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Startups don’t starve. They drown. A Lean Startup Perspective on Scaling Teams for IPO

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I am reporting at Lean Startup Week in San Francisco. In this session on scaling, JP Mangalindan (Yahoo Finance) posed Jeff Jordon (Andreessen Horowitz and Eric Ries (Lean Startup Co, LTSE) questions to cull from their extensive experience key takeaways for scaling fast and effectively.

Is it true that there should always be more than just one founder?

There is no hard and fast rule, however, the general norm has been that 2-5 founders range has and can be been successful and any more, less so.

However, the need for one founder to be in charge is clear and so many have supported the unequal equity split, to make the final call clear. So 51% trumps 49% when push comes to shove.

As for the founding team, complementary strengths are always crucial. However here, a fine balance between enough diversity of thought and not too much diversity so much so it causes too much conflict.

A pattern in multi-founders companies is that one founder usually separates early from the company. So founder vesting where each founder gets his or her full package of stocks at once to avoid getting taxed for capital gains; but, the company has the right to purchase a percentage of the founder’s equity in case he or she walks away.

What in your experience are the traits of successful entrepreneurs?

Jeff jumped in first with “The ones with unyielding courageous persistence and power through. They are story-tellers or great salespeople. They have a vision and a clear North Star.”

Eric added quickly, “Remember the attributes that bring you to being a strong entrepreneur also makes it the same person unable to be successful. A great trait is that the entrepreneur is known to ignore certain facts. Which is fantastic as a perseverance exercise but not great in the long term management of a team.
They are also charismatic and that too can be a double edged sword. So the
same person has to do be a balance of both extremes. A rare skill.

The successful entrepreneurs who know how to look for employees who are also founders has the greatest success. Always set a high bar for talent at the start.

Remember the true story is that the early employees work harder and for less rewards than the founders. In fact that is how the mafia of the startups continues as each early team members of unicorns go on to build their own empires.

Meritocracy means good ideas come from anywhere and good ideas come from anywhere an in organization.

Find the empolyees who are more missionary than mercenary. They believe in what company is doing not just in it for the money. Remind all new members joining a startup is statistically proven not the way to get rich.

What are the classic hiring mistakes you have seen?

Too much hiring for domain expertise vs startup skill and the new employees come from a big company and they are not domain smart – they are more strategic. They have people who work for them and are verses in organizational politics

Also watch for great people entering the startup the at wrong stage. Too many hire a
CFO before they need one.

Hire my friends can be a very common and costly mistake.

What else kills rapid growth?
Startups don’t starve. They drown. When the startup is tackling everything and
they can’t pick what they are good at. Then they are lost.
To do Lean Startup is to focus. All research points to the fact that people not good at multi tasking. Technology may move fast and we humans are not good at learning so fast. Know which problem you are trying to address
Not only are many startups not focused, they are not focused on right thing

Look at the desert stories of Pinterest and Airbnb.
Jeff was reminded of how he knew he was scaling when he literally had a line outside his door till 6pm and he would have to answer all those questions which ranged from anything to everything. When you can’t make the decisions then you become a coach to the team rather than the decision maker. When you grow bigger then you are the GM and coach people who manage the teams. Basically your role is to build, motivate and leverage.

Eric posed a question that should be on every rapid entrepreneurs’ mind.
“How do you manage the psychology that you are an entrepreneur and now you have entrepreneurs working for you?”

These standards of being an entrepreneur many have to do and learn. So many startup leaders graduate successfully from the Y Combinator and forget that
have you created a Y Combinator for your employees? Your mindset moves from entrepreneur to now the investor and you have to recreate internationally in each team member what you took for granted.

Jeff looked back in self reflection and admitted that he grew ebay without much culture and in their 5th year looked back and went “Eeeek! I should have put in culture.” Citing Alfred Lin from Y Combinator the power of culture can fix all problems, so spend a lot of time on culture. Eric chimed in that the shared consciousness is a mindset as well as key metrics CEO should pay attention as scale. This consistent set of metrics act like a North Star.

Callum Connects

Rishabh Singhvi & Varun Saraf, Co-Founders of Why Q

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Surprised by the lack of delivery services available for local Singaporean hawker stall foods, Rishabh and Varun started their own delivery service.

What’s your story?
Varun and I moved to Singapore in 2008 and soon turned into foodies. After completing our studies at SMU, we worked in corporate offices in the Singapore CBD for 4 years. Here, we faced the problem of long queues and found it hard to find feasible delivery options on a day to day basis. We made it our goal to help others like us, so they don’t face the same problem of finding affordable yet tasty options to eat their daily meal. The name asks all those queuing up at food courts and hawker centres a simple question – Why Queue … when we can bring Singapore’s favorite hawker food to you?

What excites you most about your industry?
The Hawker culture is the most exciting and intriguing part of the food industry in Singapore. It is deep-rooted in the local Singapore culture. There is rich variety of cuisines available under one roof, food is delicious and very affordable. We were very surprised how this part of the food industry was completely ignored by other food deliveries.

What’s your connection to Asia?
I was born and brought up in India and have been staying in Singapore for the past 10 years.

Favourite city in Asia for business and why?
The ease of running a start-up and the professionalism makes Singapore my favourite city for business. It has the most business-friendly regulations, low start-up costs and takes only a week to register and get your business going.

What’s the best piece of advice you ever received?
“If you do build a great experience, customers tell each other about that. Word of mouth is very powerful.” – Jeff Bezos

Who inspires you?
Hawker Uncle and Aunties are our Hawker Heroes. Most of the stalls are family-run businesses. The dedication and hard-work that they put in is commendable. They come to the hawker centre at 3am to start preparing food for the day and leave only in the evening after cleaning and washing everything.

What have you just learnt recently that blew you away?
We are leaning so much about our hawker partners through our #HawkersOfSG series, inspired by #HumansOfNewYork. For example, one of our hawker partners was into advertising (until the 2008 recession started, after which he started one of the most popular hawker stalls in the country) while the other used to sell and ride Harley Davidson bikes (and now sells black pepper rice bowls). Their stories and how they turned into our Hawker Heroes continues to inspire us and blow us away.

If you had your time again, what would you do differently?
I think I haven’t reached that stage in life yet where I look back and want to do things differently.

How do you unwind?
Watching and playing football 🙂

Favourite Asian destination for relaxation? Why?
Bali, definitely. One of the most beautiful and chill places.

Everyone in business should read this book:
Zero to One by Peter Thiel

Shameless plug for your business:
Cheapest and largest Hawker Food delivery in Singapore.

How can people connect with you?
On whatsapp at 90268776 or email at [email protected]

Twitter handle?
We’re on Instagram – https://www.instagram.com/whyqsg/ and Facebook – https://www.facebook.com/whyqsg/

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started,
built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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Entrepreneurship

Science is the Next Big Thing in Startups

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From pharmaceuticals to petrochemical processes: Newcomer companies and investors and investors alike are setting their sights on science. How the start-up scene moves beyond the mobile apps bubble…

For the last two years Silicon Valley analysts and venture capitalists are anticipating the burst of yet another bubble. This time, under the risk are the mobile start-ups which constitute the biggest share of the market. Out of 50 companies listed in Forbes’ “the hottest startup of 2015” (by valuation) only six companies are based on innovations in other-than-mobile area, one company provide cleaning services, while the rest are diverse mobile apps.

Meanwhile many products listed can be barely called innovative. A significant proportion of the listed start-ups are texting apps, apps for people search (starting from business partners to life partners) or delivery services. While those services can definitely facilitate one’s life, in general they differ from their predecessors by only a narrower audience.

Many venture investors expect stagnation if not decrease on the markets, which is why they start to transfer their capitals from start-ups offering customers software to start-ups offering specific solutions for existing businesses. Such companies are expected to demonstrate more stability in the near future.

The Market for Mobile Apps Might be Saturated

Back in 2012 a talented entrepreneur could walk into a venture capitalist’s office, say his startup was a mobile-first solution for pretty much any problem (payments! photos! blogging!), and walk out with a good-size seed investment. “That pitch was enough to get going,” says Roelof Botha, a partner with VC firm Sequoia Capital. “It’s not enough anymore.”

“I think investors are bored with investing in another messaging app. And our idea is crazy enough that it might just work. ”, has declared in 2014 Nadir Bagaveyev a founder of a start-up using 3-D printers to make rocket engines. By 2016 the company attracted investors funding sufficient to launch its first rocket.

Pharma and Biotech Start-Ups in High Demand

Currently the most successful science-based start-ups are the companies offering innovative solutions in the field of pharmaceuticals and biotechnologies. It’s noteworthy that despite the previous revelations and even judicial proceedings the list of the most expensive start-ups still includes Theranos, blood analyzing laboratory, whose story did not descend from the main pages of the global leading media from 2014.

It first amazed the audience with its fantastic take-off and then with its collapse. One of the crucial parts of the success story of this start-up is its fundamental difference from the majority of the services produced in the Silicon Valley. Unlike the others, it was not a story of yet another beautiful gadget for communication or mobile app, but the story of the scientific idea which intended to conquer the world.

The great success stories in other scientific areas are now happening on occasional basis. However certain facts allow to predict that the situation is to change soon. One of such factors is growing interest among the big corporations to attract innovative solutions from outside to develop their businesses.

Given the accelerating pace of scientific and technological development of the world, the activities of internal R & D departments are often turn to be insufficient to ensure stable development of innovative business. Outsourcing of the R&D may become the efficient mechanism to stimulate the growth of the company. And high-tech start-up can certainly benefit from it.

Start-Up Technology for the Petro-Business

In December, 2016 world leading companies in the field of gas processing, petrochemicals and chemicals announced their intentions to enforce their R&D capacities by attracting start-ups. 3M, AkzoNobel, BASF, The Dow Chemical Company, DuPont, Henkel, Honeywell UOP, LG Chem, Linde, Sibur, Solvay and Technip together created a global stage for startups and investors.

“The petrochemicals industry can and must rely on the potential of open innovations to facilitate further inventions and implementation of new solutions in all major application areas, from construction and medicine to packaging and 3D printing. Thanks to the participation of international partners, IQ-CHem is now the largest global project within the industry which attracts innovative solutions and provides for their implementation into practice,” said Vasily Nomokonov, Executive Director of Sibur, a company which coordinates the project.

Positive Experience in Chemicals and Beyond

Some of the listed companies have already gained positive experience in working with start-ups which may have driven them to elaborate a systemic approach to attract innovative companies.

At the beginning of 2016, SIBUR and RRT Global start-up reached an agreement to build a pilot plant for isomerization based on RRT Global technologies in Sibur’s Industrial Park SIBUR “Tolyattisintez”. According to Oleg Giyazov, co-founder and CEO of RRT Global cooperation with a large corporation bring significant advantages to his company.

“By cooperation with Sibur we get a huge industrial experience that enables us to develop technologies and solutions better fitted to the market demand. This advantage is often not given due attention, but we, on the contrary, see significant opportunities in it. Currently, RRT Global cooperates with several companies around the world” he said.

Another petrochemical leader BASF enjoys successful cooperation with Genomatica start-up. In 2013 BASF started the production of 1,4-butanediol based on renewable feedstock (renewable BDO) using Genomatica’s patented process and in 2015 the license was expanded to the Asian market.

Unlike traditional forms of cooperation between a start-up and a venture capitalist, a cooperation between start-up and a relevant corporation allows to minimize the risks associated with investing in a potentially promising idea where the key word is “potential” (but not “guaranteed”). While delivering services in the same field as the start-up the corporation gets an opportunity to more effectively and accurately estimate the market value of an innovative idea and to support its implementation.

Structural Changes Ahead: Outlines of A Coming Market

In the short term prospective, possibly in 2017, the global start-up market will face structural changes – both in terms of start-ups professional orientation and of funding mechanism. In the future science-based start-ups will dominate the market and will change our lives at a deeper level than the way of sending a text message or searching the restaurant for an evening meal. To be more concise this is already happening in the pharmaceutical industry, and the other scientific areas are to follow.

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About the Author

This article was written by Dominik Stephan of Process Worldwide. See more.

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