Top 12 challenges every Start-up faced in 2020
Many people talk about how great it is to start a venture, but few are honest about how difficult it is to run one. Open any popular Fintech research, LinkedIn or business publication and the stories are full of glossy funding rounds, headline grabbing valuations, leader-boards and deals — all the romantic notions of start-up life. Critical coverage is rare. There is a real pressure on start-ups and their investors to “look good”. Optics, #impressions and reach matter in this world often detached from the reality of business. It is great to celebrate the headlines, but it is the journey one learns far more from, which ironically, is the least discussed. The journey provides a realistic view of the calls made, the constant juggles, hard things and the jugaad [Hindi word for ‘hustle’]. Let us talk more openly about it.
As a founder of a Fintech start-up, let me start with myself and share our journey this year. There is no doubt that 2020 has been a most challenging year for businesses. The pandemic created a perfect storm of budget squeezes, lockdowns, market uncertainties and personal stress. Who better to learn from in a time of crisis than a genius — Albert Einstein who said, “If I had an hour to solve a problem and my life depended on the solution, I would spend the first 55 minutes determining the proper question to ask… for once I know the proper question, I could solve the problem in less than five minutes.”
At Leading Point we applied this questioning philosophy and devoted considerable time and effort to frame the right questions, experiment with different approaches and address these challenges. I am sharing the questions that kept me awake in 2020. I hope this is useful for founders and enterprise executives to overlay their own experiences and share their stories.
I started Leading Point, a digital transformation company dedicated to helping business work better over three years ago. Our mission is to help companies re-align their people, technology and data for maximum effect. Our suite of SaaS products plug into your enterprise and transform key areas like risk & regulatory compliance, data management and cyber security. And our expert delivery services provide revenue and cost efficiencies
It is 02 March 2020. We just moved into bigger offices. Business is looking up. We signed new client mandates, welcomed new hires, and are making steady progress on our product development. What could possibly go wrong?
As it turns out, a lot can!
And a lot did.
Our 2020 headlines might read that business will see positive top-line growth, increase # new clients, # new team members, # new partners, and maturing products. And we will be announcing additions to our senior team in January which I am very excited about. But these are rear view metrics and don’t give you the full picture at all. Things could have easily gone the other way. We still don’t know how 2021 will unfold so this saga is not complete.
Here are the 12 questions that kept me awake in 2020 and the lessons we have learnt during this time:
1 — What problem are we solving? Is it still important?
LESSON: Prioritise. Brutally.
This is hard in the best of times! What is our mission at Leading Point? What fights are we fighting? Are these fights still relevant? Entrepreneurs are inherently optimistic. You can’t not be to create anything of substance. So it is vital to have a counterbalance of challenge, realistic assessments and devil’s advocates. To stick to our true objective helped us validate our focus as a digital transformation company. Even if the short term is painful, the long term will be worth it. We killed a service offering in this process and prioritised efficiency generating features in one of our products.
2 — Now that industry innovation sessions and community events had practically come to a halt, how will we grow our industry reach?
LESSON: Innovate your engagement plans
Building market visibility is more important for challengers than established players. You have to be better, louder and prove yourself more than incumbents. We looked at multiple proposals including virtual events, webinars, 1–2–1’s and podcasts. In the end we went with a more selective set of webinars and 1–2–1’s to talk about our propositions and our research into ESG. We put most conference presentations on hold till later in the year. While businesses embraced Zoom meetings to keep dialogues and workflow going, nothing can replace the energy, the insights and relationships formed in a room full of industry leaders, designers, technologists and investment professionals focusing passionately on a topic. We had tapped into this energy with our Data Kitchen and Industry Innovation sessions. We can’t wait to open doors to our next Data Kitchen in 2021 now at our new home at RISE Fintech London. We sorely missed this side of business and didn’t find an ideal solution. Hats off to all in the events, panel and conferences business for keeping it going in such a challenging environment. If you have enjoyed particular formats as an organiser or attendee I’d love to hear your experience.
3. Shall we pitch for new business prospects or not? What should be our approach to sales?
LESSON: Empathy > Revenue in times of crisis
No sales = No business is critical to survival for any business. But in the midst of a crisis such as this pandemic, it is important to adopt a mindset that centres on taking care of everyone as a family. This translates to simply being there for your clients, network and partners. Be helpful. As a bootstrapped revenue-led growth business, new business was essential for us to preserve what we had built. We took the empathy approach. We stood by our existing clients, and some requested budget cuts of 50%, some had to defer signed-off business to tackle a different set of business priorities. We adapted our sales proposals and commercial models to reflect our clients cash pressures, particularly those who were start-ups and SME’s. We respected delays in sales cycles and payment terms. I have always believed that sales is a team effort. The year bought out the best from our most junior or newest talent to our senior members, everyone contributed to our daily visual pipeline, triggering new market conversations and finding new angles. In summary, trying to breakthrough the sales funk got us more back to basics under an overarching approach that we were going to help our clients and stakeholders, sales or no sales. In the long term, our clients and partners will surely recognise we were there for them when they needed us most.
4. How do I deal with companies who don’t pay their invoices?
LESSON: Some bitter pills will have to be swallowed
Regrettably one of our clients in the US started defaulting on their invoices. Not what we were expecting as this was an entity backed by investors including the ex-CEO of a major US bank and a senior team from Stanford. Their issue may have stemmed from diminished prospects of the business and potentially, cashflow. Our legal team and I are keen to try and resolve the matter. Of course this can happen in any jurisdiction, at anytime. The point is, it could not have come at a worst time when it did! We have upgraded our client and partner qualification criteria and diligence with overseas entities. It also goes to show that you may have the best “optics” i.e. major ex bank CEO backer, super bright founding team from Stanford, but that means ***t in business. It has been a hard lesson.. If any of you have experience in dealing with cross border debt recovery, it will be great to compare notes. DM me please!
5. How can we work with other organisations to get through this? What type of partnerships should I prioritise?
LESSON: It is hard to dance with an elephant.
To quote my better half, for the best partnership, you have to kiss a lot of frogs! It is no surprise that the pandemic accelerated a need for partnering between firms. To share some numbers, in 2020 we had discussions with 40+ potential partners with the aim to explore a holistic, value-creating partnership. At the start of the pandemic, we were in discussions with five large companies broadly in the data, automation and cloud services space. Fast forward nine months, we have seen more success with focused, proposition-oriented players than the larger players. Here are some notes I took on why a large company may not be the best partner for a challenger till explicitly qualified-in:
a) A larger player comes to the table with expectations that their partner should invest hundreds of hours to learn and train on their products, invest weeks on planning meetings and bring qualified, cooked opportunities to makes their sales and partner teams look grand. But;
b) Larger players often seem to forget that any successful collaboration involves healthy give-and-take and it should make sense for the end customer. Partnership is not a Logo exchange.
Challengers will save a lot of time by remembering these points. It is hard to dance with an elephant! Our partnership framework has evolved. We qualify harder and recognise explicit channel partners, tech partners and joint value proposition partners in domains we specialise in. My rule of thumb is — if in the first three months, your partner has not demonstrated they think about you and add some benefit to your business, it is time to move on.
6. Given the longer working capital cycles and business impact this year, what financial options should we consider?
LESSON: Need-based liability is better than opportunistic equity dilution
At one point we were projecting a significant revenue risk. Finding the bottom was not easy. We trimmed our non-SG&A costs and the team made collective sacrifices we are proud of. There were a lot of initiatives in the market such as CIBIL, Bounce Back Loan, Future Fund, Bank Facilities, Equity Finance and Crowdfunding. We chose to sign a finance facility to ensure business continuity instead of diluting our business prematurely with an investment round. Our journey to date has been founders capital and revenue-based growth. The senior team and partners took salary cuts. We have an approved EMI plan and it has been great to reward and recognise our team with equity.
7. What does ‘Good’ look like in a year like 2020?
LESSON: People First.
2020 was originally planned to be a year of 50–70% growth for Leading Point. We took the decision early on to do whatever it takes to take care of our team and not affect redundancies. We understand the mental and economic impact of losing your job through a pandemic is huge. Best and worst case scenarios were chalked out and a decision was made to accelerate our product roadmap to preserve growth and our team. I think once we made that decision and communicated it, it was a lot easier for us. We knew we are in this together.
8. How do we take care of each other as a team?
LESSON: Communication is key — a Team is a marriage of a different kind.
At Leading Point, mental health has always been high on our agenda. We believe happy and healthy individuals make a company thrive. Start-ups are a high-pressure environment so informal chats and acts of kindness is our way to maintain human connection on a daily basis. We kept communications open, discovered our talent with quizzes, team drinks, time in outdoor parks or 1–1 coffees when allowed and our daily morning stand-up. This extended to time off for team members who needed a break, to talking about mental health and helping on personal issues. Transition to remote work has been hard during the initial months for everyone and we learnt from each other. I think my colleagues Charlotte, Thush and Dishang articulated this a lot better in the latest report by Harrington Starr, December 2020 on Fintech Workplaces “Creating a culture of kindness”
9. Should we change the way we organise ourselves? Who should focus on what in the business?
LESSON: Prioritising is a constant
We reviewed our products, services, sales, marketing & strategy functions to create more bandwidth where possible and clearer direct responsibilities. We outsourced more of our finance, legal, product development and advisory functions. Equally the events of this year made us accelerate our drive to ensure that at a senior level we have at least two team members who can double up on functions such as sales leadership, product management, partnerships, pitches and commercial management.
10. Do we need an office in 2021? Do we need an office at all?
LESSON: Choose between Frugal V/S Efficient
We started from a coffee shop! And we were broadly setup to operate as a distributed company from day one. That said, there are parts of our business, our community, the creativity and productivity that run best in-person. From a purely cost perspective, we can operate from a virtual office setup in future if required. What became clear during this pandemic was that our current office provider’s processes, systems and services were ill equipped to handle our future growth. So we decided not to renew our lease with them and met the wonderful folks at RISE London and will be there from 2021. This team showed great responsiveness, preparation in terms of safer work environment and platform to collaborate with other Fintech.
11. There is so much talent out in the market — how do we approach this?
LESSON: Harbour a symbiotic relationship with new talent
Adverse situations bring out the best in people. There is also opportunity in adversity. Not implying that we took undue advantage of the great talent pool available during the pandemic. On the contrary, our endeavour has been to make it a win-win deal. We have added new roles this year to reflect this. From marketing & client insight, to account management, design skillsets, to project-based delivery consultants and our ESG research and solution development. It is a juggle as we are also mindful of ensuring business sustainability. Going into 2021 we are looking at our future CFO and CPO on the senior end and building out our product organisation. In summary, if there are opportunities to onboard great talent it is worth considering that even if with unconventional reward models. My old boss used to say “good people always pay-off in the long-term.”.
12. How will I remember this year?
LESSON: Gratitude with a Resilient team!
Gratitude for survival. For appreciation of what we have and often take for granted. Gratitude for those that care for us and the real heroes in society. Gratitude for the little things that matter. For how our personal and business lives can be connected. One thing we can nurture at start-ups is to show your human side. Let the team get a sneak peak into your private life — something as irrelevant as the football posters in your home-office and your funky hats. Grow closer as a team. See the power of what a team can do if it is running in the same direction.
Heartfelt thanks to all those who gave their time to us, helped us, guided us, thought of us and supported us at Leading Point.
Time will tell how 2021 shapes up. But I know we have built practices this year that will help us build a better business. Here’s hoping to a great 2021 for all Start-up Founders!