Startup on a shoestring: a heuristic for thinking

This article is the seventh in the Startup Series on FirstPost’s Tech2 section and first appeared on Dec the 1st, 2016.

A startup, while it works to make revenue with its product or service, incurs essential costs. A shoestring budget calls for resourcefulness and creativity in building the business.

An earlier column discussed building the MVP on a small to vanishing budget. The Tl; Dr for this column is as follows: You pay for some things, you do not pay for some things; you should take your time to understand which is which.

The advice applies whether you are bootstrapping or playing with someone else’s, i.e. an investor’s or a VC’s, money.

How to know which is which? There is a thumb rule for that too.

For all startup related decisions, ask yourself: “Is this expense helping me advance our startup’s objectives?”. If the answer is “yes” then go for it, provided the cash in your bank account allows for it. If the answer is “no”, just stop and reconsider.

If you fear this will take all the joy out of your life, there is a third possibility: re-purpose some of your treats and desirable experiences such that they serve both your startup and to enhance your personal joy. Founders, rightly or wrongly, are not often able to separate work and non-work in ways others can. The approaches that work often address this peculiarity of the founders’ existence. Some call it leveraging, I call it maximising several of your life’s purposes in one go.

But since life is less than black and white, this week we have some tips, gathered from the trenches, which will hopefully give you a spur to more creative ideas. Some of these tips may not be new to the more experienced founder.

First off, we cannot manage what we do not understand or measure. The very first thing to measure and track is your weekly spend. Tracking gives us data, and data can help us make smarter choices in many instances. I once asked a founder, with a professed love of a specific drink at Starbucks, to estimate how much money she spent on Starbucks annually. The number was eye-watering. She then chose a two-pronged strategy: she now makes her coffee at home using ground coffee and a cafetière, and she holds work meetings in Starbucks so she can occasionally treat herself, while writing off the expense as a legitimate business expense (check business expense rules in your country with your accountant before applying this blindly).

Second, get creative, and discover “free” or “freemium”. Identify the business costs that you can keep low. Do you really need that co-working office space, or can you work from your home or shed in early days? Communication costs can be reduced to quite low with generous free minutes on mobile plans but it may be wise to keep them for making those calls, where you cannot use Skype or WhatsApp-to-Whatsapp calling. Identity the business-critical stuff you cannot afford to lose and make backups. Some of the best established project management tools such as Asana and Basecamp get you started with a free account, sometimes with limited features and you can then upgrade to a paid plan for additional features and more projects. New tools come along with free offerings, but be alert to their data export policies in case they go bust and you need to move to a different platform. Did I say make backups?

Third, manage your costs of training, learning, and staying up to date with stuff essential to your business. Most publications these days tweet out their best pieces. The web gives access to a lot of materials on software skills to business news. This column series is a good example of such materials. Find libraries, ask friends to give you their subscription copies once they are done.

Fourth, in doing all this, do not be penny-wise and pound-foolish. Do not scrimp on coming across as a professional, whether it is how you dress when you meet a potential customer, advisor or financier, or whether you turn up on time. I can see some of you rolling your eyes at this. Perfectly fine, if you feel comfortable turning up to meetings with a customer, while not showered, wearing clothes that smell, and late! Remember in the early days, founders are always selling. Choose the impression you want people to take away.

Finally, get a grip on tax rules for business expenses. Ask your accountant. Write off every single legitimate expense. This should not be hard if you have paid attention to the point at the beginning. Getting a grip on what you are spending is essential to staying within a shoestring budget.

In the next column, I will address a question I hear very often, my advice on the issue, and the reasons for it.

Startup on a shoestring: building the MVP

This article is the sixth in the Startup Series on FirstPost’s Tech2 section and first appeared on Nov the 15th, 2016.

“You may be a business man or some high-degree thief,
They may call you doctor or they may call you chief,
But you’re gonna have to serve somebody”.

Nobel Laureate Bob Dylan is not known as a business advisor but his words are worth pondering.

A startup may be your dream, your personal pain point, your vision but unless you find enough people to say “yes, we share this pain too” and “yes, we will pay for the pain to go away”, there will be no startup beyond your dream. This is where building the Minimum Viable Product (MVP) comes in.

An MVP, as founders will know, is a bare-bones prototype that can be used to test if the dream should remain a dream or if some elbow grease may help its realisation. Its value in getting early adopters in is significant.

Early adopters are different beasts, psychologically speaking, from later adopters. They get your drift, your vision; they will use a less than perfect product and give you feedback; and you will gain several things. You will gain some early champions, you will get to see how the product works in the hands of actual users not just the people who designed it and how it needs to change, and you will get a better idea of what you need by way of talent to drive the startup.

Open source tools and cloud services enable quick building up of MVP for web based services. But not all startups are building web services or apps. How does one build an MVP for a physical product? As the following examples show, the web can be immensely useful in these contexts too.

Svaha-USA makes STEAM-themed clothing for children. Some mums asked them for STEAM themed dresses. Before swinging into action based on some feedback. Svaha-USA chose to test the wider market by setting up a crownfunding campaign for their first such collection. Not only was the campaign oversubscribed, they built a new following and now STEAM themed dresses for mothers are an integral part of their offering.

The founders of Onnix Bags in London, aiming to offer customisable, handcrafted bags at affordable prices, started by building a community first. Practising artist Austin Kleon’s advice, Show Your Work, they shared their process of design and building supplier relations with the community. This community came through in a big way when they ran their crowdfunding campaign, and you guessed it! They benefited other founders in their community by sharing in great detail how they went about their campaign. Where markets are finicky and unforgiving, such as in fashion and personal goods, building an MVP could go hand-in-hand with early marketing and brand building as Onnix successfully did.

Similarly, Que Bottle, the Bay Area based makers of collapsible, food grade silicone bottle, tested the concept in a secret but global group of founders, before launching their crowdfunding campaign which was swiftly successful.

Of course, one could always develop and distribute a finite number of prototype product or devices and collect feedback but the upfront capital investment may be substantial. Founders with a track record and solid social capital, such as Jo Aggarwal and Ramakant Vempati, who founded Touchkin, a mobile predictive healthcare startup in India, may find the path to raising funding eased somewhat.

You may have noticed the emerging theme here. To ease the path to success, it helps if one is plugged into the entrepreneurship ecosystem, and both ask for help and share your learnings. While entrepreneurship ecosystems may differ slightly in their cultural origins, the core values of paying it forward and helping one another are notable in both the Silicon Valley and London ecosystems. As the Indian entrepreneurial ecosystem matures, these values are already taking hold and helping strengthen the ecosystem.

Many founders see themselves as outliers or iconoclasts. But in reality, most of us are ordinary with extraordinary dreams. That iconoclast bit is true only for a minuscule number. And even those would benefit from knowing about, joining, and participating in the local founder ecosystem. Many ideas are tossed around in these communities, but only some make it to the MVP stage and even fewer become successful businesses. There is, of course, no better cure for founder loneliness, more on which later in this series, than to see a whole community, who understands you and empathises with your pain and helps you deal with it.

There are two angles to the startup on a shoestring budget. This column focused on building an MVP before going big, the existential aspect of building a startup on a shoestring budget. In a later column we will discuss how founders can keep costs low.

Brexit and the luxury brands of Britain

(A version of this article appeared in LiveMint on November the 17th, 2016.)

British Prime Minister Theresa May’s visit to India and trade talks with her Indian counterpart take me back to the midsummer’s day in 2016. We in Britain woke up to find that the Leave campaign, colloquially called Brexit, had won the referendum. The pound plummeted and for a while, the stock markets were in chaos. Markets stabilised but the pound continued a downward trend, beating historic lows.

Britain luxury brands are known for their heritage, design, craftsmanship, and quirky individuality which together shape a luxury narrative matched by no other country’s. London too is a choice destination for the experience of buying both British and non-British luxury brands.

The weakened pound was good news for tourists visiting the UK. The month of Ramazan, which traditionally brings wealthy visitors from the Middle East to London, followed. Flight bookings from Europe as well as Asia reportedly rose after the referendum. Premium and luxury hotels benefited from a rise in reservations and stays by overseas guests too. All this made London the hottest and cheapest luxury shopping destination this summer. Much shopping took place as is evident from UBS’s analysis of tax refund receipts. Tax refunds, which are typically sought on big ticket goods, rose by 36% in August.

So far the Brexit vote looks good for luxury shoppers from outside the UK. The picture for luxury brands is more complicated.

The iconic British brand Burberry has seen a 30% rise in sales in its British stores in the last six months. Facing headwinds otherwise, Burberry has also cut prices in its Hong Kong stores, taking advantage of the weaker pound as the brand notably incurs 40% of its costs in Britain.

It is a mixed picture for luxury watches, which are often presented as investment pieces, hence seen as considered purchases not impulse buys affected by currency fluctuations. Many coveted luxury watch brands are imported into the UK and the weaker pound has made the imported goods more expensive. Prices for brands such as Cartier and Mont Blanc, owned by the Richemont Group, have been increased while Hublot, Omega and Tag Heuer, owned by LVMH and Swatch Group, are holding on. The latter category of brands is taking the impact on its margins. For now.

The British luxury watch maker Bremont however is quids-in despite 30% of its costs being imports of Swiss watch parts, which are now more expensive. A weaker pound has helped the firm deal with falling sales in Asia and come out stronger.

To complete the picture and London being a hub for creative entrepreneurs, I spoke with proprietors of several upcoming luxury brands. My conversations revealed a mixed picture. Many small luxury brands source parts, finished products or packaging abroad while serving mainly local British customers. After the referendum, the bill of materials is decidedly more expensive by 10-30% depending on where they import from. As small businesses and nascent brands, however, they cannot always pass on the costs as price increases to the customer. Some however are slowly edging up prices of some products while keeping other prices steady. Overall this does not bode well for smaller, upcoming British luxury brands. Tighter margins will hamper their growth, and in many cases, their ability to survive.

It is also important to remember that despite the outcome of the referendum, Britain is, at the time of writing, still operating in the single European market with free movement of people. This makes it easier for people from Euro countries to travel to and shop in the UK. Any change in the ease of travel will affect Europeans travelling to and shopping in the UK just based on a weaker pound.

Luxury marques already under pressure, such as British car maker Aston Martin, expect a short term lift from the weakened pound but that may only last till Britain quits the single market. The automotive supply chain is global, and that will continue to affect the brand’s margins and profitability especially if Britain loses single market privileges and is not able to strike similarly attractive deals with the many countries where Aston Martin sells.

Some luxury brands are already thinking long term. For instance, Bremont is collaborating with the Advanced Manufacturing Research Centre in Sheffield to reduce its reliance on imported parts. Aston Martin too has made recent investments in product development and a new plant in the UK although its reliance on imported parts will continue for a while. But absent any clarity on the nature of trade deals Britain may be able to make, the return on these investments remains uncertain.

The pound recorded a brief recovery on November the 3rd, 2016 after the High Court ruled that the government will need parliament’s approval to trigger Article 50 which is essential for the official start of negotiations with the European Union. The judgment has temporarily buoyed the Remain voters. The uncertainty is further compounded by the government choosing to appeal the decision in the Supreme Court.

Luxury brands, like many others, will just have to sit tight and watch. After all, what is a couple of years in the grand schema of luxury brands that have lasted or intend to last for centuries?

Of pigs and predictions

The Trump victory has left many of my friends reeling and in disbelief. It has also already brought out criticism of pollsters and polling data. Some sceptical ones go a step further and condemn all prediction makers, and mock machine learning and artificial intelligence. This condemnation is foolish and tantamount to throwing the baby out with the bathwater.

Prediction models turn on data, collected from the right questions being asked of the right statistical sample of people. Reductive questions generate neat data sets which then provide all the right answers.

But as experienced market research people will tell you, far fewer people, than those who enthusiastically nod and say they will purchase a new product, actually do. It is not that people are lying, it is just that human beings tend to give answers to please the asker. On politics and other emotionally charged matters, this tendency to give socially acceptable answers to minimise confrontation is especially pronounced. People also change their minds over time.

If the outcomes of any large exercise, where people actually make active choices, shock us it is worth remembering that the only truth is revealed preference i.e. what our actual choices reveal about our preferences. Human beings do not always seek to maximise utility, often preferring to use simplifying shorthand or heuristics to make decisions. The heuristics could have encoded in them experience and knowledge, as well as prejudices and received wisdom.

The concept of revealed preference is, of course, flawed too. If I pick Candidate A over Candidate B, it does not say I prefer Candidate A, merely that I prefer Candidate A to Candidate B. In the future, if Candidate A is up against Candidate C, I may pick Candidate C not because of Candidate C’s superiority over Candidate A but because my preferences are not immutable. Faced with more than two options, we have a way to simplify the choice for ourselves as well as I have written here.

It may sound nihilistic to suggest predictive modelling is not really reliable. But if we are relying on flawed and mutating preferences, and treating them as immutable truths in our analysis, how can methodologies and predictive models generate anything reliable?

It would be akin to putting lipstick on a pig. We would have used up lipstick but the pig would still be a pig.

In the last UK general elections, the Brexit campaign, and now the US general elections, predictions have failed to, er, predict anything reliable.

It is time we learnt to judge differently — by expanding our comfort zones, by listening more, by asking and seeking to understand more, by being healthily sceptical, and by bringing critical thinking lenses to all those pursuits.

For now, if your side won, good for you. The advice to try and understand the other point of view applies to you too. But if your side didn’t win, dry your eyes, dust yourself up, and go out and talk to someone who is not cohabiting your comfort zone.

The narratives we hear will have rough edges, and not the cleanliness or reductiveness of survey questions. But that texture is the stuff understanding is made of. Less data, more understanding. That is what we need.

Luxury’s talent conundrum

A version of this essay appeared on Hudson Walker International’s Opinion section published on November the 4th, 2016.

The Luxury sector is facing headwinds. Single digit growth seems here to stay. The behaviour and the expectations of the elusive but coveted millennial consumer remain somewhat a mystery with conflicting trends emerging. For instance, millennials seem disinterested in owning houses and cars, but are nonetheless happy dropping $25 Bn on diamond jewellery. The luxury consumer is globally mobile and digitally savvy, thus requiring brands to think of narratives that remain relevant and accessible in the many contexts in which the consumer might encounter the brand. The traditional luxury maison with its aura of exclusivity is also under challenge from the small, nimble luxury brand that not only knows where to find the new consumer but also to serve her well with messages and products that appeal to her, and do so in an agile manner. The emergence of these new brands is not unrelated to the technological developments challenging and reshaping the entire luxury value chain.

Like many other industries being redefined by technology and the warp speed of the web, the luxury sector too is facing a talent shaped challenge. The sector however remains quite conservative in where it sources talent, privileging industry embeddedness over attracting outsiders. These outsiders may come in and ask uncomfortable questions but they also have the ability and aptitude to shape the future of the industry. The need for luxury sector leadership to shake up their thinking on talent is apparent.

But how can they do it? Well, here are some ways to examine the existing thinking critically.

Consider whom you are attracting. While seeking to fill a position, if the hiring manager in the luxury maison sees applications from only those already working within industry, there is a problem. Pretty much every other industry has had to learn, some grudgingly, others more willingly, ways to reach out to active and passive talent where the talent hangs out and to make their brands more relevant to those professionals who would not otherwise consider them as possible employers.

Ask whether you are hiring for what they can do for the maison, or for what they have already done in their careers. This is trickier than it looks at first pass. Research suggests men are often hired for potential while women have to have proven it before. The luxury sector overwhelmingly sells to women, who have increasing economic power as well as alertness to governance issues in companies they buy from. The hiring-for-potential-or-proof challenge is exacerbated when companies are hiring for a future that is not fully spelt out and is unfurling as we watch. If you are seeking to acquire skills that are themselves nascent, consider that those skills may well have been acquired and demonstrated outside formal employment. As the boundaries between work and non-work areas of life dissolve, it is worth remembering that we bring our whole selves to wherever we go. Hiring conversations need to evolve from the curriculum vitae to exploring the passions of the individuals in their life. This will have to become normal as people pursue and build many careers within their professional lives, which brings me to the next point.

Before even seeking new talent, think deeply about how you will retain them, once they are hired. The adage that “employees do not leave companies, they leave their managers” needs modification. Employees leave in pursuit of fresh challenges knowing well that having multiple careers is now not a novelty but the default, and that only they themselves are responsible for shaping their work life. This challenge is multiplied manifold when the talent freshly hired is a a star and aware of her star power. Monetary and non-monetary incentives are the hygiene factors. Retention is about giving them something to believe in, something that lifts the game daily from mundane transactions to an opportunity to make a meaningful difference.

Lest this monograph should make these challenges sound insurmountable, I should add that this is where a seasoned and well-networked headhunter comes in. A good headhunter serves as the consigliere or consigliera to the maison. He or she understands the essence of the luxury brand, and can communicate it faithfully to a prospective candidate in a manner that bridges elegantly the gap between the narrative of the brand and its salience to a candidate’s aspirations. This is a crucial skill as a luxury mason’s success in attracting, hiring and retaining talent now depends on how well the leadership articulates their vision of the future and demonstrates that it is in line with the future emerging before our eyes.

The industry whose mainstay is heritage and craftsmanship is up against rapid technological and socio-political change. Something’s got to give for the industry to remain relevant and thrive. Talent is where the solution to that conundrum lies.