Deepak: ‘We are beyond co-working space. We are a startup campus.’
This interview with Deepak Madnani, founders of Paperclip, was conducted and condensed by EntrepreneurHK.
EHK Talks to Serial Entrepreneur and Co-Working Space Paperclip’s Founder Deepak – Part I
Is this your first startup in Hong Kong?
This is not my first startup. I am a serial entrepreneur and a failure specialist, and that is something that I am very proud of. Being a startup and working with entrepreneurs, it is good to share that part of the story and then you have people talking about: What is the big deal about failure? Why are we talking about failure? Actually the important part is the learning that goes on in that journey from failure to eventual success. Not that I am successful, I am still on my journey and Paperclip is part of that path. Luckily, I have been able to create something like Paperclip that can help and support the entrepreneurs on their journey.
Can you tell us about the current market situation of co-working space business in HK?
We did a soft-launch back in December 2013. It was during the same week as the Startmeup – the Hong Kong government programme that we are helping and supporting. We are helping this year’s Startmeup too.
I think back then there were 7 or 8 co-working spaces. In February 2014, when we launched and started taking members, there were about 17 co-working spaces. Today there are 32. The exciting thing is that there is a huge supply and options for entrepreneurs, at the hot desk level and at the pure co-working space level. Entrepreneurs have a lot of options, which is really good.
What do you define as a startup campus and how do you differentiate it from other co-working spaces?
At the first level everybody sees these co-working spaces and that, as far as I am concerned, is just a property play. To me, what’s important are: How do you manage and value the community? How do you support entrepreneurs on their journey?
When I talk about Paperclip, I primarily like to talk about myself as a startup campus. Where we are sitting here right now is our academy. We have a fully functioning operational academy here. Our model is a co-working space and academy. Our ultimate goal is about the community and the entrepreneurs. The community being the most important part of building Paperclip.
This startup campus called Paperclip, is a space for me to express myself – my experience, interest, passion, and vision. It is a space for me to develop an entrepreneur community that I always wanted. And it is an opportunity for me to help and support startups.
A couple of years ago, I found a gentleman called Steve Blank in the U.S. who at that time was teaching this whole new approach to building startups called ‘the lean startup’. I went to train with him in the U.S.. Under Steve, I learned the lean startup methodology, and the uses of business model canvas tools. And then I went on started teaching and spreading the startup gospel. I continue that journey here at Paperclip. So while we have the co-working space, what is exciting for me is the academy. Paperclip gives me the chance to work with entrepreneurs. I can share things that they can actually use to build their businesses.
What is the market prospect in HK for the co-working space business? On what grounds do you come to that conclusion?
It’s going to be tough. Hong Kong has extremely high rental. You really need to know your business model. You need to know exactly what value you are going to be giving to the entrepreneurs. If it is purely going to be on a price and rental basis, you are in a tough spot, because there is going to be more people coming in with bigger resources that can drive the price down. I am not going to play the price game although my prices here are every affordable. So I think the prospects are very high, if you know your business model and value proposition.
There are over 32 co-working spaces in HK already, what prompted you to start Paperclip?
One part of being an entrepreneur is dumb stubbornness. We always think we have an answer for something. The second part of being an entrepreneur is knowing how to play your risks. I have experience in the property business so that is part of my journey of validation. I may not look like it but I am an old man, so I have been through a lot. The expression I like to use is that I have a graveyard of business cards, because I have been through so many businesses.
I’ve developed some good skills and experience when I was in the property business. So while people say investing in Paperclip is a very big risk, my well understanding in the property market helped me minimize the risk to an extent.
In my opinion, where the risk is, is in trying to build a community for entrepreneurs, trying to ensure I have the right curriculum to teach and serve the right entrepreneurs. But that is my model. I can’t speak for other people. But for the co-working space model, you really need to know the whole dynamics of the property market.
What is the biggest challenge you have faced when you launched Paperclip?
There were like 100 different challenges. If you look at it as a timeline, finding property here is a challenge. I don’t have a big fund behind me, and this is all my own funding. Finding a space in Hong Kong that was big enough and close enough to Central is the biggest challenges. You need to be accessible to the community, and you need to be able to find all the functions that an entrepreneurs needs. So finding a space that I could rent — renovate according to standards that I want and build it — was the biggest challenge. I had to end up buying the space, and renovating it to the standard that I wanted it. The standard that reflects Paperclip and what it wants to provide.
This is not about ‘oh wow Deepak, you have so much money’. Actually no, this was the biggest leap of faith that I have ever taken to invest in Hong Kong’s future. Whatever fund that I had made that I was thinking of investing on startups, I put in here, because this was the bigger version, I am supporting the entrepreneur community here. I called my wife and said we are going to be a startup again. She trusted me. But I also have to make sure that I can pay the rent and send the kids to school.
What are the fundamental functions that an entrepreneur needs?
There are so many aspects required to build a business. There is an article I wrote called ‘accelerating slowly’ which effectively talks about my views and explains my long-term plan.
The ecosystem required to support entrepreneurs is very interesting. There are so many aspects: you need mentors, advisers, lawyers, accountants, community but you also need a market. Part of that support system that I am providing is the basic ‘grey hair wisdom’ that all entrepreneurs need. It is something that in 20 years down the road they would say I wish I knew that 20 years ago. That is what I feel I am providing – a language that the methodology provides and the tools that the business canvas provides and presented from an experience entrepreneurs point of view.
Hong Kong people also need to think bigger and that is what in the U.S. there is no lack off. It is because they have the biggest market in the world and want to access everybody. This is the challenge to Hong Kong entrepreneurs. You need to think big if you really want to make use of Hong Kong’s resources.
If you had a chance to start all over again, what will you done differently?
I will give you a three-part answer.
Part one is that I would have definitely found some strong mentors at the beginning, I use the word strong and safe. These are people that can challenge you. These are people who are not giving you the answers because the entrepreneur does not need the answer. What they need are validation and support on their journey.
The second part is co-founders. They are very important but also hard to find, just like dating, life, marriage, and best friends. Business is like that.
The third part is also having an idea that is big enough. Maybe this is more of a personal part but the idea has to be big enough that fits your personal ambitions. I think that is very important.