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StartupEntrepreneursasaNiche
PrakashNedungadi
30thJun2012
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TableofContents
Introduction
ResearchObjectives
Methodology
Findings
Conclusions
15
Recommendations
16
Limitations
17
Bibliography
18
Ann.1QuestionnaireforEntrepreneurs
19
Ann.2QuestionnaireforInvestors
23
1.0Introduction
BeingaStartupentrepreneurisbecominganincreasinglypopularcareerchoicefor
severalbrightandambitiousmenandwomen.Thereasonsforthisinclude:
theseeminglymagicalsuccessofseveralpeoplewhostartedvirtuallyoutofagarageto
createcultbrandslikeApple,GoogleandFacebook,andtherebyachievedearlyand
massivewealth,fame,freedom(fromemployment)
theabilityoftheInternettomakenewideasworkandscaleupeasilyandrapidly
theincreasedavailabilityoffundsfromAngel/VentureCapital/PrivateEquityinvestors
thelackofopportunitiesandtheapparentboredomofrepetitive,largeofficeorblue
collarwork;furthermore,thesedays,veryfewcareerpathsofferapermanent,stable
job
BangalorewasrecentlyidentifiedasoneofthetoptenhubsforStartupsintheworld.
Withanumberofpeoplenowmovingtowardsbecomingentrepreneursinthecity,it
wasfeltworthwhiletofindoutwhetherthiswasaviablenicheforacoachingpractice.
WhywouldStartupentrepreneursneedcoaching?Onereasonistheirhighfailurerate.
Datasuggestthatonly29%,i.e.about3of10businesses,survivethefirst10years
followingtheircreation.Fortheentrepreneurswhobeginstarryeyedwithvisionsof
success,theemotionalimpactofsuchalowsuccessratecouldbeveryhigh.
Percentageofbusinessesstartedin1992thatsurvivedeachyearaftertill2002
Source:IllusionsofEntrepreneurship:TheCostlyMythsthatEntrepreneurs,Investors,
andPolicyMakersLiveBybyScottShane(2008)
Furthermore,coachingmightproveintegraltoStartupentrepreneurs,especiallysince
theirsuccessreliesupontheirabilitytogrowwiththeorganization,orindeed,aheadof
it.Forexample,thepersonalskillsrequiredtocreateandrunonesmallquickservice
restaurantaredifferentfromthoserequiredtohandleadozenoftheminacity,and
thenseveralinanumberofcities.Thisiscompoundedbythesheerspeedatwhich
growthhastohappen.Entrepreneursdontgetenoughtimetoemotionallyadjustto
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newsituationsbecausethedemandfrominvestorsforthemtogrowrapidlycanbe
ruthless.Finally,beinganentrepreneurcanbeattimesaheadyjob(e.g.,whenthe
fundingjustcomesin!)oraverylonelyjob(whentimesarechallenging).Thiscan
impactthemoraleandbalancedthinkingofayoungentrepreneurunlesshe/sheis
supportedtogrowasapersonandgiventhetoolstomanage,andindeed,benefitfrom,
thisrollercoasterjourney.
Finally,researchshowsthatcoachingimprovesorganizationperformanceinstable
companiesby37%,accordingtoManchesterInc,ExecutiveCoachingYieldsReturnOn
InvestmentOfAlmostSixTimesItsCost(Source:ManchesterInc).Itcouldbeargued
thatStartupsaremoreinaninfantstageinanorganizationslifeandhencethegain
canbeseveraltimeshigher.
Giventheabove,severalquestionsseemtoarise:
Whyisitthataflourishingcoachingbusinessforstartupshasnthappenedyet(in
Bangalore)?CanstartupentrepreneursaffordcoachinganddotheyWANTtospend
moneyandtimeforit?Ifso,whatkindofcoaching,atwhatstage?Whatinfluencedo
investorshavewhendeterminingtheneedforcoaching?Cantheybethegate
keeperswho,whenconvinced,willnudgeorinsistuponcoachingsessionsfor
entrepreneurstheyareinvestingin?
IsthereabusinessmodelforacoachingpracticethataimsatStartUpsasitsniche?
2.0ResearchObjectives
2.1 DeterminetheWANTforcoachingamongstStartupsandinvestors(i.e.whatis
thebasisforasustainablerevenuemodel?)
2.2 AssessthenatureofcoachingdemandedacrossdifferentstagesofStartupfrom
bootstrappingtoearlystagetomidstage.
2.3 Determinetowhatextentinvestors(VCs)encourage/incitestartupentrepreneurs
togetcoached
2.4 TounderstandpossibleCustomerPropositionsforasuccessfulStartupfocused
coachingpractice
3.0Methodology
3.1Designtwostructuredquestionnairestounderstand
a)fromStartups:theirneeds/wants,triggers/barriers(i.e.factorsthatpromptthem
to,ordiscouragethemfrom,seekingcoaching)(PlseeAnn1)
b)frominvestors:cantheybegatekeepersthroughwhomacoachingpracticecan
successfullyreachthestartupentrepreneur?(PlseeAnn2)
3.2Interview:
5StartupentrepreneursinBangalore/India
5venturecapitalists
4.0Findings
Note:intervieweesnameshavebeenkeptconfidential,buttheirquotesaregivenin
blueandtheirinitialsareshownagainstthequote
4.1ALLStartupentrepreneursfeltthatcoachingwasrequiredateverystageof
evolutionandcouldimpactthesuccessofaventuretremendously.
Specificareaswere:
Asidefromtheabove,inALLstages,alltheentrepreneursIspoketohadthefollowing
commonissuesthatcouldbeaddressedbycoaching:
a)Lonelinessthefeeling,especiallyintoughtimes,ofbeingcompletelyaloneand
unabletoshareproblemsevenwithclosefamily.
IhadtosellpartofmyresidenceandthereweremonthswhenIborrowedfrom
friendstomakesalarypaymentstomyteam(HD)
Ihavenoonetoturnto,unlikewhenIwasaprofessionalandhadabosstomentor
me(PG)
b)Doubtattimesthereweredoubtsaboutwhetherthesacrificewastoomuch(most
ofthemhadgivenupgoodjobstobecomeentrepreneurs)
IwasmakingRs1,00,000inmyjobandnowIcouldscrapeupjustRs30,000withso
muchworkandtension(PG)
IhavesomuchexpectationofmyselfandsodotheVCsandmyemployeesfrom
me....willIdeliver?(VJ)
c)Responsibilitybeingresponsibleformanypeoplebothfrontlinestaffandsenior
teammembersandbeingthepersonwherethebuckstopseverytime.
Thereisnoletup;initially,Ihadtogetupeverydayat6a.m.,headtothevegetable
markettobuyfortherestaurant;now,Ihavepeopletomanagethings,butwhenthey
dont,itendswithme(GJ)
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OftenIhavefeltdrainedwitheverythingthatisonmyshoulders(VJ)
4.2Thereasontheyhadnottakenupcoachingsofarwas:
a)notawareofgoodcoachesandthepowerofcoaching(GJ,VJ)
b)usedlocalhelpandmanaged(PG,HD)
c)feltthatsomeentrepreneurswouldnotliketobelievethattheskillstheyrequired
hadchangedorthatacoachcouldreallyhelp(VG)
4.3KeycharacteristicslookedforinaStartupcoach:
a)Trustismostcritical:Entrepreneursfeltthattheirtimewaspreciousandtheycould
onlyspenditwithacoachtheycouldreallytrust.
IfIfoundthatmycoachwasalsocoachingacompetitorortalkingtomyinvestoror
customer,Iwouldbereallyletdown(VG)
b)Understanding:aStartupslife:thespeed,managementofuncertaintyandacting
fromthegutweresoimportantforastartupthatentrepreneursneededacoachwho
couldbeperfectlysensitivetothatneed
Somepeoplewhohavenotbeenentrepreneursdontunderstandthepaceatwhich
wehavetomakedecisions(PG)
c)Consultancycumcoachingissometimesarequirementi.e.blendedcoaching
Wouldlovetohaveasoundingboard,butalsoideallyshouldbeabletogiveme
specificadviceonthebusiness(VG)
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4.4RoleoftheVentureCapitalistorBoardMemberasaCoachorMentor:
Thereseemtobeconflictingviews,withsomesayingthattheyimplicitlytrustedtheir
VCsjudgment,whereasotherssaidthattherewassomeformalityintherelationship
andfulltrustcouldnotbeassumed
Sometimes,youcantopenuptoyourinvestororBoardmember100%(PG)
YoucantalkaboutyourbusinesspressurestotheVC,buthesprobablynotinterested
inalltherestthatsgoingoninyourmind(HD)
4.5Affordability
AfeeofRs8,00,000($16,000)fora6monthassignmentwasnotseenasashow
stopper,foragoodcoach.Alltheentrepreneurssawthattherightcoachcouldadd
tremendousvalue,sothefeespaidwasrelativelylittleforthegainsthatcouldaccrue
IpaidandattendedaworkshopbyRobinSharma,themotivationalguru,inFebruary
andIreallygotalotoutofjustthatoneday,whichIamimplementing.IfIcouldgetthat
moreoften,Iamsureitwouldbeworthit.(GJ)
Thereisnostandardtowhatshouldbepaid,soitsdifficulttosaywhatisright.But
clearlythepotentialgainsaremuchmorethantheamountyouaresaying(PG)
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Theexceptiontothiswasthebootstrapstage,beforetheentrepreneurhasgotany
funding.
Entrepreneursatbootstrapstagealsoneedcoaching,buttheycantaffordwhatyou
aresaying.Perhapsgroupcoachingorsomeothercosteffectivemodelcouldbe
developed?(PG)
4.6Otherneeds:
Entrepreneursfoundthatdialoguewithlikemindedorlikestateentrepreneurswasa
HUGEhelpandrelease.Thisindicatesthehugepotentialofpeercoachingforstartups
Justtherealizationthatmyproblemisnotuniquegivesmeahugerelief(VJ)
Whenweshareproblemsandweseethattheothergetsit'perfectly,thenitmakesus
muchlighter(GJ)
4.6VoiceoftheVentureCapitalists/Investors:
Despitethefactthattheirinvestmentwasinthehandsoftheentrepreneur,VCswere
unsureofthepracticalfeasibilityandthepotentialsuccessofcoachingforstartups.
IntheUS,whenastartupmovesfromstagetostage,weusuallychangethe
entrepreneurorCEOastherearespecificpeoplethereforspecificstages.ButinIndia,
entrepreneurssometimesresistthis(AM)
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Normally,wecannotinsistthatthestartuptakesonacoach.Wehavetoleavethe
developmentoftheentrepreneurtohim/her.ThatswhyVCsprefertochange
entrepreneurswhenthebusinessoutgrowsthem(SS)
WehaveplacedacoachontheBoardoftwoofthecompanieswehaveinvestedin.
Andithasworked.Butwecantinsistonthiswitheveryone(KS)
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5.0Conclusions
5.1CoachingforStartupsisadefinitebusinessopportunityandcancontributegreatly
tomakemorenewbusinessessuccessful
5.2ThekeytargetgroupisStartupsentrepreneursthemselves;VCs/Investorsareonly
asecondarytargetgroup
5.3Theneedsforcoachingatdifferentstagesaredifferent.Respondingdirectlytothese
needsshouldbeaneffectivewayofMarketing.Forexample,bootstrapcompaniesneed
morecosteffective,shortcoachingburstswithanemphasisonpeercoachingand
groupcoaching.Earlyandmidstageentrepreneursaremoreatargetforsustained
coaching
5.3DevelopingrelationshipswithalargenumberofStartupsandthenpairingthemup
forpeercoaching,basedonrelatednessandfit,couldbeagreat,costeffectivevalue
add,allowingforbetterpricingflexibility
5.4Thekeypromisesare(1)Trust,(2)Abilitytoreallyunderstandandhelpthe
entrepreneurmakerapidprogress;thecustomerpropositionshouldbebuiltaround
theseideas
5.5Insomecases,offeringblendedcoachingorcoaching+startupconsultancycan
beanaddedbenefit.
15
6.0Recommendations
6.1StartacoachingbusinessinBangalorethatfocusesonStartupsasaniche
6.2TwoKeyCustomerPropositionsneedtobetestedtoseewhichwillworkbetter:
Proposition1:IPower:EmpoweryourselftodriveyourStartuptothenextstage
Proposition2:EntrepreneursSanctuary:createyourownpathinanenvironmentyou
cantrust.
6.3Developminimum3products/services:
a)PeerCoach:developadatabaseofentrepreneurs,developamodeltofindoutwho
areincompatibleorsimilarsituations,andpairthemup;offerthembasiccoachingskills
(e.g.listening,questioning)andletthemcoacheachother,withsome(paid)inputfrom
us.
b)GroupConnect(affordablegroupcoachingforearlyStartups):
c)NextStage:specializedonetoonetransformationalcoachingforentrepreneurs
whosecompaniesaretransformingfromonestagetoanother.
6.5ProvideforumsthroughFacebookfriendsandarticlesofinspiration(thisisalready
beingdone,butisamusthavetodevelopcontinuousconnect)
16
7.0StudyLimitations
7.1Samplesizewassmallandselected
7.2RespondentsmayhavebeenbiasedasIwasadministeringthequestionnaireand
theyknewthatIwasinterestedincoaching
17
8.0Bibliography
1.IllusionsofEntrepreneurship:TheCostlyMythsthatEntrepreneurs,Investors,and
PolicyMakersLiveBy(ScottShane,2008)
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Ann.1
QuestionnaireforStartUpEntrepreneurs
Dear_______________,
Thankyoufortakingpartinthisshortsurvey.AsImentionedtoyou,Imlookingatthe
areaofprovidingStartupswithahugeleveragetoimprovedperformance.through
businesscoaching.Yourthoughtswillhelpmedevelopideasthatcouldperhapsbenefit
severalentrepreneurslikeyouinthefuturetomovemorerapidlytowardsprofitable
scaleupandeventualmassivesuccess.
Soheregoes:
1.Canyoutellmethenatureofyourbusiness?Isitstartup,earlystage,midstage,
laterstage?Haveyouyetmovedfromonestagetoanother?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
2.Asyourbusinesshasgrown,haveyoufoundthechallengesithasgiventoyouasa
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personandthereforetheskillsyouneedtomanagethesehaschanged?Ifyes,howso?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
3.Inyourinteractionwithentrepreneursandyourownexperience,whatarethemain
emotionalchallengesfacedbyanentrepreneurinhis/herjourneyfromonestageto
another?Howoftendoesithappenthattheseemotionalchallengesaresobigthat
theyhaveimpactedthesuccessofthestartup?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
4.Haveyouheardofbusinesscoaching?Businesscoachingisaboutgivingan
entrepreneurlikeyouthesupporttotransformyourselfasyourcompanymovesfrom
onestagetoanother,sothatyouretainskillsthataregoodandcritical,youdropwhat
arenolongerrelevantforthenewstageandyoupickupnewskillstomanagethenew
environment.
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Greatbusinesscoachinghasbeenknowntomultiplybusinesssuccessmoresustainably
andforgivingsignificantlyincreasedhappinesstotheentrepreneur.
Ifitcouldindeeddeliveronthispromise,doyouthinkmanystartupswouldbenefit
fromengagingwithgreatcoaching?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
Ifyes,why?Ifno,whynot?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
5.WhatdoyouthinkmightbesomeofthemainbarriersthatentrepreneursofStart
upswouldhavetostartcoaching?Whatwouldbesomeofthebestwaysyoucould
thinkoftoovercomethesebarriers?
________________________________________________________________________
________________________________________________________________________
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________________________________________________________________________
_______________________________________________________________
6.A6monthengagementwithagreatcoachmaycostRs68lakhs.Ifitcouldincrease
theeffectivenessofastartupentrepreneursubstantially,andtherebyjustifyanRoI
manytimesthecost,doyouthinkStartupswillfeelinterestedinengagingacoach?
Ifyes,ormaybeyes,why?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
Ifnoormaybenot,thenwhynot?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
Thankyousomuchforthediscussion.
22
Ann.2
QuestionnaireonCoachingforStartups
Name______________________________________
Designation_______________________________
Company__________________________________
1.Whatkindsofentrepreneursdoyoufund?
Bysize________________________
Bysector______________________
2.Whatisthetypicalprofile/softheentrepreneursinwhoyouinvest,ifthereisone?
1.
________________________________________________________________________
2.
________________________________________________________________________
3.Whatarethethreemainfactorsinternaltoanorganizationthatyoufeelarecritical
forthesuccessofaventurethatyouinvestin?
1_______________________________________________________________________
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___________________
2_______________________________________________________________________
____________________
3_______________________________________________________________________
____________________
3.Inyouropinion,whatarethekeyhuman/emotionalqualitiesrequiredforthe
entrepreneursthatyouinvestinforthemtobesuccessful?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
4.Howcriticaldoyoufeelarethesequalitiesforthesuccessoftheventure?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
Verycritical
Important
Neitherimportantnorunimportant
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Notsoimportant
Notatallimportant
5.AsaStartupgrowsfromstartuptotinytomidsizetolarge,doyoufeelthe
leadership,managerialandhumanqualitiesthatanentrepreneurneedstohaveateach
stageascriticalcapabilitiesaredifferent?
Yes/No
Ifyes,why?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
Ifno,whynot?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
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6.Listthetop3criticalhumancapabilitiesrequiredofastartupentrepreneur
123
atthestartupstage?_____________________________________
____________________
atearlystage_____________________________________
____________________
atmidstage______________________________________
____________________
atlargestage______________________________________
____________________
7.Talkingofhuman,emotional,social,managerial,andleadershipqualities,arethere
anycleargapsthatyouseebetweenwhatisrequiredandwhatentrepreneurshaveas
theymovefromstagetostage?Ifyes,whatarethemostimportantgaps?
Yes/No
Ifyes
1._______________________
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2.________________________
3.________________________
8.Whatisyourunderstandingofbusinessorexecutivecoaching?Doyouhireordoany
oftheorganizationsthatyoufundhirecoaches?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________
9.Businessorexecutivecoachingisaboutsupportingapersontobebetterabletodeal
withissuesthatcomeinthewayofenhancinghisperformanceandtheperformanceof
theorganization.Theissuescouldbepersonal,emotional,orrelationshipchallengesas
wellasbusinesschallenges.Inarecentstudy,businesscoachinghasproventoimprove
organizationperformanceinlargerorganizations.AccordingtoaManchesterreport,
whilehalfofexecutiveswhoreceivedcoachingreportedimprovementinorganization
strength,77%reportedanimprovementinworkingrelationships.
Doyoufeelthateffectivecoachingtostartupsorthekindoforganizationsyouinvestin
canimprovetheirabilitytoperformandtherebybenefitorganizationperformance?
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Definitelyfeelitcanimproveperformance
Mostlikelyitwillimproveperformance
Cantsay
Notlikelytoimproveperformance
Willdefinitelynotimproveperformance
10.WhataretheareaswhereyouthinkthatBusinesscoachingcanbenefitandimprove
theperformanceofstartupentrepreneursortheirteams?
a)
b)
c)
11.Atypical,effectivecoachingengagementofabout8months(32weeks)wouldcost
aboutRs4.8lakhs.Theimpactwouldbeasignificantcapabilityenhancementofthe
startupentrepreneur.Howwillingwouldyoubetosupporttheideaofthe
entrepreneurtakingcoachinginthatcase?
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Iwouldalmostinsistonhistakingcoaching
Iwouldbeverywillingtosupportcoaching
Iwouldnotbewillingtosupportcoaching
Iwoulddiscouragehimfromtakingcoaching
29