Vacancy: Humble, Ruthlessly-Focused and Less Flashy Founders Required

India needs more founders and start-ups. It’s the one part of the economy that can create much-needed jobs. A founder’s journey is never easy, but it’s easy to either put them on a pedestal or rubbish them with one brush. I aim to do neither but seek to provide a balance which I think is missing in most media narratives.

India’s founders historically belonged to the wealthy and well-connected families. They had access to capital and government licences and had the luxury of time to establish their businesses.

So, most families across the country entered into many businesses, mostly unrelated. Many business families fell by the wayside as the economy opened up and their brands offered shoddy value to consumers, and they didn’t invest in capability for the future.

Today’s world is dramatically different. Capital is available at a price; technology is available off the shelf and focusing on core activity and outsourcing the rest is feasible for any new company.

Why do start-up founders inspire me? They have taken the path less travelled and that is huge. This is a visible, personal risk.

The Killer Instinct

Most people accept the current world order. Founders challenge it. They have the can do, will do spirit. They take on giants in the industry; they are willing to stake their reputation to build a business.

We have argued that Indians lack the killer instinct. That is not true when it comes to founders as they are willing to take the difficult road for years to see their ideas fructify.

Founders inspire me because they are dreamers and challengers. They dream of rearranging the market by challenging it. They create jobs and are role models for many. They have set off a chain of start-up dreams across the country and attack legacy brands with a leaner cost structure.

They are young and irreverent. But they push the envelope and learn. The question is: do they learn from their own mistakes? Do they course-correct and take calculated risks? How they build resilience and maturity will define them and build their legacy.

These founders rethink the traditional business models of the industry. They are resetting the concept of innovation time and responsiveness.

Start-ups have launched more innovations in the fast-moving consumer-goods space than all the traditional legacy companies put together in the past decade. They are attacking some unmet needs in every market.

Founders are better users of technology to rethink every process and consumer value. They are passionate and articulate.

Lack of Focus

Why do they disappoint me? While they challenge a market, their understanding of the potential of the market is selective. I believe they think of business more like a banyan tree that grows 15 metres instead of a redwood tree that grows 60–100 metres.

The banyan-tree thinking leads them to drop a few branches into unrelated markets and spread themselves thin. The single-minded focus which made them an entrepreneur seems to desert them when they start growing. I would like them to think scale in one category.

They seem to be in a hurry. They go into adjacencies without focus. To be fair, they are a victim of the venture-capital culture of fast revenue growth without commensurate profit.

They end up with a string of pearls strategy—different businesses on a string or a string of pearls in the same category. Either way, it dissipates everything they do starting with their core.

Early success in one category leads them to believe that they can win across categories. The story outruns the substance. Conviction turns into arrogance/entitlement. They have not thought through their right to win in different categories.

Next, some of the successful start-up founders paint an unreal picture of the journey—easy, smooth, full of money, glamour, high-prized accessories. Start-up life is farthest from the image created on Instagram. They are in a hurry to be noticed and to offer capsules of advice on everything under the sun. They create a mirage of an image. They declare success too early. They glamourise hustle.

Suddenly everything shifts from the consumer and business to “me”. That is a bad role model for the many who follow them. Everyone starts believing that you can start with ₹50,000 and create ₹500cr. Followers start drinking this kool-aid.

Let’s put some context to the argument. India has the maximum number of listed companies. The average size of a listed company is between ₹250cr and ₹300cr. So, the first target for a start-up should be to reach this average revenue. A recent study by management-consultant firm Bain said that most of the 243 insurgent direct-to-consumer brands in India were at about ₹100cr.

Capital and Commitment

All businesses need capital, commitment and capabilities. It is rare for a founder to have capability across many sectors that they want to venture into. If we look at all the Indian conglomerates, very few of their businesses are in the top 3 in their industries, most lag.

To be among the top in a category, 10% market share is required. The profit pool is in the hands of the top 3 players generally.

Commitment is relentless focus. Start-ups attract capability when talent believes that the start-up is winning. The day a start-up flounders, talent deserts them in hordes. Employee stock options of an average company are not what attracts talent.

A founder must first set up a goal to be among the top 3 and that’s when scale will happen.

We always hear of the founders who succeeded, not the ones who took the same risks and failed quietly. For every successful start-up, we have a million unsuccessful ones. The shake up is relentless. The scent of victory is heady.

India needs more start-up founders. But more humble, more grounded, less flashy and ruthlessly focused. Start-ups are the creators of jobs. Start-up founders are loved most when they are underdogs.

The writer is operating partner at Advent International