Scaling a venture comes with multiple challenges, which are even more complex when delivering affordable and essential services to low-income and underserved segments.
Acknowledging that many of our portfolio companies face similar challenges – regardless of industry, stage, or where they are based in the world – Elevar designed a Beyond Discussions event in Mexico in the first week of March. The event created a space for our Latin American entrepreneurs to share their experiences, successes, challenges and lessons learned. Some of our closest technical advisors, early founders in our portfolio, investors and serial entrepreneurs were present. This was the first time we had hosted this type of event for our Latin American portfolio. It was a great opportunity for our entrepreneurs to re-imagine the possibilities for their ventures, and to move the goalpost even further in terms of desired performance and scale.
Here are some of the salient takeaways:
Hiring will always be a challenge and as an organization grows, how to recruit will become more complex. There was a robust debate over whether it was better to hire using networks or headhunters. While there are plenty of resources available to recruit new talent, getting the right candidate – one who embodies the DNA of the business – can be a difficult task to outsource. The conclusion emerged that leveraging professional networks and getting referrals from top performing employees are the most effective ways to attract new talent. Having said that, headhunters can be more effective in geographies that networks do not extend to, and when they are willing to take the time and effort to understand the company and the key characteristics for the position.
Attitude matters over expertise in recruitment, and motivation matters over money in retention. The second theme was around whom to recruit, and the key characteristics to look for in a candidate. Common wisdom was that while one tests for expertise, the candidate’s ability to learn and adapt, problem solve, and to work as part of a team are key drivers to their growth and success. While monetary compensation is an important incentive, other key factors to retention include understanding one’s role as part of driving an organization’s mission, being given professional growth opportunities, employee stock option plans, and being part of a culture that makes people feel valued.
Focus on long-term value creation for every stakeholder, the rest will come along. Mr. R. Ramaraj (an Elevar Senior Advisor and serial entrepreneur) urged entrepreneurs to focus on long-term value creation for every stakeholder versus focusing on the short-term exit value for shareholders. This long-term value creation will eventually transform into investment opportunities for upcoming investors, meaning that exit opportunities will come along naturally.
Raise reasonable capital when it is available, keep cash on hand, and maintain a diversified investor base since they are all critical to getting through difficult times. The discussions centered around the importance of raising capital from investors who are aligned with the long term goals of an organization, as well as value creation for every stakeholder, including customers of the company. Successful companies are always open to raising capital, which allows them to manage market downturns and cash-constrained environments (like we are currently dealing with in a Covid-19 world; this event was held as the world was beginning to understand that an event of magnitude was emerging). Having enough cash also creates a competitive advantage and allows any company to consider well-timed market opportunities, like acquisitions. Finding an aligned but diverse investor base can be challenging – but, if available, can be a robust brain trust during difficult times and reduce the risk of over-reliance on a single investor.
Understanding customer needs is critical. This is a key part of Elevar’s investment thesis, and it was no surprise to hear this perspective from our entrepreneurs. One interesting insight from our entrepreneurs was that, at times, customers are not aware of what they need because they have never had access to a specific solution. Hence observing them to understand their pain points becomes key to designing effective solutions. This requires companies to use data to build customer level insights, but to go beyond and understand the day to day lives of customers – frustrations, fears, excitement, needs and personal desires – in order to serve them effectively.
Customer acquisition strategies (while controlling costs) are not one size fits all – especially for new value propositions and remote geographies. Addressing this early is important to making a company’s unit economics work and to laying the foundation for scale. This is particularly true since the customer segments that Elevar’s entrepreneurs seek to serve can be harder to access. Some may live in rural areas that are geographically difficult to reach, are not 100% digital (so preparing non-digital customer acquisition strategies becomes an essential part of the process), and information may need to be shared in a manner that is tailored to them. Building partnerships for remote sales, leveraging technology, using data to determine which marketing strategies are working and getting innovative are critical while developing customer acquisition strategies.
Increased awareness of the need for social and environmental impact can help entrepreneurs position their companies strategically. There was an open session with Rafael del Villar, who is the Chief Advisor to the Governor for Banco de México. Rafael provided a macroeconomic view of the main drivers and potential regulatory developments, that are moving economies towards more socially and environmentally conscientious practices, and more conscientious capital allocation. This perspective helped Elevar’s entrepreneurs better understand how they can innovate around social and environmental challenges, and the investment proposition they can provide to investors.
Being an entrepreneur is a journey that requires passion, vision, sacrifice, and the right partners. Another open session was with Ujjivan founder Samit Ghosh, with whom Elevar has had a long relationship filled with mutual trust and support. Samit was a relatively early mover in the Indian microfinance space, a visionary who grew Ujjivan into a public company, partly with the involvement of early investors like Elevar who understood his desire to scale impact. During his session, Samit shared his personal journey and his motivations for starting a business. One of his biggest learnings was to align stakeholders and ensure that the end client remained as a central part of the decision making. This was accomplished with the help of strong leadership and a long term perspective.
Overall, it was a day full of diverse insights from panelists and participants. Enriching conversations between entrepreneurs and other stakeholders in the Latin American ecosystem laid the groundwork for potential partnerships that, we hope, will positively impact businesses and their end customers. We were left inspired and energized by our entrepreneurs’ endurance and resilience.