Founder To CEO – A VC’s Perspective On Leading Start-Ups #startup leadership

In the 12th edition of the Leaders’ Cafe, we had Manu Rikhye, Partner, Merak Ventures as our guest speaker in conversation with Gatik Chaujer, Co-Founder, TransforMe Learning to discuss his insights on essential leadership skills for growing a successful start-up.

Summary

Startups have limited resources in the form of capital, talent, tools, and other resources.

  • Founders of startups have an ownership mindset that drives them to push harder than anyone else.
  • Perseverance is required to succeed in the chaotic startup environment, where every decision can make or break the company.
  • Successful founders in a resource-constrained environment are focused on the outcome that each dollar spent will create for the business.
  • Incentives should be aligned with outcomes to drive entrepreneurial spirit and high performance.
  • Misconceptions about entrepreneurship swing between extremes of thinking fundraising is easy or too difficult, influenced by external factors.
  • Developing conviction in your idea, taking the plunge, and learning from successful and not-so-successful founders can help you succeed as an entrepreneur.
  • As a mentor, it’s important to remind founders to stay focused on solving the initial problem before getting distracted by other opportunities.
  • During times of scarce funding, it’s important to shut out the noise and focus on the fundamentals of your business.
  • Successful startups achieve success by focusing on their business fundamentals and taking one step at a time, even in the face of uncertainty.

Transcript

Gatik Chaujer –
What do you think are the principal differences in leadership behaviours, in a startup versus a more established organization?

Manu Rikhye –
The main difference between large organizations and startups is first, access to resources. Startups have limited resources in the form of capital, talent, tools, and other resources. This affects how leaders work with others and their personal contributions. Another difference is the ownership mindset of founders, which drives them to push harder than anyone else, making it hard to find people to match their level of commitment. The third difference is the perseverance required to succeed in a chaotic startup environment, where every decision can make or break the company.

Difference between large organizations and startups:

  • Limited access to resources for startups (capital, talent, tools, etc.)
  • Ownership mindset of founders
  • Perseverance

Gatik Chaujer –
What recommendations do you have for startup leaders to manage scarce resources, exhibit ownership and perseverance? Also, how can leaders inspire their team to have a founder’s mentality and exhibit behaviors that lead to success in a startup ecosystem?

Manu Rikhye –
Successful founders in a resource-constrained environment are focused on the outcome that each dollar spent will create for the business. They avoid making decisions based on organizational pressure and become cautious but not overly so. Incentives should be aligned with outcomes to drive entrepreneurial spirit and high performance, which can be achieved through a simple structure that links compensation and career growth with successful delivery of tasks. This approach may not match the level of contribution of a founder but can help people step up and perform at a high level.

Gatik Chaujer –
What are the common misconceptions among startup founders about building a successful business?

Manu Rikhye – 
Misconceptions about entrepreneurship are influenced by external factors, and can swing between extremes of thinking that raising money is easy or that it’s too difficult to even try. It’s important to develop conviction in your idea and take the plunge, regardless of external circumstances. Everyone’s entrepreneurial journey is different, and it’s helpful to talk to successful and not-so-successful founders to learn from their experiences.

  • Misconceptions about entrepreneurship swing between extremes of thinking fundraising is easy or too difficult, influenced by external factors.
  • Develop conviction in your idea, take the plunge, and learn from successful and not-so-successful founders.

Gatik Chaujer –
As a mentor to many startup founders, can you share an experience of how you helped a Founder succeed and what they needed most help with? This can give an insight to viewers who may be considering this journey and how to find a mentor.

Manu Rikhye –
I have to confess that in the last four years, my work as a mentor has been more about reverse mentoring and learning than me being able to give advice to others. I have been privileged to work alongside some of the best and most talented founders in India, which is something I am very excited about.

One common theme that comes up among early stage founders is that they start with one big problem and solution in mind, but as they begin to build their solution, they encounter multiple opportunities and get distracted. As a mentor, I remind them that resources are finite, and they must stay focused on making progress and showcasing that their solution can solve the initial problem before branching out to other opportunities. This becomes even more critical as finite resources can make or break a company.

As humans, we are often affected by what we hear, and founders are no exception. During times when funding seems scarce, I have to talk founders off the edge and remind them that if they build a valuable business, they will find the capital they need. I advise them to shut out the noise and focus on the fundamentals of their business, taking one step at a time.

One of our portfolio companies, Advantage Club, had an outstanding founding team, and when we started partnering with them four years ago, it was hard for people to understand their business, which was an employee retention and recognition platform. However, they kept making progress, and today they are successful because they focused on the fundamentals of their business and kept walking one step at a time.

Initially, people were unsure about the value proposition of Advantage Club – an employee retention and recognition platform. When we invested in them, the hope was that they would reach a revenue of $1 million and the world would start to take notice. They surpassed expectations and achieved $2 million, then $3-5 million, and now they’re close to reaching a revenue of $10 million ARR, serving 60 countries globally with a SaaS offering. Despite the noise about unicorns and funding, very few companies in India have been able to reach this threshold. The frustration and disappointment felt by the founder were understandable, but I advised them to keep walking one step at a time and eventually, someone would have to notice their enviable offering and talented team.

As a mentor to early stage founders, I remind them to stay focused on solving the initial problem before getting distracted by other opportunities. I advise them to shut out the noise during times of scarce funding and focus on the fundamentals of their business. Our portfolio company, Advantage Club, achieved success by focusing on their business fundamentals and taking one step at a time. Despite facing uncertainty, I encouraged the founder to keep walking one step at a time and eventually, their hard work paid off.

Gatik Chaujer –
What should HR and L&D leaders be looking at differently in the startup ecosystem? Should they approach talent development differently? Can you provide any insights or examples?

Manu Rikhye –
To succeed in today’s rapidly changing world, individuals must embrace the fact that expectations, deliverables, and talent availability are all evolving faster than ever before. This means taking the time to learn about what’s happening in the world and upskilling oneself to bring more value to their roles. Finding a personal approach to accessing information and knowledge can be helpful, such as investing in early-stage companies or exploring new tools.

Another important factor in staying ahead of the curve is being open to adopting new technologies. Companies are often slow to embrace new ideas, waiting for others to prove their effectiveness. However, this can result in missed opportunities as the technology may become less relevant by the time it’s adopted. By having the courage to adopt new technologies, individuals can unleash value and find solutions to pain points that older products may not address.

Lastly, developing skills and leadership are crucial in navigating this fast-paced environment. By constantly learning and growing, individuals can stay ahead of the curve and lead their teams to success.

  • To succeed in today’s world, individuals must upskill and stay informed about evolving expectations, deliverables, and talent availability.
  • Being open to adopting new technologies can help unleash value and solve pain points that older products may not address.
  • Developing skills and leadership are crucial in navigating the fast-paced environment and leading teams to success.

Gatik Chaujer –
What are the top three skills that L&D leaders should focus on to develop leaders in a startup at various levels, according to you?

Manu Rikhye –
That’s a great question. In the startup world, the skills you need to think about are different than in the corporate world. One skill that I think startup organizations need strongly is the ability to navigate difficult decisions and manage conflict within and outside the organization. Additionally, softer aspects of leadership, like building a strong organizational culture and having a clear set of people and leadership practices, should also be prioritized. Startups should focus on creating a living document of their culture and leadership practices, which can be given to people as a toolkit to make assimilation easier. Overall, these are the top two skills that I think startup leadership, HR, and L&D should think about.

  • Starting a company can disrupt financial security from a regular paycheck.
  • As a founder, you have complete ownership and responsibility for decision-making and outcomes.
  • Access to resources and talent can be a struggle, and founders may have to do tasks outside their skillset.

So, here’s an audience question from Jay Krishnan AG – should we plan starting taking revenue from the MVP? or should it be only to take feedback to improve

Manu Rikhye –
The key is supreme focus on getting an MVP out and starting monetization early. This is the ultimate test and only when you have a minimum viable product in the market can you start the feedback loop. Seeding the idea that it has to be a paid product from the start is important, even if you initially offer discounts for early feedback. It’s essential to get real people paying real money for it as it’s a false sense of success if not.

Gatik Chaujer –
My question to you is, when do you think or how soon should a startup organization start looking at investing in leadership development? How soon should employee development, leadership development be looked at from a startup lens?

Manu Rikhye –
As a founder, investing in developing and coaching your team should be a priority from day one. It may seem time-consuming in the short term, but not doing so will prevent you from delegating and focusing on more strategic tasks. Once you have enough resources, it’s important to hire full-time or part-time partners to address coaching needs and invest in finding the right leadership and HR. Many founders invest heavily in these areas early on, even if they have received funding in the millions. They may hire partners to help with culture and verbalize their expectations.

  • Developing and coaching the team should be a priority from day one for a founder.
  • Hiring full-time or part-time partners can help address coaching needs and finding the right leadership and HR.
  • Many founders invest heavily in these areas early on, even if they have received funding in the millions.

Gatik Chaujer –
Picking up the last question from the live show – he talks about how he’s seen you in the past, and obviously, he’s wanting to get your broad insights on leadership, courage, that’s really his anchor when he sees you. So anything you’d like to share.

Manu Rikhye –
As a founder, I believe that leadership courage and grit are essential qualities to possess. In large corporations, success can sometimes be disconnected from these qualities, but as a founder, you have no choice but to demonstrate them. It’s like fighting on the front lines, and ducking isn’t an option. You have to find that extra sense, that extra gear, and muster the courage to make hard decisions. Failure to do so could mean the end of your business, and everything that relies on it. So, it’s a do or die skill that is critical for success.