[Photograph by Carsten Tolkmit under Creative Commons]
Some time ago, a friend called up excitedly. He had succeeded in raising Series A investment. Raising capital had been a long grind, and the money would now allow him and his co-founders to pursue their growth plans aggressively. "Let’s meet - there are so many decisions to make. I want your advice on a couple of things," he said.
"Of course. More than what to do, I can certainly share from my experience what not to do," I said.
My friend and I never met up to have that conversation.
I was a little puzzled for a while. I tried to put myself in his position. When our company got funded, it was a heady experience. With capital in hand, several possibilities had opened up suddenly. We could pursue our plans without constraints now, put many ideas to test.
Would I have wanted to talk to anyone about what I shouldn't be doing then? Of course, I wouldn't! In retrospect, it didn't seem too odd that we didn't meet.
Entrepreneurs are driven by self-beliefs, and they are essentially optimistic. In that frame of mind, it is difficult to apply one's mind to what shouldn't be done. That seems to be a cautious, defensive approach - quite the opposite of how entrepreneurial minds are configured.
And yet, several successful entrepreneurs I have met are fairly conservative in their approach. They worry as much about what could go wrong and what not to do, as what should be pursued vigorously.
But many others don't. I certainly didn't. My experiences have been shaped more from our entrepreneurial misses than our successes. And now, when I look back at my entrepreneurial journey in MindWorks Global (MWG) for the past eight years, I have learnt most from the choices we shouldn't have made.
Failure, flipped around, is nothing but an outcome of a decision or an action that you shouldn't have taken.
Failure, flipped around, is nothing but an outcome of a decision or an action that you shouldn't have taken.
Through Cautionary Tales, I hope to distill many wrong choices we made, and how we learnt from those mistakes to rebuild our path.
Let me briefly describe our entrepreneurial journey. MWG started out with a pioneering idea - get newspapers and magazines globally to outsource editorial production. It had never been attempted before. Only someone bitten by the entrepreneurship bug would be crazy enough to think that he could convince English-speaking countries to outsource editing to a country where English is the second language.
We got some of the biggest newspaper brands in Asia onboard initially, which validated our proposition. Angel investors helped us build the initial delivery capability and we got English publications in Asia and Europe. Helion Venture Partners then came on board as we got ready to take our proposition to the biggest market, the US.
We made headway initially. Based on that initial traction, we set up a US subsidiary; the CEO relocated to New York to be able to focus fully on sales. We hired a seasoned sales professional, an American, to drive customer acquisition even more aggressively.
And then, it all came crashing down. The immediate trigger was the bankruptcy of two of our biggest customers. But this was symptomatic of a deeper malaise in our customer market (print media), which we had missed right from the beginning.
Our customers had always operated in protected markets, and global outsourcing was too radical an idea to find acceptance there, especially when their core (print media) business was rapidly shrinking.
When growth stalled, our burn rate became unsustainable overnight. In desperation, we looked at some adjacent customer segments (newspaper ad production) but found the competition was too entrenched.
Digital media was a promising new opportunity, but that required new investments, especially in technology. By the time we realized this, we had run out of money.
It took us three long years to work our way out of the hole we had dug for ourselves: building a new value proposition, new capabilities and profitability in operations.
From losing Rs 35 lakh monthly, we are now a business with a healthy 25 percent net margin. From a company with zero digital media skills, we now are experts in digital media products, owning one of the fastest growing digital media properties in the auto vertical. And so on.
I am sure our story sounds like countless stories you have read and heard. The pattern seems predictable enough. And yet, it plays out over and over again. Why?
Let's take the burn rate. How were we justifying losing that much money monthly? We had to hire a seasoned American salesperson. "You can’t sell to Americans without a local person fronting the relationship." Her package, at Rs 1 crore, wasn't cheap.
We had to set up a large delivery capacity. "We are dealing with large potential clients who won't take us seriously until we project a certain size."
All of us in the team truly believed in these arguments - and we may have been right. If only we had validated our customer assumptions rigorously. Spending fast is ok if you are acquiring customers also just as fast. The investment is justified then.
Spending fast is ok if you are acquiring customers also just as fast.
We were not acquiring customers anywhere close to the rate we were spending. But that was not obvious to us then. If you are burning fast without acquiring customers at an equally scorching pace, you are kidding yourself.
How did we get our customer market so horribly wrong? Why did we, repeatedly, get our sales hiring wrong? And then, how is it that when we ran out of money, we found a way to healthy profitability? How did we build resilience in our organizational culture that allowed us to come back?
It comes down to setting up a system for questioning one's own assumptions. Two practices have worked well for me.
It comes down to setting up a system for questioning one's own assumptions.
Suppose you are about to make a big decision, and you have convinced yourself about the solution to go with. Now, assume that solution vanishes - it is no longer available to you. What would you do then? This thought experiment will force you to evaluate other options, thus allowing you to revisit your original decision with lesser bias.
Another method I have found useful is trying a test version first. Instead of committing fully to a course of action, figure out how to test your decision on a smaller scale. Do the pilot, and if the results are looking good, dive in.
Instead of committing fully to a course of action, figure out how to test your decision on a smaller scale.
Entrepreneurs enjoy n degrees of freedom. They have complete flexibility to focus organizational energies in any direction they see fit. Success comes more to those who can decide what not to do just as well as what should be pursued.
