By: Prakash Nedungadi
Being a Start-up entrepreneur is becoming an increasingly popular career choice for several bright and ambitious men and women. The reasons for this include:
-the seemingly magical success of several people who started virtually out of a garage to create cult brands like Apple, Google and Facebook, and thereby achieved early and massive wealth, fame, freedom (from employment)
- the ability of the Internet to make new ideas work and scale up easily and rapidly
- the increased availability of funds from Angel/ Venture Capital/ Private Equity investors
- the lack of opportunities and the apparent boredom of repetitive, large-office or blue collar work; furthermore, these days, very few career paths offer a “permanent, stable job”
Bangalore was recently identified as one of the top ten hubs for Start-ups in the world. With a number of people now moving towards becoming entrepreneurs in the city, it was felt worthwhile to find out whether this was a viable niche for a coaching practice. Why would Start-up entrepreneurs need coaching? One reason is their high failure rate. Data suggest that only 29%, i.e. about 3 of 10 businesses, survive the first 10 years following their creation. For the entrepreneurs who begin starry-eyed with visions of success, the emotional impact of such a low success rate could be very high.
Source: “Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By” by Scott Shane (2008). Furthermore, coaching might prove integral to Start-up entrepreneurs, especially since their success relies upon their ability to grow with the organization, or indeed, ahead of it. For example, the personal skills required to create and run one small quick-service restaurant are different from those required to handle a dozen of them in a city, and then several in a number of cities. This is compounded by the sheer speed at which growth has to happen. Entrepreneurs don’t get enough time to emotionally adjust to new situations because the demand from investors for them to grow rapidly can be
ruthless. Finally, being an entrepreneur can be at times a heady job (e.g., when the funding just comes in!) or a very lonely job (when times are challenging). This can impact the morale and balanced thinking of a young entrepreneur unless he/she is
supported to grow as a person and given the tools to manage, and indeed, benefit from, this roller-coaster journey.
Finally, research shows that coaching improves organization performance in stable companies by 37%, according to Manchester Inc, ““Executive Coaching Yields Return On Investment Of Almost Six Times Its Cost”” (Source: Manchester Inc). It could be argued that Start-ups are more in an “infant” stage in an organizations life and hence the gain can be several times higher.
Given the above, several questions seem to arise:
Why is it that a flourishing coaching business for start-ups hasn’t happened yet (in Bangalore)? Can start-up entrepreneurs afford coaching and do they WANT to spend money and time for it? If so, what kind of coaching, at what stage? What influence do investors have when determining the need for coaching? Can they be the “gatekeepers” who, when convinced, will nudge or insist upon coaching sessions for entrepreneurs they are investing in?
Is there a business model for a coaching practice that aims at Start-Ups as its niche?
2.0 Research Objectives
2.1 Determine the WANT for coaching amongst Start-ups and investors (i.e. what is the basis for a sustainable revenue model?)
2.2 Assess the nature of coaching demanded across different stages of Start-up– from bootstrapping to early stage to mid-stage.
2.3 Determine to what extent investors (VCs) encourage/incite start-up entrepreneurs to get coached
2.4 To understand possible Customer Propositions for a successful Start-up-focused coaching practice
3.1 Design two structured questionnaires to understand
a) from Start-ups: their needs/ wants, triggers/ barriers (i.e. factors that prompt them to, or discourage them from, seeking coaching) (Pl see Ann 1)
b) from investors: can they be “gate-keepers” through whom a coaching practice can successfully reach the start-up entrepreneur? (Pl see Ann 2)
- 5 Start-up entrepreneurs in Bangalore/ India
- 5 venture capitalists
Note: interviewees names have been kept confidential, but their quotes are given in blue and their initials are shown against the quote
4.1 ALL Start-up entrepreneurs felt that coaching was required at every stage of evolution and could impact the success of a venture tremendously.
Specific areas were:
Aside from the above, in ALL stages, all the entrepreneurs I spoke to had the following common issues that could be addressed by coaching:
a) Loneliness . the feeling, especially in tough times, of being completely alone and unable to share problems even with close family.
“ I had to sell part of my residence and there were months when I borrowed from friends to make salary payments to my team” (HD)
“I have no one to turn to, unlike when I was a professional and had a boss to mentor me” (PG)
b) Doubt . at times there were doubts about whether the sacrifice was too much (most of them had given up good jobs to become entrepreneurs)
“I was making Rs 1,00,000 in my job and now I could scrape up just Rs 30,000 with so much work and tension” (PG)
“ I have so much expectation of myself and so do the VCs and my employees from me….will I deliver?” (VJ)
c) Responsibility . being responsible for many people– both front-line staff and senior team members– and being the person where “the buck stops” every time.
“ There is no let up; initially, I had to get up everyday at 6 a.m., head to the vegetable market to buy for the restaurant; now, I have people to manage things, but when they don’t, it ends with me” (GJ)
“Often I have felt drained with everything that is on my shoulders” (VJ)
4.2 The reason they had not taken up coaching so far was:
a) not aware of good coaches and the power of coaching (GJ, VJ)
b) used “local” help and managed (PG, HD)
c) felt that some entrepreneurs would not like to believe that the skills they required had changed or that a coach could really help (VG)
4.3 Key characteristics looked for in a Start-up coach:
a) Trust is most critical: Entrepreneurs felt that their time was precious and they could only spend it with a coach they could really trust.
“If I found that my coach was also coaching a competitor or talking to my investor or customer, I would be really let down” (VG)
b) Understanding: a Start-up’s life: the speed, management of uncertainty and acting from the gut were so important for a start-up that entrepreneurs needed a coach who could be perfectly sensitive to that need
“Some people who have not been entrepreneurs don’t understand the pace at which we have to make decisions” (PG)
c) Consultancy-cum-coaching is sometimes a requirement i.e. blended coaching “Would love to have a sounding board, but also ideally should be able to give me specific advice on the business”(VG)
4.4 Role of the Venture Capitalist or Board Member as a Coach or Mentor:
There seem to be conflicting views, with some saying that they implicitly trusted their VC’s judgment, whereas others said that there was some formality in the relationship and full trust could not be assumed
“ Sometimes, you can’t open up to your investor or Board member 100%” (PG)
“You can talk about your business pressures to the VC, but he’s probably not interested in all the rest that’s going on in your mind” (HD)
A fee of Rs 8,00,000 ($16,000) for a 6 month assignment was not seen as a showstopper, for a good coach. All the entrepreneurs saw that the right coach could add tremendous value, so the fees paid was relatively little for the gains that could accrue “I paid and attended a workshop by Robin Sharma, the motivational guru, in February and I really got a lot out of just that one day, which I am implementing. If I could get that more often, I am sure it would be worth it.” (GJ)
“There is no standard to what should be paid, so it’s difficult to say what is right. But clearly the potential gains are much more than the amount you are saying” (PG)
The exception to this was the bootstrap stage, before the entrepreneur has got any funding.
“Entrepreneurs at bootstrap stage also need coaching, but they can’t afford what you are saying. Perhaps group coaching or some other cost effective model could be developed?” (PG)
4.6 Other needs:
Entrepreneurs found that dialogue with like-minded or like-state entrepreneurs was a HUGE help and release. This indicates the huge potential of peer- coaching for start-ups “Just the realization that my problem is not unique gives me a huge relief” (VJ)
“When we share problems and we see that the other ‘gets it’ perfectly, then it makes us much lighter” (GJ)
4.6 Voice of the Venture Capitalists/ Investors:
Despite the fact that their investment was in the hands of the entrepreneur, VC’s were unsure of the practical feasibility and the potential success of coaching for start-ups.
“In the US, when a start-up moves from stage to stage, we usually change the entrepreneur or CEO as there are specific people there for specific stages. But in India, entrepreneurs sometimes resist this…” (AM)
“Normally, we cannot insist that the start-up takes on a coach. We have to leave the development of the entrepreneur to him/ her. That’s why VC’s prefer to change entrepreneurs when the business outgrows them” (SS)
“We have placed a coach on the Board of two of the companies we have invested in. And it has worked. But we can’t insist on this with everyone” (KS)
5.1 Coaching for Start-ups is a definite business opportunity and can contribute greatly to make more new businesses successful
5.2 The key target group is Start-ups entrepreneurs themselves; VC’s/ Investors are only a secondary target group
5.3 The needs for coaching at different stages are different. Responding directly to these needs should be an effective way of Marketing. For example, bootstrap companies need more cost-effective, short coaching bursts with an emphasis on “peer coaching” and “group coaching”. Early and mid stage entrepreneurs are more a target for sustained coaching
5.3 Developing relationships with a large number of Start-ups and then pairing them up for peer coaching, based on relatedness and fit, could be a great, cost-effective value add, allowing for better pricing flexibility
5.4 The key promises are (1) Trust, (2) Ability to really understand and help the entrepreneur make rapid progress; the customer proposition should be built around these ideas
5.5 In some cases, offering “blended coaching” or coaching + start up consultancy can be an added benefit.
6.1 Start a coaching business in Bangalore that focuses on Start-up’s as a niche
6.2 Two Key Customer Propositions need to be tested to see which will work better:
Proposition 1: “I-Power: Empower your self to drive your Start-up to the next stage”
Proposition2: “Entrepreneurs’ Sanctuary: create your own path in an environment you can trust.”
6.3 Develop minimum 3 products/ services:
a) PeerCoach: develop a database of entrepreneurs, develop a model to find out who are in compatible or similar situations, and pair them up; offer them basic coaching skills
(e.g. listening, questioning) and let them coach each other, with some (paid) input from us.
b) GroupConnect (affordable group coaching for early Start-ups):
c) NextStage: specialized one-to-one transformational coaching for entrepreneurs whose companies are transforming from one stage to another.
6.4 Provide forums through Facebook friends and articles of inspiration (this is already being done, but is a must-have to develop continuous connect)
7.0 Study Limitations
7.1 Sample size was small and selected
7.2 Respondents may have been biased as I was administering the questionnaire and they knew that I was interested in coaching
1. “ Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By” (Scott Shane, 2008)
Questionnaire for Start-Up Entrepreneurs
Thank you for taking part in this short survey. As I mentioned to you, I’m looking at the area of providing Start-ups with a huge leverage to improved performance….through business coaching. Your thoughts will help me develop ideas that could perhaps benefit several entrepreneurs like you in the future to move more rapidly towards profitable scale-up and eventual massive success.
So here goes:
1. Can you tell me the nature of your business? Is it start-up, early stage, mid stage, later-stage? Have you yet moved from one stage to another?
2. As your business has grown, have you found the challenges it has given to you as a person and therefore the skills you need to manage these has changed? If yes, how so?
3. In your interaction with entrepreneurs and your own experience, what are the main emotional challenges faced by an entrepreneur in his/ her journey from one stage to another? How often does it happen that these emotional challenges are so big that they have impacted the success of the start up?
4. Have you heard of business coaching? Business coaching is about giving an entrepreneur like you the support to transform yourself as your company moves from one stage to another, so that you retain skills that are good and critical, you drop what are no longer relevant for the new stage and you pick up new skills to manage the new environment.
Great business coaching has been known to multiply business success more sustainably and for giving significantly increased happiness to the entrepreneur.
If it could indeed deliver on this promise, do you think many start-ups would benefit from engaging with great coaching?
If yes, why? If no, why not?
5. What do you think might be some of the main barriers that entrepreneurs of Startups would have to start coaching? What would be some of the best ways you could think of to overcome these barriers?
6. A 6-month engagement with a great coach may cost Rs 6-8 lakhs. If it could increase the effectiveness of a start-up entrepreneur substantially, and thereby justify an RoI many times the cost, do you think Start-ups will feel interested in engaging a coach?
If yes, or maybe yes, why?
If no or maybe not, then why not?
Thank you so much for the discussion.
Questionnaire on Coaching for Start-ups
1. What kinds of entrepreneurs do you fund?
2. What is the typical profile/s of the entrepreneurs in who you invest, if there is one?
3. What are the three main factors internal to an organization that you feel are critical
for the success of a venture that you invest in?
3. In your opinion, what are the key human/ emotional qualities required for the entrepreneurs that you invest in for them to be successful?
4. How critical do you feel are these qualities for the success of the venture?
Neither important nor unimportant
Not so important
Not at all important
5. As a Start-up grows from start up to tiny to mid size to large, do you feel the
leadership, managerial and human qualities that an entrepreneur needs to have at each
stage as critical capabilities are different?
If yes, why?
If no, why not?
6. List the top 3 critical human capabilities required of a start-up entrepreneur
1 2 3
-at the start-up stage?_________________ ____________________
- at early stage _________________ ____________________
- at mid stage __________________ ___________________
- at large stage __________________ ____________________
7. Talking of human, emotional, social, managerial, and leadership qualities, are there any clear gaps that you see between what is required and what entrepreneurs have as they move from stage to stage? If yes, what are the most important gaps?
8. What is your understanding of business or executive coaching? Do you hire or do any of the organizations that you fund hire coaches?
9. Business or executive coaching is about supporting a person to be better able to deal with issues that come in the way of enhancing his performance and the performance of the organization. The issues could be personal, emotional, or relationship challenges as well as business challenges. In a recent study, business coaching has proven to improve organization performance in larger organizations. According to a Manchester report, while half of executives who received coaching reported improvement in organization strength, 77% reported an improvement in working relationships.
Do you feel that effective coaching to start-ups or the kind of organizations you invest in can improve their ability to perform and thereby benefit organization performance?
Definitely feel it can improve performance
Most likely it will improve performance
Not likely to improve performance
Will definitely not improve performance
10. What are the areas where you think that Business coaching can benefit and improve the performance of start up entrepreneurs or their teams?
11. A typical, effective coaching engagement of about 8 months (32 weeks) would cost about Rs 4.8 lakhs. The impact would be a significant capability enhancement of the start-up entrepreneur. How willing would you be to support the idea of the entrepreneur taking coaching in that case?
I would almost insist on his taking coaching
I would be very willing to support coaching
I would not be willing to support coaching
I would discourage him from taking coaching