Tag Archives: startups

How the risk appetite of entrepreneurs affects their exits in Silicon Valley, India and Africa

I run this fun experiment each time at most events I speak at. I ran is again yesterday at the CII event yesterday in Bangalore. The experiment is to gauge the risk appetite among entrepreneurs. It is not scientific nor is it structured. It has though, given me a sense for the risk appetite among the entrepreneurial class.

I have run this experiment now over 30 times and have had fairly consistent results. If there are over 100 people in the audience, I ask folks three questions and request a show of hands.

Q1. If I gave you a 10% chance of making $2 Million from your startup, how many of you will take that outcome? I get a show of hands at this point.

Q2. If I gave you a 1% chance of making $20 Million from your startup, how many of you will take that outcome? Show of hands again.

Q3. If I gave you a 0.001% of making $1 Billion from your startup, how many of you will take that outcome? Final show of hands.

Over the last 3 months, I have spoken at 2 conferences in the US, 1 in Zurich, 1 in Africa, Singapore and over 5 in India.

The results give me a quick sense for the hypothetical risk appetite for entrepreneurs in that community.

In the US at both the conferences, the distribution was 30%, 10% and 60%. In Zurich it was 60%, 30% and 10%. Africa was very close to the US surprisingly, at 35%, 15% and 50%. It is almost as if Africans have nothing to lose and Americans don’t care for small outcomes, but both end up at the same place.

In all the conferences in India, it has been 70%, 25% and 5% (and that’s being generous in 2 conferences including yesterday, where 2 out of 150 people opted for the 3rd choice).

Rather than draw quick conclusions about the risk appetite, I thought I’d think about it more and understand why Indians are happy with smaller outcomes.

Given that the effort over several years to create a $10 Million outcome at your startup is the same as one that has a $1 Billion outcome, why dont we focus on the large opportunities?

  • Is it fear of failure?
  • Is it that we are “happy” and content with even the small things?
  • Is it that $2 million is such a large change in our lives that the $1 Billion does not seem worth it?
  • Is it that we really don’t aim big? Notice I did not say think big, I said aim big? Nuance, but a big difference
  • Is it lack of exposure to large markets?
  • Is it that we are not hungry enough?
  • Or is it something else?

I don’t quite have an answer. When I mentioned that I dont have an answer to the moderator Mohan Reddy yesterday, he expressed dismay. He was looking for an answer – was it our cultural background, our education system, our values, our government – someone or something had to be blamed.

I dont know the answer, but have a deep desire to find out.

Why?

As we start to invest in the early stage startup ecosystem in India, it is important to calibrate the possible returns and allocate funds associated with the returns. If most entrepreneurs in India are okay with smaller returns, it makes sense for us to allocate fewer fund here than China, Israel or Africa.

From our experience at the accelerator, where, over the last year we have “invested” our time, resources and energy in 23 startups, we know that the risk appetite is much lower among startup founders in India, compared to those in Israel for example.

We have already had 2 small “exits” and 3 closures in India. Israeli companies are still out there, fighting for their series A and beyond, while 1 company had pivoted dramatically in Israel, only to start again.

Is the reason something completely different? Is it that we are realists and don’t think the billion dollar outcome is even possible?

As Henry Ford said:

“If you think you can do a thing or think you can’t do a thing, you’re right.”

Where is analytics headed in 2020? An insight gathered from 25 top #startups

The most amazing part of my job is that I get to learn from the smartest entrepreneurs in the world. I cant think of too many people who get a chance to talk to 3 entrepreneurs via video conference in California at 8 am, 2 startup founders from Singapore at 1030, have lunch with 4 amazing big data analytics company promoters in Bangalore and then wrap up the night with a conference call at 830 pm featuring a recently funded analytics company in Boston.

Most VC’s get a local perspective, Silicon Valley, Tel Aviv, Bangalore, or Beijing. I get pitched from all over the world. Most investors in the valley will tell you the best and brightest come to the valley, but I believe there’s a big shift happening. More on that later.

I wanted to share one very insightful thing I learned after 25+ detailed (over 1-2 hour) briefings with entrepreneurs who are all innovating in the analytics space.

The future of analytics is in offerings based on derived insights.

I just gathered this insight, so let me explain.

Historically the analytics space was filled with services companies. In fact  consultants would take loads of data and gather insights to help their clients with their business objectives. The best known analytics companies that dont call themselves analytics companies are Mckinsey, Bain and other management consultants. Then companies like MuSigma and others decided to “offshore” this insights service. The problem with this type of offshore services business is obvious – low margins (net of 20% and since they are people intensive, they dont scale as fast).

The purveyors of the software model of analytics are those that provided a SaaS product – names such as Cognos, Business Objects etc. Companies like Kaggle crowdsourced your analytics and there are hundreds of companies providing SaaS analytics, such as GoodData, Insights Squared, etc. The problem with this type of business is that most of these software products are “generic” hyper cubes and data warehouse / data mart models. Their margins are better than services, but still nowhere near the 80% gross margins that some industries command.

Since we all know that software is eating the world, many companies in industries such insurance, banking, finance, manufacturing are all facing a threat from new age software companies, who are re-imaging the businesses.

The next generation of analytics companies are those that take the insights gathered and create an offering in that specific area so they can benefit from the insights, instead of providing those insights to others in the industry who make more money from it.

Let me take a simple example. Global Analytics just raised $30 Million. They are an analytics company. They used to provide their insights to financial institutions by way of giving them “leads”. These leads were those customers who were worth extending credit to. An average lead in this case cost their client $30 – $100 (depending on quality).

While that in itself was a big and large market, the larger market is to extend the banking facility themselves, which means with their analytics and insights can directly offer short term cash loans to those that their analytics deems are the best. The average customer in this case will make them $500 – $5000 (depending on the size of the loan). They did this via their own offering Zebit.

Now, most founders with a background in software will say “Wait a second. what business are we in? Software or Financial Services”? That’s a good valid question.

But when you get into the “Financial Services” business there’s loads of things you can re-imagine and redo the right way with a “software frame of mind” as opposed to being a “financial services insider”.

Huge difference in revenue and margins.

That’s the future of analytics.

Using the insight gathered from the analytics to offer a product / service direct to customers and not selling the insight or analysis to existing players.

Let me give you some more examples.

Lets say you are foursquare. You have analytics and insights into where people check in, where they go, what their patterns are with respect to travel.

Would you rather sell this treasure trove of data to marketers (and face a bunch of privacy issues) or would you create an offering based on those insights yourself?

The value to a museum of information that a potential customer is near their location is possibly $2.5  (that’s quite high I imagine if the tickets are $25).

Instead if foursquare offered a virtual museum tour or a personal crowdsourced guide to the museum, then they could sell that for $10 and have 40% margin on that offering.

Imagine if you had driving habits data about car owners – how they drove, what time, how fast, how safe, etc.

Instead of selling the “best driver” data as a lead to the insurance companies, who might pay you $100 – $200 per lead, you could create your own insurance offering based on miles traveled, safety of the drive etc., changing the long standing model of one-size-fits-all car insurance.

There are lots of examples that entrepreneurs are dreaming up these days and the most audacious ones I am talking to want to upend large established industries. It is both exciting and scary at the same time.

That’s exciting. Software will truly eat the world.

The reason why #startups fail in India is different from why they fail in #silicon valley

I read the interview with Steve Hogan yesterday about the reason for failed startups. Take a look at the #1 reason why startups fail according to him.

Hogan says, is that they’re sole founders without a partner. “That is the single biggest indicator of why they got in trouble,” he says, adding that it’s especially common for sole first-time founders to fail.

Sole founders.

#2 was lack of customer validation and #3 was “company ran out of time” – or money.

From our India data, I can tell you that among technology startups, solo founders make up less than 35% of the companies. We track now in our database about 15,000+ entities.

If you look at the reported closure rate, they are not significantly different from entities with multiple founders.

In fact in my own personal experience with 33 startups that I have closely observed in the last 12 months at the accelerator, the #1 reason for startups to close in India has been mis-alignment of founders.

Let me give you some examples that I am not sure are uniquely Indian, but occur in India a lot more than in the valley.

First was a team of founders working on a B2B marketplace.

Two founders we interviewed and accepted were related, but chose not to let us know about it. In the first 2 weeks at the accelerator, in multiple meetings they would often contradict each other’s views of their target customer’s pain point. One founder was a self-appointed “domain expert” and another was the “technical founder”.

The domain expert was an expert primarily because of the fact that she was not technical. She did not really have a background in the field, and neither was she all that experienced dealing with the potential customers. They had both stumbled into the problem while they were working in their previous jobs that were not related to their startup. After the first few weeks of multiple disagreements on the direction of the product, they chose to “keep their relationship intact” than to work on their startup.

Second is a team of strong technical founders.

Both these founders were among the smartest hackers I have met in India. Pound for pound they would be among the best developer teams you have ever worked with. They had worked with each other for over 5 years at a large MNC and came highly recommended. Their pedigree was excellent as well.

The problem they were addressing was real and fairly technical, and you were compelled to go with the team just given their background and the problem they were solving. The trouble was their answer to every customer problem was build more code. They were loathe to talk to real customers and after multiple fits and starts decided to split a few months ago. They still remain friends, but chose not to work on their startup.

Third was a strong team of founders, who had worked together for a year at another project.

They were also folks with excellent backgrounds, great Ivy league college degrees and were solving a real problem that many consumers had in India.

After a year of working together, building what I considered a good team of 5-10 folks and an alpha, then beta product, they chose to go separate ways. In discussions with both founders after the split, each blamed the other for not “delivering”. One person was the designated CTO and the other was CEO and chief sales guy. They did close a round of funding, but the product went through multiple fits and starts. The problem they were solving was real and even I was an early user of the product.

In all three cases, I found that having the co-founder was the big part of the problem.

Lack of communication, inability to stick through tough times and different visions for the company / product were the biggest causes for failure.

I’d like to understand from you what about our culture, our maturity as a startup republic and our progress with technology makes these problems more prominent in India.

 

The step function of #changes that are happening in the #Indian #startup scene

Most everyone believes that startup growth happens in step functions. You work for ages on something and it seems like there is little progress, but as an entrepreneur you are plugging away at it and suddenly one day, the growth is dramatic. Then it plateaus for a while and grows again. That’s the same for startup ecosystems is my opinion (not researched).

Step Function Growth
Step Function Growth

I am starting to see the next step function of growth in the Indian technology startup scene. There are a lot of people (entrepreneurs, investors, etc.) contributing to this growth and its hard to point to why it happened except in hindsight.

First, what metrics should we track so we can really know if there’s a step function or no progress?

Here are a few that we track at the Accelerator.

1. # of startups: How many startups are getting formed, where are they getting started, etc.

2. # of funded startups: Time taken to fund startups, amount of investment into startups, stage the companies are in at the point of angel investment etc.

3. Pace of growth: How quickly are they signing customers, how quickly are they getting VC investment, how quickly is their revenue growing, etc.

The NASSCOM 10K startups initiative is one such forcing function contributing to the growth.

Yesterday in partnership with NextBigWhat they organized the first of several #startuproots event.

A big part of that event was the #sharktank, which had 4 companies out of 200 that applied, that were going to pitch to investors and they had to make a decision on the spot.

For those of you who are not familiar with the sharktank format, the startups get 5-10 minutes to pitch, the investors get 5-10 min to ask questions and 2-5 min to make an offer. The entrepreneurs can then take some time to make their decision and then make a counter offer.

All offers are binding, save for legal and financial due diligence. Which means if and investor gets cold feet later, they cannot back out.

Yesterday, 4 companies presented. I had heard about 2 of those companies before (but did not know they were chosen) and the other two companies were fresh and new.

There were 8 investors who were part of the sharktank, but only 6 were serious. The other 2 seemed more there to critique and provide theoretical knowledge about startups.

Pankaj Jain from 500 startups, Ravi Gururaj from HBS, Ranjan Anandan from Google, Anirudh Suri from India Internet Fund and RK Shah from HBS were on the investors side.

Tookitaki (ad-tech space), Moojic (retail music hardware), Credii (Mid-market IT decision support) and Lumos (solar panels for backpacks to charge your phone), were the presenting companies.

All four got funded at the end of the event. I personally thought 2 of them would definitely get funded, but all 4 getting offers was truly a step function change.

I was personally pleased that Lumos got funded. They are doing something new and innovative that most Indian entrepreneurs wont do – Working on a non-software, difficult to scale hardware business, because of their passion.

I have to call out a special mention to RK Shah. RK is not a technology entrepreneur, (he runs a textile unit) neither is he a professional institutional investor. He wrote 2 checks himself yesterday. We need more RK Shah’s in India.

Finally big kudos to Jaivir, Brijesh and the rest of the NASSCOM 10K startup team. In less than 1 week, they got 850 signups for the event, and 500+ people attending.

Why forced mergers in the eCommerce space is a good thing

Right now there are many distraught entrepreneurs and industry watchers who are either a) saying “I told you so” or b) saying “this is bad for startups”, when they read the latest “forced merger” between several eCommerce companies. While many felt it started with Flipkart and Letsbuy, the most recent BabyOye and Hoopos has more commentary on the negative side.

While we in India, have been witness to these mergers only in the last few years, this has been happening in the valley for eons  The new age name given to some of these funded startup exits is acqui-hire. Somehow acqui-hire in the valley is great and forced mergers in India is not.

There are and were many naysayers when there was a raft of funding in the eCommerce space a few years ago. Many folks were right about unsustainable business models, rampant discounting, unsustainable customer acquisition costs, etc. To them I say:

From Alfred Lord Tennyson’s poem In Memoriam : 27, 1850

“‘Tis better to have loved and lost
Than never to have loved at all.”

The eCommerce bubble in India has created a new set of entrepreneurs. They did it with other people’s money. No one really lost except for the LP’s who I am sure are now once bitten, twice shy about returns from Indian startups.

Honestly though, I have talked to 5 Limited partners at large organizations who are disappointed with returns from Indian Venture capital, but also realize they dont really have much of a choice but to stay invested.

There are some that claim that other deserving entrepreneurs, who were working on non eCommerce startups, were ignored during the eCommerce bubble. That’s absolutely nonsense.

In India over the last 3-5 years, if you were a good entrepreneur with a good business, great team and chasing a large market, you were able to raise money. The ones that did not get funding, either were chasing smaller markets, were going to grow slowly or were not sufficiently good teams.

Now what do I claim that mergers are good for Indian startups?

1. They help companies and their employees consolidate to create one large player in a mid-sized to big market, instead of 10 players chasing the same market and being extremely competitive.

2. They provide a means of employment for the many employees at those companies who were not the founders or the investors.

3. They give hope to the many entrepreneurs in the making that you can have a “failure” and still be considered for another opportunity in a startup.

4. It provides the investors an opportunity to consolidate their portfolio and hence double down on their winners, without spreading themselves too thin. That way the remaining portfolio companies win.

5. It frees up time from several investors having to spend time on middle-of-the-road companies, and gives them more time to spend chasing new opportunities.

6. It is easier to merge a company in India than it is to shutdown. The process to shutdown a company is also a lot more expensive.

Anything I missed on the other goodness from the eCommerce forced mergers?

What should you expect from an accelerator?

I have written previously about how to evaluate accelerators and choosing the right accelerator since there are so many of them these days and also about what the goal of an accelerator is.

I wanted to share somethings that entrepreneurs should expect from an accelerator from a perspective of a startup founder. I think the best thing that has happened is that so many accelerators have opened in the last few years. Similar to eCommerce companies in 2010-11, I expect many to close or shut down within the next 2-3 years.

There are 3 top things an entrepreneur needs according to me:

1. Access to customers: Whether it is beta customers for feedback, early adopters for providing traction (paying customers) or larger customer for growth, startups thrive on customers. Depending on the stage of your company, if an accelerator does not help you get customers, they are not doing their job. That’s the first lens I would adopt to judge accelerators. If you have access to customers, you can practically write your own destiny. If all the accelerator does is provide advice on getting customers but does not provide introductions to customers, or have customers be ready to adopt and review your platform, you are not going to get much traction or be “accelerated”.

2. Access to talent: In India, for startups, good development talent is hard to get , marketing & sales talent is harder and design talent is extremely challenging to get on board. If your accelerator does not help you with talent sourcing or provide talent in house to help you tide these critical areas when you need them most, you should run away. I have heard the notion that the graduates of the accelerator will help you, but entrepreneurs helping other entrepreneurs by providing time  is not very sustainable. Most of the very successful startups and their executives are extremely busy. While a sense of pay-it-forward does exist, its just not sustainable is what I have found. There’s no substitute for dedicated people to help you with development issues, help you with User experience and design (mockups, wireframes, HTML/CSS development and information architecture) or marketing talent to roll up their sleeves and run campaigns.

3. Access to capital for growth: While I am personally not a big fan of funding as a metric for accelerators to gauge their success, capital is nonetheless needed to grow and thrive, especially in India, where most founders are not serial, successful entrepreneurs or those that come from a “rich family”. So look for an accelerator that provides you an extensive and wide set of investors from seed to early stage and from venture to growth. If all the accelerator does is “showcase you in front of several investors” but does not actively nudge investors to help take a closer look at your company, I dont think they are doing their job.

There are several other things that matter which include a support system of the existing entrepreneur network from their previous batches, access to meetings internationally that possibly help get some global exposure, and a great space to work from, besides other things. However if you dont have access to customers, talent and capital, there’s no value in joining an accelerator.

The Indian startup ecosystem should look at Israel as a role model

I love Israel. Having been there 7-8 times over 5 years when I worked for a company (Mercury Interactive, acquired by HP) that had its development center there, I believe they have some of the best developers, product thinkers and execution oriented folks.

They are also amazing at marketing. They have successfully convinced the world that they are the “startup nation“.

Never mind that they have 1/3 as many product startups as India produces annually and never mind that Indian companies acquire or get acquired twice as much as Israeli companies. Indians also make up 52% of Silicon valley startup founders, whereas Israelis make up less than 8%.

Take a look at those 3 data points and tell me they are not facts. The PWC report is for 2012, so its relatively recent. The # of companies we track in India versus Israel startups in our database is three times as well. The # of companies on Angel list or Crunchbase reveals a similar statistic.

Still its Tel Aviv that creeps up on Silicon Valley as the top startup center. If you read the startup genome report, you’ll be convinced of the same based on their methodology.

What are the arguments I have heard against India being the startup nation?

1. Quantity not quality:  We produce numbers, but not quality. Many of our startups are clones of Silicon Valley companies featured on Tech Crunch 3 months post launch. I looked at the 3 top Israel incubators and found that over 60% of the companies they were helping were clones as well.

2. Exits: We dont have a significant number of $billion or hundreds of million $ exits. I have found that while we do not have those exits, the number of companies listed on the stock market in the US for both Israel and India are comparable.

3. Market access: Israel has excellent knowledge, insights and know-how about US markets. Since Israel itself is a fairly small market, most Israeli entrepreneurs focus on US markets solely, even though they are geographically closer to Europe. Technically the # of people with market knowledge of the US in India far exceeds that of Israel, but they are not in product startups but at large companies.

4. Services mindset & positioning: Thanks to the ginormous success of Indian services companies who helped position India as the “world’s backend” (comparable to China being positioned as the world’s manufacturer) we have been already positioned as low value, low margin, consulting providers.

5. Late start: Even though Israel is 60 years old and India as a nation is a little older, we had a late (2001 or so) start to technology startups. Compared to Israel which had some interesting companies (need references here, what I have heard is mostly anecdotal) in the late 90’s as well.

Why do I still say Indian startups should look at Israel as a role model?

1. They champion their startups very well. They are very well vested in their startups success. They are constantly talking about how good their startups are, how they are possibly better than the valley and why they have the best talent in the world focused on startups.

2. They take significant risky bets. The # of investors in Israel (seed, angel and institutional) is comparable to those in India even though the number of startups is a third.

3. They look out for each other. The community is so well connected with each other that they genuinely look out and help each other. I dont know of any other place that supports their own as much as Israel does.

If you have been to Israel or have lived / worked with Israeli’s please tell me in the comments if there are a few data points I missed.

If you have any good data (not anecdotes, I have enough of those) to counter any of my arguments, feel free to call those out as well.

Why do founders split? Performance and Execution

Both A & V met at their company cafeteria a few months before they decided to work together and start their venture. A was a front-end developer and V was a SEO and web analytics consultant. They both worked at the large company separately for 3+ years but did not have the chance to work together at all.

They were both in different teams and their paths did not cross very much. While standing in the cafeteria line, they got chatting about a weekend event and found they had several common interests and similar aspirations.

They decided to spend the next few months, talking about various ideas they had, mostly around starting a new venture in the eCommerce space. Neither had much experience in ecommerce, but they figured they would be able to add an operations person later.

4 months after their meetings they chose to build a online platform (one that held no inventory, but sold multiple products) for computer and mobile accessories of all kinds.

A, built the first version with some help from another friend who was the backend expert who offered some time in exchange for coming on board full-time if the venture got funding.

V focused his efforts on talking to suppliers and also helping A on some of the SEO work. Besides setting up their social media profiles, he also spent time taking to courier, payments and logistics partners to setup relationships.

3 months after starting they did a launch with friends and family. Response was good (relatively speaking), with 3 orders in the first day and over 5 in the next week.

I met them when V sent me their plan and asked for a meeting to discuss their seed funding requirements.

Given that I have had a poor track record with eCommerce companies and I dont like investing in them I declined the meeting.

A few months later, I met V at a startup event, when he mentioned that they both had split. He mentioned that the site kept going down and A was a good front-end engineer but not a strong developer overall, he said that they both had decided to shut down their venture.

I have not met A, but did check out his work and website. While I would not call his work legendary, it was not too shabby either.

The second biggest reason why founders split besides having differing vision is they both dont believe the other person is performing or executing as well as they are.

Rarely do they look in the mirror to see their own shortcomings.

There have been 2 other cases where I saw this similar situation. One person is either not executing at all – for various reasons or a deliverable or two is missed and friction sets in.

In one case a founder had a new born child within a month of the venture getting off the ground and had to spend a lot more time at home, which made the co-founder irritated and angry. They split and eventually closed the company.

I was surprised that they did the venture together knowing that one of them was going to have a baby.

When a pattern of execution and delivery on commitments is not set, then friction sets in very easily.

Its very hard to figure out if someone is executing well based on their “resume”. Most resumes are inflated (I am guilty as well) to “sell” and “position” the candidate in the best light. Even if they have worked at a position where its fairly easy to determine if they deliver and execute or not, it is mighty difficult to discern whether they were good because of the system built around them or because their manager extracted the best from them.

The only way to determine that is working together.

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

I prefer to fund teams that have worked together in their new venture for more than 6 months. That’s an arbitrary number no doubt, but I dont have an alternative.

Teams which have worked together before, need to be working together again before I am sure that they know how to work with each other in a new environment without the support system they had before. There are exceptions, but they are rare.

I am hoping again that this is a demand and supply issue that resolves itself in a few years. Right not there are too many opportunities (thanks to Angel List) for good companies with high performance teams that have worked together for a while for me to even consider teams that have relatively younger working histories.

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 fallacy of providing “great mentorship” in 1 hour chunks

I have a good friend who has been a successful corporate executive for over 15 years. Off the charts smart and with a keen sense for the “inner issues” driving other people, he is able to figure out the root cause of most problems faster than most people I know.

He does though have a lack of time, like most other people. Having been in a large company for most of his career, he wished to live vicariously through other people and was keen to “mentor” young entrepreneurs. My advice to him was to focus on helping younger people in his company rather than entrepreneurs. He seemed to think about my tip, but chose to ignore it.

He setup 1 hour mentoring sessions with 3 entrepreneurs who he felt were working on problems that he was keen to understand more about and wanted to help them while he learned more about the market they were targeting.

Each session was fairly standard and given his corporate background, were scheduled a month in advance with consistency and a sense of purpose.

After 2 sessions, 2 entrepreneurs said they were busy and could not make the call or be in person.

He did feel he brought value to them in both the sessions and heard from the entrepreneurs that his advice was valuable. While he was in the process of scheduling the follow up, one entrepreneur told him rather bluntly that he did not have the time.

My friend took it rather well, and wanted to understand how he could make the time more valuable. Both entrepreneurs said the same thing.

There were pieces of advice that they could get from my friend, but they did not have the time to execute on his suggestions and felt that while well meaning, most of the suggestions were not precise enough.

Note that they did not say that the suggestions were not actionable enough. They said that the recommendations were not precise.

I get nearly 2 executives and mid-career professionals from larger companies and older entrepreneurs wanting to be a mentor at the Microsoft Accelerator each week.

Most we reject.

Some because they just want to add the mentor title to their LinkedIn profile and dont have enough time to provide.

Most others because they want to compress the “mentorship” in chunks of 1 hour sessions every month.

Its hard to do anything well in 1 hour chunks in infrequent periods of time. Even if its frequent the context is fairly limited.

Its even harder to provide any value in a 1 hour mentorship session.

Which is the prime reason I am not taking any new “meetings” to provide feedback and advice to new entrepreneurs who are not in our accelerator.

There’s very limited to little value that the session can actually provide is my experience.

I might feel good about it, so might the entrepreneur for about 15 minutes after the meeting. When the dust settles, though, after a day or two, they realize the multiple edge cases and scenarios that my advice or suggestions wont really work.

If you think you can provide value in 1 hour chunks as a “mentor” I’d love to hear how you are doing it and how you measure the value of your advice.