How to be a valuable non-tech co-founder

This article is the thirteenth in the Startup Series on FirstPost’s Tech2 section and first appeared on April the 3rd, 2017.

The excessive media focus on techies as startup founders often makes non-techies doubt their ability to found and build a startup and create value. Many non-tech persons I meet believe that they won’t get investment without a tech co-founder whom they then spend considerable time trying to find. Many techie founders on the other hand seem to not think of finding non-tech co-founders with the same keenness. Both approaches need a rethink.

For starters, both the tech and non-tech founders have to stop using the term “non-tech”. The term suggests the primacy of tech skills which, while not inaccurate, does not highlight its limitations i.e. unless the technology is solving a problem and can create a product or service for which someone will pay, there is no business there. “Non-tech” in other words is the business person in a startup team.

A well-known story where a “non-tech” leader changed the fortunes of a “tech” company is of Mark Zuckerberg, the tech founder of Facebook, bringing Sheryl Sandberg on board as the Chief Operating Officer. At the time, Facebook was privately owned, valued at $15 billion, making nearly $56 million annual loss. Within eight years, under Sandberg’s leadership, Facebook grew its revenue more than 65x, made nearly $3.7 billion profit, did a successful IPO and, at $320 billion, now ranks as the fourth-most valuable tech company in the world.

So, how to be a valuable business co-founder?

Bring an understanding of the target customers. Talk to as many as you can. Listen with an open mind. Don’t look for patterns too early. Don’t challenge their reported lived experience even if it clashes with research data. Just listen, with attention.

But what if you are building is something truly path-breaking such as Henry Ford’s car? Ford famously said if asked for what they want, customers would have asked for faster horses! Even in such a case, you will still need to listen, evangelise, recruit champions, and build an organisation to reap the rewards for the startup. That was the magic Sheryl Sandberg brought with her operational nous to growing Facebook!

In an early stage startup, the business co-founder would translate the understanding of the customer to the tech team building the product. Being the champion of the customer and the community through the development process is not easy and will require great empathy with the tech team and the development process as well. At the same time, it is important to emphasise how some tech decisions should not be made before the business issues are resolved. A startup I advised learnt to its considerable cost that it is wise to get the payment gateway sorted before signing up to the customisation of a shopping cart and e-commerce platform. This folly of putting the cart before the horse was also quite expensive.

Test your product, service or app yourself first, and do so remembering the customer feedback you collected. Go further and involve some of your strongest critics in that testing. Enable iterations with an eye on the customer’s concerns, balancing the customer journey with technological feasibility. In a startup I was involved in, the business co-founder wanted the website to be designed to be accessible even on low bandwidth as many consumers were likely to be. Her concerns were overlooked to such an extent by the tech co-founder that the end result was an unusable website, the death knell for the e-commerce-only venture.

Examine all the processes, interfaces, “touch points” where your customer and community interact with your business. Ask if you are treating them well – addressing their concerns, reducing friction in how they can pay for something or raise complaints or indeed give feedback to the business.

In another startup, customers wanted the ability to consult a human being on the phone or chat before completing a purchase. The lack of such a possibility was frustrating customers and ending up in no sales being made. Neither the tech nor the business co-founder had paid attention to that feedback from the customer testing phase, as they were both used to eschewing human contact in favour of online experiences while shopping.

Examine the processes and organisation design for whether they are fit for purpose, efficient, and scalable. Does your business have seasonal cyclicality? Will you need more staff to ship thus increasing costs in your high season? How will you process returns if all your staff is dedicated to shipping faster and more? These questions are often not thought of in advance, as I saw in case of a fashion startup, whose success exceeded their expectations.

 

Getting help for your startup

This article is the twelfth in the Startup Series on FirstPost’s Tech2 section and first appeared on March the 16th, 2017.

Asking for help is an essential founder survival skill. But founders often do not know when to seek help, whose help to seek, whose help to accept, and how to evaluate and pay for any specialist expertise about which they, as founders, know little. Here are some key questions founders ask (and should ask) about getting help.

What help is needed? The answer often depends on the stage of the startup’s life. For instance, a competent startup lawyer would help with the legal structure, the shareholding rights agreement and other key legal scaffold in the early days. Essential help pre-launch could also come in the form of strong introductions to early adopters, potential channel partners, or influencers who can shape early adoption or off-take for your product as well as to people who can help access angel or VC funding and make introductions to advisors or board directors. The help needed post-launch varies. Customer referrals & recruitment, partnerships for growth, raising growth capital, geographic expansion, possible exit conversations are some examples. It helps a founder to map out the first growth stages

Whose help is needed? In my experience, the advisors that work with startups fall into three broad baskets: specialists, hands-on warriors, and famous-names. The first two are self-explanatory categories and include advisors such as lawyers and accountants, and people who are rainmakers, door-openers and hustlers on your startup’s behalf. Some of these are needed short-term or as-and-when. Others may be involved for short or longer periods of time. The last category however often dazzles and confuses founders. I recently advised an innovative social enterprise one of whose founders is a “celebrity”. While keen to keep control and wanting to be CEO and board director, the celebrity cofounder does not have time to do any actual work. This is problematic especially given the brand gains from keeping the famous cofounder on board. Could another advisor perhaps have a word and clarify expectations? Think of Theranos as a cautionary tale! A stellar lineup of directors and advisors, assembled for their political connections not their scientific nous, has not helped but hampered the company’s goals.

How to assess the suitability of advisors? The best way is to use a combination of verifiable credentials and testimonials. If asked for references or testimonials, I introduce the founder who is asking and one or more of the other founders I have advised, and let them converse freely. But this is rare. More commonly, founders approach me because they have been referred by someone who knows us both well. In such a case, I am the one who asks questions. Due diligence is a two-way street after all. This is when I find founders unprepared to talk or share information. Some ask for NDAs before sharing anything. Others go overboard in talking themselves up. None of these works. Advisors have finite time, and if you cannot sell your idea and vision to them, you won’t keep their interest very long.

How to compensate advisors? Startups often struggle with this question. The varying degrees of involvement required thwarts one-size-fits-all approaches. Many founders are pleased that some advisors are happy to accept equity. But equity is really the founders’ only major bargaining chip. Giving it away like toffee is unwise. Investors may also not be very happy with too much equity in the hands of advisors not actively involved. Some advisors such as lawyers, whom you want involved long term as you grow, may be better candidates for equity or options, than some other advisors whose advice is short-term or highly specific in nature. Then again not all advisors may accept equity. In such cases, the founder has to ask how badly that specific advisor is needed by the startup. Whatever you agree, put it in writing, alongside the framework for engagement; especially where you are giving away shares or options, clearly state the cliff and the vesting schedule.

Finally, how to manage advisors? This is crucial not least if you are paying your advisors. The keenest of advisors will not chase you, the founder, to give their advice. You, the founder, have to figure out a way to get their input. It helps to have a framework in place. One of the best frameworks I have worked with specified the scope of advice, the time expected of the advisor per month including roll-overs if the agreed time was not used in a given month, and the mode of communication that also identified which of the founders will be their interface.

Not all advice will be good, implementable, or effective. Some advice may be just awful. The relationship between advisor and advisee needs to be mutually beneficial and subject to periodic review. As founder, it is finally your call. It is, after all, your dream!

Going global

This article is the eleventh in the Startup Series on FirstPost’s Tech2 section and first appeared on March the 1st, 2017.

As we have discussed earlier in this column series, founders benefit from creating a scaffold, a structure that enables future success at scale, without them needing to come back later and fix things that should have been done right the first time.

This includes thinking global from the beginning.

Does this sound crazy? It really isn’t! The question “what if I want to go global?” is asked more often than you might think.

As always, the questions a founder asks will shape the business and ready it for taking on the world.

As a first step, validate your offering in your target market. One of my advisee founders is currently doing customer surveys and undertaking competitive assessments in another market to understand if her product offering makes sense and can be offered competitively, and if she may need some form of a local outpost to sell and offer post-sales service. Yet another founder, with a slightly complex healthcare related offering, is negotiating an overseas alliance with a research partner, who can help her set up a significant proof-of-concept study to obtain local data that may go down well with the regulators in that market.

Prima facie, services that can be offered remotely have a slightly easier time “going global” but may hit the buffers fairly quickly in some sectors. For instance, if you are a producer of conceptual films for advertising and public relations, can you really deliver the goods if you do not understand the idiom of the overseas market of your client? How good are the language skills available to your company if you are to serve a non-English speaking client? How might that impact your costs and margins?

Second, assess your assets and organisational readiness for serving customers globally. For instance, if your intellectual property is crucial to your startup’s success, is it adequately protected in the new territory? If yours is a product company, are you ready to deal with the logistics of shipping, returns, and associated processes? The latter is a harder question than it looks. It is tough enough sometimes to serve a customer within a massive country such as India or the USA, where states may have different local taxes, octroi and other levies. Delivering products across national borders takes more preparation. Can you deliver in various regions with different sales tax or customs regulations? Can your delivery partner deliver not only the goods but also the customer experience you are promising? Crucially though, you must work backwards to figure out the pricing of your products in different markets and communicating them clearly. Sometimes a customer abroad may be required to pay VAT and customs duty on the goods they have ordered. The landed cost could be so high as to make the product purchase unenjoyable. Is the communication on your website clear and transparent in shaping these customer expectations?

While on communication, there may be an additional consideration of website language(s). Are you comfortable signalling readiness to deal with customers who may be use a language other than English? Can you consistently support all website content being available in all the other languages? At what cost?

These concerns apply whether you sell products or services.

Further if for any reason, the customer wishes to return the goods, how easy have you made it to make those returns? Who will bear the cost of returns? Will your delivery partner also make the collection for returns? Is your returns process therefore clearly communicated to the customer on the invoice or accompanying papers? How do your internal processes work for checking the returned goods and restocking? For planning purposes, you may need to include an estimate of returns in your financial projections. If they are off by a considerable margin, you could have some significant trouble on your hands.

Each customer transaction, including returns, will generate a footprint for your invoicing and accounting system, as well as a corresponding entry into the bank account. Have you clearly thought of the process and tested that it works and can cope with selling in diverse regions?

A well-run, fine-tuned operation is essential to serving customers in many countries around the world.

A vital, final point here is about people. Do you, your employees, your service providers, indeed your board directors, mentors and advisors have experience of “going global”? Can they help you avoid common mistakes and help build a business ready to serve the world?

More crucially, if you yourself do not have the experience, how will you assess whether their skills and experience are right for your startup’s ambitions? We shall address this often asked question in the next column.

Brand leadership has to change

A few years ago, shortly after the 2008 crash, American Express in the United States paid many of its less profitable customers to close their accounts and go away. The move garnered much attention and analysis then. It was seen as a de-leveraging move. Whatever hubbub surrounded the brand then has since died down and in an unscientific survey of my business-savvy friends, few remember that this happened at all.

It was a story of a brand choosing its customers, rather than the dominant narrative that conventionally goes the other way round. The latter powers the nascent GrabYourWallet movement.  Another campaign, Sleeping Giants, is similarly holding brands and companies to account if they continue to advertise on extremist websites.

These are interesting times, as the Chinese curse goes.

As consumers, we profess to love brands that are “authentic“, never mind that in many cases, contrived authenticity, not rooted in values embedded into the business’s value chain, is all we are getting excited about.

What happens when “authentic brands” meet programmatic advertising? Unfortunate, inadvertent outcomes, that is what. Brands are left scrambling to do damage control.

What happens when “authentic brands” take a stand that is vastly unpopular? What happens when the brand’s CEO tells a customer she is free to leave if she does not like their philosophy? Isn’t that just the brand being authentic?

What when all signs point to the emergent challenges being bigger than the more popular political bugbear of the time?

Is authenticity malleable? Should it be?

What if a brand never had cause to reveal some of its stances before and is now choosing to do it in a way that consumers find abhorrent?

And when that comes to pass, should consumers force the brand to comply with their idea of authenticity, or choose to walk away with their wallets?* After all, wisdom says, when facts change, changing our minds is no bad thing.

These growing disagreements and schisms are why, more than ever before, brands need values at their foundation, in their DNA, embedded in their value chain.

Real, defensible, explicit values that the brand is willing to stand up for.

Not convenient values that change with the times or fads du jour.

It is then that brand managers will truly be able to use programmatic advertising as a tool to help them rather be helplessly enslaved by it, while they operate in a haze, whether it be about their brand values or technology.

It is then that “customer choice” will come to mean both that the customer chooses, or rejects, the brand and that the brand chooses, or rejects, the customer.

[* Switching costs for small businesses on a shopping cart platform are not negligible but then that is an economic argument, not one about values.]

 

Helmsmanship of a modern luxury organisation

Change is afoot in the luxury industry. Fewer than 5 weeks into 2017 and several luxury firms’ CEOs have left or are leaving. It is just days since we heard that Chloe Creative Director Clare Wright Keller in Richemont was to quit and while I was writing this piece, Riccardo Tisci’s departure from Givenchy was announced.

While LVMH issued a warning, Ralph Lauren maintains its earnings guidance, even though the share price dropped on the news that Stefan Larsson is leaving.

These creative and corporate developments are taking place against the backdrop of geopolitical uncertainty and also markets behaving exuberantly as if the stock market is somehow decoupled from the economic and political sentiment.

This may well be the year of reckoning for the luxury sector.

Luxury brands have too long dithered between their exclusive image and the effect of the democratic nature of the web. The digital consumer expects luxury brands to navigate the fine line between customising the experience for the consumer, because she is known to them but without becoming too familiar and intrusive. As various privacy related issues rear their head, and cultural expectations diverge, the problem becomes more challenging for luxury brands.

As “things” became more accessible, the pendulum swung towards exclusive “experiences” although this year is seeing the rise of the tangible, as Rebecca Robins, author of Meta-Luxury, says highlighting the resurgence of print books as well as millennials choosing Smythson and Moleskine notebooks to start their 2017.

The intangible and the physical however must both make money, retaining the interest and loyalty of customers across the demographic especially as millennials aren’t as broke as previously assumed.

When Larsson joined Ralph Lauren, its eponymous founder became chief creative officer stepping away from his CEO role, signalling the separation of creative from corporate, as it were. Differences over strategy is the given reason for Larsson’s departure.

Frankly this really isn’t the time for corporate and creative to cleave.

This is the time for corporate and creative to coalesce and pore collaboratively over the information contained both in the yottabytes of “big data” coming in from the many social media channels and consumer created content, as well as the “small data” that the brand’s heritage has yielded over the years.

This is the time for finding meaning in both of those and layering it with the essence of the luxury brand, to remain relevant in these times of change.

This is the time for the luxury sector — corporate and creative — to finally reckon with technology and find a new narrative of relevance that brings the sector in step with the times.

This is the time for creative and corporate leadership to reject Draytonesque kissing and parting, and choose Donne-like commitment to rejuvenate luxury’s relevance.