Challenges of Being a Start-Up CEO!

This is an excerpt from the book ‘A Making Of A CEO’ by Sandeep K. Krishnan. Sandeep Krishnan is director of People Business and an adjunct professor at IIM Bangalore. This book is a result of interviews and analysis of top-level CEOs across various sectors. This excerpt has been taken from the chapter, ‘Start-Up CEOs’. It describes the mindsets of CEO and what it requires to establish a successful business while building an awesome team.

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.

When in Business, do it like Sindhis!

 

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.

Aspects of being a startup CEO UpGrad Blog

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.

How to Get Your Start-Up Idea Validated

 

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 percent 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.

Do You Have All the Skills Required to Start a Business?

 

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 non-performers
  • 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.

What skills do venture capitalists look for in early stage entrepreneurs?

 

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.’

This book, The Making of a CEO by Sandeep K. Krishnan is a must-read for anyone who aspires to be in the top job or is already there.

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