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May 19, 2008

Lesson from the PurpleYogi

I just read VC Bill Burnham's post on the lessons he learnt from his investment in Stratify. An Internet-era company that was originally founded as PurpleYogi, the company has several Indian connections: it was incubated at IIT-Bombay, raised investments from Infosys Technologies and its founders are of Indian origin. Stratify changed its business model, post the Internet crash, and was acquired in late 2007 by Iron Mountain.

I learned a lot of investment lessons from Stratify, the most important of which are:

1. Don’t underestimate the value of a great technology team. Great tech teams can quickly adapt a product to suit changing markets and priorities. They also create products and technology with lasting value that can be leveraged in multiple ways.

2. If at first you don’t succeed, find a new market and/or a new business model. It’s often said that very few start-ups achieve success with their original business plan and after my Stratify experience I believe it. Start-ups should always keep an open mind about potential changes in business model or market focus that might increase the chances for success and should be honest with themselves when it is clear that they are “stuck”.

3. When everyone else is selling, it’s not a bad time to think about buying. In the public markets they call it capitulation; in the private markets they call it fatigue. It’s hard to fight the urge to run with the herd, but if you can, you can often make a lot of money.

Venture investments can be real roller coasters. Stratify went through two business model changes before they found the market, model and product that clicked . Through it all a core team of people stuck it out and ultimately built a great business that everyone can be proud of. Congrats again to all involved!

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.