Tag Archives: India entrepreneurship

Why do founders split? 1. Differing visions

Over the last 4 months, I have heard of or at least 8 companies closing down because of “founder issues”. Overall this number of companies that I have been tracking personally where the company closed was 14. So relatively speaking the number of companies that closed because the founders split is larger than “lack of funding”. The only other reason I have heard have been lack of traction. These are companies in the valley and India BTW.

Why do we have so many companies which close because of founder issues?

I tried calling and talking to many of the founders separately to understand what the issues were and its not clear that there are the same that plague most “marriages”.

Most married couples split because of financial issues, compatibility issues or “cheating”.

With most founders, I cannot point to the 3 main causes yet, since I have limited data, but I can share what happened in some of these cases, based on my understanding of their situation. Sometimes, my understanding was colored by my impression of one of the founders, but I tried to remain objective about the situation.

Differing vision of where to take the company. This was cited by most of the founders.

“We  used to talk about where we wanted to take the product. We had a general direction and were fairly aligned. Then it started with a few features that we had different opinions on. In a matter of weeks we would constantly fight about every feature. The constant fighting drove our team mad and we decided to split”.

“We started with targeting large enterprise customers, since my co-founder had a few relationships there. We found that many had a long time frame to get us on board as a vendor. Then we decided to change our target to mid-sized companies. That changed the vision of our product and some key features, which the developers could not deliver on. I still thought we could focus on larger customers, but my co-founder did not and we decided to split”.

Many times, the vision of the company is considered very sacred by the founders. Which is a good thing. Alignment of vision is hugely important. I can also see how the vision changes at times, since the initial assumptions made, usually change as you go to market and meet customers.

Some founders are flexible about that change and are willing to be patient about finding that vision, whereas others want to stick to a vision they originally came up with.

If you are a solo founder and are looking for a co founder, it is hard to determine flexibility of your co-founder since most people seem reasonable and fairly flexible during the first few months. I tried to formulate a list of questions to ask – largely scenario based, such as what would happen if this were to occur, or how would you react if this happened?

Most times when I asked those questions of people I got fairly good answers which I consider are reasonable.

These questions did not help very much though, since as we talked about before, vision’s change and so do people’s impressions.

When you ask the objective question in a non threatening situation, it is easy to be collected, objective and composed.

That’s rarely the case when product shipments are behind, payroll is delayed and a customer contract is taking longer than anticipated.

What takeaway do I have from this main reason for founder’s splitting?

If you have not worked together for a “significant period” of time, its very difficult to find out if your co-founder is flexible to change.

So what do I now do as a result of this learning?

I prioritize teams where founders have not worked together for a significant period of time, much lower. If you have a co-founder you have met at a hackathon event, or a startup event, and have been working on your company for 4-6 months, then I would likely pass on your company.

Its not because I dont like your idea or product, its because of demand and supply. Right now, I get many more companies where co-founders have worked together for much longer and have recency of shared vision.

In the next post I will talk about another reason why founders split – performance and execution.

The startup ecosystem in India is schizopherenic

Okay now that I have your attention with that ridiculous headline, let me define a few things first.

Schizophrenia is a complex mental disorder that makes it difficult to:

  • Tell the difference between real and unreal experiences
  • Think logically
  • Have normal emotional responses,
  • Behave normally in social situations

Lets try and list all the players in this ecosystem. I have provided this list sorted by the importance of the player to the ecosystem (obviously this is my opinion and hence biased).

1. Entrepreneurs – the heart and soul of the ecosystem

2. Talent for the entrepreneurs (meaning people to hire)

3. The early adopters (Both consumer and businesses)

4. Investors – Angels and Venture Capitalists

5. Incubators and Accelerators

6. Universities & research institutions

7.  Advisors, mentors, coaches

8. Startup communities, media and events organizations

9. Service providers – lawyers, accountants, etc.

10. Larger companies for partnerships, distribution and marketing

11. (Dare I say) Government – yes for things such as incorporation, taxes, etc.

12. Cheerleaders and poster girls (or pinup guys if you like).

13. Successful startups and successful / failed entrepreneurs

14. Associations, government liaisons and trade organizations

15. Interested public

Do I have an exhaustive list? Probably not, but this is a good enough start.

Every player has something unique they bring to the table and has a perspective on what’s good and bad about our Indian startup ecosystem.

Even if we mostly stick to the technology space, we say one thing and do the exact opposite.

No wonder most entrepreneurs get confused.

1. We want more innovative product companies but we end up funding mostly me-too eCommerce companies.

2. We want to build the next facebook and Google and yet most entrepreneurs have a “consulting / services” company on the side to make money.

3. We want to work on cutting-edge technologies, but end up picking yesterday’s tech stack since “there’s a lack of talent’.

4. We want to encourage the government to participate, but end up bad-mouthing them at every event (One panel member even suggested they were out to kill startups).

5. We want to have a clean incorporation, but still choose the cheapest service provider to incorporate the company (a lawyer even told me yesterday, he has to turn down 2 companies a week who want his services for free).

6. We want to be first to try a new piece of technology but are unwilling to pay to be an early adopter.

7. We want to encourage more entrepreneurs to participate in an incubator, but keep ridiculous anti-dilution clauses to maximize upside.

I could go on, but you get my point.

Is this an India thing alone? No, I have seen many of the same in Silicon Valley as well.

But at the center of the valley is an entrepreneur with an idea who wants to change something and everyone else is rooting for her.

In India I dont believe we quite know who’s at the center. We make rock stars of our VC’s, large company CEO’s and Government officials.

So if you are part of this ecosystem I would request you to please keep only one question in mind when you have to make choices:

” Will this help more entrepreneurs get excited about starting a company in India?”.

Then please do the right thing and don’t just say the right thing.