Whether its buying a shirt, opening a bank account or hiring someone - each transaction involves a set of individuals that define the final outcome. Last 6 months have seen giants like Google and Twitter tweaking things around to have the right people in charge for the incremental growth. Time will tell if Larry Page and Jack Dorsey are the right guys for respective firms, but the principle that individuals define (drive) the outcomes is clearly evident in both the cases. So how important is it for a young startup to have the right set of people at helm?
Most startups strive to satisfy an unmet need. Some create entirely new services or products while others improve upon existing offerings. No matter whatever a startup does it requires (or is dependent upon) more than a few individuals to execute its vision and fulfill its purpose of being. As the startup moves from a paper idea to execution stage, there are twists and turns in the way - including but not limited to possible changes in product, strategy, market conditions and risks. More often than not it is during these exciting times that most founders are tested for cohesiveness, adaption, agility, flexibility and purpose of being together.
During the initial stages of a startup most likely its the individual with the ‘Vision and Idea’ who drives things. Founders who
- complement, trust and back each other,
- are open to change and adapt,
- have fun together,
- have at-least equally compelling purpose for being together
are more likely to succeed than others. Where most startups fail is the percolation of vision amongst its core team and identifying the real stakes (stake isn’t material only) for all individuals in the core.
Time and again I have observed individuals failing their firms because the firms were not able to identify correctly the purpose that drives an individual to be a part of the team. The purpose governs the stake an individual has in success or failure of the firm, which in turn governs individuals’ behavior.
It is widely assumed and followed that processes and incentives tend to take care of individuals’ behavior. I am ardent believer in the whole “Process” methodology, but its the people who make the processes’ work rather the other way round. The whole theory of finding & evaluating the purpose of an individual is more relevant for a startup given its lean structure. As pointed out by Jim Collins - “Right People on the Bus” and one way of doing that is identifying and aligning the “Purpose” of your each individual in your team.
As a VC I get to meet fairly large number of entrepreneurs - seasoned and first time entrepreneurs on a regular basis. Its mind boggling and intriguing to meet 20-something, care-free, calm and passionate individuals adamant to change things for better. When raw and unstructured minds think out of bounds, disruptive changes happen and that is what attracts me to entrepreneurship. Having been in the fray myself, I made my fair share of mistakes and fortunately learnt from them (at-least I’d tend to think so).
Unfortunately, just like most industries as more & more venture capital headlines make their way to WSJ expectations and focus of a lot of young entrepreneurs shift. Rather than focusing on strategic and operational issues their focus shifts to valuation and first funding round.
To give you a flavor of things, I have been advising a start-up (for obvious reasons we’ll keep things anonymous) since sometime. The idea & service the guys have been working on is niche, scalable and presents huge opportunity. With little competition, smart and energetic team everything seems alright about the future. Lately, the founder felt the need for further investments to scale up and rightly so we started discussions about the modalities.
Few meetings later, I realized how his ambitions grew to levels that were unsustainable and unwarranted at this stage. True, my last post was about being unreasonable but it was being unreasonable for a different set of reasons and not for altering business plans that would enable raising a predetermined amount of funds at a decided valuation. Every subsequent meeting thereafter resulted in him asking me one question - “What about my first funding round?”
Worried about the distraction and illusion that had crept into the kids mind, I advised him to go around shopping at his terms. Few days later, since he couldn’t find a taker he came up with a toned down version of the expectations but still not ready to bite the reality. The game is still going upon but I sat down and thought about my own experience as an entrepreneur. When I set out on my entrepreneurship journey, the goal was never to bounce off the venture or raise hefty amounts of capital. Instead we focused on creating a lean model that capitalized on human capital rather than financial capital.
My learning has been that entrepreneurship is very similar to rafting in uncharted waters. You need to be agile and prepared to tackle issues yourself and focus on business (strategy, operations and execution) rather than waiting for someone (VC, Advisor) to steer your ship. The moment, one takes eyes of the task at hand, the water might get better off you. So all you young would be entrepreneurs only board the ship if you are willing to take control of things and enjoy the roller coaster ride.
