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The Startup CEO
A CEO needs to have much more than a founder’s vision to build a sustainable organisation
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A CEO definitely faces a lot of challenges. The role of a start-up founder CEO, however, might have a lot of unique dimensions to it. The founder CEO brings the idea of a product or service as a business entity. He/she sets up everything from scratch—creating the business offering, starting the sales engine, hiring the first set of employees, creating a physical workplace if required, and then planning for the scale-up. This is a very critical phase for the CEO and the organization. It is important that the founder hires the right kind of people with key skills. The product/business offering should be conceptualized and best aligned with the customer needs.
Most founder CEOs need exceptional skills to market and sell the product. Vedantu is an interesting example of how a vision propelled the founders to create a strong offering in the market. Vamsi Krishna, founder CEO of Vedantu said in an interview, ‘Vedantu is a venture in the edtech space that facilitates live, one-to-one online learning through a platform, connecting teachers and students from all parts of the country. The venture successfully filled the gap in the sector, by bringing personalization and democratization to education.’ Vamsi and his team wanted to create something meaningful in the field of education and they have accomplished that. The goal of the founders is to make Vedantu the Airbnb of education.
Another interesting example in the edtech space is Byju Raveendran—the founder of Byju’s classes. His love for teaching led to the creation of an innovative and scalable model in this space. With a mantra of ‘life-long love for learning’ and use of technology, Byju’s has become the largest edtech company in the country with some of the best-known venture capitalists backing the firm.
While we use the word CEO and founder synonymously in a start-up environment, it is important to understand that the skills required of a founder and those of a CEO are vastly different, especially when the company starts growing. Bhavik Kumar, co-founder of Medibox Technologies, defines a good CEO as ‘someone who is able to manage a given situation to the best of his abilities’. He believes that a CEO is more of a delegator while a founder executes and shows how the work is done. A founder has the luxury to go more or less by his gut feeling but the CEO always has to take rational decisions as he/she has to explain his decisions to the board. When you are a founder, you drive yourself but a CEO might be driven by the board.
While the key characteristic of a founder might be to have a vision for business and a strong passion to make it happen, a CEO needs to have much more than that to build a sustainable organization. It is important to recognize the importance of the transition from a founder to a CEO and how a founder must be ready to take that journey. A few of these characteristics are: system and process orientation, ability to manage people, range of functional skills and broader understanding of business, and even having a managing style that aligns the whole organization for a common purpose. A founder can become a successful CEO if he/she can understand these skills and apply them well in the organization.
Nithin Kamath is the founder CEO of Zerodha, an online discount brokerage firm. Nithin won the Economic Times’ Bootstrap Champ award in 2016. Zerodha is an interesting example of how a founder’s passion was converted into a business proposition. Nithin started stock trading at the age of seventeen. Zerodha started operating on 15 August 2010 with the aim of providing a cost-effective, hurdle-free and technology-enabled experience to the trading community. Nithin shared how as a CEO you should constantly innovate to stay ahead of the curve and grow the business. It is also important to rework the strategy to enable growth. For example, initially at Zerodha, the competitive advantage was cost. However, Nithin quickly realized that to sustain the competitive advantage, it was important to build a cutting-edge technology platform and also create a more informed customer base. This was how Zerodha conceptualized Zerodha Varsity, an online education platform to understand trading.
In a discussion with students at IIMB, Nithin mentioned that these innovative steps helped Zerodha sustain its growth. As the organization grew, his biggest challenge was to sustain a culture of freedom and innovation for the employees. Nithin’s story is a good example of how hard work and focus help to build a successful organization. Prior to setting up Zerodha, Nithin worked in a business process outsourcing (BPO) and as a sub-broker at a large brokerage firm. He stated that for almost three years he was working in the night at a call centre and trading during the day. It is interesting to note that Nithin built his company around what he knew best, and that can be an important factor for success.
A study undertaken in the US, published by the Entrepreneur in 2017, states that one-third of successful entrepreneurs built businesses in their area of work, one-third in a related industry, and the other one-third had a good understanding of the industry and the customer needs. Similarly, Vamsi Krishna’s advice to future entrepreneurs is to ‘experiment instead of searching for certainty’. He believes that at the first stage, nobody can be 100 per cent right. So, the best way to avoid failure in order to build a strong and successful start-up is to try to practise and learn about the service or product that one wants to deliver to one’s customers.
As more and more people take to entrepreneurship and start-ups, there is a lot of discussion around what makes successful start-up CEOs. Some of the key aspects are:
• The ability to create purpose/vision
• Execution of the vision
• Attracting key talent and letting go of nonperformers
• Willingness to take risks
• Influencing ability
• Taking decisions
• Clarity in communication
To illustrate and contextualize some of these aspects, Dr Mohan M.R., founder CEO of Nano Hospitals says, ‘The biggest challenge was forming a like-minded team and making each staff member a stakeholder in our vision, mission and values. Further, winning people’s trust was the biggest challenge. Bridging the perception gap between doctors and patients was also a problem.
The other problem which we faced was the lack of trained staff, and to make them understand and train them in compliance with our protocols.’ As Dr Mohan mentioned, the skill of the founder CEO in building a team and aligning it with the purpose of the organization can help manage the key challenges in a start-up...
In an interview, Neeraj Kakkar, the CEO of Hector Beverages (owns Paper Boat), shared his advice for founder CEOs: ‘There are two things which are important in early stages of anything, you require a lot of focus—you cannot be distracted. Then there is also an escalation of commitments. You cannot waste resources over something that is not going to work. Finding the right balance is the key.’
Paper Boat’s story provides a brilliant example of product innovation, marketing, bringing together passionate people, creating a unique organizational culture and understanding the role that a founder CEO plays in sustaining the organization’s growth.
The common factors that contribute to the success of start-up founder CEOs are: they have an idea which they are passionate about, a vision built on the idea, the ability to influence stakeholders like investors, a team that will be a part of the vision and strong execution capability. Fortune-113' class='description_topic_highlight'>Fortune India’s ‘forty under forty’ lists CEOs and founder CEOs who have been successful in their careers. It is interesting to note that entrepreneur CEOs who made it to the list in 2016 built their businesses across a spectrum of industries, finding a niche in terms of offering or execution. The list included the India head of Xiaomi, Manu Jain, who was instrumental in scaling up operations and sales; Bhavish Aggarwal, co-founder and CEO of Ola, who built a strong taxi aggregator service in India; Amit Jain, the president of Uber India; Vijay Shekhar Sharma, founder and CEO of Paytm, a wellknown payment and commerce company; and Richa Kar, founder CEO of Zivame — an online lingerie portal. The success of these CEOs, who have scaled up their start-ups, indicates that age and experience are not deciding factors.
Anvar T.K. who is one of the co-founders of Aufait, a comprehensive web-portal management services IT firm, shares his experience of leading start-ups. At Aufait, co-founders took turns to play the role of CEO over a period of ten years. Each founder had a period of two–three years to work on a plan and grow the business.
Anvar, due to his interest in the IT product space, moved out of the operations role of the company and is the co-founder of another start-up called XAdapter. According to Anvar, the most interesting part of being a founder CEO is the opportunity to make your vision a reality. The difficult part is managing the administrative part of running a company, which can drain many entrepreneurs. These are aspects related to compliance, administrative tasks and even managing the accounts of the firm. The best advice that worked for him was to ‘hire team members who are better than you’. He said that while many start-ups look at the cost while hiring team members, his experience was that the right talent, even though more expensive, would deliver much more in terms of value.
As businesses grow, the founder CEOs have a more complex role to play. For example, if the business gets funding, investors may play an important role at the board level. The investors, especially venture capitalists (VCs), may play an active role in advising the founder CEO/board on how to manage growth. The VCs may even suggest getting a professional CEO or leadership team on board to execute the plan. An interesting example of how the relationship between the founder CEO and VCs can go into a downward spiral is the case of Housing.com, an online real estate portal. The relationship between Rahul Yadav, founder and CEO, and the VC, Sequoia Capital, turned sour and also led to many controversial public spats. Rahul accused Shailendra Singh, managing director of Sequoia Capital India Advisors, of poaching employees from Housing.com. The controversial email, written in a harsh tone, went public and created negative publicity. Similarly, Rahul was openly critical of Housing.com’s board. The communication between them, that was made public, showed the lack of a positive working relationship. Rahul Yadav had to step down as the CEO of Housing.com as the board asked him to quit as an employee. Some failures are attributed to the business ideas themselves, and some to the CEOs’ inability to manage the scale-up. They became unfit to lead the firm as CEOs.