Guard your time
A classic founder’s syndrome is to get involved in every functional role at the start-up. Almost every entrepreneur goes through this learning, spreading themselves too thin only to realise that it is not sustainable. Unless you lap up mega bucks from a venture capitalist (VC) in the first few months, you are more than likely to have a young inexperienced (read affordable) team, that will require a lot of grooming and handholding initially. You will find yourself splitting your time between countless activities completely choking your bandwidth. As you will get entrenched into day to day operations, you’ll have little to no time for any strategic thinking or even to reflect on your decisions and do course correction. Even after being at it for five years, I’m still trying to learn how to block some time everyday just for myself, ‘me’ time when I’m not being bogged down by operational issues and the daily firefighting, but I am thinking of things that will take us to the next level. The only real work I'm able to do every time (everything else is operational firefighting) is at a quaint little café close to my office. With an open door policy, I have no check on my personal time, and with people walking in all the time with all kinds of issues, I’m barely thinking of strategic issues or anything that is not core to daily operations. The café is my escape pod where I’m off email and phone calls, ear plugs playing my favourite music with me making notes on things that otherwise get buried under the daily operational mayhem. That is when I’m doing real value addition.
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Focus on cash flows and not (only) fund raising
Most start-ups set fund raising (venture capital) as the most important milestone. Never make that mistake! This can set you off on a deathly spiral that will completely consume your venture. One must prepare for a life without an equity infusion. And, the only way you can be prepared for such a life is by not losing sight of the single most important goal of becoming cash flow positive. For every start-up that gets funded, there are hundreds that don’t. Law of probability tells us that you very well might be in the larger pool of non-funded ventures. Besides, while venture capital is a great validation for your venture, it comes at a significant cost. The equity that you dilute is not the real cost of raising money. Instead it is the loss of control that is more expensive. By getting to a cash flow positive state (and staying there), one not only increases the longevity of the venture, but also wields a greater bargaining power when negotiating with VCs. By no means am I suggesting that one should say no to VC money. One must proceed with extreme caution when evaluating capital infusion. I’ve met several entrepreneurs, who rue the fact that they raised equity capital too early. Not only that, the entire process of fund raising (scouting for investors/initial assessments/elaborate documentation/several rounds of discussions/due diligence) is very time-consuming and completely saps you of all your energy taking the focus away from your core operations. Lapping up VC money is seen as the start-up having made it, when the reality is that this is just the beginning. This is where the ride becomes tricky for the founder.
Invest time in building Human Capital
Human capital is the ultimate bottleneck for any organisation looking to scale. It is also the most overlooked aspect of business by most founders. Systems and processes are only enabling tools that help reduce the odds of making gross errors but eventually it’s a great team that will take you to that next level. It’s the quality of this human capital that will dictate the direction and quantum of your start-up’s growth. It is only natural to have a very sales-driven approach during the early years. However, smart entrepreneurs quickly realise the importance of allocating significant bandwidth towards building teams.
While there might be a beeline of enthusiastic job-seekers all too keen to work for a Flipkart or a Snapdeal, your modest start-up will not be as fancied. In fact, it’ll be an uphill task to recruit and even tougher to retain talent. The start-up’s brand equity will most likely not have the pull and you won’t be able to offer industry salaries. But you will still have to push hard to bring the right, if not the best, people on board. There will be a great deal of selling that as a founder you will personally have to do in order to convince people to join.
Another mistake that almost all of us make is hire for skill and background while ignoring ‘fit’ as an overemphasised buzzword. I learnt it the hard way but the ‘fit’ actually matters a lot! Here is my understanding of ‘fit’. At a very basic level, not everyone is cut out for start-ups. Modest offices, frequently evolving roles, limited supporting infrastructure, an unstructured environment, and lack of clarity in medium-term, high stress levels, are some factors that can be very unnerving for even the best of employees. In our first three years, we hired anyone who was willing to come on board. It was only later that we realised that hiring merited a direct and much deeper involvement of one or more co-founders. What I learnt over the years was that it is imperative to identify people, who have fire in their belly, those who might look like underachievers on a resume but have this innate desire to prove detractors wrong, motivated people whom you can inspire and align with your vision for the start-up. Be upfront in setting expectations, especially if someone is coming with a large company experience. I make sure that in my interviews, I spend ample time talking about how the candidate feels about working in an unstructured environment and what motivates her. My best recruits have been the ones where people wanted to challenge themselves, and almost had a personal agenda to prove to the world. It's a treat to work with such people.
More next week!
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(The author is co-founder of Claro Energy, a New Delhi based start-up that provides solar water pumping solutions that find application in irrigation and drinking water supply. With a team of 120 people, the company has a presence in 14 states across the country and has been profitable since 2011, the year it was incorporated. The author is an alumnus of the Kellogg School of Management, Northwestern University, US)