It was an exciting day at Lightspeed’s Bangalore office this Tuesday as we kicked off the first edition of Lightspeed Extreme Entrepreneurs (EE) with eight high-spirited startups. For the first masterclass, we hosted Ritesh Agarwal, founder & CEO at OYO Rooms (a Lightspeed portfolio company), in a session moderated by me. We’ve captured some of the highlights below, in the hope that it will benefit several more founders outside the eight that constitute the first EE cohort!
Risk it, vs. regret it
As an entrepreneur, you have to be open to taking risks, especially when the downside is limited but the upside is high. For example, Ritesh recalled the early days at OYO, where focusing on the business would keep him away from more fun stuff (or school!), or when he spent money (which he didn’t have much of) on an air-ticket to meet with an angel investor. With hindsight, several such risks paid off years later.
Over time, its also important to seize as many of the opportunities that come knocking on your door, even though you may not know exactly where they will lead. For Ritesh, whether it was the Thiel fellowship, which helped to expand his horizons and learn what ‘big’ truly meant, or finding highly reliable investor partners along the way, embracing opportunities worked in his favor.
Stay close to your customers, always
For Ritesh, this was a literal reality during the company’s early days. He spent several months staying in budget hotels, and closely understood each and every pain point a small asset owner has. “What you build should be based on this carefully trained mechanism of understanding the customer, and not just pure instinct. When the time came to onboard supply and convey the value proposition, I knew exactly what to say to these asset owners.”
Staying close to your customers also helps build unparalleled conviction about the severity and scale of the problem you’re solving. Most branded hotel chains in India are 100 rooms or more, but 95% of the supply that exists is in smaller properties. Top-down market statistics often ignore this market, so there is no way to form a view on opportunity size unless you have your ear close to the ground. This is especially true in markets like India where a large part of the economy is unorganized and reliable data is hard to come by.
Hire the ‘right’ people, sooner than later
As he was highly plugged into the day-to-day operations (like taking customer calls), Ritesh jokingly recalled how I had once told him, “Okay, so now that we have the head of the call centre in place, we need to find a CEO”. Its important that as the company starts growing, you evolve into a leadership role, and be okay with letting go. The entrepreneurial journey is as much about sacrificing, as it is about gaining. It could be sacrificing time with your family, ownership in the company, control (to make way for other senior management) and what not, but the common thread is an obsession with the mission. As you think about your first few hires, you should disproportionately test for cultural alignment, and the skill-set to take ownership for various functions. In OYO’s case, everyone in senior management has stuck through the ups and downs because they exhibit incredibly high levels of ownership and are connected by a common mission.
When it comes to recruiting, hire people not for today but for 2-3 years from now. By doing this, you end up solving for two things – a) in a high growth environment, it protects against the risk of outgrowing your people (and the consequent lack of bandwidth), and b) you give new employees enough time to grow with the company and understand nuances that can help them do their job better.
Prioritize few, but keep rest of the matrix in view
Founders often find themselves lost in a fog of activity, and need to step back and focus on a subset of decisions. But what do you focus on, when?
- First, focus on survival.
- Next, spend your energy and resources on getting to product-market fit. Are you building something that customers want? Is the product at a stage where it works like a machine – you provide the raw materials, and the model keeps scaling automatically.
- Once you have something that’s working, start thinking about what it will take to amplify it and start building the competencies to scale. One of the first things to do to prepare for scale is to hire for it.
- Validate your ability to impact key business levers such as unit economics, customer experience etc. Doing so will give you the conviction to make deliberate trade-offs in the event this ever becomes necessary. For example, if competitive dynamics necessitate you to scale faster and compromise unit economics for a period of time, you can make this trade-off deliberately if you’ve built the competency to scale and validated the economics.
As a word of caution, the takeaway here is not to just do just one thing at a time. The key is to prove/ validate different things to yourself early on (including say, economic viability), so that you are in a position to make deliberate choices on what to double down on if/when required.
Finally, an interesting point that came up during Q&A was around internationalization. The way Ritesh characterized their approach was “We aren’t trying to take OYO to China. We are doing what a local entrepreneur would do if they copied the OYO model in China.” The difference is nuanced but very profound as it reflects the importance of not trying to replicate your existing business in a new market but instead adapting your business to the unique requirements and context of that market.
This is the first in a series of blog posts that will come out Lightspeed’s Extreme Entrepreneurs program. We hope you found the takeaways useful. To stay updated, follow EE on twitter here and the official Lightspeed India handle here.