Most posts on entrepreneurship exhort the dreamers to develop certain personality traits. My favourite one is EPIC by Swamiji – Insanely Enthusiastic, Persistent, Independent and Clear. Others give the essential startup tips to become successful such as developing a compelling product or a minimum number of early customers. I would like to tell you about the DO NOTS, from my personal experience of being an entrepreneur.
To be honest, I have lacked the courage to publish a story like this on LinkedIn or other platforms earlier as I have always feared being ridiculed for failure by my professional network. Thank you os.me for giving me a safe space. I hope my story would benefit those who are either about to take the plunge into entrepreneurship or are in the middle of it and are facing the similar tough life questions as I did.
Lesson #1: DO NOT decide to be an entrepreneur because you detest the conditions at your workplace or would like to prove something to your employer in vengeance.
About 7 years back, I was doing very well in a clean energy startup that I had joined as a founding employee three years earlier. With a global MBA and an experience in well-paying jobs over 5 years in two big MNCs, I was full of confidence to prove my mettle in a startup with just a paper business plan. Having worked extremely hard with salary sacrifice as the second in command in the company, I expected fair and equitable rewards in the long-term. However, professionalism is a rare quality in the Indian promoters and there came a point where despite me being at the peak of my performance, the promoter started reneging on the terms of award of my stock options that I was promised at the time of joining. In a state of anger, I decided to quit my job and move over to a startup, founded by a friend who had been alluring me to join him as a co-founder. I resolved to prove those who undervalued me, wrong. This impulsive decision continued to haunt me for many years afterwards.
Lesson #2: DO NOT piggyback on someone else’s passion for the idea. Friendship is necessary for good co-founding teams but is not the sufficient condition.
The startup was in the primary healthcare service delivery business that I knew very little about. My co-founder had some experience of running this business, albeit in an entirely different market segment. I did no due-diligence on the business before joining other than sitting in the pilot clinic a couple of times and interacting with a couple of employees and customers. I silenced my rational mind that was arguing that the problem the idea was solving wasn’t big enough. My co-founder was six years younger to me and while we were professional acquaintances in a job earlier, we had never worked together. He was quite passionate about it and exuded tremendous confidence in it. Instead of seeing passion as something you realise overtime based on your keen interests, I tried to share it with someone I trusted to be experienced in the space. I’d later realise that our work styles and interests were very different.
Lesson #3: DO NOT raise other people’s money into your startup until you have enough conviction in the idea and yourself.
I decided to ignore ‘misgivings’ of my rational mind and worked hard in setting up the business, wooing the customers and in securing the partnerships. Both of us co-founders had put in enough money to run a pilot but we equated success with attracting angel investors rather than proving the idea with a certain size of customers. I would always wipe out my worries and put lipstick on a pig by talking about the massive market size. A highly reputed industry icon backed us with her personal investment. That enthused me albeit not fully. Despite having no conviction on the idea, I was married to running the business as the CEO because now I had an angel investor to keep happy. From within, I was always squirming in proving myself in this business.
Lesson #4: DO NOT keep at entrepreneurship for the sake of putting on a brave face. Keep your ego aside and accept failure as it is not a judgment on you.
Eight months on, the business was on the brink of collapse. The captive customer market was too small to attract enough footfall everyday at our centres. Rather than shut down the venture and return half the money left in the bank, we chose to ‘pivot’ (or change our idea) as it was too early to accept failure. By now I knew that I didn’t feel competent and passionate enough about the ideas in the healthcare space. My heart was in education and I had an idea I had done some market validation on. But I couldn’t convince my co-founder to do a sector-pivot as that would have meant returning the money to the investor. I also came across an interesting job opportunity in the education investing space right at the time we were deciding to pivot. Again, my ego prevented me from accepting failure early on and kept me at our startup even though I wasn’t entirely convinced about what the value to the customer of the product I was building.
Lesson #5: DO NOT measure success by first adopters without waiting to see their retention. Compare your business with others but understand the contrast fully.
We faced the classic innovator’s dilemma but took comfort in the examples of a few startups in the US in the similar space. We had no experience of developing mobile-tech so we had to hire an expensive CTO. With him and a team of external developers, we somehow managed a functional app in about six months. By now, we were three co-founders as my friend’s wife, an extremely hardworking and passionate person had joined us. We closed in with some amazing brands offering shopping deals as rewards on our app for subscribers running or walking a few kilometers in a day. With little promotion, we managed to get about 4,000 customers on our app within a month of launch. There was one big problem though: we didn’t have a revenue model and the never ending quest for putting deals from brands to lure the customers on the app was draining our cash fast. After six months, the customer base came down to a few hundreds as the monotony with the deals set in. We realised later that the US startups in the same space also had to shut down or pivot.
Lesson #6: DO NOT build a business for the investors. Raising just the survival money is a signal not of your prudence but of your wanting to sail through the headwind.
My co-founder who was extremely jaded by now because of the long-haul and lack of salary, decided to quit. His wife, my new co-founder, and I were out with our fund raise pitch again without any major customer base to show. Dejected by lack of love from several investors, I discussed the product with a mentor-friend of mine who was a highly successful angel investor then and is now a VC investor. Given his knack of identifying the high-potential mobile tech startups, he advised us to pivot yet again from extrinsic (rewards) to intrinsic motivation (self, social). He expressed an interest to invest if we committed to these changes and as we were too scared to lose him, we changed course again. We came out with something very impressive as a first-time social-fitness product but it was even more difficult to communicate to the market than our previous app. It had now taken us another six months to build the new product. We had raised just enough to build the product and pay moderate salaries to a small team over the next one year. However, building it had cost us much more than we thought, leaving no money for marketing.
Lesson #7: DO NOT lose focus and get greedy about the first deal you get. Be careful about who you want to service.
Just as we were about to complete the product development, an insurance company got a whiff of it. They asked us to offer our app as an employee engagement product on fitness to their corporate clients. Having had no revenue-paying customers in 2.5 years, we lapped up the contract with the big insurance company, even though it was not comparable to the development effort and the opportunity cost of diverting our efforts from our target segment. We danced on their tunes making all the massive changes they needed in our product. We lost track of the B2C segment as the same product couldn’t be positioned for the two different segments. The product managed to impress the big corporate client of the insurance company but servicing them became a nightmare for our tiny development team. We worked hard to get more insurance customers but the lead time in sales was months.
Lesson #8: DO NOT collapse just before the finish line, if you have run well to it. Before calling it quits, try injecting a lifeline as persistence does pay off.
Our bank balances were declining sharply as by now we had a decent size tech and design team. Our existing mentor-investor would not commit any further money. As founders we could have committed more money but neither of us were convinced if that would really turnaround the company. We were nervous, tired and frustrated. We decided to run the business in a lean maintenance mode and look for buyers. Even though we were good fits with other mature startups and keeping just our team without any cash payment to us was our offer to them, their core operating issues prevented them from closing a deal with us within our timelines. In hindsight, we should have put in the money for the next six months ourselves and kept looking for a good buyer. We did manage to find someone who was a master of distress buyouts and returned 1/10th of the investment monies to our investors to give us an ‘honourable’ exit.
Lesson #9: DO NOT equate self-probing to self-doubt and ask yourself tough questions routinely
This is my story, each entrepreneur and her/his circumstances are different. Having traversed the path, I would still recommend a mindful entrepreneurial stint to everyone as even in failure there is life-long learning that is hard to experience in any other stint. However, I do hope that my learning would give someone in similar situation as mine some ideas to probe oneself on. Most importantly, ask yourself: can you spend your lifetime solving the problem your idea is trying to solve? If the idea motivates you enough that it can become your life’s purpose then it is worthwhile spending time on exploring if there is a large market willing to pay for it. Else, you are in the wrong profession.