Indian Summer

Prashant Mehta
19th May 2016

Across boardrooms and TT tables, discussions still focus on valuations, fundraising and unicorns. Stop it. It’s time to focus on building real businesses and stop worrying about valuation.

No, I’m not talking about the American kind.  Get ready for a long summer with scorching temperatures and no relief from rains in sight.  Across the country, people are finding ways to deal with the critical situation by using creative means to manage the water crisis.  

It’s time investors and entrepreneurs alike took stock of the situation and start to address the critical situation facing many companies.  Across many boardrooms and TT tables, discussions still focus on valuations, fund raising and unicorns.  Stop it.  

Time to wake up and realize, we’re dead in the center of the ‘Indian Summer’.   Which means, it’s time to focus on building real businesses and stop worrying about what’s the valuation of my company.  The two biggest factors, assuming you have a strong vision, that can lead to building a great business is to have a high performance team and laser like focus on areas that matter.  

Let’s start with focus.  In countless discussions, we see startups trying to do too much.  The temptation is understandable – “that company is now worth $1b or they raised $100m @ $500m valuation”.  It’s easy to look over your backyard into your peer’s to add more products, regions, channels to your plate.  This is exactly antithesis to what you should be doing in today’s environment.  

How many of you are spending engineering and product resources on areas that contribute less than 10-15% to your margins?  Yes, margins and not GMV!  

No matter what you think, each of these areas consume real management bandwidth, technology resources, marketing dollars and much more.  In fact, the amount of total resource allocation to a 10% business is usually much more than the actual impact of the business.  I strongly recommend you stop and analyze the true potential of the particular area and answer the following questions:

-     Did you get into this business because your competitor has raised significant capital on the back of this idea?

-     Have things changed since you got into the particular area?

-     Is your motivation to show short term growth of revenues/GMV?

-     Will this help you raise funding at a higher valuation?

-     Your core customers haven’t utilized the product or service and are not benefiting?  

If the answer to ANY of the above questions is Yes, stop immediately.  It’s a trap.  And the consequences in the months and quarters to come are far more damaging than the short term gain you have predicted.  

Finally, once you start to invest in one of these areas, it’s almost impossible to stop the activity as your emotional quotient takes over.  What will my team think if we stop?  Is this a sign of failure?  What will my investors think?  How will media report this?  Frankly, it doesn’t matter.  The consequences of NOT stopping is far far greater.  Of course, if the answers to the earlier questions were NO, then you should keep investing in these areas.  

If not, next and the more difficult decision, is to look inward to determine if every member of the team is performing.  Any company with 100+ employees has at least 10-15% of their staff that is non-productive.  This could actually be as high as 20-25% in certain cases.  Most of this is caused by investing in non-core activities.  

When you have 10+% of your staff that’s not as productive, it starts to pull down the productivity of your top performing team members.  Which leads your top talent to question their worth and value to the team.  In turn, they are the first to leave.  So you end up with the most undesirable of situations – your top talents starts to leave and your bottom performers stay on as they have fewer options!  

It’s India Summer and time to make some hard calls.  What does it take:

-      First, look hard into your core areas of business and as a management team agree that you will stop doing 15% of what you are doing today.

-      That can be a new product, a new region and/or a new sales channel and stop it.

-      Stopping something is really liberating.

-      It helps provide clarity.

-      It will help you focus more energy into areas that matter.

-      It will help save costs by not spending on resources for the 15% area - marketing, tech, product, people...

-      This is not easy. Because everyone is hoping that today's 15% will become tomorrow's leader.  

Next, set tangible goals and metrics for your team

-     Review team performance across the company every six months.  Most companies don’t even do full year reviews because they don’t have time to focus on what’s important.

-     For those who are not performing, provide specific feedback and capture these in writing.

-     If you don’t see material improvements, give them a specified time line to improve (three months, but not more than six months)

-     Clearly communicate what would happen if improvements are not met.

-     When it’s time to let go of team members, carry these out with humility and compassion.  After all, they have been with you through ups and downs.

-     Have individual conversations.  Commit to helping them get other jobs.

-     But be strong and execute with speed and precision. In fact, plan deeper cuts than necessary.  Don’t get trapped into the death by thousand cuts.

-      It will help those people who are still with you get greater responsibility.  

Investors also need to support these decisions and not focus on increasing the mark to market on their investment.  These are some of the most difficult decisions you will make.  But it’s in the best interest of the company’s future!  

I learnt this the hard way…