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  • Writer's pictureVikrant Vartak

You are NOT a Rocket Entrepreneur. Or ARE YOU :) ??

The last decade has witnessed a lot of ‘rocket entrepreneurship’. Many entrepreneurs have been obsessing over size, scale, and market share. Rocket entrepreneurs even more. Each one of us knows quite a few of these rocket entrepreneurs; either directly or through media – lofty ambitions, ‘charismatic’ & ‘flamboyant’ (at least they pretend to be), aggressive, always in haste, mostly young, generally overconfident & arrogant, wanting to grow too fast (though the house is not in order), craving for money and everything that money can buy, extravagant (spending much beyond their means), flaunting expensive brands, reckless borrowers, willing to cut corners, and so on. Let’s explore this highly contemporary topic of rocket entrepreneurship.

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In Jul-2019, I had attended a two day business conference hosted by Entrepreneur India in Delhi. One of the keynote speakers was Aditya Ghosh, the ex-IndiGo boss who had recently taken over the reins of OYO as their new CEO. While one side of me was both awestruck and inspired by OYO’s astounding growth story, the other side was highly skeptic, and wondered whether this was a time bomb waiting to explode?! My close to 25 years of management education & experience seriously questioned whether so much was really possible in so less of a time?!

In what seemed like a blink, the company became ubiquitous and highly visible in world’s most populous countries like India and China. Interestingly, in a blink, the company also became India’s biggest cautionary tale, screaming out ‘what not to do’.

OYO’s ill fate matches well with Soft Bank’s (OYO’s major funder) many other portfolio companies too - Implosion of WeWork, Uber’s disappointing IPO, OneWeb's (a satellite operator) bankruptcy, Didi's (China’s dominant ride-hailing provider) dismal performance, and so on. The same is true with so many more once-upon-a-time-stars.

Unfortunately, the rise followed by HARD fall of OYO – and rest of these ‘unicorns’ - is not just an aberration. What we witness with the OYO’s of the world, we witness the same at all the levels of the entrepreneurial world. Someone who used to be the poster boy of India’s startup world, is now the poster boy of a new, fast growing genre called ‘ROCKET ENTREPRENEURS’.

Each one of us knows quite a few of these rocket entrepreneurs; either directly or through media – lofty ambitions, ‘charismatic’ & ‘flamboyant’ (at least they pretend to be), aggressive, always in haste, mostly young, generally overconfident & arrogant, wanting to grow too fast (though the house is not in order), craving for money and everything that money can buy, extravagant (spending much beyond their means), flaunting expensive brands , reckless borrowers, willing to cut corners, and so on.

The Two Entrepreneurial Camps

Entrepreneurs fall into one of the two camps. The first consists of those interested only in making money. I do not consider them to be the real entrepreneurs. The more ambitious amongst them would qualify as rocket entrepreneurs. Their entire focus is on earning a lot of money. Many of them do not even have a clear idea on what they would want to do of it, except of course indulge in materialistic comforts. Some of these people would struggle to raise money from VCs with the hope to realize their dream of cashing out and living a life full of comforts. Often they claim to be worth some arbitrary amount and want VCs to fund their half baked ideas and dreams. They are those who have grown up reading about sky-high valuations and seeing unicorn founders worshipped in the media like rock stars.

The people in the second camp are the real entrepreneurs. They're not driven by the love of money or by how much they might potentially be worth. Instead, they're obsessed with their product or service, and believe that they are in this game to solve some serious business problem; just as Steve Jobs clarified after retaking the reins at Apple in 1997, “our goal is not just to make money but to make great products.’

Most successful real entrepreneurs are not motivated by money. It’s about a larger purpose, the experience, the way of life, the chase, the identity, the rush. It is a calling. They are patient and they in for the long haul. We hosted a lot of these real entrepreneurs through our flagship event called The Senate Talk Show. Each one of our Talk Show guests, representing some of the most respected & successful organizations in Pune – Symbiosis, KPIT, Thermax, Cybage, Panchshil, Chitale Bandhu, and so on - worked relentlessly towards making a ‘significant impact’, rewarding them with a lot of money as a ‘co-product’ of their organization building effort.

Good Growth vs. Bad Growth

In the fabulous book called ‘Maverick’ by Ricardo Semler, there is a nice quote which says, ‘only two things grow for the sake of growth: businesses and tumors’.

Not all growth in business is good. It is important to distinguish between ‘good growth’ and ‘bad growth’. Good growth is profitable (both the top and bottom lines should grow consistently), organic, differentiated, capital efficient and sustainable. It may not turn in the best numbers in the industry when measured over any short-term period, but the cumulative performance over a longer period is very good. Good growth also strengthens the company’s DNA by creating new competencies and strengths.

On the other hand, bad growth is growth for its own sake. It is profitless, wasteful of capital, reckless and erratic. This kind of growth has been the undoing of many business leaders obsessed with the drive for size.

Rocket entrepreneurs are obsessed by growth. This obsession often pushes them towards pursuing ‘bad growth’. We see many of these funded ‘rocket entrepreneurs’ burning cash at a tremendous place and producing losses year after year. They measure their business success on the basis of size, scale, and marketshare. They acquire companies and assets driven out of ego rather than on objective grounds.

Entrepreneurial Illiteracy

A few of us start young; mostly those succeeding family businesses. However, a substantial percentage of first generation entrepreneurs get some corporate experience before we take the entrepreneurial plunge. While, we would have gained a lot of knowledge, skills, and experience through our corporate stints, it is vital to understand and appreciate that the techniques and strategies that made us good ‘employees’ do not ‘as it is’ work when we become an employer. The world of entrepreneurship brings a new and different set of challenges than the world of work. The way our educational institutes do not teach us how to make the transition from education to work, the world of work doesn’t teach us how to make the transition from work to entrepreneurship.

Entrepreneurship is a completely different game, and it is best to consider oneself a novice rather than wrongly extrapolating our corporate experience, and believing that we know our stuff as an entrepreneur right from our early days. Like any other field, we need to go through the grind. Even more, the learning can never stop as what we know is hardly a small percent of what we do not.

Financial Illiteracy

Robert Kiyosaki wonderfully explains the importance of financial literacy in his highly famed book, ‘Rich Dad Poor Dad’. I am sharing a few of these excerpts applicable to any professional, but more so to entrepreneurs, in the paragraphs below.

What is missing from our education is not how to make money, but how to spend moneywhat to do after you make it. This is financial aptitude – what you do with the money once you make it, how to keep people from taking it from you, how long you keep it, and how hard that money works for you. Many highly educated, professionally successful people are financially illiterate. These people often work harder than they need to because they have learnt how to work hard, but not how to HAVE THEIR MONEY WORK FOR THEM.

Money often puts a spotlight on what we do not know. That is why, all too often, a person who comes into a sudden windfall of cash – let's say an inheritance, a pay raise or a lottery – soon returns to the same financial mess, if not worse than the mess they were in before they received the money. Money only accentuates the cash flow pattern running in your head. If your pattern is to spend everything you get, most likely an increase in cash will just result in an increase in spending.

In the long run, it's not how much you make, it's how much you keep, and how many generations you keep it. If you want to be rich, you need to be financially literate.

Would you do what the rich do after they became rich? Or would you do what they did before they got there?

Entrepreneurs are obsessed with sales and growth. Rocket entrepreneurs even more. It is very un-sexy and un-entrepreneurial for them to talk about cost management and frugality. However, frugality is a handsome income; it could be a lot easier to save a rupee than to earn it.

Warren Buffett quotes, “One of the great secrets to making more money is spending less money. To get rich, we first have to make money, and it helps if we make lots of money. One of the ways to make a lot of money, is not having to spend a ton of money.”

Robert Kiyosaki writes, “As your cash flow grows, you can buy some luxuries. An important distinction is that rich people buy luxuries last, while the poor and middle class tend to buy luxuries first. The poor and the middle class often buy luxury items because they want to look rich. They look rich, but in reality they just get deeper in debt on credit. The old-money people, the long-term rich, built their asset column first. Then, the income generated from the asset column bought their luxuries. The poor and middle class buy luxuries with their own sweat, blood and children's inheritance. A true luxury is a reward for investing in and developing a real asset. Buying a luxury on credit often causes a person to sooner or later actually resent that luxury because the debt on the luxury becomes a financial burden.”

This can’t get truer for rocket entrepreneurs! Extravaganza is one of the key traits of a rocket entrepreneur. On the personal side, they will justify buying BMWs and buying business class tickets. The same extravaganza will be seen on the business side too – costly advertising & promotion campaigns, unnecessary sponsorships, extra lavish offices, over pampered teams, top heavy organizations (with a host of CXOs, VPs/Sr. VPs, GMs etc), and so on. They will offer fantastic reasoning to justify this lavishness though the biggest truth would be that these lavish spends cater more to their large egos than serve their businesses. If fact, they weigh their business down by putting unfathomable load on their balance sheets.

What makes this worst is that, in most of the cases, all this is done out of borrowed money, either funded by the VCs or borrowed at higher interest rates too! In any case, it is ‘other people’s money’, not their own as capital and money is synonymous for them!

The Higher You Rise, the Harder You Fall

The entrepreneurial journey for most rocket entrepreneurs does not last very long – generally, not more than a few years – be it OYO or the rocket entrepreneur next door. Most of them either wind up in a few years or are thrown to the sidelines to lead a very ordinary life.

Rocket entrepreneurs end up not owning any assets because they never focus and work towards acquiring one. As a result, when their ‘short entrepreneurial stint’ ends, they get back to square one, or many times even worst – tarnished reputation, bankruptcy, debts for life, and/or on the wrong side of law.

Entrepreneurship is living a few years of your life like most people won't, so that you can spend the rest of your life like most people can't

My blog may seem anti-money! That’s certainly not the case. I do not wish to undermine the importance of money. After all, why do we entrepreneurs start our business? Why do we risk our stable jobs? Isn’t ‘making pots of money' one of our key goals?

Stephen Covey was correct in quoting, "Entrepreneurship is living a few years of your life like most people won't, so that you can spend the rest of your life like most people can't".

In Mavens, we say that, as business owners we should be able to add one significant asset in every three years on our personal balance sheet. Likewise, we should be able to make a decent addition to our growth capital each year on our company balance sheet.

Does this really happen? Do entrepreneurs really make a lot of money? Do we really prove Stephen Covey right?

Unfortunately, research shows that entrepreneurs as a class make only as much money as they could have if they had been employees. In fact, entrepreneurs make less, if you account for the higher risk that they take! If a substantial amount of money is not going to be one of the co-products of all our effort, then the game is just half played, or more appropriately, it is incorrectly played.

Entrepreneurship is as much a science as it is an art. It is as much cerebral as visceral. When the statistics already defy our chances of success, CAN WE AFFORD TO BE RECKLESS ROCKET ENTREPRENEURS?

Even OYO, the poster boy of rocket entrepreneurship, has now professed that its main aim is to scale back, grow responsibly, and cut its losses. They plan to hire more experienced management, slow down their growth, shrink inventory drastically, bring in global corporate governance practices, and focus on the basics a hospitality brand should focus on: operations and training. After all, these are lessons learnt the hard way! However, not everyone gets a second chance!

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Vartak Heritage, 100 Ft D.P.Road,

Near Mhatre Bridge, Opp Gharkul Lawns,

Vartak Baug, Erandwane, Pune-411052

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