Shantanu Deshpande, founder and CEO of Bombay Shaving Company, took to LinkedIn to offer tips to startup founders amid a growing trend of startups failing in India. While acknowledging that risk is inherent to startups, he expressed that watching founders walk away from their ventures and seeing investors lose money is deeply “painful”.
The IIM Lucknow graduate shared five key suggestions for founders. One of his main points is that founders need to tell their investors well in advance when their company heads into trouble, whether it’s low runway, missed targets or poor sales.
“Not when you’re helpless or out of options,” he warned, adding, “Distress can be sniffed 6 months before it hits. Start communicating with investors immediately.”
He further advised founders to keep aside their egos during tough times as it is “counterproductive”. Instead, he advised to “take whatever deal keeps the oxygen tank from running out”. “Stop posturing and negotiating ‘from position of strength’,” he went on to say.
To sail through crisis, Deshpande encouraged founders to be aggressive about survival – “find buyers, cut costs, do your best to live to fight another day. Ask investors to open their networks”.
Drawing from his own experience building his company over the past eight years, he told founders to shed the “victim” mindset. “If things don’t work out, market slapped you… Do the hard things with courage, he said, before adding, “This is when you earn your founder stripes. Even when going down potentially. The self-pity is nauseating.”
In his fifth and final point, Deshpande said losing angel investors’ money should never be taken lightly. Founders should reflect the seriousness of that loss through both their words and actions. The mindset of “Haan equity risk tha na” (it was an equity risk anyway) is, in his view, unacceptable.
“Losing your angel’s money should hurt, and your words and actions should reflect that appropriately and adequately. Every situation is different, but the ‘Haan equity risk tha na’ type take-for-granted mindset is unacceptable,” he wrote in his LinkedIn post.
Deshpande, who is in his 30s, remarked that a founder’s “true character” is seen during such testing times. “Seeing founders exhibit horrible behaviour, throw tantrums, act like victims and show true character in these situations. Leaves a putrid aftertaste. Can’t look ’em in the eye, forget investing or trusting them again. However, founders who manage a bad situation with grace and fairness earn much respect,” he concluded.
An investment professional, Ashwin Suresh, responded to Deshpande’s post and said, “A rare breed of founders, also return capital (whatever remains) back to investors, when they are convinced that what they are building isn’t working from a market need perspective.” Deshpande agreed with him, saying that it “takes insane courage”.
Aniket Nikumb, an entrepreneur and investor, commented: “We all know the equity risk… but those founders who explained the situation and bought back stock at 1 re to book a tax loss… big respect for them. Huge respect for those who returned partial money/ got some partial outcome… it shows you didn’t throw up your hands but tried hard to make something work. Worst is founders trying to do some clever structuring and saying I am gonna buy this company at 5-10c on the dollar… otherwise I am walking away. Absolute worst form of blackmail that will come back. Seen all these kinds and remember very well who was which kind of founder.”
“You have written all this only from the point of view of the investor – what about the entrepreneur?” asked business psychologist Vijai Pandey. Deshpande responded to him, saying that he has shared tips stemming from his own experience and that he “expects better from his tribe”.