Sheth can afford to say that. He has the distinction of scaling two unicorns—Elance (renamed as Upwork), and Gupshup—across two different geographies.
He cofounded Elance in the US in 1998 as a marketplace for gig workers. It eventually merged with a company called oDesk in 2013, renamed Upwork two years later, and then publicly listed on Nasdaq in 2018. Meanwhile, in 2004, Sheth co-founded enterprise messaging platform Gupshup, which hit a valuation of $1.4 billion in 2021 when it raised money in an investment round led by Tiger Global.
Sheth gave up a potential career in academics—he was pursuing a PhD at the Massachusetts Institute of Technology—to plunge into the unfamiliar world of entrepreneurship.
“We all have the fear of the unknown. But if you really think about it analytically, what’s the worst that can happen? Let’s say I try something, maybe for a year, and it doesn’t work. I’m still the same educated, qualified person. I could probably still end up getting the same or a similar job,” Sheth said. “In some respects, I’ll be much wiser or mature or would have learned a lot, and probably might even get a better job because I have some entrepreneurial experience.”
Not that Sheth’s discounting the potential perils of entrepreneurship. Sometimes it can be a long dark tunnel with no light, but there are upsides to it, he said.
Sheth spoke with Mint for a new podcast series called Founder Diaries, where we take you through the entrepreneurial journeys of some of India’s most high-profile founders, and a peek into what it takes to build successful enterprises. Edited excerpts:
Tell us about your journey into starting up.
I had a great academic career. I studied computer science at IIT (Indian Institute of Technology) and MIT (Massachusetts Institute of Technology). When you get to the US, I think you’re exposed to so many other influences, lots of opportunities. I realized very quickly that I didn’t want to be in academia, I wanted to be sort of in the entrepreneurial or business world, at least.
I dropped out of my PhD program. I did get my Masters but PhD would have been another four years, perhaps.
I’d taken some business school courses while at MIT as well. I found Wall Street very interesting, very challenging. The financial services industry is also very quantitative and analytical. It’s kind of obvious now, but those were the early days of when they were starting to hire CS (computer science), math, physics people to model securities. So I sort of ended up there. (Sheth earlier worked at Citibank and Merril Lynch).
This was in the mid-90s. Suddenly the internet happened. Netscape, in particular, went public. Having been in grad school at MIT, I was exposed to a lot of those tech influences, but I was just surprised by how quickly they hit the mass market, public consciousness, and so on.
So, around then, I started thinking about doing something entrepreneurial.
I read that it was in a 2BHK apartment in New Jersey.
Yes. When I got started the internet was happening. There’s this thing called the regret minimization framework, which means when you are much older, you don’t want to have any regrets in your life.
When you’re on your deathbed, and when your grandkids ask you, what were you doing when the internet happened, or now, when AI (artificial intelligence) is happening, I didn’t want to have to say, oh, I was doing a regular job.
Then specifically, you do find an idea that appeals to you, that you’re excited about, passionate about.
That’s when I started. I founded a company called Elance—it was a confluence of basically three of my formative influences. Coming from India, I knew there were talented people all over the world. But in New York City, you’d still hear people saying, “I can’t find a graphic designer“, or something. Imagine if you could just connect the two. Given my tech background, I knew how transformative the internet was going to be and could reduce the cost of connecting people around the world.
Then given my Wall Street background, I knew that you could create marketplaces, not just for stocks and bonds but even for illiquid securities like derivatives. You take all of those three things and what you end up with is a global services marketplace. That’s how we came up with the idea for Elance.
Early on in your life, you can’t just optimize for money or salary. You have to do things that mean something to you and can have an impact.
When we created the company, we raised a small funding round of about a million dollars using my IIT alumni network connections. Then my friends brought in other investors. We raised a million dollars from 15-20 people.
It was a very modest beginning. My classmate from IIT, who became my co-founder, he needed a place to stay. We said, okay,we’ll get you the apartment, but why don’t we make it a two-bedroom apartment, and you can stay at night there.
But in the daytime, it became our office. It was in a residential tower, where, over the next few months, we grew to about 20 people. In New York or in Jersey City, where we were, this was the New York equivalent of a Silicon Valley garage.
Did you struggle with having to leave a salaried job?
Of course. It’s a risk and, in fact, the paradoxical thing is the better an academic background you have the more likely you are to have a good job. Therefore, the more hesitant you might be to give it up. I know for a fact that certainly a lot of my IIT classmates were wonderingwhat are you thinking, why are you doing that.
I’ve always had this perspective: especially when you’re early on in your life, you can’t simply just optimize for money or salary. You have to do things that mean something to you and that can have an impact. If a startup succeeds, arguably it’ll generate much more, even in financial terms, value, except that it won’t do it immediately. You’ll have to defer your gratification.
Starting up is a bit like sculpting. You have a sense that something is there, but you keep chipping away at it, fixing this, finetuning that, gathering feedback, and so on.
I like tinkering. I like problem-solving. I like the process of innovation, finding new solutions. So that’s just something I liked. But then you need salary and cash flow. Fortunately, my wife was a dentist. So, we lived on her salary for a year. She was, of course, a real trooper.
People end up exaggerating the risk in their mind because we all have the fear of the unknown. But if you really think about it analytically, what’s the worst that can happen?
Let’s say I try something, maybe for a year, and it doesn’t work. I’m still the same educated, qualified person. I could probably still end up getting the same or a similar job. But in some respects, I’ll be much wiser or mature or would have learned a lot, and probably might even get a better job because I have some entrepreneurial experience.
How long did it take for you to get the payoff on Elance?
20 years.
Longer than Gupshup, then.
Yes, it took a long time.
How did the process of listing Elance come about?
I started Elance in 1998 and worked there in an operating role till about 2004 or 2005, when I started Gupshup. But I still held my shares in Elance; it wasn’t an exit in that sense. I was still on the board and a shareholder. Then Elance continued, merged with another company, was rebranded to Upwork, and was listed publicly in 2018.
In the meantime, I founded and was working in Gupshup and we scaled that up.
How did that switch happen?
On the Elance side, our original idea was a sort of a B2C (business-to-consumer) idea—it was focused on small businesses, which is almost like they behave like consumers. We set up a marketplace and small businesses would log in and they would find freelancers, and they would connect.
But in 2001, there was a huge dotcom crash. A lot of companies, a lot of tech startups died because funding dried up, because the stock market for tech stocks had collapsed.
Elance, fortunately, had raised a $50-million round literally the month before the collapse happened. Which shows that sometimes it’s better to be lucky than smart, because if that wouldn’t have happened, it would have been a different story altogether. Anyway, so we had the capital, but it was very, very painful.
Suddenly your customers don’t have money, they may not be able to invest. So your growth forecasts and projections have to decline, which means you then have to lay off all the people that you hired over the last few months. As a founder, it’s very personal.
Ultimately, the customer reality is the only reality. That’s the ground truth. It’s not what you think internally, it’s not what your investors say.
But another big shift that happened was our board suggested that while small companies will suffer in that stock market crash, the large companies still had ample resources.
Then, we kind of pivoted, we built enterprise software for the same space, for services procurement. After three or four years of that, I was less interested in the enterprise side of it because it was diverging from the original idea. I just wanted to get back to, sort of closer to, what I was interested in, which is (building) more of a consumer business.
The irony is that Elance spun off the enterprise part of the business and refocused on the original idea that I had come up with. And Gupshup, which started as a consumer business, has now morphed into an enterprise business.
Is there a third startup in your career?
Who knows? I mean, look, I like the journey. I don’t try to think too far ahead. You kind of have to be in the moment and execute. But I love the process. If I’m not starting, then I’ll certainly be investing and advising lots of other startups.
What would you say are the key differences between starting up in the mid-1990s and when you began your second stint (in 2011)?
I think the biggest difference was just me personally. As a repeat entrepreneur, or having had some of the experience, you avoid some of the rookie mistakes. Because in a startup there are so many things going on all at once.
For example, when you’re hiring a team, what kind of people to hire versus not. In the early days, you want more versatile people and later on you hire specialized people. Or, sometimes you’re eager to fill a certain skill set. But if that person is not a team player, that can be very disruptive.
In fundraising, how to sell, how to articulate, how to explain to investors, and so on—you’re a little more experienced.
Also, the investors can see that you’re more experienced, that helps as well. Negotiating term sheets and contracts, you know what to anticipate, you know what can be a problem down the road. It’s sort of looking around corners.
Can you talk us through when you realized that you had a product market fit (in both the startups)?
I think it’s sometimes easier in hindsight. In our case, in the early days, Elance wasn’t growing fast enough and that’s why we switched to a different model (of chasing enterprise customers). Then a few years later, it came back to the original model. By then it was a lot bigger.
It’s the same thing here at Gupshup as well. In the early days, there were a lot of regulatory changes and a lot of competitive dynamics, which made the messaging business a little difficult.
Entrepreneuship is excruciatingly difficult, and that’s the untold story of startups. Nobody talks to the company that failed. Maybe they tried very well, but struggled.
Maybe the simple answer is in both these scenarios you focus on the key metrics, and you keep innovating and adapting and adjusting, finetuning the original idea, because sometimes there’s this (misconception) that you come up with this awesome insight on day one, and then you implement it, and then it’ll succeed or fail. It’s rarely ever the case that that happens.
It’s a little bit like you’re sculpting something and you have a sense that something is there, but you keep chipping away at it, fixing this, finetuning that, optimizing that, gathering feedback requirements, and so on.
That’s why sometimes there’s that confusion of is the product market fit here or not, and is it going to grow or not.
With Gupshup, when did you realize that the fit was there?
If it’s a consumer product, then you want at least a few thousand consumers. If it is an enterprise product, then, at maybe a dozen or two dozen enterprise customers.
At Gupshup, I think there were two points in particular.
One was that the SMS messaging platform was very popular with enterprises, so that grew in the beginning. But then, when WhatsApp came in (Gupshup had partnered with WhatsApp), that was about 2018, it really accelerated after that. And we couldn’t keep up with all the customer demand, we were stretched for resources, and trying to get things done, and always under pressure to accomplish that. It’s sort of the market’s signal to you saying, look, what you’re selling is very valuable.
A founder’s job is just constant selling. You’re really a salesperson.
Ultimately, the customer reality is the only reality, that’s the ground truth. It’s not what you think internally, it’s not what your investors say, but really, it’s the market reality.
One thing to add is, sometimes you can get misleading metrics, say, if you’re subsidizing your customers, giving a lot of deals and offers to get them to come and buy. But once the deals go away, the customers also go away. So you may think you have traction, or a product market fit, but it’s not really (there), because you were buying the customer, you’re buying revenues. So you have to make sure that it’s actually the customers doing it for their own reasons.
Were there moments of challenges where you felt that it’s too hard and almost giving up?
Of course. Lots of challenges and lots of such moments. We’ve had pivots, multiple pivots in both companies, and kind of near-death experiences where we almost came close to running out of cash. You’re in a deep, dark tunnel with no light inside.
Certainly, the dot-com crash (2001) was the first one, but at least then we had cash. But even 3-4 years later, when we needed to go get additional funding, the market had dramatically worsened. I think we had to do some structuring. All of these were really difficult and painful experiences.
Even at Gupshup we had similar things. It was a lot harder when I was going through it.
Work, your blood, sweat, tears, and sometimes even your money is all tied into it. It’s not just that you lose a job. You could lose all of this. Maybe your reputation, maybe your money, maybe your sanity, and you have all these people depending on you as well. So that amplifies it, and your family is depending on it as well.
What keeps me going is the big picture, the fact that you’re building products that may be used by millions of people and create a lot of value for your customers. That makes all the pain worthwhile.
It is excruciatingly difficult, and that’s the untold story of startups. Because most startups that get covered, perhaps, are like post-facto, you look at successful entrepreneurs and you talk about it. But nobody goes and talks to the company that failed or that struggled. Maybe they tried very well, but struggled. I think people should be aware of it.
In hindsight, I’m glad that when I started I didn’t know a lot of this. When you’re ignorant, ignorance can be bliss when you just have no idea.
I think maybe what helped me was I always had this approach or mindset of look that I’m not going to worry about the things I can’t control, I’m going to focus on the things I can. And you kind of have to say, I’m the same smart and hard-working person with good intent and I’m trying to do my best and it is what it is.
What would you say are the key attributes that a founder should have?
At the meta level, a growth mindset and a lot of grit. Maybe also a sales mindset. Most entrepreneurs don’t realize that the founder’s job is just constant selling. You’re really a salesperson because when you’re recruiting employees, you’re selling to the employee, you’re selling to the investor, you’re selling to customers, and you’re selling to media. You’re selling to everybody all the time.
Emotional maturity helps (for a founder) but if you don’t have it, you’ll develop it very quickly because you’ll get knocked around so much so quickly. Even intellectual humility gets developed very quickly. Your customers will tell you or the market will tell you or your investors will tell you there’s so much.
I don’t want to make it sound all negative. Ultimately, what keeps me going is when you focus on the big picture, the fact that you’re going to build products that may be used by millions of people and create a lot of value and wealth for your customers, that makes all the pain worthwhile.
What advice would you give to founders who don’t come from an IIT or an MIT? It is likely to be more challenging for those founders to develop the kind of network and the ecosystem around them.
Those founders have great advantages, more so than an IIT founder like me.
I’m not talking for anybody else (but, if) you are blessed with a great academic and exceptional academic background, you kind of assume if I work hard and I’m smart, I’m going to get the grades because the whole exam system and schools work that way and then you come into the real world and it doesn’t work that way. You’re still smart and you’re still working hard but because the market crashed your startup is failing and you’re just not prepared for it at all.
Meanwhile somebody who didn’t get it handed on a platter, they’ve always had to work for it, struggle for it. They’ve already built some of those qualities—the grit, the perseverance, they often have a chip on their shoulder saying ‘I want to show the others how good I am’.
Oftentimes you’ll find diamonds in the rough. You have to look beyond the superficial.
But you’re right about the networks. Often, there’s a signaling (about the best schools). Sometimes investors assume, oh if he’s from IIT, he might be better.
That can be a negative but every entrepreneur has to play to their strengths and try to minimize their weaknesses. So if you don’t have the network, but you have more perseverance, you’ll work harder to reach out to more investors and convince them.
It’s not like IIT has a monopoly on entrepreneurship. Ultimately it (entrepreneurship) requires a diverse set of skills—your intellectual abilities, your emotional and interpersonal skills, your psychological sort of ability or risk-taking ability.
Do you invest in startups?
Yes, I do. I’ve invested in dozens of them. Sometimes it’s hard because I still have an operating role and a day job. It takes work even just evaluating. (Venture capital firms) talk to hundreds of companies to decide which ones to invest in. I don’t have that luxury of time to be able to do that. But if there are people I know or spaces that I understand or that are related to what I’m familiar with, there I can make a decision much faster.
What are the metrics that you use to screen?
If it’s a very early stage businesses, typically in angel rounds, it’s just the team and the market opportunity or the space that they’re targeting.
I’m not a financial investor. I tend to be much more strategic and I want to engage with the entrepreneur. It helps me learn about what they’re doing and they can learn from my experience.
If you know the person and have some experience, I think that helps.
If you don’t know then, chances are if they are referred by somebody, then that would be good and helpful as well.
Ideas are a dime a dozen, but how well and effectively you execute is important.
But just by having a conversation you can tell whether they can deal with it (entrepreneurship). How are they thinking about the problem that they have defined. How are they explaining that opportunity. How are they interacting or answering questions or responding to suggestions. That gives you a sense of the founder.
Do they have some confidence and conviction. Are they open to other insights and ideas. Do they have something in their background that tells that they could persevere through challenges, that they can innovate or adjust and adapt as the market circumstances change. I think those are all the things you’re trying to gauge.
I mentioned earlier about salesmanship. You’ll know right away as they’re trying to sell. Oftentimes you’ll find diamonds in the rough. You kind of have to look beyond the superficial.
Is there any new space that you’d like to get into, which could be your third business?
I think AI is such a breakthrough capability. I’m not going to go into all the details but there’s a tonne of opportunity there because it’s going to disrupt everything. But on the other hand, there’s going to be lots of startups and lots of companies trying many different angles.
It’ll be a very crowded space as well.
It doesn’t bother me because if it’s not just the idea, it’s also the execution that matters. Ideas sometimes are a dime a dozen but how well and how effectively you execute (is important). I would still bet on my own ability to execute. Even if some others are doing it, we can we can do better.
AI is a space I’m familiar with and looking at, but there are many others. I’m sure crypto will still come back in some ways. There’s bio and climate. There are so many other large spaces. I mean, frankly, you just look at any major world problem and that kind of tells you whether there’s a problem we are trying to solve or there’s some new technology that we are trying to find applications for.
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