I’m a heavy user of FlipBoard, as it often surfaces worthwhile stories about founders and mentoring. However, I’ve noticed over the past few months that it has presented more and more clickbait, “The single secret to immortality,” “How to get rich while you sleep,”, “How to become rich and famous even if you are over 70!” and more!
I always ignore these headlines, but for some reason I read the Entrepreneur.com article 4 Lessons From an Entrepreneur Who Became a Self-Made Billionaire Before Turning 40, by Daniel Priestley, which even sports a clickbait subtitle, Bhavin Turakhia and his brother Divyank started their billion-dollar journey with a $375 loan. This turned out to be an article worth reading and annotating for my readers.
Not only has Indian entrepreneur Bhavin Turakhia built and sold three companies for a total of over $1 billion, he and his brother have never raised external funding!
Bhavin is a massive advocate of bootstrapping a business unless it is absolutely essential to seek investment. He says, “When you truly believe in the value of what you are creating, diluting the equity is the most expensive way to grow.”
Here are four lessons he passes on the first two of which I’ve not seen before in the hundreds of articles and books I’ve read about startups. And these are all lessons well worth learning.
Lesson 1: Value creation over valuation
Many of the founders I mentor are obsessed with raising money and once you enter that process you quickly become obsessed with your valuation, as it determines how much dilution your equity will suffer in direct proportion to how much money you raise. But Bhavin believes that founders must focus not on valuation, which is an important number only to founders and investors, but on the value you provide to your customers. But how do you measure customer value? Rather than get snagged in the typical founder metrics of eyeballs, traffic and employee headcount, Bhavin focuses on net-promoter-score (NPS), customer satisfaction, and profit. Heed Bhavin’s words, “Valuation is a side-effect, not a goal.”
Lesson 2: Creativity over cash
Well this seems counter to the prevailing wisdom, isn’t cash king?! Well Bhavin sees two common problems companies have that raise too much capital: one, they end up overpaying for customer acquisition, rather than employing no-cost, low-cost guerilla marketing techniques to acquire customers. Hiring an agency to conduct a focus group foregoes the needed face to face interactions with your customers. Here’s another great quote from Bhavin: “Adversity causes innovation.” “If a business is too well-funded, there’s always a temptation to throw money at problems rather than digging deep for an innovative solution.” Also known as “Necessity is the mother of invention.”
Lesson 3: Quality of people over quantity of people
This is what I preach to my mentees: getting too much investment too soon can easily lead to hiring too quickly, which tends to favor growth in the size of the company – a number easily shared and bragged about – over the quality of your team, something less obvious. Here’s a great quote from the Daniel Priestley about the dangers of hiring too many people too quickly:
Every new hire adds complexity to your culture. Each person brings with them baggage and experience. If you hire average people, they dilute the focus of the rock stars. Companies that do not have deep pockets should recruit just a few brilliant people and they will probably have an edge over the 100-person company that expanded their team too quickly.
Lesson 4: Staying focused
This is my Lesson 1! And it is so important that I would make it lesson 2 as well. Seriously, one of the biggest problems I see with startups is that they all want to boil the ocean. They seem to have an irrational fear that if they focus on only one thing they will be leaving lots of other opportunities to their competitors. But to quote Bhavin again, “Success is directly proportional to the level of focus you can put into solving a problem.” As the author wisely adds, “Investors who are not in control of the running of the company need to diversify their risk across many companies, but entrepreneurs need to choose a big problem and focus all their energy into solving it better than anyone else can. ” I’m in violent agreement with Bhavin, who says, “One of the biggest things that kill startups is defocusing.”
So sometimes it’s well worth taking the bait, even if it’s click bait!