Hard Truths about Thriving in Hard times, from Vertex Founders' Dialogue 2023

Elise TAN | 09 May 2023

At Vertex Ventures SEA & India, we pride ourselves on being a proactive and engaged partner to our founders. We not only provide capital and support at every step of their journey, but also believe in the power of community - one that encourages a vibrant exchange of ideas and experiences among our portfolio founders. Recently, our Managing Partner, Joo Hock Chua, organized a Founder's Dialogue event, bringing together 13 of our founders from Singapore, Malaysia and Indonesia to discuss a wide range of questions and issues, such as navigating team growth from 300 to 1,000 people. It was an afternoon filled with engaging roundtable conversations, valuable insights, and relationship-building among our founders. We are immensely grateful to all our founders for their active participation and willingness to share their learnings.

Being a founder is like the captain of a ship navigating rough and choppy waters and it helps tremendously to hear from others who have been there and done that. Here are the ‘hard truths’ I have learnt:

Hard Truths about Surviving and Thriving during the Economic Downturn

The conversations during the event were noticeably different from what they might have been in 2021, when the fundraising environment was more exuberant. Much of the initial discussions revolved around strategies for thriving in a slow funding period and managing costs and expenses to extend cash runway.

(From left to right: Anggara Pranaspati, cofounder of Manuva, Prajit Nanu, cofounder of Nium)

Anggara Pranaspati, cofounder at Manuva (Formerly Tjetak), an end-to-end supply chain platform for SME manufacturers shares, “To keep costs low, it is often inevitable to downsize the team. But the key way to do it is to do it only once, as multiple rounds of layoffs can significantly impact employee morale."

(From left to right: Dalton Fouts, cofounder of ReturnKey, Melvin Chee, cofounder of RPG commerce and Brian Marshal, founder of Sirclo)

It reminds me of how a ship would survive a turbulent storm in the past. The captain needs to first lighten the load on their ship and then ensure his or her team does all they can to steer it to safety. It must have been a tough decision for the founders - downsizing amidst a slow funding environment. And it is so important to do so with care as Brian Marshal, founder of Sirclo, points out. Recently, tech giants, Google and Meta, have drawn flak for the multiple rounds of layoffs (leading to a sense of insecurity and low morale among employees) and rewarding the senior executives with higher pay.

(From left to right: Adrien Jorge, founder of Propseller, Benedict Tan (VVSEAI) and Kah Kheng Gan (VVSEA))

But should we explore salary cuts before going ahead with layoffs in a progressive manner? Adrien Jorge, founder of Propseller, a tech-powered real estate agency, agrees and shares a "programmatic’’ approach that the Propseller team put in place back in 2020 to recover salary cuts based on revenue targets - “if we get to this level of revenue, we will recover X% of the salaries”. This was an interesting piece of advice that resonated with me. Prajit Nanu, cofounder of Nium, the global payments infrastructure for the on-demand economy, also relates to this as his team cut their salaries previously but received in-kind compensation in the form of ESOPs. (Read more in the article penned by my colleague Genping Liu - “Ambitious yet Grounded: A note on Nium becoming a unicorn) Back to the ‘ship’ analogy, I think it’s helpful to back up with concrete actions to demonstrate that all of them are ‘in it together’ - if the company recovers and does well (or ship re-enters calm waters), everyone benefits.

And obviously, experiencing heightened stress levels is an inevitable outcome of navigating through challenging periods. Our founders share that they adopt mechanisms to manage it. They prioritize self-care by deliberately carving out pockets of time to disconnect from work and engage in activities such as sports, which help them decompress and rejuvenate. Prajit and Nikhilesh Goel, cofounder of Validus, a one-stop SME finance platform, share that their favourite sport is cricket.

Hard Truths about Building a Strong Company Culture

“If I were to do this all over again, I would make sure to prioritize building a strong company culture. It helps to attract the right kind of employee profile.” emphasizes Jeffrey Tiong, cofounder of Patsnap, a leading provider of Intellectual Property (IP) and research and development (R&D) analytics. Wai Hong Fong, cofounder of Storehub, an operating system for retail and F&B businesses in Southeast Asia, reveals that his team identifies themselves as a "professional sports team", focusing on results and outcomes as an organisation. This approach not only attracts go-getters, but also creates a tight-knit team atmosphere, where everyone is working together to score a win for the company.

But let's face it, building a strong company culture isn't easy. It isn't all sunshine and rainbows - depending on a company's values and culture, not everyone will fit in. Dalton Fouts, cofounder of ReturnKey, a recommerce platform, recalls that he hired someone from a larger tech company and she couldn’t get used to the startup culture, which is often more scrappy. I guess this is a common perception for first-time founders because it is easy to assume that someone who has worked at a tech company would suit the startup culture.

Prajit adds that he learns it the hard way that candidates from ‘cushier’ job environments find it challenging to get used to a startup environment. He also recommends hiring a good “Head of People” earlier. And it would be better to groom a HR generalist with less experience into the Head of People, rather than hire a senior recruiter from the onset.” His view is that recruiters tend to be more target driven, rather than ‘culture carriers’. I felt that was an insightful one, because most founders tend to de-prioritize the HR function and think that hiring a full-time HR person is only important when the company grows bigger.

(From left to right: Jeffrey Tiong, cofounder of Patsnap, Wai Hong Fong, cofounder of StoreHub)

One standout advice that I took away - When it comes to culture, there are processes that must be done by the founder and cannot be outsourced to others, Wai Hong personally onboards newcomers once a month through a session he calls “Cultivate” so that they get to hear Storehub’s early company building journey, the vision as well as values directly from Wai Hong himself. Jeffrey agrees and shares that his company has more than 1,120 people now, but he still makes time to interview candidates for senior leadership positions.

Like a captain selecting and bringing sailors onboard a ship, it's essential to hire people who not only have the right skill sets, but most importantly, values that align with the company culture. It’s crucial to set sail with the right team to brave the storms together.

Hard Truths about Growing the Team Sustainably from 300 to 1,000

Having a strong culture lays the foundation for scaling up the company. But growing a team sustainably from 300 to 1,000 is not a walk in the park, as Jeffrey candidly shared with us. He warns us that "a lot of things will break" in the process. The others in the room agree and add that team changes are inevitable, including the departure of key members of the C-suite, who were instrumental in building the business from the ground up. Personally, I thought that would be one of the hardest things to do. It's a tough pill to swallow, as Prajit reminded us, especially when emotional bonds have been formed between leaders and team members over the years. And he made it a point to ‘take care’ of his leaders when they exit the company. As I learned, a mark of a good founder is recognizing the strengths of a leader, whether they excel in leading small teams of two to 10 people or larger teams. Jeffrey offers a slightly different perspective, noting that highly experienced leaders may feel burnt out more quickly in a fast-paced environment, but they can still provide value. It is key to rotate them into roles that vary in terms of demands to prevent burnout.

The conversation naturally steers to whether one should hire a new experienced talent or groom an existing employee into a new role, and it sparked fascinating discussions.

(From left to right: Daphne Ng, cofounder of Dedoco, Roshini Mahtani, founder of The Parentinc)

Roshni Mahtani, founder of The Parentinc, the largest content, community, and commerce platform for parents in Southeast Asia, shares that promoting from within has been a useful strategy in boosting employee engagement and morale. She adds, an internal promotion not only demonstrates the company's acknowledgment of an employee's contribution and impactful work, but it also shows how much the company is willing to invest in his or her professional development. To groom the candidates into more senior roles, she also hires experienced C-suite executives on sabbatical to coach her team on a part-time basis. Wai Hong also chimed in, mentioning that he hires an executive coach for himself and one to coach his team. When hiring externally, as Jeffrey emphasized earlier, cultural fit is crucial. Several times, he hired senior employees from other tech companies, but it didn't work out because of poor cultural fit.

Ultimately, the ability for someone to grow their career meaningfully as the company grows depends on whether he or she possesses a growth mindset. As Jeffrey noted, fast growth is almost always a painful experience, and you need to be mentally and emotionally prepared for the "growth pains." It's essential to recognize the strengths of your leaders and rotate them into different roles to prevent burnout, as well as to hire people with the right skills, experience, and values that fit your company's culture.

Attending the Founders’ Dialogue event was such a valuable experience - much like a captain of a ship, the role of a founder is very demanding - one needs to navigate the challenges, survive the storm and keep the team onboard motivated to sail successfully to their destination. Thanks again to our founders who have generously shared their wisdom and experiences.

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