The Beginning of an Inclusive Startup

 

Last week, I talked about how Silicon Valley and the tech industry, in general, is biased against women.

It was to battle this that myStartUpCFO was started. In August 2013, we began with the social objective of integrating women back into the workforce, without robbing them of family time. We actively work towards closing the stark gender gap, where a woman is not made to choose between a booming career and an equally demanding personal/family life.

Over the years, we’ve observed that women often quit work to raise their family. As they move out of the workforce, they tend to lose part of the skill-sets that they had earned with so much effort: negotiation, analysis, math, logic, and collaboration. As a result, the company loses a dedicated employee, mainly because of domestic difficulties. She also ends up unhappy because she had to give up a thriving career to bring up her family. Why choose when both are possible?

At myStartUpCFO, we believe that the idea of working along a timetable is an industrial era concept and doesn’t work in today’s digital world.

As a result, we provide a virtual and flexible office which helps women stay in the workforce, even when family or other externalities demand more of their time. Our workforce is predominantly women and they have complete flexibility to work from home. This also allows us to tap into talent outside of a 100-mile radius.

If you can’t trust your employees, why hire them in the first place?

This is where it all begins. We enable our employees to work within the framework of the company guidelines but with the ease of timings that suit them.

The benefits of such a setup are manifold:

One, it tells our people that we believe in them, and we trust them to do a competent job without a lot of handholding. This pushes them to deliver, to be resourceful, and figure out problems on their own without escalating everything to their supervisor.

While building higher capacities, it also maximizes productivity and minimizes attrition: two of the biggest challenges most companies face.

It also brings our overheads down, the ones pertaining to a physical office space, allowing us, in turn, to offer the cost advantage to our clients.

However, I’ll be the first to admit that this setup is not without its share of challenges.

With about a hundred people spread across the globe, it’s difficult to foster a close-knit culture and encourage open communication. People often don’t feel a connection to the entity and lack an informal channel to share.

We are actively focusing on initiatives that will encourage conversations: from a company newsletter bringing the latest on-dits from our different units across the world, as well as Google+ Communities to mentor, guide, and foster a deeper connection.

If any of you here are dealing with the challenges of a remote team, or has questions about how this would work in practice, I’d be happy to talk, and help avoid the pitfalls that nearly got us the first time we did this!

At myStartUpCFO, we are proud of the supermoms that work with us, and we happily tell our clients to expect crying kids and barking dogs in the background when on a call with our teams!

6 Mistakes Founders Make When Raising Funds

Raising money for your startup doesn’t have to be an impenetrable mystery, like whether your fridge light stays on when you shut the door. Every week, I meet people who still haven’t figured it out. In this article, I’ve shared some common mistakes I stop people from making.

The fridge light turns off. Next topic, fundraising.

  1. Too little, too late: In an earlier article, I mentioned that startups should raise more money than they need, or else risk becoming a #BurnRateZombie. We are part of a volatile ecosystem. It’s good to be prepared, especially when you’re starting out.

What most entrepreneurs also seem to forget is that raising funds takes time.

Even if you strike a deal, it could be months before the money is transferred into your account. Don’t ever stop raising funds. Continue to network and interact with the right people, even if you don’t need the money right away.

Most importantly, be mindful of your burn rate and runway. It’s easy to get so consumed in growing the business that you lose track of critical financial numbers. Watch your runway like a hawk so you can have your investor outreach strategy ready when you need it.

2. Too much, too soon: When it comes to fundraising, too often, people focus on the how, and not enough on the ‘how much’ and ‘when’.

We’ve heard horror stories of promising companies that get massive funding early in their life cycle only to die a quick and humiliating death. Color started off as a photo-sharing app that raised a whopping $41 million in 2011. This was before it had added a single user.

What happened?

It shut down months later in September 2012. The team was acqui-hired by Apple, but there was so much negative publicity around the app that Apple never even bothered with an announcement! Experts proclaimed that the product did not resonate with the customers. In other words, a bad product-market fit.

FYI, Instagram had raised a $500,000 seed round.

3. Selling yourself too low: Another drawback of raising too much too early in is the high probability of a low valuation. You’ve given away some equity as well, which would mean you no longer have complete control over your new business. You now have a lot of money, an iffy product, no real proof of concept, and someone you are answerable to. How would that work for you?

Remember this: A startup operates in two phases — the build stage and the growth stage. Funds fuel growth.

During the build stage, it’s important to stay lean, and not be controlled by VC money because it can often complicate things.

The problem is, when entrepreneurs raise millions, there’s pressure on them to spend it. VCs did not give them the money to accrue the savings interest. However, until the founders fully understand the market and how their solution fits into it, they can’t spend it in the right direction.

4. More money, more mistakes: When you have limited resources, you are forced to look deeper and make tough choices. It pushes you to negotiate harder on your office lease, or perhaps take a more frugal space. It teaches you how to stretch a dime to a dollar, and make each dollar work for you the right way. It will force you to keep salaries palatable in an inflated market, and will constantly push you to take decisions that bring you closer to your revenue model. These are hard decisions, and these hard decisions make for a solid foundation.

5. Don’t spray and pray: Don’t make the mistake of reaching out to every investor you’ve heard of. Do your homework. I’ve heard of startups at seed stage pitch to investors who don’t invest in companies that size or in that industry, only to be disappointed in the end. Save yourself the heartbreak and look for funding in the right places. Know your audience and speak their language. Are you trying to pitch a food delivery service to Mark Cuban? Chances are he will decline.

6. Consult an expert: Talk about being penny-wise and pound foolish. Some entrepreneurs decide not to get legal and financial help when signing term sheets to save a few thousands. How does that end? With a raw deal that could cost you a lot more than what you were trying to save.

Understanding the right valuation, pre- and post-money, in case of multiple funding rounds and what terms are actually good for your company requires specialized knowledge. Even before you speak to an investor, work with a good financial advisor to help understand what you need and deep dive into the numbers.

Got a question? Leave a comment.

Sexual Harassment and the lack of an inclusive culture in startups of Silicon Valley

Kalanick’s world melted with one blog post by Susan Fowler. A detailed, dispassionate 2,910-word account by an ex-Uber engineer opened a can of worms for Uber and brought forward the misogynistic culture of the $68b company.

“When I reported the situation, I was told by both HR and upper management that even though this was clearly sexual harassment and he was propositioning me, it was this man’s first offense, and that they wouldn’t feel comfortable giving him anything other than a warning and a stern talking-to. Upper management told me that he “was a high performer” (i.e. had stellar performance reviews from his superiors) and they wouldn’t feel comfortable punishing him for what was probably just an innocent mistake on his part.” – Susan J Fowler

Close on the heels of Uber, Justin Caldbeck, Partner at Binary Capital, put in his papers for sexual misconduct against female founders.

In another alley, a Silicon Valley tech worker had to undergo the horror of being groped by her CTO after an office party. You know what’s worse? The CEO refused to fire the perpetrator. Eventually, the woman had to move while the predator flourished because he was a friend of the founder and successfully defended his actions under the guise of a hug.

“I felt disgusted for months after that,” said Haana, who requested that the Guardian not include her full name or identify the small tech startup where she used to do marketing. “It affects me on a level that I wish it didn’t.”

There is something seriously wrong with the startup valley. Toxic work culture seems more of a norm, rather than an aberration. In a recent research study, more than 60% women face some form of sexual exploitation at work in the Silicon Valley.

Under the guise of innovation and disruption, the culture at startups conveniently excludes women. The not-so-subtle reminders are late night parties where booze flows and bonding happens over shaved heads.

It’s sad that sexism and discrimination haunt women even at high-profile technology companies, including Twitter, Apple, Oracle, and Google.

This much is clear that these technology giants overlooked an inclusive work culture while building their organisations.

Where did we go wrong? How can we fix it?  

Why do we forget that a culture that ignores half of the workforce is built to fail, even after being uber successful.  

8 Pieces of Advice for When Your Startup is Low on Cash

Originally published on Startups.co

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In June 2013, I met the CEO of a data analytics startup here in the Bay Area. They had raised many millions already and I was on a mission to pitch them our services. However, as I stepped into their foyer, I was already filled with questions.

This was a handsome office for a company that had just raised a Series A round. Rather outsized, like a gangly teenager wearing his father’s jacket. Looked nice, but why does a small startup need a 5X office in one of the priciest real estate areas?

His answer caught me off guard. “I don’t ever want to feel cramped again!” he said, squishing his shoulders together.

Not far from this office, not so long ago, Steve Jobs had made a speech about “Stay Hungry, Stay Foolish”, and here was a company that got him exactly half-right.

I’ll let you determine which half.

This guy actually committed ~50% of the funds raised to the lease he signed for his “non-cramped” office. We never ended up working with this company, and needless to say, they ended at the auction block soon after.

Startup shows and the media flaunt the flamboyant lifestyles of entrepreneurs, and once the VC money hits the bank, this temptation is difficult to resist for even the saner ones out there.

If not personal extravagance, a lot of companies go on a wild hiring spree, or gleefully hand out big contracts to marketing agencies.

Founders often claim this defense: “But the money is raised to be spent!”

Of course it is. VCs did not invest in a Savings account. However, it’s important to figure out a scalable and sustainable business model first, before going out all guns blazing to promote a half-baked business with no product-market fit.

Mohit Bhatnagar, the Managing Director of Sequoia, agrees:

“In the new regime, startups are shunning previously popular buzz-phrases such as ‘growth over profit’ and ‘winner take all’ and adopting new ones instead — getting ‘unit economics’ right and reducing the ‘cash burn rate’.”

In an earlier article, I talked about watching the red flags that signal a #BurnRateZombie. Let’s now talk about how to avoid becoming one. Here’s how to rein in your spend:

1. Audit Subscriptions and Online Services:

I was going through the bank statements of one of my clients when I noticed that their AWS bill for the month was almost a $100,000. This was about 10X their usual bill and curious, I rang the CEO. He had no idea; he’d never even read the bill. After some legwork, we found out that every click on the website was spawning a new instance on AWS, and when we argued with the vendor, we ended up saving them $20,000.

Seriously though: read your bills. Especially for the online services you and your team has subscribed to. You need to make sure your licenses are only for the services you regularly use. Sometimes different employees authorize services to bill your card and then they leave the company, letting the billing continue for months or even years. There should be at least a quarterly audit checking the justification for each subscription, and an automated system to stop existing subscriptions when the person using them quits without bringing in a replacement.

2. Fire your Worst Clients, Not your Best Salespeople:

Don’t cut your best sales guys, instead fire your worst clients. 20% of your clients contribute to 80% of your stress. Focus your energy and effort on the good ones.

Good clients want you to survive. Ask them for an advance or best, a full payment on the bill they owe you.

3. Increase Performance Standards:

Firing your team is not an easy decision to make. Sometimes you might not even be sure whom to cut without affecting performance and team morale. Increasing performance standards might help make this decision easier.

4. Deferred Compensation and Salary Catch-ups for Employees:

If the situation is dire enough that you can’t meet the upcoming salaries of your key people, be honest with them. If they believe in your vision and sense a genuine opportunity, they might go for deferred salaries, freeing up your immediate cash reserves for more crucial expenses.

5. Fixed vs Variable:

Break down your burn into two subparts: fixed and variable. Fixed expenses are one you incur irrespective of the number of customer transactions. For example, salaries, rent, office equipment etc. On the other hand, variable expenses are directly related to your transaction volume. These are more flexible, because your cost moves proportionately with your revenue.

Try to keep fixed expenses at a minimum, and make them as variable as possible. For example, link a percentage of your sales team’s salary to a bonus linked to the business they bring in, or sign a lease agreement that gives you the right to expand your office at the same location, but doesn’t weigh you down if you don’t need the space right now. This will help you control the burn if business dips tomorrow.

6. Message Cuts:

Sometimes your team doesn’t catch up to the fact that you’re running low on money. They’re used to having free beer in the office fridge, Friday-night parties, and a daily gourmet lunch. You might have to get the message across the hard way: tone down the splurging. It might not make a big dent on the bottom line, but all the drops add up to make the ocean.

7. Be shy to commit to expenses that are difficult to reverse once committed.

Like a Vegas wedding that’s quick to get into, but harder to get out of, think of renting or leasing a big ticket item instead of purchasing it. Outsource instead of hiring in-house, to save money on benefits. This way, pulling the plug is also a lot easier if they don’t perform.

8. Quick Burn Vs Slow Burn:

Take the office space on lease, it will still burn your money, but slowly. Buy the same place and kiss that money goodbye forever.

Survival is tough. It is taking a series of decisions that go against consensus, and require continuously maintaining a shoe-string mentality when you have millions in the bank. It’s important to maintain this mentality consistently; cutting back after you’re used to splurging is very difficult. Like an always-broke college student suddenly on the payrolls of a rich company, who finds it impossible to go back to operating on his student budget.

Have you come close to becoming a Burn Rate Zombie? Which of these tips helped you survive? Share your story in the comments below.