My first startup fail and a pan-in-your-face-lesson
Emotional Intelligence for founders
Phi ⌀ Education was my first independently run and set up company. I started it in China with 2 close friends both from the US. The origin story was very Hollywood-esque - 3 friends at a university dining hall, when I suddenly said “do you guys think the Bezos and Zuckerbergs of the world were thinking about writing papers when they were freshmen? No. They were thinking about starting their own thing” I said this and then did a dramatic exit.
A few days later, Phi Education was born with 3 passionate, bright-eyed college freshmen in China, some McDonald’s waffle fries and Chocolate Sundae and the very real problem of no one knowing how to speak fluent Mandarin. My days were spent thinking about how to provide college/career counselling services & personality development to Chinese high-school students, I was making business plans during classes, and I genuinely did not care what happened to my academics during this time. I was meeting everyone who I thought could help me with understanding how to conduct business in China. And I was so so lucky to be amongst people who actively invested in my learnings.
(Unrelated image of chocolate croissants - the university café was out of them the day I had the crazy idea of just doing business in China when all I could speak was Ni Hao (that too was wrong because my tones were messed up))
We started operations, and my co founders and early team were genuinely the best support system I had. They were my friends, we were all ambitious, and we quickly developed a strong team spirit where we had inside jokes, divided the work in a smart way playing to everyone’s strengths, and enjoyed the sweet taste of Shanghai success. Within a few weeks of starting we were making good money - but then what went wrong?
2 things: Finances and lack of leadership on my part.
I will talk about the finances first, because that is seemingly a no-brainer but more people than you realize mess them up. As the money came in, 3 college students weren’t capable of handling it correctly or creating a sustainable cash flow; in-fact, the term cash flow wasn’t a part of our vocabulary at all. Within a month we were all in debt to ourselves despite having a gross profit of over 90%. Our spontaneous trip to a city that was 1300 km from our university was great for making life-long memories, but terrible for anything to do with the business. And we did not learn our lesson - the clients kept coming in, the business kept growing and I kept thinking our “splurges” were justified. This might give some of you a heart attack, but we were investing $0 back into the business. Yikes. I know. I was 19. We all make mistakes.
The second and more critical lesson in the long run was the way I was acting as a leader. As my team and I dealt with the stresses of business, college, and our evolving outlook on life that came from being in a cross cultural environment, I had no idea what it meant to actually ACT as a leader. You see, running a startup is a very intimate process. It’s like getting married (to your co founders) and raising a baby (your company). This means you will get to see all sides of your co-founding team. The baby (company) needs attention at all times and is entirely dependent on the founding team. This means you are spending an abnormal amount of time with you cofounders and get to see them closely; the good, the bad, the ugly, the broken, the strong - everything about an individual.
All this demands you to develop a very strong sense of emotional intelligence as a self proclaimed CEO (guilty. I now know better).
Ok Zarfishar, what does that even mean?
First, it means that you must have stellar communication skills. My biggest mistake was not actively recognizing the efforts my team was putting in to the company. If I hadn’t slept in days, neither had they. If I had a crazy Stats class and R to deal with, they had abstract math or policy papers. The point is, I should have been more empathetic and very very intentional with how I communicated. It’s easy to think you’re the one carrying the most weight, but you should test that out before things go bananas over a dinner that was too bad for the price you paid. Beyond how best to give feedback, I should have had open discussions about the vision and future of the company. This brings me to my second point.
Founders must try not to get emotionally attached to the project. Hold on. This does not mean you lose the passion, it just means you detach your personal self worth from the project. Look, the stats are already not on your side, and you are an outlier (you’re essentially going against the current trying to convince people to adapt a new habit by purchasing what you sell), but you must be emotionally aware enough to take any feedback you get at face value. Product failure is not equal to me being a failure. The faster you develop this skill, the easier it is to take the hits from the “no”s you’ll be hearing and the betrayel you’ll face when your customers don’t buy your subscription even though Sarah from pilates class promised she loved it and would also make her husband Ahmed buy it too.
Thirdly, TALK about the hard questions. The idea of running a company is exciting. It’s thrilling and once you develop a knack for it, you don’t wanna let go, but as things get hard, people begin to reconsider their priorities. This is especially true when working with first time founders. I’ve learnt that age doesn’t matter here; first time founders tend to behave very similarly whether they are 18 (me), 22 (a friend I met in last year of university) or 43 (a cofounder I had for my 3rd company). You must talk about things that will inevitably make people uncomfortable: job descriptions and accountability methods, equity percentages, profit divisions, loss bearing, exit strategies, and if you get to that stage, dilution of shares, active press/media presence, etc.
Lastly, you must remember that whether it’s your customer, your team, or an external partner, you’re dealing with people at the end of the day. I read in “The McKinsey Way” a very cool book written by Ethan M. Raisel that all business problems, financial, organizational, political, are at the end of the day people problems. You want the solution? You go talk to the people. I’ve learnt that it’s very true even for fully tech companies. Which means your life as a founder will become so much easier if you intentionally factor in the time to speak to your customers (duh!), but also your co-founders, your employees, your investors, and every stakeholder involved.
No picture at the start for this piece, but I hope if you read this, you learn from my mistakes and have a better experience of your first company.
I am so incredibly grateful to both my cofounders for not just sticking it out with me, but then having the grace to laugh about the good and the bad memories 4 years later. The support I got from them is incredible, and the fact that they still believe in me is sometimes just the adrenaline rush I’m looking for, to go buy another domain ;) Thanks for everything guys! Love you XOXO