In the startup Ecosystem, founders often juggle multiple roles and struggle navigating the complex terrain of growth, financial management, and organizational culture. Our guest today is a seasoned startup advisor who brings a wealth of experience from his background in Finance and Consultancy. With a deep understanding of the challenges startups face, he shares his journey, insights, and strategies that have helped numerous startups thrive. Let’s dive into our conversation with Mr. Akhilesh Sharma (Founder) (Octillion Advisors). Below are the excerpt of the interview
Q1: Can you tell us a bit about your background and how you became a startup advisor?
I’ve always admired Mr. Nani Palkhivala and initially aspired to a career in law. However, my growing interest in finance led me to pursue CA instead. During my Articleship at Laxminiwas and Co., I specialized in Direct Taxes and gained extensive exposure to compliance intricacies.
I’ve also been an active part of the startup ecosystem in Hyderabad. Many of my friends started various startups, and whenever they faced operational or strategic challenges, I would help them solve these issues. This experience made me realize that I could combine my diverse skills and knowledge to assist startups in navigating their challenges. It has been two years since I made this decision, and I am happy with the path I chose.
Q2: What motivated you to become a startup advisor, and how do you approach helping founders manage the complexities of their growing businesses?
When you walk into a startup, the first thing you often notice is the founder juggling multiple roles. As the organization grows, this multitasking can lead to a loss of attention to detail, and founders can’t be expected to know every intricacy of the business. This is where problems start to pile up, drastically affecting the functioning of the startup and demotivating both founders and employees.
During these turbulent times, our primary role as startup advisors is to identify these issues, provide founders with an objective perspective, and solve these problems. The impact of our solutions extends beyond just revenue or profit multiples.
We might prevent a potential layoff of an employee struggling to make ends meet, give hope to a founder doubting his idea, or improve the lives of many employees by transforming the organization’s culture. This is what motivates me!
Q3: What factors should an entrepreneur consider when selecting the entity structure for their startup, and what entity structures do you typically recommend?
It completely depends upon the type of business and the priorities of the founder. When making a choice between an LLP and a Pvt Ltd, the founder should consider the following:
1. If you prefer secrecy of your financial numbers, then go for an LLP.
2. If you wish to issue ESOPs in the future, then Pvt Ltd is the only way.
3. If you are bootstrapped and need unsecured loans from family or friends to fund your startup, it is better to go for an LLP.
4. If you wish to get investors on board, then there is no choice but a Private Limited.
5. Taxation should also be considered, but it is a complex and lengthy discussion for another day.
It should also be kept in mind that at an early stage when you are testing waters with your co-founder, it is better to meticulously plan and take this decision as the cost to keep these entities afloat ranges anywhere between 25,000 to 30,000 per annum, and to shut them down you would have to spend not only money but also TIME.
Q4: What’s the single most crucial step a founder should take to ensure their startup’s financial health remains robust?
Vineetha Singh, in one of the episodes of Shark Tank, aptly pointed out that many startups fail not due to a lack of funds but because of mismanagement of funds. Let’s consider a startup that has recently secured funding equivalent to a 24-month runway, either through venture capital or other means. It’s common for founders to become lax in financial discipline after a few months, losing track of expenses and facing challenges in working capital management as they focus on market expansion (which is understandable). This often leads to financial setbacks, leaving the founder with only a 6-month runway before realizing their situation.
Implementing a Management Information System (MIS) report is the most critical step a founder should take to keep their startup’s financial health in check. An MIS report acts as a customizable dashboard with key financial metrics, allowing founders to analyze and track their financial performance in a way that’s tailored to their specific entity. Analyzing key ratios can help identify and correct any deviations or overspending in a timely manner.
Q5: How crucial is cultivating an inclusive culture for startups?
Culture is the essence not only for startups but for any organization. An organization’s culture, although intangible and not recorded in books, is its invaluable asset. It drives the collective vision, binds the entire organization, and is the responsibility of the founder to cultivate. An inclusive culture fosters understanding across all levels of management, encourages collaboration towards common goals, and creates a stress-free environment, leading to lower attrition rates and leveraging the human capital of the organization.
It’s important to note that while an employee might leave for higher pay elsewhere, they are more likely to return for a better work culture. Conversely, an employee who left due to a toxic culture is unlikely to return even with a higher salary offer.
Q6: What is the impact of AI on business processes?
While adopting AI and automating processes can be beneficial, it’s crucial to weigh the pros and cons carefully. Not every process susceptible to AI replacement should be automated without thorough evaluation. Founders should assess the impact on both customer and employee experiences before implementing AI.
Q7: What should founders keep in mind before implementing AI in their startups?
Founders need to evaluate how AI implementation will affect customer experience, and sometimes employee experience as well. For example, many startups have replaced traditional customer support with AI bots. Previously, a customer could speak directly to a support executive who could address their issues efficiently. Now, customers often have to navigate through generic AI prompts, which can be frustrating and time-consuming, ultimately harming the customer experience.
Consider a food delivery app: with a traditional support team, resolving issues was straightforward and personalized. However, with AI bots, customers may struggle to get their specific problems addressed, driving them to competitors who still offer human support. Although AI in customer support is more economical, it can negatively impact customer satisfaction and loyalty.
A balanced approach is the best solution. Combining AI with human support can enhance customer experience rather than diminish it. Strategic use of both AI and human resources can ensure that customer interactions remain smooth and satisfactory, preserving customer lifetime value (LTV) and competitive edge.
Q8 How can startups or entrepreneurs get in touch with you if they need your services?
They can reach out to us on info@octillionadvisors.com
TET Desk