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.

Risk culture and your startup

This article is the tenth in the Startup Series on FirstPost’s Tech2 section and first appeared on January the 23rd, 2017.

A healthcare startup founder I know was in a dilemma. For a pretty sizeable chunk of the equity pie, she had agreed to take on as cofounder a tech development guy. He would in turn build the platform which would enable her business model. As delivered, the platform however was far from adequate. The tech cofounder however was not amenable to taking feedback. Lately he had gone completely quiet and was not responding to emails or picking up calls. Our healthcare founder was left with a platform that did not work as expected, with no access to the source code, and now a growing dread that the company was slipping away from her even before it was built. She had no more money left to bootstrap or to pay for legal advice to buy out his share so she could get the code and find another solution.

When I heard about it, I asked her if the equity was his outright or had a vesting schedule, whether there were ways of clawing back some of the equity as a BATNA, what checks and balances had been built into the agreement between them. What I found was not encouraging.

Through some wrangling, this particular situation somehow found a cobbled-up solution. It is, however, illustrative of why your company’s risk culture needs to be thought of right at the time of creating the startup.

Whenever I bring this up with founders, they ask if entrepreneurship is nothing but risk taking by any other name. It sure is! It is about taking those risks that advance your goals, not risks that destroy your dream. It helps to develop the ability to tell the two kinds of risks apart.

I am not recommending that instead of building your product and your customer base, you spend your time writing huge formal manuals or official policies. I am, however, strongly recommending that you give some thought to the values, beliefs, knowledge, attitudes and understanding about risk shared by a group of people with a common purpose, collectively the risk culture.

How to shape your risk culture in early days? Here are some tips to clarify your thinking.

First, ask if the risk advances your objectives, your dream. At what cost?

In early days of developing a product, building user communities for early testing of features and pricing, capturing feedback and using it to improve the product, all cofounders may use their own devices to write code, collect information and user feedback, keep essential documentation. This is a good move to avoid spending a lot of cash on buying hardware that belongs to the company, if indeed the company as a legal entity exists at all in the early days. There are of course several possible existential risks at this stage. How is the repository for what the cofounders are learning being built and accessed? Where is the essential information — source code, names of suppliers, passwords for services to name a few — kept? Can all cofounders access it? Can it be lost or tampered with easily? What is the backup plan?

Second, think of mitigation plans required, should the undesirable event you anticipated comes to pass.

What if cofounders fall out, someone wants to leave, or someone dies? Can one cofounder hold the entire venture to ransom? What if your only supplier decides not to work with you, and they have copies of your sketches which they could as easily manufacture and start selling? It goes without saying that this mitigation planning needs to happen when you are making key decisions about cofounder relationships, product development, suppliers etc. One can, of course, deal with undesirables as they arise but it is likely to cost more money and time to fix than to prevent or have other recourse.

Last but not the least, by thinking through, however uncomfortable it may be, what happens if it all goes to the wall.

This is the tricky bit. Our healthcare founder was on the verge of incurring a heavy cost for not thinking through the apocalypse scenarios regarding her cofounder. His contribution was essential to her startup but his temperament and working style could not be mitigated by writing tough contractual terms. We don’t like to imagine doomsday situations, sometimes rightly so as they can be paralysing and demotivating. But it is important to know at some level what you would do to salvage your startup if the worst things you had not planned for happened.

Our risk propensity is about that we are willing to accept for just returns. A clear framework for the risk culture makes it easier to identify, preempt, accept or reject those risks. It is wise to start early.

Building your startup’s culture

This article is the ninth in the Startup Series on FirstPost’s Tech2 section and first appeared on January the 9th, 2017.

To be fair, building organisational culture is usually not on many founders’ radars in the early days, when much must be done in very little time. However as I have written in earlier columns, it is wise to consider building the scaffold of your startup for blazing success. Because while failure gives time to ponder, success rarely spares the time to do things over.

How can one go about laying the right foundations for a startup’s culture?

Culture is a catch-all term applied to business practices, processes, interactions and behaviours that make up the work environment in an organisation. Culture in a startup is how founders’ values manifest in practice. Particular business practices and behaviours may also be shaped by the founders’ personal pain points that they may be addressing with their startup.

As ever, starting with the basics is a good first step. If you are lucky, you and your cofounders are on the same page as to the values that matter to you and that set the tone — both for the organisation you wish to build with your cofounders and for your cofounder relationship.

The cofounder duo behind PostFold, whom I advise, created their fashion startup after noting that affordable fashion was often poor quality in materials and craftsmanship, or failed to understand the structure of modern life where one can seamlessly go from one’s desk at work to an evening do without an opportunity to change clothes. Their research also showed that regardless of poor quality, the markups on fashion labels were high but this did not necessarily mean that the master tailor and the machinists got paid decent wages. This, they noted, was a significant factor in poor retention of tailoring talent, which is crucial to the survival and success of a fashion business.

Their shared values were quite simple but firm. They set out to deliver a high quality of materials and craftsmanship affordably to their customers, while delivering a superior customer experience. This was the idea at the centre of their business design. They also wanted to create an atmosphere of trust and respect in the workplace, which shaped how people interact with one another in the business. This idea is in line with their belief that happy employees ensure that customers are served well. Remarkably — and this may not be feasible for all startups — the organisational values are also their core brand values.

In turn, these values shaped how they designed their business processes e.g. how customer complaints and returns are to be handled, how employees may be able to purchase the company’s products at a discount or borrow samples for occasional use, or how employees could choose work-from-home while delivering on deadlines and ensuring their collaborative projects did not get derailed.

Further, the clearly articulated brand values have shaped their brand communication strategy. If something does not increase their brand’s prominence or does not better the customer experience they aim to deliver, they choose simply not to do it. Avoiding bandwagons allows them to focus on building the excellence in serving their customers and keeping their employees motivated and engaged.

To recap, values guide our sense of what is important and what is right. Culture is how our values manifest in practice. Our daily decisions and behaviours align to our values. Processes and incentives can create reinforcement of the values on a day to day basis.

A media entrepreneur I advise has found a creative way of reinforcing the organisational values and culture within the team. He has created rituals and shared experiences to enhance the sense of belonging and the belief in their shared values. These shared rituals and experiences allow the team to speak freely, raise concerns, thrash out things and return to work with a renewed sense of commitment to their work and its purpose.

Like much else involving people and their interactions, the culture of an organisation evolves too, especially with growth and scaling. For instance, while the entire, currently small, team at the media startup I mentioned earlier can go on a shared experience, it will become harder even at twice the size.

Similarly, nearly all startups learn quickly that the formality of communications and the accessibility of the founders both change as the team size grows. This subtle change in culture can upset early employees and founders alike. At least as founders, you may find it helpful to make peace with that possibility early on.

In the next column, we shall talk about a specific aspect of building culture crucial to building a sustainable and well-run organisation.