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!

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.]

 

Pay for a good startup lawyer

This article is the eighth in the Startup Series on FirstPost’s Tech2 section and first appeared on Dec the 23rd, 2016.

I am aware this is controversial advice.

Especially since the last column said: “You pay for some things, you do not pay for some things; you should take your time to understand which is which.”

Especially since we all know free legal templates are available online, or a friend can send you their stuff, and you can take them and tweak them, and you are done. This is where I mention that I have seen startups in India working with documents that state their jurisdiction as England and Wales. They certainly found a template for free! But is it serving them and their purposes?

The ability to make sense of legal documents is not for everybody. The inability to make sense of legal documents could however be quite expensive. The advice of a competent, experienced startup lawyer is something founders would do well to pay for.

Here is why.

A good lawyer will not just write you legalese and lots of documentation but she will build you the scaffold for a future of success and high growth. It is something to plan for now, because let’s face it, when you are blazingly successful, you won’t have time to come back and re-do the paperwork assembled from a random assortment of templates.

One of the first decisions in a startup is about location and structure. A competent lawyer, equipped with adequate tax advice if necessary, will help set up the most optimal structure for future growth and in a location that works for you. “But I am incorporating in India,” you may say. Fair point, but a good lawyer, who understands the competing jurisdictions you could incorporate in, such as Singapore, will explain the options to you, thus helping you think more broadly and globally about your business right from the start. Tax is not the only consideration, of course. A location can often beat your default location on the entrepreneurial ecosystem, the ease of finding and hiring talent including from other countries, and most crucially, the ease of doing business.

With cofounders on board, you will need a watertight shareholding rights agreement everyone agrees to sign. A shareholding rights agreement outlines founder shares of equity, but more importantly, outlines important issues that may come up including cofounders wanting to leave, resolving matters in a going concern, potential conflicts arising and so on. I have lost count of how many founder conflicts could have just been avoided or resolved more easily, had someone thought of writing a sensible shareholding rights agreement up front.

As you build the business, you will need to think about several other contracts e.g. with service providers and partners. Service providers may send you their own contracts on which it would be wise to get legal eyes so you know what you are signing up to and what recourse is available to you if things don’t pan out as expected. Next come employees and their employment contracts, which for startups may be different from those offered by BigCo employers. A major difference, for instance, may be the inclusion of stock options in the employment contract, as well as termination clauses and what happens to unvested or unexercised options in different scenarios. Especially if your startup is a success, this is an important matter to not deal with in an amateurish manner.

Whether your website is transactional or not, it is an essential for business and brings responsibility. A good startup lawyer will help write the right policies governing the use of your website for the visitors, and policies disclosing how you will treat data you may collect on their visit, their interaction and their transactions with your business.

These considerations are common across startups. Some specific startups may need specialist advice.

For instance, if you are creating a startup in a regulated industry, such as FinTech, in which none of the founders has adequate deep experience, the importance of a lawyer with industry specialisation cannot be overstated. A competent lawyer can advise you on compliance and regulatory challenges arising from, say, your business model.

In case, you are creating a social enterprise or a non-profit, correct legal advice would save you much heartache. Can you set up a trading arm? Who can and cannot donate to your organisation? What tax benefits are and are not allowable? How do you ensure adequate transparency, disclosure and compliance?

And of course, if you are creating a startup with a patented product, you will have already dealt with a lawyer specialising in intellectual property, and the advice here would dovetail with your experience.

Ignorance of the law, in no jurisdiction, is an admissible excuse for violations or non-compliance. Ignorance is definitely an expensive indulgence should anyone, from your cofounders to your customers, bring about a lawsuit against your startup.

Be smart.

Startup on a shoestring: a heuristic for thinking

This article is the seventh in the Startup Series on FirstPost’s Tech2 section and first appeared on Dec the 1st, 2016.

A startup, while it works to make revenue with its product or service, incurs essential costs. A shoestring budget calls for resourcefulness and creativity in building the business.

An earlier column discussed building the MVP on a small to vanishing budget. The Tl; Dr for this column is as follows: You pay for some things, you do not pay for some things; you should take your time to understand which is which.

The advice applies whether you are bootstrapping or playing with someone else’s, i.e. an investor’s or a VC’s, money.

How to know which is which? There is a thumb rule for that too.

For all startup related decisions, ask yourself: “Is this expense helping me advance our startup’s objectives?”. If the answer is “yes” then go for it, provided the cash in your bank account allows for it. If the answer is “no”, just stop and reconsider.

If you fear this will take all the joy out of your life, there is a third possibility: re-purpose some of your treats and desirable experiences such that they serve both your startup and to enhance your personal joy. Founders, rightly or wrongly, are not often able to separate work and non-work in ways others can. The approaches that work often address this peculiarity of the founders’ existence. Some call it leveraging, I call it maximising several of your life’s purposes in one go.

But since life is less than black and white, this week we have some tips, gathered from the trenches, which will hopefully give you a spur to more creative ideas. Some of these tips may not be new to the more experienced founder.

First off, we cannot manage what we do not understand or measure. The very first thing to measure and track is your weekly spend. Tracking gives us data, and data can help us make smarter choices in many instances. I once asked a founder, with a professed love of a specific drink at Starbucks, to estimate how much money she spent on Starbucks annually. The number was eye-watering. She then chose a two-pronged strategy: she now makes her coffee at home using ground coffee and a cafetière, and she holds work meetings in Starbucks so she can occasionally treat herself, while writing off the expense as a legitimate business expense (check business expense rules in your country with your accountant before applying this blindly).

Second, get creative, and discover “free” or “freemium”. Identify the business costs that you can keep low. Do you really need that co-working office space, or can you work from your home or shed in early days? Communication costs can be reduced to quite low with generous free minutes on mobile plans but it may be wise to keep them for making those calls, where you cannot use Skype or WhatsApp-to-Whatsapp calling. Identity the business-critical stuff you cannot afford to lose and make backups. Some of the best established project management tools such as Asana and Basecamp get you started with a free account, sometimes with limited features and you can then upgrade to a paid plan for additional features and more projects. New tools come along with free offerings, but be alert to their data export policies in case they go bust and you need to move to a different platform. Did I say make backups?

Third, manage your costs of training, learning, and staying up to date with stuff essential to your business. Most publications these days tweet out their best pieces. The web gives access to a lot of materials on software skills to business news. This column series is a good example of such materials. Find libraries, ask friends to give you their subscription copies once they are done.

Fourth, in doing all this, do not be penny-wise and pound-foolish. Do not scrimp on coming across as a professional, whether it is how you dress when you meet a potential customer, advisor or financier, or whether you turn up on time. I can see some of you rolling your eyes at this. Perfectly fine, if you feel comfortable turning up to meetings with a customer, while not showered, wearing clothes that smell, and late! Remember in the early days, founders are always selling. Choose the impression you want people to take away.

Finally, get a grip on tax rules for business expenses. Ask your accountant. Write off every single legitimate expense. This should not be hard if you have paid attention to the point at the beginning. Getting a grip on what you are spending is essential to staying within a shoestring budget.

In the next column, I will address a question I hear very often, my advice on the issue, and the reasons for it.