Lokesh Garg - Equity Is the Costliest Source of Funds and Therefore One Should Be Mindful About How Much and When They Should Raise It (Leading Finance Vertical OfBusiness)

Trust your team. If you want to scale, you should learn to delegate. You cannot do everything yourself. Only a good team can bring a big impact. You should let others make mistakes and let them learn from their own experiences. I believe, we are sum of our experiences (good or bad) and failures. This is important because once you become a billion-dollar company, you may not find team to look at each detail with equal amount of attention. Therefore, start investing in people around you when you are small and have enough time to invest.

Tell us about your background, upbringing and journey.

I studied Chartered Accountancy in Delhi and did my schooling from a Govt. School based out of East Delhi. I am from a very humble background, and I am taking care of my expenses since the age of 15, when i use to coach my classmates or students at my own school. My grandfather was the main reason I started doing great in my studies and even started earning myself so early. I have seen many ups and downs in both personal and professional life and that is one of the main reasons why I am a strong believer of “Karma”. I believe that whatever may be the situation, your “Karma” can change everything favourably. 

I started as a Tuition teacher and then graduated to become a trainer at a famous Skill Development institution, till I completed my CA in 2005. I did my CA in first attempt and started my professional career with A.F. Fergusons & Co, which later merged with Deloitte. I spent close to 7 years with Deloitte and spent close to 2 years with Paytm. 

Sooner, I started feeling that I wanted to do something on my own. I wanted to do something more innovative and challenging than a fixed timetable job. With this aspiration in mind, I started looking for a great start-up idea and then I happen to meet the team I am currently working with. It has been a wonderful experience since then because what I have learnt in the last five years is way beyond what I had learnt in 12 years before that.


When & how did you get clarity on what you wanted to do and how did this idea come to you?

I had already spent close to 12 years working for big/ small corporates and due to my ability to become supremely multitasking, I always had offers from big brands and Fortune500 companies, but during my short stint with Paytm, I quickly realised that sooner or later, I will either start something on my own or will become an integral part of a start-up founding team.

Because of my background and upbringing challenges, I was inclined towards two sectors:

1) Skill development/ Edu-tech 

2) Unorganised SME sector in general

In Oct 2015, I first met the founding team of OfBusiness and I immediately liked the idea and the team. Although, everything was at a very initial formative stage, but I already started feeling that this team can bring a very positive change to the miserable life of SMEs in India and this can be very impactful. We started with very handful peoples and funds in hand, but our dreams were very big. Today, we are one of the fastest growing start-ups in India. We are trying to solve all kind of problems faced by an SME, e.g. material/ working capital/ sales/ operations / logistics/allied services etc.


What have been your biggest challenges as a Founder CEO & what advice would you give to others to avoid them?


I am founding team member & Leading Finance vertical at OfBusiness.

I have very closely seen three start-ups in past 16 years and especially last 5+ years with OfBusines taught me three things in particular:

Trust your team. If you want to scale, you should learn to delegate. You cannot do everything yourself. Only a good team can bring a big impact. You should let others make mistakes and let them learn from their own experiences. I believe, we are sum of our experiences (good or bad) and failures. This is important because once you become a billion-dollar company, you may not find team to look at each detail with equal amount of attention. Therefore, start investing in people around you when you are small and have enough time to invest.

You should be willing to learn new thing and open for challenges and criticism. As a founding team member, I cannot afford to limit myself to one part of the business. While I may be responsible for one function or segment, but I should be able to contribute to what others are doing and therefore able to participate at company level decisions. One should take active interest in non-core functions e.g. I actively try to understand perspective of sales/ ops and Tech peoples, and this has massively improved the overall efficiency of my core-function.

Make your problem everybody’s problem and you will see problem is solved in no time. You never know who can suggest an out of the box solution. In this process people feel more involved and important. We generally face 1000 problems every day and therefore we can’t give our 100% attention to each and every problem, whereas if we develop a habit of involving people around us, possibility and effectiveness of the solution massively increases.


What is your advice to an early stage founder looking to build an ESOP program today?

A lucrative ESOP plan is very crucial to attract and retain good talent. Generally, people choose a start-up over a corporate for two reasons:

1) Huge professional & personal learning in a very short span of time 

2) wealth creation through ESOPs

Apart from real wealth creation, ESOPs also increase sense of belongingness and competitiveness. An employee who is part of ESOP plan always tries to take more initiative and bring more value on the table, since increase in the value of his ESOPs is directly linked to the increase in the value of start-up itself. 

So, I would recommend an adequate ESOP pool across all the levels to ensure longevity and stability of good talent. Apart from ensuring adequate allocation of ESOPs across all the level, start-up should ensure frequent liquidity events. With every liquidity event, real cash value of the ESOP increases, and everyone feels more motivated and feels like that thing are going good for real. It is also important that founding team actively engage with its peoples to effectively communicate the value creation through ESOPs.

Qapita helps founders, CFOs and CHROs to organize their equity ownership record at one place making it the single source of truth. You can use Qapita to run scenarios, issue ESOPs and communicate their value to employees, run buyback or liquidity programs and engage with your employees effectively. Do click here for a demo. 

What is your view on implementing ESOP buybacks and liquidity programs in startups?

It is generally very difficult to create liquidity program before Series C or D Equity round. This generally happens after 4 or 5 years of full-scale operations and depends on size of the equity round and dilution.

Since the very idea of ESOP’s is to ensure long term retention of good talent and long-term wealth creation. It is generally suggested that a start-up should start to offer ESOP liquidity event only after 4 to 5 years of its existence. An early-stage liquidity event is not only difficult to create but also fails to create good wealth for its peoples. Liquidity program should be structured in such a way that it benefits peoples across functions and levels. I believe that it is very important that founding team & investors keep its peoples informed about value creation on a regular basis and keep reassuring that company and its investors will deliver its promise of wealth creation through timely liquidity events.


When should one consider raising funds, what according to you is the right time?

Equity is the costliest source of funds and therefore one should be mindful about how much and when they should raise it. It generally depends on business idea, monthly and quarterly burn, stage, and scale of operations etc. It is generally suggested that one should not raise too much and dilute too much at initiate stages. One should either bootstrap or raise a very small amount for a minimal possible dilution. 

It is also beneficial to start with a combination of bootstrap and angel money. By doing this, you will find good quality of peoples at initial stage and that really helps. One should go for a proper big equity round at series C/D stage when you get a good valuation, and you typically need funds to fuel your growth engine.

What does your typical day look like and how do you handle setbacks?

It was different during initial days and now it is totally different. My day generally starts with going through my To-Do list. I like to maintain a comprehensive list of important things to attend during the day. First half of the day generally goes as per To-Do list, but second half of the day is mostly going into handling random situations. 

Since we are blessed with a very good team, and they literally take care of all operations issues, my time mostly goes into problem solving, dealing with external and internal stakeholders, overall reviews, solving customer centric issues, looking at the exception reports, strategic meetings and hiring new talent for the company. We still interview most of the peoples to ensure DNA match across all key positions. Most of our peoples are actively available 24*7 and always handling a new problem. Before leaving from office, i always try to make sure that all the burning issues are properly handled.


Which is your favourite book and why?

I would not name a single book here, since I believe each book/ author has something to offer for its readers. Recently I read “The Bhagavad Gita” and found it very relevant for problems we generally face daily. I strongly believe that more than books, peoples around us can better teach us and help us to move forward.