ELEVEN LAWS FOR START UP ENTERPRENURES
*By CA. Sanjiv Nanda, Partner Smarthead Consulting.
Once a press reporter asked George Soros the managing director of Soros Fund management LLC, one of the biggest fund managers in the world : “Which out of the two countries between China and India will do better in the long run and tell us one reason for it ?
Soros replied “ I think India in the long run will do better than China and one reason for it is that India has got a lot of entrepreneurship.”
I think what Mr. Soros predicted is coming out true now as a lot of young and not so young people are starting businesses with new and disruptive ideas. Previously to sell old newspapers, plastic items and furniture we had the neighborhood kabariwala but now we have “OLX Website”. Previously to sell our old car we had the neighborhood car dealer and now we have “Car Bazar.com”. Previously to buy our monthly grocery needs we had the nearby grocery store but now we have the “Bigbasket.com” with facility of online ordering, free home delivery, payment on delivery and that also at a much cheaper price. So all these start-ups happened because of new ideas, and availability of “Angel Funding” or “Venture Funding” almost at the drop of a hat.
We at Smarthead Consulting, a boutique management consultancy firm, having more than 125 man years of experience between its partners in running businesses have helped many start-ups to start and prosper. The eleven laws listed below are the summary of our experience gathered on what makes some start-ups successful and the common mistakes that most of the start-ups make and die. Some of the start-ups which followed these principles are doing well and those of the start-ups that did not follow these laws have been wiped out and those entrepreneur’s are back in jobs with their dreams shattered.
Let me also warn you that this is not an exhaustive list but an indicative list and may vary from industry to industry.
First Law – Your Idea Should be Disruptive and should Solve a Real Problem of the customer.
When the idea of the light bulb in your head starts flashing, you, still need a circuit breaker. You need to ask the big question: what was the problem I set out to solve and is there a customer waiting for that solution?
“Most business ideas change shape several times- the operative jargon is “Pivot” i.e., You change the product or service after customer feedback – and then they get accepted by the market.
“Did you identify the problem by siting in a coffee shop, or have you met real, potential customers” is a question that needs an honest answer. Easy presumptions people make are:
I have the perfect product.
I have no competition in the market.
There is huge potential market for my product.
Second Law– Idea is not Everything but Executing the Idea Successfully is:-
Every founder (one with ideas, products and customers) who crosses your path will dole out this bit of common sense: “Business is all about execution.” Add to that the fact that: it is all the more difficult to execute a new idea in India.
Many great ideas have died unnatural deaths because somebody did not have the guts to implement it.
Third Law – Find a Co-founder with complimentary skills:-
The journey of an entrepreneur is a very lonely and a tough one and very few are able to achieve their goals. So for this journey’s ups and downs you need a partner or a co-founder who like you also believes in the idea and is ready to hold your hand when you get disheartened as you will many a times.
So, look for a co-founder. Friends and family, husband and wife, well there’s no rulebook on what combo works as long as it doesn’t hobble the venture. But going solo isn’t a good idea because a partner with complementary skills helps. The vision has to be clear between the co-founders and there should also be role clarity and clear distribution of work with minimal overlaps.
Fourth Law – Funding does not mean success has been achieved
Start-up founders who have raised millions of dollars in VC funding are today’s rock stars. But the money merely means you have to work harder to prove that your business model really works.
“Funding is not equal to success at all,” says veteran investor Haresh Chawla. “That’s the single biggest mistake people are making. They are assuming it validates your business model, it doesn’t. Funding just means investors are saying go ahead and try it out.” A discount scheme like presently being done by most of the e-commerce B2C consumer item companies like Flipcart and Snapdeal doesn’t mean your model is working.
Experts like us say the ideal way to start would be to build a minimum product with your own money (prize money, savings etc.) before you go and meet your first investor.” When money starts becoming a bottle neck for the growth and execution of your company, that is the right time to raise funds,” says Rishabh Gupta, CEO of Housing.com. “Selection of an investor is also a complicated journey and is similar to choosing a spouse.” If you get the right wife (Investor) your life is made but if you choose the wrong one your life will be hell.
Fifth Law– Look for Mentors:-
Once you have an idea and have done a pilot successfully then you are sure that the idea has merits. Further, your convincing a high net worth Investor (HNI Investor) or Venture Capitalist confirms that other people also believe that your idea may be workable. But you will still need expert help in many areas to make this idea work. Some of these areas where you will need expert help either in-house a outsourced will be in human resource for team building, finance to manage funds, strategy to build a robust executable business plan and such other areas. Besides experts you will also need a few Mentors who will guide you based on their own experiences as entrepreneurs of the hour to overcome some of the hurdles on this journey.
As Mark Zuckerberg of Facebook recently shared with our Prime Minister Modi at his recent town hall meeting at Silicon Valley Facebook headquarters that one of his mentors was Steve Jobs, the founder of Apple Laptops, Tablets and Mobile iPhones. So every successful idea executor has had atleast one mentor and most atleast two or three mentors.
As a start-up entrepreneur you will need a mentor to brainstorm your ideas, and to overcome hurdles. Just five years ago, many of India’s biggest start-ups were still finding their own feet. Today, however, Flipkart’s Sachin Bansal, Snapdeal’s KunalBahl, Paytm’s Vijay Shekhar Sharma and Zomato’s Deepinder Goyal are mentors themselves. “Be shameless about asking,” is the best advice. At last count, there were over 80 start-up incubators across the country and some 550 angel investors.So a typical line-up of experts could include entrepreneurs, financiers, marketing men, human resources experts, media experts (yes, they matter too), and an occasional old hand who has seen it all. Experience counts here and helps an entrepreneur.
Sixth Law– Chase your start-up dream Idea and not just venture capital
Don’t chase the money. Perfect your idea instead , is a good advice to follow. Not having money when you need it can choke a business, but you may not always need capital to prove a business model or do a pilot.
“The moment you use the word entrepreneurship interchangeably with start-up people think it means VC funds and funding as milestones,” says Venture Capitalist Ravi. More important than the money is to have a good idea and then try to execute that idea. Further for that idea to be successful at some stage it has to start generating cash flow, resources and profits.
Seventh Law– Do Profitable Growth and Strategically scale up:-
Growth by itself is not an end by itself in the start-up space till it makes economic sense at least in the long run. Further, most people agree that a start-up’s call on when to expand operations depends on the response it gets from customers and its cash pile. Studies globally point to 70 per cent of companies failing because of premature scaling up. Aprameya Radhakrishna, co-founder of Taxiforsure (Radhikrishna and partner G. Ragunandan sold the Taxi aggregator to rival Ola for $200 million in March) reckons sometimes there’s no choice but to grow.
“In the three and-a-half years we ran TaxiforSure, there were times we were ahead of the competition. We could have been a lot more aggressive, but we weren’t. We learnt from that mistake. So, the next time we got the opportunity, we stepped on the gas when we had to” successful another start-up entrepreneur shared this tip,“In Indian, execution is the biggest challenge, and everything around will deter you from it. Aggressively executing your ideas( Scale Up) is a foolproof way to ensure constant growth.”
Eighth Law– Find and Recruit the Right Team:-
Hiring for a start-up isn’t the same as recruiting for a big, established company. Many cash-strapped start-ups have trouble finding the right fit. But so do those companies hiring in large numbers even if they have the money.
Shared a start-up entrepreneur “When we started off, we had a very different work culture as we were a much smaller company. And the level of attrition was much less. But as we grew fast, a lot of the people we hired earlier were not the right fit in the company and so attrition began to pick up as well. But too many People coming and going doesn’t lead to a very good work culture.”
“We had this model at InMorbi which we called the kick-ASS hiring model,” says Atul Satija, former Chief Revenue Officer at the Bangalore-based mobile advertising technology start-up. It stood for –
necessarily in that order. “Which means you should always hire for attitude first,” he says, explaining that placing skills first is a common mistake entrepreneurs of start-ups make. Satija, who worked in Google for several years, says he learnt much more about teams during his five years at InMorbi than he did in his many years at Google.
Ninth Law– Set Priorities and Delegate.
Running a star-up could mean juggling a hundred issues at any point of time. Often, it becomes difficult for entrepreneurs to prioritise the issues in a manner that best serves the company’s objective. Saurabh Kochhar, CEO, Food Panda told the media that the start-up was addressing several issues, though he didn’t discuss the specific allegations.
“There are still certain problems with the system and we are trying to solve them. We are prioritizing them and deciding which gets attention first, “says Kochhar. Unlike most start-ups, Food Panda was started by professional founders who were approached by investors with the idea as well as the investment to start the business. “A model such as this starts one-off initially, rather that figuring things out and asking for money you have funding from the word go. You can do a variety of experiments,” he says.
Quite often, prioritization also means delegation of responsibility, something most start-up founders are wary off. “As the company grows, one begins to understand that you can’t keep an eye on everything. The need to have a hand in everything mostly leads to inadequate work,” says Sumant Sinha of Renew power another start-up in clean energy space. Delegation of responsibility frees up time to address the bigger and often other pressing issues which are many in a start-up.
Tenth Law– Be transparent, open and clear with all the state holders.
Facebook founder Mark Zuckerberg recently had this to say when he posted a video of the firm’s new office building at Metro Park, California: “At Facebook, no one has offices. Everyone has a desk, even the people running the company, because the idea was to create an open and transparent culture where “Everyone could see what everyone else was working on.”
It pays to be open about things, within the team and also with partners and other stake holders. “From the beginning, ensure you have a transparent system,” advises Ravi Naryan, Director of Microsoft Ventures India. “Your stakeholders should be aware of where things are business-wise, so that there will be no unpleasant surprise in the future,” he says.
“It is important for investors to see the honesty of purpose and integrity the entrepreneur has,” says Sumant Sinha of Revew Power Ltd. “They have invested in the company and have as much of a say in its decision making so be transparent with them.” And above all they all also want you to succeed as they will only get their money’s worth only when your idea succeeds.
Eleventh Law – Sometimes you succeed when you try a new Idea and sometimes you fail but learn:-
If there’s one telling change India’s start-up boom symbolizes, it’s the willingness of a large number of youngsters to try a hand at entrepreneurship despite the risks involved. “An entrepreneur whose venture has failed will be a better bet even when you are looking to employ someone as he has initiative and self- motivation as a habit.” says Shankar Maruwada an entrepreneur.
Says Aparna an HR Recruiter “These are people who want extreme passion wherever they are working and want a larger impact on the society. Those are kind of people who love working with start-ups.
So to conclude it is not that everybody who follows these eleven laws of start-up entrepreneurship can never fail but following these laws will certainly improve the chances of success for such entrepreneur.
For the country and the economy we can only pray that God let their creed breed as they create wealth and value for themselves and their investors and also jobs for the country.
Any Start-up Entrepreneur needing free advice is welcome to email me at :- email@example.com.