The number one job of a founder is to communicate clarity

In the very early stages when there are few people in the organization, only a few projects are running at any point in time. The founder typically knows how such projects connect with and reinforce each other to produce an output that’s more than the sum of its parts.

Organizations amplify the directions coming from the top

As an extreme example of this, consider the organization when it is just one person: the founder. This person has the luxury of high bandwidth communication between different concepts sitting in his/her brain. The product manager, the marketer, the developer, the designer – all are sitting in the same brain of the founder, and hence alignment of their actions is a natural outcome. Whenever there’s an impulse in one part of the brain (like launching a new feature), another part of the brain immediately pitches in to prevent it from getting misaligned (like wondering – how will this feature sell?). ...  Read the entire post →

People don’t leave companies, they leave their bosses

It’s a common way of saying that so and so has left a particular company to join another company. Actually, a company is an abstraction for the group of people who comprise it. So, often, what people exit from is not the company but their interactions with their team in the company.

Most people would stick around as long as they’re treated with respect, paid fairly, instructed clearly and given work that usually falls within their abilities but sometimes challenges it, giving them opportunities to grow. Good bosses ensure that they create such conditions for people. ...  Read the entire post →

Don’t hire for roles, hire for a change

It’s easy to hire people. You think of what’s the next bottleneck in your organization’s growth and hire a role to fill that bottleneck. Typically, this involves coming up with a job description (which is often copy-pasted from elsewhere), announcing the job opening, and then interviewing the candidates.

Sounds easy, isn’t it?

Hiring people is the easy bit – there are enough candidates waiting to be hired. But the challenge lies in hiring someone who emerges as a star performer, contributing significantly to your company’s growth. ...  Read the entire post →

Your team’s culture is defined by your behavior, not your words

Imagine you’re the founder of a startup project (it could be a company, a non-profit, a religion, or even a country). You have a weird habit: you like to come to the office by noon and stay late (say until 8 pm). You hire your first employee, and on the first day he arrives at the office at 9 am (just like he did in his previous job).

The empty office seems odd to him, and it becomes odder still when he sees you stroll by in the office during his lunchtime. In the evening, since it’s the first day of his job, he waits for you to leave but the entire time, you are happily busy on your laptop. You leave the office by 9 pm and a couple of minutes after you, the new hire leaves. Thinking of his first day as a fluke, the new employee comes in early again tomorrow but the same thing repeats. ...  Read the entire post →

Your north star metric should be a leading indicator of profits

Kodak, Toys R Us, and Blockbuster were market-leading companies with hundreds of millions of dollars in revenue at their peak. During their heydays, nobody could have predicted that they will one day go bankrupt. Yet, they did and, along with that, became a prime example of why revenue or profit is exactly the wrong metric when it comes to predicting the future of the company.

Always pay attention to what’s actionable

Financial metrics are, of course, important from an accounting point of view. But they are strictly backward-looking. They tell you how the company has performed in the past but have very little actionable information for the future. As an entrepreneur, you need to pay attention to where future growth will come from, not simply review the past growth. That’s the job of the accountants. ...  Read the entire post →

Study your most successful customers to set your direction

Setting product and business direction is actually really simple:

  • Study your most successful customers in detail
  • Know why are they more successful than other customers
  • Take those lessons and tweak your product in a way that nudges all other customers to be a bit more like the most successful ones
  • Use your knowledge of the most successful customers to refine your pitch to highlight aspects of your products that your most successful customers get value from.
Your most successful customers are probably also your most underutilized resource

Your most successful customers are the ones who have by themselves discovered the use cases of your products that give them an enormous benefit. When your customers are working so hard to derive value from your product, your job becomes easy. All you need to do then is to interview successful customers and figure out how to make their valued use cases explicit in your product to other less successful customers.

It is also possible that some customers discover a use case of your product that you never designed your product for. When you discover these accidental use cases, highlight them in your marketing pitch to tap into entirely new customer types. ...  Read the entire post →

What kills startups is the lack of feedback

A startup is like a hypothesis inside an entrepreneur’s head and the entire point of the startup journey is to know whether it’s true or false (besides being able to make money).

Feedback – both positive or negative – forces you to iterate towards a better product

Entrepreneurs thrive on feedback from users. Every bit of feedback – even if it is negative – gives them an orientation. In fact, negative feedback is a clear indicator that the entrepreneur has identified the right problem, but perhaps the specific solution that she came up with is lacking.

As an entrepreneur, you should embrace negative feedback because it shows that customers are at least paying attention. What you should fear is silence. If no feedback is coming your way, prospects are not replying to emails, or users are dropping off from the product without telling you why then there’s simply no way for you to iterate. ...  Read the entire post →

Profit overpowers ethics, if left unchecked

We have seen our beloved companies transform into greedy and heartless entities over a period of time. Why does it happen?

Just like individuals, companies are idealist when they’re younger and pragmatic when older

It’s usually not because founders have had a change of heart and they start loving money more than anything else. What typically happens is that incentives in an organization gradually start exclusively prioritizing profits.

This process typically begins when a company raises investment from professional financers like banks or VCs. The number one job of investment professionals is to get a return on their investment. It’s not that investment professionals don’t care about anything else, but if their job exists to make more money from money, that’s what they’ll do. With professional investors onboard, whatever a company does then is seen from the lens of the return that investors can get.  ...  Read the entire post →

Great entrepreneurs think like investors

There are many stakeholders of a business. There are employees, customers, suppliers, management, directors, shareholders, investors, investors’ investors, the government, and society. Things are fine when everyone’s interests are perfectly aligned.

You’d not be able to guess because there is no difference

But the more the number of stakeholders, the harder it is to keep everyone happy. When the interests of stakeholders diverge, an entrepreneur must choose whose interest must be prioritized. The choice, in practice, is hard, because some stakeholders are going to be unhappy when decisions don’t go their way. (Say, when an entrepreneur lays off employees). ...  Read the entire post →

Investors will prioritize financial returns over your ambitions

Investors like talking about what makes a good business. You’ll find angels and VCs on Twitter constantly talking about what makes a good team, how to get product-market fit, and many other such aspects of startups.

Conflict happens when an entrepreneur’s motivation misaligns with investors’ motivation

Given the amount of preaching that the investor community does, it is understandable then that many first-time entrepreneurs end up believing that the VC community invests in companies in order to make them better.

There’s some truth to it as investors are incentivized to see their companies improve. But investors invest in a company to get a good financial return in the company. This is a trivial observation but it can be easily overshadowed by the apparent we-exist-to-help-entrepreneurs gyan that is ever pervasive in the VC land. Perhaps the world would be a better place if most VCs openly talk about their own incentives rather than talking about what businesses should be doing. ...  Read the entire post →