In a recent episode of the "Economics Out Loud" podcast, two NES graduates, Tamara Orlova, CFO at Flo Health (mobile app for women based on a menstrual cycle tracker), and Ekaterina Pranitskaya, Head of Product at Superdao (platform for start and manage decentralized autonomous organizations), talked about their personal experience.
Tamara: Startups almost always mean a high level of uncertainty. Everything is constantly changing, because the company is growing rapidly (if everything goes well), the product is changing, the team is changing, new markets are emerging or old ones are transforming. The planning horizon is much shorter in a startup than in a corporation. It is necessary to constantly adjust the course, which, on the one hand, is quite difficult, and on the other hand, is very interesting.
You need to keep your mind flexible. In a startup, if you make a decision and follow it once and for all, you will most likely be hitting against the wall. It's a big myth that entrepreneurs need to have a strategy set in stone to succeed. People who have achieved remarkable success in business believe very much in their strategy, but very often you can find that after a year they already believe in something different.
Ekaterina: When you read success stories of large companies, for example, Uber or Apple, you think: "Wow, the founders are geniuses, they thought everything out right away. And I definitely can't do that." And when you find yourself inside such a company, you realize that their success is a confluence of a huge number of events, and they just don't tell you about the dozen failures that went along with the dozen triumphs.
It's impossible to think of and to come up with everything at once. You first do one thing and may even raise dozens of millions of dollars. But then you and your team may realize that the gold mine and something that can save humanity is something else. You change the idea and concept of your company, and investors agree to it because they invest in a team they believe in.
Ekaterina: Both depend on the purpose of the company. When a company is just one year old or younger, investors need general KPIs similar to the general understanding of its business. Importantly, KPIs should not curb development. There are two approaches to KPIs. The first is to avoid specific numbers or use them, for example, only in money terms: it doesn't matter what you sell, what matters is how much you earn. You may change the product, but the metric remains the same. The second approach is to come up with a very general metric that will not change, because it reflects the essence of the business.
Tamara: The complexity of the processes should correspond to the development and requirements of the business. If a company starts building processes too early, when neither its managers nor investors need them, and if a company grows for too long without organizing processes - both can cause equally great harm.
When I just moved from Sony to Flo Health and suggested making a budget for a year, the entire product team thought that they misheard me as they were thinking about a quarter, at best. Nowadays, we have a much longer planning period, and this is not because I want it to, but because our business requires it. Engineers should plan for hiring people. Investors expect the growth of certain metrics linked to the company’s evolution. Showing them just nice slides would no longer work, they already expect a certain accuracy in planning. The company is beginning to attract more attention from regulators, legal risks are increasing, and more complex processes need to be built.
I think that the point when companies usually begin to complicate processes, is reaching either 100 employees or revenue growth.
Tamara: It's hard to say which time is the best and whether it has passed for now. Rather, there is a cyclicity. For example, 2021 was absolutely incedibly wonderful for startups and scaleups, because there was a lot of money on the market, and investors' risk appetite was quite high. Today, investors are becoming more cautious, and the stream of money is drying up, although there is still a lot of cash.
Meanwhile, the difference in the position of companies that are at very early stages, and companies that have already moved to the growth stage is quite big. It is a good time for very young companies, and more mature companies are under stress because they are closer to public markets, and investors are already assessing how much companies will be worth in a public offering. Since the markets are falling, they become more cautious.
Ekaterina: I worked at VKontakte and, while doing research on certain products, I found Superdao. The founder wrote to me, saying “there is no product, let's make one.” And I agreed although I had no plans to change my job.
Tamara: I think Katya mentioned a very important reason why people move to a younger company from a corporation: there is no product, and you can make one. This is an important argument, because the smaller the company, the clearer your personal contribution is.
Tamara: If a person has the desire and the capacity to take risks, if he or she is ready for instability and the fact that it would already be great if one out of 10 startups becomes a success, then he or she can go for it. The beauty of being employed by a corporation is that it makes it more likely that, having evaluated the business, you would get into a startup that will succeed and not fail. However, it all depends on the person. Ekaterina says that she joined the company two weeks after it was legally established. In this case we can say that she is in the same boat as the founder.
Ekaterina: I will most likely launch my own startup. Working in a startup, you realize that you could do about the same, but owning a part of the business rather than just being paid a salary. And if you have managed to raise money, then it would, in fact, be your salary for six months or a year. If the company fails you go on, as if you quit a job.
I used to think that there is a small number of roads that lead to success. In reality, this is not the case. Among my friends, some dropped out of school, some dropped out of university, some got a PhD, some worked for a few years in a corporation, and in the end everyone ended up at a place where they wanted to be.
Tamara: It seems to me that it all depends on how you understand success. If we are talking about the work of a manager or building a big business, then I will in principle agree that soft skills are more important than hard skills. But there are many areas where professionals in some narrow field earn as much as managers do. Also, many people do not want managerial work at all.
Ekaterina: I think that the main skill is critical thinking. It's amazing how rare people seem to have well-developed critical thinking. When you come to a corporation and start asking questions about why and whether a solution corresponds to the strategy (questions that look obvious), then you immediately begin to be treated as a person who understands everything and stands head and shoulders above the rest. And the second most important quality at work is curiosity: trying to understand what is happening around, why markets are falling now, why they started to fall, and so on.
Tamara: I think that Russian specialists have enough of everything.
Those who have achieved success in Russia are used to working hard, working in changing circumstances, constantly adapting and being under stress.
What is missing in education? Our education system is largely based on the mechanical reproduction of the memorized material. Therefore, Russian specialists may lack the critical thinking that Katya was talking about, as well as the ability to present their thoughts clearly, concisely and eloquently.
Ekaterina: I have an extremely biased sample, because I studied at the NES-HSE joint BA program in Economics, and it seems to me that it gave me about everything that I needed: it strongly developed in me critical thinking, presentation skills, English skills. In general, I don't see where the program could do more for us.