Prime Venture Partners Podcast

How to build a Unicorn Startup - Culture, Roles, Equity Splits?

• Prime Venture Partners: Early Stage VC Fund • Season 1 • Episode 151

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Is culture really more important than strategy? We unpack this bold statement by diving deep into how to intentionally shape a startup's culture from day one. 

In this critical episode, get practical tips from Shripati & Amit on aligning company values with daily behaviors, decision-making processes, and hiring practices. Learn why the first 18 months are crucial for setting the tone and how even the smallest actions can significantly impact your company’s culture.

Scaling a startup isn’t just about growth; it's about maintaining and evolving your culture. We discuss the unpredictable journey to achieving significant exits, stressing the need for adaptability and continuous performance evaluation. Learn how to foster a culture of radical candor and open communication, essential for long-term success.

Tune in to learn more:

0:00 - Building Startup Culture and Team Dynamics

8:28 - Founders' Roles and Equity Split

16:58 - Navigating Founder Equity and Company Exits

23:39 - Scaling Culture and Organizational Performance

30:15 - Establishing Feedback Culture in High-Growth Startups

From defining roles and distributing equity to maintaining and evolving culture, this episode provides valuable insights for founders at every stage of their journey.

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Amit Somani:

What is the dynamic between a 2 or a 3 person co-founding team? How equity is distributed between founders? You just figure out. Do you want to be king or do you want to be rich?

Shripati Acharya:

Literally. I think culture is one of those things that it gets created, whether you like it or not.

Amit Somani:

Culture is what employee number 50 or 500 or 5000 says. The culture is that culture eats strategy for breakfast. It is how you're making decisions, how you're hiring people. It's the first 10 hires. Welcome to the Prime Venture Partners podcast. This is Amit Somani and I am delighted to be jamming with my partner, Shripati Acharya.

Shripati Acharya:

Thanks, amit, glad to be on the show with you.

Amit Somani:

So we're going to talk about something which is, you know, what we call. You know, hard is easy, soft is hard. So it's culture, it's founders and it's the team, and how do you build that and what are some of the dilemmas around that? So there's a very popular quote from Peter Drucker that comes to mind that culture eats strategy for breakfast, and I'm sure, sripati, you would have heard that at Harvard Business School many times, of course. Yeah. So I think it's very, very. You know, we often talk about building products, building GTM, hiring people and all that, but perhaps not enough about building culture. What are your thoughts on that, sripati? And you know you can maybe just kick us off there.

Shripati Acharya:

Absolutely. I think culture is one of those things that it gets created, whether you like it or not. So, whether you are working on it actively, whether you want to define it, whether you want to shape it, it's going to be there, so you'll end up with something. It whether you want to shape it, it's going to be there, so you'll end up with something. And the question here is that whether what you end up with is something that you wanted it to be. So that's really the issue here, and so you're much better off trying to create a culture which you want to create and then seeing where it goes. And I feel that for a startup, this is one of the most underappreciated areas, because you're as a founder, you're so interested in building the product, getting financing, getting the capital raised to the right level, hiring teams, etc. And the last thing you want to do is something loosey-goosey and soft as culture.

Amit Somani:

Absolutely, and you know, I have this sort of thesis that the culture of a company, especially a startup, gets formed much like a kid growing up, or even a kid in the womb, in the first 9, 12, 18 months. Right, because, like you said, whether you build it consciously or not, it's getting built. It is how you're making decisions, how you're hiring people, it's the first 10 hires, it's how you take trade-offs, et cetera, et cetera. So it is getting built, whether you like it or not. So might as well be deliberate about it and conscious about it and kind of build it.

Shripati Acharya:

Exactly and, as we know, the culture is not what the founders determine. The culture is not what the founders determine. It is what everybody else around the table talks about and how they interact when the founders are not in the room.

Amit Somani:

Absolutely. In fact, I don't know where I'll Some folklore that culture is what employee number 50 or 500 or 5,000 says. The culture is Not what is written on the fancy wall with their vision and mission statement and the culture and values. It's what people are actually feeling and experiencing of how things get done in your company. Yes, so can we define it a little bit more? Right, like, what is culture? So suppose there's a startup founder listening to the podcast, how should they define culture? What are the elements of it? You know, a couple of things that come into my mind are how decisions get made. Like I said earlier, what kind of people do you hire? How do you do trade-offs If the founders are not in the room? If the customer's not in the room, you know how do you make decisions, et cetera. But what are some other elements that people should consciously think about when they're defining culture?

Shripati Acharya:

So I feel that think about it from the standpoint of a new employee who has joined. What are the questions they are asking themselves, without necessarily asking, what are the things in their mind? And the things in their mind are well, how should I actually behave and interact in this meeting? So let's think about some practical terms. You're in a meeting and a conversation is going on and the CEO is saying something and you disagree with it. How do you, what do you do at that point?

Shripati Acharya:

That is the direct impact of culture. So if a culture is something where you are, it's very transparent and open and you can go and dispute anything in an open fashion, then, yes, there is actually no, I guess, concern or fear, whatever you want to call it. But if suppose the culture is one where it is differential but they are not even saying it's actually the right thing or the wrong thing, because there are a lot of companies where you want that, where it is, or, I would say, where a top-down culture works very well, because everybody aligns quickly and fully without having endless debates, because you can have companies where there is this open culture, where there's a lot of debates and then you're doing analysis, paralysis and nothing gets done. That's definitely worse than the previous one, right? So not even saying one is better than the other, but that defines the culture. What do you do? How do you interact with your peers, how do you interact with your seniors, for example? That's probably one example of culture.

Amit Somani:

Yeah, you know. A couple of other things that are coming to mind is are things like do decisions get made based on data or you know some kind of insight, or perhaps you know who you know or what you know right of insight? Or perhaps you know who you know or what you know right? So in certain companies, if you don't have data, you know Rupert Murdoch is famous for having said this right, if we have data, then we'll talk. Right, If you have opinions, then we'll use mine.

Shripati Acharya:

You know so we'll go with the highest person. Jack Welch has a quote right In God we trust everybody else brings data.

Amit Somani:

Yes, that's there, you go right. So I think it's very important. I like that thing about you know a new employee coming in, or employee number 50 coming in to my point earlier. It's whatever they are feeling when they're coming in, like you know, a week or a month or three months later. That's what's kind of defining what culture is.

Shripati Acharya:

There's another element of it which I'm actually reminded of, because Amazon quite famously has this culture of being of customer centricity. So what culture can help define is put the guardrails within which you make decision when it has not been prescribed. So, of course, you might have, you know, a company guidance wherein that you need to travel. You know economy class here and business class there, and these are all rules, right, it's fairly straightforward. But the question is, what do you do when it has a situation where you need to use your judgment, and the culture helps guide that. And so, from what we understand I think you have mentioned this to me that in Amazon, there's always a seat in any meeting for the customer, that's right. An empty seat, an empty seat right, which is what? For the customer, that's right. An empty seat, an empty seat right, which is what would the customer think? That is culture to me, right, which is putting you know helpful guardrails around how you make decisions.

Amit Somani:

Absolutely. And similar things were true at Google, saying is this right for the user? If it's right for the user, then it's fine, because that's a core value, that's a core principle, that's a core belief. So let's transit. You know, since I started with saying, you know, hard is easy, soft is hard, let's talk about some of the harder issues and I want to, in particular, bring up because we've now seen you know dozens, if not you know, worked with actually dozens, but seen thousands of companies over the last 10 years what are some of the dilemmas and the dynamics which are very hard and difficult to get around. And so, therefore, people sweep it under the rug and I'll kick it off. Yeah, right.

Amit Somani:

So what is the dynamic between a two or a three person co-founding team? Right? And how do they? It's not just decisions, right? Who's the CEO, who's not? Let me just even start there. We have met innumerable companies, including one as late as last week, but they said, no, no, we haven't decided. We're two buddies, we're like we've been together since grade six, we'll figure it out. No, not really, but there are so many of these dilemmas. So what do you think about this notion of getting some kind of vibe and some of the more uncomfortable questions kicked off between the founders sooner than later, and perhaps even all along the journey.

Shripati Acharya:

Yeah, I feel that this who is the CEO question is like a really great, I would say, test case about how much evolved and firmed up that relationship between founders is. If you think about it, it's very common, in fact desirable, for founders to be friends, and because from friendship comes trust and trust is really central to be successful because you are going to face a lot of ups. You know, our partner, sanjay, famously says that you have, in a year, 360 days of pain and five days of exhilaration, and in deep year you get 361 days of pain, 361 days of pain. So that's what startup journey is, and in order to navigate that the stormy sea successfully, you need a lot of trust and that comes from friendship and knowing each other intimately, having gone on travel together or been on those hard classes together and burn the midnight oil and whatever have you, or been on parties, everything else. But the thing with startups is that, while that is essential to start the company, you need to go ahead and develop another side of that relationship, which is a professional relationship.

Shripati Acharya:

And who is the CEO is the first question in that professional relationship, because a CEO is the first among equals, so the buck does stop with he or her as a CEO. When you're talking about issues, the CEO is the person who is signing off on documents. Typically, and ultimately, the performance of a company the responsibility does rest with the CEO. So it is not a trivial decision and it is an important conversation and to me, when founders have come in and said that, hey look, we'll figure it out, my suggestion is that you know, we should figure that out before you actually do any kind of fundraise. Not because it's the investors who want it or desire that, but it actually leads to a certain set of conversations and terms of engagement being defined between founders, which is just super important.

Amit Somani:

Yeah, couldn't agree with you more. And what happens is, when you probe some of these so-called soft things, you will get to the harder issues. What are the roles and responsibilities? How will we measure each other's performance? How will we make each other accountable? Right? Where does the buck stop, whether it is with respect to investors, customers, partners, etc. Right? So I think these conversations start coming up, which is what you don't want to discuss. You're like this is beautiful, let's just build this product. Customers are asking for it, let's get the pricing right. But you don't want to talk about like, okay, how will this really kind of happen?

Shripati Acharya:

Well, the typical question which we ask and I think it's a relevant one is that what happens when there's a disagreement? And the typical answer which you get is hey look, we just talk it out, kumbaya, we all get to an amicable understanding. While that would be true, and we hope it is, most of the time you have to account for the case where there is a disagreement and then the right answer here it's not really a trick question is that the CEO has to make that decision and, more importantly, the founder or rest of the founders have to be on board with it, right? That's why you choose that CEO. And related to that is this question of, like, how equity is distributed between founders, right? Maybe I should ask you that question, right? Because you know we see a lot of times when it is equal and, at least for a neutral observer, it does not quite make sense.

Amit Somani:

Yeah, absolutely. I think that's the next kind of tough question, right. One is who's the CEO? We'll figure it out. What's the equity? Of course it's equal. You know one, you know it's three of us or it's two of us. So it's this.

Amit Somani:

But it's not really absolutely. It's not necessarily the case of how it should be, and I think a lot of it is also because one is because it's uncomfortable to talk about two, it's because you conflate the notion of being a founder or a co-founder with being an equal partner. It is not necessarily the case. You co-founded something together, you took the same risk, the same leap of faith built on a relationship, built on trust, built on some opportunity. But as you contribute to the company now and going forward and as you scale with the company, that has to be more commensurate with the kind of equity and the equity split. And you have to have enough mutual trust and respect to be able to say like, oh, for this kind of role.

Amit Somani:

Five years from now, if you are hiring somebody, you know what would be nominally pay them. Of course you're a founder and you will get your founder equity and you'll get your seat at the board and all those other good things. But I think that people don't want to talk about the roles and responsibilities and the contribution that you're expected to make. So it's a little loosey-goosey saying look, we're all one big, happy family. And actually you are right, because at the beginning everybody does everything right. It's like the proverbial two guys and a gal and a dog in the garage. So what role and responsibility. But that's not going to be the case once you have 15 people. It's not going to be the case when you have $10 million of revenue or $2 million of revenue.

Shripati Acharya:

And I would say, amit, that you are kind of like setting yourself up for issues and problems and really a debt which the company has to repay sometime in the future, because, just think about it, the contributions will typically be different depending on the domain in which you are. It's not like you are smarter than me, but suppose today we are starting a company which is in travel, you are in a CPU of Make my Trip and at Google, you know, running consumer products. I would think that you would probably add a lot more value than most other people, right? If you and I were starting a company. So it actually depends on even the company and the actual problem statement which they're looking to address.

Shripati Acharya:

So it's really not about like who is smarter. It is what the future contribution is going to be and if that conversation can be had and you agree to a what you think is a fair contribution ratio and obviously it is qualitative right but if you come to some understanding, it really prevents problems later. Because what happens later and we have seen this in companies, in fact, I've seen this in very successful companies later also, and this I'm talking even from my experience being in the Valley at that time is that the person who is clearly making a larger contribution starts having angst about it. Okay, this could be like three years later.

Amit Somani:

Yeah.

Shripati Acharya:

And now everybody else in the company also sees it right.

Shripati Acharya:

Suppose one person is a ceo, another person is cto, and let's say the cto is just like blowing it out of the park, yeah, and the ceo is just a salesperson.

Shripati Acharya:

I'm not saying just, it's like a sales, but now this is really a tech company or the vice versa, right? So what happens is that everybody in the company now is like keeping quiet because they know this is not really fair and this is. Everybody ends up knowing what equity is anyway. And now, even between the founders, it's creating friction, which is really not what you want, because you want all your forces to be squarely focused on making it as successful as possible. So I'm not here really batting that there should be differential equities in all cases, but it is a question which at least should be asked, discussed and come to an understanding between the founders and realize that you speak now or forever, hold your peace, because these kinds of things don't change materially. It can be on the margin, you know some bonus pool the company would allocate and so forth, but just be reasonable about it. And honestly, this comes down to a worldview which you and I frequently talk about, which is about being rich versus being king.

Amit Somani:

Yes, yeah, there's this beautiful book I recommend called the Founder's Dilemmas by Professor Wasserman from Berkeley, which talks about just figure out, do you want to be king or do you want to be rich? And the metaphor is that if you want to be rich, you need to think big, right. You need to structure things for more success. You need to figure out who all you need to bring to bear. It could not just be co-founders, which is, of course, the most critical starting ingredient, but investors, senior employees, cxos we'll talk about all that right, and therefore you may have a smaller pie of a much bigger thing. But if you want to be king, you're like this is my little empire and like I run this and you know this company will never be more than $10 million. But hey, look, I'm king, right, like I decide what you know what I'm going to do. So I don't think people necessarily think about it very consciously and deliberately.

Amit Somani:

Let me take the devil's advocate to that. Let's say I'm one of the. You and I are kind of starting a company and the kind of roles are flipped and it's something that you have both expertise in or experience or whatever, and I'm feeling like marginalized right, saying wait, like it's fine, like, but right now there's nothing, right? We're just starting out and like, well, I'm also slogging, you're also slogging 16 hours a day, 18 hours a day. So why am I like? You know, like I'll evolve, right, I'll grow, you'll also grow, I'll also grow. So how do you think about, like, resolving stuff like that, right? But I do agree with your broader premise that just the virtue of talking about this will clear up a lot of the air, even if you end up at 50-50. But for a moment you say no, no, it's not 50-50. There's some differential and I'm the one getting the little bit of the lesser equity. How do I, at an emotional level, get my head around this?

Shripati Acharya:

So the way I look at it is that you have to dispassionately look that it's actually good for me as a person who is actually getting lower equity, if it is actually fair and good for the company. And it is good for the company Because in one sense you, uh I would think that, hey, this is actually reflective of the respective contribution and in one sense it reduces friction later, because if I have disproportionate equity, a grossly disproportionate actually, what happens is problems occur, not because you have two percent more or something like that. Right, when you clearly say that you know this is this is this doesn't make sense, right? You know this equity distribution and, honestly, future rounds.

Shripati Acharya:

Investors ask this very uncomfortable question when they are coming into the company. So it is not even like several years down the road. You might do a seed round, you might do a in series A or series B, you might start getting pushback on this one, because at that time there's enough history to the company and there is enough evidence of which way the company is going and what the various contributions are. And so it just the way to think about it is that you're rich versus king question and say, look, you're building a large company, there is going to be differential contribution. Looks like this person is, uh, you know, it is in travel, it is in advertising, it's in all these different areas.

Shripati Acharya:

I don't have that skill set. I have other skill sets and I'm actually really helping prevent issues later and honestly reducing attention on myself, because I also feel at peace that, hey, look, you know, I think I did the right, right, right decision there, and this is really the mindset you will need on and on and on To build a large company. To build a large company and this is just part one of it. The larger, actually, issues come with the ego here, when the roles actually change, right, right, and now, when a person is, let's say, there is a Wall Street Journal article, there is an article in Economic Times, right, and it has a full page picture of Amit Somani on it.

Shripati Acharya:

I'm like, hey, look, you know, like what about me? You know I also did this stuff. What do you do then, right? So I think that this thinking, just taking a step, step back, taking a look at the company and saying what's going on here and it's okay, right, sometimes one person gets a spotlight, because the ceo will naturally typically get the spotlight, because if you're a reporter, you just basically say hello, can I talk to the ceo of the company? It happens to us when folks call us for our portfolio companies and we connect them to the ceo not to all the founders, right? So I think that that understanding and probably maturity perhaps, is really, really helps. But you will be surprised how often these little things not even talking about equity, I'm talking about this example lead to a lot of friction.

Amit Somani:

No, that's a brilliant one. And you know one of the things that, since we're sharing prime secrets on the air, lead to a lot of friction. No, that's a brilliant one. And you know one of the things that, since we're sharing prime secrets on the air, that I often ask founders or at least try to assess on my own is you know which founder is driven by what Meaning particularly power, money, fame, impact? Of course there's, you know, it's not. You don't pick one or the other, right, you mix and match. But what are your core drivers? And in many cases, people are very aware of their anti-drivers. They're not aware of the core drivers. So they may be like look, I don't really care much for fame, I want to build something cool, I want to be rich, or vice versa. Right, I want to be the face of this thing.

Shripati Acharya:

I want to be the face of this thing. I want to be the engineer that you know built the open AI algorithm or the Google page rank or whatever.

Amit Somani:

Like I don't really care, I want to be featured in the Wall Street Journal. Yeah, I don't want to be featured in the Wall Street Journal, but I want to win the Turing Award or I want to get some, you know, whatever recognition in the scientific community. But if you don't know and you haven't really gone into the depth of kind of figuring that out, you know that can cause kind of issues. You know each other, right, like you said, you're friends, you're probably classmates from IIT or XYZ or whatever, but you haven't really like what drives this person, what's the chip on the shoulder, what's the motivation? And when you get into these things and you say, no, no, I also care about fame, sripati also cares about fame. So, like, I also want to be in that Wall Street Journal article or vice versa. So that's one that leads me to another slightly more upbeat question, which is, but related in the same genre, that as companies mature and we've seen this a few times that you start getting exit opportunities, right. And again, if you haven't talked about it, and this is their first company and like three years in, you're doing something great, you've built some nice product, you've got some revenue, you've got some traction Somebody comes and offers $50 million to buy this company. Now, each of you own several you know tens of percentage points of equity in the company, maybe more, and you're like man, we could make $10 million each at the age of 29, right, or more. Now, what do we do Now?

Amit Somani:

I've seen and heard scenarios where, like, somebody else is like, look, this is life-defining money, like I got to take this right, I can't like who knows when exits will happen or not. And the other person is like no, no, no, I'm going to go big or go home, right, so I'm not here to do this thing. I want to like go build this into a unicorn, deca-corn, whatever, and if it doesn't make it, no problem. So how do you think about some of these other dilemmas, some of which you can anticipate and notionally like talk about it in your dating process or your early company, but some of it as you go along, right, you get into that. Or somebody just, like you know, got found a fatigue, like saying we're doing this for five, six years, we're getting 10, $10 million each or whatever.

Amit Somani:

$20 million investors, 10 million dollars each or whatever 20 million dollars. Investors are getting some exit, let's just get out. The other person like, no, this is my life's work. I'm going to do this for another 10 years. Like I don't want to get out, I'm not going to sell at all. How do you think about dilemmas of that nature?

Shripati Acharya:

so I think those are like very difficult. Uh, so one thing is that you cannot really pre-plan for it. Yes, right, you cannot like say, look, we agree that we shall hereby commit ourselves to creating at least a billion dollar exit, because the matter is fact of the matter is, it's an unknowable thing. You don't know what's going to happen. You are looking for product market fit. You don't know how large the market is going to be. You don't know what the competitive dynamics is going to be. You don't know how the funding environment is going to be. You don't know what kind of team you get to end up creating. So you just don't know. So to me, like there's a line, there's a thing right. It says Aankh mein ho swar, lekin paav prithvi par tike ho. Right, dream big, but have your feet firmly planted on the ground. And what that really means is that you're evaluating it. And maybe 50 million is the right thing to do.

Shripati Acharya:

Right, because you might have wanted a really large thing but, you take a step back and you say, look, you know, all things considered, this is very the risk here is just too much, which I'm not willing to take, or I don't have the investor support or whatever else I'm presuming is going to happen.

Shripati Acharya:

I mean which we ask our founders these questions what are you presuming to be true at this point Now, looking what you already know and what is ahead for this? To be a big company, and are those assumptions fair and reasonable to me? So one thing I would say is that deciding these things is really about having a lot of conversations with your own trusted board, your personal advisory board, of course, with your investors, as you know, your own trusted board, your personal advisory board, of course, with your investors as well. But your own personal board and the founders might very well, you know, differ in their opinions here, but I feel that there's no straight answer. Honestly, these are tough questions and the thing is, even if you have taken the exit, you would never know what it would have been to continue. Right as we know that Zuckerberg famously turned down I think it was $500 million or billion dollar exit soon after he had started from Yahoo, and, of course, we know where it is today. So for everything you'll find five other for every such Facebook.

Shripati Acharya:

There are probably 10 examples where somebody didn't take the exit or probably 100 and didn't make it so honestly, I don't know how to there's no cookie cutter answer there.

Amit Somani:

Yeah, no one thing. That I think helps. Again. It's back to the. You know, planning is essential, plans are not.

Amit Somani:

Is when you're conversing on how do you, how are you going to potentially make these decisions, what are your drivers, what are my drivers, why am I doing this? Et cetera, et cetera, and then you figure out the dissonance. Right, it doesn't mean you don't do the company or you don't do it together. Of course you do. But you say, okay, this is how you think, this is where you're coming from. Right, this is what you want to kind of do. And so it does help when you talk about these various things in terms of, not that specific scenario, but like, for me it's not the money, right, for me it's like huge impact. Like I want to take Facebook or this thing to a billion users. So like, even if I got a billion dollars, like what would I do with it? Like I didn't go to a billion users. Like I want to take it to a billion users, or the other way around. Like, look, money is really important for me and like you know, I don't know whatever Zuckerberg was at that time 22. Like I more companies after this?

Shripati Acharya:

right, so, but I think it's really related back to our culture conversation earlier, which is that how do you have difficult conversations?

Shripati Acharya:

Yes, right, and as founders you need to have the ability to have difficult conversations in an open and productive fashion, and if you do that, it will actually percolate down to the rest of the company. No amount of writing it on big boards and big and 100 point font is going to change that, because that culture is established the very first time in a full room. You have a disagreement? Yes, right, and how do you do it? And if you have the ability to actually listen, understand their point of view, give a proper, you know your point of view and actually are together trying to find a solution versus trying to be right, then it'll actually help the company move forward. It's a tough thing to do, but on the positive side, we have seen companies which have those characteristics really, really succeed. And those companies are the ones which have like learning machines, right, because they're able to take the input, process it, it and then decide and doing it without any sense of insecurity so I I'm into books.

Amit Somani:

I have two book recommendations. One is called crucial conversations, a fantastic book, and another one is called radical candor, which, even at prime, we all read and it's one of the core values for prime itself. Yeah, that in a radical candor, you care deeply about the other person, you have a great relationship, but you're very candid and direct in approaching the issue at hand. Right, it's about the issue, not the person, right? Yeah, yeah, so I think those are. I mean, there are tools and of course, you can use other tools as well, and other frameworks and so forth.

Amit Somani:

That leads me to a different kind of area. So this is all at the startup. You know, get your value system aligned, get the culture for the first employee, 10th employee, 50th employee. I think that people don't spend enough time on how will you evaluate performance and how will you evaluate each person's ability to scale and the organization's ability to scale as you go along? I think a lot of the performance evaluation, the peer-to-peer feedback, the evaluation of each co-founder by, let's say, a CEO or the board, is all a little bit loosey-goosey. Do you want to talk a little bit about that, sripati, in terms of how do you, once you have an ongoing concern and it's working, and so on. How do you keep on the track?

Shripati Acharya:

Perhaps in this particular case, I can be a little bit more prescriptive in my suggestions, right, which is that once you have decided you know who among the founders is the CEO, then you really need to cast away the founder tag, right in terms of how you operate, because there will be, as the company is successful, a lot or tons of people who are not founders by definition, right, and they'll also be in senior roles.

Shripati Acharya:

So the idea that if I'm a CTO and a co-founder and you are the CEO and a co-founder, I'm reporting to you, then I think that the relationship, as far as the professional relationship is concerned, should be as if I'm a CTO and you're a CEO and these founders think that might or might not have been there right? Which means, translated very specifically, is that we do have a performance conversation whenever, whatever the organization's cadence is once a year, once every six months and so forth and you'll be surprised that this almost never happens. Years go on into a company's founding. Companies are large, they're successful, making tens of millions of dollars of revenue, maybe even more, and we don't have that structure in place and by not putting that structure in place, you're not providing an avenue to have that difficult conversation. You cannot just grab this hey Hamid, let's go have a coffee in Starbucks and say I need to give you a performance feedback. It doesn't quite work that way.

Amit Somani:

Right, yeah, no, I would extend it further, sripati. So one this is the most difficult one, right, which is that you know everybody reports to the CEO. There's conversation between the CEO and the person who's in that role or responsibility, not just the co founder, like you said. There are two other critical constituents, at least two, maybe more right. One is your employees, and you know what kind of feedback are you collectively, as a leadership team, as a founding team, taking from the employees, right? So I think there's a lot of sometimes gap between doing something as simple as a 360 degree review to say how are we performing as an organization, what could we do better as an organization and as a founding team, as a management team, et cetera. So I think employees are not necessarily always heard, you know, in a very kind of thoughtful and deliberate manner.

Amit Somani:

And the other is the board, and are you formally getting performance feedback from the board? Because the CEO reports to the board, the entire management team indirectly reports to the board. So you know many CEOs will be like, look, I got the ARR, I got this, I got churned down, good, to raise the next round, all hunky-dory. Not true? Because you want to get feedback from the board in terms of how you're performing, what could you do differently, how's your team performing right, et cetera, et cetera. So I think those are two other areas that I would encourage people, if I were to be prescriptive, to say, hey, think about consciously getting direct feedback from the board on performance, not on ARR and so forth and also some avenue to get it from your other colleagues, you know, non-co-founders, employees, et cetera.

Shripati Acharya:

Absolutely, and I think this is part of that culture bit again, which is, how open is the company in terms of getting feedback? Because I believe that the best companies are trying to get to the truth. They're trying to get feedback from whatever level, because the junior, most person who's in contact with the customer, might actually have a brilliant idea and that brilliant idea must surface. That person might also have the information about what is seriously going wrong with the company. Maybe the company is losing to the competitors and there's a new competitor threat. All these things are like disruptive technologies and somebody needs to surface that it. There's a new competitive threat Gen AI. All these things are like disruptive technologies and somebody needs to surface that.

Shripati Acharya:

It's very easy for senior management, even in a startup, to be in a cocoon if you don't have an open culture of actually surfacing these kind of things. So it's super important to actually put you know, establish that, and just imagine in a meeting, if suppose there is one person is a peer of the of a founder. Now is this in which, like, a founder is quote, unquote, pulling rank and hence not act and overruling? You don't do you? You don't want that culture right. So I think all these things. If you're conscious of it, you'll probably do the right thing as a founder, but if you're not aware of it, you might actually just let it ride and then it, as we discussed earlier, just becomes a de facto culture in there.

Shripati Acharya:

And related to that is, you know, you just mentioned a point with a comment on that, which is the CEO reports to the board, right, and I think that the board is quite a time remiss.

Shripati Acharya:

Yes, I think that the board is quite a time remiss in giving and that's like folks like us right in terms of giving feedback to the CEO. And one of the things which I find really, you know, amazing about some founders and I've had that really privilege of working with them that they would call up after the board meeting and I said, hey, look, what do you think went wrong and what went right and what are we doing not right here? Do we actually, you know, do it properly? Do we present the right things, or do you really think is there something which you need to say which you haven't talked about in the board? Can I actually talk to you about it or can you tell me? That level of openness to me fundamentally gives you a superpower because now you have the ability to listen and incorporate feedback. Of course you can reject it anytime, of course, but just having that particular DNA just sets it up for a beautiful relationship between the board and the CEO and also fixing issues.

Amit Somani:

Absolutely no. I couldn't agree with you more. So I think a lot of these things that we've talked about in fact, this by itself could be a podcast kind of on its own just feedback and how to make and give feedback. But I think, overall, the point that we're sort of making as we come to a close here is that you need to be deliberate about creating culture. You need to talk, you know, say the unsaid right. Talk about the uncomfortable conversations, whether it's equity, it's roles and responsibilities, feedback, its ability to scale and so on and so forth, rather than let it kind of be swept under the rug and like we'll see it when we kind of get there. It may be too late by the time you get there.

Shripati Acharya:

Absolutely. And if I may just paraphrase this in another way, which is that you start the company on a core foundation of friendship and trust. That is very important and you should continue to be there, but you need to add another pillar to it and that is a professional relationship in terms of engagement. And the sooner you have that conversation, relationship and terms of engagement, and the sooner you have that conversation, the more firm is the foundation of the company.

Amit Somani:

Absolutely, and if I may sort of bring this to a wrap, I think culture, just like product or GTM, can be an ultimate differentiator. And so much like folks out there, you're trying to build great companies, great products, great services. Think about building a great culture. Well put, great services, think about building a great culture Well put.

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