Startup dilemma: build to sell or build to scale !

The term unicorn has been bandied around a lot more in recent times than fairy tales of past; in some circles, unicorn spotting is a very profitable sport especially early on. The number of unicorns had grown rapidly a few years back but appears to be slowing down. Most of the earlier unicorns have scaled higher after they achieved the status ($1 billion valuation or market capitalization), the younger ones are happy to be acquired. Meeting young and not so young founders some interesting trends are emerging.

The startup ecosystem has been conducive for many budding entrepreneurs with path breaking as well me too ideas tweaked to local markets or different segment of the market; many of them reached a critical mass to sustain a set of customers and grow organically. The founders were focused on building real business offering products or services to their defined customers. They build sustainable costs and drove business with passion; as a result they also created new proposition and market where none existed.

Their growth was not exponential and neither was their market valuation; demonstrating patience they learnt from their mistakes, changed course when customers demanded a change, collected a team of passionate believers and sought money only when they wanted it for a specific purpose. Their perseverance paid off with founders, investors, employees and customers benefiting from the glory that was due to them. These unicorns get discussed in every conference on disrupting the market and innovation.

For every outlier that made it, there are thousands if not more who fell of the wayside, cast into oblivion, never to be heard of again; not that their ideas were not good or the founders not passionate enough, they somehow failed to execute and change course when required. In a few exceptional cases, the founders bounced back wiser from their learning of falling, nobody is tracking the rest. But that is not of significant interest except to historians, the focus at this time is on the ethics of startups seeking valuation to sell.

Recently in news one of the potential unicorns was accused of fudging data and questionable business practices and ethics. The whistleblowers were ex-employees whose conscience woke up when it did, probably when they discovered these or maybe because they did not get part of the spoils. Irrespective of the instigation for them to come out, the more interesting fact is the shock it created for the industry and the business; auditors descended with vengeance to scrutinize data, transactions and reports.

They had scaled well and zoomed past some of the earlier players with initial rigor that gave them a financial cushion courtesy of investors and venture capital. Their success was talked about with release of growing numbers that showed path to profitability and the fact that the scale made them larger than competitors. They were portrayed to become the first unicorn in their defined segment; within a year with increasing valuations they managed to hit the magic number and were formally classified as a unicorn.

Greed is a very big motivator; the founders and investors believed that they were onto something big and that it will surpass all expectations. Founding team tweaked numbers to show continuous exponential growth even when the market was not growing; investors believed the story. All the due diligence and rush to invest in the company was built on the first big round of funding and the credibility of the investor; future investors did look at the numbers and aberrations were explained by the founders to their satisfaction.

The reality hit the investors when allegations surfaced on everything not being as it appears to be fulfilling the idiom: if something is too good to be true, it probably isn’t. Auditors painstakingly poured over the records separating the truth and fiction; incriminating evidence pinned down some of the senior staff who worked at the behest of the founders. With operations curtailed and staff motivation down, the valuation went Deep South and customers came out with their own version of horror stories.

In hindsight it is evident that though the company was built on a real business opportunity, the love affair with valuations resulted in a change of strategy to build for valuation so that the business can be palmed off at the height of the hype. Greed again played a role in the exposure when some of the perpetrators discovered that they were not going to benefit to the extent they believed. And all fell down as the nursery rhyme goes, the investors turned their attention to check their other invested companies for similar ailments.

Those who got away thank their stars, the rest ? I wish them luck !

On Vacation, does the Company miss the Employee more or Employee miss the company ?

It was a long overdue vacation after having put in almost three years of relentless effort towards the digital transformation of the company, the fruits were visible. It was a much deserved vacation, as his manager told him packing him off for a couple of weeks. He was anxious as he planned his sojourn, worried a bit, what if things fell apart or an exception brought down the system or impacted the business. He feebly voiced his concerns to his team, who reassured him of full support during his leave of absence.

His family was delighted and off they went to their long pending and promised vacation; on his part he packed his work gear hoping to stay in touch with the team and his customers, ready to intervene should anything require his attention. Days passed by uneventfully as he frequently checked his email and messages – they revealed nothing untoward. Unable to control his anxiety, he called his trusted lieutenant; he was surprised to hear that there indeed had been some issues, which the team resolved but did not disturb him.

In another part of the world a slightly different situation played itself out; the CXO was going off for his scheduled bi-annual vacation, something he never missed. Every six months he took off with family, at times to locations that had no modern amenities like internet access or cellphone network. His coordinates were always known and in case of an emergency, he could be contacted; the occasion never occurred as nothing was seen as so critical that required his intervention or could not wait until his return.

Credit to him, he had built an able and professional team that did not require their leader to keep the company running. Without exception they were empowered to take decisions which they did and sought validation at a later date upon his return. Until this time, when his Assistant frantically contacted him breaking the golden rule only to be greeted by a crisp response on why she bothered to disturb his R&R (Rest & Recreation/Rest & Relaxation, a military term now used by the corporate world for senior executive leaves).

In both cases the company continued to function with insignificant disruption by events that unfolded during the respective absences. It would be false to say that they were not missed, but the organizations had the resilience to continue to operate. The differences quite stark between the two corporate high achievers, the first could not disconnect from his work and the second could create a clean break. As a matter of record, they were both equally loved and respected by their team, peers, bosses and their customers.

Was the first leader insecure or did not trust the team to manage the operations effectively ? Did he feel the lack of control during his absence cut out from the day to day hullabaloo and fighting crisis like situations ? Had he got addicted to the adrenaline rush and importance was making his life miserable ? It was a matter of prioritization between work and life; he had lived through his career focused only on getting results in his professional life, which he did get with movement up the corporate ladder quicker than others.

The latter case was about confidence, conviction, delegation, and a firm belief that that the best course is to work hard with clearly demarcated lines between work and family. His rise through the ranks was equally fast and the future looked bright with more to come; he had consciously worked to balance his corporate commitments with the time spent with his family. He was unwilling to compromise this while proving the cynics wrong that such an attitude will adversely impact career growth and opportunities.

Enterprises demonstrate and have resilience far higher than individuals believe in their belief of self-importance to their role, responsibility and impact to the company. People come and go, planned and abruptly, at times fired, and in all cases they do leave a gap; the company self-heals and moves on irrespective of hierarchy, location, position of power, there are others who fill in. With time some leave their mark – to be remembered for the legacy they leave behind – positive or negative, the others fade into oblivion.

It is up to every individual to decide how we react to incidences, what we portray ourselves as, dependencies we build at workplace, work in a team and manage one in our professional lives. We also determine how we present ourselves to our families, friends and society; our identity unfolds in many ways though we are largely known by our professional identities. The work-life balance is no longer an enigma, it is a moving target which keeps shifting; there is no right or wrong or benchmark to follow, it’s a mirage !