Starting a business is one of the most challenging and rewarding things you’ll ever do. The process is simpler than you might imagine, but to try to boil it down to five or 10 steps may seem implausible at first.
Kunal Bahl, the co-founder and CEO of the e-commerce platform Snapdeal, has shared some experiences which may benefit entrepreneurs as they go about building their businesses:
Value vs Valuation
Private companies need to get value obsessed not valuation obsessed: That's the view coming in from Bahl, who co-founded Snapdeal along with his school friend Rohit Bansal.
"We have seen the pain and disappointment faced by the hottest consumer tech startups after they go public because the valuation when they are private tends to depart from their value," wrote Bahl in a
LinkedIn post dated July 16.
According to Bahl, value is driven by revenues and economics whereas valuation is driven usually by a vanity metric that may have a far lower correlation with the true progress being made by the company.
"Private market investors are usually ok with replacing value with valuation, given their downside is protected by the preference shares that they hold. However, once companies go public, the valuation converges to the value of the business, given there is no preferential instrument in the hands of the investors that protect their downside," Bahl said in the post.
Also Read: Snapdeal's Kunal Bahl on how to tackle adversity and build business Boring Can Be Good
When people ask Bahl what's next for Snapdeal, he usually gives the same boring answer - more of the same.
"I can see in their eyes that the answer underwhelms them," admitted Bahl.
"However, excellence only comes with repetition of what is working for a reasonable period of time. Building a company the old-fashioned way, basis real revenue and good economics is not front-page news, but it sure beats constant fundraising and not being in control of your destiny."
Volatility Is A Part Of Building A Business
Bahl, who was ranked 25 on Fortune 40 under 40 Most Influential Business Leader list 2014, believes when you are building a business, you are bound to see volatility.
"There will be periods your business will grow fast and then periods when you will be scratching your head on why things have slowed down or how to get to the next orbit of scale. Here's the good news: it is completely normal," Bahl.
The Gurugram-based online marketplace, Snapdeal has been on a roller-coaster ride. From a valuation of $6.5 billion to backing by global investors and employing 10,000 at its peak, the Kunal Bahl and Rohit Bansal-led entity has seen it all.
However, the company founders claim to be finally getting its groove back. Thanks to the plan they’d put in place in 2017, when talks for a sale to Flipkart fell flat.
Less Is More
According to Bahl, there is tremendous value in having small boards that are aligned with the company's strategy and focus.
"It is important to think of each board member as a specialist in something, who you would turn to particularly when you need assistance in the area of their specialisation," wrote Bahl.
He said the specialisation could be in marketing, product, people management, governance, fundraising/M&A, or anything else.
"Good board members are more guides and less teachers," said Bahl.
A Good Thing Is A Good Thing
Finally, a word on corporate governance, an area that is less spoken about in the startup industry but merits significant attention.
"One of the practices we instituted about 5 years ago was of quarterly audits by a Big 4 auditor. In the beginning, it was onerous and seemingly unnecessary to get the business audited every quarter when all any private company needs is a statutory annual audit. But the advice we received was that it will minimise surprises at the end of the year especially in a high transaction velocity business," wrote Bahl.Taking Snapdeal's example, Bahl said their firm completes the annual audit within a few weeks of the end of the financial year and is the first company in the private tech ecosystem in India to file its audited annual financials.