The Indian start-up ecosystem in 2021 has not just seen a host of new-age companies attaining unicorn status; there has also been an interesting trend of many of them bolstering their senior talent pipeline. Early this year, consumer tech products brand, Boat, hired MD of Godrej Consumer Products, Vivek Gambhir as its CEO. Similarly, Ola hired former Amazon and IBM Global Services executive, Arun Sirdeshmukh, as CEO of Ola Cars. Mamaearth hired Zairus Master, as its chief business officer.
It’s well known that a start-up in its infancy can only be driven by the entrepreneurial fire of its founders. Too much focus on building an organisational structure or focusing on profitability could be counterproductive for an early-stage start-up. The focus is to grab growth opportunities and valuations so that it can attract the next round of funding. However, as the start-up matures, it does need to look at long-term sustainability and profitability and that’s when it requires senior leadership—which has the skill sets to take the organisation on a path of sustained growth. The executive search firm, Hunt Partners, in a recently released report, ‘People and Portfolios in the Covid-19 crisis’, says that the start-up ecosystem is increasingly feeling the need to have a strong senior leadership pipeline, especially in the COVID-19 era, when a lot of them underwent existential disruptions.
According to Arjun Erry, client partner, Hunt Partners, the pandemic has made the creation of CXO level roles such as chief financial officer, chief revenue officer, and chief human resources officer of paramount importance. “The CFO will need to help organizations on multiple dimensions—stabilising the company financials in the near term; creating the right conditions for growth, as the company emerges from the crisis, and building financial resilience for the company during an uncertain future,” says Erry. The CFO, according to Erry, can also play the role of chief risk officer. “He should be able to map the worst-case scenarios and go backwards to manage capital expenditures and operating expenditures and be able to cushion the volatility of the revenue,” he adds.
The Hunt Partners report (which has been put together by talking to leading venture capitalist firms), says that 77% of investor companies mentioned that more than 25% of their portfolio companies are hiring. Around 73% of Indian investors say that none of their portfolio companies replaced or plan to replace any of their leaders. Over 36% of investors in India foresee themselves using executive search firms to hire CXOs for their portfolio companies.
Life-cycle Matters
Kannan Sitaram, venture partner, Fireside Ventures, says that start-ups wanting to strengthen their leadership team isn’t an outcome of the pandemic; it is more to do with the life cycle or maturity level of the start-up. “As operations get complex and there are many channels of business as well as multiple locations, the start-ups will need a seasoned CRO—who will be able to develop new products, so that a new set of consumers can be attracted. It will also need a CFO who will take care of compliance issues and risk management. At this juncture culture-building also becomes important, therefore a good CHRO is also required to attract the right kind of talent.” With a significant number of new-age companies going for IPO, factors such as managing corporate governance and ESG matters also become important adds Sitaram.
Rohit Bhayana, managing partner, Lumis Partners, says that the easy availability of capital has also increased the appetite to hire good leaders so that they can build sustainable businesses. “Many start-ups, despite being three or four years old, have reached a level where they need to create structures of a large organisation. The CEO’s role also becomes far more complex, as he/she has multiple priorities—that would range from managing employees, stakeholders, and consumers. Therefore, a leader who has the experience of managing complexities and has weathered many storms is essential.”
Agile & Resilient
Being agile and resilient is important for a start-up. The Hunt Partners report says that the definition of agility and resilience, especially for the CEO of a start-up has changed in the pandemic era. “Earlier agility came at a premium, but it was about moving fast and capturing an opportunity, this time around what investors told us is that CEOs need to be agile to the point where they may have to vacate a certain market or shut a certain business,” says Hunt Partners’ Erry.
“Pre-pandemic it was all about the gold rush, spotting opportunities and capturing newer territories. Agility in that context was about land grab, in today’s context, agility is about the ability to sidestep and say no,” he further explains. Therefore, it is the proverbial grey-haired CEO who is in demand today.
Entrepreneurship has its role but building a robust organisation and systematically developing a business needs a certain skill set that invariably comes from people who have worked in larger organisations, agrees Sitaram.
Compensation
Are start-ups paying top dollars to these senior leaders? Not necessarily. Senior leaders are willing to take cuts, says Sitaram. “The value of employee stock options has gone up.”
“There is no perceptible change in compensation. Candidates are keen to understand the founder’s long-term valuation game,” adds Erry.
While start-ups are increasingly getting open to hiring senior leaders from legacy companies, there are enough instances of the latter not being able to handle the start-up pressures. “They are unable to manage the continuously evolving business models and it is not allowing them to go on-ground and start creating something concrete,” says Erry.
K. Sudarshan, Managing Partner, EMA-Partners, concurs. “Many large company CEOs joining start-ups are quitting due to incompatibility issues. In large organisations, they have the luxury of time, but a start-up is always in a hurry.”