Making of a CEO

2 Start-Up CEOs

A CEO definitely faces a lot of challenges. The role of a start-up founder CEO, however, might have a lot of unique dimensions to it. The founder CEO brings the idea of a product or service as a business entity. He/she sets up everything from scratch—creating the business offering, starting the sales engine, hiring the first set of employees, creating a physical workplace if required, and then planning for the scale-up. This is a very critical phase for the CEO and the organization. It is important that the founder hires the right kind of people with key skills. The product/business offering should be conceptualized and best aligned with the customer needs.

Most founder CEOs need exceptional skills to market and sell the product. Vedantu is an interesting example of how a vision propelled the founders to create a strong offering in the market. Vamsi Krishna, founder CEO of Vedantu said in an interview,¹ ‘Vedantu is a venture in the edtech space that facilitates live, one-to-one online learning through a platform, connecting teachers and students from all parts of the country. The venture successfully filled the gap in the sector, by bringing personalization and democratization to education.’ Vamsi and his team wanted to create something meaningful in the field of education and they have accomplished that. The goal of the founders is to make Vedantu the Airbnb of education. Another interesting example in the edtech space is Byju Raveendran—the founder of Byju’s classes. His love for teaching led to the creation of an innovative and scalable model in this space. With a mantra of ‘life-long love for learning’ and use of technology, Byju’s has become the largest edtech company in the country with some of the best-known venture capitalists backing the firm.

While we use the word CEO and founder synonymously in a start-up environment, it is important to understand that the skills required of a founder and those of a CEO are vastly different, especially when the company starts growing. Bhavik Kumar, co-founder of Medibox Technologies, defines a good CEO as ‘someone who is able to manage a given situation to the best of his abilities’. He believes that a CEO is more of a delegator while a founder executes and shows how the work is done. A founder has the luxury to go more or less by his gut feeling but the CEO always has to take rational decisions as he/she has to explain his decisions to the board. When you are a founder, you drive yourself but a CEO might be driven by the board.²

While the key characteristic of a founder might be to have a vision for business and a strong passion to make it happen, a CEO needs to have much more than that to build a sustainable organization. It is important to recognize the importance of the transition from a founder to a CEO and how a founder must be ready to take that journey.³ A few of these characteristics are: system and process orientation, ability to manage people, range of functional skills and broader understanding of business, and even having a managing style that aligns the whole organization for a common purpose. A founder can become a successful CEO if he/she can understand these skills and apply them well in the organization.

Nithin Kamath is the founder CEO of Zerodha, an online discount brokerage firm. Nithin won the Economic Times’ Bootstrap Champ award in 2016. Zerodha is an interesting example of how a founder’s passion was converted into a business proposition. Nithin started stock trading at the age of seventeen. Zerodha started operating on 15 August 2010 with the aim of providing a cost-effective, hurdle-free and technology-enabled experience to the trading community. Nithin shared how as a CEO you should constantly innovate to stay ahead of the curve and grow the business. It is also important to rework the strategy to enable growth. For example, initially at Zerodha, the competitive advantage was cost. However, Nithin quickly realized that to sustain the competitive advantage, it was important to build a cutting-edge technology platform and also create a more informed customer base. This was how Zerodha conceptualized Zerodha Varsity, an online education platform to understand trading.

In a discussion with students at IIMB, Nithin mentioned that these innovative steps helped Zerodha sustain its growth. As the organization grew, his biggest challenge was to sustain a culture of freedom and innovation for the employees. Nithin’s story is a good example of how hard work and focus help to build a successful organization. Prior to setting up Zerodha, Nithin worked in a business process outsourcing (BPO) and as a sub-broker at a large brokerage firm. He stated that for almost three years he was working in the night at a call centre and trading during the day. It is interesting to note that Nithin built his company around what he knew best, and that can be an important factor for success.

A study undertaken in the US, published by the Entrepreneur in 2017, states that one-third of successful entrepreneurs built businesses in their area of work, one-third in a related industry, and the other one-third had a good understanding of the industry and the customer needs.⁴ Similarly, Vamsi Krishna’s advice to future entrepreneurs is to ‘experiment instead of searching for certainty’. He believes that at the first stage, nobody can be 100 per cent right. So, the best way to avoid failure in order to build a strong and successful start-up is to try to practise and learn about the service or product that one wants to deliver to one’s customers.

As more and more people take to entrepreneurship and start-ups, there is a lot of discussion around what makes successful start-up CEOs. Some of the key aspects are:

The ability to create purpose/vision
Execution of the vision
Attracting key talent and letting go of non-performers
Willingness to take risks
Influencing ability
Taking decisions
Clarity in communication

To illustrate and contextualize some of these aspects, Dr Mohan M.R., founder CEO of Nano Hospitals says, ‘The biggest challenge was forming a like-minded team and making each staff member a stakeholder in our vision, mission and values. Further, winning people’s trust was the biggest challenge. Bridging the perception gap between doctors and patients was also a problem. The other problem which we faced was the lack of trained staff, and to make them understand and train them in compliance with our protocols.’⁵ As Dr Mohan mentioned, the skill of the founder CEO in building a team and aligning it with the purpose of the organization can help manage the key challenges in a start-up.

In an interview, Neeraj Kakkar,⁶ the CEO of Hector Beverages (owns Paper Boat), shared his advice for founder CEOs: ‘There are two things which are important in early stages of anything, you require a lot of focus—you cannot be distracted. Then there is also an escalation of commitments. You cannot waste resources over something that is not going to work. Finding the right balance is the key.’

Neeraj Kakkar, Founder CEO, Hector Beverages (Paper Boat)

The team⁷ had a wonderful opportunity to meet and interact with Neeraj Kakkar, CEO of Hector Beverages at his office in Whitefield. The office environment was extremely casual, complete with a swimming pool. The company’s two dogs gave us a very friendly welcome and ushered us into their colourful and quirky office. Below are excerpts from the interview that we had over glasses of Paper Boat.

Do you come from an entrepreneurial background?

No, I do not have an entrepreneurial background. I come from a very middle-class family. My grandparents came from Pakistan, settled down in Haryana and worked in small shops. My father joined a government power plant as a subordinate and worked there all his life.

As an entrepreneur, how important is it to have family support, because entrepreneurs are already up against a lot of things, trying to prove to people that they are doing fine. How did you embrace and/or overcome this?

Generally, if you are not from a business-class family, they won’t support you ever, I don’t think so. Not straight away.

You have different mindsets depending on where you come from. It is easier for people who come from business-class families, than for people who don’t. And you can’t buy the support. You can’t expect them to support you from the beginning, so you will have to go and do the things that you want to do. At some stage things will fall in place and in the end everybody will like you, love you and support you.

My father had never seen something like this in his life, so he was very afraid. The whole thing was pretty scary for him, but I think my wife has been very supportive. She helped me go through this journey and always encouraged me to follow my dreams. My father is a very proud man today.

In one of your interviews you said that entrepreneurship is a pretty selfish decision. What did you mean by that?

Yes, I think most entrepreneurs are happier because in the end they end up doing things that they want to do rather than doing things that people around them would like them to do. I only like to do things which I am interested in. I work on products which are interesting. I don’t have to do anything to please anyone.

But it’s the people who suffer, other people around you, your family, but when you go home after a hard day you are very happy. Entrepreneurship gives you immense joy and there is nothing that can replace that.

Please tell us more about your work mantra.

I love my work and I would do whatever it takes to keep working. Even at home, I find excuses to go and check my email; sometimes I go to the bathroom and check my email.

I don’t think this is the case just with me. I think it is the same with all the people who love their job. I don’t want to go on vacations often because when you absolutely enjoy what you do every single day, you do not feel stressed. Nobody is forcing you to do what you do, and since you do it because you enjoy it, it will show in the results. If given an option, I will choose work over watching a movie.

With two MBAs, what are the things that you learnt from business schools?

I think confidence is the biggest thing that I learnt from my MBAs. The first time I did my MBA, I couldn’t speak a single line of English. I studied in a Hindi-medium school and spoke in Hindi all my life. Every time I wanted to say something in English, I would end up using ‘matlab’ and ‘ki’ in every sentence. I think if you don’t have proper language skills, it stays with you for a long time in your life. At the back of your head there is always something that holds you back. That got corrected after the first MBA.

I was in the company of people who were from Delhi University, good colleges. When you talk to them every single day, it gives you a lot of confidence to stand in front of people and speak. The second MBA was the same actually. You’re there competing with some of the best minds in the world, people from different countries, and then when you top the class, you think if you can do well here, you can do well anywhere else too.

Apart from that, an MBA gives you a network and a set of people you can always talk to. Technical subjects like finance and softer ones like strategy are both critical in some sense. I think education is important, network is important. I think it gives you a lot of confidence to do what you want.

How difficult was it to get people to believe in your idea of Paper Boat?

I don’t think it was very difficult. See, if I say that I am working in a company part-time and that I am starting something new, then people will think that I am not passionate enough. Nobody will believe you. People will say that he is not convinced himself, then why should I be? If you want to build a castle, you must be able to burn all the bridges behind.

In the US, every single opportunity was open for me to explore. I topped my class in Wharton, I could have done anything there, but I decided not to and came back to India to do this. All my co-founders came in easily, the money came in easily and we always got support from the people around us.

How was the experience of taking your product to the market in the initial days?

One of the things in entrepreneurship is that you always face early success and early failure. Every single day, there is a time when you are very happy, and on the same day there is a time when you are sad. For example, you launch a product, and go to your first outlet. The owner looks at your product and orders some. You are very happy. Then you go to the second retailer, but he/she is not sold. You become extremely sad [laughs].

Early-stage bipolarity is real.

Has the external funding made any substantial changes in the organization?

To a large extent, there is still freedom. I don’t see a lot of changes happening because of the funding. They invested in us knowing what I want to do and they appreciate that. Personal and professional integrity matters the most when you have people believing and investing in you.

How has your leadership style evolved after becoming a CEO?

Coca-Cola is a great company [Neeraj worked as a general manager with Hindustan Coca-Cola]. I learnt a lot there, but at the same time when you come from such a place and you want to work in an entrepreneurial set-up, you have to unlearn a lot of stuff. I have always learnt hands-on, led from the front; always been in contact with the front end. In a large company, the system takes care of people. You can afford to be abrupt, to be high-handed, you can talk to people and they will listen to you, because there are other things around them that make them feel secure. But these systems aren’t in place in a start-up. You will have to be very cautious about what you tell people, how you speak to them, how you respect them, because if you don’t do that well, people will become insecure. So I think the responsibility is far higher here, and you have to change your leadership style accordingly.

So what kind of system did you put in place at Paper Boat?

It is work in progress all the time, because it is still a growing organization. Systems are there to a certain extent but it is still not set in stone. In the initial days, it is personality-driven work. There is no formal performance-appraisal system in the initial days of a start-up and the evaluation of performances is based on your perception. But as you grow, you don’t want that to happen, you want it to become a meritocracy. No system is perfect but you constantly work towards making it better.

What do you look for in people when you are hiring them?

We look for two things. One is skill set, the capability of any person. The second is the value system. We want people who are not necessarily the best performers, but possess values that we hold in high regard. We value hard work with an honest conscience, adaptability, positivity, innovation and treating others with respect. We want to work with such people.

However, another thing is that you still want everybody to work together. There are some people in the organization who have all the five values and then there are others who don’t. I don’t have all of these five values but I work on them every day.

What have been the exciting parts and the not-so-exciting parts of being a CEO?

The exciting part is that you meet a lot of people whom you normally wouldn’t have met in your life otherwise. My work allows me meet them. That’s the exciting part. And for the non-exciting part, I think it becomes slightly lonely at the top sometimes. Even if you are not confident at some point, you cannot show that to people. As the organization grows and hierarchy sets in, information flow to the top becomes difficult. It is important to have knowledge of what is happening on the ground. I don’t micromanage but I am always connected with what is happening in different sections of the business.

Your products are very creative. How do you foster creativity within the organization as a CEO?

Innovation is a core value in the organization. We encourage people to be creative. This is something that we have learnt from technology companies. Consumer companies are sticklers for their practices and don’t change too much. I think technology companies do it very well. So, for example, Google does it very well by taking feedback from consumers. Apple keeps improving all the time to make its products better. They take feedback to improve. We encourage people to change, we encourage our employees to do better all the time. On the communication side too, we ask our people to push the envelope and not settle even if things are okay.

What is your vision for Hector Beverages in the coming years?

How I look at it is, in some sense, we are the protectors of these recipes which have been around for centuries. Many of the drinks which we make have been made for thousands of years. These are recipes which have a strong connection. So, it started in some household, was passed down from mother to daughter. But because they are not available in accessible hygienic packaging today, they are disappearing from our cultures and markets. I have the job of protecting these recipes and if we are not there these may disappear.

How do you manage conflicts?

You try to understand. You need to develop long-term trust. You listen to everybody very carefully. Understand their points of view and take decisions. Ultimately, risk cannot be diffused. But at the same time, those who have a different viewpoint will believe in you only if they know that if you are wrong, you will come back and do the right thing.

Do you find time outside of work to do some extra activities?

Yes, I love to read. But at this point, any time I get, I spend it with my family. I have a twelve-year-old son, and I don’t get enough time to spend with my family because of my work.

What has been your mantra for success?

I think you should do only what you want to do. Work and life should merge. You should feel passionate and happy to go to work.

Who has been your role model?

Narayana Murthy is my biggest inspiration. He has been able to create so much for people living in small towns across the country. I looked up to him even before I ever met him. He is passionate and loves his work. He has raised his kids very well. He is willing to do anything for his company; he is always the first to arrive and the last to leave. He is a role model for all the sacrifices he has made.

What is your advice to twenty-somethings dabbling in entrepreneurship?

There are two things which are important in the early stages of anything—you require a lot of focus. You cannot be distracted. Then there is also an escalation of commitments. You cannot waste resources over something that is not going to work. Finding the right balance is the key here.

Paper Boat’s story provides a brilliant example of product innovation, marketing, bringing together passionate people, creating a unique organizational culture and understanding the role that a founder CEO plays in sustaining the organization’s growth.

The common factors that contribute to the success of start-up founder CEOs are: they have an idea which they are passionate about, a vision built on the idea, the ability to influence stakeholders like investors, a team that will be a part of the vision and strong execution capability. Fortune India’s ‘forty under forty’ lists CEOs and founder CEOs who have been successful in their careers. It is interesting to note that entrepreneur CEOs who made it to the list in 2016 built their businesses across a spectrum of industries, finding a niche in terms of offering or execution. The list included the India head of Xiaomi, Manu Jain, who was instrumental in scaling up operations and sales; Bhavish Aggarwal, co-founder and CEO of Ola, who built a strong taxi aggregator service in India; Amit Jain, the president of Uber India; Vijay Shekhar Sharma, founder and CEO of Paytm, a well-known payment and commerce company; and Richa Kar, founder CEO of Zivame—an online lingerie portal. The success of these CEOs, who have scaled up their start-ups, indicates that age and experience are not deciding factors.

Anvar T.K. who is one of the co-founders of Aufait, a comprehensive web-portal management services IT firm, shares his experience of leading start-ups. At Aufait, co-founders took turns to play the role of CEO over a period of ten years. Each founder had a period of two–three years to work on a plan and grow the business. Anvar, due to his interest in the IT product space, moved out of the operations role of the company and is the co-founder of another start-up called XAdapter. According to Anvar, the most interesting part of being a founder CEO is the opportunity to make your vision a reality. The difficult part is managing the administrative part of running a company, which can drain many entrepreneurs. These are aspects related to compliance, administrative tasks and even managing the accounts of the firm. The best advice that worked for him was to ‘hire team members who are better than you’. He said that while many start-ups look at the cost while hiring team members, his experience was that the right talent, even though more expensive, would deliver much more in terms of value.

As businesses grow, the founder CEOs have a more complex role to play. For example, if the business gets funding, investors may play an important role at the board level. The investors, especially venture capitalists (VCs), may play an active role in advising the founder CEO/board on how to manage growth. The VCs may even suggest getting a professional CEO or leadership team on board to execute the plan. An interesting example of how the relationship between the founder CEO and VCs can go into a downward spiral is the case of Housing.com, an online real estate portal. The relationship between Rahul Yadav, founder and CEO, and the VC, Sequoia Capital, turned sour and also led to many controversial public spats. Rahul accused Shailendra Singh, managing director of Sequoia Capital India Advisors, of poaching employees from Housing.com. The controversial email, written in a harsh tone, went public and created negative publicity. Similarly, Rahul was openly critical of Housing.com’s board. The communication between them, that was made public, showed the lack of a positive working relationship. Rahul Yadav had to step down as the CEO of Housing.com as the board asked him to quit as an employee.⁸ Some failures are attributed to the business ideas themselves, and some to the CEOs’ inability to manage the scale-up. They became unfit to lead the firm as CEOs.

Vasuta Agarwal, Business Head, InMobi India

In modern-day start-ups, especially in the technology space, we see educated and experienced professionals joining the co-founders to pursue their passion. Vasuta Agarwal, who heads the business of InMobi in India, is an interesting example. Vasuta left a career at McKinsey to join the start-up world in 2012. A BITS-Pilani and IIMB graduate, Vasuta took an unusual decision to leave a coveted job to join an organization that was still at a rather nascent stage. Yet, going against the advice of her friends, family and colleagues, Vasuta decided to take this leap of faith. She joined the co-founders of InMobi to help them build the future of mobile advertising. Today, InMobi has seventeen offices globally and Vasuta heads InMobi’s business segment in India.

Vasuta was in the director’s merit list for being among the top 5 per cent of her batch at IIMB. She was also a part of the drama society at IIMB. Vasuta emphasizes that McKinsey prepared her for everything in life because she always had to be thinking on her feet to deal with experienced and senior clients from various industries. In 2012, she took the decision to join InMobi as part of the founders’ strategy team. This has been her longest stay at a company so far. Vasuta says that the fast-paced nature of the mobile industry and the start-up world provide her with new challenges every day that keep her going.

Vasuta believes that her involvement in extracurricular activities has taught her some very important skills which help her in managing her work at InMobi. Playing sports not only taught her teamwork but also the ability to deal with failures. It taught her how to handle disappointment better. The drama and theatre classes made her more confident. She learnt how to talk to people, especially when it came to presenting in front of clients or at conferences. It also taught her how to come across as a calm and composed individual. She believes that in order to move up the corporate ladder, you need to prove yourself, start performing and give more than people expect from you in your current role.

Vasuta’s main day-to-day challenge in her current role includes managing uncertainty and ambiguity, given the rapidly evolving digital and mobile space. She needs to manage the uncertainty without it affecting her work and team. The other critical challenge Vasuta speaks about is talent retention. She feels hiring new talent is easy but keeping them engaged by giving them challenging work every day is difficult.

Vasuta claims that a good CEO should have the following critical qualities:

Ability to have a certain vision
Ability to inspire people around that vision
Ability to execute that vision

Founder CEOs of start-ups have to handle multiple roles. Their personality traits and skills also play a key role along with the expertise they bring to the table. Jessica Stillman, an author with Inc.com, after collating responses from experts and researchers in the field of start-ups, mentioned six key traits of successful start-up CEOs.⁹ These were resilience, people sense, intellectual humility, risk awareness, vision and passion. In the early stage of a start-up, processes and other people might not be available to help. In such a scenario, the founder CEO is the ultimate decision maker and, in most cases, the only decision maker. A lot can depend on how decisions are made and executed by the CEO. The decisions related to business operations or people management can have a major impact on the sustenance of the organization.

CB Insights,¹⁰ a research firm that analyses company data, did a study to analyse why start-ups fail and the top five reasons were:

No market need for the services or products of the firm
Running out of cash
Not having the right team
Getting outcompeted in the market
Pricing/cost issues

These points clearly show some of the skills that could help a founder CEO succeed. Having a great sense of the market need, ability to garner resources, having a sense of the right team needed, and managing competition could enhance the chances of start-up success.

Start-Up Stages and the Role of the Founder CEO

A start-up goes through various stages. A research study¹¹ covering thirty-five countries calls entrepreneurs who are at an early stage in their careers ‘baby business owners’. While those who are just starting out, the ‘nascent entrepreneurs’, are at the idea-forming stage that will give ‘birth’ to the business.

The ‘baby business owners’ sustain it and grow it to build a more established firm. Startup Commons, a global non-profit initiative, mentions these stages broadly as formation, validation and growth. The first stage of formation involves ideating, conceptualizing and committing. The second stage involves the minimum viable proposition; hence validating the concept. The last stage includes scale-up and growth. The skills required of a founder CEO would definitely change depending on what stage the start-up is in. In the first stage of formation, the most critical part would be the idea and how it is going to be made into a business proposition. At this stage, it is important that the founders have a very objective view of whether the idea can make a difference to its potential customers. Hence, calculated risk-taking and decision-making top the list of capabilities required. This is also the stage where if there are multiple founders, they align and commit to the cause of the start-up. It is these ideas that led to some growth stories like Facebook, Google, LinkedIn or Instagram.

An interesting example illustrating the first two stages would be of three young entrepreneurs from Rajasthan in India. As reported in major newspapers, the three entrepreneurs, Chetanya Golechha, Mrigank Gujjar and Utsav Jain, all tenth-standard students, built a start-up based on infusion beverages. The all-natural infused beverages successfully passed the idea stage and were accepted by the customers with sizeable sales. After the business was tested for its viability, they received funding of close to half a million dollars for a scale-up.

Flipkart was founded by Sachin and Binny Bansal in 2007. The founders got the idea of starting an e-commerce platform in India while working for Amazon.com. From a modest beginning as an online bookshop, Flipkart has grown to become one of the largest e-commerce service providers in the country. In the past ten years, the company has grown beyond its formation and raced past the validation stage to high growth. The company has more than 30,000 employees and as of 2016, a turnover of 2.2 billion dollars. The challenge it now faces is to find new revenue opportunities and differentiation from the competition.

CEO Skills at Various Stages of a Start-Up
Formation	Validation	Growth
Ideation Vision Influencing others Risk-taking	Vision Customer acquisition Building consensus Resource management and accountability Execution focus Risk-taking	Strategic planning Customer management Execution focus Stakeholder management Managing people Networking

The founder CEO has to take responsibility for his/her own actions and also for the organization. So at every stage of the start-up, the CEO is the key decision maker and executioner. Finally, the accountability rests with him/her. An IBM study found that many start-ups failed because the founder CEOs were unable to manage the governance aspects of running a business; lack of knowledge, experience or judgement leads to misrepresentation of facts and poor governing standards. This eventually leads to the investors losing money and, subsequently, faith in the founders. Nipun Mehrotra, an IBM leader commenting on the study, mentioned that it was the key responsibility of a start-up founder to treat investor money as his/her own money, creating accountability in the process.¹² Another integral part of this role is to build the organization’s culture. Are you going to have a culture of openness, fun, challenges and innovation? Many start-ups, especially in the technology space, have tried to be ‘cool’, allowing freedom, openness and, beyond everything, high focus on outcome and creativity. Research indicates that one of the reasons behind failure is the inability to build a culture that can ensure future success. The major factors that can lead to failure of the business include a poor business proposition, hiring without a plan, poor planning of day-to-day activities, lack of team building, inability to translate the organizational goals to the team, poor sales efforts, inability to raise funds/lack of planning to raise funds, and inability of the CEO to manage him/herself properly—including poor etiquette.

Swapnil Pawar has been the founder/CEO of four ventures after graduating from IIM Ahmedabad in 2006 and a stint with BCG (Boston Consulting Group). He was the founder of PARK Advisors—a personal investment advisory firm; CEO of Karvy Capital, the asset management firm of Karvy Group; founder of Scient, an asset management firm; and CEO of Engineers Gate, a portfolio management firm. The key trait of being successful is to focus on the key strategy and not diverge and spend resources on a multitude of ideas that might come in the way. In a smaller company there are so many distractions and it is important to focus. It is important to stay true to the chosen path and make changes only if required in a well-thought-out manner. The CEO of a start-up, along with his/her team should be able to carve a niche early on in the life cycle of the company. It may be the product, the technology or even the way you market. For example, PARK Advisors attracted a lot of attention because of the thought leadership articles that got published in the mainstream media. There should be a focus on profitability and growth. Many start-ups focus on valuation and growth without real profitability. At one point, this can lead to erosion of capital and resources. Swapnil also advises that it is important for an entrepreneur to venture into businesses where he/she has considerable expertise, otherwise you may be relying on false hopes of a successful venture without knowing the ground realities. As a founder, Swapnil also led teams of high-calibre individuals. He mentions as a CEO your role is to ensure that individual efforts are channelled to the larger goals and plans of the organization.

In many organizations, we see that the founders hire professionals to scale and sustain the organization. A recent example in the Indian context is of Richa Kar of Zivame. Richa is the founder and CEO of Zivame, an online lingerie store that she started in 2011. While, she was instrumental in getting the organization to a certain growth stage, she moved away from the day-to-day operations and focused on more strategic projects related to the business. It is important for the founders to focus on their strengths and bring in professionals to manage other operational aspects to ensure that the organization is prepared for growth. Founders hire a CEO or a more experienced team to manage the operations as the business grows. It may be driven by the founder, or other stakeholders like investors who envisage the need for a more experienced team to grow the business.

Rakesh Kumar and Poornima Rakesh, Founders, WE Fitness

Rakesh Kumar started his journey as a businessman when he got involved in his family business at the age of eighteen. The business was headed by his grandfather who was the karta of the HUF (Hindu undivided family). Run in a traditional manner, Rakesh found multiple opportunities to improve the business: from computerization of the offices to using more efficient communication mechanisms. However, Rakesh found that bringing change in a family-run business was a difficult process because of resistance for the same and the inbuilt hierarchy. In 2002, he started his own business with a set of partners. They started a fitness centre. Rakesh was chosen as the CEO because most of the funding had come because of his credibility, and a lot of the ideas were his. The firm brought new concepts of fitness in south Bengaluru. It moved away from the traditional concept of body-building and focused on fitness as a concept that was gender neutral; they also created a modern environment for exercising. The firm made good operational profits and built a reputation in the market. However, the firm had to close down in 2010. Ego issues between the partners led to the closure. Divergent views in management philosophy and lack of concurrence on many aspects of decision-making led to the shutdown of the business. Rakesh mentions that in many partnerships or family-run businesses, professional management and empowering the employee is not the practice. Often, even if the CEO believes in certain practices and decision-making processes, if the other partners do not agree, it can lead to conflicts.

When Rakesh decided to start his new business, he was clear that it would be professionally managed and would have a singularity in leadership. From 2010 to 2013 Rakesh put his efforts into building WE Fitness—a modern fitness centre. He invested his own money to fund the venture. The focus was to create a fitness centre that would appeal to all target groups of people who are concerned about their health. The idea was to create an environment that was fun and engaging for the members. Learning from past experience, Rakesh decided to name the centre ‘WE Fitness’—where there was more ‘We’ and less ‘I’. There was more emphasis on teamwork and less on personal egos. He also introduced a system where each employee was empowered to do their best for the centre. Rakesh’s wife, Poornima Rakesh, joined WE Fitness as an instructor. A homemaker, Poornima transformed herself into a trainer by taking specialized courses in fitness. She also helped the centre strengthen its aqua fitness programmes. Rakesh did not set any targets for the employees as he wanted them to see it as their own responsibility and do their best, rather than be driven by the owner/founder. This professional culture also attracted talent that liked being empowered. The fitness industry was not considered very lucrative by those looking to build a career. WE Fitness focused on creating a learning environment and also insisted that the trainers undergo formal training to appreciate and understand fitness and body physiology better. The empowerment, learning and a more formal approach towards fitness helped attract and retain a core set of employees. This culture has helped to achieve more than 30 per cent growth year-on-year from 2013, even with an environment of increased market competition.

As in the case of Rakesh Kumar, a start-up, even after becoming a more established firm, can struggle to survive for many reasons, not purely financial. Noam Wasserman, a professor of clinical entrepreneurship at the University of Southern California (USC) and the director of USC’s Founders Central Initiative, in his article ‘The Founder’s Dilemma’ published in the Harvard Business Review,¹³ mentions how difficult it is to find a successful founder CEO. According to his research from US start-ups, only 40 per cent of founders remain CEOs after a period of four years. Many of them understand their limitations to take the company ahead or are forced to leave the job to professional CEOs due to pressure from the board or VCs. Most founders believe that they are best suited to lead the organization. They provide the initial vision, put the idea in action and bring the team together. However, at the growth stage, the competencies of the founder may not be enough to bring the organization forward.