Let's Build a Company

I realized one thing: many companies which build a big and profitable business generally solve the simplest of problems. Their problem statements are clear and repeatable. Solving difficult problems gave us a natural high, one which we had become accustomed to. As I gradually became an entrepreneur, I wanted to really shake that off and get on the road.

When an angel investor or a VC is looking at investing in the start-up, the belief is that this seed will lead to a big forest that will bear fruits, which they will pluck. But when it is clear that a particular seed will only lead to a single tree, no one would be interested in investing.' This analogy about 'seed money' has stayed with me ever since.

When Bhavish Aggarwal started cab-hailing service Ola in 2010, and was trying to raise the first round of funding, he went through all the difficulties that a newbie entrepreneur faces. He pitched to folks in coffee shops, he went to all the big funds. Finally, he raised the seed round at a valuation of less than 1 million dollars. The company is now worth more than 6 billion dollars. He was a first-time entrepreneur then, with few signals attached to him. In 2019, he started Ola Electric, raising Rs 400 crore in the first round, with valuation rising to a billion dollars in six months' time. This is the strength of signals.²

One of the main questions that entrepreneurs who are starting off ask is: How do I decide the valuation of company? What should I say or offer to the investor? How do I decide if the investor is pricing fairly or not? There is no logic to it. It is a matter of supply and demand. If lots of people want your start-up, your valuation will be high.

I think at the earliest stage, the only people who can invest in you are the three Fs: friends, family and fools.

If a person is unwilling to invest his money in your start-up, it means he doesn't believe in it enough to hold any equity.

we had believed that having a unique idea was a positive. Turns out it wasn't. There was no one in the US or Europe doing what we were; there was no one else in India who was doing it at that time either. A unique idea scares venture capitalists. The rationale is that if this idea is as good as the entrepreneur believes it to be, why aren't other folks doing it? It is much easier for a venture capitalist to be convinced about funding you if a similar idea has been funded abroad, or by another VC fund locally.

In a large company, there is a travel desk to book tickets, a cafeteria for food, the hotels you stay in are nice.

Nobody tells a first-time entrepreneur how hiring is such to work in your company is a full-time job. We made a lot of a big part of running a company. Attracting the right people mistakes in hiring, but, over time, came up with these golden rules for hiring people for different levels:

We figured out that the right kind of people for an earlystage start-up with less funding are people with at least one drawback. Generally, the drawback is either 'weak spoken English' or graduation from a 'noname college'. These are the people ignored by the big companies because they are biased towards certain colleges and types of hires. They want someone polished. That leaves a large pool of fresh graduates who can be employed and trained by start-ups. Many of these folks are naturally hungry to achieve. They want to succeed in life as much as you want to build your start-up.

Entrepreneurship gives a lot to the entrepreneur. But it also takes a lot from you. If you are an entrepreneur, pause and check what you are giving away. Stop looking at your phone when you are with your partner, don't take that call when you are out on a dinner date, take an annual vacation together, stop multitasking while chatting with your mom, dad, brother, sister and the love of your life.

The chemistry of the co-founders makes or breaks a start-up. The clearest indication that something is not going well is when you can't say what is on your mind to your cofounder. If you ever find yourself in a position where you are unable to talk to your cofounder, you are in trouble. In that case, simply go and talk to them. There is no other way. When you can say it out loud, then, suddenly, the tension disappears from your mind. It is out in the open and you can work on it together.

'You can never make a decision for your entire life in just one instance in time. There is always a trade-off. The key is to be aware of what you have traded off. And no regrets. Let the body speak; hear your emotions.

It has taken me a lot of years to realize that as one builds the company, it is not the company which needs the most support-it is the individual(s) building the company. As you hire people, spend time in raising money, take time away from your family on weekends, and are left with no time to spend with your parents and kids, the person most affected by all this is you. You are the one processing information constantly and reacting to it.

Let me quote from Ben Horowitz's blog entry. He's one of the founders of Opsware, and of the venture firm Andreessen Horowitz.

You can create a place of trust. A place where the people who work there believe that the company will keep their interests in mind before taking any call. A place where they will be listened to. A place which is more than just an entity to create economic wealth.

Trust works both ways. Trust is what team members should have in their CEO, that s/he will put their interests before any personal interests. At the same time, there needs to exist the reciprocal trust that the company is hiring people who believe in putting its interests first. This seemingly paradoxical position is what creates trust. It feeds off the other, leading to a place where people can work with maximum emotional security. This is important in creating an organization with great culture. And this is why hiring and retaining the right folks is critical to building vibrant culture.

I read this somewhere and it has always resonated with me:

In his path-breaking book Free to Learn, Peter Gray writes that the best work is play, and that play is always conducted in an alert, active but non-stressed frame of mind. It is easy to build an office where everyone has to dress formally, talk slowly and just look at the computer screen in their cubicles for eight straight hours. But such an office can't really be the place where the best work of someone's life can be done. By including fun in the culture, we wanted to enjoy what we were doing. If folks enjoyed what they were doing, if they actively made friends in the office, they were more likely to stay on.

hiring makes culture weak. It leads to the 'strangers at a cocktail party' problem. This is described well in the book ReWork: Change the Way You Work Forever by the founders of Basecamp:

Start-ups don't need an HR person. Start-ups need a great recruiter. Someone who can:

I found this in a LinkedIn post by Brian Fink, an American technical recruiter, and I think this summarizes the matter well.

Moving fast for a start-up is essential and good.

Why Leaders Delay Firing They find it hard on their conscience: Many leaders personally feel responsible for the failure of the person in question.

Before letting someone go, a leader must ensure that there is genuine underperformance; don't go by just a gut feeling.

Mark Suster has this to say: 'I have never regretted firing anybody. Not once. I have on many occasions regretted not firing somebody quickly enough.' He adds, "Trust me:

Once a person has made up their mind to leave, it is difficult to change it back. They have made the effort to go out and find a job. They have spoken to their families and friends, explaining to them their reasons for changing their job. Now, even if what you are saying makes sense to them, to really accept it will mean acknowledging to themselves and to their friends and families that their original decision was incorrect. This kind of acceptance is hard. Therefore, it is possible that because of your authority and the need to maintain a good relationship in the future, the person might say yes, but they rarely stay long enough for it to be helpful to them, to you or to the company.

There is a saying, 'People leave their managers, not their companies.' I think this is true to a large extent, but not entirely. People leave for a lot of reasons. They want to pursue higher education, they want to move abroad or move to a government job; they get married, or their partner gets a job in another city and they move. The key thing we have realized over the years is that it is okay for people to leave.

So when a person comes up to you to say they want to leave, wish them all the best and see how you can help them in whatever path they have chosen for themselves. Because the bus has already left, and the time to do what you could have done is gone. You can now dust yourself off and do things to ensure that the rest of the folks want to stay.

In 1969, Peter and Raymond Hull wrote a book called The Peter Principle, in which they observed that people in a hierarchy tend to rise to their 'level of incompetence'.' In other words, a team member keeps getting promoted based on their success in previous roles until they reach a level at which they are no longer competent, as the skills required in one job do not necessarily match with the other. So now the team member is in a role in which they are not competent.

At CoCubes, we treated our team members as adults. We didn't go as far as Semco,³ where everyone decides their own salaries (within a range, of course) and the same is publicly displayed to the entire organization. But we told people that they could reveal their salaries to anyone they wanted to. There was no company policy on it.

As a lead, the key priority was to explain to team members 'why something is being done' as opposed to 'here is what you need to do'. This led to an 'owner' mindset within CoCubes which served the company well and built an organization where folks took ownership of their work.

People hate to be compared to each other. When we started, we used to do it often. There is generally a star person in each function, and it is easy to set them as a benchmark and compare everyone to them. This almost always backfires because:

In our entire twelve years of running CoCubes, we never singled out an individual for an award. There is a difference between an award and praise. Praise is never in comparison to someone else. But if you award someone with the title of Best Account Manager' or 'Employee of the Month', what you implicitly say is that everyone else has done a lesser job than this person, that their contributions are not worthy of an award. Over time, this leads to a workplace where:

In his article, Borowitz argues between two methodsAndreessen vs Zuckerberg. While Andreessen believed that a title is one of those things that is easy to give, and that one should give people the highest title possible to keep them happy socially, Zuckerberg deploys titles that are significantly lower than the industry standard. He wants titles to be meaningful and reflect who has influence within the organization. Keeping in mind the few hundreds of people CoCubes had, we chose the Andreessen method. It also fit in with our philosophy of letting people take their fate in to their own hands.

This helped us to make sure that everyone was aligned with the kind of culture we wanted to create within the company Our lead code looked like this:

At the end of the day, a team member working on something can think of their work in two ways:

We had named our company CoCubes, connecting colleges and companies.

You can change your idea and your company. But it is much more difficult to build in a market when it is not ready for your product. In such cases, even having a product market fit leads to mediocre outcomes-which is totally avoidable!

I once read a beautiful article on Africa. It talked about the countries in the African continent that did well after gaining political independence and those that didn't. What was eye-opening for me was the reason that was identified for the countries doing well. The countries in question hadn't asked their white population to leave after gaining independence.

The first kind of people who get attracted to a fancy office are risk-averse people. When someone joins your company not because they believe in what you are doing but because you have a nice office with a coffee machine, lounge chairs and a big pantry, they do not constitute better talent for you. This is because there is a possibility that in your journey the fancy office may go away, and when that happens, so will many of those folks who joined looking at the fancy office.

Start-ups are risky both for the entrepreneur and for the person joining them. While the ride is enjoyable and your learning curve will be high, anything can happen, and this should be made clear to the person upfront.

The money you have just raised is to help find solutions, and to find them fast. For that, you need a person who is comfortable with ambiguity, who is comfortable with things that are broken, who likes fixing stuff. Not a person who believes things are solved.

Well, here's the truth: start-up is real life. And if you have just bought jet fuel from a venture capitalist, they expect to see speed. So people who value comfort will join and either be comfortable, or, if pushed hard, will leave. Some will have the self-discipline to push themselves, but most will not. And for such people, if the interiors of an office are enough to convince them to join, a good hike in another company is also good enough for them to leave.