January 8, 2014 was a big day for India. And for once, this had nothing to do with politics, sports, legislation or Sachin Tendulkar.
Sometime during the day, an unassuming, 1 year old startup posted the following message on their website –
“Today, we’re very excited to announce that Facebook is acquiring our company. With this acquisition, Little Eye Labs will join forces with Facebook to take its mobile development to the next level!”
– making the Indian tech community deliriously happy. This was Facebook’s first acquisition from India. The company that seemed to have proved to be truly world-class was Bangalore based Little Eye Labs. “They came with bags of money to our office and said we are buying,” jokes Gaurav Lochan, Little Eye Labs’ first employee. The real picture isn’t as filmy, but significant none the less.
Little Eye Labs’ chief, Kumar Rangarajan, and his colleague Gaurav Lochan visited the NextBigWhat HQ this Tuesday. In conversation with a group of app developers/entrepreneurs here, they traced their steps from working at just another corporate, to starting up, making their mark, and getting acquired. Here’s the story:
Starting Up With a Large Co-Founding Team
The five co-founders met when they were working for the software engineering company, Rational Software, where they built developer tools. Not too long after, they parted ways. When they came back together to form Little Eye Labs, they had two things to solve initially the first was getting a product, and getting it right.
While much of this looks like carefully planned decisions in hindsight, it wasn’t. Here’s how Kumar traced his thoughts leading up to the sale
Deciding on a model was tough, but we went with a fail fast, grow fast model
Once that was done, you would need more money, which meant an investor since your money will not be sufficient
An investor will want an exit – either an IPO or a buyout. Were we really IPO material? We’re engineers, not businessmen. So a buyout it is.
“For that, we have to build value for a potential buyer – we cannot be aiming for that all the time – but it has to be a conscious part of our architecture. Once we decided that, it was just a matter of when, where, how,” narrates Kumar.
The Product: To Know What Product You Need, Know Your Customer
Once they came together to form Little Eye, they needed to find a product to focus on. After spending weeks on various ideas including trying to be the Netflix of India, they decided that building developer tools was their strength.
“Among developers we needed to decide on what kind of developers, whether web or mobile – we chose mobile, and then whether it should be for Android or iOS. We decided to build tools for the modern developers – something which someone who is in college or school should also be able to use,” narrates Kumar.
To be able to understand the kind of product to be made, the team needed to understand the customer. Aside from targeting developers, they soon found that even performance testing as a concept was completely unheard of at the time.
We were trying to sell performance analysis a a concept. What we found early on is that people don’t even want to do testing. Performance testing was secondary to them– explains Kumar.
So they started with going to conferences to meet developers who were also early adopters to talk about their product.
The First Conference
The streak that led them to their big break started with making the most of conferences. At the Blrdroid conference, they presented multiple times.
“We had to make this domain interesting, so what did we do? We didn’t talk about our product. We talked about everything else, we talked about how apps consume battery, how does an app consume battery, what affects battery life and at the end we would say hey here’s our tool, have you tried it?” says Kumar.
Post Blrdroid, Little Eye Labs started receiving invites for app specific events. People knew that they weren’t an app, but invited them since they added value to the event. With the initial traction, they made their way to more events and conferences to meet people.
Pricing: Price Has to Reflect the Value
“You cannot be pricing at the level of a Maruti 800 and claim that you’re a BMW,” says Kumar.
They decided to price their product as “reasonably premium” keeping in mind value generated. But what was reasonably premium? Initially, they had decided on a price point of $100/developer/year or $10/month. Finally they chose $50/developer/month or $500/developer/year.
“The moment you have decided to price it – whether it is $10 or $100, your drop in customers is not going to be that significant,” says Kumar.
The Way to Developers Was By Approaching Testers
“Our biggest obstacle was – software, who buys software? And we were trying to sell to developers. By default, no average developer would pay for software, they would look for every other possible way to run the same thing,” says Kumar.
This is when the next leg of conferencing they went to helped them. Although their product was not ready, they set up a booth at Droidcon. They had a working demo with them. Theirs was the only product with a completely new concept at the conference and they started getting the audience’s attention.
“With that we were able to sense the pattern that more than developers, testers liked our tool. Developers will always find ways to find faults, but testers will be eager to use tools. Our use case was going to be like this – 35% developers and the rest would be testers,” says Kumar.
Facebook Spots Little Eye. Again. And Again.
After its multiple presentations at BlrDroid, they next went to Droidcon, GSF’s London tour and finally were invited to Google I/O.
It was at the London tour that Facebook first spotted Little Eye. The next was at Google I/O in May 2013.
“A lot of Facebook guys came to the booth and spoke to us for a long time. They specifically said that – we have a problem on Galaxy Y, can you help with this? Using our tool we were able to find the bug. That was a strong validation, there was no acquisition discussion, but a series of meetings led to the conversation in June,” explains Gaurav Lochana.
They also met the CEO of another company who made them their first potential acquisition offer.
Once this saw some light, Little Eye let Facebook know of the development. With colleague Gaurav Lochan’s connections they found a Facebook connect.
“We told them that we are getting an acquisition intent from someone else, can you give us advice? She got the hint and said ok, if you are talking about acquisition, then talk to us as well, since we too are interested in what you guys are doing,” says Kumar.
Acquisitions happen because of people. Little Eye Labs was constantly in sight of its competitors, larger companies and the tech community. This gave them credibility and gave customers and potential acquirers that they were here to stay.
Acquisition happens because they were discoverable, they were out there. And NOT waiting for others to find them.
Connecting the Dots
Back when they had started Little Eye, their mentors advised them to be conscious of who would acquire them.
“In the 1-2 weeks we spent in the US, we spent a lot of time meeting people. Then we started segregating our acquirers into multiple categories, the platform guys, Google/Facebook/Amazon type, who would like our technology and buy us for the technology,” says Kumar.
The other kinds of businesses would be HP that would build a business on top of a business, and then services companies. They knew they wanted the first category to buy them out.
“So when the acquisition actually came, we had a lot of discussion internally still, because we were unsure – was it too early? A lot of things were made ok because it was Facebook, and this was a company we wanted to get acquired by down the line. Debates happened back and forth, but finally we said ok,” says Kumar.
Building a World Class Product from India
The biggest lesson learnt by Little Eye is also its best advice to entrepreneurs. Global products can be built from India.
“If you want to build global products from India, your product should stand at a better benchmark than a global product. Our biggest threat was Google. So we had to stand our ground and move forward with the conviction that we can build a product better than Google,” says Kumar.
LittleEyeLabs : Big Lessons Learned
– Be out there.
The entire Little Eye Labs journey can be summarized as
“Be Out There. Be Visible.”
“Be Out There. Be Visible. AND Keep Shipping”
Everybody prefers to board a moving train – many startups have shut down because the talk with a potential acquirer went on for 6-9 months during which they stopped shipping.
For Little Eye Labs, it was a journey of iterations and sticking the neck out.
We at NextBigWhat wish the entire team a great time ahead [yes : *Like* this post, please :)]
[For app developers/mobile entrepreneurs, we recommend you to attend bigMobilityConf where we are bringing in actionable insights from several entrepreneurs.]