everybody was doing the start-up and you could get money and that whole thing. One night I hit the Ikea and FedEx website and the first thing they asked you to do was tell them what country you’re in. I thought that was dumb. I came up with the technology to solve that problem. Now, when you get ads targeted to you based on your location online, more than likely that’s my technology.
Jim Fitzpatrick: Very cool.
Sanjay Parekh: Started that company, raised 12 million dollars. We sold that company in 2007 and then I started an event to give back and help out other entrepreneurs. Ended up help co-founding another company that exited a few years ago and working on number three now.
Jim Fitzpatrick: That’s awesome.
Sanjay Parekh: Also, helping other entrepreneurs through Prototype Prime.
Jim Fitzpatrick: That is phenomenal. What are some of the common challenges for tech entrepreneurs here in Atlanta?
Sanjay Parekh: I think challenges for entrepreneurs at everywhere, not just here in Atlanta, but it’s all the same. Raising money is a challenge, finding talent is a challenge. Understanding your customers is a challenge. All of these things are a little bit different. I think things have gotten a little bit easier in terms of some of these. Like raising money, nowadays you don’t need to raise money as soon or as quickly as you did back in the dot com days when we had to buy servers and all that stuff. Now they’re so cheap so it makes it easier to do things.
Jim Fitzpatrick: It’s a good time to be out there as a tech entrepreneur.
Sanjay Parekh: I think it’s always a good time to be an entrepreneur, tech or otherwise.
Jim Fitzpatrick: Especially with the great economy that we’ve got going on right now too. I’m sure that plays into it, right?
Sanjay Parekh: Well, and bad economies are even a better time honestly to be a great entrepreneur. I mean we’ve seen so many great companies come out when there’s bad times because people go off and do things. King of Pops which is a great Atlanta story, came out when things had gone down and that got started and that’s a great company.
Jim Fitzpatrick: That’s a good point. That’s a good point. People find they may be out of job because their company downsized or what have you and some of the people that are watching us today, that’s the case. I lost my gig back in 2008, 2009 or maybe even more recently and they find themselves saying, “Well, wait a minute I could do that. Or I could build that. Or maybe I’m going to get into the business that I’ve always dreamed of.” Or what have you and certainly tech is so hot. Explain for us how a tech start-up can raise money. We talked a little bit about raising money to get going. Talk to us about how they can raise the necessary funding to launch or expand their operations.
Sanjay Parekh: Yeah, nowadays a lot of it is about the traction that you get. We see these stories about people raising, like Magic Leap is one of them, it’s all secretive, they just know released their product. They raised hundreds of millions of dollars. That’s an abolition, that’s not a normal thing. Most people, you need to show traction. You need to develop some type of product even if it’s prototype or early beta, deploy it, get customers, show traction, show that people actually want the thing that you want to sell. That’s when you start raising money. Honestly, you start raising it at beta evaluations too then, than if you do it earlier.
Jim Fitzpatrick: For the people that are watching today that go, “I have a great idea. I’ve got the blueprint for it. I’ve even developed it. I don’t have a customer and I don’t have anybody that’s out there in the field trying it perse, but I know that I’m onto something here. I’m just broke. I’ve got a great idea.” What do you say to that guy or girl that’s watching us today that goes, “Wait a minute, he’s talking about getting traction. I don’t have the hindered or two hundred or a million dollars to get traction.” What do you do with an idea?
Sanjay Parekh: It doesn’t take that much money to do it. You need to be scrappy. That’s kind of the whole name of the game of being an entrepreneur. You’ve got to figure out with limited resources how to get things done. You’re not a big corporation. Big corporations throw just tons of money at stuff and they figure out a way to make it all work with that. Right?
Jim Fitzpatrick: That’s right.
Sanjay Parekh: Us, as entrepreneurs, we have no money. It’s better to be in that mindset than to have too much money. We’ve seen so many start-ups that have raised a lot of money, and they just burn through it. They don’t accomplish anything.
Jim Fitzpatrick: I know.
Sanjay Parekh: It’s better to be scrappy. There’s always a way to figure out how to get access to a customer, how to deploy something, how to build some kind of minimal, viable product that just tests out the idea and makes sure it’s actually something worthwhile. Not just in terms of raising money, but you’re going to spend the next eight to 10 years of your life on this. You want to make sure it’s something that actually going to be valuable and fruitful at the end of that time.
Jim Fitzpatrick: That’s right. How do you know if it hasn’t already been done?
Sanjay Parekh: Six billion people on the planet it’s probably been done. Almost everything’s been done at some point unless you’re doing some kind of crazy technology material that I don’t understand. A lot of times it’s about the execution. It’s really about doing it better than anybody else.
Jim Fitzpatrick: Okay.
Sanjay Parekh: It shouldn’t matter that there’s competitors. If you can do it better, you’re going to win.
Jim Fitzpatrick: If you can execute better.
Sanjay Parekh: If you can execute. It’s never about the idea, it’s all about the execution.
Jim Fitzpatrick: Which is more important, a cash paying customer or users? We’ve met some people who’ve said, “Well, I don’t have anybody paying me for this, but I have a hundred people using it. It seems to be working well.” Which one is more important to traction?
Sanjay Parekh: Somebody that’s willing to part with money means that you actually have found something that is an actual problem for them. There’s value attached to it, it is causing them pain in their business or in their lives or whatever, it’s a real thing. If they’re willing to try it for free, I don’t know.
Jim Fitzpatrick: Not the same, right?
Sanjay Parekh: Right, it’s not the same. Is it really that big of a problem? The dollar is the thing that really differentiates.
Jim Fitzpatrick: Unless it’s some sort of a free app, ultimately anyway and you’ve got a bunch of people using it and it seems to be working well.
Sanjay Parekh: Yeah, but it’s always how are you going to monetize it? Anything that you try to do with a free app, people are going to revolt at some point. You’re going to lose people. Netflix raises their rates by a dollar a month and people lose their minds. It’s amazing.
Jim Fitzpatrick: That’s a good point, yeah.
Sanjay Parekh: It’s such big content, $12 a year. I mean that’s all their asking for.
Jim Fitzpatrick: Or 20% more on Amazon. Oh, my God, 20% more, so now it cost you 120 bucks a year instead of a 100 or whatever the number is. It’s crazy.
Sanjay Parekh: How many times a year do you use it. All the time, at least for me, it’s all the time.
Jim Fitzpatrick: That’s right. It’s crazy. For our viewers looking to launch their own start-up, what advice would you have for them? I know it’s a very broad question, we’d be here for the next seven weeks, right? Discussing what that advice might be but kind of hit the high points.
Sanjay Parekh: I think start right away. Don’t wait. There’s so many times that I hear entrepreneurs say, “Oh, I’m waiting for this, waiting for this.” You got to start today. You got to figure out what you’re going to do. Start lining up those steps. Ideally, it’s not just you doing it, you need to find a co-founder. Especially if you’re a first time entrepreneur. That’s probably the critical thing, if you can convince somebody else of your crazy dream, and buying in, maybe there’s actually something there. Try to go out and find a customer, even beforehand. If you can find that customer that says, “Hey, this is that big of a problem that I’m willing to pay for it now before you even build it.” Then you really know that you’re on to something.
Jim Fitzpatrick: Do you need a business plan to raise money?
Sanjay Parekh: Not nowadays.
Jim Fitzpatrick: Really?
Sanjay Parekh: Yeah.
Jim Fitzpatrick: I know the people watching are finding that really, you’d think that you’ve got to officially go in and put down the book and go, “Here’s our plan.” Nobody’s reading it, are they?
Sanjay Parekh: It depends on who you are. If you are a small business. If you’re opening a chain of whatever or a franchise or whatever, yeah, you’re going to need a business plan. Because you’re not going to Venture Capitalist or Angel Investors more than likely, you’re probably going to a bank. They’re going to require a business plan. That it’s well thought out, researched and everything. If we’re talking about scalable, high tech start-ups and things like that, nobody reads those, honestly.
Jim Fitzpatrick: That’s a thing of the past.
Sanjay Parekh: Nobody does, because really at the end of the day what you’re betting on is the team. You really want to get to know the team very, very well. That’s going to be the difference between this thing succeeding or not. Do you believe in this team? You’re not going to get that on a piece of paper and a business plan.
Jim Fitzpatrick: How important is it that the team has prior successes? Is that important? Like you got a bunch of college kids that all get together. Hey, we just got out of college, we have this little idea and we’re going to do it. It’s going to be an app, Facebook or whatever. Do investors look at it and go, wait a minute these are all a bunch of 25 year olds what do they know, other than the fact that they know how to program and they know how to build a widget? Is it important that they come in and go, “Hey, I just sold xyz.com for a half a billion dollars.”?
Sanjay Parekh: Yeah. I just recently invested in a team where both of the founders just got out of college a year ago. The whole time they’ve been working on this start-up. For me, it’s all about the team. It’s not about the past success. I mean how is somebody going to have past success unless somebody bank rolled them their first time. How do you get that first success then? Somebody has to be willing to support the team when they’re their first time entrepreneurs.
Jim Fitzpatrick: That’s right.
Sanjay Parekh: Every second time entrepreneur was a first time entrepreneur at some point.
Jim Fitzpatrick: Yeah, that’s exactly right.
Sanjay Parekh: I think it depends on the investor. It depends on how their risk profile is. For somebody like me, I care about the team and if I feel like the team is going to do whatever it takes to be successful, then even if they go to zero, I know that they tried their hardest. That’s good enough for me.
Jim Fitzpatrick: Well, Sanjay Parekh, thank you so much for joining us today on Atlanta Small Business Show. We really appreciate it and hopefully we can have you back to talk about more of these programs.
Sanjay Parekh: Absolutely. Thanks for having me.
Jim Fitzpatrick: Great.