Speaking with Osman Rashid, Serial Entrepreneur with multiple exits in US
Osman Rashid is a Pakistani businessman with multiple ventures in education and consumer-facing space. He has founded three companies previously; an online textbook rental and student hub Chegg. He was co-founder and CEO of Kno, (acquired by Intel in November 2013). Kno had received funding from Andreessen Horowitz and others. He founded Galxyz, in 2014, which was an educational software company focusing on creating next-generation language arts and science enhancement products for Primary and Middle School students.
As of now, he is the CEO of CONVO, a communication platform for enterprises. We had a chat with Osman recently and this is what we discussed:
Let us start with your brief introduction, your education, and early career overview
I am essentially a product of Islamabad. I grew up there, especially in my middle years. I am from a middle-class family of a government servant. My father worked for the Foreign Ministry, so I was born in London, then came back to Pakistan for a few years, then we moved to Africa for a few years and finally came back to Islamabad after the seventh grade. I did my FSc from the Islamabad College for Boys. I had a wonderful time and learned a lot of things across all these different environments and from meeting different people, but I think I did my biggest learning in Islamabad. From there, in 1989, I went to the US to join the University of Minnesota to pursue an undergraduate in Electrical Engineering which I finished in 1993. I then joined a startup in the US as a product manager. I wanted to get in the business side of things using my technical background. As a product manager, I helped the company launch a brand new product. Eventually, the product took over the company itself and then was acquired by a South African company in ’99. All through this process, I felt like I was learning many different skills, none of which were taught in school, which really helped me be the person that I am today.
You have co-founded two great companies: CHEGG and Kno. Can you share some early stories of your entrepreneurial journey and what your inspiration was for starting up these companies? What are the specific problems that you were trying to solve?
The idea for Chegg came out of our real-life experience being poor students in the US. One of the things to hit you as a foreign college student when you come to the US is how expensive everything is. From the tuition fees to the living expenses, it is a lot. One of the real pain points we had was the cost of textbooks; they were, and still are extremely expensive! We would have to buy a $150 textbook, and after using it for a term, our only option would be to sell it back to the bookstore for around $35-$40. But the bookstore would be able to turn around and sell the used book for around $120 again! The fact that they were taking advantage of us both times really used to make us mad!!
With Chegg, we had the idea to solve this worsening problem. That affordability problem was the real driver behind starting the company. It was something that I could understand; something that, frankly, I was passionate about. One of the most important lessons I learned from Chegg is that even a brilliant idea can fail. I learned this the hard way because Plan A that we had for Chegg did not work out and we had to resort to Plan B, which thankfully ended up working. The big lesson was that we never gave up trying to solve the problem that we really believed in, even though it required pivoting the company, a lot of hustle and a lot of effort.
Another takeaway is that it’s all about listening to the customer’s voice and paying attention to what your customer is looking to do. For instance, when we launched our textbook-renting product (Plan B), things seemed to be going well but we noticed a lot of traffic coming in, searching for the book, putting it in their carts, but not going through with the final checkout. Something was stopping them from buying or renting the book from us. As we dug deeper to figure out what the problem was and spoke to the customers, we found out that there was a very simple, psychological reason that was stopping them. In the US, you can actually drop your class within two weeks of the start of the semester and take another one. Many students thought that if I rent a book, but end up dropping the class, it’ll be a problem to return the book. We solved this by adding just one line of text to the website, “Dropping your class isn’t a problem. All the returns are free,”. The moment we did that, the traffic went through the roof! So the big lesson here is that you really have to keep paying attention to details, and the founders of the company have to do it – you can’t assume that somebody else is going to do it. In the early days, you need to take full responsibility for the success of your company!
Similarly, with KNO, we wanted to get into the world of digital textbooks; we found regular textbooks too heavy, and students were breaking their backs carrying backpacks full of heavy textbooks. We were building our tablet even before the iPad came out. The idea was to take education to the next generation, to the next level with the transition to digital. Not just a textbook but the ability to take notes, watch videos, and collaborate with other people. That was the whole notion behind it as the wave of the future.
For a Startup problem, what is your fundamental school of thought for its evaluation or selection?
I look at the people and try to judge their willingness to go all the way. If you are not passionate about it, you’ll never give it your hundred percent. Unless you have this extra fire in you that drives you towards a solution for a problem that you’re passionate about, you won’t be able to succeed. Startups are very tough. Things do not always go your way. There are many bumps on the road. If you look at the situation nowadays, with COVID-19, so many dreams of startups have gone on a pause because these teams are not together and their customers’ buying decisions have stopped. This is considered a ‘bump in the road’ from a start-up’s perspective and unless you’re really passionate about solving the problem, you’ll end up folding up because you’ll just lose your energy.
How would you describe your journey of emerging from an idea to one of the successful business exits of Silicon Valley?
Exhilarating. Today, Chegg has become one of the top ten most valuable companies in the education space – even more than some of the world’s top publishers combined. It amazes me when I look back, it’s unbelievable because I know what the company has been through. We rarely looked back at how far we had come, but always worked on how far we have to go. There were problems to solve every day and we just focused on those.
We started figuring out that we were onto something big when we were getting calls from customers saying that the website made a huge difference to their lives; we had parents and grandparents calling in, telling us that it was the first time they could afford books for their kids. When all these testimonials started to show up, we knew we had done something amazing. We used technology to beat out our competitors, and what made us stand out within the technology community was that we were extremely efficient in testing, verifying, and most importantly, scaling.
After building two successful ventures, how did you look to invest in Convo and start SOAR? Did you see a bigger opportunity in the Pakistani market?
Convo started out with a couple of brilliant people. I was simply a user. I then became an investor and then I bought out the founders.
In my opinion, there is a huge investment opportunity here. Pakistan is the fifth largest country by population, the majority of those are the youth and they are all going mobile, so there is an opportunity to build a company that could potentially be the largest in the country that develops enterprise products. I truly believe that Pakistan could have a massive play in the enterprise collaboration market with a (relatively) homegrown product within Pakistan.
In education, I believe this is a peak time for disruption in Pakistan, especially when you start thinking about what we want Pakistan to look like 20 years from now. With SOAR STEM schools, I believe that the jobs of the future are going to be leaning towards STEM, which is Science, Technology, Education, and Math. If we don’t prepare our elementary school kids now for jobs they need to get 20 years from now, then we will once again miss an innovation wave as a country. We have the opportunity to take our rightful place as a country in the enterprise markets of the world.
In education, I feel there has been way too much profiteering in Pakistan. With SOAR, we aim to give an excellent education at an affordable price – because we want all kids to be able to access quality STEM education – that is what our country needs! We want to take the SOAR brand all over Pakistan – we aim to open a STEM-based franchise that will allow us to rapidly expand across Pakistan. Our very own Einsteins and Curies could be in a village somewhere waiting for an opportunity – we want to make sure they get it! With SOAR, we are hoping to be the catalyst that drives other schools towards this kind of education model – where you will make a smaller profit, but you will be enabling the future of Pakistan – the lower and middle class must get educated in STEM to meet the future demand in our country.
How does Convo distinguish itself from other products in the enterprise communications realm? What are the products’ “voice” or “vision”, so to speak?
Communication today is very different from what it was twenty years ago, we use a lot of social media now, as opposed to emails. The informal communication methods of social media are being used – or actually abused – in the corporate world. Private information is being sent on public platforms without regard to privacy and security loopholes! The idea behind Convo is to create a communication platform designed specifically for enterprise systems, that integrates security from the ground up, and that uses cloud hosting within Pakistan so that we securely host our client data within our country. As a long-term vision, we plan on bringing a unified interface that gives access to both mobile and desktop enterprise applications.
But Convo is succeeding even outside of Pakistan. In the US, companies have chosen our product over Microsoft Teams and Slack. I can attribute that to our extreme focus on solving the client’s pain points.
In your opinion and experience, what is the important thing to consider when balancing adding features to a product that customers want vs. features the competitors have?
You must find the balance between solving the customer’s problem without becoming a consulting shop. You must keep in mind the other customers that you have as well; you should not be building products that will work only for this one customer but be completely useless to anyone else. Of course, there are exceptions when you believe you can build something better than anyone else and use it as your competitive advantage. However, becoming a one-customer-company is a pitfall many startups fall into. Instead, I would advise you to pick and choose things from the customers’ needs that fulfill your vision as well, so that both parties can benefit.
Advice for startups working to (or struggling with) deciding their MVP?
In order to get to an MVP, you really need to understand the core of the problem you are trying to solve. At Chegg, it was about “Do students want to rent books?”, so we set up working on that and then made it smooth. Then we looked at how best to return books – and we just iterated from there. At Convo, it is about “Do enterprises want new age communication tools that are locally hosted?”. At SOAR, “Do parents want a quality STEM education at an affordable price?”. If the MVP is not working, then it requires you to spend time seeing what is wrong and that has to be done with your customers and users. A small thing could be stopping users from going to the next level for you.
What was or is your biggest entrepreneurial challenge and how you deal with it?
Your number one challenge is always your team. I had to build teams up from scratch for both Chegg and Kno. The biggest challenge is to build a team that understands the kind of journey you are embarking on and is equally passionate about the problem because if you have the right team, you can get through anything. The first team that you build is what matters the most. They must have the entrepreneurial mindset and they should be ready to scale the small product that you started with into something big. When you get to hundred-plus employees, the company culture begins to change and it’s not as aggressive as it used to be but until you’ve crossed that threshold, you need people around you that will support you and build you up.
Another challenge I had was choosing a co-founder for SOAR. I was lucky that I found an amazing co-founder in Dr. Shazia Khan in Lahore. She is an amazing educator, passionate about what she does, and pushes everyone around her to do better. I would say that she is one of the top five entrepreneurs in Pakistan and she doesn’t even know it yet. It takes people like her to build something amazing.
How do you differentiate between good and bad co-founders?
Co-founders should always be complementary; if you are a business guy then your cofounder should be a technical guy. Also, before you officially get started, you should spend a few months working together on your idea to see if there is cohesion between yourselves.
Co-founders should also be able to focus solely on the company. If your cofounder is involved in several other projects or companies, it’s going to be difficult to get through problems if your company is priority number three on your cofounder’s list.
How do you manage your time between your companies? Would you advise entrepreneurs to focus on multiple problems or at only one problem?
When you are starting out on your journey, do not work on two ideas at the same time. It’s a recipe for disaster. You can never get anything done as you are focused on something else. However, in my case, after having a lot of startups under my belt, I know a little bit about what to expect, where the pitfalls are, and what I need to focus on, so I am able to split my time between SOAR and Convo. Also, with SOAR, my co-founder essentially runs the whole operation. She is an educator and I’m not. I understand my own strengths. I bring strategy, I bring direction, I bring investments, and I bring the passion for STEM, but she runs the organization on a daily basis. This gives me the time to focus on Convo as a full-time CEO.
Can you name a person or people who have had noticeable impacts on you as a leader? Someone who has been a mentor or an inspiration in your life?
I tend to think of the people who have given me a shot when my skill set clearly indicated that I could not do it. Ilan Sharon, the CEO of Venturian, was the first person to give me a shot after I graduated with my electrical engineering degree. I did not have any business being a product manager. But in my first interview with him, he judged my passion and took a leap. The hiring mindset in the US doesn’t focus on where you are from or what your parents do, but on what you can do. He was an Israeli immigrant and he could have easily not given a Pakistani a job, but he did. I learned a lot from him and I would like to think that I helped him a lot as well.
The second person was the Chairman of Chordiant, Sam Spadafora, who invested in me, saw my hard work, and helped make the right connections to build my own company. He passed away recently but he was one of the most amazing people that I have met in my career.
How do you see the Startup ecosystem of Pakistan and what are your key takeaways from the Silicon Valley experience which can help the Pakistani Startup Ecosystem to be fully mature and compatible with the rest of the world?
What makes Silicon Valley truly amazing is the high volume of entrepreneurs in one place. This density of entrepreneurs allows you to connect with and learn from people who are going through or have gone through the exact same experience as you, so it gives you so much opportunity to learn!
Pakistan is starting to build this entrepreneurial space through incubation centers, which allows like-minded people to work together and share their experiences. I think the ecosystem is at the early stages, but it will definitely be fantastic to see it build up over the next 10 years.
What advice would you like to give to young entrepreneurs/investors in Pakistan, especially in the current world pandemic situation?
When there is an economic depression or a recession or a pandemic, your first order of business should be to assess yourself and see whether and how you can survive it. Your investors can only take you so far; the infrastructure of the company should be strong enough to bear the brunt of the times it is going through. There’s a notion called Zero-based modeling which asks the company to evaluate the money that they have right now and evaluate whether they can make it to the next milestone. Companies need to live by that and if you are passionate enough and you want to keep it alive, then you need to cut your costs down to the bone and only keep the bare necessities. Try to find a customer that will pay you for what you have or try to team up with someone to cut down your costs. You must figure out how to survive and get through this. I have been through these kinds of situations multiple times and I have seen companies surrender and give up and I have seen companies survive by letting go of wonderful employees because they have to. You must make tough choices to survive.
Would you plan to currently invest in any of the new ideas in Pakistan?
I ask myself if my investment is for the country or not. And, for now, I would say that I am doing a lot of investments already, with the two companies I have. I am also looking at companies that I think I may want to acquire; companies with a lot of potentials which I feel might need a bigger platform. I am definitely open to investing in new startups but I like investing in startups and products that I can understand; things that I believe I can add value to.