Every successful company goes through 3 distinct phases, the startup phase (0 – 1), the scaling / growth phase (1 – 10) and finally profitability (10 – 100). The archetypes of people required to help the company transcend all phases, is different at each stage. Avnish Bajaj, Founder & MD, Matrix Partners india, shares his experience on building the perfect Org in this episode of Matrix Moments.
Salonie: Hi and welcome to Matrix Moments. This is Salonie. And we are back with Avnish Bajaj, Founder & Managing Director, Matrix Partners india. Jim Collins once said great vision without great people is irrelevant. And today’s podcast is about the different stages a founder and his or her team go through when building a company. These are not funding stages, but stages or phases in entrepreneur experiences in their journey of going from idea to exit.
Avnish, how do you think about this? And if you were to broadly categories these stages that a founder goes through, what would those be?
Avnish: Thank you for having me back, Salonie. Great to be back here. So, you know right from the Baazee days, i have wondered why is it that one cannot just get perfect org right up front. And interestingly, i have observed, and it’s applied at Baazee. it’s applied at Matrix. i am seeing it in some our other portfolio companies that it takes three versions of the org to kind of probably finally settle down into something that is stable length and scaling.
And if you reflect on it - and look, there are no right or wrong answers. This is as ambiguous a topic as one can have. But i will tell you my root cause analysis. And my root cause analysis is that specially in the tech world specially for companies of the type in which we invest, there are three phases. And i know we have are going to have a topic around product market fit and what we measure at what stages. But in reality, there is a 0 to 1 phase. There is a 1 to 10 phase. And there is a 10 to 100 phase.
There 0 to 1 phase is really about finding product market fit. Figuring out if it even works. The 1 to 10 phases, assuming you get through 0 to 1, is to scale that product market fit. And the 10 to 100 phase is actually - you can call it 100,000 whatever you want to call it, is to scale the value of that company. is to scale the business.
Now if you think about it, what is an organization? What is a business? A business does not operate in isolation to your Jim Collins comment. it does not operate in isolation of people. So, it’s really people who have to take the company through all these three, i would argue, very different phases.
Now, ask yourself, are the traits required at each stage the same. Clearly not. They are very different. The hustle phases. The doer phase is the phase of finding product market fit. Typically, people who do really well are the people who are hustlers. They are doing stuff. They don’t need to - it’s not like they can’t think, but they don’t need to think that much. it’s a lot more about hustle.
As you move beyond that, the thinking hat needs to come on more. So, i would call the doer phase. Then the second 1 to 10 would be the doer plus thinker but note that doer is first. And then the third, i would call is thinkers with doers. Meaning people who can think big, who can think long term, and can think commercial, can think strategic. But, they still need people who are doers working with them, for them.
Now interestingly - and we have a chart (see below) that you should include either in this question or the next, the best founders transcend these phases. They go 0 to 1. They grow up - they may even right from the start know how to be 0 to 1000. But most of the time they will do 0 to 1, 1 to 10, and beyond that. And that what makes them entrepreneurs. That’s what makes them different. However, not anybody is like that. And i think where organizations struggle the most is the fact that the founder is making this transition very quickly, but the people with the founder are finding it very hard. And i think that’s why it takes a few phases to get it right.
Salonie: Right. What would you say are some of the levers or the triggers that people can tap in to or are required to transition from one stage to another? So, capital of course would be one of the biggest levers, but in addition to capital?
Avnish: it’s going to sound very tenuous, but i will tell you that it’s about mindset. And i know we are going to talk about culture at another time. But i would say recognize - if you were to recognize that an organization is like an organism and that they are going to have life stages like we have life stages. And that they will go through baby and adolescence and maturity and then maybe even decline, hopefully not, in an organization. Knowing that upfront means that what you would do and anticipate would be different. Example being how do kids ultimately grow up and go to college? Well, they get a very particular type of training at a certain period of time, right? And so, on and so forth. For work and so on and so forth.
So, the point, therefore, is that one has to recognize that - and it’s very hard, but one has to recognize upfront that the organization will have to evolve to get the right match between the stage of your organization because it’s almost not - imagine the pace at which some of these companies grow. it’s not very obvious in that moment if i were to tell you is it 0 to 1, 1 to 10? is number 6 or 7? We don’t know. And i think the best thing a founder can do is to recognize that this is going happen. Almost design their organization and their culture for that to happen. We will talk a little bit about that in the next question.
But, if i were to recognize that this is going to happen, i will tell the people who are working with me in the first phase that, hey, you know what? There may be other people we will need down the road. But, now this comes back to culture. Do the people who have gotten you from point A to point B, do you make sure that you train them, you retrain them, you invest in them to see if they can take you to the next phase? Or, you potentially put them in a different role? i think that’s the tricky part. But i think if i were to give one takeaway, it is beware that this is coming. And therefore, plan in advance.
And otherwise, what you can see is a lot of churn can happen. You have people who feel that they have done - gotten the organization to a certain place and then suddenly you have a layer of people coming in. They may be from the outside. They may have a different experience set. And that generally results in i would say most organizations struggle into transition between these phases.
Salonie: Right. So obviously bringing in a specialist at each stage is key for the company to grow, but like you said how do you balance that out with bringing in the right people, the experts, but at the same time maintaining your firm’s attrition rate or churn?
Avnish: Yes. So, it’s very challenging. And i think if i had to give a one-word answer, it’s about culture. it’s about the kind of culture you built. And, like i said, we can try to cover that in another topic. But, look, people i think appreciate if you are extremely transparent with them. i mean most people are not delusional. And they would say, okay, i am - A) First of all, we have this concept of radical candor, we have discussed before, which is about do you care about the person. Do you care about that person’s career? And are you transparent with them all along the way of where they stand. And i think what some organizations do well others don’t do as well is to recognize that there is always if you think of an org chart as boxes and obviously people are the people in the org, there’s probably always a box - in most organizations there is always a box for a person. But their current box may not be their box, right? So, if somebody is unable to make the transition, can you put them in a role in which they will excel?
in most organizations once they get to a certain stage, they are also launching new businesses, doing other things. if this person was very good to launch the first business, maybe they are the right person to launch the second business. But, they may not be the best person to scale the first business. And i have seen this actually quite a bit. And it’s worked really well when you think about the fact that just mindset that there is like - if it is a large growing organization, if it is truly getting from 10 to 1000 that there is probably a box for this person. So, that’s one.
Second, radical candor and transparency. Letting people know in advance which comes down to open communication. And if that is the underpinnings of the culture, i think people essentially look for dignity and respect. Lot has been said about whether people work for money, people work for organizations. Net Net people work people. And, if you can create that kind of a culture where that caring piece of it is there, i think you will find that organizations will make the transition much better. That said, still a very hard thing to do.