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Tag: #entrepreneurship

  • Entrepreneur – activist/philosopher/business-man

    Entrepreneurs are agents of change in society. They do not leave the world the same place that they inherited. The complexity of the entrepreneurial process often transforms the individual, redefines the world view they had, and, in the process, begins influencing the world. As an entrepreneur, there are many integrated roles that the same individual carries. In essence, we see at least three of them that can often cloud our thinking about entrepreneurship.

    As an Activist: Entrepreneurs carry their worldview into the venture they are creating. Their preferences about how things should be and how it should be executed, often guide their venture building. However, the process of venture building is not a unitary exercise of the individual and necessarily involves other individuals to commit to the venture creation process. When your individual opinion does not get appreciated muster in the negotiation process, it is likely for this to be a very personal setback and we begin to resent the ways of the world. This could easily become dominant, and the activist hidden in the entrepreneur takes centre stage, and the venture building persona takes a back seat.

    As a Philosopher: Entrepreneurs engage in decision making on an almost a continuous basis. The never-ending tunnel of decisions to be made could get taxing on the mind, thereby clouding the usual thinking. Most entrepreneurs, at this point, begin searching for answers in philosophy to guide their decision making. While these philosophical escapades are a useful guide, they could also be completely numbing if you do not learn to move from thinking to actions to resolve your deadlocks. Watch your thoughts.

    As a business person: Entrepreneurs indeed pursue opportunities. It is very easy to create a business with an opportunity when it exists for the taking. However, once you have set up the business, we often try to extract more value out of the venture than we are creating through it. In this sense, the business-man logic could take over the entrepreneurial logic in the venture. If you take out more than what you are creating, the venture may not be viable; people may lose trust in your business and even worse, in you as an individual. Watch out on overgrazing the pasture. You must keep a healthy balance.

    While an individual must don multiple hats in dealing with the uncertainties of the entrepreneurial journey and building a venture, we have to watch out for the hats themselves engulfing the entrepreneur in you.

    Ask yourself:

    What is my goal as an entrepreneur?

    What alternate roles would complement my entrepreneurial role?

    Are these alternate roles taking over the entrepreneur in me? Am I tending to become an activist, a businessman or a philosopher? Am I losing sight of what I want as an entrepreneur from this journey?

  • My role – opener, middle order, finisher

    Some entrepreneurs realize very early where their heart lies – they know whether they want to be a single venture, portfolio, or serial entrepreneur. However, even within an individual venture, there are various roles that the entrepreneur needs to engage in at different points in time. It is important to realize and acknowledge the differences the role demands as they build their venture.

    It is useful to take a cricket analogy and put three roles from the perspective of team batting. We could imagine three broad roles in – the openers, the middle-order batsmen, and the finishers. As openers, the task is to understand the pitch you are playing in, handle the tough conditions, and provide the platform for the subsequent players to pose a strong total to defend against. As a middle-order batsman, you want to continue the momentum gathered, handle the storm if there is a failure of the openers, and give the necessary stability as the innings get built. Controlling the pace of the game is an essential role to be played here. As a finisher, you are expected to accelerate the scoring rate, pile up as many runs moving past the expected outcome, and create a stronger point of advantage.

    Even in the entrepreneurial journey, you want to kick start the engine that would drive your business. Study the industry, identify the customer patterns on which you can build your business. As a middle-order batsman, you want to think of getting your product and production in place appropriately to be able to capitalize on the promise that was shown initially as the opener. Once you have a predictable process in place, you’ve got to scale rapidly and ensure that your growth rates are robust and beating expectations. The middle orders work to ensure there is an accumulation of resources which could push the finishers to go for a full assault.

    Understanding that there are different roles and that these roles would have to change for the same individual as they move through the journey of the single venture makes one prepare for the transitions. Active management of the transition is essential to build a single venture that you envision.

    Ask yourself:

    What is the role I need to play now – an opener, a middle-order batsman, or a finisher?

    Have I built the necessary base for the next role to take over?

    What are the parameters I should watch out for to make this shift smooth? How do I prepare for these transitions in roles? Do I know someone who could guide me through these transitions?

  • No cookbook!

    While the discussion thus far has tried to give you some observations we have made over the years of working with entrepreneurs, we must admit that what we know about the entrepreneurial process is just the surface level. So, a word of caution, these observations are a small collation. It is not a set of procedural inputs – say a codebook that can take you from point A to point B.

    Given this understanding, we must look at entrepreneurship as being closer to an art, and our observations are attempts at making it into a craft. But we are far away from making it a science. We must still pay attention to each idea and study its course or growth. Each ideas’ journey is unique – the entrepreneurs come in with a unique bundle of resources and capabilities.

    Their social networks and the way these networks are leveraged are often very contextually focused. They differ substantially as the entrepreneur engages in the venture development process. The venture building process, in addition to being path-dependent, also involves a lot of social complexity, which makes it extremely unique to the venture. The abstractions from these individual stories to make them generic is a continuing effort.

    Useful companions in these journeys are experienced entrepreneurs often acting as mentors and other people who have gone through similar journeys. Discussions with these people would provide more likely a heuristic input on your venture journey and not a specific procedural knowledge which can be blindly applied. It is left to your ingenuity to stitch these heuristic guidelines and chart your journey.

    Ask yourself:

    Am I looking for very specific information about charting the course of the venture all the time?

    What generic yet relevant information could be gathered through conversations? Do I know someone who can help with getting the relevant information? If not, how could you bridge this network gap?

  • What got me here won’t get me there!

    Entrepreneurship and the formation of new ventures is a process. It is not a one-time effort. Do not at any point believe that you could work for a few days on a venture, and that would suffice to let the venture move on its own trajectory. Building the venture is an on-going activity requiring constant attention and effort.

    There are at least two distinct and contrary parts in which efforts need to be invested in while building the venture. The first part is composed of substantial exploration and efforts in laying a strong foundation for the second part. The second bit is more exploitative in its approach to ensure that the foundation laid can carry the weight and deliver its promise. These two segments have been subtly highlighted in different works.

    • In Peter Theil’s book Zero to One, the discussion is primarily in the first direction. The One to N part of it is a completely different beast and needs a different mindset to be adopted for growth.
    • When seen through the effectuation lens, the effectual mindset is suited for the initial part, while to build a larger venture, one has to get into a causal mindset.
    • From the lean startup school, the first part is considered to be composed of two distinct elements – the problem/solution fit, and the product/market fit; and the latter part is assumed to be designing the scaling of operations.

    In the first part, passion fuels the investment of energy into venture building. This energy should be balanced by keeping the flexibility and agility until the venture begins showing a promise of growth. In the second part, the promise is to be converted into a scalable business. All your decisions have to acknowledge the shift in mindset. The kind of people you hire, delegation, the nature of customers you are primarily targeting, the redeployment of profits in your business – in fact everything.

    Most entrepreneurs do not sense this difference and continue to play their game plan from the first part, in the second part. This can wreak havoc as you then become the main barrier for your venture’s progress. In such situations, it is important to step aside and be an owner rather than a manager.

    Ask yourself:

    Have I built the venture to a degree where I need to shift my mindset to allow the venture to realize its growth potential?

    What capabilities do I need to develop to be able to exploit the potential promised from my venture thus far? Is there someone more capable than me to take over the reins of the venture and realize it’s potential?

  • Lean and effectuation methods

    Most of the discussion on how to approach the venture building exercise from the venture idea could be laid out into two broad approaches. The lean startup approach is abundantly talked about and followed in various accelerators incubators etc. and the other being the effectuation approach. While we would be shy of providing a detailed discussion on the lean and effectuation approaches here, it would be incomplete without touching on this topic. We give a cursory view of the differences made at the fundamental principles. We thereby provide contrasting perspectives in understanding the two approaches to venture building.

    The lean approach focuses on building a venture, beginning with a venture idea, keeping the consumption of the resources to the minimum, yet= investing sufficiently to identify a plan to accomplish the venture through multiple experiments. This approach makes an entrepreneur the central actor, and the primary person in whose mind the journey takes shape. The dominant learning is done through analysis of the outcome of the actions and interacting with customers.

    On the other hand, the effectual approach does not consider venture ideas to be a necessary starting point. An individual is but a bundle of capabilities whose skills, knowledge can be utilized either through their agency or through someone else’s agency into creating the venture. The evolution of the venture is through the process of co-creation, and so the venture is constructed through the commitment of stakeholders.

    While these two schools portray two different aspects of the venture creation process, an individual entrepreneur executing it does not need to limit himself/herself to one school or the other exclusively. Both these perspectives deal with the resource constraint issues an entrepreneur faces in different ways. The two perspectives provide useful lenses to consider dealing with the situation at hand, and by doing so, the entrepreneur could choose and design a path (often combining the two perspectives) to build the venture.

    Ask yourself:

    If I am dealing with a resource constraint situation,

    What would a lean startup say about dealing with the situation?

    What would the effectual approach say about dealing with the situation? What is doable given the two perspectives? Could I combine these two learnings in a useful manner to design a solution past my constraints?

  • Milestones or measures of success

    As we have been discussing, building a venture is a process that is to be unfolded over time. The challenge is compounded when you know that the long, arduous journey is rarely marked in any directions. It is pertinent to ask – Without these benchmarks, how do we know we are progressing, The answer is not easy.

    Without benchmarks, entrepreneurs try to make a path to assess their progress by looking around for socially-expected trajectories. But when you don’t have this information readily available, the next best thing to do is to look for some cues in the media – you may subscribe to some magazines. Follow these blogs and look at the conversations, you would immediately anchor yourself on to some categories of articles that are more visible and have gotten a higher viewership.

    Entrepreneurship is a journey in a resource-scarce environment. You are more likely to get attention on topics that deal with resource acquisition. One of the widely covered topics is the funding scenario – and articles typically cover startups that have raised funds from an investor (either angels or VCs). This high visibility sets in aspiration, in an otherwise non-benchmarked journey, and the entrepreneur, most likely begins to pursue investment.

    On the other hand, the media does not cover stories about getting a large customer order. It does not describe the challenges in the process nor the detail of how the entrepreneur overcame this. Simply put, it’s good to think – “once a customer pays you for the product, it is your money, and you have complete control over how to invest it! But try doing it with investors’ money! You are not as free.” Should you not search for a customer instead?

    The argument above is only to illustrate the challenge of not having minimum benchmarks. The solution in such cases is to remain pragmatic and ask about your own standards of success metrics. In most cases, these success metrics are individual specific. You have to also realize that the venture you are building is distinct from you as an individual. You are to act as a custodian of the venture after you have gone past a certain stage. The venture has its own life, and you have to get the right mix to help it realize its potential.

    Ask yourself:

    What activities am I often engaging myself in? What is driving me to pursue those activities?

    Are these activities aligned with the appropriate milestones for the venture? If I am confused, is there anyone with whom I could clarify my confusions with?

    Is my notion of success and failure justified? Am I pursuing visibility? If so, what is the visibility translating to for my venture?

  • Tools to ease routine operations

    To iterate, entrepreneurs engage in a variety of activities while building their ventures. It is easy to get consumed in the operations so much that you often don’t take time to distance yourself from the routine demands and think strategically about the business you are developing. Managing your time remains a serious problem as one often substitutes time invested in building with monitoring routine operations, instead of hiring a manager who can allow you to free your attention.

    A useful yet neglected aspect by most entrepreneurs during this time is the use of productivity software. There are several software which help to improve productivity by structuring different aspects of your business. On one hand, these softwares help reduce the time spent on repetitive tasks, and on the other, they also provide a rough process outline for the execution of certain activities. Additionally, they also become repositories of knowledge that may otherwise disappear as one may forget to pass on all the information to the next person taking charge.

    For example, taking up a customer relationship management software may simply allow you to map the flow of your leads towards customers better. Capture the important points from discussion with a specific sales lead. You could also diagnose when more attention needs to be given to a specific stage of the sales cycle, and where bottlenecks may exist.

    It is better to begin using this software after a few physical conversions and a rudimentary process, as you begin seeing the benefits clearly and also appreciate what the software may provide you through the formalization of the process. Make it a point to do your own digging for software to see what fits you and your needs., given that there are a plethora of softwares and features to choose from. 

    Ask some entrepreneurs who would have tried these tools and study the one which is contextually useful to your business.  Do not use just the freebies, try to get the paid features if you feel that they are worth it. If you feel unsure about paying for premium features, try out a few before you finalize while ensuring that you can migrate content across different platforms.

    The shifting may look a bit time-consuming in the initial phases. This temporary overhead will give you benefits of having spare time over the long run. Bear with the transition challenges, and you will surely find it rewarding.

    Ask yourself:

    What is my routine set of activities which take away substantial time which I could employ to think and build strategies for the venture?

    What areas are these activities typically in – Marketing? Sales? Accounting?

    Are there softwares that could help standardize the process and reduce my time consumed in managing and monitoring the progress?

    Whom could I speak to about this software and shortlist the potential list which I could evaluate myself?

    What are the issues that do not get addressed in each of this software?

  • Raising investment

    Entrepreneurs often start their venture through savings, and dwindling savings makes anyone anxious. Raising external investment is thus an early goal that most entrepreneurs set for themselves. However, we find many entrepreneurs chasing the goal as a primary one and lose sight of the overall business that they set out to build. They get so attached to the intermittent goal that the end goal of building the venture is off their radar. If there is no business, what are you really raising money for?

    When is an apt time to raise investment then? If you are to go by the advice of lean methodology in building a venture, the appropriate time is when you have accomplished a product-market fit and ready to scale up. The goal of an entrepreneur before this point is to accumulate validated learning that ensures that the assumptions of the business are correct; after this point, it is growth. Investors, on the other hand, look to grow their wealth. In doing so, their goal is always growth. Raising money before the product-market fit is achieved will be a misfit between the entrepreneurs’ and investors’ goals. If you have gone to an investor and have received a response that says – show us traction; this misfit of goals between the two parties is more likely a reason.

    Doing it this way, does it mean that the goal of gathering funds is delayed in the entrepreneurial journey? Is there an alternate option? Yes, there is always the 3F that you could reach out to – friends, family, and fools. These are the people most likely to invest in you before you have figured out the appropriate business model for your business. Your friends and family trust you and your ability, thus are more patient with you till the business model takes shape.

    While you may find some fools who believe in your idea, if you raise funds from gullible individuals, you are more likely to kill the venture due to mismatch.  The conditions for investment posed to you would leave you with no excitement in building the venture anymore.

    When considering investments for the venture, watch out for – the right timing to raise money, the right people to raise funds from, and the right means to raise it.

    Ask yourself:

    Am I making fundraising the primary goal by any chance, or is it still business?

    Which is the most likely source to raise investment from at this moment?

    Why are they investing in us? Is there a difference in goals? Have you considered the motivation of the individual behind the investment?

  • Equity as a tool to handle uncertainty

    There are many approaches one could choose when running a venture Some have preferences for proprietorship, others for partnerships, others for LLPs, private limited firms, and so on. Without getting into specific choices, we focus on private limited firms

    Equity is defined as a residual risk in academic literature. While many stock traders understand equity and engage with it day in and day out for a living, there is limited understanding that we have about how one could use it in the early stages of entrepreneurship. In early stages, entrepreneurs that split equity often do so based on parameters like – who came up with the idea initially, what skillsets people get to the table, opportunity costs for compensation, etc.

    If you are to effectively use equity as a tool in the early stages of entrepreneurship, you must consider the uncertainty that entrepreneurs must deal with. Entrepreneurs make decisions with limited information and often without enough safeguards or clarity about the future. Equity is a useful tool they could use in this situation. Here are some simple suggestions to help you retain equity in the early stages and handle the inherent uncertainty.

    a.         Have a well-designed cofounder’s agreement, where you could allocate the decision rights on various aspects of business separately

    b.        Do not split equity in equal proportions!

    c.         Let most of the founders earn their equity (think about vesting periods!         Periodic peer reviews)

    d.        On decisions where the allocations are not in the cofounder’s agreement, the         one with the highest equity would have to take the call. After all, that person    has the highest equity!

    e.        How do you decide to resolve deadlocks? How about a person specifically to           help in tie-breaks?

    f.         Have you planned to get some high-quality employees through ESOPs?

    g.         If you are using equity as compensation, could you think of alternate ways of           compensating – say through commissions, etc.?

    Ask yourself:

    What is the basis to allocate equity among founders?

    How do we know all the founders will stick together through the journey?

    Have we thought of scenarios when we can possibly get someone like Elon Musk on board if we meet them on a flight?

    Have we separated decision-making rights among the founders? Are there alternatives to distributing equity as compensation?

  • Knowing ‘doing gap’ – Execution!

    Venture ideas act as goalposts that we aim to charge towards. The venture journey, however, is not a linear one. It is filled with incomplete information and many more unknowns. While thinking about the product, can you help identify the number of avenues where the offering could be improved and developed? The toughest challenge then often lies in execution.

    For the corporate trained, this challenge is even higher since the organization’s management process already narrows down the attention of individuals to very specific tasks. This allows for narrow spans of attention, improved efficiencies in the execution. This source of efficiency itself could limit us from learning something new and restrict our domains of experience. If we hang around for too long, the threat of becoming deskilled and useless looms large.

    Another bane of being embedded in the lower-middle levels of the corporate hierarchy for too long is that you are more likely to be trained to believe that thinking is, in itself, an execution. You have a small group of people whom you guide and command towards accomplishing specific goals, so you begin monitoring their activities in line with the thoughtful expectations you set up for them. The adherence gives you rewards. However, this is not the case as entrepreneurs; thinking does not substitute execution. 

    Entrepreneurship requires one to be multi-faceted. You must do a little bit of everything and integrate it towards building the venture.  Thinking is only the starting point of execution. You need to work with other people to get the venture idea into realization. Engaging in execution remolds our thinking into something that is grounded. It also ensures a higher rate of success, as against thought through ideas.

    Another barrier to execution is in the inability of entrepreneurs to break their ideas into smaller executable components. These elements should not simply drive the creation of the offering but should at all points ensure that the venture and its value is validated.

    Ask yourself:

    How am I assuming things to happen in the venture building process?

    Have I been stuck too long thinking about it? What is the simplest version of the idea as against the larger idea?