Some pertinent lessons for all aspiring entrepreneurs on the dos and don’ts of a start-up
The title of this book can be misleading, as it indicates something more brazen than what the reader gets when perusing the pages. Shradha Sharma and TN Hari have brought out what can be called ‘another’ book on what must be done to have a successful start-up, and which reads like several others that have been written on the subject. There are some personal experiences that add a certain flavour, but on the whole, it reads like a guide book on what should be done and what should be avoided when executing such plans. This actually holds true for any company and not just a start-up, though the authors’ focus is on the latter. The concept of having an idea and implementing it holds good for any company. The guidance provided on how you need the right people and incentives is also well articulated in this book, as well as the pitfalls of not being able to scale up the enterprise. This is probably the crux of the challenge with start-ups, which look good when they are small, but are not able to transcend the issue of size. The interesting thing about such guide books based on experience is that while whatever is written makes a lot of sense, the fact remains that globally most such enterprises fail. There are several reasons for this, which are partly covered in the book. But the point is that no enterprise can be established or run based on a rule book. Often the creator or management react to situations and this may or may not work.
Further, if one thinks deeply about most of these start-ups, market motivations often prevail over ideology, with the entrepreneur seeking to create value and sell the enterprise for the right price. The standard operating procedure is to start an enterprise that looks potentially great and then sell it even when it’s making loss. History also shows that even loss-making start-ups fetch good value, which makes the originator richer. Therefore, one point that is not brought out clearly here is the ‘commitment of the entrepreneur’ to the product or service being offered. This holds true, especially when funding comes from outside and where making an exit can become an end in itself.
Most of the chapters are well articulated and make for good reading. There are sections on leadership and how to be a leader. Human resource issues have been covered in some depth, especially hiring, firing, providing incentives, dealing with employees, etc. Compensation may not be important to begin with. And while it’s not possible to pay well initially, profit-sharing and stock options are ways used to retain talent. Normally, when there is a lot of energy in the workforce, compensation is seldom a limiting factor, as almost everyone joins the firm knowing that it’s new with uncertain outcomes, but the drive to do something new keeps the energy level high.
There is also a section on the importance of communication and the need to keep this a continuous process, as there is a dialogue with employees on a real-time basis. The book also has some advice on avoiding clutter and pitching for simplicity. Here, the authors take the reader through the need to have tightly-packed meetings, where the goals and routes are clearly spelt out rather than going through unnecessary clutter, which is what normally happens. Towards the end, the authors give some personal advice based on their experiences. Creating an organisation that lasts for long creating value should be the goal of any start-up. Without this motivation, commitment gets lost. Second, starting could be easier, but real success comes from scaling up, which is a challenge for most enterprises.
Third, they admit that there are no free lunches and all those who have helped and supported you should be remembered and compensated at a later date. It’s a case of pure business give-and-take. Fourth, they argue that one should be thick-skinned, as there will always be perverse comment from outside, which is to be heeded, but not taken seriously. Fifth, advice-givers, especially those who have been with the start-up from the beginning, will always add value and shouldn’t
be ignored. They also talk of trust and loneliness, which are more emotional factors that one has to negotiate when creating something new. Two success stories provided by the authors are those of Amba, which worked well in the investment area, and Bigbasket closer to home. The former was finally bought by Moody’s, which is, in a way, an indication of how well it was run. This should sound encouraging to new entrepreneurs who are looking to germinate and grow new ideas.
There are some Warren Buffet taglines included here that are quite legendary. These include tenets like leadership not being about knowing what is right, but in doing what you think is right. Another one goes like this: avoid the noise while picking up the signal. This may sound quite clichéd, as there are very few who are able to actually do this, just like how there are only a handful of perspicacious investors in any market who do the right things, while the rest assume the role of followers. It holds for start-ups too.
Writer is chief economist, CARE Ratings