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Tag Archive : Entrepreneurship

Startup Board Meetings 101

Most founders deem that their relationship with their board will be adversarial and combative. I assume that the founders must get sleepless nights before the board meeting. Maybe it provides the founder flashbacks to the nights spent they spent rolling their beds as they tried to present their school report card to their stricter parent, usually their dad.

Why do I think that?

The creative ways I see founders avoiding calling (forget conducting) board meetings as if it were the plague. Founders drum up excuses for delaying the board meetings, much like my classmates and I did to avoid submitting our signed and acknowledged report cards. Founders get sick; then a family member gets sick, then the ICU and next the morgue. Next when the health issues run out, then the team members are blamed; the reporting systems cop the blame – the list is endless. It is comical to witness the founder’s unnecessary creativity. However, the board is not a founder’s dad, waiting to rap them and it does not need to be that way.

That start-up boards must not have an adversarial relationship with the founders. This relationship should not disintegrate into that abyss is the responsibility of the investor board member and the founder.

For starters, the board must not get into the day-to-day working of the company unless there is a crisis, and the board must over-ride the management – it is rare but required. How can a founder avoid this situation is to be honest, in the founder’s hands.

A first step to building trust in the board-founder relationship is for the founder to get into the habit of organizing, conducting and following-up on productive board meetings.

  • A board meeting must be conducted every quarter – at the very least.
  • Some start-ups may require monthly board meetings, but a long-term plan of conducting monthly board meetings is onerous – on the founder and their board.

An important distinction that many founders fail to make is that a board meeting is not an investment pitch, but neither is it the investor update. A board meeting’s purpose is to get into the meat of things that the founders are working on versus the sizzle that sold to current and prospective investors.

If you, as a founder, are confused about what to discuss at your board meeting, I believe that Mark Suster’s How to Prepare for a Board Meeting to Make Sure you Crush It is a must-read for you.

Essential points that Mark delves into are the importance of a well-thought-out agenda, a solid deck and providing enough time to your board members to prepare for the meeting.

Now, if you’re scratching your head on what goes into a board deck, then Bryan Schreier’s post on Sequoia Capital’s website, aptly titled, Preparing a Board Deck should be in your reading list. 

A start-up founder that has an adversarial or a laissez-faire relationship with its board members is losing the plot. The best situation that a founder could wish for is a well-functioning board is their sounding board and guide for the road ahead. The board gives the founder a third party and a bird’s eye perspective on their venture’s progress because founders lose their objectivity in the day to day function of their ventures.

But it is important to note that the responsibility of creating the right board relationship must begin from the founder and supported by their board members – not the other way around.

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How to deliver bad news to investors

Hey founders, today I’m going to address a crucial topic: When to update your investors with bad news. If you’re an entrepreneur and running a business, you will have to give bad news at some point.

There are many ways to give bad news. One of them is not to give any news at all, let everything go down, and then explain why you have only ruins and not a building on fire. This method isn’t recommended, but some people choose it – I don’t.

There are minor issues or bad news that can be managed in your monthly and quarterly updates. Like missing your quarterly numbers by 3-4%, or if you’re having a tough time recruiting people, or if a particular distributor who was contributing a large part of the business dropped you for reasons unknown or customer complaints. These are the kinds of things you can manage in your monthly and quarterly updates.

However, certain kinds of news shouldn’t be neglected. These should be communicated to the investors immediately. If a co-founder has left, or one of the co-founders has been diagnosed with severe disease and will not be available for the next 6-8 months, or your fundraising efforts are falling through, or a significant client that contributes a substantial chunk of the profit has left. These are the kinds of situations that need to be communicated to the investors immediately, preferably not on e-mail.

What I recommend is organizing a conference call or an in-person meeting. Explain what is going on to the investors face to face, in a way that is direct with no sugar coating. Be humble about the fact that things have gone wrong. Don’t try to play up things to avoid the investors being angry at you. If the situation is terrible, investors have a right to be irritated and will point out things that could have gone better. You should take criticism in your stride as you’re expected to execute successfully. Take responsibility, be direct, and you’ll find that investors will probably come back with solutions for you to manage the mess.

In adverse situations, you should have a turnaround plan. I would recommend having one if you’re going to have a face to face meeting. If you don’t have one, let the investors know and get back to them in a few days or a few weeks. There may be some questions the investors have, for which you may not have the answers. I would recommend not making up turnaround plans on the spot. If you don’t have the answers, tell them. Mention that you’re going to get back to them in 5, 7 or 10 days (or whatever number of days you believe you need) but ensure that you keep those promises.

Delivering bad news should not be difficult. It’s only tricky when you don’t want to give bad news, and you feel hiding is the best way forward. But it doesn’t solve anything. In fact, it only leads to the problem of getting bigger. If hypothetically, the company shuts down, and investors find out that you knew in advance, you could find yourself in a hot legal soup.

I’ll leave you with that, and I would love to know how some of you guys have shared bad news in the past. Also, if you have tips for other entrepreneurs, do share them in the comments.

The Indo-African perspective on the role of mentors in your startup

Over the weekend, I was a guest of Baljinder Sharma, a serial entrepreneur and a highly respected individual in the India & Africa startup scene. He put together the first India Africa Entrepreneurship & Investment Summit in Mauritius.

The event started as an idea to create a bridge between two ecosystems that houses over 1/3rd of the world’s population. It culminated in a 2-day event attended by over two hundred illustrious participants of the African & Indian early-stage ecosystem.  

The number of close relationships forged at the event is the barometer of success for such an event. On that scale alone – this event was a resounding success. I made several new friends, some from India and many from Africa. I will strongly encourage Baljinder to make the event a permanent annual feature for both ecosystems.

On the first day of the event, I was on a panel with an impressive list of panelists viz, Stephen Newton, Jonathan Mazumdar, Eric Osiakwan. Atim Kabra deftly and expertly moderated the panel channelizing our experiences and energy into a coherent narrative. Our discussion topic – the role of mentors and incubators in our respective ecosystems. Our discussion on mentorship got extremely engaging so much so that we did not enter into any meaningful conversation on incubation.

My co-panelists came up with a host of discussion points, but we unanimously agreed that the title of “the mentor” was thrown around very casually in our respective ecosystems. Often, service providers are self-anointed mentors, and their misrepresentation can have disastrous effects for the founders, their startups, and their investors.

On Sunday night as I boarded the flight back to Mumbai, I put down those discussion points that resonated with me; here is that list.

A mentor should not cost the company money.

This point is not to say that the mentor should work pro-bono. However, mentors that offer hourly/weekly/monthly/annual payment plans are service providers. If your proposed mentor charges money to meet you for an evaluation – please be smart and avoid them. 

A mentor’s role is to guide, not to become the founder.

I have committed this mistake a few times, so it hits home. Many times, founders start abdicating the decision-making role to the mentor, and there are several times the mentor starts getting too deeply involved. The mentor is not the CEO or a co-founder, but neither are they above the CEO or the Founders.

If you have crossed this line in your mentor-mentee relationship already – it is time to scale it back maybe even take a break. 

A mentor’s job is to do /advise you on what is best for you, not to make you happy.

This point is a personal favorite.

The mentor’s role is like that of a coach – they are present for the overall success of your company, not your success alone. Therefore, they must offer advice which is best for the company.

A self-respecting mentor will promptly quit if they get the message that their presence is to be a rubber stamp to your whims.   

A founder should have multiple mentors.

This learning was new to me. A founder should seek out multiple mentors that can help them with different aspects of their business or challenges. As the startup grows, there should be a churn in the mentors with new mentors taking over from the mentors that have finished their role/utility.

A good mentor stands on the side-lines while you make mistakes.

An extension of point 2. Experienced mentors sit on the side-line while you make mistakes even if they could help you avoid them. The lesson of letting you experience failure and learning how to prevent future mistakes is more important than the experience of getting saved by the mentor.

A good mentor will warn the founder of the challenges but leave the final decision on them.

The mentor’s role is to guide the founder through their decisions, but in the end, the founder is the one that must pull the trigger. When a mentor starts making decisions for the founder stops taking responsibility for the results.  

It would be best if you chose mentors that have substantial previous experience in the areas you need help

If you want to learn how to build a billion-dollar startup, who would you go to for help? The founder that built billion-dollar startups a couple of times or the founder struggling to get their startup out of their garage? 

Even though this sounds like a simple point reiterated – I am surprised how many times founders commit this mistake.

The best mentors only take on mentoring projects that challenge them.

Good mentors get sought, but they aren’t running after the money. They are looking for a challenge. A challenge that will stretch them and help them grow thereby (and in most cases) helping the mentor and the mentee.

Mentors that are running after money will accept any project, regardless of whether it intrigues them are not the right choice for you and your startup.  

The very best mentors get involved before the founders know that they need them and leave before the founders question their existence.

An involved mentor that is “in-sync” with their mentee knows precisely when to increase their involvement and when to decrease or terminate their relationship. A mentor that must be asked to leave has stopped paying attention.

It would be best if you convinced the mentor that you are worth their time investment, not the other way around

When a mentor is chasing you, explaining why you “need” their mentoring or pestering you to “sign-up” with them, they are a service provider. Service providers have other motives driving them but they are most likely not in line with your mentoring requirements.

The best mentors are so busy with their projects. They place a high value on their time. Therefore, you must convince them that you are worth the opportunity cost of their time – without using money as the offset.

My takeaway from the panel: Choosing is a mentor isn’t rocket science, but neither is it a game of roulette. Choose wisely through the generous application of common sense.

Let’s talk about entrepreneurial stress

It has been fourteen days since VG Siddhartha took his life. In that time, the entrepreneurial ecosystem has heard arguments from several vantage points to understand the cause of the stress that led to his untimely demise. It is stomach-churning and thought-provoking stuff.

Various arguments attempted to place the cause of VG’s entrepreneurial distress onto a multitude of issues. His close political affiliations, the stress that different business bailouts had put on his balance sheet and even his battles with the income tax department. His balance sheet was funded using debt and private equity; therefore, the private equity guys were to blame as well. However, to place the blame on any one person or phenomenon is to oversimplify a very complex issue i.e., the effects of entrepreneurial stress. 

The one silver lining of this somber episode is that it has got us all talking about entrepreneurial stress. It is a real thing, and there is an excellent chance that an entrepreneur close to you is under this stress right now. Yes, even the most successful ones.

In the Indian ecosystem, a successful start-up founder is treated as a demi-god. The media can quickly relate that entrepreneur into a Tony Stark-type invincible personality – capable of resolving any situation and turning almost anything they touch into gold. The price of this success is steep because the lens of failure is brutal. Ask any of the high-flying entrepreneurs that witness a reversal of fate – the fall from grace can be cruel and lonely. 

The truth is that an entrepreneur undergoes the same level of stress as that of a high-performance athlete. Another reality is that this stress will not vanish. 

The first step to dealing with entrepreneurial stress is to admit its existence. This step is most difficult because it hacks away the cloak of invincibility that entrepreneurs take painstaking effort to build. However, unless we admit that this stress exists, we cannot act on its causes. Ray Zinn wrote a great post on Stress and the Entrepreneur that delves deeper into this.

The next step is to identify the factors causing stress. There are internal factors that the entrepreneur can control and external ones that they cannot. It could be the nature of the business (like running a stockbroking platform), an environmental factor (like the transit time from home to office) or a personality trait (like procrastination and putting off decisions). The factors that can be addressed, should be acted on immediately and earnestly. The factors that cannot be addressed can be overcome through several methods, which high-performance entrepreneurs utilize to channelize their stress positively.

Lastly, once the stress factors have been identified and dealt with, an entrepreneur needs to build a core group of people to fall back on. The people invited to this core (aka inner circle) play a critical role, and they need to be educated on the things not to do.  

This post is one of the toughest blogs I have written because I have had my personal experiences with entrepreneurial stress, which kept clouding my arguments. I kept reverting to the times in my career when I stared from the cliff of despair into the depths of failure. I know today what I did not back then. Even then, I sometimes find myself feeling overwhelmed, overworked, and slightly burnt out. It usually shows up with the burning sensation in my eyes, persistent pain in my back and a marked drop in my physical stamina. 

Initially, I did not know that it was stress. When I could self-diagnose, I took a short vacation, reduced my meetings load or delegated more. The awareness helped with resolution. However, the VG Siddhartha episode has awakened me to change my stance from a reactive one to a proactive one.

So should you.

Why I refuse to promote women’s entrepreneurship

Tomorrow I am judging a start-up competition in Delhi that awards its winner up to Rs. 5 lakhs to start their business. Since the contest is only for women, I have received several messages thanking and congratulating me for promoting women’s entrepreneurship. Unfortunately, I am not a big believer in “women’s” entrepreneurship.

I believe that word entrepreneurship is asexual and to treat someone, mainly because they are a female founder (or entrepreneur), with a different mindset is simply not right. Why should we denigrate a founder, just because she is a woman? Does her X chromosome make her business any less valuable, profitable, or exciting?

Therefore, it irks me that there are events, panels, discussions, specially curated to promote women’s entrepreneurship or female founders, exclusively. Most female founders and executives that I have interacted with see it the same way. We all know that anyone discriminating against a business run by a woman leader or refusing to fund a female founder hurts the person holding the bias much more than it hurts the woman – not only in terms of mindset but also on return on investment. 

When I look at my portfolio, I see amazing founders. It is just an afterthought that over 50% of them have women co-founders like Prerna at Daalchini, Kanika at Jadooz and Dhanya at KabaddiAdda. Even within my family office portfolio, several of our most successful investments are powered by female founders like Shivani at Tala, Avneet at CarveNiche, Mahima at Coutloot, Naiyya at BabyChakra and many more. They have made us several x’s on our investment (and no I do not keep nor intend to keep a separate portfolio performance based on sex), and some of them will turn into unicorns in the future – one of them very soon! 

However, none, nada and zilch, of these founders or their start-ups are in our portfolio because they were women. They earned every bit of the success they have achieved, and I respect them for their blood, sweat, and sacrifice – as an individual. In my interactions with them, I see them as entrepreneurs NOT as women founders, and I hope that they know and feel that they are equals.

Therefore, I do not see any good reason to promote female founders or entrepreneurs, because I have experienced excellent returns on my investments by treating each founder as an individual and backing their businesses based on merit. The moment that I start treating a founder differently because they are women, it means that I do not see them as equals. I will skew my thoughts to cater to my bias, and it will hurt them as much as it will hurt my bank balance.

So I am going to continue to be supportive, critical, effusive, disappointed and elated by my founders without discriminating on them because of their race, age, color, sex, national origin, religion, and physical disability. I believe this approach is the best way to promote any founder.

The fastest path to the CEO chair is very different than what you might believe!

The Fastest Path(s)

Last week I concluded the appraisals for 2019 as well as inducting two analysts into our team at Artha Venture Fund. I attempt to have a conversation with each of the new inductees, and one of the questions I ask them is where they see themselves in the next five years. Most of them have plans on doing an MBA or becoming a manager, but very few have plans to become entrepreneurs.

Therefore when I do their appraisal, I ask them the same question once again, and it isn’t surprising that most of them have had a shift in their five-year goals. Invariably they would like to be in some entrepreneurial position whether that was in a start, proprietorship, NGO or as a fund manager. I hold the entrepreneurial energy that flows within the walls of our office responsible for this shift, and I am confident that I am the one responsible for dropping cans of fuel to flame any evidence of an entrepreneurial spark.

While I have recalibrated the goals for many team members, I have found that like the entrepreneurs that I have met, my team holds misconceptions about the path one should take to becoming a CEO/Founder. I could harp on my own experiences as a case study for them to follow, but it was a pleasant surprise to learn that the team of Nicole Wong, Kim Powell, and Elena Botelho were conducting a study that I could share!

In a ten year study, the trio assembled data on 17,000 C-Suite executive assessments, studying over 2,600 of them in-depth. They wanted to analyze who gets to the top and how and they went onto publish a book based on their findings called, The CEO Next Door.

Their study (aptly called the CEO Genome project) took a close look at the career paths of individuals that they have (once again) aptly called, CEO-sprinters. Their study discovered that on average, it took 24 years from the date of joining their first job to become a CEO. Therefore CEO-sprinters are those individuals that got the CEO title before 24 years.

Some of the data sharing from the study are thought-provoking:

  • 24% of the CEOs had an elite-MBA
  • 7% graduated from an Ivy League school
  • 8% did not complete college
  • 45% had had a significant career blow-up

The study concluded that the CEO-sprinters had three types of career catapults that got them to the CEO chair early viz:

  • Go Small to Go Big
  • Make a Big Leap
  • Inherit a Big Mess

Understanding these career catapults and experiencing them is crucial. Their importance is inferred by the fact that:

  • 97% of the CEO-sprinters had had at least 1 of those experiences
  • ~50% had had at least 2

I will review the book in a future post, but until then you can learn about the career catapults as well as other findings from the CEO-genome project at   

I concur with the findings of the CEO Genome project, and it has once again confirmed what my mentor & ex-boss used to ingrain into each leader that was led by him

The people that solve the most problems make the most money!

281 and Beyond

Vangipurapu Venkata Sai Laxman aka VVS Laxman played cricket for India for 16 years (at the international level). When his cricket career came to an end, only 12 other people had played more cricket than him, 2 of whom were his teammates (Sachin Tendulkar and Rahul Dravid). He was a vital cog in the Indian batting line up and one of the fab four of Indian batsmen in the 2000-2010 decade. Except at the time of retirement, he wasn’t involved in too many controversies. On the outside, it seemed as though Laxman had it all, but his autobiography reveals how many trials and tribulations his beautiful career faced beneath what looked like a shiny surface. In that sense, 281 and Beyond is like the behind the scenes video of a top-grossing movie.

In my opinion, 281 and Beyond is not a book about cricket. It is a book about a child’s journey to fulfill his childhood dream- to play cricket for his country. He describes how he went on to achieve his goal through discipline, performance, and hard work, only to realize that the toughest part wasn’t getting there but consistently performing to remain at the top.

The child is forced to grow up quickly by the constant scrutiny of a billion Indians, that hero worship their national cricketers, following their every move, carrying them high during the victory, but each believing that they could do a better job when their heroes fail. The anxiety of consistently performing at the top under different coaches, captains, the backdrop of match-fixing, and an inconsistent and poorly-managed selection policy and how Laxman overcomes each of these with runs made from the blade of his willow is the crux of this book.

What does it take for someone to continuously play to such a fickle gallery? How does one come back after a string of failures? How does one keep themselves sane against an insane backdrop? Laxman answers all of that, and beyond.

Why did I like this book?

I love autobiographies that are written from the perspective of the protagonist, in this case, VVS Laxman. I like to visualize the autobiographies that I read. So, when the author delves deep into the inner turmoil and emotions that they were feeling during certain key moments in their lives, it provides a greater level of understanding that makes them more real, relatable.

In this book, I appreciate the frankness with which Laxman has discussed why he believes he was wronged several times during his career, his opinion about teammates, captains, coaches and how much they contributed to his journey as a cricketer.

As a keen cricket follower, I could remember most of the performances and events that Laxman was referring to. So, not only did the book take me over my frustrations (on the defeats) and jubilations (on the victories) of those matches but also provided the context to what was happening behind the curtain i.e. in the locker rooms, the training sessions, the team bus, and even the hotel rooms. It helped me forgive the Indian cricket team (and Laxman) for several frustrations, except the humiliation at Barbados in 1997, a defeat whose aftermath he talks about on himself, his captain (Sachin) and the team – riveting stuff.

What I learnt from this book?

There is a lot of commonality between the lives of entrepreneurs and performers i.e. actors, sportsmen, musicians, etc. Both groups must innovate to stay ahead of the competition while consistently giving good performances to retain their target audiences. Both groups wish to leave behind a body of work that will be remembered for eons after they are gone. In both groups, competition is challenging and only a few make it big enough to be remembered, and even then, their moment in the sun could be eclipsed faster than it took to get there.

The ability to perform at the top and stay relevant in a rapidly evolving world is something that only a few have managed to do and yet people continue to sign up for these jobs. What is their motivation? Why do they keep coming back? Do they not fear failure? 281 and Beyond answers all these questions and more.

When I wrote the post on Things Not To Do If You’re In The Entrepreneur’s Inner Circle, I was only 40% of my way through this book. Completing it only vindicated my thoughts on how important the role of your inner circle is in your success. Throughout the book, Laxman credits his wife, parents, uncle, coaches etc. (i.e. his inner circle) for the roles they’ve played in his success – which at times was not to interfere at all.

Who is this book for?

This book is for anyone who wants to fulfill their dream but fears the negative consequences of failure. The toughest part (as you will learn from this book and real life) isn’t the quest to achieve your dream but to continue to live it.

34/2019

Things Not To Do if You’re in the Entrepreneur’s Inner Circle

I have to admit that after my interaction with Dr Marcel, I have been a little obsessed with researching about entrepreneurial stress. So, over the last weekend, I read the treasure trove of links I had been collecting on Pocket and what I learnt was eye-opening.

Some of the most hard-hitting articles I found were The Psychological Price of Entrepreneurship written by Jessica Bruder, The Quiet Price of Entrepreneurship by Chris Cancialosi and 7 Reasons Entrepreneurs Are Particularly Vulnerable to Mental Health Challenges by The Failure Factor podcaster, Megan Bruneau. All the articles were written from a personal point of view and I could relate to them because not only have I been through what they were talking about (as an entrepreneur) but have also witnessed (and continue to) the emotional turmoil that foundership entails as an investor/mentor/board member. Let me assure you, it’s not all rainbows and butterflies.  I should also admit that the strong urge to write these two posts came from a personal episode, I recently faced.

The last 12 months have been nothing short of roller coaster ride in both my professional and personal life. The stress of operating a new business (read: launching a fund) while handing over the reins of businesses that I was previously managing to other partners was exponentially increased due to the diagnosis of a serious and life-threatening illness to an extremely close confidant and family member. This episode took place when things were just starting to look brighter after another close family member’s life-threatening illness was successfully cured. Just when it looked like there was a light at the end of the tunnel, I realized that it was a freight train coming towards me at full speed.

It helped that things at Artha were on a roll. Everything we were doing, we were doing well, and the recognition of our efforts wasn’t happening only in India, but on a global level. However, my stress levels were increasing unchecked and I was working myself down to the bone. However, I did keep up a strong image that everything was okay, that I could handle all that was being thrown my way, until the day my 25th flight of the year (yes, its been that sort of year!) was about to take off.  

Just as my flight was taxiing out, I got some shocking advice from one of my closest advisors which went completely against Vision 2022 for Artha. Normally, I would have reinforced the vision to my stakeholder, and I have done that several times in the past (and at times, even to myself) but somehow this particular advice upset deeply me, and I couldn’t put a finger on why.

The advisor, who was a part of my inner circle had acted on the advice of a third person who did not have a complete understanding of all the things that were happening at Artha.  Therefore, the advice was an opinion stated as a fact and did not hold up to any scrutiny. It was advice that was both, dangerous to provide and to hear.

That I went through this episode at a time when I was researching the importance of mental health for entrepreneurs made me realise the importance of sensitising the founder’s inner circle and the role they play in deriving peak performance from the founder.

As I had mentioned in my last post, most top creators/performers/founders have tight inner circles which provide a cushion from the noise of the outside world, as though it were a sanitised bubble. This inner circle acts as a sounding board that at most times aids a founder to discover answers for themselves. The members of the inner circle could exist in the background, but they have a vital role to play and their importance can be gauged from examples of people like MS Dhoni, Sachin Tendulkar, Warren Buffet, Virat Kohli, VVS Laxman, Michael Jordan, and many more who have openly spoken about the important roles their inner circle has played.

Therefore, while it is as important for the inner circle to keep a check on who they give access to in order to maintain the cleanliness of this sanitised space, it is also important for them to keep a check on the advice that they provide. I have personally witnessed the destructive power of polluting this sanitised space in the case of the swift destruction of my ex-boss’ legacy and have read about it in the case of Vijay Mallya, Anil Ambani, Vinod Kambli, Amanda Byrnes and several others.

I am quite sure that there need to be some clear guidelines for the inner circle to follow, on the things they should “not do”. Essentially, what I have realized is that just like it takes a village to make a man, and an ecosystem to build a start-up, it takes a strong inner circle to build an entrepreneur. So, if you are a friend, an advisor, a mentor, parent, sibling or a family member to an entrepreneur, this is a list of things you have to stop doing (seldom against your best intentions) because it is causing us ‘entrepreneurial- stress’.

  • Projecting your own doubts onto us

By nature, every successful founder has ton of self-doubt. We doubt the assumptions we’ve made on our business plans, whether we will achieve all the goals we’ve set, whether we will have enough time or money to achieve those goals, whether the market is changing against our expectation or whether our competition is pulling a fast one on us. I could go on for days on these self-doubts, but you get the idea.

We do not need any more doubts added to this list (unless it comes from someone working with us). In fact, we need space to clear our own doubts, therefore, adding additional ones (which sometimes aren’t even well researched) is detrimental, period.

  • Making us focus our attention on results v/s the process

The media judges a company by how fast they achieve results, but it is important to remember that the best businesses are (and will be) the ones that spend time developing the right processes which in turn, deliver consistent results, even if it might take a bit longer. Just like instilling good habits in a child, building the right processes take time and patience.

When our closest network lets outside influences cloud their best judgement and then (they) attempt to colour our lenses, it is going to lead to a long term disappointment. Instead, it is imperative for our support system not to judge us based on results – good or bad.

  • Constantly chirping in our ears about our mistakes

We often make mistakes, tons of them, and we will make tons more. Our failures are scars in our memory and I rarely come across a founder who hasn’t learnt from his/her mistakes. What is important is that we understand the reason for the mistake, learn from it and avoid repeating it. Our inner circle can help by ensuring we do not drown in failures. But it is fatal to consistently chirp in our ears about where we’ve gone wrong causing us to relive that stress yet again.

  • Publicly sharing our failures and privately praising our successes

I have learned that the best way to protect a close relationship with anyone is to praise them publicly and criticize them privately. However, I see many inner circlers doing the exact opposite. This creates an excruciatingly difficult social & personal situation for us.

I simply do not advocate false or effusive praises.  In that case, you can avoid praise altogether. But criticizing us openly (or behind our backs) and putting us in a defenseless position is honestly as good as shoving a knife in our back, and I’d request that you avoid it at all costs. Just speak to us directly in private if you have any criticism whatsoever.  

  • Drawing comparisons

Like there’s an Afridi for every Sachin, a Djokovic for every Federer or a Suarez for every Messi, every business has a competitor or peer that could be performing better or worse than them (at some point in time).

While I agree that it is important to be aware and informed about what our competitors (or compatriots) are doing, our business model and path to success do not need to be the same. I believe in emulating versus imitating, but the choice of whether we should change (or not) should be left to us.

  • Forcing on us the opinions of advisors we have not chosen (most important!)

Maybe you’re at a party or a social gathering and you meet someone who gives you their opinion on our venture (with whatever titbits of information they have). You find their opinion/ judgement to be awesome and it completely changes your outlook towards our business. Now, instead of challenging your newly acquired opinion by first researching the advice you’ve been given or checking the credentials and the experience of your advisor, you blatantly pass that advice on to us and present your acquired opinion as fact.

Our entire business plan that could be moments away from validation, is now asked to be altered because you believed this ‘new advisor’ knows more about our business than us. This causes major stress and can affect our relationship in the long run.

If you have been doing this to the entrepreneur who counts you as their inner circle, please stop. Instead of meaninglessly passing on one person’s opinion, you should either put in time and effort and do some research or discuss it with us with full disclosure on who provided the advice so that both you and I can collectively come up with the right way forward.

Just remember that not all inner circle members are needed for advice on the business and each person plays an important role but as long as they do not try to become what they are not. So just like an expensive car should only be tinkered with by a well-trained technician, business models should only be tinkered with, by people who are or have been deeply involved in the business and have an experience in doing so.

You should adequately challenge any ‘random’ opinion you hear, before uttering it to the entrepreneur. Even then, that suggestion should only be followed if (and only if) the entrepreneur is convinced to take action. After all, it is the founders who have to run the business and not the person whose half-baked advice you have been listening to.  

32/2019

Influencing v/s Incentivizing Customers

I have been reading Drive by Daniel H Pink and not only am I surprised by how little I understood about customer motivation but also have found the answer to why almost any company that has tried to buy customer loyalty has failed (and miserably at that). Yesterday, as I was setting up my newly created family office in Hyderabad, I got into a discussion about the influence versus incentive strategy that startups utilize to gain initial traction utilised by startups with the principal of a newly created family office in Hyderabad.

The discussion started over how Paytm was going to recover the losses it was willing to make to get customers to transact using its platform. Earlier, I would have defended Paytm stating that these incentives were like dangling a carrot to get customers into the habit of using Paytm, but I’d also ask, whether the platform understands that selling its service below cost means that they value their service at zero (or less than that). As I am learning through the research carried out in this book,  using incentives to alter consumer behaviour can have similar effects as addictive drugs have on the human body. For example, in Paytm’s case the massive incentives lead to a sale, but in order to get the customer to transact again, Paytm has to keep increasing the size of these incentives. All the while the platform remains unaware, if the customers would want to transact at all, if the subsidies were taken away. In fact, it could even lead to a situation wherein users that would have used their services regardless, have developed the habit of being incentivized and therefore expect incentives to be doled out each time. In essence, the customer acquisition cost becomes a transaction acquisition cost, a cost that continues to escalate with each interaction – a truly dangerous situation, in my opinion.

I realised that I myself, was guilty of this behaviour last month while searching for the alternatives that were available to buy a new phone. I was willing pay the sticker price to offline stores, but got lured into buying the phone online with Paytm’s offer to give me 8% cash back; a cash back to subsidise the interest on EMIs and money in my PayTm Mall wallet. It was a no brainer for me to choose this option that was giving me the same phone at a deeper discount than any offline retailer was willing to offer. However, when I was looking in the market to buy something for my dog, the lack of any cash back offers from Paytm prevented me from using it, and I chose Amazon instead. With the cash back money in my wallet I should’ve used Paytm, but intuitively only wanted to utilise Paytm if and was getting a deep discount.

This behaviour and its end result remains the same for any venture using an incentive laden customer acquisition model. The customer needs more and more incentives to be loyal and will stop using the product/service the minute the incentives are taken away.

In fact, Ronnie Screwvala had asked this question on twitter a few weeks ago and received a cheeky reply from Vijay Shekhar Sharma but not an answer.

27/2019

Sell the Sizzle in Your Next Pitch

Many things are important towards the success of a start-up pitch but getting the audience to relate to the problem that is being solved can be the difference between a nod or a nay. For many founders this could mean that they must essentially dumb down their pitch, and I would agree with that approach over a technologically complex and “intelligent sounding” presentation any day.  In sales we call this approach, selling the sizzle.

In a nut shell what I am suggesting to the presenter in you, is to hone down on the objective of the first pitch i.e. being relatable enough to warrant further investigation. I would not advise neither expect a presentation to get an investor to write a cheque immediately after the pitch, that is unheard of and nearly impossible. However, if your pitch has the recall value to keep investors thinking for hours, days or even weeks after it – the goal has been achieved.

These are some key ingredients to achieve the desired effect on an investor audience:

  1. Create an image of your target customer
  2. Explain the challenges that the target faces today
  3. Delve into the loss (in time, money, etc.) that this target faces
  4. Elaborate how that loss is hurting the target and how the current solutions aren’t helping
  5. Elucidate how your solution solves these problems (a video case study is recommended)
  6. Calculate the value delivered to the target
  7. Quantify how many such targets exist i.e. TAM, SAM, SOM, etc

Your story should get woven in such a way that the investor finds themselves in the shoes of the target and can visualize the issue, the solution and the value it would provide to them. A great example is this Bhavish Agarwal’s 2011 pitch for Ola.

Notice how Bhavish asks the audience for a show of hands of how many people have had a bad taxi experience. Almost everyone has faced this issue at some point or the other or knows of someone that has, i.e. relatable. Instead of delving into the awesomeness of Ola’s tech stack, he uses ‘you’ multiple times during the presentation to gently put the audience into the shoes of a taxi hailer. He shares just enough pain points to get your creative juices flowing and start looking for a solution to this imaginary problem. Smartly, he chooses to stay out of the techplaining which he understands can (and will) get covered during follow-on conversations with interested investors.

If you think about it, it is easy to argue with an explanation but hard to argue with an experience. Therefore, it makes logical sense to cut out the excess fabulousness of your pitch and focus on only delivering a pitch that is edible, visualizable and recallable. The rest can wait.

19/2019