3 lessons from being a first-time founder
I started my first company, Nivaasa, in 2016. We offered co-living apartments for people moving to Gurgaon. We bootstrapped the company and ran it for over 2 years and then decided to exit and sell the company.
Those 2 years were very hard and challenging times. In hindsight, I’m very grateful for that experience and managed to learn a lot, but when I was in it, it was very hard. I strongly believe that starting a company and going through that journey, is probably the best way to learn some very important lessons, which you can never get from any class — offline or online. Having said that, there were some mistakes which could have been avoided. I wanted to highlight a few of them and why they could have, and should have been avoided.
Mistake #1: Every business should be able to raise venture capital
When we were starting out, one of our biggest competitor NestAway had just raised $30M from Tiger Global. We told ourselves that we would build a profitable business and only then go raise money, but there was always this pressure to grow faster, else we might not be an attractive investment for VCs. The truth is that the business we were building would have never been attractive to VCs, but that doesn’t mean it was a bad business. We made the mistake of trying to be more “tech” and “asset light” for investors, which got us no where.
It’s very important to think about the nature of the business your building and if venture capital is the right option. Venture capital is not appropriate for most business because the VC business model relies on outsized returns. There are many different kinds of investors who have lower return expectations (and lower risk tolerance), and as a founder it’s very important to choose the right one.
A good place to start is to really understand how the VC model actually works and why they expect such high returns. Secrets of Sandhill Road by Scott Kupor is a great book to help you understand this.
Mistake #2: Put in all your savings into your startup
People might have different opinions on this one, but I believe that it’s not the smartest thing to do.
What kills companies is that the founders lose steam and burn out. That’s what happened to me. When you need to debate with yourself , whether or not to spend the extra $2 on a meal, that’s not a great place to be and being in that spot for too long will eventually burn you out.
I am a strong believer of having skin in the game, but there are many different ways to do that. The very fact that you’re investing all your time and energy into a startup (which is inherently risky), that should be enough to signal that you’re all in. Investors might not perceive this well — if you’re asking them to put in their hard earned money, then it’s only fair you put in some too, right? I think there’s a balance, yes, put putting all your money in, I wouldn’t suggest that.
Mistake #3: Not winding down soon enough
You know when things are not working out. You’ve pivoted a couple of times, tried a bunch of things but it’s getting harder and harder to keep going. You tell yourself that it was always going to be hard journey and that you need to work harder. If it was that easy, everyone would be a billionaire no? All of that is true, but you also need to be honest with yourself and know when to call it quits. Most founders I know, who end up winding down companies, said they should have done it sooner.
It’s one of the hardest thing to do, especially when things are going “just ok”. You’re basically saying you failed and have let down everyone who believed in you — your employees, your customers, your partners, your investors. But the truth is that by dragging it on, you’re doing none of them any favour. I’m sure you’ll find many stories of people who succeeded because they didn’t give up — as long as you feel you have it in you to keep fighting, keep going, but you’ll know deep down when that’s not the case. Don’t forget the reality that 9 out of 10 startups actually fail and more often than not, it’s a slow death and not falling off a cliff.
Starting a company and being a founder has been one of the best decisions of my life and I wouldn’t go back and change anything. In fact, I’m glad I made those mistakes, because now it’s so clear to me why they were sub-optimal choices, and I’m less likely to land up in the same spot as I was before.
If you’re a first time founder and you’d like to know more about my experiences and learnings, do reach out and I’d love to share them with you!
This essay is a part of my 30 day writing challenge. You can read more about why I’m doing it here