ENTREPRENEUR SPECIAL ......HOW NOT TO END UP LIKE UBER

HOW NOT TO END UP LIKE UBER





Founders and investors say there are lessons to be learnt from Travis Kalanick's exit -processes may be tough to follow in the early years, but have to be introduced soon

Uber's been in the news over the past few months for its “toxic work culture“ and CEO Travis Kalanick finally stepped down, putting the spotlight on the way startups work and the need to look into a company's internal processes early on. Closer home, Housing.com's drama with founder Rahul Yadav is an example of a company that grew fast and aggressively without paying too much attention to overall work culture.

“This is a wake-up call for everyone,“ says K Ganesh, serial entrepreneur and founder of entrepreneurship platform GrowthStory . “Uber revolutionised car ownership and the concept of shared economy . But the developments of the last few weeks show that just because you are a startup, you cannot ignore certain fundamentals,“ he says.

Founders and investors say that processes may be hard to put in place during the first few years of a startup when everything is in flux and the focus is on g rowth, but systems have to be introduced after a certain stage.

“A startup needs to be dynamic and flexible at the early stage, without many restrictions. But once the organisation builds up to some size, a structure needs to be put in with clear responsibilities and roles,“ says V Balakrishnan, former Infosys CFO and founder of Exfinity Ventures.

Founder of online grocery delivery company BigBasket Hari Menon says he was “completely hands on“ for the first three years after he set up the company in 2011, but began slowly delegating work to managers.“For the first three years, all the managers reported to me on a daily basis and there was no HR. Today , I focus on reviews as the organisation has grown to 13,000 employees and I have to delegate,“ he says.

Girish Mathrubootham, founder of customer support software company Freshdesk, has a simple rule for when formal structures have to be established: When people stop recognising one another in a company .“At that stage, founders can't oversee everything. As a CEO, you can't do everything,“ says Mathrubootham, who founded the company , now valued at an estimated $700 million, in 2010 in a small 1,000sqft space.

CULTURE COUNTS

One of the major things a startup has to focus on from the beginning is company culture, or the environment in the workplace, which includes the mission, ethics, communication and more.

“There are two things: company building and culture building,“ says Mathrubootham. “If you look at the Uber culture, they thrived by breaking laws. Some of it is not just illegal, but also unethical.“

It's the responsibility of the founder to lead the company towards the right culture. “ An organisation's culture is built by how the founders behave,“ says Balakrishnan of Exfinity Ventures. “Tone at the top is very important and if that is practised and emphasised from Day One it will send a strong message across the organisation in building a good organisational culture.“

Essentially , the company reflects the founder's personality , and it's important to have an external observer who can provide feedback regularly . Bala Girisaballa, CEO-in-residence for Microsoft Accelerator, explains: “Since a founder's view is always coloured, it helps to have another person, not related to the company , give suggestions.“

Investors usually refrain from getting too involved with the dayto-day functioning of a company .Most investors that Girisaballa has met prefer taking a backseat. The focus is on execut ing strategy , he says, but others dispute this saying investors should be more active.

“While there is a need to provide flexibility and freedom to the entrepreneur, certain behaviour and practices should be unacceptable. There should not be any relaxation in governance and cultural issues. It is the board's responsibility to sit with the founders and draw those lines,“ says Balakrishnan.

Mathrubootham says investors in Housing.com should have acted when they saw the first signs of a brash founder endangering the entire company . “In the case of Uber and Housing, there were warning signals but the investors did not bother much and focused on growth.This was a mistake,“ he says.

The biggest difference between a startup and an established company, says Rutvik Doshi, director at Inventus Capital, is that a startup is creating a large asset out of nothing. “A larger company spends most of the time trying to protect that asset. Sometimes, the transition from startup to large company doesn't happen smoothly . It becomes the responsibility of the CEO and board to put systems in place and collectively reach a decision,“ Doshi says.

Shalina Pillai & Anand J

TNN