Latest / The Collaborative Canvas Podcast / Why Startups Fail Beyond Product-Market Fit | Lloyd Mathias on Founders, AI & Governance

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Why Startups Fail Beyond Product-Market Fit | Lloyd Mathias on Founders, AI & Governance · The Collaborative Canvas Podcast

• speaker-0: Today, as a failed startup founder, is not a bad thing. Gen Z consumer is also more welcoming of failure, but he also recognizes if a company and a brand behaves like a speaker-1: what point of time you think, you know, that ego hits with any factor, I mean with could be any element that that makes them go way beyond their original chemistry? speaker-0: As the journey grows, I think startups tend to evolve. speaker-1: What else can go wrong between the founders? speaker-0: People always find that the conflict is rooted in business. Starts off saying that I don't agree with your idea and those are small routine things which happen normally. Ninety-nine percent of the investors who could keep SNEE experience is very often not considered and that is a lot of speaker-1: One quality every founder must have. If I'm joining another company as a co-founder, what should I look into it? speaker-0: Integrity and commitment. speaker-1: Welcome to another episode of the Collaborative Canvas Podcast. Over the last three decades, India has witnessed enormous shifts in the way businesses are built. We have moved from brand-led growth and traditional marketing to digital transformation, startup disruption, AI, and now a growing focus on governance and institution building. Very few leaders have had that opportunity to observe and contribute to this evolution from as many vantage points as our guests today. Joining me is Lloyd Mathias. Independent director, angel investor, business strategist, and a former corporate leader who has held senior leadership roles across some of the world's most recognized organizations, including PepsiCo, Motorola, Tata Teliservices, and HP. Today he serves on multiple boards, advises businesses, and invests in startups, and continue to shape conversations around the leadership, governance, technology, and India's growth story. In this conversation, we will explore what has changed in business leadership over the years. What separate separates us enduring companies from short-lived success and why founders' alignment matters as much as product market fit? How AI is also shaping the decision making these days and what is the next decade about holding on for India's new startup ecosystem? Lloyd, it's a pleasure to have you on the show. speaker-0: Thank you, Ankesh. Lovely to be on ⁓ the the c collaborative canvas. Looking forward to a great conversation. speaker-1: Thank you so much for coming onto the ⁓ on to the show. We ⁓ spoke briefly about ⁓ so many things. I mean I've been ⁓ looking at your podcast for over a while now and this something which caught my attention y you mentioned to some podcasts five years ago about you know the changes in the in the startup word which is likely to happen. I think in over the past five years, a lot has changed. I remember when I was with ⁓ an organization during my twenty twenty-three year, Chat GPT already started coming into the town. and a lot of people were using it, though it was at a very nascent stage. How do you see ⁓ you know, from that fifth year five years ago to now, things have changed. speaker-0: Pace of change has been dramatic for businesses in general. And I would say, you know, two or three big landmarks. I mean, for overall India specifically, I think 2016, when Gio came into the market, suddenly the use of smartphones expanded. Right? Earlier, all that we talked about before 2016 was still about 10, 20 million Indians who were, you know, using e commerce, et cetera. I think post 2016, when they democratized ⁓ data. ⁓ you know, India has become the largest data consuming country in the world, right? So everyone, your security guard, everyone's watching YouTube videos. So I think that was one big change. The second, you're absolutely right, is November 2023. For when ChatGPT came, AI came alive. Right? Till then we all knew of AI, we were all wondering what AI was about, cloud computing had happened, ⁓ you know, all the other changes had happened. In fact, AlphaGo was the big point. But I think when Chat GPT made AI a consumer phenomenon. That's when suddenly things changed. And now I think the change is accelerating, right? So today as you know that young people, or most people actually, don't go and put keywords into a Google search. It's normally a question. Tell me which FIFA football world cup match is happening tonight. Yeah. ⁓ you know, who's likely gonna win between Argentina and whatever. So I think it's always people are posing questions, and I think that has changed dramatically. And I think therefore, and you know, if you look at the last three or four decades, I think this is going to be the most significant impact. of technology in our lives. Almost like what happened when the internet first came on. I think this is going to be a very, very significant impact in every which we have our life, personal and of course professional and business. Things are going to change very, very dramatically. speaker-1: But you've seen the startup ecosystem ⁓ in in the last five and a half years. And ⁓ if I really have to talk about my own experience, I you know, I've seen, you know, things have changed very drastically. I mean, people are using AI not just for writing prompts, but they're actually making movies out of it. I mean, we have seen a lot of ⁓ those. And you've been interacting with a lot of startup. What has fascinated you most, you know, when it when it comes to usage of the AI and from what you actually predicted to what is right now? I would say the biggest speaker-0: Single thing that you know we can celebrate, I think, is the speed of innovation. So you're absolutely right. I think, like you said earlier, AI was more about finding a way around, asking questions. Today it's about doing things, right? So there's a you know ⁓ AI company that I'm involved with. ⁓ they are doing sales training. And this founder, the lady founder, they have done their entire app ⁓ using all the ⁓ the the the the the ⁓ you know the ⁓ the coding entirely through AI. And they have, as of now, a functional app that works brilliantly in nine languages. And they haven't, barring for a chief technology officer and one or two other people helping put together, it's almost entirely outsourced. Now this would typically have taken at least six months to a year, you know, having a big technology team, you know, blocking time, doing all kinds of, you know, ⁓ A B testing. I think therefore this whole thing is now companies seamlessly. So I think one is it has accelerated the speed of innovation. Two, I think it's bought down the difference between well-established companies and a startup. Right? There's a time, and I keep repeating this in every consumer context. I think there was a time when the large multinationals, the large companies, they had six advantages that startups would never reach. They had great distribution, they had great supply chain manufacturing all over, they had top class RD. They had a brand that was built over time, spending a lot of money. They had the best in class people, right? And they had an innovation RD lab, so to speak, right? Which small companies couldn't compete. Today, if you look at it, you know, ⁓ a direct D2C consumer startup can reach at least 50% of the outlet India's largest, say, Hidustal Lever can reach in the matter of a few months through third-party logistics. Today's supply chain is an equalizer. I mean, there are enough of speaker-1: Exactly. speaker-0: Companies that manufacture soaps or whatever that you can get done from the same as the global companies. So there are ⁓ you know, so manufacturing is not really a competitive advantage. Third is if you look at areas like ⁓ you know, kind of distribution, how am I going to get across? Again, you know, that has not become ⁓ much of a difference. So I think the only real differentiators really today is about brand and about innovation. And both these are about people and also the speed at which you can change. And therefore, if you look at it, Today, the large company are still investing on people because they recognize that is their one key differentiator. And two is in terms of building brand and doing RD, the innovation aspect. But even there, I believe that startups are more agile and they can between an idea and a product, I think they can be much, much faster than any large company for obvious reasons. So I think that is the most inspiring fact that AI has enabled entrepreneurs to create world-class products without having all the big resources that was happening in the past. So that has been a big jump. speaker-1: Lloyd sir, tell me something. ⁓ there's always a hidden truth ⁓ which not many people actually know. And I have also realized while talking to a lot of brands these days, ⁓ you said they have the best in class labs, best in class people. When both of them are already there, you know, the innovation thinker mind always gets, you know, on on ⁓ on the go. You know, as in people are keep on keeping thinking alive and they're creating spaces. And when it comes to startups who actually creating those labs with the use of AI within themselves, how what is basically that differential ability between the two organizations that one always needs startups to actually, you know, give them what they can actually do where whereas they have all the capabilities and all the, you know, wealth in the world to actually do that and they still ⁓ don't need ⁓ startups. But at the end of the day, I still still see there there's always a collaboration between ⁓ smaller players to a larger brand and they believe KR Let the let's get them on board. speaker-0: Great question, Ankesh. I would say that a single word differentiator is empowerment. Let me explain. I think where startups can learn from large companies are four aspects. The first, I think, is the fact that in a large company, there are processes that help the company run efficiently. Right? A lot of startups, you know, I spend a lot of time with founders, and founders say I don't need process. ⁓ Team members have, I speak to them once an hour. Two processes. I think there is an advantage in following a process. I'll give a small example. You know, well-known furniture rental firm that I was, you know, mentoring. ⁓ The founder kept telling me, I said, Do you have a Monday manning ⁓ Monday morning all-hands call? He said, Sarotni. I mean, I talk to my four regional heads every half an hour. So Monday morning kyachize. So I said, try it out. After about a third week, he came back and said, Fantastic, because when I get all my regional heads, And my CFO on the call, suddenly there's an element of competition. Last week South did their targets, like in North fell behind. So that has made a difference. People are coming prepared. They are knowing their numbers. They are not talking about the funnel. Okay, this week it's Suddenly, when all are together, I'm getting a holistic view, but they are also feeling business, we all away. ⁓ he said, you know, data. I at my mind, I know I can tell you state-wise kya aura, suddenly when you put it in a process which seemed very old-fashioned, he said, now it's become far more rigorous. Right? People are working towards it. There is a competition. He said, I mean difference. So one is I think startups can learn from big companies is kind of process. The second, I think which big companies do by definition, is a bit of succession planning. The reason I say is for startups are small, they're working on small budgets. They don't think What the second line? So it is the one or two founders, you know, who are like the gods or baki sub-executors. Until you have somebody who can challenge your thoughts, who can question you, things keep falling apart. And I therefore always tell founders, get one or two guys almost as smart as you, right? They may not be co-founders, but there are people who can look you in the eye say, boss yeah, I think until that happens, things won't work. So I think one is the ability to challenge, which large companies have succession planning, so it makes a difference. The third, which I believe that startups underplay, is a little bit of culture, right? They say culture kya cheese. My point is, large companies they've built a culture, and culture has certain rituals that have to be practiced. Do you publicly call out a successful guy every month? Do you have a you know once a quarter, you know, that these three guys did outstanding performance sales-wise? Have that as a part of the rules because you taking out your favorite employee for a drink. What Alak Chi said, but the moment it gets recognized on a big level, a male goes to all hands, ki so-and-so has done well. So I think have certain rituals which are part of shaping the culture. Even if you're a very five-member team, but have that culture. So people recognize that the founder and this startup values people. I think that is a very important part. And I think the last thing that startups can learn from big companies is actually look back and review. Because startups are in a hurry. I think go back and review what worked, what didn't work. Right? Because that institutional learning that big companies codify startup. So the same mistake is made one year later. At least large companies recognize ki chirata. So have a little bit of that review and kind of record it. So people know this work didn't work. What large companies can learn from startups, and I believe that's much bigger learning. I think one is the empowerment. The fact that startups are empowering, right? A young guy knows, I mean, I remember I was in one multinational and you know we went to one of the large campuses and we found, you know, a very smart guy who said, No, no, I'd rather work with the with a startup. He Why? He said, Look, I can get to hang out with the founder. He said, When will I get to see the CEO of your company? And then we realized, right, our CEOs were on a different level. So I think one is empowerment, which I think is a very big one. Two is the freedom to fail. Right? Today, as a a failed startup founder, is not a bad thing. Right? We can happily put it in our LinkedIn. Right. Whereas in the 90s, you know, to talk about a failure was like a backward. So I think startups are not afraid to fail. And the third one, which is linked to this, is the fact that startups go with making a decision and changing on the fly. It like they say the world world. Right? We all use Gmail for many years. Right? There'll be changes. I think the fear to put something out there and then say basic response quick karenge change is Whereas large companies are so particular that research, every ad should be researched. We don't have that luxury. Right? Just to give you again a quick context, I mean, you know, when I began my career early in days in Pepsi, we used to have four big campaigns a year. Diwali campaign, peak summer, back to school, you know, whatever. I mean, today a large brand will be doing what, average of fifty, sixty campaigns a year? I mean, every week there's something new, some new festivals or whatever. Because digital is much faster. The shelf life is much shorter. So, therefore, you don't have the luxury to research and get everything right. Go with it, make tweaks as you go along. And I believe the new general consumer, Gen Z consumer, he's also more welcoming of failure. But he also recognizes if a company and a brand behave like a human, right? Some things work, some don't work. So it's a more casual approach as opposed to saying getting everything right. speaker-1: As opposed to saying everything is right, ⁓ let's again going back to the earlier question when I asked you, you know, what excited you? So what concerned you? speaker-0: Lots of concerns. ⁓ what concerns me the most in startups are really two things. I think one is what I would call is founder integrity. and by this I mean is that today as a investor and you know, a lot of the VC firms, they're betting a lot of money on great startups. And I've been in a lot of discussions when all the discussion rests around product market fit. What is the TAM? Totally available market, what is the addressable market that this startup can address? And what is the right to win with the right product market fit? A lot of discussions, right? They will do research, they will talk to users, they will do a lot of stuff. I think virtually no time and energy spent on looking back at the founder. Because effectively, if I'm betting $10 million in a founder's company, I'm betting $10 million on that guy. If he loses interest, if his you know life changes. That money is effectively gone. It's an idea that can't be transferred. So I think doing deep due diligence on a founder is very important. And I know there's almost an ethical line, but I know VC funds today who do deep diligence to the extent of going back to a founder's college days and maybe talking to his roommates in the hostel. Because there are some fundamental character flaws that will always recur in a person's life. speaker-1: But is it b because everybody is becoming a founder ⁓ without having any prior experience of how to fail or how to succeed? speaker-0: That's not a bad thing, but it's also the fact that barriers to entry are low. Right. In my generation, when you know you want to be a founder, I mean, unless you had a rich dad, you couldn't do it. Today, availability of venture capital or even, you know, what you call startup capital is much easier, right? You can go to a bunch of angels and get funded. I think it's not the barrier to entry, it's just the fact that today people realize that it's a shortcut towards wealth, right? Everyone's saying Charpat Salma exit Karlu. I mean, I need twenty crores and I want to settle down in Goa. Or Bermuda as well. I think that get rich quick thing has made a lot of people take shortcuts. So the thing was Area Charalia, if I get some funding, if I can go to certain levels, somebody will pick me up. Also because the venture capital world works on the bigger full fool theory. Right? So the series A company is willing to sell out to a larger firm and so on and so forth. And we've seen things like Baiju, et cetera, collapse. So I think that's one part. Therefore, integrity is very important. The second, I would say, link to integrity is a little bit of Founder chemistry. Very often you have co-founders. And I've found that very often it's the people difference that matters. Both the founder maturity and chemistry, but also how the founders treat their core team. So you have to start building a team from day one. It's not just about a great idea, a great market fit, and two founders go. I think you have to get people who are on the same mental wavelength, but who can also challenge you. Give them responsibility, give them a small part of equity. But I think it's about Ability to build a team and also the founder chemistry. And I can tell you, and personal experience from at least three startups. I think the moment the startup becomes big, gets noticed, gets ⁓ you know, but reports in the CNBC and Economic Times, I think that's when ego battles come in. Kiba equal, we are both 50-50 plus partners, they can use photos of jad, why not me? Right? And therefore, that these are small ego issues. And we have to keep reminding startups that the game is much longer, right? Do you both want to retire as millionaires in seven years? Or are you worried about the fact that, you know, his picture came in economic times, many ni? You know, so that is so I think founder chemistry is something where there is a lot of work to be done. speaker-1: I was about to come to that question because again, one of your podcasts also talked about ⁓ the founder chemistry is should be checked by venture capitalists. Sure. ⁓ let's take an example for say. ⁓ there there's a company with say four founders. And so initially all four of them are actually equating it together. But at a later stage, ⁓ you know, they they start getting clients and they started getting clients and now they're making some money. What at point of time do you think or basis the experience that you've spoken to a lot many people. Wha at what point of time you think, you know, that ego hits with any factor, I mean with it could be any element that that makes them ⁓ go way beyond their original chemistry and then, you know, ⁓ doesn't work. So probably see it round or before that. speaker-0: See, I think two things. I think one is in the startup world, ⁓ you know, one fallacy, I won't say fallacy, but one fantasy, is that people begin to re-access their net worth, right? I'm a young kid out of college, four years, you know, I'm I'm comfortable with a bike, I have a certain lifestyle. Two or three years into my startup, suddenly people say, boss, up a startup ki value 30 crores. Right? I'm 40% owner of this company. Now, suddenly, when I'm mentally thinking that my real net value is 12 crores, right? And I'm suddenly beginning to live that lifestyle. I think people tend to have delusions of grandeur. Hey boss, I've arrived. Right? And you know, to some extent you're right. Financially, that value is true. But it's not that tomorrow morning I can cash out of a barakro like a chalbasi. Right? I'm it's not gonna happen. But a lot of people very often it's the wealth that or that, you know, the kind of value that changes. I think second, it's also as the journey grows, I think startups tend to evolve. Right. So the idea that you started with, very often there will be one or two pivots. I think at that process, people believe that they're beginning to lose control. When I just the Mark said just idea like I started up the company, today it's not that. And those times people get a little very often people get very possessive about their idea. Right? The company has evolved. Right? I mean, we all heard of ⁓ Depindar Goel's story of ⁓ of Romato. I mean, I mean the idea literally came from the fact that when he used to work in one of the big consulting companies. I mean he realized that during lunchtime everyone running around trying to find menus. I mean he just compiled all the menus. He got someone to, you know, make a PDF copy, send it to everyone on their phone. Suddenly people had 40 restaurant menus handy. And then there the idea came that hey, make it more convenient instead of being so scattered about in everyone running for lunch. So I think the ability to take that idea, build it into larger is important, but not to get too possessive because it'll change, right? I mean, I think Zomato has, I wouldn't say pivoted, but done brilliantly. They moved from just ⁓ You know, food ordering into groceries, Blinkit, larger. Now they've got a great one, they've got Bistro from Blinkit, which is only ordering food, which is image, but only from cloud kitchens. So anything you order will be given in ten minutes and it'll come from a cloud kitchen, a dark kitchen near you. So I think the ability to pivot to be agile and yet not to be too possessive about the idea, I think that's another part. So the second point I would say is the ability to for a for a startup not to get too attracted to his idea. ⁓ speaker-1: Well basically they're more obsessed about their own product market fit. speaker-0: And a little bit about their little the ego comes into placing because my idea, why is it changing so dramatically? Why is the company changing a different shape? And that's how companies grow. speaker-1: So let's say the same company got multiple advisors and the idea is now pivoting from what it used to be at A1 to what it is now at A10. If this is not the only concern that founder A is saying that, you know, this is my idea and I wanted to take the bigger piece of share, what else can go wrong between the founders? speaker-0: Very often it's I mean my general reading it's very often personal chemistry. People's behavior as two batchmates in the same hostel versus two people sitting in front of an investor conference with a hundred media people. I think suddenly their personas change. Suddenly it's a lot about the fact that at this press conference she got 80% weightage, Miratoni Uwa. ⁓ he seems to be taking a much higher share of the attention, right? So one aspect is that. Two is very often it's a divergence of views. I believe that if we go this route, this is how our company will succeed. He doesn't agree with it. So therefore, one of the things I do believe is that a lot of startups should have a clear demarcation of roles. Right? If you're doing technology, then you have the last word on technology. If I'm doing go-to-market, then I am the last word. Right? You're welcome to give me inputs, but we can't have this. So I think a clear division of roles helps. Very often that does not happen. In startups, Company should look ahead. We'll keep doing things. So I think soon one has to draw those hard lines because those keep the company grounded. Right. And startups often don't do that. The third one, and this is, I think, the bigger issue which today a lot of ⁓ venture capital companies are seeing, is the poor quality of governance. And a very simple term tell you: when a startup happens, they take a lot of shortcuts to save cost, justifiably. Right? So if I need a transport company, I will use that. When I need to hire staff, my wife, she's a talent search person, so I will give the job. When I need to do my office interiors, my brother-in-law, he is an interior designer, my Use Karalunga. When I want to change offices, I know my second cousin is a real estate guy, all that is fine, right? Because you know these people, you know they are. As you grow bigger, these become what is called related party transactions. Related party transactions, right? So when a large fund is coming in. They're saying that, okay, so all your hiring is happening through your wife. So round tripping, all your real estate is happening through your brother-in-law, round tripping. These become sincere serious issues. So I think right from day one, I think you have to keep some levels of governance, right? Which is not to say you don't take shortcuts, you have to do that. But the moment you become big, make sure that you now transition to a different firm. Keep that little gap and difference. Because these are things that are big red flags. And as larger rounds of funding come, people look at this aspect and make a judgment on your character. Ki bay bandati, product market fit is good, market is good, but Blue Smart, but coffee ⁓ compromised. You know, so you know that if the company is putting X amount of money, so 20% under Gumra. BV kear going to his brother-in-law, going to his cousin, which is a big red flag. Right? Because you know that you're de-risking the business. If the startup goes under, speaker-1: Joe Blue Caps cassette. speaker-0: At least I've made my money, right? My wife and my whatever. So I think those are things that today companies are evaluating far more closely. Which was not the case a few years ago. Now they've recognized that this is it. And these are intric intricate part of the startup journey. So I'm not saying it's negative, but this is important. speaker-1: One more question, just I realized ⁓ initial level pino y if the founders have their if they're planning a succession plan, they should have somebody who can evenly you know challenge them on their face. Can they be founders or can they be anyone other than founders? speaker-0: I think it be anyone. The point is you have to have a certain level of trust. You know, and uncase you've worked long enough, you recognize that good organizations, there's a little culture of openness and transparency. It's not that boss is always right. The boss makes mistakes. But the ability to acknowledge that somebody else can have a better idea or somebody can point a flaw in your thought and your idea, I think that comes with a little maturity. And therefore, you need to get people of some caliber. So I'm very wary of startups which has, like I said, two very bright people. And Baki sub-executors. I think you need to have a little bit of thinking, horsepower in the middle level. And these could be your ex-colleagues, friends, whatever. I mean, one is of course having your advisory board and mentors, but also having a team that can challenge you. That is important. speaker-1: Do you think there should always be a level three to challenge, say, if I hire an advisor and we believe that there are people who would, you know, just blindfold agree with the advisor, whatever he said, because he comes with a lot of experience. What if he is wrong? speaker-0: ⁓ absolutely. So I I certainly believe that, like I said, good organizations are built on challenging every bit of advice. Right? So just taking your past experience is good enough, is not good enough. Right? I've seen it myself when I moved from, you know, almost 30 years in the corporate world. I think a lot of when I went to startups, there was a lot of resistance. Kiya Buddha ka sa kaya. Right? I mean somebody who's done whatever. And I recognize that that's not the way, right? Through your corporate career, it's your name on your card that. Is your equity. Now it's your own equity. So until you add value, people are not going to take you seriously. I'm totally of the view that certainly they have to be challenged. And today I look at everything that I'm about to say: will it really make a difference? Will it add value? And the moment and founders are sharp, the moment they recognize that, I think people are far more welcoming. Right? So founders are wary of you know older people trying to give them advice. But the moment they see someone is adding value to their business, it's a different speaker-1: Otherwise it's a complete fall apart because if you're just blindly trusting the advisor and not, you know, considering that you also have the similar kind of an experience and whatever you're telling this guy is telling you you're blindly applying to it and you're not challenging the decision whether it is right or not, you can rot into speaker-0: Very often Ankeshina says that a lot of founders are pretty headstrong and they don't blindly trust. In fact, the worry is, and you know, a lot of people I know who advise, mentor, fund startups, I think their concern is that is the team listening? Right? I don't want him to listen to everything because that's why he's a founder. He's got certain strong ideas, he's got a passion, and that he should not change. But he should also be able to be open to welcoming some advice. So he should be able to. Think that okay, this is what he said, this makes sense for my business, this does not work. Right? So having a few challenges is good, but there are people who consistently close the Ki boss muya sawata. I know the whole business. I think that becomes a worry, and that one should be wary about. speaker-1: So ekbaday, since we were talking about the founder conflict, I mean there have been cases where, you know, these kind of discussions are least considered in overall startup ecosystem. I mean, I've seen ⁓ it it can pose a severe risk, hearing from you now that, you know, if if the conflict has not been resolved, it can lead to disaster. Sure. ⁓ basis the experience ⁓ how far the this internal fiction can destroy the organization. speaker-0: I think it can go very, very far if it's not nipped in the bud. And the worry is that in the initial stages, people always find that the conflict is rooted in business. It starts off saying that I don't agree with your idea. And those are small routine things which happen normally. But I think the moment there's a personality difference comes in, then that starts impacting the business. And the moment the teams recognize ki donno founders may there is a small problem, then the team morale starts getting impact. ⁓ people align themselves. Yeah, I'm going to align with him. I think those are very dangerous signs. So I believe, like I said, founders have to kind of do a lot of due diligence when they get a co-founder on board. It is as rigorous, and I'm using it, you know, ⁓ politically incorrect term, it's like a marriage, right? You need to get that chemistry right. Not just about your skills being compatible, but also people you like to hang out with, right? I mean, as in your co-founder, besides being a business partner, can also be your friend, right? I think that has this be little bit of a human element. And very often it's just matching skills. My marketing, I want a technology guy, I'm a finance guy, I want someone in HR. I think it's not just about skills, but it's also about a certain personal chemistry. We both have to enjoy each other's success. We have to celebrate together, and we have to be able to have a drink on a bad day together. I think that is a it i each one will find his own thing. But I I find that problem gets magnified the moment a startup reaches year three and four. Right? The moment when two guys start up with a hostel room and a garage idea, they are good. But the moment each of them is competing for their five bedroom apartments key, I've got an X five and you got an Audi, I think then the problem starts. So wealth is a magnifies differences. speaker-1: So up when when you advocated the fact that there should be a founder chemistry and, you know, understanding their behavioral compatibility while evaluating your business overall as a venture capital. Is there a dark truth that, you know, I like the idea of this whole organization, the business model is like amazing. I know there's a difference between the two founders. Let me still invest. And then one fine day I'll find a successor and can get them off because I still hold the equity part of it. speaker-0: Personally and I know a lot of funds, the moment they see this as a red flag, they don't move forward. Okay. Because that to my mind is very fundamental. Right? Like I said, a business model can change. And very often the business models change and are a big benefit. But when you have personal issues, it becomes very difficult. speaker-1: Before you answer that ⁓ in detail, one more thing. Sure. When you're evaluating them, how are you doing that? Because at one point of time you said, you know, the investors or the VCs, they actually check ⁓ if they're hostile friends, they go and check with the policy. speaker-0: So these are later rounds when large venture capital firms start topping up with 40, 50 million dollars and beyond. I think that's when they want very deep insights into the founder's character, right? Because we've seen some big companies go higher very often because you recognize that whatever this founder had a weakness for women or whatever. I mean, various issues. So I think that's when people look at deep character assessments. It's not just as the build-run a business. The fact that you have taken a business to scale. That you're now presenting in front of a large global VC firm, whatever is great. Or your company is with two years of an IPO, that's great. But I still want to know enough characteristics about you to see if can I trust him to take it to the next level? What got you here? Will it get you there? I think those are things that large firms are now assessing, saying that he's in a different environment now. And we want him to be able to stand up and succeed. But if there are some big flaws, then this is the time to iron them out. And these flaws are not about his communication skills and all. It's more about character issues. Is he a naval bird? Is he is he the kind of person who will take shortcuts? Is he going to fudge his revenues? Small things like this. But there are a lot of telltale signs if you look at a person's past ⁓ that give you give give up give a person away to a large extent. Right? Now I said therefore it's a little ethical fine line. Are you being a detective? That's not your job. But you want to understand enough of character dis character decision points. It's like doing a very good ⁓ reference check. But doing it from four different, four or five different sources. Partners, vendors, ex-employees, ⁓ previous life experiences, maybe his hostel mates, maybe his friends who are totally in the social ⁓ social space, you'll get a fair degree of a person's comfort. And I think I just given the amount of money, you know, kind of playing in the system, I think it's warranted. speaker-1: But you said nothing happens. I mean, as in people do check about their when it comes to like forty, fifty million dollars. ⁓ but there have been companies who just blindly just, you know, trust ⁓ the model and don't even look at the founder's chemistry. And I'm not saying that I I have the real numbers in front of me, but I believe that, you know, you know, it's a human psychology. I mean people actually believe in the business model because at the end of the day they really wanted to make money, even if this investor is there. speaker-0: So you have a point there, and let me be up front. I think the issue is not just startup founders, the issue is also VCs. And let me tell you up front. I think the whole venture capital, private equity space is also full of mercenaries. Right? It's very powerful and heady to be on the table as an investor. But recognize that 99% of the investors who are raising capital. So they are basically raising and deploying capital with a clear path of exit. Ki Pan Sal, seven years, ten years, we need to exit. And a lot of the money is not theirs. Of course, they make a carry and they make very good commissions. It is very heady because you have founders saying jiha, sir, yes, yes, yes, right? But it's not your money. So they are mercenaries. And a lot of venture partners also look at what I would say is the bigger fool theory. Ki boss, I need to take this company from 10 crore to 60 crores. At 60 crores on a five multiple, this company is going to be worth five times the value. Or kwa ilila. Right. And therefore we've seen a lot of companies that have got past and suddenly they collapse because the business model is not rigorous. So I think the issues equally on the VC front as well. Right? So there are both parts. Just that in the VC space, I think over time, people who do take shortcuts, over time, some of them can weed it out because the reputation stays. You know, people who have made some dud deals, that's on record. Founders Kaitna I mean, like I said, some failures are good, but when you realize the failures are happening not because of basic business issues, market conditions can change, the product market fit can change, a new product can come and change the whole equation. Those things happen. But when it comes to some personality issues, then it's a red flag. Right? For example, I lived through the telecom years where 80% of a telecom company's profit was value-added services. Just say internet kulgaya and you know smartphones became the norm. Suddenly your daily SMS and ⁓ you know, all that stuff is just gone. So business models can change and therefore they happen. But you have to be very watchful. speaker-1: So in in in eventually, you know, if founders are getting evaluated, so the V C should be. But most of those founders don't even have time or the speaker-0: Very, very unfair power equation, you're spot on. ⁓ 99% of case they don't get. But large founders whose firms are big and about to go to IPO, they have a lot of VC firms chasing them and they get to pick and choose. It's a small, small percentage of them. They get to pick and choose, and they can, of course, do their own thing. So I totally agree with you. But the power equation is very, very driven by the funders. Right? Today it's 95, 10, 5 versus, you know, for the venture. speaker-1: I'm seriously glad that I'm actually having this conversation because this was the truth that I was not even sure of. ⁓ for me, investor is just an investor, whether it's an angel one to give a small ⁓ portion of the money or it's a large, big backed B VC firms. But I think you just unfolded a lot many layers of how to see the VCs versus founders and how both can actually work together. speaker-0: And therefore I always believe that a good founder, irrespective of the journey, even when he's at an angel level, when he's desperate to raise some money, I think should also look at someone who can add a little bit of experience and value. Right? So I certainly want your five, ten lakh check as a early stage founder, but I certainly would like to have a guy who can even give me a two lakh check if he's going to come from the industry which can help me. Can he open a few doors? Yeah. Right? Does he know the regulation in this area? Is he an expert in supply chain because my startup is working towards, you know, fulfilling that? So I think experience is very often not considered, and that is a lot of value. Right. To have someone on your cap table who can advise you, I think is invaluable. And therefore I always believe that investors sometimes can work as low-cost consultants. Right. If I have skill in the game and if I have a small stake in a company, I feel co-owner, right? So then I'm my my my my my mentorship and my advice is far more valued because, you know. I see that if this business grows, I'm gonna make more money. speaker-1: I mean, I think you actually raise a very good point. So considering there's a s new startup, ⁓ the two founders are more of like marketing guys and one is Finn guy. ⁓ and AI is taking it all over the place. And they really I mean, I think probably I can take a classic example of what you mentioned about, you know, that sales ⁓ training model. So ⁓ if I really have to onboard a let's say co-founder, not even a VC. I mean, even if a VC is coming on board and if he comes with an experience What would you suggest this VC should or the founder should evaluate with the existing founders that if I'm coming, I'm coming with a technological background, I'm coming with my tech tech IQ and with a two lakh rupees of a check, I will go I'm going to contribute this, but I really need to know those guys. So what checks and balances he should take care of? speaker-0: So I would go one step before this. I would say that with every startup that I've personally invested in or been involved with, I look at at a one core level, is it based on a deep consumer insight? Right? And the reason I'm saying so is that to my mind, at its core, show you know shaved off all the all the other terminologies, startups have to be solving for some consumer good. Right. I'll just give you two small examples in if you indulge me a bit. So this was literally. One month after COVID started. So March 2020 was a lockdown. I think in April or thereabouts, April end, ⁓ you know, a bunch of three very young people who had done one startup that failed, they called me and two other people and said, We have a great idea. They said, Look, this COVID thing looks like it's going to go on. ⁓ 90% of or 99% of teachers have never done a conference call in their lives. We know of Zoom and Teams. I'm talking of pre-2020. He said an average teacher who's been teaching in front of a blackboard now suddenly there's a scenario when the lockdown kind of site lifts, everything is going to go virtual because schools will not open. I mean, how does a class six teacher who has spent 25 years in a good school now suddenly start running a Zoom call? ⁓ Now, kids are very smart, a sixth graders are about 12 years old. I mean, he knows a lot of tricks. So this guy actually gave it anyway. So their thing was we will do a small training program online for teachers how to run a Zoom class. Right? What is the how do you keep how do you you know make sure that you're talking to students very time, make sure people are unmuted. Because kids are very smart. I mean, there's a there's a classic story of ⁓ you know one of the kids telling ⁓ telling you know the teacher that when the moment she asked him a question, he went static. And ⁓ teacher said, Wi-Fi to cherage, until a dog walked to the back room. Right? So anyway, so these guys just had some basic tricks for teachers. To understand how to run this. Did fabulously well. It the startup got taken over by a larger company in about 18 months, but they suddenly had schools queuing up saying 150 teachers put them through this three week training program. And these are very basic tenets of running conferences, but also keeping in mind children, how to rotate the screen, et cetera, how to do displays. So I think people who can ideate quickly, great value. Second thing I believe, and sorry, my other point is also agility, right? Another company that had started much before COVID was doing a Oyo model. They were doing, you know, taking these many houses in NCR, which are not occupied. People have six, seven room houses and converted them into co-working spaces. So far, so good. Coworking and residential spaces like Oyo. COVID happened, business mom. They had raised one small round of funding. They quickly turned around and mapped all the places which were close to hospitals. So in Gurgao there were three places close to Medanta, whatever. And they said, we will make a pitch to the hospital saying all your paramedical stuff. They have to go somewhere in the night. They can come and stay here. You guys come and do the sanitization. Just took off. Right? So they suddenly from becoming a Natha Dada Oyo, which was keeping rooms for people, corporate travelers, they became a facility for all the paramedics, doctors, nurses, you know, guys who live in hospitals, close enough. Because there was no public transport. People wanted something within 200 meters, 500 meters they can walk to. So I think the ability to change is very important. So I would say the first ability is therefore, and you know, I mean, since since you're fundamentally an insights guy, is the ability to understand the consumer need and see if you have a problem solving. Then how do I get the right set of people who can mine? Right? So when you're doing an Oyo kind of startup, you want someone who has the ability to talk to doctors, who can reach the medical, who knows that profession very well. Right. Similarly, when you're doing a startup that's basically training teachers, nothing great. But you want someone who can understand the psychology of a fifty-year-old, how to teach him to to run a video conference. So I think that is the second part. speaker-1: I think agility to apnea dotim bar bullet. I believe the ability to understand what exactly is needed and by when is what works out the best. But again, I'm trying to still understand that, you know, if I if I'm joining another company as a co-founder, what should I look into it? They've been there for two years now, and they want me to be as a co-founder with, say, a decent five lakh check. What should I evaluate them? speaker-0: I think one is do you believe in that business? A cloak idea. Two is can you add some value? Besides the financial the check, can you add some value? And third, I would say is that the quality of the founder. Is it somebody who will respect your co-foundership as an equal? Not as someone just keep a skill, then two years later I will put him on the side. I think those are three things. One is understanding the founder, two is seeing whether the business interests you, and can you Add some value. Right? And I'm just I just extend it a little bit, Ankesh, because I've known you from the past. I think it's the same kind of tripod philosophy that some of us used in our corporate world. We always keep saying in our companies, why will you continue to remain in the company? One, is it adding some value to you? Are you learning? Are you adding some value to the company? And third, are you having a growth prospect? Okay, two years. Of course, somewhere along you're going to make money as well. But keep those in mind and keep looking at that every now. Then, which is what I always tell a lot of young people who change jobs every one year. I said keep these three things. If you're learning something, if you've got growth prospect, and if the money and the people are good, hang in there. speaker-1: And ⁓ before we actually ⁓ sign up because I I the kind of conversations we are actually having, it can go lost and lost. But ⁓ before we end up, I wanted one more question to understand. ⁓ in fact, ⁓ let's say we are retrograding right now back again to the twenty twenty ⁓ five or twenty twenty when you actually gave that interview, twenty twenty one. ⁓ considering Lloyd sees himself in twenty thirty five, what would have changed by then? speaker-0: Personally, I would like to evolve a little more. I believe that, like I said, I began my career in the late 80s. So I'm quite a relic from the past. I'm delighted to see a few changes, right? The first was liberalization in the early 90s, then we saw large companies come. Then, of course, was the opening up of ⁓ venture capital and the fact that entrepreneurship. And what I'm most, most delighted about, and you know, I really believe and I get excited every day, is to see a lot of new age entrepreneurs. And I believe India will, you know. Reach somewhere very big in the world on the power of the energy of young entrepreneurs. Right? When I grew up in the era, the big industrialists were big industrialists the Tatars and the Villas. I mean, today, a lot of the big names today are people I know. I mean a Vijay Shekhar G, etc. etc. These are people who have come from nowhere. So the fact that it's become democratic, the fact that is very good. I would be like to be able to evolve so that I can participate in a lot of the new economy as an equal, someone who enjoys, and ⁓ is able to add some value. Right. And I do recognize that your skills get outdated. Like I tell people all the skills I learned in my first two jobs or in the early 90s irrelevant. Right? I mean, I used to be a marketeer of a CMO of some big companies. I didn't know what performance marketing was. Right? I had to learn that afresh. Right. So I want to certainly add that value. At the same time, I want to bring some of the logic and the maturity that I had into new businesses. I'll give a small example if you permit me. Was the fact that today speaker-1: True. speaker-0: A lot of startups and performance marketing is vanity metrics. It downloads, it likes, it's engagements, ⁓ it's whatever. And I say, look, look beyond these vanity metrics. What is the real value? What is the customer lifecycle value? How many repeat engagements do you have? Right? How many customers are engaging with you in a meaningful sort of way? How much of that is converting to a sale? Ask those real questions. Yeah. Right? And people are just jumping performance marketing. So I'm saying performance marketing is fine until you see what is the end of the result. speaker-1: I agree. No, I for performance marketing is just about showcasing your brand to the consumer. That's it. Beyond that, what are you actually collecting? speaker-0: And long term, you're going to build a business of that. And therefore, I get very worried. So I keep advising people: marketing, say yeah, but look at it, make sure it's grounded into real business. speaker-1: Yeah. Agreed. So Lloyd sir, ⁓ we we are coming to the closure of the conversation and I have some rapid fire rounds. So one quality every founder must have. speaker-0: Integrity and commitment. speaker-1: One quality that makes you immediately cautious about a founder. speaker-0: I think someone who is not serious about his cause, who's you know literally saying, Kibay, I want a one two year exit. Worry. I want someone who says I want to build the next Facebook. I know not every government can do, but someone who has a long staying power. speaker-1: And if somebody says Kya glitch das Salme, I'm going to exit. Okay. I'm sorry. The most overrated start startup matrix today. speaker-0: That's fine. I think the most, I mean, I would say two or three metrics. I think one is ⁓ the ability to say that I can grow 10x, 20x. I think some look, I everyone can pull an Excel. So I think that's one. Two, I think is the other one who people who are saying that this is what we can we have grown in the last two years to you know, show your momentum as a big thing. And third, I think is a startup that literally is based on a very weak idea that is successful now. But the idea doesn't I think those are the ones I get most concerned about. speaker-1: The most underrated business matric today? speaker-0: The ability to stay the course. Right? People are changing so much, but you want someone who has at least a two to three year vision. And the second one, which I also believe that a lot of people don't check, is to check the attrition of your top performers. I mean, I sit on a handful of boards and very often, say once a year the CHRO brings out a chart about attrition. Industry average of attrition was 15%, Tamari Company, 9%. Good. Now tell me out of your top 10% performers, how many are with you? That makes a difference. Right? People tend to look at attrition as a one consolid number. If you're an employee of a company of 400 people and you measure the overall attrition 15%, but if you're top 20 people who really matter, it's a worry. But people don't look at that aspect. So I really believe that measuring attrition of the top talent is a very critical matter. speaker-1: So you have complete the sentence. The companies that will survive the next decade are the ones that speaker-0: are agile, are resilient and are built on basic governance and integrity. speaker-1: And the cl closing question, if you could give one piece of advice to yourself being thirty years old, what would that be? speaker-0: I would say I should have turned entrepreneur earlier, right? I mean, I did the full role and I'm happy with what I learned. But I think I'm delighted to the fact that today India offers so many opportunities for an entrepreneur. And one can take so many diverse different career paths, right? Which is much more limited in the 90s. But I certainly would have you know loved to have jumped into the entrepreneurship bandwagon ⁓ thirty years ago. speaker-1: But I guess you're actually fulfilling a lot of dreams of those founders who are actually coming to you and you're validating the idea and giving them an opportunity to become somebody like entrepreneurs. speaker-0: But yes, absolutely. And that's which I've enjoyed myself. speaker-1: Thank you so much Lloyd for taking time out and discussing this piece with us. What I particularly enjoyed about this episode is about how our discussion moved beyond startups, technology and businesses, which are more, you know, human side of building organizations. Whether it was a consumer understanding, founder alignment, governance, ⁓ leadership or the role of AI, one thing or theme constantly came through is great companies are ultimately built by people. And understanding people remains the heart of every successful business. I'm sure our audience of founders, business leaders, marketers, investors, and even young professionals will take away valuable lessons from this journey and ⁓ Lloyd's ⁓ experiences. And I would can only thank him again because you know sharing these kind of insights so generously, it's it's not that easy. Everybody speak on on the camera like that. We we decode so many things. I mean, for me, sitting right next to him and learning so many things and understanding where exactly as a startup founder I should be. And ⁓ thank you so much to it for taking again time out because this is this is something like very close to my heart these days because I'm myself a founder and then you know we struggle on on very basic issues while running a startup. And ⁓ to everyone watching or listening, thank you for being part of the Collaborative Canvas. If you enjoyed this episode, please like. share and subscribe and until next time stay curious stay collaborative and keep building what next. Thank you. speaker-0: Thank you, Ankesh. Enjoyed this chat. Lovely being on the collaborative canvas. And thank you and all the very best. speaker-1: Thank you, sir. speaker-0: Mm-hmm.