In the dynamic world of startups, navigating the initial stages of entrepreneurship can be both exhilarating and challenging. Aneesh Khanna, an esteemed early-stage entrepreneurship consultant and coach, brings a wealth of knowledge and experience to help aspiring entrepreneurs find their footing. In this insightful interview, Aneesh shares pivotal moments from his own journey, common challenges faced by early-stage entrepreneurs, and practical advice on validating business ideas and building a strong founding team. Join us as we delve into Aneesh’s expert guidance on transforming startup dreams into successful ventures.
Can you share a pivotal moment from your corporate or startup experience that has significantly shaped your approach to consulting and coaching early-stage entrepreneurs?
- David and Goliath – I always believed that when it comes to Customer Love, what a big company does, a small company can do much better. All through my corporate journey, there were many moments when I thought, as a big company, we have all the money, the brand, the resources, why can’t we create true ‘Customer Love’. Love, where if you as a brand disappear tomorrow morning, you take a part of the soul away from your loyal customers. This was one of the key factors, towards moving from Corporate life to Entrepreneurship
- The 100 page SHA + SSA and 3 cups of coffee– I remember sitting in a coffee shop, sometime in 2012, with a SHA (Shareholder Agreement) and a SSA (Share subscription Agreement), given to me for review by the Angel group, who was putting the 1st external capital monies in my startup. I spent 4 hours reading, what I was not trained to do. So many questions and no one trustworthy to ask for an honest response. The pressure of irritating the investors, with too many ‘track changes’ also played on my mind as an Entrepreneur waiting for Money to hit the bank. That and many such moments in my own Entrepreneurship journey, drew me towards becoming an Early Stage Entrepreneurship Coach.
What are some common challenges you observe among entrepreneurs at the earliest stages of their journeys, and how do you recommend they overcome these challenges?
I observe some very specific challenges and pre-set notions in the mind of aspiring and early-stage Entrepreneurs:
- Niche v/s the Big TAM game – Not every entrepreneur needs to solve for Gen AI or make a low calorie Cola. In fact, the larger the TAM (Total Addressable Market), the more competitive it is with a small bootstrapped budget to make an impact in the market. Ideally a small niche, allows you to focus on the smallest set of customers, who really need what you are building. When you create super Customer love with these set of users, who have the acute problem that you are solving, then you can increase the TAM over time.
- Every Idea has already been taken – Often times, very young and aspiring Entrepreneurs, who want to choose Entrepreneurship as a career option, face this dilemma. Ganesh Balakrishnan, Founder at Flatheads said something beautiful ‘The key to a good startup idea lies in the power of observation and an open mind. You can identify big opportunities hidden in plain sight’. This is a skill that I advise early stage aspiring Entrepreneurs to inculcate.
- Fundraising is Entrepreneurship – Staying away from this belief is a challenge of our times for young entrepreneurs. The belief that ‘only if I raise money, can I build a startup’, ignoring this noise and getting started, is a clear challenge. There are so many benefits of starting small, building a frugal prototype or MVP (Minimum Viable Product), finding a few users, looking for a grant from an Incubator/Central government scheme, then looking at raising your first round of external capital.
How do you help entrepreneurs identify and validate their business ideas in the initial stages, ensuring they have a viable market fit?
Early-stage consulting can be very subjective, since each idea is different and therefore there is a need for a framework to help with Idea Validation. A framework also helps in deep diving into the problem that the Entrepreneur intends to solve.
To make this process more tangible, I work on an 8-step framework, as outlined in the image below:
- Defining the Problem – Identifying the Problem clearly. This is a critical step, since we can get lost into the solution. Take a step back and articulate the problem in one sentence
- Is it a Painkiller – Get the Entrepreneur to speak to at least 25-30 people who have this specific pain on account of this problem. You want to be a Painkiller and not a Vitamin C tablet
- How is big is your market? – How to calculate the TAM? You can use existing Industry metrics for a Top-Down Approach or a Bottom up approach where you multiply the number of users with the Average Order Value
- Competition Analysis – Create a 2X2 Competition grid to clearly see the white spaces in the Industry. A competition matrix is a reflection of the Industry, in which you want to build your Idea
- Crafting the MVP – Focus on only those features that solve a problem. Building a solution secretly in beta state is passé. Great products are built after many layers of iterations, based on customer feedback
- PMF and Channel – Product Market Fit will come from the customer cohort who are the early adopters, for whom the problem is being solved the most. Product Channel Fit is as important as PMF. Choice of selling on Website, Marketplaces, Omni channel, General Trade, Modern Trade, Exports etc.
- Revenue and Unit Economics – Entrepreneurs need to assess their Unit Economics on a monthly basis. Understanding the layers of Contribution Margins, EBITDA and Net Profit are critical in today’s times.
- Bootstrapping and getting off the ground – Bootstrapping can teach you so much about running a frugal business. Pitching to Friends and family members for your initial funds. Looking at Government and Incubator grants are also a possibility at this stage for select sectors.
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Could you discuss the importance of building a strong team early on and what qualities you believe are essential in the founding team of a startup?
- Strengths of the Founding Team – It is important for the founder/s to reflect on, ‘What are the key strengths of the team members’? Are they experts in technology product development, digital marketing etc. What is their core training; are they technologists or marketeers or finance professionals. The balance in the Founding team, is critical in the early days, since you may not be able to afford a lot of external consultants and specialists.
- Culture is Top-Down – The Founder and the first team, set the tone of the company culture in the early stages of the 0-1 journey. In my book ‘Ain’t No Eureka – Your Idea to Enterprise Journey’, I talk about how Company Culture is critical in the early days of a Startup. I quote Harsh Jain, Founder at Dream 11, who says “For anyone wanting to build culture, write down what culture means to you. In the first 20-30 employees, culture flows directly from the founder. After you cross that number, you need the culture to be written down, what does that culture actually mean?”
He goes on to say “We(Dream 11) have had the same office DNA since we started in 2008. We have an astroturf in our whole office. We keep with the sports culture and the sports DNA. We are truly a digital company, so people are our biggest asset. We keep our headcount low, so that people are challenged beyond just one specialized skill set and they grow with us. Every single person must have meaningful ESOPS, so we create wealth for them as we create wealth for our investors and shareholders.” Thinking about Culture very early on, is important. Often time founders think that this is a job of the HR department and we can do this, when we reach some size and scale.
- Hiring for Culture before Skills – In the early stages of the startup, its all about the heart and the culture and the mission that you are on. When you hire, think of the Culture first and then the Skill set of the initial core team members. There will be a lot of potholes, adversities, near death situations; at this time the mission of ‘WHY’ the team got together, to solve a specific problem, keeps the Startup alive and kicking.
In your experience, what are the key elements that distinguish successful early-stage startups from those that struggle to gain traction?
- Obsessing about the Problem – Entrepreneurs who from Day 1, when they have the seed of the Idea in their mind, obsess about the pain areas and the angst of the potential customers, are the ones who outlive others. There a million decision points for an Entrepreneur to make in his/her journey, they must use ‘solving the problem’ as their yardstick at the crossroads of all these decisions.
- Deep Focus on Iterating the Solution – No product is successful in its first version. Customer conversations leading to product iterations are the only way to ultimately reach success. The constant endeavour to be the best, not necessarily the largest, differentiates Entrepreneurs.
- Stay Humble despite Fundraising – You are here to solve a problem, you are not your company, but in fact as an Entrepreneur your primary role is to serve your company. Entrepreneurs have to keep staying away from the glamorous weight of fundraising heroism, and stay humble. This is a huge differentiating factor.
- Demolish to rebuild continuously – There is no constant today. In 2023 we were cribbing about the need to have ice cream, cauliflower and ear phones delivered in 10 mins. Today, its part of our daily lives. Life before and after GPT, are drastically different for many professionals. I think reinventing your products and services, the way you market them, the new customer pain areas you uncover, have all got to be reviewed from time to time.
- Build a Company Culture to be proud of – Build a culture, which people at 7 p.m on a Sunday evening, think about with a smile. Take care of your employees and they will take care of your customers.
Aneesh Khanna’s deep understanding of the entrepreneurial landscape, combined with his practical approach to coaching, offers a guiding light for early-stage entrepreneurs. By focusing on problem-solving, iterative development, and fostering a strong company culture, entrepreneurs can navigate the complexities of their startup journeys with confidence and resilience. As Aneesh emphasizes, the key to success lies in staying humble, continuously evolving, and obsessing over creating value for customers. With these insights, aspiring entrepreneurs are better equipped to build impactful and enduring businesses.
