September 13, 2024 • 36 mins
Is culture really more important than strategy? We unpack this bold statement by diving deep into how to intentionally shape a startup's culture from day one.
In this critical episode, get practical tips from Shripati & Amit on aligning company values with daily behaviors, decision-making processes, and hiring practices. Learn why the first 18 months are crucial for setting the tone and how even the smallest actions can significantly impact your company’s culture.
Scaling a startup isn’t just about growth; it's about maintaining and evolving your culture. We discuss the unpredictable journey to achieving significant exits, stressing the need for adaptability and continuous performance evaluation. Learn how to foster a culture of radical candor and open communication, essential for long-term success.
Tune in to learn more:
0:00 - Building Startup Culture and Team Dynamics
8:28 - Founders' Roles and Equity Split
16:58 - Navigating Founder Equity and Company Exits
23:39 - Scaling Culture and Organizational Performance
30:15 - Establishing Feedback Culture in High-Growth Startups
From defining roles and distributing equity to maintaining and evolving culture, this episode provides valuable insights for founders at every stage of their journey.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Amit Somani (00:00):
What is the dynamic between a 2 or a 3 person
co-founding team?
How equity is distributedbetween founders?
You just figure out.
Do you want to be king or doyou want to be rich?
Shripati Acharya (00:09):
Literally.
I think culture is one of thosethings that it gets created,
whether you like it or not.
Amit Somani (00:13):
Culture is what employee number 50 or 500 or
5000 says.
The culture is that cultureeats strategy for breakfast.
It is how you're makingdecisions, how you're hiring
people.
It's the first 10 hires.
Welcome to the Prime VenturePartners podcast.
(00:37):
This is Amit Somani and I amdelighted to be jamming with my
partner, Shripati Acharya.
Shripati Acharya (00:44):
Thanks, amit, glad to be on the show with you.
Amit Somani (00:47):
So we're going to talk about something which is,
you know, what we call.
You know, hard is easy, soft ishard.
So it's culture, it's foundersand it's the team, and how do
you build that and what are someof the dilemmas around that?
So there's a very popular quotefrom Peter Drucker that comes
to mind that culture eatsstrategy for breakfast, and I'm
(01:10):
sure, sripati, you would haveheard that at Harvard Business
School many times, of course.
Yeah.
So I think it's very, very.
You know, we often talk aboutbuilding products, building GTM,
hiring people and all that, butperhaps not enough about
building culture.
What are your thoughts on that,sripati?
And you know you can maybe justkick us off there.
Shripati Acharya (01:30):
Absolutely.
I think culture is one of thosethings that it gets created,
whether you like it or not.
So, whether you are working onit actively, whether you want to
define it, whether you want toshape it, it's going to be there
, so you'll end up withsomething.
It whether you want to shape it, it's going to be there, so
you'll end up with something.
And the question here is thatwhether what you end up with is
(01:52):
something that you wanted it tobe.
So that's really the issue here, and so you're much better off
trying to create a culture whichyou want to create and then
seeing where it goes.
And I feel that for a startup,this is one of the most
underappreciated areas, becauseyou're as a founder, you're so
interested in building theproduct, getting financing,
(02:15):
getting the capital raised tothe right level, hiring teams,
etc.
And the last thing you want todo is something loosey-goosey
and soft as culture.
Amit Somani (02:25):
Absolutely, and you know, I have this sort of
thesis that the culture of acompany, especially a startup,
gets formed much like a kidgrowing up, or even a kid in the
womb, in the first 9, 12, 18months.
Right, because, like you said,whether you build it consciously
or not, it's getting built.
It is how you're makingdecisions, how you're hiring
people, it's the first 10 hires,it's how you take trade-offs,
(02:50):
et cetera, et cetera.
So it is getting built, whetheryou like it or not.
So might as well be deliberateabout it and conscious about it
and kind of build it.
Shripati Acharya (02:58):
Exactly and, as we know, the culture is not
what the founders determine.
The culture is not what thefounders determine.
It is what everybody elsearound the table talks about and
how they interact when thefounders are not in the room.
Amit Somani (03:10):
Absolutely.
In fact, I don't know whereI'll Some folklore that culture
is what employee number 50 or500 or 5,000 says.
The culture is Not what iswritten on the fancy wall with
their vision and missionstatement and the culture and
values.
It's what people are actuallyfeeling and experiencing of how
things get done in your company.
Yes, so can we define it alittle bit more?
(03:35):
Right, like, what is culture?
So suppose there's a startupfounder listening to the podcast
, how should they define culture?
What are the elements of it?
You know, a couple of thingsthat come into my mind are how
decisions get made.
Like I said earlier, what kindof people do you hire?
How do you do trade-offs If thefounders are not in the room?
If the customer's not in theroom, you know how do you make
decisions, et cetera.
(03:55):
But what are some otherelements that people should
consciously think about whenthey're defining culture?
Shripati Acharya (04:01):
So I feel that think about it from the
standpoint of a new employee whohas joined.
What are the questions they areasking themselves, without
necessarily asking, what are thethings in their mind?
And the things in their mindare well, how should I actually
behave and interact in thismeeting?
So let's think about somepractical terms.
You're in a meeting and aconversation is going on and the
(04:22):
CEO is saying something and youdisagree with it.
How do you, what do you do atthat point?
That is the direct impact ofculture.
So if a culture is somethingwhere you are, it's very
transparent and open and you cango and dispute anything in an
open fashion, then, yes, thereis actually no, I guess, concern
(04:44):
or fear, whatever you want tocall it.
But if suppose the culture isone where it is differential but
they are not even saying it'sactually the right thing or the
wrong thing, because there are alot of companies where you want
that, where it is, or, I wouldsay, where a top-down culture
works very well, becauseeverybody aligns quickly and
fully without having endlessdebates, because you can have
(05:06):
companies where there is thisopen culture, where there's a
lot of debates and then you'redoing analysis, paralysis and
nothing gets done.
That's definitely worse thanthe previous one, right?
So not even saying one isbetter than the other, but that
defines the culture.
What do you do?
How do you interact with yourpeers, how do you interact with
your seniors, for example?
That's probably one example ofculture.
Amit Somani (05:29):
Yeah, you know.
A couple of other things thatare coming to mind is are things
like do decisions get madebased on data or you know some
kind of insight, or perhaps youknow who you know or what you
know right of insight?
Or perhaps you know who youknow or what you know right?
So in certain companies, if youdon't have data, you know
Rupert Murdoch is famous forhaving said this right, if we
(05:50):
have data, then we'll talk.
Right, If you have opinions,then we'll use mine.
Shripati Acharya (05:53):
You know so we'll go with the highest person
.
Jack Welch has a quote right InGod we trust everybody else
brings data.
Amit Somani (05:59):
Yes, that's there, you go right.
So I think it's very important.
I like that thing about youknow a new employee coming in,
or employee number 50 coming into my point earlier.
It's whatever they are feelingwhen they're coming in, like you
know, a week or a month orthree months later.
That's what's kind of definingwhat culture is.
Shripati Acharya (06:18):
There's another element of it which I'm
actually reminded of, becauseAmazon quite famously has this
culture of being of customercentricity.
So what culture can help defineis put the guardrails within
which you make decision when ithas not been prescribed.
So, of course, you might have,you know, a company guidance
wherein that you need to travel.
(06:39):
You know economy class here andbusiness class there, and these
are all rules, right, it'sfairly straightforward.
But the question is, what doyou do when it has a situation
where you need to use yourjudgment, and the culture helps
guide that.
And so, from what we understandI think you have mentioned this
to me that in Amazon, there'salways a seat in any meeting for
(07:00):
the customer, that's right.
An empty seat, an empty seatright, which is what?
For the customer, that's right.
An empty seat, an empty seatright, which is what would the
customer think?
That is culture to me, right,which is putting you know
helpful guardrails around howyou make decisions.
Amit Somani (07:13):
Absolutely.
And similar things were true atGoogle, saying is this right
for the user?
If it's right for the user,then it's fine, because that's a
core value, that's a coreprinciple, that's a core belief.
So let's transit.
You know, since I started withsaying, you know, hard is easy,
soft is hard, let's talk aboutsome of the harder issues and I
(07:36):
want to, in particular, bring upbecause we've now seen you know
dozens, if not you know, workedwith actually dozens, but seen
thousands of companies over thelast 10 years what are some of
the dilemmas and the dynamicswhich are very hard and
difficult to get around.
And so, therefore, people sweepit under the rug and I'll kick
it off.
Yeah, right.
So what is the dynamic between atwo or a three person
co-founding team?
Right?
(07:57):
And how do they?
It's not just decisions, right?
Who's the CEO, who's not?
Let me just even start there.
We have met innumerablecompanies, including one as late
as last week, but they said, no, no, we haven't decided.
We're two buddies, we're likewe've been together since grade
six, we'll figure it out.
No, not really, but there areso many of these dilemmas.
So what do you think about thisnotion of getting some kind of
(08:20):
vibe and some of the moreuncomfortable questions kicked
off between the founders soonerthan later, and perhaps even all
along the journey.
Shripati Acharya (08:28):
Yeah, I feel that this who is the CEO
question is like a really great,I would say, test case about
how much evolved and firmed upthat relationship between
founders is.
If you think about it, it'svery common, in fact desirable,
for founders to be friends, andbecause from friendship comes
trust and trust is reallycentral to be successful because
(08:50):
you are going to face a lot ofups.
You know, our partner, sanjay,famously says that you have, in
a year, 360 days of pain andfive days of exhilaration, and
in deep year you get 361 days ofpain, 361 days of pain.
So that's what startup journeyis, and in order to navigate
(09:13):
that the stormy sea successfully, you need a lot of trust and
that comes from friendship andknowing each other intimately,
having gone on travel togetheror been on those hard classes
together and burn the midnightoil and whatever have you, or
been on parties, everything else.
But the thing with startups isthat, while that is essential to
start the company, you need togo ahead and develop another
side of that relationship, whichis a professional relationship.
(09:36):
And who is the CEO is the firstquestion in that professional
relationship, because a CEO isthe first among equals, so the
buck does stop with he or her asa CEO.
When you're talking aboutissues, the CEO is the person
who is signing off on documents.
(09:56):
Typically, and ultimately, theperformance of a company the
responsibility does rest withthe CEO.
So it is not a trivial decisionand it is an important
conversation and to me, whenfounders have come in and said
that, hey look, we'll figure itout, my suggestion is that you
know, we should figure that outbefore you actually do any kind
(10:17):
of fundraise.
Not because it's the investorswho want it or desire that, but
it actually leads to a certainset of conversations and terms
of engagement being definedbetween founders, which is just
super important.
Amit Somani (10:32):
Yeah, couldn't agree with you more.
And what happens is, when youprobe some of these so-called
soft things, you will get to theharder issues.
What are the roles andresponsibilities?
How will we measure eachother's performance?
How will we make each otheraccountable?
Right?
Where does the buck stop,whether it is with respect to
investors, customers, partners,etc.
(10:52):
Right?
So I think these conversationsstart coming up, which is what
you don't want to discuss.
You're like this is beautiful,let's just build this product.
Customers are asking for it,let's get the pricing right.
But you don't want to talkabout like, okay, how will this
really kind of happen?
Shripati Acharya (11:05):
Well, the typical question which we ask
and I think it's a relevant oneis that what happens when
there's a disagreement?
And the typical answer whichyou get is hey look, we just
talk it out, kumbaya, we all getto an amicable understanding.
While that would be true, andwe hope it is, most of the time
you have to account for the casewhere there is a disagreement
and then the right answer hereit's not really a trick question
(11:27):
is that the CEO has to makethat decision and, more
importantly, the founder or restof the founders have to be on
board with it, right?
That's why you choose that CEO.
And related to that is thisquestion of, like, how equity is
distributed between founders,right?
Maybe I should ask you thatquestion, right?
Because you know we see a lotof times when it is equal and,
(11:54):
at least for a neutral observer,it does not quite make sense.
Amit Somani (12:01):
Yeah, absolutely.
I think that's the next kind oftough question, right.
One is who's the CEO?
We'll figure it out.
What's the equity?
Of course it's equal.
You know one, you know it'sthree of us or it's two of us.
So it's this.
But it's not really absolutely.
It's not necessarily the caseof how it should be, and I think
a lot of it is also because oneis because it's uncomfortable
to talk about two, it's becauseyou conflate the notion of being
(12:27):
a founder or a co-founder withbeing an equal partner.
It is not necessarily the case.
You co-founded somethingtogether, you took the same risk
, the same leap of faith builton a relationship, built on
trust, built on some opportunity.
But as you contribute to thecompany now and going forward
and as you scale with thecompany, that has to be more
(12:47):
commensurate with the kind ofequity and the equity split.
And you have to have enoughmutual trust and respect to be
able to say like, oh, for thiskind of role.
Five years from now, if you arehiring somebody, you know what
would be nominally pay them.
Of course you're a founder andyou will get your founder equity
and you'll get your seat at theboard and all those other good
things.
But I think that people don'twant to talk about the roles and
(13:09):
responsibilities and thecontribution that you're
expected to make.
So it's a little loosey-gooseysaying look, we're all one big,
happy family.
And actually you are right,because at the beginning
everybody does everything right.
It's like the proverbial twoguys and a gal and a dog in the
garage.
So what role and responsibility.
But that's not going to be thecase once you have 15 people.
(13:29):
It's not going to be the casewhen you have $10 million of
revenue or $2 million of revenue.
Shripati Acharya (13:40):
And I would say, amit, that you are kind of
like setting yourself up forissues and problems and really a
debt which the company has torepay sometime in the future,
because, just think about it,the contributions will typically
be different depending on thedomain in which you are.
It's not like you are smarterthan me, but suppose today we
are starting a company which isin travel, you are in a CPU of
Make my Trip and at Google, youknow, running consumer products.
(14:03):
I would think that you wouldprobably add a lot more value
than most other people, right?
If you and I were starting acompany.
So it actually depends on eventhe company and the actual
problem statement which they'relooking to address.
So it's really not about likewho is smarter.
It is what the futurecontribution is going to be and
if that conversation can be hadand you agree to a what you
(14:28):
think is a fair contributionratio and obviously it is
qualitative right but if youcome to some understanding, it
really prevents problems later.
Because what happens later andwe have seen this in companies,
in fact, I've seen this in verysuccessful companies later also,
and this I'm talking even frommy experience being in the
Valley at that time is that theperson who is clearly making a
(14:53):
larger contribution startshaving angst about it.
Okay, this could be like threeyears later.
Amit Somani (14:59):
Yeah.
Shripati Acharya (15:00):
And now everybody else in the company
also sees it right.
Suppose one person is a ceo,another person is cto, and let's
say the cto is just likeblowing it out of the park, yeah
, and the ceo is just asalesperson.
I'm not saying just, it's like asales, but now this is really a
tech company or the vice versa,right?
So what happens is thateverybody in the company now is
(15:22):
like keeping quiet because theyknow this is not really fair and
this is.
Everybody ends up knowing whatequity is anyway.
And now, even between thefounders, it's creating friction
, which is really not what youwant, because you want all your
forces to be squarely focused onmaking it as successful as
possible.
So I'm not here really battingthat there should be
(15:43):
differential equities in allcases, but it is a question
which at least should be asked,discussed and come to an
understanding between thefounders and realize that you
speak now or forever, hold yourpeace, because these kinds of
things don't change materially.
It can be on the margin, youknow some bonus pool the company
would allocate and so forth,but just be reasonable about it.
(16:05):
And honestly, this comes downto a worldview which you and I
frequently talk about, which isabout being rich versus being
king.
Amit Somani (16:15):
Yes, yeah, there's this beautiful book I recommend
called the Founder's Dilemmas byProfessor Wasserman from
Berkeley, which talks about justfigure out, do you want to be
king or do you want to be rich?
And the metaphor is that if youwant to be rich, you need to
think big, right.
You need to structure thingsfor more success.
You need to figure out who allyou need to bring to bear.
(16:37):
It could not just beco-founders, which is, of course
, the most critical startingingredient, but investors,
senior employees, cxos we'lltalk about all that right, and
therefore you may have a smallerpie of a much bigger thing.
But if you want to be king,you're like this is my little
empire and like I run this andyou know this company will never
be more than $10 million.
But hey, look, I'm king, right,like I decide what you know
what I'm going to do.
(16:57):
So I don't think peoplenecessarily think about it very
consciously and deliberately.
Let me take the devil's advocateto that.
Let's say I'm one of the.
You and I are kind of startinga company and the kind of roles
are flipped and it's somethingthat you have both expertise in
or experience or whatever, andI'm feeling like marginalized
right, saying wait, like it'sfine, like, but right now
(17:20):
there's nothing, right?
We're just starting out andlike, well, I'm also slogging,
you're also slogging 16 hours aday, 18 hours a day.
So why am I like?
You know, like I'll evolve,right, I'll grow, you'll also
grow, I'll also grow.
So how do you think about, like, resolving stuff like that,
right?
But I do agree with yourbroader premise that just the
virtue of talking about thiswill clear up a lot of the air,
(17:41):
even if you end up at 50-50.
But for a moment you say no, no, it's not 50-50.
There's some differential andI'm the one getting the little
bit of the lesser equity.
How do I, at an emotional level, get my head around this?
Shripati Acharya (17:56):
So the way I look at it is that you have to
dispassionately look that it'sactually good for me as a person
who is actually getting lowerequity, if it is actually fair
and good for the company.
And it is good for the companyBecause in one sense you, uh I
would think that, hey, this isactually reflective of the
respective contribution and inone sense it reduces friction
(18:17):
later, because if I havedisproportionate equity, a
grossly disproportionateactually, what happens is
problems occur, not because youhave two percent more or
something like that.
Right, when you clearly saythat you know this is this is
this doesn't make sense, right?
You know this equitydistribution and, honestly,
future rounds.
Investors ask this veryuncomfortable question when they
(18:38):
are coming into the company.
So it is not even like severalyears down the road.
You might do a seed round, youmight do a in series A or series
B, you might start gettingpushback on this one, because at
that time there's enoughhistory to the company and there
is enough evidence of which waythe company is going and what
the various contributions are.
(18:58):
And so it just the way to thinkabout it is that you're rich
versus king question and say,look, you're building a large
company, there is going to bedifferential contribution.
Looks like this person is, uh,you know, it is in travel, it is
in advertising, it's in allthese different areas.
I don't have that skill set.
I have other skill sets and I'mactually really helping prevent
issues later and honestlyreducing attention on myself,
(19:22):
because I also feel at peacethat, hey, look, you know, I
think I did the right, right,right decision there, and this
is really the mindset you willneed on and on and on To build a
large company.
To build a large company andthis is just part one of it.
The larger, actually, issuescome with the ego here, when the
roles actually change, right,right, and now, when a person is
(19:45):
, let's say, there is a WallStreet Journal article, there is
an article in Economic Times,right, and it has a full page
picture of Amit Somani on it.
I'm like, hey, look, you know,like what about me?
You know I also did this stuff.
What do you do then, right?
So I think that this thinking,just taking a step, step back,
(20:09):
taking a look at the company andsaying what's going on here and
it's okay, right, sometimes oneperson gets a spotlight,
because the ceo will naturallytypically get the spotlight,
because if you're a reporter,you just basically say hello,
can I talk to the ceo of thecompany?
It happens to us when folkscall us for our portfolio
companies and we connect them tothe ceo not to all the founders
, right?
So I think that thatunderstanding and probably
(20:34):
maturity perhaps, is really,really helps.
But you will be surprised howoften these little things not
even talking about equity, I'mtalking about this example lead
to a lot of friction.
Amit Somani (20:46):
No, that's a brilliant one.
And you know one of the thingsthat, since we're sharing prime
secrets on the air, lead to alot of friction.
No, that's a brilliant one.
And you know one of the thingsthat, since we're sharing prime
secrets on the air, that I oftenask founders or at least try to
assess on my own is you knowwhich founder is driven by what
Meaning particularly power,money, fame, impact?
Of course there's, you know,it's not.
(21:08):
You don't pick one or the other, right, you mix and match.
But what are your core drivers?
And in many cases, people arevery aware of their anti-drivers
.
They're not aware of the coredrivers.
So they may be like look, Idon't really care much for fame,
I want to build something cool,I want to be rich, or vice
versa.
Right, I want to be the face ofthis thing.
Shripati Acharya (21:32):
I want to be the face of this thing.
I want to be the engineer thatyou know built the open AI
algorithm or the Google pagerank or whatever.
Amit Somani (21:34):
Like I don't really care, I want to be featured in
the Wall Street Journal.
Yeah, I don't want to befeatured in the Wall Street
Journal, but I want to win theTuring Award or I want to get
some, you know, whateverrecognition in the scientific
community.
But if you don't know and youhaven't really gone into the
depth of kind of figuring thatout, you know that can cause
kind of issues.
You know each other, right,like you said, you're friends,
you're probably classmates fromIIT or XYZ or whatever, but you
(21:54):
haven't really like what drivesthis person, what's the chip on
the shoulder, what's themotivation?
And when you get into thesethings and you say, no, no, I
also care about fame, sripatialso cares about fame.
So, like, I also want to be inthat Wall Street Journal article
or vice versa.
So that's one that leads me toanother slightly more upbeat
question, which is, but relatedin the same genre, that as
(22:15):
companies mature and we've seenthis a few times that you start
getting exit opportunities,right.
And again, if you haven'ttalked about it, and this is
their first company and likethree years in, you're doing
something great, you've builtsome nice product, you've got
some revenue, you've got sometraction Somebody comes and
offers $50 million to buy thiscompany.
Now, each of you own severalyou know tens of percentage
(22:36):
points of equity in the company,maybe more, and you're like man
, we could make $10 million eachat the age of 29, right, or
more.
Now, what do we do Now?
I've seen and heard scenarioswhere, like, somebody else is
like, look, this islife-defining money, like I got
to take this right, I can't likewho knows when exits will
happen or not.
And the other person is like no, no, no, I'm going to go big or
(22:57):
go home, right, so I'm not hereto do this thing.
I want to like go build thisinto a unicorn, deca-corn,
whatever, and if it doesn't makeit, no problem.
So how do you think about someof these other dilemmas, some of
which you can anticipate andnotionally like talk about it in
your dating process or yourearly company, but some of it as
you go along, right, you getinto that.
(23:19):
Or somebody just, like you know, got found a fatigue, like
saying we're doing this for five, six years, we're getting 10,
$10 million each or whatever.
$20 million investors, 10million dollars each or whatever
20 million dollars.
Investors are getting some exit, let's just get out.
The other person like, no, thisis my life's work.
I'm going to do this foranother 10 years.
Like I don't want to get out,I'm not going to sell at all.
How do you think about dilemmasof that nature?
Shripati Acharya (23:37):
so I think those are like very difficult.
Uh, so one thing is that youcannot really pre-plan for it.
Yes, right, you cannot like say, look, we agree that we shall
hereby commit ourselves tocreating at least a billion
dollar exit, because the matteris fact of the matter is, it's
an unknowable thing.
You don't know what's going tohappen.
You are looking for productmarket fit.
(23:57):
You don't know how large themarket is going to be.
You don't know what thecompetitive dynamics is going to
be.
You don't know how the fundingenvironment is going to be.
You don't know what kind ofteam you get to end up creating.
So you just don't know.
So to me, like there's a line,there's a thing right.
It says Aankh mein ho swar,lekin paav prithvi par tike ho.
Right, dream big, but have yourfeet firmly planted on the
(24:19):
ground.
And what that really means isthat you're evaluating it.
And maybe 50 million is theright thing to do.
Right, because you might havewanted a really large thing but,
you take a step back and yousay, look, you know, all things
considered, this is very therisk here is just too much,
which I'm not willing to take,or I don't have the investor
(24:42):
support or whatever else I'mpresuming is going to happen.
I mean which we ask our foundersthese questions what are you
presuming to be true at thispoint Now, looking what you
already know and what is aheadfor this?
To be a big company, and arethose assumptions fair and
reasonable to me?
So one thing I would say isthat deciding these things is
(25:03):
really about having a lot ofconversations with your own
trusted board, your personaladvisory board, of course, with
your investors, as you know,your own trusted board, your
personal advisory board, ofcourse, with your investors as
well.
But your own personal board andthe founders might very well,
you know, differ in theiropinions here, but I feel that
there's no straight answer.
Honestly, these are toughquestions and the thing is, even
if you have taken the exit, youwould never know what it would
(25:26):
have been to continue.
Right as we know thatZuckerberg famously turned down
I think it was $500 million orbillion dollar exit soon after
he had started from Yahoo, and,of course, we know where it is
today.
So for everything you'll findfive other for every such
Facebook.
There are probably 10 exampleswhere somebody didn't take the
exit or probably 100 and didn'tmake it so honestly, I don't
(25:48):
know how to there's no cookiecutter answer there.
Amit Somani (25:52):
Yeah, no one thing.
That I think helps.
Again.
It's back to the.
You know, planning is essential, plans are not.
Is when you're conversing on howdo you, how are you going to
potentially make these decisions, what are your drivers, what
are my drivers, why am I doingthis?
Et cetera, et cetera, and thenyou figure out the dissonance.
Right, it doesn't mean youdon't do the company or you
don't do it together.
Of course you do.
But you say, okay, this is howyou think, this is where you're
(26:14):
coming from.
Right, this is what you want tokind of do.
And so it does help when youtalk about these various things
in terms of, not that specificscenario, but like, for me it's
not the money, right, for meit's like huge impact.
Like I want to take Facebook orthis thing to a billion users.
So like, even if I got abillion dollars, like what would
I do with it?
Like I didn't go to a billionusers.
Like I want to take it to abillion users, or the other way
(26:37):
around.
Like, look, money is reallyimportant for me and like you
know, I don't know whateverZuckerberg was at that time 22.
Like I more companies afterthis?
Shripati Acharya (26:47):
right, so, but I think it's really related
back to our culture conversationearlier, which is that how do
you have difficult conversations?
Yes, right, and as founders youneed to have the ability to have
difficult conversations in anopen and productive fashion, and
if you do that, it willactually percolate down to the
rest of the company.
No amount of writing it on bigboards and big and 100 point
(27:10):
font is going to change that,because that culture is
established the very first timein a full room.
You have a disagreement?
Yes, right, and how do you doit?
And if you have the ability toactually listen, understand
their point of view, give aproper, you know your point of
view and actually are togethertrying to find a solution versus
(27:30):
trying to be right, then it'llactually help the company move
forward.
It's a tough thing to do, buton the positive side, we have
seen companies which have thosecharacteristics really, really
succeed.
And those companies are theones which have like learning
machines, right, because they'reable to take the input, process
it, it and then decide anddoing it without any sense of
(27:52):
insecurity so I I'm into books.
Amit Somani (27:55):
I have two book recommendations.
One is called crucialconversations, a fantastic book,
and another one is calledradical candor, which, even at
prime, we all read and it's oneof the core values for prime
itself.
Yeah, that in a radical candor,you care deeply about the other
person, you have a greatrelationship, but you're very
candid and direct in approachingthe issue at hand.
Right, it's about the issue,not the person, right?
(28:15):
Yeah, yeah, so I think thoseare.
I mean, there are tools and ofcourse, you can use other tools
as well, and other frameworksand so forth.
That leads me to a differentkind of area.
So this is all at the startup.
You know, get your value systemaligned, get the culture for
the first employee, 10themployee, 50th employee.
I think that people don't spendenough time on how will you
(28:37):
evaluate performance and howwill you evaluate each person's
ability to scale and theorganization's ability to scale
as you go along?
I think a lot of theperformance evaluation, the
peer-to-peer feedback, theevaluation of each co-founder by
, let's say, a CEO or the board,is all a little bit
loosey-goosey.
(28:57):
Do you want to talk a littlebit about that, sripati, in
terms of how do you, once youhave an ongoing concern and it's
working, and so on.
How do you keep on the track?
Shripati Acharya (29:07):
Perhaps in this particular case, I can be a
little bit more prescriptive inmy suggestions, right, which is
that once you have decided youknow who among the founders is
the CEO, then you really need tocast away the founder tag,
right in terms of how youoperate, because there will be,
(29:31):
as the company is successful, alot or tons of people who are
not founders by definition,right, and they'll also be in
senior roles.
So the idea that if I'm a CTOand a co-founder and you are the
CEO and a co-founder, I'mreporting to you, then I think
that the relationship, as far asthe professional relationship
(29:52):
is concerned, should be as ifI'm a CTO and you're a CEO and
these founders think that mightor might not have been there
right?
Which means, translated veryspecifically, is that we do have
a performance conversationwhenever, whatever the
organization's cadence is once ayear, once every six months and
so forth and you'll besurprised that this almost never
(30:14):
happens.
Years go on into a company'sfounding.
Companies are large, they'resuccessful, making tens of
millions of dollars of revenue,maybe even more, and we don't
have that structure in place andby not putting that structure
in place, you're not providingan avenue to have that difficult
conversation.
You cannot just grab this heyHamid, let's go have a coffee in
(30:37):
Starbucks and say I need togive you a performance feedback.
It doesn't quite work that way.
Amit Somani (30:44):
Right, yeah, no, I would extend it further, sripati
.
So one this is the mostdifficult one, right, which is
that you know everybody reportsto the CEO.
There's conversation betweenthe CEO and the person who's in
that role or responsibility, notjust the co founder, like you
said.
There are two other criticalconstituents, at least two,
maybe more right.
One is your employees, and youknow what kind of feedback are
(31:06):
you collectively, as aleadership team, as a founding
team, taking from the employees,right?
So I think there's a lot ofsometimes gap between doing
something as simple as a 360degree review to say how are we
performing as an organization,what could we do better as an
organization and as a foundingteam, as a management team, et
cetera.
So I think employees are notnecessarily always heard, you
(31:27):
know, in a very kind ofthoughtful and deliberate manner
.
And the other is the board, andare you formally getting
performance feedback from theboard?
Because the CEO reports to theboard, the entire management
team indirectly reports to theboard.
So you know many CEOs will belike, look, I got the ARR, I got
this, I got churned down, good,to raise the next round, all
(31:47):
hunky-dory.
Not true?
Because you want to getfeedback from the board in terms
of how you're performing, whatcould you do differently, how's
your team performing right, etcetera, et cetera.
So I think those are two otherareas that I would encourage
people, if I were to beprescriptive, to say, hey, think
about consciously gettingdirect feedback from the board
on performance, not on ARR andso forth and also some avenue to
(32:10):
get it from your othercolleagues, you know,
non-co-founders, employees, etcetera.
Shripati Acharya (32:17):
Absolutely, and I think this is part of that
culture bit again, which is,how open is the company in terms
of getting feedback?
Because I believe that the bestcompanies are trying to get to
the truth.
They're trying to get feedbackfrom whatever level, because the
junior, most person who's incontact with the customer, might
actually have a brilliant ideaand that brilliant idea must
(32:40):
surface.
That person might also have theinformation about what is
seriously going wrong with thecompany.
Maybe the company is losing tothe competitors and there's a
new competitor threat.
All these things are likedisruptive technologies and
somebody needs to surface thatit.
There's a new competitivethreat Gen AI.
All these things are likedisruptive technologies and
somebody needs to surface that.
It's very easy for seniormanagement, even in a startup,
to be in a cocoon if you don'thave an open culture of actually
(33:02):
surfacing these kind of things.
So it's super important toactually put you know, establish
that, and just imagine in ameeting, if suppose there is one
person is a peer of the of afounder.
Now is this in which, like, afounder is quote, unquote,
pulling rank and hence not actand overruling?
You don't do you?
(33:23):
You don't want that cultureright.
So I think all these things.
If you're conscious of it,you'll probably do the right
thing as a founder, but ifyou're not aware of it, you
might actually just let it rideand then it, as we discussed
earlier, just becomes a de factoculture in there.
And related to that is, you know, you just mentioned a point
with a comment on that, which isthe CEO reports to the board,
(33:45):
right, and I think that theboard is quite a time remiss.
Yes, I think that the board isquite a time remiss in giving
and that's like folks like usright in terms of giving
feedback to the CEO.
And one of the things which Ifind really, you know, amazing
about some founders and I've hadthat really privilege of
working with them that theywould call up after the board
(34:08):
meeting and I said, hey, look,what do you think went wrong and
what went right and what are wedoing not right here?
Do we actually, you know, do itproperly?
Do we present the right things,or do you really think is there
something which you need to saywhich you haven't talked about
in the board?
Can I actually talk to youabout it or can you tell me?
That level of openness to mefundamentally gives you a
(34:29):
superpower because now you havethe ability to listen and
incorporate feedback.
Of course you can reject itanytime, of course, but just
having that particular DNA justsets it up for a beautiful
relationship between the boardand the CEO and also fixing
issues.
Amit Somani (34:48):
Absolutely no.
I couldn't agree with you more.
So I think a lot of thesethings that we've talked about
in fact, this by itself could bea podcast kind of on its own
just feedback and how to makeand give feedback.
But I think, overall, the pointthat we're sort of making as we
come to a close here is thatyou need to be deliberate about
creating culture.
(35:09):
You need to talk, you know, saythe unsaid right.
Talk about the uncomfortableconversations, whether it's
equity, it's roles andresponsibilities, feedback, its
ability to scale and so on andso forth, rather than let it
kind of be swept under the rugand like we'll see it when we
kind of get there.
It may be too late by the timeyou get there.
Shripati Acharya (35:28):
Absolutely.
And if I may just paraphrasethis in another way, which is
that you start the company on acore foundation of friendship
and trust.
That is very important and youshould continue to be there, but
you need to add another pillarto it and that is a professional
relationship in terms ofengagement.
(35:49):
And the sooner you have thatconversation, relationship and
terms of engagement, and thesooner you have that
conversation, the more firm isthe foundation of the company.
Amit Somani (35:56):
Absolutely, and if I may sort of bring this to a
wrap, I think culture, just likeproduct or GTM, can be an
ultimate differentiator.
And so much like folks outthere, you're trying to build
great companies, great products,great services.
Think about building a greatculture.
Well put, great services, thinkabout building a great culture
(36:16):
Well put.
Prime Venture Partners (36:16):
Dear listeners, thank you for
listening to this episode of thepodcast.
Subscribe now on your favoritepodcast app for free and you'll
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(36:37):
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a review on Apple Podcast.
To read the full transcript,find the link in the show notes.
What is the dynamic between a 2 or a 3 person
co-founding team?
How equity is distributedbetween founders?
You just figure out.
Do you want to be king or doyou want to be rich?
Shripati Acharya (00:09):
Literally.
I think culture is one of thosethings that it gets created,
whether you like it or not.
Amit Somani (00:13):
Culture is what employee number 50 or 500 or
5000 says.
The culture is that cultureeats strategy for breakfast.
It is how you're makingdecisions, how you're hiring
people.
It's the first 10 hires.
Welcome to the Prime VenturePartners podcast.
(00:37):
This is Amit Somani and I amdelighted to be jamming with my
partner, Shripati Acharya.
Shripati Acharya (00:44):
Thanks, amit, glad to be on the show with you.
Amit Somani (00:47):
So we're going to talk about something which is,
you know, what we call.
You know, hard is easy, soft ishard.
So it's culture, it's foundersand it's the team, and how do
you build that and what are someof the dilemmas around that?
So there's a very popular quotefrom Peter Drucker that comes
to mind that culture eatsstrategy for breakfast, and I'm
(01:10):
sure, sripati, you would haveheard that at Harvard Business
School many times, of course.
Yeah.
So I think it's very, very.
You know, we often talk aboutbuilding products, building GTM,
hiring people and all that, butperhaps not enough about
building culture.
What are your thoughts on that,sripati?
And you know you can maybe justkick us off there.
Shripati Acharya (01:30):
Absolutely.
I think culture is one of thosethings that it gets created,
whether you like it or not.
So, whether you are working onit actively, whether you want to
define it, whether you want toshape it, it's going to be there
, so you'll end up withsomething.
It whether you want to shape it, it's going to be there, so
you'll end up with something.
And the question here is thatwhether what you end up with is
(01:52):
something that you wanted it tobe.
So that's really the issue here, and so you're much better off
trying to create a culture whichyou want to create and then
seeing where it goes.
And I feel that for a startup,this is one of the most
underappreciated areas, becauseyou're as a founder, you're so
interested in building theproduct, getting financing,
(02:15):
getting the capital raised tothe right level, hiring teams,
etc.
And the last thing you want todo is something loosey-goosey
and soft as culture.
Amit Somani (02:25):
Absolutely, and you know, I have this sort of
thesis that the culture of acompany, especially a startup,
gets formed much like a kidgrowing up, or even a kid in the
womb, in the first 9, 12, 18months.
Right, because, like you said,whether you build it consciously
or not, it's getting built.
It is how you're makingdecisions, how you're hiring
people, it's the first 10 hires,it's how you take trade-offs,
(02:50):
et cetera, et cetera.
So it is getting built, whetheryou like it or not.
So might as well be deliberateabout it and conscious about it
and kind of build it.
Shripati Acharya (02:58):
Exactly and, as we know, the culture is not
what the founders determine.
The culture is not what thefounders determine.
It is what everybody elsearound the table talks about and
how they interact when thefounders are not in the room.
Amit Somani (03:10):
Absolutely.
In fact, I don't know whereI'll Some folklore that culture
is what employee number 50 or500 or 5,000 says.
The culture is Not what iswritten on the fancy wall with
their vision and missionstatement and the culture and
values.
It's what people are actuallyfeeling and experiencing of how
things get done in your company.
Yes, so can we define it alittle bit more?
(03:35):
Right, like, what is culture?
So suppose there's a startupfounder listening to the podcast
, how should they define culture?
What are the elements of it?
You know, a couple of thingsthat come into my mind are how
decisions get made.
Like I said earlier, what kindof people do you hire?
How do you do trade-offs If thefounders are not in the room?
If the customer's not in theroom, you know how do you make
decisions, et cetera.
(03:55):
But what are some otherelements that people should
consciously think about whenthey're defining culture?
Shripati Acharya (04:01):
So I feel that think about it from the
standpoint of a new employee whohas joined.
What are the questions they areasking themselves, without
necessarily asking, what are thethings in their mind?
And the things in their mindare well, how should I actually
behave and interact in thismeeting?
So let's think about somepractical terms.
You're in a meeting and aconversation is going on and the
(04:22):
CEO is saying something and youdisagree with it.
How do you, what do you do atthat point?
That is the direct impact ofculture.
So if a culture is somethingwhere you are, it's very
transparent and open and you cango and dispute anything in an
open fashion, then, yes, thereis actually no, I guess, concern
(04:44):
or fear, whatever you want tocall it.
But if suppose the culture isone where it is differential but
they are not even saying it'sactually the right thing or the
wrong thing, because there are alot of companies where you want
that, where it is, or, I wouldsay, where a top-down culture
works very well, becauseeverybody aligns quickly and
fully without having endlessdebates, because you can have
(05:06):
companies where there is thisopen culture, where there's a
lot of debates and then you'redoing analysis, paralysis and
nothing gets done.
That's definitely worse thanthe previous one, right?
So not even saying one isbetter than the other, but that
defines the culture.
What do you do?
How do you interact with yourpeers, how do you interact with
your seniors, for example?
That's probably one example ofculture.
Amit Somani (05:29):
Yeah, you know.
A couple of other things thatare coming to mind is are things
like do decisions get madebased on data or you know some
kind of insight, or perhaps youknow who you know or what you
know right of insight?
Or perhaps you know who youknow or what you know right?
So in certain companies, if youdon't have data, you know
Rupert Murdoch is famous forhaving said this right, if we
(05:50):
have data, then we'll talk.
Right, If you have opinions,then we'll use mine.
Shripati Acharya (05:53):
You know so we'll go with the highest person
.
Jack Welch has a quote right InGod we trust everybody else
brings data.
Amit Somani (05:59):
Yes, that's there, you go right.
So I think it's very important.
I like that thing about youknow a new employee coming in,
or employee number 50 coming into my point earlier.
It's whatever they are feelingwhen they're coming in, like you
know, a week or a month orthree months later.
That's what's kind of definingwhat culture is.
Shripati Acharya (06:18):
There's another element of it which I'm
actually reminded of, becauseAmazon quite famously has this
culture of being of customercentricity.
So what culture can help defineis put the guardrails within
which you make decision when ithas not been prescribed.
So, of course, you might have,you know, a company guidance
wherein that you need to travel.
(06:39):
You know economy class here andbusiness class there, and these
are all rules, right, it'sfairly straightforward.
But the question is, what doyou do when it has a situation
where you need to use yourjudgment, and the culture helps
guide that.
And so, from what we understandI think you have mentioned this
to me that in Amazon, there'salways a seat in any meeting for
(07:00):
the customer, that's right.
An empty seat, an empty seatright, which is what?
For the customer, that's right.
An empty seat, an empty seatright, which is what would the
customer think?
That is culture to me, right,which is putting you know
helpful guardrails around howyou make decisions.
Amit Somani (07:13):
Absolutely.
And similar things were true atGoogle, saying is this right
for the user?
If it's right for the user,then it's fine, because that's a
core value, that's a coreprinciple, that's a core belief.
So let's transit.
You know, since I started withsaying, you know, hard is easy,
soft is hard, let's talk aboutsome of the harder issues and I
(07:36):
want to, in particular, bring upbecause we've now seen you know
dozens, if not you know, workedwith actually dozens, but seen
thousands of companies over thelast 10 years what are some of
the dilemmas and the dynamicswhich are very hard and
difficult to get around.
And so, therefore, people sweepit under the rug and I'll kick
it off.
Yeah, right.
So what is the dynamic between atwo or a three person
co-founding team?
Right?
(07:57):
And how do they?
It's not just decisions, right?
Who's the CEO, who's not?
Let me just even start there.
We have met innumerablecompanies, including one as late
as last week, but they said, no, no, we haven't decided.
We're two buddies, we're likewe've been together since grade
six, we'll figure it out.
No, not really, but there areso many of these dilemmas.
So what do you think about thisnotion of getting some kind of
(08:20):
vibe and some of the moreuncomfortable questions kicked
off between the founders soonerthan later, and perhaps even all
along the journey.
Shripati Acharya (08:28):
Yeah, I feel that this who is the CEO
question is like a really great,I would say, test case about
how much evolved and firmed upthat relationship between
founders is.
If you think about it, it'svery common, in fact desirable,
for founders to be friends, andbecause from friendship comes
trust and trust is reallycentral to be successful because
(08:50):
you are going to face a lot ofups.
You know, our partner, sanjay,famously says that you have, in
a year, 360 days of pain andfive days of exhilaration, and
in deep year you get 361 days ofpain, 361 days of pain.
So that's what startup journeyis, and in order to navigate
(09:13):
that the stormy sea successfully, you need a lot of trust and
that comes from friendship andknowing each other intimately,
having gone on travel togetheror been on those hard classes
together and burn the midnightoil and whatever have you, or
been on parties, everything else.
But the thing with startups isthat, while that is essential to
start the company, you need togo ahead and develop another
side of that relationship, whichis a professional relationship.
(09:36):
And who is the CEO is the firstquestion in that professional
relationship, because a CEO isthe first among equals, so the
buck does stop with he or her asa CEO.
When you're talking aboutissues, the CEO is the person
who is signing off on documents.
(09:56):
Typically, and ultimately, theperformance of a company the
responsibility does rest withthe CEO.
So it is not a trivial decisionand it is an important
conversation and to me, whenfounders have come in and said
that, hey look, we'll figure itout, my suggestion is that you
know, we should figure that outbefore you actually do any kind
(10:17):
of fundraise.
Not because it's the investorswho want it or desire that, but
it actually leads to a certainset of conversations and terms
of engagement being definedbetween founders, which is just
super important.
Amit Somani (10:32):
Yeah, couldn't agree with you more.
And what happens is, when youprobe some of these so-called
soft things, you will get to theharder issues.
What are the roles andresponsibilities?
How will we measure eachother's performance?
How will we make each otheraccountable?
Right?
Where does the buck stop,whether it is with respect to
investors, customers, partners,etc.
(10:52):
Right?
So I think these conversationsstart coming up, which is what
you don't want to discuss.
You're like this is beautiful,let's just build this product.
Customers are asking for it,let's get the pricing right.
But you don't want to talkabout like, okay, how will this
really kind of happen?
Shripati Acharya (11:05):
Well, the typical question which we ask
and I think it's a relevant oneis that what happens when
there's a disagreement?
And the typical answer whichyou get is hey look, we just
talk it out, kumbaya, we all getto an amicable understanding.
While that would be true, andwe hope it is, most of the time
you have to account for the casewhere there is a disagreement
and then the right answer hereit's not really a trick question
(11:27):
is that the CEO has to makethat decision and, more
importantly, the founder or restof the founders have to be on
board with it, right?
That's why you choose that CEO.
And related to that is thisquestion of, like, how equity is
distributed between founders,right?
Maybe I should ask you thatquestion, right?
Because you know we see a lotof times when it is equal and,
(11:54):
at least for a neutral observer,it does not quite make sense.
Amit Somani (12:01):
Yeah, absolutely.
I think that's the next kind oftough question, right.
One is who's the CEO?
We'll figure it out.
What's the equity?
Of course it's equal.
You know one, you know it'sthree of us or it's two of us.
So it's this.
But it's not really absolutely.
It's not necessarily the caseof how it should be, and I think
a lot of it is also because oneis because it's uncomfortable
to talk about two, it's becauseyou conflate the notion of being
(12:27):
a founder or a co-founder withbeing an equal partner.
It is not necessarily the case.
You co-founded somethingtogether, you took the same risk
, the same leap of faith builton a relationship, built on
trust, built on some opportunity.
But as you contribute to thecompany now and going forward
and as you scale with thecompany, that has to be more
(12:47):
commensurate with the kind ofequity and the equity split.
And you have to have enoughmutual trust and respect to be
able to say like, oh, for thiskind of role.
Five years from now, if you arehiring somebody, you know what
would be nominally pay them.
Of course you're a founder andyou will get your founder equity
and you'll get your seat at theboard and all those other good
things.
But I think that people don'twant to talk about the roles and
(13:09):
responsibilities and thecontribution that you're
expected to make.
So it's a little loosey-gooseysaying look, we're all one big,
happy family.
And actually you are right,because at the beginning
everybody does everything right.
It's like the proverbial twoguys and a gal and a dog in the
garage.
So what role and responsibility.
But that's not going to be thecase once you have 15 people.
(13:29):
It's not going to be the casewhen you have $10 million of
revenue or $2 million of revenue.
Shripati Acharya (13:40):
And I would say, amit, that you are kind of
like setting yourself up forissues and problems and really a
debt which the company has torepay sometime in the future,
because, just think about it,the contributions will typically
be different depending on thedomain in which you are.
It's not like you are smarterthan me, but suppose today we
are starting a company which isin travel, you are in a CPU of
Make my Trip and at Google, youknow, running consumer products.
(14:03):
I would think that you wouldprobably add a lot more value
than most other people, right?
If you and I were starting acompany.
So it actually depends on eventhe company and the actual
problem statement which they'relooking to address.
So it's really not about likewho is smarter.
It is what the futurecontribution is going to be and
if that conversation can be hadand you agree to a what you
(14:28):
think is a fair contributionratio and obviously it is
qualitative right but if youcome to some understanding, it
really prevents problems later.
Because what happens later andwe have seen this in companies,
in fact, I've seen this in verysuccessful companies later also,
and this I'm talking even frommy experience being in the
Valley at that time is that theperson who is clearly making a
(14:53):
larger contribution startshaving angst about it.
Okay, this could be like threeyears later.
Amit Somani (14:59):
Yeah.
Shripati Acharya (15:00):
And now everybody else in the company
also sees it right.
Suppose one person is a ceo,another person is cto, and let's
say the cto is just likeblowing it out of the park, yeah
, and the ceo is just asalesperson.
I'm not saying just, it's like asales, but now this is really a
tech company or the vice versa,right?
So what happens is thateverybody in the company now is
(15:22):
like keeping quiet because theyknow this is not really fair and
this is.
Everybody ends up knowing whatequity is anyway.
And now, even between thefounders, it's creating friction
, which is really not what youwant, because you want all your
forces to be squarely focused onmaking it as successful as
possible.
So I'm not here really battingthat there should be
(15:43):
differential equities in allcases, but it is a question
which at least should be asked,discussed and come to an
understanding between thefounders and realize that you
speak now or forever, hold yourpeace, because these kinds of
things don't change materially.
It can be on the margin, youknow some bonus pool the company
would allocate and so forth,but just be reasonable about it.
(16:05):
And honestly, this comes downto a worldview which you and I
frequently talk about, which isabout being rich versus being
king.
Amit Somani (16:15):
Yes, yeah, there's this beautiful book I recommend
called the Founder's Dilemmas byProfessor Wasserman from
Berkeley, which talks about justfigure out, do you want to be
king or do you want to be rich?
And the metaphor is that if youwant to be rich, you need to
think big, right.
You need to structure thingsfor more success.
You need to figure out who allyou need to bring to bear.
(16:37):
It could not just beco-founders, which is, of course
, the most critical startingingredient, but investors,
senior employees, cxos we'lltalk about all that right, and
therefore you may have a smallerpie of a much bigger thing.
But if you want to be king,you're like this is my little
empire and like I run this andyou know this company will never
be more than $10 million.
But hey, look, I'm king, right,like I decide what you know
what I'm going to do.
(16:57):
So I don't think peoplenecessarily think about it very
consciously and deliberately.
Let me take the devil's advocateto that.
Let's say I'm one of the.
You and I are kind of startinga company and the kind of roles
are flipped and it's somethingthat you have both expertise in
or experience or whatever, andI'm feeling like marginalized
right, saying wait, like it'sfine, like, but right now
(17:20):
there's nothing, right?
We're just starting out andlike, well, I'm also slogging,
you're also slogging 16 hours aday, 18 hours a day.
So why am I like?
You know, like I'll evolve,right, I'll grow, you'll also
grow, I'll also grow.
So how do you think about, like, resolving stuff like that,
right?
But I do agree with yourbroader premise that just the
virtue of talking about thiswill clear up a lot of the air,
(17:41):
even if you end up at 50-50.
But for a moment you say no, no, it's not 50-50.
There's some differential andI'm the one getting the little
bit of the lesser equity.
How do I, at an emotional level, get my head around this?
Shripati Acharya (17:56):
So the way I look at it is that you have to
dispassionately look that it'sactually good for me as a person
who is actually getting lowerequity, if it is actually fair
and good for the company.
And it is good for the companyBecause in one sense you, uh I
would think that, hey, this isactually reflective of the
respective contribution and inone sense it reduces friction
(18:17):
later, because if I havedisproportionate equity, a
grossly disproportionateactually, what happens is
problems occur, not because youhave two percent more or
something like that.
Right, when you clearly saythat you know this is this is
this doesn't make sense, right?
You know this equitydistribution and, honestly,
future rounds.
Investors ask this veryuncomfortable question when they
(18:38):
are coming into the company.
So it is not even like severalyears down the road.
You might do a seed round, youmight do a in series A or series
B, you might start gettingpushback on this one, because at
that time there's enoughhistory to the company and there
is enough evidence of which waythe company is going and what
the various contributions are.
(18:58):
And so it just the way to thinkabout it is that you're rich
versus king question and say,look, you're building a large
company, there is going to bedifferential contribution.
Looks like this person is, uh,you know, it is in travel, it is
in advertising, it's in allthese different areas.
I don't have that skill set.
I have other skill sets and I'mactually really helping prevent
issues later and honestlyreducing attention on myself,
(19:22):
because I also feel at peacethat, hey, look, you know, I
think I did the right, right,right decision there, and this
is really the mindset you willneed on and on and on To build a
large company.
To build a large company andthis is just part one of it.
The larger, actually, issuescome with the ego here, when the
roles actually change, right,right, and now, when a person is
(19:45):
, let's say, there is a WallStreet Journal article, there is
an article in Economic Times,right, and it has a full page
picture of Amit Somani on it.
I'm like, hey, look, you know,like what about me?
You know I also did this stuff.
What do you do then, right?
So I think that this thinking,just taking a step, step back,
(20:09):
taking a look at the company andsaying what's going on here and
it's okay, right, sometimes oneperson gets a spotlight,
because the ceo will naturallytypically get the spotlight,
because if you're a reporter,you just basically say hello,
can I talk to the ceo of thecompany?
It happens to us when folkscall us for our portfolio
companies and we connect them tothe ceo not to all the founders
, right?
So I think that thatunderstanding and probably
(20:34):
maturity perhaps, is really,really helps.
But you will be surprised howoften these little things not
even talking about equity, I'mtalking about this example lead
to a lot of friction.
Amit Somani (20:46):
No, that's a brilliant one.
And you know one of the thingsthat, since we're sharing prime
secrets on the air, lead to alot of friction.
No, that's a brilliant one.
And you know one of the thingsthat, since we're sharing prime
secrets on the air, that I oftenask founders or at least try to
assess on my own is you knowwhich founder is driven by what
Meaning particularly power,money, fame, impact?
Of course there's, you know,it's not.
(21:08):
You don't pick one or the other, right, you mix and match.
But what are your core drivers?
And in many cases, people arevery aware of their anti-drivers
.
They're not aware of the coredrivers.
So they may be like look, Idon't really care much for fame,
I want to build something cool,I want to be rich, or vice
versa.
Right, I want to be the face ofthis thing.
Shripati Acharya (21:32):
I want to be the face of this thing.
I want to be the engineer thatyou know built the open AI
algorithm or the Google pagerank or whatever.
Amit Somani (21:34):
Like I don't really care, I want to be featured in
the Wall Street Journal.
Yeah, I don't want to befeatured in the Wall Street
Journal, but I want to win theTuring Award or I want to get
some, you know, whateverrecognition in the scientific
community.
But if you don't know and youhaven't really gone into the
depth of kind of figuring thatout, you know that can cause
kind of issues.
You know each other, right,like you said, you're friends,
you're probably classmates fromIIT or XYZ or whatever, but you
(21:54):
haven't really like what drivesthis person, what's the chip on
the shoulder, what's themotivation?
And when you get into thesethings and you say, no, no, I
also care about fame, sripatialso cares about fame.
So, like, I also want to be inthat Wall Street Journal article
or vice versa.
So that's one that leads me toanother slightly more upbeat
question, which is, but relatedin the same genre, that as
(22:15):
companies mature and we've seenthis a few times that you start
getting exit opportunities,right.
And again, if you haven'ttalked about it, and this is
their first company and likethree years in, you're doing
something great, you've builtsome nice product, you've got
some revenue, you've got sometraction Somebody comes and
offers $50 million to buy thiscompany.
Now, each of you own severalyou know tens of percentage
(22:36):
points of equity in the company,maybe more, and you're like man
, we could make $10 million eachat the age of 29, right, or
more.
Now, what do we do Now?
I've seen and heard scenarioswhere, like, somebody else is
like, look, this islife-defining money, like I got
to take this right, I can't likewho knows when exits will
happen or not.
And the other person is like no, no, no, I'm going to go big or
(22:57):
go home, right, so I'm not hereto do this thing.
I want to like go build thisinto a unicorn, deca-corn,
whatever, and if it doesn't makeit, no problem.
So how do you think about someof these other dilemmas, some of
which you can anticipate andnotionally like talk about it in
your dating process or yourearly company, but some of it as
you go along, right, you getinto that.
(23:19):
Or somebody just, like you know, got found a fatigue, like
saying we're doing this for five, six years, we're getting 10,
$10 million each or whatever.
$20 million investors, 10million dollars each or whatever
20 million dollars.
Investors are getting some exit, let's just get out.
The other person like, no, thisis my life's work.
I'm going to do this foranother 10 years.
Like I don't want to get out,I'm not going to sell at all.
How do you think about dilemmasof that nature?
Shripati Acharya (23:37):
so I think those are like very difficult.
Uh, so one thing is that youcannot really pre-plan for it.
Yes, right, you cannot like say, look, we agree that we shall
hereby commit ourselves tocreating at least a billion
dollar exit, because the matteris fact of the matter is, it's
an unknowable thing.
You don't know what's going tohappen.
You are looking for productmarket fit.
(23:57):
You don't know how large themarket is going to be.
You don't know what thecompetitive dynamics is going to
be.
You don't know how the fundingenvironment is going to be.
You don't know what kind ofteam you get to end up creating.
So you just don't know.
So to me, like there's a line,there's a thing right.
It says Aankh mein ho swar,lekin paav prithvi par tike ho.
Right, dream big, but have yourfeet firmly planted on the
(24:19):
ground.
And what that really means isthat you're evaluating it.
And maybe 50 million is theright thing to do.
Right, because you might havewanted a really large thing but,
you take a step back and yousay, look, you know, all things
considered, this is very therisk here is just too much,
which I'm not willing to take,or I don't have the investor
(24:42):
support or whatever else I'mpresuming is going to happen.
I mean which we ask our foundersthese questions what are you
presuming to be true at thispoint Now, looking what you
already know and what is aheadfor this?
To be a big company, and arethose assumptions fair and
reasonable to me?
So one thing I would say isthat deciding these things is
(25:03):
really about having a lot ofconversations with your own
trusted board, your personaladvisory board, of course, with
your investors, as you know,your own trusted board, your
personal advisory board, ofcourse, with your investors as
well.
But your own personal board andthe founders might very well,
you know, differ in theiropinions here, but I feel that
there's no straight answer.
Honestly, these are toughquestions and the thing is, even
if you have taken the exit, youwould never know what it would
(25:26):
have been to continue.
Right as we know thatZuckerberg famously turned down
I think it was $500 million orbillion dollar exit soon after
he had started from Yahoo, and,of course, we know where it is
today.
So for everything you'll findfive other for every such
Facebook.
There are probably 10 exampleswhere somebody didn't take the
exit or probably 100 and didn'tmake it so honestly, I don't
(25:48):
know how to there's no cookiecutter answer there.
Amit Somani (25:52):
Yeah, no one thing.
That I think helps.
Again.
It's back to the.
You know, planning is essential, plans are not.
Is when you're conversing on howdo you, how are you going to
potentially make these decisions, what are your drivers, what
are my drivers, why am I doingthis?
Et cetera, et cetera, and thenyou figure out the dissonance.
Right, it doesn't mean youdon't do the company or you
don't do it together.
Of course you do.
But you say, okay, this is howyou think, this is where you're
(26:14):
coming from.
Right, this is what you want tokind of do.
And so it does help when youtalk about these various things
in terms of, not that specificscenario, but like, for me it's
not the money, right, for meit's like huge impact.
Like I want to take Facebook orthis thing to a billion users.
So like, even if I got abillion dollars, like what would
I do with it?
Like I didn't go to a billionusers.
Like I want to take it to abillion users, or the other way
(26:37):
around.
Like, look, money is reallyimportant for me and like you
know, I don't know whateverZuckerberg was at that time 22.
Like I more companies afterthis?
Shripati Acharya (26:47):
right, so, but I think it's really related
back to our culture conversationearlier, which is that how do
you have difficult conversations?
Yes, right, and as founders youneed to have the ability to have
difficult conversations in anopen and productive fashion, and
if you do that, it willactually percolate down to the
rest of the company.
No amount of writing it on bigboards and big and 100 point
(27:10):
font is going to change that,because that culture is
established the very first timein a full room.
You have a disagreement?
Yes, right, and how do you doit?
And if you have the ability toactually listen, understand
their point of view, give aproper, you know your point of
view and actually are togethertrying to find a solution versus
(27:30):
trying to be right, then it'llactually help the company move
forward.
It's a tough thing to do, buton the positive side, we have
seen companies which have thosecharacteristics really, really
succeed.
And those companies are theones which have like learning
machines, right, because they'reable to take the input, process
it, it and then decide anddoing it without any sense of
(27:52):
insecurity so I I'm into books.
Amit Somani (27:55):
I have two book recommendations.
One is called crucialconversations, a fantastic book,
and another one is calledradical candor, which, even at
prime, we all read and it's oneof the core values for prime
itself.
Yeah, that in a radical candor,you care deeply about the other
person, you have a greatrelationship, but you're very
candid and direct in approachingthe issue at hand.
Right, it's about the issue,not the person, right?
(28:15):
Yeah, yeah, so I think thoseare.
I mean, there are tools and ofcourse, you can use other tools
as well, and other frameworksand so forth.
That leads me to a differentkind of area.
So this is all at the startup.
You know, get your value systemaligned, get the culture for
the first employee, 10themployee, 50th employee.
I think that people don't spendenough time on how will you
(28:37):
evaluate performance and howwill you evaluate each person's
ability to scale and theorganization's ability to scale
as you go along?
I think a lot of theperformance evaluation, the
peer-to-peer feedback, theevaluation of each co-founder by
, let's say, a CEO or the board,is all a little bit
loosey-goosey.
(28:57):
Do you want to talk a littlebit about that, sripati, in
terms of how do you, once youhave an ongoing concern and it's
working, and so on.
How do you keep on the track?
Shripati Acharya (29:07):
Perhaps in this particular case, I can be a
little bit more prescriptive inmy suggestions, right, which is
that once you have decided youknow who among the founders is
the CEO, then you really need tocast away the founder tag,
right in terms of how youoperate, because there will be,
(29:31):
as the company is successful, alot or tons of people who are
not founders by definition,right, and they'll also be in
senior roles.
So the idea that if I'm a CTOand a co-founder and you are the
CEO and a co-founder, I'mreporting to you, then I think
that the relationship, as far asthe professional relationship
(29:52):
is concerned, should be as ifI'm a CTO and you're a CEO and
these founders think that mightor might not have been there
right?
Which means, translated veryspecifically, is that we do have
a performance conversationwhenever, whatever the
organization's cadence is once ayear, once every six months and
so forth and you'll besurprised that this almost never
(30:14):
happens.
Years go on into a company'sfounding.
Companies are large, they'resuccessful, making tens of
millions of dollars of revenue,maybe even more, and we don't
have that structure in place andby not putting that structure
in place, you're not providingan avenue to have that difficult
conversation.
You cannot just grab this heyHamid, let's go have a coffee in
(30:37):
Starbucks and say I need togive you a performance feedback.
It doesn't quite work that way.
Amit Somani (30:44):
Right, yeah, no, I would extend it further, sripati
.
So one this is the mostdifficult one, right, which is
that you know everybody reportsto the CEO.
There's conversation betweenthe CEO and the person who's in
that role or responsibility, notjust the co founder, like you
said.
There are two other criticalconstituents, at least two,
maybe more right.
One is your employees, and youknow what kind of feedback are
(31:06):
you collectively, as aleadership team, as a founding
team, taking from the employees,right?
So I think there's a lot ofsometimes gap between doing
something as simple as a 360degree review to say how are we
performing as an organization,what could we do better as an
organization and as a foundingteam, as a management team, et
cetera.
So I think employees are notnecessarily always heard, you
(31:27):
know, in a very kind ofthoughtful and deliberate manner
.
And the other is the board, andare you formally getting
performance feedback from theboard?
Because the CEO reports to theboard, the entire management
team indirectly reports to theboard.
So you know many CEOs will belike, look, I got the ARR, I got
this, I got churned down, good,to raise the next round, all
(31:47):
hunky-dory.
Not true?
Because you want to getfeedback from the board in terms
of how you're performing, whatcould you do differently, how's
your team performing right, etcetera, et cetera.
So I think those are two otherareas that I would encourage
people, if I were to beprescriptive, to say, hey, think
about consciously gettingdirect feedback from the board
on performance, not on ARR andso forth and also some avenue to
(32:10):
get it from your othercolleagues, you know,
non-co-founders, employees, etcetera.
Shripati Acharya (32:17):
Absolutely, and I think this is part of that
culture bit again, which is,how open is the company in terms
of getting feedback?
Because I believe that the bestcompanies are trying to get to
the truth.
They're trying to get feedbackfrom whatever level, because the
junior, most person who's incontact with the customer, might
actually have a brilliant ideaand that brilliant idea must
(32:40):
surface.
That person might also have theinformation about what is
seriously going wrong with thecompany.
Maybe the company is losing tothe competitors and there's a
new competitor threat.
All these things are likedisruptive technologies and
somebody needs to surface thatit.
There's a new competitivethreat Gen AI.
All these things are likedisruptive technologies and
somebody needs to surface that.
It's very easy for seniormanagement, even in a startup,
to be in a cocoon if you don'thave an open culture of actually
(33:02):
surfacing these kind of things.
So it's super important toactually put you know, establish
that, and just imagine in ameeting, if suppose there is one
person is a peer of the of afounder.
Now is this in which, like, afounder is quote, unquote,
pulling rank and hence not actand overruling?
You don't do you?
(33:23):
You don't want that cultureright.
So I think all these things.
If you're conscious of it,you'll probably do the right
thing as a founder, but ifyou're not aware of it, you
might actually just let it rideand then it, as we discussed
earlier, just becomes a de factoculture in there.
And related to that is, you know, you just mentioned a point
with a comment on that, which isthe CEO reports to the board,
(33:45):
right, and I think that theboard is quite a time remiss.
Yes, I think that the board isquite a time remiss in giving
and that's like folks like usright in terms of giving
feedback to the CEO.
And one of the things which Ifind really, you know, amazing
about some founders and I've hadthat really privilege of
working with them that theywould call up after the board
(34:08):
meeting and I said, hey, look,what do you think went wrong and
what went right and what are wedoing not right here?
Do we actually, you know, do itproperly?
Do we present the right things,or do you really think is there
something which you need to saywhich you haven't talked about
in the board?
Can I actually talk to youabout it or can you tell me?
That level of openness to mefundamentally gives you a
(34:29):
superpower because now you havethe ability to listen and
incorporate feedback.
Of course you can reject itanytime, of course, but just
having that particular DNA justsets it up for a beautiful
relationship between the boardand the CEO and also fixing
issues.
Amit Somani (34:48):
Absolutely no.
I couldn't agree with you more.
So I think a lot of thesethings that we've talked about
in fact, this by itself could bea podcast kind of on its own
just feedback and how to makeand give feedback.
But I think, overall, the pointthat we're sort of making as we
come to a close here is thatyou need to be deliberate about
creating culture.
(35:09):
You need to talk, you know, saythe unsaid right.
Talk about the uncomfortableconversations, whether it's
equity, it's roles andresponsibilities, feedback, its
ability to scale and so on andso forth, rather than let it
kind of be swept under the rugand like we'll see it when we
kind of get there.
It may be too late by the timeyou get there.
Shripati Acharya (35:28):
Absolutely.
And if I may just paraphrasethis in another way, which is
that you start the company on acore foundation of friendship
and trust.
That is very important and youshould continue to be there, but
you need to add another pillarto it and that is a professional
relationship in terms ofengagement.
(35:49):
And the sooner you have thatconversation, relationship and
terms of engagement, and thesooner you have that
conversation, the more firm isthe foundation of the company.
Amit Somani (35:56):
Absolutely, and if I may sort of bring this to a
wrap, I think culture, just likeproduct or GTM, can be an
ultimate differentiator.
And so much like folks outthere, you're trying to build
great companies, great products,great services.
Think about building a greatculture.
Well put, great services, thinkabout building a great culture
(36:16):
Well put.
Prime Venture Partners (36:16):
Dear listeners, thank you for
listening to this episode of thepodcast.
Subscribe now on your favoritepodcast app for free and you'll
be the first one to know whennew episodes are available.
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Podcast, Spotify, CastBox orhowever.
You get your podcasts, Then hitsubscribe and if you have
(36:37):
enjoyed the show, we would bereally grateful if you leave us
a review on Apple Podcast.
To read the full transcript,find the link in the show notes.
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