In the autumn of 2016, I came across a very stimulating LinkedIn article by Justin Billingsley, the Global COO of Publicis Communications. It was about a man called Javier Sanchez Lamelas who was the first non-American Global Marketing VP of Coca-Cola, and his book “Marketing”. The article prompted me to connect with him and quickly order the book online after a query to him. I finished the sample text in no time. During the year of 2015-16, I took keen interest and close view of Indian start-ups, had invested in two start-ups, and was pondering with a consumer idea which could change the mobile phone scenario in India.
When I received the book, I completed the Preface (which itself has the contents of a complete book) with the rapt attention, in record speed. The last line of the Preface shook me up, mesmerized me for a while and prepared me to take a life-defining decision in my long corporate career – “It was time for me to start my new project in life: working for myself.” The commonality or context of the decision-making was a tad similar for both of us but with an exception of ‘start-up bug’ in my case.
The Initial Days
An entrepreneur’s journey is one of the toughest, especially in the early days, when resources are limited. The courage and conviction an entrepreneur shows through his journey are formidable. It has been 10 months since I quit my corporate job and turned entrepreneur, shifted my base and have been bootstrapping my life. The idea was germinated in one city and it bloomed in another city. The lessons I have learnt in the process are real gems which will prepare me for taking the next roadmap in future. In Fifty Shades of Grey, Anastasia Steele stumbled on the shades of a young business magnate, Christian Grey. My road to entrepreneurship is somewhat similar to unearthing the shades of entrepreneurship which are full of ups and downs, agreements and disagreements, highs and lows, trials and tribulations. In the process, I witnessed ‘my idea’ taking shape of ‘our idea’ and rightfully so.
All my experience and expertise had been put to test and I had to explore some areas of business which I never had any perspective or understanding of. These grey areas are as vital as your organs in your body as they are to a venture and a lot depends on how you comprehend, decode the inner meaning and disseminate to take a pole position to proclaim or renounce. This is critical to the survival of one’s own self, belief, and the venture as well and not allowing any of them to get crushed by any internal or external forces.
Being an Entrepreneur
Good entrepreneurship may be improvisational, but that doesn’t mean you operate without a strategy, business metrics and unaware of requirements of company formation. Here are some of the grey shades of entrepreneurship which a budding greenhorn entrepreneur should take cognizance of before getting into forming an entity.
- Dilemma of Founder vs Co-founder status
It’s easy to look at success stories like Elon Musk but the journey is full of vicissitudes. Sometimes great ideas fail to transcend into good businesses and it could owe to those at the helm of affairs, and sometimes, visionary entrepreneurs can take faded ideas and turn them into great businesses. If you are the one who envisioned the idea first, then the first thing you should do is to incorporate your own company and invite like-minded people to join you as co-founders. Even if you have not incorporated your venture, you make it clear to your would-be co-founders about how much stake you will hold – if it is not completely agreeable to others, you make sure that you retain the maximum stake. There is nothing wrong in this as it is business ultimately and everyone will make money if the venture sails through. There is certainly a price that you need to reserve for your idea and you need to protect that.
If you are not in a position to take the executive role or if you are not equipped with the required expertise to run a business, and then let it run by the most eligible co-founder, the best man in the team. Or, if you wish to run it then choose a good mentor from outside and give him a board seat and let him guide you. My suggestion will always be that the person who heads the venture should have the relevant business background, rather than having a tech or finance background. You help the team in building the vision and roadmap for the brand. Don’t look for similar expertise in other partners as dissimilarity will complement each other in the founding team and help in focusing on core individual expertise and skillsets that are imperative to run a business. Hiring is the option but the initial years call for a rock solid team at the top which can huddle to put its heart and soul into the venture.
If you are a bunch of professionals who have moved from your long corporate career, then debate, discuss and deliberate on who will head the venture. It can’t be someone saying “I will be the CEO” which is dangerous as the person will try to dominate and impress upon others over a period of time in future on small things as well. Don’t leave anything for guessing with your Victorian attitude and then have heartburns later.
- Keep your documents in order
Much has been written about the feud, the tussle between the founder/co-founders in the recent past and all details of mudslinging activities are in the public domain. Not many have forgotten the spats in an E-com company (Shopclues), a big data tech venture (Mu Sigma) where the co-founders were into bitter tug-of-war game. Why does this happen? Here are my two cents on this – ego clash leading to a power struggle, money playing a big role (in the form of holdings), and unclear exit clause.
Documentation is the key in any venture and you must spell out as much as possible. Once you clear the above point #1, then you get into the Term Sheet. The Term Sheet should have a shareholding percentage, role and responsibility, target, timelines and very clearly any consequence in failure or absence of role not performed in addition to all legal points. The consequence for failing in performance is a very burning topic and not many would like to spell this out. However, you must take the bull by the horns and lay it out clearly even with a caveat. This is the foundation of how you will be measured as an individual and consequence of that. Exit clause is a must to include in the Term Sheet and until all sign on the Term Sheet you don’t ever proceed on other things. Term Sheet must be followed with the Shareholders’ Agreement which is a more elaborate one.
- Kill any bad blood in the beginning
Start-up venture is a team game and the success of the venture depends on how well-oiled your wheel is. If one cog is not moving well, then others have to fill in and get the wheel going at the desired speed. If any co-founder “feels” he is doing “more than others” and deserves more shares, then cut the crap immediately. He is then not fit to be a member of the team and discuss it internally among other co-founders and reaches an agreement. However, if all other team members feel he is doing more, then he should be compensated with extra emoluments or wages but not through dilution of shares from others. If you really want to succeed in the market, you really need to work together as a TEAM.
- Bootstrap your idea
If you dream, dream big, create a value, and believe in yourself. This doesn’t sound pompous to me but the crux is that you need to have a long shot of your vision. Recently, Nivruti Rai (GM, Intel India and VP, Data Centre, Intel Corp) said in Techsparks 2017 that “90 pc of start-ups fail due to lack of innovation”. If you are dreaming big, then it must have disruption that can change the society at large. The execution of idea and marketing are two very important milestones whether you are into software or hardware. In India, there is a tendency to attract funding in software/internet related ideas rather than pure-play hardware innovation.
Now, that easy money of 2015-16 investments is not easy to come by and it will continue to be so as the investors have not made money yet. You should be ready to bootstrap your idea till the initial numbers of traction in the market and then you can expect to get some investments. This will also help you to get a better valuation.
- Don’t be optimistic
I am not a pessimist but too much of optimism actually is detrimental for any venture. The founders go overboard because of their intense passion in creating something and in the process lose sight of other business-related matters. The fundamental of running a business doesn’t change whether you are in traditional or new age business. For any start-up investment/ funding is a very critical pillar for execution and scale up. When you start with your idea, be very realistic about your deadline in product development, distribution and marketing and you should factor delays in your plan. If you have considered all by and large, then it will not frustrate you and you will not have sleepless nights and anxious days. I would say that you must be grounded and take a realistic view of every aspect of your business.
This whole discourse is not aimed at scaring a budding entrepreneur or maligns anyone. The objective is to share my experience and observation, and give heads up to others on certain aspects imperative to a start-up. A start-up can benefit out of this and be cognizance of the realistic approach to the path of glory. I may not be able to identify “50 shades” in the start-up world, but have much more to come up with.
– Debasmita Dutta