Book Summary 4: The High Performance Entrepreneur
This is the fourth book in the summary series, out of 26 startup books I planned to read this year.
Compared to the books I summarized earlier, this one has much less which is radically new. However since it describes the entire journey of an entrepreneur from the seed of a company to scaling it big, reading it is very rewarding as it’s more real than the relatively theoretical books I earlier summarized.
Here I’ve summarized the key points I liked from the book. I have left out or reduced other topics of the book – such as how to write a business plan, tips for startup employees, customer retention strategies, and brand building; because I felt there are better sources for this information in other books I’ll be reading.
All the wrong reasons to start a company:
- We are friends and have a great idea, so we will start a company.
(This is a good start but very insufficient reason to start a company!)
- We have a completely new idea that can transform our entire industry
(This turns out to be true very, very rarely. Most of the transformative business ideas started as something else and evolved by market interaction. There is usually very less chance that nobody else has thought of your idea. Usually either they have tried it, and it doesn’t work; or they haven’t found the rationale to try it. So be careful before you proclaim that your idea is unique and never been done before. )
- My career is going nowhere. I hate this company. I hate my boss. So I will start my own company.
(The push away from your job is not enough, without a pull of a good business idea, business sense, and the determination for executing the plan. )
- My time is running out! If not now, when?!
(You cannot start a company depending on how well the timing fits for YOUR career, timing matters only in the sense of whether the market is ready for your idea!)
- I do not want the money, I just want to serve the country.
(If you do not need money, you’re usually better off joining an NGO to serve others. Money is the fuel for a business and every entrepreneur must recognize its importance.)
So what is the right reason to start? Starting a company is a lot like deciding to have a baby. And most women would tell you there can never be a rational enough reason to get into the problems of bearing a baby. It is difficult, full of discomforts and sacrifices. Yet when the time comes, a woman would give up everything in the world to have her child.
It is the same with the decision to start a startup.
Is it right for you?
The foremost attribute of people who become entrepreneurs is self-confidence. The author even argues that there are no exceptions to this rule.
To determine your entrepreneurial streak, ask yourself if you tried out unusual things, and whether you enjoyed them.
- Did you take the important decisions in your life, or someone else took them for you?
- Did you enjoy the process, irrespective of the outcome?
- How well do you handle small adversities and who took decisions for you at that time?
- Did you ever feel helpless?
- Did you get out of the situation by taking your own decisions or did you allow the situation to determine the course?
- Can you make friends with a stranger?
- Do you know your physical and mental limitations? Do you think you can work to overcome them?
- Do you feel comfortable in talking about yourself?
- Do you feel comfortable asking others for help?
- Does the act of buying and selling excite you?
- Do you like meeting people?
- Do you see things to completion?
- Entrepreneurs value their sense of freedom, but they are also very disciplined.
- Entrepreneurs work hard and are extremely goal oriented
- Entrepreneurs are flexible and opportunistic
- Entrepreneurship is about egolessness- you have to give up certain comforts and do any task within your company
- Entrepreneurs love money
How do entrepreneurs spot opportunities?
They look at the big picture, they see where the world around them is going and within that framework they see connections between their innate capabilities, emergent needs and the challenge of building an organization. They are also passionate about the line of business they choose.
It helps to see the world around you, and to think of the way things might change in the next decade or two, and chances are that in thinking backwards from the future, your great idea will emerge.
What to look for to make an A-team?
- Proven competence, an ability to pull one’s own weight
- Complementary composition (they should be good at things you’re not good at )
- Multitasking capability (very important in an early startup)
- Shared vision (the glue of the startup)
- Personal integrity and mutual trust
- Ability to question each other, and take disagreements in the stride
- Resilience (because in a startup, things never exactly go as planned)
- Sense of humour (people who cannot laugh at their situations or themselves will find it hard to cope with the stress of being in an initial startup team)
DNA, Mission, Vision, Values
Every human being’s uniqueness lies in the DNA. It is how we pass on something of ourselves to our progeny. Likewise, every organization that is born and will continue in time must have its own DNA. It is why you exist. For example, the author says that his company Mindtree’s DNA is in imagination, action, and joy. The mission statement conveys the direction in which the organization must march. It is about what kind of organization you want to create. The vision statement flows from it. The vision statement consists of a set of intermediate goals that define success. While choosing these goals, it is useful to consider:
(1) a financial goal – revenue/ profitability etc
(2) an admiration goal – such as being the best employer in some category or some other recognition
(3) a goal towards social sensitivity- something which your organization would stand for.
From the vision flows the annual plans. Once these things are in place, the company’s leadership must decide values that will guide the day-to-day behaviour and decisions of the company, and make them in sync with the mission, vision, etc.
How are you different?
One of the most important questions to answer is, “how are you different?” The author talks about the ‘six horses of differentiation’:
(1) stand for something (eg. Porsche stands for great design)
(2) choose tools with care (battles are usually won by the side with the better weaponry, not the more patriotic or passionate side)
(3) develop your own methodology (eg. The way mcdonald’s serves you a burger or uber gets you a cab, or fedex a parcel)
(4) build quality in whatever you do (try to reach six sigma levels)
(5) innovate- ask yourself, what is different and new today? (use tools like the six thinking hats or systems thinking or design thinking)
(6) invest in the brand.
Choosing the right investor
It is critical that you make a careful decision on the source of funding the venture. It is very important that you choose investors who understand your business – stay away from ‘dumb capital’. Non-interference cannot be the reason why choose to raise money from someone. An investor putting his or her hard-earned money must hold you accountable and you better embrace that discipline. Once a quarter, a couple of days of concentrated interaction with your investor is essential to the health of your organization.
If you haven’t already figured out how to sell, do not expect your investor to do it for you (through their ‘contacts’). Sometimes, they could open a few doors. But even then, the act of convincing the customer is your task.
It can take 6 months to a year between an investor enticing interest in your proposition to the money actually reaching your bank account. There is a lot of paper work too. During this interim period, be on the lookout for alternatives. The deal is not done till the money is in your bank account.
It’s important not to show desperation. Above all else, you must sense the right chemistry with the people dealing from the end of the investor(s).
Dealing with people who have transparent sources of funds is a far better option than turning to questionable sources. Also be wary of raising funds from friends and family who love you but do not understand your business.
Lastly, try and get an investor who takes the long-term view. Do not get entangled with people who want a quick and easy way out.
Reasons startups fail
Learning from others’ failures is a big theme in Bagchi’s book. Here I’ve listed the various reasons he cites for startup failure. It would be wise for any startup (or future startup) to consider if they’re making mistakes in a similar pattern.
- They fail because there are differences among the founders. Irrespective of emotional closeness, expect differences as co-founders. Ensure role clarity and ownership pattern, and only become partners if everyone adds significant value by their presence (not because of closeness).
- They fail because they are underfunded. This also leads to conflicts, desperation, and ultimately failure. You should know how much money you will need to start the business, and when and from whom to raise it.
- They fail because they fall into the ‘deadly embrace’ syndrome- they get too excited about a single technology, or get locked into a single customer relationship. You must learn to de-risk tech overdependence, customer overdependence, and geography overdependence from the very beginning.
- They fail as founders do not let go. It is a big tussle between ownership and growth, and as a startup (compared to a small business like a shopkeeper), the founders soon have to learn to let go of control over everything if they wish to expand.
- They fail due to poor governance and lack of accountability.
- They fail because they try to be too big too soon and in that process, end up doing things which are not in their core competence.
- They fail because of a wrong choice of investors and the consequential mismatch in expectations.
- They fail because of health and family reasons of the entrepreneurs involved.