Startup on a shoestring: building the MVP

This article is the sixth in the Startup Series on FirstPost’s Tech2 section and first appeared on Nov the 15th, 2016.

“You may be a business man or some high-degree thief,
They may call you doctor or they may call you chief,
But you’re gonna have to serve somebody”.

Nobel Laureate Bob Dylan is not known as a business advisor but his words are worth pondering.

A startup may be your dream, your personal pain point, your vision but unless you find enough people to say “yes, we share this pain too” and “yes, we will pay for the pain to go away”, there will be no startup beyond your dream. This is where building the Minimum Viable Product (MVP) comes in.

An MVP, as founders will know, is a bare-bones prototype that can be used to test if the dream should remain a dream or if some elbow grease may help its realisation. Its value in getting early adopters in is significant.

Early adopters are different beasts, psychologically speaking, from later adopters. They get your drift, your vision; they will use a less than perfect product and give you feedback; and you will gain several things. You will gain some early champions, you will get to see how the product works in the hands of actual users not just the people who designed it and how it needs to change, and you will get a better idea of what you need by way of talent to drive the startup.

Open source tools and cloud services enable quick building up of MVP for web based services. But not all startups are building web services or apps. How does one build an MVP for a physical product? As the following examples show, the web can be immensely useful in these contexts too.

Svaha-USA makes STEAM-themed clothing for children. Some mums asked them for STEAM themed dresses. Before swinging into action based on some feedback. Svaha-USA chose to test the wider market by setting up a crownfunding campaign for their first such collection. Not only was the campaign oversubscribed, they built a new following and now STEAM themed dresses for mothers are an integral part of their offering.

The founders of Onnix Bags in London, aiming to offer customisable, handcrafted bags at affordable prices, started by building a community first. Practising artist Austin Kleon’s advice, Show Your Work, they shared their process of design and building supplier relations with the community. This community came through in a big way when they ran their crowdfunding campaign, and you guessed it! They benefited other founders in their community by sharing in great detail how they went about their campaign. Where markets are finicky and unforgiving, such as in fashion and personal goods, building an MVP could go hand-in-hand with early marketing and brand building as Onnix successfully did.

Similarly, Que Bottle, the Bay Area based makers of collapsible, food grade silicone bottle, tested the concept in a secret but global group of founders, before launching their crowdfunding campaign which was swiftly successful.

Of course, one could always develop and distribute a finite number of prototype product or devices and collect feedback but the upfront capital investment may be substantial. Founders with a track record and solid social capital, such as Jo Aggarwal and Ramakant Vempati, who founded Touchkin, a mobile predictive healthcare startup in India, may find the path to raising funding eased somewhat.

You may have noticed the emerging theme here. To ease the path to success, it helps if one is plugged into the entrepreneurship ecosystem, and both ask for help and share your learnings. While entrepreneurship ecosystems may differ slightly in their cultural origins, the core values of paying it forward and helping one another are notable in both the Silicon Valley and London ecosystems. As the Indian entrepreneurial ecosystem matures, these values are already taking hold and helping strengthen the ecosystem.

Many founders see themselves as outliers or iconoclasts. But in reality, most of us are ordinary with extraordinary dreams. That iconoclast bit is true only for a minuscule number. And even those would benefit from knowing about, joining, and participating in the local founder ecosystem. Many ideas are tossed around in these communities, but only some make it to the MVP stage and even fewer become successful businesses. There is, of course, no better cure for founder loneliness, more on which later in this series, than to see a whole community, who understands you and empathises with your pain and helps you deal with it.

There are two angles to the startup on a shoestring budget. This column focused on building an MVP before going big, the existential aspect of building a startup on a shoestring budget. In a later column we will discuss how founders can keep costs low.

Slicing up the equity pie

This article is the fifth in the Startup Series on FirstPost’s Tech2 section and first appeared on Nov the 2nd, 2016.

Cofounder conflict over equity sharing can often cause a startup to be aborted before launch or otherwise fail quickly, as many of us who work with founders in very early stages know well. Some founders do not want to share equity. It is fine as long as they understand what is needed to grow the startup and can buy that talent in. Early stage ventures often cannot afford to pay people market rates, nor can they risk core talent walking away easily. Giving equity to cofounders, who bring key talent, helps address these concerns.

Founders often ask, “how much equity should I give my cofounder for the amount of work she will be putting in?”. My brisk answer to this “how long is a piece of string?” question is: “it is what you negotiate and what all cofounders are happy with”. Inevitably it leads to a further question whether there is a formula to make this negotiation easy and the answer to that is “No”.

Founder experiences show that a long term and successful cofounder relationship is predicated not so much on the slices of the equity pie but on the sense of perceived fairness in the arrangement, including in the course of the relationship.

To facilitate the equity sharing discussion, I start by advising potential cofounders to develop their vision for the venture together. Creating a shared vision and defining broad strategic goals then help them understand better the contribution expected of each of the cofounders in shaping the startup. More importantly, they develop some appreciation of how much weight each cofounder is pulling, and how their roles and contributions may evolve over the life cycle of the startup. At this point, I often see relatively inexperienced founders starting to relax and then I remind them to consider probable contingencies.

Roles and responsibilities aren’t cast in stone. Scope creep can and does happen. What happens, for instance, when the person, who was in charge of customer development and marketing, ends up leading on user experience design, developing the product roadmap, and owning all revenue generation and operations, because they appear to stack together naturally? How would the cofounders deal if she wants to return to the drawing board and renegotiate the slicing of the equity pie?

People and their priorities change over time. What happens if the chief technical architect develops the core product and then wishes to leave for a job with more income security and predictable hours because her family is growing, but wishes to retain her equity in the business? How would the remaining cofounders deal with that negotiation while also ensuring that the future of the core product is not jeopardised?

What about unforeseeable things? What if the business runs out of money before lining up the next round of funding? What if, in the virtual team, one of the cofounders becomes unresponsive while holding the business to ransom? What if a cofounder becomes unwell or dies unexpectedly, bringing her partner or family into the picture in the way nobody has quite imagined? These are a fraction of the scenarios that I have seen played out in cofounded startups where the cofounders were caught unawares.

Envisioning these possible scenarios is a squirm inducing exercise for most founders. But it also makes clear that the relationship the founders are about to enter is an evolving entity with uncertainties and potential conflicts in the future, not an immutable one. Cofounders also start to realise that fairness as accepted by all sides matters.

They also realise that above all, at all times, a focus on the business is crucial. It is not beyond possibility that a cofounder decides that not only will she leave the startup she will also ensure the startup does not survive after her. It is uncomfortable to think of such a scenario but it must be considered in advance.

How do we ensure fairness then, if things are going to chop and change, and people are going to behave unpredictably, even maliciously?

Here let’s draw upon some common sense. While resolving a cake dispute, a parent friend of mine uses a trick. She lets one child slice the cake, and the other children pick the slices first. The resulting dynamic is fascinating and instructive. Stretched to a cofounder negotiation, one of the tests of fairness would be, if you were doing all that any given cofounder is doing, would you be happy with the share she is getting?

It is also important to understand that fairness must be perceived and seen as fairness by all parties. And that perfect fairness is an asymptotic goal, albeit one worth working towards.

In a later column, we shall discuss embedding these negotiations into formal agreements and what it means for the startup.

On fancy job titles

This article is the fourth in the Startup Series on FirstPost’s Tech2 section and first appeared on Oct the 19th, 2016.

In one of my corporate venturing roles with a large Indian conglomerate, I served as the country manager of a European country. That was also the job title on my card and in my email signature file. The important sounding title was not just about sitting in a fancy office overlooking Zurich lake. I made a lot of calls and set up my meetings with prospective clients for business development purposes. I also went daily to the post office to collect our mail, printed and sent and filed my own faxes, made coffee and washed my own coffee cup, took out our recycling, and did a whole bunch of administrative work that people in large companies do not even think about or farm out to secretaries and assistants.

It was, after all, a new and small operation albeit with a BigCo parent company.

Startups are no different. In the early days of a startup, founders do everything from washing cups to taking and making calls to filing papers to paying bills. They do VAT returns, meet account filing deadlines, minute board meetings, keep an eye on the cash in the bank and so on. They pack products and take those packages to the post office for mailing. They also go out and represent the company to customers, partners, vendors, media and financiers. There is nobody else to talk about the brand, the company, the product but the founders who created the business. In other words, early days are when the startup founders are always selling, trying to sell or fulfilling orders.

Is there a need for startup founders have important sounding titles? Some even argue over them!

Titles serve a purpose.

Titles are useful in signalling to customers, partners, vendors and other third parties about the roles of the individuals they are dealing with. Giving such comfort and confidence is an outward facing utility of titles. Yo can go the ego-boosting heavy title route, or take a leaf from Craig Newmark’s book. He is the founder of Craigslist and calls himself “customer service rep”.

Inside the startup, roles and titles can help start a useful and essential conversation about allocation of responsibilities as the early rapid growth forces functional specialisation within the founding team. The CEO should ensure there is enough cash, that the company is heading in the right direction, and that there are enough people on the team — or from vendors and partners — to do what is necessary. The COO’s role may be defined by the context often spanning revenue ownership, supply chain, operations and other processes. The CMO takes charge of all marketing and communications with an aim to establish the brand as well as drive inbound inquiries and sales.

Then there are the future employees. As founders, you sell the vision to future employees so they consider working with you. Some of these employees then actually want big corporate-sounding titles e.g. VP. In an early stage and relatively flat organisation, a title such as VP may mean little. But what it can do is catalyse the thought process required to develop an organisational structure that will support future growth including growing numbers of employees, their roles and their career trajectories.

I am no fan of hierarchical organisations but equally the evidence from holacracy as implemented by Zappos and others following their lead, and from self management structures as implemented by Buffer is mixed. So, for now, even for startups, organisation design for growth remains an active challenge on the table. Titles are not essential but they could bring much needed clarity as jobs evolve away from the traditional functional bases of design to other philosophies including customer at the centre of the organisation.

During my country manager stint, I had several meetings with big-cheese type persons in prospective client organisations. It was not uncommon, when I turned up, to be asked by the gatekeeper to the said big-cheese, “Wo ist der Geschaeftsfuehrer?” (Where is the boss?).

I was, after all, a petite and young Indian woman, turning up to meet an important man in their company!

Handing over my card with a smile, I would reply, “Ich bin die Geschaeftsfuehrerin, bitte.” (I am the boss, please!).

The big title? It always worked.

Cofounders and the dating analogy

This article is the third in the Startup Series on FirstPost’s Tech2 section and first appeared on Oct the 3rd, 2016.

The search for a cofounder is analogous to dating. There is an ideal checklist of attributes — skills, qualities and more as you will see — and then there is the ineffable chemistry check.

Since no two people are alike, we will naturally encounter both similarities and differences. Over the years of working with startups, I have developed a framework which can help you think through the dilemma.

Values of cofounders should ideally be the same or similar. A key value to consider is the importance of control. Extensive research by Noam Wasserman of Stanford finds that there are people, who want complete control and ownership, and there are people, who understand that some control may need to be given up to build and grow the venture’s reach and value. This understanding is pretty fundamental to building a venture, especially if you plan to raise external investment to do so. A fundamental disagreement here would not make for a a good cofounder relationship.

Goals, needless to say, have to be similar not different, although one can work with  the possibility of changing mind later. For instance, a cofounder may commit today to work on the venture till an exit event but a few years down, agree to give up an active role in running the venture. Such possibilities are hard to predict but if all else is working, they are negotiable.

Skills are best if different or complementary. It helps if the cofounders bring different domain expertise to building the startup. If you are a techie who does not have experience in speaking to early adopters and customers, and your cofounder is the customer facing person essential to driving adoption and bringing customer feedback on board, you have brought together two essential skill sets.

Work ethic is best if similar. Some people emphasise hard work, others outcomes. A startup needs both but it needs outcomes and growth milestones more than anything else. If a founder thinks hard work is substitute for results, it is not going to work. It is therefore best if cofounders are on the same page as to the purposiveness of the work ethic. It is worth noting that work hours are not the same thing as work ethic. Work hours are often negotiated with the needs of the start-up in mind. While a developer can work late into the night coding, a customer facing cofounder has to work the hours when she can meet customers and partners.

Networks serve a startup best if different, or complementary. This would help the start-up maximise reach into customers as well as investors. The eagle-eyed among you may note this may not work when your cofounder is your former classmate from University, as mentioned in an earlier column. In such a case, look for the contacts you need in another cofounder or an advisor. Ask yourself “what things are you definitely not good at?” and go from there.

If this framework is lulling you into a false sense of security, don’t let it. Being able to judge these essential qualities is not simple or quick. Don’t rush the decision. Spend time talking through things and listening carefully, how they see failure and success, how they talk about disappointment, how they treat people over whom they have any kind of power, how they talk about people they have relationships with.

Occasionally someone may tick all the boxes and yet make you uncomfortable. Judging someone’s character is hard, and a lot more personal than judging their skills and experience. In such moments, listen to yourself, I say. Do not dismiss your instincts and do not dismiss your gut.

However as any person in a long term commitment or relationship will tell you, the marriage begins once the wedding is over. Committing to the relationship requires the commitment to work with all that comes with it. It helps to lay down early ground rules for all to adhere. That is the scaffold of your organisation’s culture, more on which a little later in this column series.

It is worth remembering that the advertised product may be quite different from what is delivered. In other words, people may disappoint you. They may demonstrate different behaviours in an organised and predictable environment than they do in a start-up. A start-up is a high stress, demanding environment where decisions are not hedged by a large team and wrong decisions can actually waste valuable money and time.You cannot predict all this but you can deal with it. More on conflicts arising and how to deal with those will be discussed later in this series.

(Note: a version of this framework appears in “Dear Female Founder” edited by Lu Li, who has kindly permitted the publication of this piece.)

Do I need a co-founder?

This article is the second in the Startup Series on FirstPost’s Tech2 section and first appeared on Sept the 16th, 2016.

Those who read my last column may have noted my ambivalence towards the “previously successful business model applied to a different market” line of thinking. That holds good for start-ups as well as people. I am not interested in people’s role models.

I do pose one question to the founders who come to me for advice: “What things are you definitely not good at?”. It is an uncommon but essential way of bringing self awareness to the journey the founder is about to begin. Most founders giggle then start with low impact observations such as “I eat as soon as food appears; Instagramming food is definitely not for me”. Soon enough, other things emerge: “I am not really good at cold calling,” “I lose track of money easily,” “I cannot face telling people they are messing up at their job,” “My coding skills are limited to the front end, but the product I envisage needs full stack development capabilities.”

Here is the visceral realisation of John Donne’s oft-cited line “no man is an island”. No founder is an island either. Her success in realising her dream relies on many skills and many people.

Wisdom and experience tell us that one needs a team. The team would ideally consist of people, whose skills and experience complement those of the founder. But could these people be cofounders?

Becoming a cofounder is about believing in and committing to the idea, as much as the first founder does. It means being able to face up to staking one’s reputation on an idea that one did not think of, but is convinced enough to join in and make into a success. It is about committing one’s skills, networks and work ethic to building the venture. Being a cofounder requires one to champion the venture at all opportunities, to the exclusion of everything else. It may often also need one to do all of this while earning no more than sweat equity and not getting paid much or at all, till either there is enough traction or till external investment is raised.

But do these people need to be your cofounders?

Arguably, yes. Not because you need them but because while solopreneurs are successful in raising capital and making profitable exists, venture capitalists and accelerators do not often take a chance on them. It makes sense.

There are exceptions. If you are creating an e-commerce platform or setting up a marketplace, you could use an off the shelf stable technology solution with support services for implementation bought in from the platform provider, while you focus on customer and supplier development. Over time you may find yourself doing too much work and feel the need for support and help especially in areas of work which are your weaknesses. These may or may not be cofounders.

So where does one find cofounders?

When first teaching undergraduates in India in 2012, I wanted them to work in teams, an idea not encouraged in academic settings often enough. Culturally too, the vision of a lone ranger is seductive to young people. I started by asking them about the start-ups and entrepreneurs they admired. The usual suspects including Google, Microsoft, Apple, Facebook, Flipkart and so on were mentioned. I then asked them to name the founders. Suddenly the penny dropped: the realisation that none of those was a lone ranger narrative or a solo success.

Naturally they wanted to know where they might find these cofounders. “Look around you”, I said, “Your potential collaborators, co-conspirators and future partners-in-crime are in this classroom with you.” It is not clear the suggestion was believed completely. Fast forward a few years and some of them are building their ventures together.

It is not always so simple, of course. In the wider world, start by telling everyone you are seeking a cofounder. Share your ask in entrepreneurs’ communities. Build your venture’s profile on AngelList and post a job seeking a cofounder with an outline of skills you seek. Evangelise your company and briefly pitch to everyone you meet. Hustle, hustle, hustle.

When you find your cofounders, hold on to them. They are now the joint custodians of your vision. They will shape, along with you, the future success — or failure —of your venture. As the founder, you must commit to rewarding them fairly and meaningfully, to sharing information good and bad with them, to resolving disagreements quickly and keeping the wellbeing of the venture in mind. These are not unlike requirements scripted in wedding vows.

Not only will you cofounders build your venture with you, they will also witness the journey. More importantly they will be the people you clink glasses of champagne with, when you all succeed in creating something meaningful and lasting out of a mere dream.