Attracting talent

This article is the sixteenth in the Startup Series on FirstPost’s Tech2 section and first appeared on May the 25th, 2017.

Apart from having a strategic direction and enough money to execute on the vision, the key challenge for founders is talent. Based on my experience, I will go out on a limb and say this: talent is not scarce. No matter what we hear about the “war for talent”. What is scarce is the ability to know what talent you need, find that talent, and find that talent efficiently, quickly, and affordably. This is truer still of the earliest hires, who shape your vision and your startup’s culture.

Here are some pointers based on my experiences with helping founders find people for their teams.

Making a successful hiring decision requires a process: knowing whom you seek, where they hang out, whether they see and notice your call for talent or otherwise know of your need, whether your call for talent is attractive enough, whether they are interested enough to apply or reach out, whether your hiring process confirms a mutual fit, whether you agree terms and, finally, whether they are still interested and have not been poached by a better offer in the meanwhile. This step-by-step looks obvious when one lays it down in black and white. In reality, most founders founder when it comes to hiring because they are haphazard and their follow-up is poor. Avoiding disorganised thinking and the ensuing chaotic hiring process, which can repel many a good candidate, is therefore the first thing to aim for.

The second thing is to avoid obvious and easy answers. At every step.

Most founders look in one type of spaces e.g. online startup communities or mailing lists or Slack groups. These are also spaces where your target talent is most likely to see all the other competing possibilities. Avoid being so narrow and niche. The wiser thing to do would be to tap your IRL network too. Ask the people you know who are not connected to the startup space and you may unearth several new possible candidates. As a bonus, your contacts would also have vouched for you and your startup before those candidates agree to talk to you.

People have CVs and people have side projects. These side projects in many cases provide insight into a person’s thinking as well as their skills. The obvious mistake is to not probe these side projects and thus miss possibilities. In two instances that I have been involved with, the side projects pursued by potential hires showed how those hires were perfect for the company’s international expansion plans.

Falling back on unconscious biases is another obviously easy thing to do in hiring. And avoidable. It has been shown that women get hired on proof, while men get hired for potential. If you are not finding or reaching talent of the kind you want, it would be foolish to let your unconscious biases against an entire gender make your hiring outcomes worse. Unconscious bias training goes some way not the whole way in addressing these flaws in thinking although it would be advisable for your own personal growth as a leader and entrepreneur. Emerging hiring technology could give a helping hand too. For instance, Blendoor enables merit based matching by hiding irrelevant data and thus widening your candidate pool.

Google’s chaotic hiring process in the early years has now passed into tech industry legend. It is also something best avoided and not emulated. It is crucial that founders build a creative but robust hiring process that scales, including for collecting candidate data, made simpler by platforms such as Workable, and conducting telephonic and face-to-face interviews. Equally it is important to make references as systematic and methodical as interviews themselves. Not asking meaningful questions and failing to listen actively to what the referees say is unwise, although it is easy to do cursory checks and feel you are done.

Last but not the least, avoiding firing people who aren’t a great fit is not a great move. Especially early hires, who will shape your startup’s culture, have to enable your vision and not sabotage it. If they are being disruptive or otherwise do not fit the startup, the founder has to learn to let them go. There are laws of the land that will cover firing within and outside probation periods. Of course this assumes you have given people employment contracts! It is also useful to talk to people in “exit interviews” before they leave to understand what you might have contributed to the disagreements.

Hiring is a contact sport. Putting this advice into practice will take commitment to solving the talent puzzle for your own startup.

Early employees and the art of equity distribution

This article is the fifteenth in the Startup Series on FirstPost’s Tech2 section and first appeared on May the 10th, 2017.

As a professional and an advisor, I have been on both the founder’s and the early employee’s sides of the question of equity for early employees.

In an early stage venture, equity is an idea, and equity distribution an art rather than a hard science, regardless of how much algorithmic formula type advice you find floating on the web or from well-meaning people. At an early stage, both founders and early employees are driven by the vision and the possible value creation from realising that vision. Both sides need preparation and clarity on their best number, their best alternative to a negotiated agreement (BATNA), and their respective exit strategies.

This column draws upon the several startup situations I have been or advised in and covers some essential considerations in such a discussion.

For her part, the founder sets aside a pool of X percent equity, from which early and later-but-crucial employees, and members of advisory board etc., will receive shares. Some of this X is designed to be given away as restricted stock, which is “granted” or “given”, and other as stock options, which must “vest”. The founder should have at least a rough plan for using this pool, with clear ideas on how the cliff, vesting, clawback etc may work. If she is unable to find how other startups are thinking about this, she may be able to get advice from an experienced startup lawyer, whose role in a startup has been discussed in earlier columns in this series. I have experienced at least one situation where creating the pool was an afterthought and created avoidable friction among the co-founders.

Often early employees are advised by well-meaning mentors to demand a percent of equity and not budge. Equally, founders are advised to make a fixed offer and stick to it. Both of these are poor advice. Not only is the making and the accepting of the offer a very personal decision for both sides where formulaic approaches may not work, but negotiation is also normal and an inflexible attitude does not help the situation.

Both stock grant and stock options have different implications for the recipient’s personal taxation and wealth generative situation as well as his “tie-in” to the company. Both may have a cliff, and a lock-in period or vesting schedule. The lock-in is where the founder’s and the early employee’s interests may diverge. The founder wouldn’t want a valuable employee to quit as soon as his options vest, for instance. The potential employee may rightly want to maximise his professional and wealth generative opportunities. The founder should be clear about communicating the terms of such grant or options. The potential employee will have to determine for himself whether the schedule and the lock-in are in line with his vision of his career and life.

It is worthwhile for founders to be transparent about exit avenues being envisioned or developed for the startup, and for early employees to understand those possibilities. In very early stage startups, this can be a fuzzy discussion. But it can be made better by discussing what the company is already doing, what the trajectories are, and what outcomes are feasible. This would enable the potential employee to make up his own mind about whether the offer is appealing enough for the associated risks of accepting a pay cut and the uncertainties that come with a startup.

Who drives the process? Here is some advice specifically for the potential employee. Unless you are an absolutely crucial hire, the founder will get distracted if the negotiation carries on too long. In a start-up, there are always more important things to do than discussing your specific situation ad nauseam, so you have to be the one driving the process. It would be wise to agree on a date to close an agreement. This is just a practical pointer. Sometimes we can get so hung up on the maths that we forget to have the actual conversation.

Finally, if things do not work out, it is worth remembering that walking away is a valid option for both the founder and the potential employee.

Leaving on good terms may earn the startup a friend and there may be a chance to engage again sometime in the future.

Losing and finding your mojo as a founder

This article is the fourteenth in the Startup Series on FirstPost’s Tech2 section and first appeared on April the 21st, 2017.

The journey of a founder can be exhausting. Those in solid founder teams too don’t just have a collective experience; they also have their own, personal experiences of the founding journey. It is not always easy to be in sync with others on the team, or their level of focus or motivation. Decisions are not always easy to make or consensual. Role cleavage is not simple or trivial, and yet without it, things may start to slow down. Given all this, it shouldn’t surprise us to know that founders often lose their mojo.

An entrepreneur I advise has had several such phases through the years. Helping him work through them has been a lesson in human resilience and the purposiveness that drives founders. Crucially, he has come out of each such phase with renewed vigour and focus. That should give hope to other founders in the same situation.

Building a venture is hard work but also strangely exhilarating. Even the tiredness is satisfying because you know you are building your dream and you cannot wait for the morning to come so another day could dawn and you get on with it. Intrinsically rewarding activities can be quite motivating for founders and others.

But what when you start finding all that work fills you with negative feelings instead of the exhilaration you expect? It is time to ask tough questions, to answer them honestly and to take appropriate action.

One of the more business-related, less soul-searching type, questions to ask is about founder-product or founder-market fit, which is more crucial than product-market fit to the success of a startup, especially for first time founders. This fit could come from the founder’s or founders’ core values, or their commitment to a cause, or their deep interest in the product category. Is it a lack of this fit that is dragging on you? If so, what can you do to change that?

It is also worth thinking about the specific things about your work that take the wind out of your sails and the things that energise you. The founder I mentioned earlier found the CEO responsibilities difficult to balance with the creative aspect of the work he wanted to do. There were also other activities that needed developing and executing but neither did he enjoy doing those nor were they the best use of his time or skills. With some introspection, he identified the need to expand his team to bring in skills that he did not have, and the skills that could be hired in and scaled without needing him to be involved in managing. He also realised he had to get really good at planning and time management so he could fulfill both the roles he wanted to.

Crucially, it is worth delving deeper. If the venture does not really excite you as much as you anticipated at the very beginning, why are you still here, working your socks off? Is it your ego at work? Do you feel beholden to commitments made to others? Do you fear failure? Is it a sense of deontology at work? Are you indulging in sunk cost fallacy? Something else? The founder I mentioned earlier has an overarching commitment to practising and defending certain values with vigour. When he has bad days, we talk over the issues separating the operational niggles from the strategic challenges. The exercise helps him not be overwhelmed and instead focus back with renewed vigour on what matters most to him and the startup.

Last but not the least, building a startup venture is like any long term relationship. There will be good days and there will be bad days. Good days are easy, uplifting, energising. However if you cannot hack the bad days, the relationship will feel toxic and draining. But if the bad days are too numerous and frequent, and overwhelm the good days, it may be advisable to consider quitting altogether.

What happens next?

Most people who quit a really bad relationship don’t “fall in love again” without a shed load of hard work either by themselves or in therapy. Founders who quit because the bad overwhelms the good may need some time with themselves to understand how to avoid the same fate the next time around. Knowing what sort of person you are is a good and essential first step.

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.

 

Leadership and the importance of changing one’s mind

Martin McGuinness, former deputy first minister of Northern Ireland and also former IRA commander, died today. I was shocked to learn he was only 66. Shocked because I have known his name since I was a child growing up in India, and had always thought he was much older.

But he wasn’t. In that short life, McGuinness, as many obituaries are reminding us, went from being “the butcher of Bogside” to “brave statesman”. In other words, he changed his approach to finding an acceptable settlement and peace. And he did it in the glare of the public eye.

Changing one’s mind, one’s opinion, one’s approach is an important trait for good leaders. It shows their ability to take on board new information as well as their ability to admit mistakes and course-correct. Not only are these traits indicators of an open mind, they also enable people around the leader to speak truth to power, for the consequences of silence can be many and unwelcome.

Yet we — the press, the analysts writing about companies, the electorate — find it difficult to forgive anyone, especially a politician, who changes his or her mind on an issue.

Not changing one’s mind is seen as a virtue, immortalised by Mrs Thatcher’s punny soundbite “You turn if you want to; the lady is not for turning”, before Mr Blair even tried his hand on the politics of soundbites.

Even the liberal press finds it hard to resist the chance to take a dig when it discusses a change in the direction of travel, a “u-turn“. See, for instance, the Guardian insist Philip Hammond digs in on his u-turn on national insurance for the self-employed.

This bald criticism creates pressure on leaders to be perfect, in-control, and always-right. It is unfair and wrong. And sad, because it demonstrates the rigidity of the electorate and the press pundits, who expect a leader to remain rigid, regardless of circumstances and possible outcomes of the original course.

An open mind is not cynical; an open mind is sceptical, inquiring and searching.

An open-minded voter or commentator does not distrust a change in stance as a knee-jerk reaction. What s/he does or must do is question the reason for the change, without sarcasm or without expecting an abject apology.

Is the change really just political expediency?

Is the change informed by new information?

Is the change driven by a new understanding of historicity, and how one might have been on the wrong side of history due to any number of reasons?

These questions hold good in both hierarchical societies as well as those who see themselves as more egalitarian.

Further, we need to remember that hindsight really is 20/20, and our understanding and memory of history both short and imperfect.

A friend and I were once discussing the leadership of Nelson Mandela. He is often cited in the same breath as Gandhi, who too had his flaws but steadfastly refused to support or choose violence. Mandela however categorically refused to denounce violence as a weapon in the pursuit of his cause. At the time the UK government under Mrs Thatcher was fighting another nationalist cause, which used terrorism and violence as its tools, namely the IRA. The policy of branding both the IRA and Mandela/ ANC terrorists was consistent with the thinking at the time.

As the President of South Africa, Mandela has been on record speaking in favour of luminaries, such as Colonel Gaddafi , the common cause being Africa and their shared identity as Africans. General Suharto was another one accorded high state honours by Mandela while he was a serving President.

Yet over time, the former “terrorist” Mandela came to be hailed as a hero. This shift took more than just one change of heart or mind.

In the United States, the Democrat Bill Clinton, the “first black president of the United States” did nothing to remove Mandela from the US Terrorism Watch list, while the Republican President George Bush signed a bill to change that in 2008. In the United Kingdom, where then-PM, David Cameron, who had once worked under the Thatcher government as a young whippersnapper, publicly noted in 2006 that the Thatcherite policy to brand the anti-apartheid movement terrorist was wrong. Predictably, the latter lead to many wondering aloud if Cameron was a Conservative at all — making one wonder if an extreme form of white supremacism is an essential quality to one being a Conservative in the UK!

But here is the rub. Post Robben Island, in his writings and speeches, Mandela was brutally honest in admitting his errors of judgment, mistakes, and shortcomings.

In other words, Mandela changed his mind too.

As leadership — and indeed, statesmanship — go, there are lessons in here for us all.

Especially in these times, when it is increasingly in vogue to dig in and refuse to consider the damage hard, inflexible stances can do.

Preferably before it is too late.