#74- My chat with Aman Goel, co-founder of CognoAI
"Enterprises work with us because they know we will do in 18 days what an MNC will do in 18 months"
If you follow Aman on LinkedIn or Twitter, you will notice he is now writing a lot of threads on company building and his experience doing so. I remember finding out CognoAI via some primary & secondary research and wanting to explore an investment. Little did I know, the company had already signed terms and definitive agreements with Exotel to be acquired by then. When I reached out to Aman to have this chat, he found a time and spoke to me within 24 hours!
In this conversation, Aman talks about :
How a 3-month dream internship showed what his real dreams were
The founding story of CognoAI
Early days of 21-year-olds selling to people with decades of life experience
Aquisition and life under Exotel under the mentorship of Shivku
Siddharth: Thanks for taking the time. You have a journey very different from other founders. You were a 21-year-old college student building a B2B product selling to large banks, bootstrapped to a million dollars in revenues, and got acquired by a large company within 5 years. How did you identify this is what you wanted to do? Banks are difficult buyers with long sales cycles and you were a college student!
Aman: I’ll take a step back about how I entered entrepreneurship. Like any other techie from CS, I wanted to get into a hotshot tech job in the US, get an H1B visa, and settle there. And I got the chance to do a 3-month internship at Rubrik in the US in the summer of 2016 after my 3rd year of college. It was the technical team of a Silicon Valley darling, growing very fast, with hundreds of millions in valuation, and working with one of the smartest folks. It was fantastic. But I realized two things (i) I can’t stay away from my parents and live in the US., and (ii) I wanted the motivation to wake up every morning without working in a monotonous job and wanted purpose.
During the internship itself, I started exploring options because I couldn’t see myself working at Google, Microsoft, etc in the US. A friend told me about the entrepreneurship department at IIT-B. These courses are not taught by academicians, but by actual founders who built multi-billion dollar companies. Industry veterans like Rajen Jaswa (Dyno, Selectica, Opti), Bharat Desai (Syntel), and Devdip Purkayastha (Enactus, CHEP) were our professors. Their objective was simple, build a company and experiment and we’ll help you and mentor you during your journey.
Our initial problem statement was to help people like our parents use smartphone applications via voice. As simple as navigating payment gateways or finding places via google maps. Akin to the automation of Just Dial - just call a number and ask them to book a cab, and the voice bot will understand your command and do the needful. When we presented to the professors, they told us that B2C will be very difficult and expensive to scale. They asked us to take this to enterprises and license the application. They connected us to people at Yes Bank, HDFC Bank, and Axis Bank. We got a bunch of negative responses. We were young too. When they found out we were yet to graduate, we were literally thrown out of the room! But this is how our journey in the BFSI space began.
But voice bots are difficult and there were technological barriers. The sampling rate when you speak through a smartphone is 16,000 samples/second, but it drops to 8,000 samples/second when you move to telephony. The voice quality degrades and speech recognition becomes difficult. All of this is now solved of course but in 2016 we didn’t have this technology. Hence we pivoted from a voice bot to a chatbot.
Siddharth: And you landed State Bank as your first customer. The largest bank in India, a PSU, working with 21-year-olds who pivoted from voice to chat and probably didn’t have a finished product. How intimidating was that?
You mentioned in earlier chats that your alumni network helped a lot - it made introductions, opened doors, etc. But that’s an introduction, selling & crossing the line is the hard part.
Aman: State Bank is an interesting story. We were incubated at SINE which had an MOU with SBI to give SINE startups a chance and evaluate their products. We went for our first meeting with the DGM of Innovations of SBI along with our professor Mr Devdip. It went well and they asked us to apply on their portal as a vendor. We couldn’t, because we were not incorporated yet! We did that in under a month and went back - but by that time they forgot we existed! But we couldn’t lose hope. We chased aggressively, and became friendly with a junior person who gave us our gate pass every morning. We sat outside the DGM office every day with the hope he will give us business one day.
On 1st July 2017, SBI had their Foundation Day and wanted to launch a chatbot to show their customers on that day. We were in May. We were at the right time. Another vendor had refused such a short timeline to launch. We were also at the right place. SBI had rejected 3 SINE startups earlier that year so the DGM was worried his relationship will SINE will sour. So he gave us a chance. They asked us to build a proof of concept - a basic chatbot with FAQs. It was quickly approved by CO & EDs. We were asked to do a full-scale implementation which was a nightmare. There were multiple teams, and multiple things to do. In the security audit, they gave 4500 observations! My cofounder handled that and I took over commercials where they again stretched us like anything.
I was negotiating with someone who had done negotiations worth Rs 4000 cr for SBI, a total of 6 DGMs. We were grilled badly. They didn’t negotiate on price but on the scope. We reworked the proposal multiple times. Eventually, they folded too because they had a deadline to work with. We went live at the end of June. We launched bank-wide on 1st July!
Siddharth: You were a team of 2 people, selling to a large bank, creating a product from scratch within a 2 month period. What was the story of customers 2, 3, and 4?
Aman: SBI has been very supportive. They changed our contract to include every entity within SBI Group rather than Bank only so that all our contracts were standardized and we didn’t have to negotiate with every procurement department. The DGM sent an email to every company introducing us. SBI Life immediately called us up, and onboarded us after a 15-day diligence period. It was a contract 1/10th the size of SBI but important nonetheless. We went live with SBI in November 2017. SBI Mutual Fund started talking to us too, and converted within a year.
Another interesting story is ICICI Bank. We told a professor about SBI Life and asked for an introduction to someone within insurance. He called up someone called Sandeep at ICICI Pru Life and set up a meeting. We later googled and found out that Sandeep is none other than Mr Sandeep Bakshi, the then CEO of ICICI Pru, and current CEO & MD of ICICI Bank. We also spoke to Madhivanan Balakrishnan, the CTO of ICICI Bank. We got a small project, not critical enough, but a foot in the door. ICICI Group is our largest customer today.
Siddharth: People love throwing dirt on brand-name colleges. But this is a prime example of how IIT-B opened so many doors for you - from incubation to acquisition. And also you had an internal champion among your customers.
We understand getting from 1-10 customers was a big help from professors, internal champions etc. But after 10 customers aren’t you on your own? How did you set up a sales team, and set up processes to repeat this at scale?
Aman: This was a big problem. We didn’t have a proper product, sales cycles were long, there was human-centric interaction while closing, longer deployment cycles, multiple departments etc were big problems. And my cofounder left the company. And I’ll explain why. We spoke to ICICI Bank, Axis Bank, HDFC Bank, and Yes Bank - we recently converted Axis Bank, and Yes Bank is still not our customer. It’s that difficult. It’s been 5 years. There’s no one we have not reached out to within that bank.
Fortunately, Harshita joined as a cofounder who is more patient enough to do enterprise sales and steadied the ship. She and I were from middle-class families and we thought this was a relatively big opportunity for us. We had to make it work.
We stopped all distractions and nailed down the product which was working. Banks usually ask for custom service models which we offered in the very early days to build a relationship. But to scale, we had to build a product and couldn’t do custom services. The chatbot was working, and 3-4 customers were paying so we doubled down on that and rebuilt the product from scratch. ICICI Bank provided a lot of input in that process. I did all the sales & BD, and Harshita did product development & delivery. Many companies within ICICI Group started talking to us. And we decided to do 2 things: (i) Land and expand within groups (move from bank to insurance to broking), and (ii) Land and expand within teams (customer support, recruitment, NRI banking, Corporate banking etc). Fun fact: there are 160 business teams within a large commercial bank. Our sales cycles shortened from 6 months to 1 month since we had a central procurement contract, infosec clearances, and internal references. We grew to 10-15 logos this way.
Siddharth: What happened next?
Aman: Since we had good customers, we were approached by more investors and more customers. We started doing outbound BD, writing and sharing our story on social media as well. We leveraged the IIT-B alumni network to acquire unaffiliated customers in a faster manner because we also had a strong logo base. Today we have 100+ logos.
Siddharth: In your early 2 years, you had two of the largest business groups as your customers. And you still chose to bootstrap. I say this because we were at a stage where foreign capital started coming in, we had the Flipkart deal, and venture capital was gaining prominence. What were your thoughts?
Aman: We spoke to VCs and figured out most of them want the roadmap toward $100mn in revenues to enable a decent exit for themselves. Somewhere we didn’t believe our business will become a $100mn business. They also wanted fast growth, and we knew we were a sales-led organization so growth cant be extremely fast. We weren’t like Swiggy and Ola where we could spend a lot on ads and acquire customers. We couldn’t grow 5x a year, but we were growing 2x happily.
When my cofounder left I realized the perils of entering long-term irrevocable differences, so taking venture capital was one of them for me. I was cautious. Customers funded us and we could bootstrap.
Siddharth: 2x YoY growth is still a decent outcome for VCs, right? I get the point of VCs wanting a certain exit threshold by end of their fund lives. Do you believe it is a function of large fund sizes vs small fund sizes? A $10mn ARR for a portfolio company is a ballpark $100mn valuation which is a fantastic outcome for a small or Micro VC $20-30mn fund vs a $1bn fund. A 20% stake in a $100mn company pretty much returns the fund.
Aman: VCs want large outcomes only. Out of 10 companies, 7 will fail, 2 will give mediocre returns, and 1 will give bumper returns which cover the rest of the failures. All VCs are looking for the 10th company. Nobody wants companies 1-7, rarely do they look for 8-9. Our philosophy was to listen to them and get their feedback. And we never acted on getting capital.
Siddharth: Let’s talk about the last 2 years before you got acquired. How did you start to grow your organization and build it from a 2-person team to a sales-led organization to set the base for the long term?
Aman: We were bootstrapped and never had the money to hire someone who was experienced, from IIMs, CA rank holders etc. We built the team bottom up, getting young freshers from college. These people were just like us when we started and were hungry to learn and take ownership in an exciting environment.
All of our early hires are leading verticals - sales, product delivery, customer success, and engineering. The engineering intern we hired in August 2018 is the head of engineering today. We had no employee benefits, no insurance, no laptops, no swag nothing. But we provided a fantastic culture, openness, and the ability to make mistakes. The bigger the mistake, the bigger the recognition.
If you made silly mistakes, you were bashed. But if you made a huge mistake like quoting an extra zero to the customer in pricing to figure out how much more can we charge, you were recognized. It was as simple as optimizing for large outcomes.
In early 2021 we tried something different. Hired a lot of senior folks in recruitment, business development, and sales but every single one of them didn’t work out. And this was just before our acquisition. We signed terms with Exotel in July, and everyone we hired from Jan-June didn’t work out.
After that, we became more cautious of external hiring we are now learning it back again. We started promoting people internally. When we wanted someone in BD, we asked the sales head who can take ownership and moved that person to BD.
We also learned a lot from the hiring process at Exotel. When they wanted someone to head recruitment, they hired the Director of Freshworks, for someone in marketing they hired the VP of Uipath. I am learning that from Shivku today. But I still believe a large part of leadership hiring should happen via internal promotions.
Siddharth: It is very important you say this because we see this happening at our portfolio companies too. Someone who joined in customer support moved up the ranks from Sales to Product and she is now COO within 3-4 years. When they tried to hire externally be it in Tech, BD, or Sales, it almost never worked out. They couldn’t find the conviction in the person, or there was no cultural fit, or the output was not at par. 2-3 external hires did not work. But almost everyone who joined the company from the bottom is now leading some verticals. That is very important learning for someone in a 0-1 journey. But now when you’re trying to move from bootstrapped to a large company, under the umbrella of Exotel, learning the playbook - how different is 0-1 vs a 1-10 journey? What did you have to unlearn?
Aman: 0-1 hiring is all about hiring builders. 1-100 hiring is all about optimizers and specialists. When we hire for a specific leadership role, we’d prefer them to scale rather than build something from scratch again.
How Harshita and I now think has changed. Earlier we looked at hiring as two people who could decide at 1 am that they want to go to Lonavala and reach there by 4 am without worrying about anything or making any preparations. But when you are with your family, you have to think about how will your mother or father cope with these plans. You now have to think 1 week in advance and make proper preparations. What if you are taking extended families from both sides? You have to make preparations a month in advance, rent a bus, and book the hotels. You cant just stop at a random dhaba.
So the change now was that we have to plan well in advance, and plan very well. We now look for salespeople who have already done B2B SaaS sales, better if they’ve done conversational AI. We want people who know and can do their job very well. My earlier mistake was I hired someone from B2C sales who was expecting leads from marketing.
I tell my sales head to not close meetings, and let the team members under them do it. I am coaching him to coach his team members. My input to team members is to delegate else time will become a bottleneck. Another thing we do is to not put out job postings immediately. First look to hire internally - if there is a Head of Partnerships position, look for someone capable within. The only issue may be a long time to ramp but there will be a track record of performance, cultural fit, and knowledge of what and how we do things.
Siddharth: If I were to summarize, you now believe in a 30,000 feet view, plan in advance, hire internally first, then do top-down hiring, and nudge people to delegate more.
I want to touch upon your point on bad hires. There will be bad hires, we are all human beings. How do you let go of bad hires quickly and cut your losses while being respectful to them? It is also important to maintain the company's reputation in the hiring-firing process.
Aman: Firstly, we now hire slow, and have made it rigorous. Learned it from Shivku to hire a person until you get the confidence that this person is going to be fantastic to work with. See them as someone you will be excited to work with.
Secondly, he also nails down the job descriptions very well. If hiring a VP of Corporate Development, that candidate should have done $Xmn worth of fundraising, and there are 20 other parameters. Only interview when your parameters are met so when you meet you know they’ve done these 20 things which are mission critical. If you as a founder have not raised $10mn but that VP has, then you can learn from him.
Thirdly, I used to believe when I hire someone its their job to make me successful. Shivku told me it’s actually my job to make the new hire successful. So the change has been from being a boss or manager to becoming a coach/leader. I have to coach myself and upskill to enable myself to coach someone else.
I try to document and share my learnings on Twitter or LinkedIn. It’s an archive for people to learn.
Siddharth: They say good companies are bought not sold. You shared anecdotes that conversations with Shivku opened but went nowhere until someone from A91 Partners met you at the IIT-B alumni meet.
Aman: I met Mr Abhay Pandey, Partner at A91 at an alumni meet and later at his Worli office. They invest in Series B+ companies and so we didn’t have any immediate investment conversations. He introduced me to Kaushik (another of the Partners at A91) and we had an informal chat. A year later in September 2020, Kaushik reached out to me asking how our business was doing. Our business was at its peak and he connected us to Shivku from Exotel. Again an informal chat with Shivku happened. We discussed all methods of collaboration, ranging from partnership to potentially Shivku investing to Exotel acquiring us. I was unaware that A91 was in the process of investing in Exotel at that time.
Parallelly we just spoke to an Exotel competitor regarding an acquisition who gave us a very derogatory offer. The commercial conversations were exploitative with an offer worth less than our cash in the bank. From that parallel experience, I was quite pissed off because of the time wasted and so, I told Shivku that we don’t want to discuss any acquisition with anyone at this moment.
A few months later Exotel raised 2 rounds of funding from A91 Partners, totalling Rs 85cr and A91 introduced us to Exotel for an acquisition conversation again. They asked what we are looking for in cash + stock. We wanted a decent value and some cash component as well. Again remembering the irrevocable decision coming into my mind, we didn’t want to rush into anything. They asked us to quote a figure which we did, and they agreed to it in 3 days’ time. Even their competitors came to us for an acquisition conversation but we loved the DNA of Exotel and so, we found them to be the best partners.
Siddharth: In the early stage world, acquisitions are looked down upon. Either with the belief that the opportunity was not big so they decided to get acquired, or companies acquiring put forth very derogatory terms.
But we forget an acquisition is a very good place for employees & founders to generate a payday because four years of bootstrapping mean no salaries, no benefits, no value to equity etc. That is a very tangible outcome. Not to mention being under the umbrella of a larger, well-funded brand, customer relationships, hiring playbooks, and massive PR. What did the acquisition mean to you personally and professionally?
Aman: Personally, it helped me take care of my family. My father is going through a health issue and it helped me place funds accordingly. I have brought my parents to Bombay, bought a house and they live with me now. I can provide the best life for them. It is fulfilling to watch my parents leave their hometown after 30-35 years and still be very happy here in Hiranandani in Powai. That is my biggest accomplishment.
Professionally, I am learning a lot. How to work in harmony with people who are 20 years senior. I used to work haphazardly, sending emails at midnight. But someone who is married and has to send kids to school early morning, can not do the same. I had to learn a lot of these things.
Also, we delegated all non-core functions like admin, HR, payroll, finance, etc. to the Exotel team who do it better than us. We currently focus on our core which is working with customers and delivering them the best experience. Enterprises work with us because they know we will do in 18 days what an MNC will do in 18 months.
It has also helped me structure my thoughts. As a bootstrapped founder you’re always looking to solve the most immediate problem. Today I think about what will I need to do today to grow revenues next year this time. So it’ll take Q4 to sell, Q3 to deliver, Q2 to build, and Q1 to ideate and hire, which is what I do today.
Lastly, I am learning to look at numbers in a better way. If you know what is sales supposed to do, you can reverse calculate the BD, lead gen process. So building the metrics, delegating them to the team members and teaching them to work in harmony to achieve or further delegate is what I spend a lot of time doing. Basically OKRs.
Q4 of FY21 is actually the first time we thought about targets and numbers. Prior to that, we were on a best-effort-basis.
I’ve also learned to become a bit more patient. I don’t go crazy or short-tempered about problems, instead, try to identify what went wrong and how to fix it. 0-1 is survival, and 1-100 is sustainability. This has impacted me a lot in my personal life also. A metaphorical example is that - I started learning to swim recently. Earlier I used to struggle with my entire body to keep afloat, like the 0-1 stage. Now I am learning to swim in one direction like the 1-100 growth stage.
Siddharth: This has been quite a journey and also fits well into the first things you said. Life came full circle. I understand as a middle-class Indian boy how important it is to live with family and you also spoke about wanting purpose and not being just another cog in the wheel. You went from trying to become successful to enabling others to be successful.
And you also started investing in startups yourself. I know we investors say ‘Let me know how can we help’ but don’t actually help. How do you do it differently with founders you invest in having lived through the same? You know TAM calculations and 5-year projections mean nothing.
Aman: My startup investments have been weird. I have not met anyone personally. I know a friend who invests and I invest wherever he tells me to. I trust him because he was also an angel investor at Cogno. I have 4-5 passive investments. But I will start investing actively from the next financial year.
I also mentor some startups at the IIT-B entrepreneurship department. This is not a financial investment but is rather plain mentoring without any return expectations. As a way of giving back, paying it forward. Again my mentoring is more of sharing my journey. I just want to help these 3rd and 4th-year students who are just like me when I was at IIT.
Siddharth: Happy for you to take time out and answer most of my questions. Any parting thoughts?
Aman: Thanks a lot for this conversation. I hope this benefits other entrepreneurs and students or young entrepreneurs. If there is any college student who reads this conversation and starts their own startup, I think I will call this conversation successful.