No glam in the startup camp.
Approximately 1 year ago, I met a friend over coffee at Starbucks to catch up. He knew that I had started out on my own in 2016. Amongst other things, he asked me, “how do you cope with the stress of cash flow (or the lack of)?”.
“It takes a bit of time to condition yourself psychologically but after awhile you just get used to it.”
On hindsight, I realised that this simple answer doesn’t say enough about what most founders have to go through on a day to day basis. The media frequently sensationalizes entrepreneurs, start ups and new funds that are coming to the market. And a handful of friends and acquaintances that I’ve met at countless meetings and conferences often tell me:
"Wow! So good, you must be doing well! Running your own business!”
Don’t get me wrong, I am not a pessimist. I am at worst, a hard-core realist. I like to say, “If I can’t see a dotted line to the end goal, I probably won't do it”. This goes against the conventional wisdom in which most start-ups don't really follow a fixed trajectory in the development stage of their businesses. The model is constantly evolving and the reality is that many founders often do not end up at where they had initially set out to be - which may not necessarily be a bad thing.
But running a business takes a lot of work. More than what you can imagine and think.
You think working for a boss is tough? Go start a business, be your own boss, work for everyone - clients, suppliers, partners, employees, vendors, etc. Want to make a million bucks before 40? Climb the corporate ladder in an MNC or work in a large investment bank. Even if you don't get to the top, we still can live a very good life. A lot of people don't realise that just diligently being an employee allows you to cover your bills comfortably and very possibly, fund the purchase of your second property, pay for trips to Europe, Japan or any other vacation destination of your choice. Want to turn your life upside down? Go start a business. Burn a lot of cash. Meet nasty people. Open your eyes up to a whole new world.
Bottom line, starting up isn't for everyone.
On top of maintaining sanity, founders deal with the day to day chores of hiring, accounting, invoicing, designing websites, collaterals and many countless miscellaneous things. If you can afford to ignore the rapidly declining cash balance in the bank, it can be quite fun. You are literally building an enterprise from ground up. You get to decide on the corporate colors and fonts to use, the type of projects to take on, the types of products to sell, who you want to hire and/or work with. That said, you are also responsible for sales and overheads.
Pain that does not go away.
These days I wake up with a pain in my head that just does not go away. It is the nagging feeling of upcoming payments, bills, payroll, secretarial fees etc.
It’s really a struggle sometimes - to keep the lights on not only at work, but also at home.
Once you come to terms with this, you realise that all your
Dissatisfaction around puny year end bonuses
Annual leave days that you could not take
Overtime hours spent in the office and;
Countless weekends burned because of a working on a deal or RFP
just don’t matter. They really don't matter.
Rain, shine, bull market, bear market, pandemic or not, everyone who is employed in a full-time job gets a fixed pay-check at the end of the month.
The smartest people in the world are not the entrepreneur 'heroes' portrayed in the news, but those who have managed to stay in their jobs for the last 10-20 years, drawing pay-check month after month, surviving through the ups and downs of the economic cycles.
As Steve Schwarzman from Blackstone once said, “There are no brave old people in finance”. If you are doing well today, it is not because you had a billion dollar idea that can change the world, but because you were boring. You adapted well to the times and had a good handle of managing risk at every stage of your life and career.
In the toughest of times.
In the toughest of times like these, I remind myself of the various resources that one has.
Experience. You can acquire specific experiences and memories, depending on how much money you have.
Knowledge. You can get access to the pathways and platforms that offer knowledge. But there's no guarantee that it can be internalized.
Health is a 'depreciating' asset. You can attempt to prolong this "asset life" but it'll catch up with you eventually. Also, there are always some parts of your biological system that cannot be replaced.
Friends. You can acquire the means to make friends - at the workplace, meetings, gatherings and at school. But friends who have been around for many years and been through ups and downs together, cannot be substituted, especially those who have shared specific experiences and memories with you.
Family and time. There is no way that you will ever get back family and time.
After you lay them all out: money seems to be the one thing that can always be replaced - either immediately or at some point of time in the future. Not that it is a resource that is easy to acquire, but, money is just money.
To acquire the rest of everything else, you either have to nurture, build and develop them progressively, or earn them through heart-felt experiences. Or, sometimes, you just gotta make the best of it while it lasts.
More than three years since I started out, I discovered a new-found respect for the many areas of businesses which are presumably oblivious to most people - back office functions, human resources, payroll, corporate communications, financial reporting, legal and compliance, sales and marketing and overall general management.
In short: a lot of work goes into the creation of a business and even more goes into supporting it.
I think all founders go through that same paradigm, though everyone experiences various aspects of the process differently i.e. some have more difficulty fundraising, looking for resources, developing leads and sales channels, etc.
Cashflow. You have to be really ready to be comfortable with very little cash in your bank at some point of time. Everyone’s financial background is different, make sure you evaluate and prepare yours accordingly
Do something everyday. When you find yourself at a loss, just keep moving - meet people, read stuff, pitch an idea. As long as you move, you’ll learn and achieve something.
Shareholding: respect the money. When starting out, this is tough to quantify given everyone's level of experience, capabilities and financial backgrounds. The most ideal way to do this is to have everyone commit to an agreed amount into the company and split the shareholding pro-rata based on contributed capital. Even if one party had 20 years more experience over the other doesn't mean the more experienced party deserved a larger portion of the pie. Last drawn pay is irrelevant, only the economics and spirit of the equity injection matter. Take for instance the founding of Blackstone: Pete Peterson and Steve Schwarzman both put in $200,000 of their money and split the shareholding equal ways, even though Pete was held a more senior position in Lehman Brothers.
Really have a shareholder agreement. Even a simple one is good, because everyone is committed (at least statutorily) to the business.
Do up a budget. But don’t be overly conservative, especially when it comes to IT infrastructure and travel.
Banking and money matters. Where bank and money matters are concerned, always use a joint signatory for check and balance.
"Cheerleaders" are good but the will to execute is more important. It is important to differentiate real founders who are sacrificing money and opportunity costs against those who are simply thinking up of ideas and cheerleading. The founders' will to execute is important, sometimes even more important than ideas and certainly more important than cheerleading.
Everyone in the boat must paddle. All co-founders must be individually strong. Each co-founder has to enter a business with strong technical competencies which are aligned with the core business, and ideally complementary to each other.
Resolving disagreements. In pushing a point across or in any disagreement, no one should ever say “I don’t need to do this”. Co-founders may never agree on everything, but when the decision is made, everyone must fully go with the motion.
Trust is important. More important than you think - there is trusting in a person's integrity but also trusting in a person's ability to deliver. Both are important. Trust through years of friendship should not cloud your judgement in trusting a person's execution or their ability to deliver.
Change and growth. Be fully prepared that your idea and vision of your start up will evolve and change significantly along the way. This is mostly a good thing. Be aware that what you’ll end up with will definitely look different from what you set out to do.
Share options. Dilute no more than 20% of the company (in my personal view). Then comes the how and when to give share options: Reward those who have contributed to top-line and growth of the business - customers are the blood of the business. You can follow these guidelines: (i) Contribution to the business top-line (revenue) (ii) Where revenue is irrelevant, evaluate based on overall execution support
Never give away equity. Period. See point above on respecting the money.
Human Resources. Talent identification, sourcing, acquisition and employee motivation post-hiring are ultimately key in growing and sustaining the business. As founders, always: (i) Lead by example, be hands-on and show the way (ii) Invest in your strongest staff: train them professionally but also develop them personally as individuals (iii) Hire for attitude over aptitude (iv) Always be upfront and honest in your communication All employees will leave the firm one day, but the social goodwill generated during their time at your firm will be intangible and will go a very long way in establishing both you and your company's reputation.
Beautiful presentation decks do not win deals. Good ideas, actionable strategies and the executing the plan builds credibility and THAT IS WHAT WINS DEALS.
Leverage good decision making to achieve multiple benefits. In making any decision, try to see if it can achieve multiple purposes.
Don't undermine the importance of a healthy digital footprint. Anyone who tells you not to publish your background on LinkedIn is smoking you. In today’s digital age, a website, LinkedIn portal and a proper email account is almost tantamount to legitimacy. Corporate "mileage" or existence can also be a fairly strong indicator, register your company as early as possible.
Stay positive and be comfortable with uncertainty. Complain less, do more. Be comfortable with uncertainty. There is always a possibility that an idea will not work, but if you fail, fail fast and pivot quickly to another strategy that works.
Failure is an opportunity to learn. When you make a mistake, just get up and just move on. Otherwise, you may never grow as a person. Failure makes you a humble person, adversity builds character, and makes you a better person.
Never victimize yourself. Our strengths and weaknesses are all shaped by our experiences and our will to do things. No one will bail you out from your self-pity and self-limitations.
Be solution-oriented. Instead of close captioning the problem at hand, think of ways to solve the problem, then execute it.
Make time for sanity, whatever the definition of sanity is to you - chilling over coffee, taking time to travel, spending time with family, etc. No one should work 24-7. At the end of the day even if you make it at the expense of the things that matter most to you, think about it: is it worth it?
Everyone who is getting a fixed and regular pay check is fundamentally an employee. An employee’s mindset is different. Remember this always when you manage staff, work with partners, negotiate with clients and even raising funds from investors.
You can learn a lot by working on the day-to-day mundane stuffs. You learn a lot when registering a business, making payments to mandatory employee provident funds, pay suppliers, write invoices and chase for payments.
Trade receivables is a very real thing. Working capital and debt collection are some of the most important aspects of any business. Watch this very closely but don't spoil market, always pay your suppliers on time.
Take responsibility for your decisions. Good or bad, you are always responsible for your own actions.
Never look desperate. When fundraising or getting customers, never ever be desperate. Prospective investors and clients can smell desperation
The world works in ways more complex than you can think. Don’t believe everything you see and read.
Teamwork is everything. There are no heroes in starting up.
Over the weekend, I was deliberating about stakeholder contribution and their business involvement. We liked some people because they have been long-time friends. We like some others because of having worked together in some capacity. Aside from that, we consistently interact with people whom we also consider to be potential investors, partners, prospective employees and interns. And I tried to pencil all of these down into a matrix to see where all the different stakeholders fit in.
The interests of all co-founders have to be fully aligned, but more than that, each person also needs to demonstrate competency
Opportunity costs are an important factor in aligning interest. Put it simply: If founders are in the venture as a 'hobby' or on a part-time basis, the venture probably isn't going to work out
Cheer-leaders, idea generators and business evangelists should not be paid, unless they are personally committed to and vested in the business, either in an executive or non-executive role.