Ranjay Gulati:
Hi, everyone. Welcome to Deep Purpose, a podcast about courage and commitment in turbulent times. I'm Ranjay Gulati, a professor of business administration at the Harvard Business School.

One of the most exciting and challenging decisions that a business leader can face is when and how to sell a company. On this installment of the podcast, we'll meet a man who co-founded an incredibly successful e-commerce company in India and navigated just such a decision.

Harsh Shah is one of three founders of the online fashion platform Fynd, spelled F-Y-N-D. It connects more than 9,000 Indian brick-and-mortar stores with hundreds of brands and several other online shopping platforms all in one retail experience. Customers can find what they want and get it delivered often from a mom-and-pop store nearby.

In 2019, Shah and his partners at Fynd got a $43 million offer from the giant Indian conglomerate Reliance Retail. Reliance would get an 87% stake in Fynd. The founders realized they needed an influx of new money to expand and grow, but they were worried about how the open and innovative culture of Fynd would fare in a larger legacy conglomerate like Reliance. I asked Harsh Shah to walk us through some of the decision-making.

Harsh Shah:
There were three considerations for us. I think the most important for a founder was personally whether this particular change in your journey, both as a entrepreneur and as well a founder of that company, makes sense at that point in time. And then you have stakeholders, which are the investors and the team members that also need to be considered as well as consulted as you go about making this decision.

But I think, at the core of it, we were lucky that investors essentially said, "I will leave it to you as founders to make this decision." Because it was a large control transaction, where a potential investor was looking to buy a large majority in the company, which would not just have practical ramifications but also sort of operational ramifications potentially, they very well said, my investors as well as my team, said, "As founders, whatever you guys decide, we're going to stick with you."

And I think, as founders, we said, "It's a very personal decision for each of us." And I think motivations for each founder could be very different, not just at the start of the company, but even at every different point of time within the company's journey as well. So we said, "Let's each of us ask ourselves three questions. Are we tired? Do we think we've saturated the market? And are we grossly overvalued?" Yeah?

I think the answer to the third one for everyone's always a no, but I think, importantly, the answer to both of the questions for each of us was still a no. And we didn't think that we were tired. It was seven years into the journey almost, but we still thought that we had a lot of energy and a lot of juice left in the tank.

We didn't think that we'd saturated the market when it came to technology for retailers, even in India. And, of course, we all had global ambitions. So I think the global was still a far cry, but even within India, we said, "This is not something that we've saturated completely yet."

And more importantly, it was a no for each one of us. Had even one question been a yes for any one of us, we would've gone through a very different mindset while doing this deal, but because it was no for every single one of us, actually, our first answer to Reliance was a no. We spent six months seeing no to Reliance. And every time we would have a conversation with them ,and they'd come back and ask us, "Hey, why no? Why don't you list down the reasons that you're saying no?" At one point, you could say, we just ran out of reasons to say no.

But the reality is that because it was a no for us as founders, we then went back and said, "Okay, there are then two components that we need to then think through. One is the investor and sort of the value capture for shareholders, which is investors, team members, and us as founders. And there is the future and business and product roadmap of the company."

So we said, "Now that we, as founders, do not want to let go of this company as we know it and as we're running it, if we were to figure out a structure where the investors, where the shareholders, and the roadmap of the company can be well protected and can be dealt with in a clean manner, maybe it's worth sort of going down this conversation."

And you've got to keep in mind the backdrop of what's happening in retail in India, where you've got the likes of Amazons and Flipkarts, who are spending a billion dollars a year on acquiring consumers online. And you've also got the likes of Reliance, who's spending almost a billion dollars a year to actually capture categories, retailers, and the consumer in the offline space.

So these are high-stakes game, where anyone who is less than a billion dollars is not worth sitting on the table. So we knew we had to align ourselves with definitely someone large who had the financial muscle in order to even stay in the game. So we said, "As long as we're able to figure out the structure of the transaction for our shareholders and the company and its future, I think we can make something work."

Ranjay Gulati:
Reliance Retail is India's largest company, with major holdings in telecom, energy, and retail. It has a market value of more than $200 billion. Reliance had a reputation as an aggressive risk-taking company with sharp elbows. Harsh Shah says the question of corporate culture was important to him and his co-founders at Fynd.

Harsh Shah:
We had the conversations with the higher-ups at Reliance, and we went to them and told them very clearly that, "Listen, we've heard really bad things about working with Reliance and about dealing with Reliance. Why do you think we should do this deal?"

And I think they very clearly said, "Everything you've heard in the market is true, but what you've not heard is the commitment and the capability of the company that usually we've dealt with. If the company's continued giving their commitment and continuing maintaining and even growing their capability and expertise, you will find it in the market that there's no one fairer and generous than Reliance. And yes, if someone is out there to pull a fast one on us, there will be no one worse than Reliance in actually dealing with this."

And they said that, "No matter what you write on the piece of paper, if we don't like you and if you pull a fast one on us, nothing on this piece of paper will essentially stop us from being fair with you in that context. Similarly, if you were to give your full commitment and continue to build your expertise and do well out here, there's nothing that will restrict us on being generous to you as well."

And we thought of that as something very, very pure and very powerful, right? Because we were aligning ourselves with a group that was essentially looking at building India. It was not about building Reliance Group or Jio or Reliance Retail. It was about saying, "Hey, can we get India from a 2-trillion to a 5-trillion economy?" And Reliance wants to be the engine of that.

And I think we said, "Aligning ourselves with a mission as powerful as this, it's probably once-in-a-lifetime opportunity." I think we went back to the first three questions that we asked each other. We said, "Are we tired or are we saturated?" And I think because we came down saying that we're not either of those, we wanted to continue running the company the way we were doing.

And I think a very important point for us there was we still want to be the largest retail tech company in the country and, in due course of time, even globally, and that ambition of ours doesn't change. As founders, we had the ambition of building something large and building something which is absolutely world-class.

So Reliance respected our ambition of both those and said that, "Guys, we definitely expect you to give your full commitment towards building technology for Reliance Retail. And if you guys are doing that well and you do not give us any reason to pull you up for the work that you're doing, you guys are free to do what you want to do." And from our side, we were very clear that we wanted those Chinese walls between the work that we do with Reliance as well as the work that we do outside.

Ranjay Gulati:
The deal with Reliance Retail came to completion in 2019. And then, the worldwide Covid pandemic hit. Retailers across India closed their doors and were sitting on vast inventories. What was terrible luck for the world was fortunate timing for Harsh Shah and his partners at Fynd.

Harsh Shah:
Because you've got to also understand that with Covid, digital shopping and e-commerce really had amazing tailwinds. And so we were able to be in that position where we had the firepower backed up by Reliance and the ambition and the pull from the market of getting technology to be deployed with retailers.

So we were actually in the best period with Covid because we had so much of demand from our retail partners, and we had the right backing from Reliance in order to invest very quickly in increasing our bandwidth and our capability. So, having done the transaction, having the likes of Reliance with us enabled us to go on an absolute hiring spree.

Ranjay Gulati:
Okay. How has your leadership style had to change? What about you? What have you had to learn and do differently as you are now at a different stage in the organization? And you may even ask the question, are you the right leader to take this organization to the next level? A lot of founders realize that they are great founders, but to be leading a 2000-person organization versus starting, exciting... Some people just are serial founders.

Harsh Shah:
Right.

Ranjay Gulati:
So how have you had to evolve in your own thinking about yourself, and where are you on that journey?

Harsh Shah:
I think first you've got to realize what sort of leader, both an operational and a strategic leader, you are. There's some leaders that are absolutely execution beasts. There's some leaders who probably don't enjoy the day-to-day execution work as much, but they are brilliant at analyzing direction, speed, strategy, initiative, and doing step-jump work. I think, as a founder, you've got to play each of those roles at different points in the day.

I think as a company scales up, the biggest thing that you've got to learn is to give up your LEGOs. I think even if you are an execution beast, there are certain LEGOs that you still need to give up. And even if you are a strategy beast or a mission beast, even there, there are some LEGOs that need to give up.

What I realized with myself is I'm less of an execution beast on a day-to-day level. So while I will have a pulse of what's happening, I may not get as involved on day-to-day basis as someone else or as I would have done maybe four years ago. But what that has helped me do, it's helped me free up mental bandwidth to do two things very well. Actually, three things very well.

One is grooming your own leaders and managers within your organization or grooming specific individuals which are high-potential and have a very high mandate with them. Second is being able to identify potential opportunities where, in three to six to nine months, you know want to probably have certain things going or have an initiative going there. And the third is actually to do those initiatives on a zero-to-one level. I think as founders we love the zero-to-one journey, and I think we do get a lot of energy from the zero-to-one work that we do.

So for me, personally, I think it's these three areas where it is identifying leaders and talent within the organization that are high-potential as well as who have a high mandate and actively grooming them or actively working on helping them achieve their potential.

Second is keeping an eye out for new opportunities. For example, it could be global, it could be a new different platform that we may come up with. It could be a new category of retailers that we may want to reach out to, and how do you end up understanding what are their needs and then sort of working backwards to say, "Okay, what do we need in order to get there?" And once you've identified, how do you actually just get off the ground and do the zero-to-one initiative there?

I spend my time on these three things, with a small amount of time or almost like a flexible time to get involved in the execution on a day-to-day basis. But for different founders, it's different. So for my co-founder, it's actually a lot more execution on day-to-day level because that's the kind of founder that he is, and he's really, really good at that. And that's the kind of role that's expected and needed from the teams and the work that he does. I think it depends, but I think you've got to identify, as an individual founder, what is your style and what will be the largest impact on the organization that your time can actually provide?

Ranjay Gulati:
And what do you think happens? Why do many founders fail at this juncture? Or rather, investors push them out. What do you think are the most common pitfalls that you have at least been warned about that founders don't always make good growers of the business?

Harsh Shah:
I'd like to not believe that. I think there is definitely some soft corner towards founders that I have, and I do believe that. I think a skill can be learned by anyone. So I don't think it's a good excuse to give, saying that, "Oh, I'm just not this person," or, "This is not something that comes naturally to me."

I think it all begins from giving away your LEGOs. I think we are very clear even at Fynd, not just for founders, but even as managers rise up, as managers become leaders, you need to be able to give up a large chunk of the work that you do. Otherwise, the finite amount of energy that you have as a person, you want to be able to actually invest that in as many large ROI activities as possible. And step one for you to get to that level is to give away your LEGOs.

So a heuristic that you would want to follow is, as the company scales up, 80% of your time should essentially be spent on things that are a longer-term outcome or impact than what it is today. In the first... Say, maybe stage A... I don't want to give timelines attached to it because every company scales at different paces, but stage A would be you're spending 80% of your time doing day-to-day work. Stage B would be weekly work. Stage C would be monthly work. Stage D would be quarterly work. And I think you will figure out at this time, "I would probably give 50% of my time towards maybe an annual work, about 25% to a quarterly work, about 20% to a weekly work, and about 5% to a daily work."

Ranjay Gulati:
As startup companies grow and become legacy organizations, one of the greatest challenges they face is staying nimble and innovative, keeping hold of the startup energies that powered them to success in the first place. I asked Harsh Shah how he and his partners at Fynd navigated this because the new layers of management needed in their expanding company could also become stifling layers of bureaucracy.

Harsh Shah:
Okay, so there are two aspects of this. There is the conceptual and the sort of high-level strategic aspect, and there's a day-to-day aspect of it. Let me talk about the strategic one first. And even there, there are sort of two accesses that we've sort of modeled, at least, our behavior on.

The first thing is we imbibe the aspect of ship, shipmate, and then me. So you've got to go down where the first thing is you are essentially part of the ship, then it is about your shipmate. And it's not about your team or your sub-organization but your shipmates. So it could be anyone. And it is me.

And a similar concept that we want to talk about is in sports, you're always playing for something that's written on the front of your jersey, not on the back of your jersey. So the back of your jersey is usually your name and your number. The front of your jersey is usually your team symbol. So constantly imbibe the fact that you're playing for what's on the front of your jersey, and there's a role that you're playing for what's on the front of your jersey. And even within that, it's a ship greater than shipmate, greater than me.

The reason why we don't want to talk about a team or a sub-organization is because of the second axis, which is we are a team of teams. And those teams can change with respect to the needs of that particular stage either for the project, for the initiative, for the product, for the business line, or for the company.

So it's less about wanting to constrain you to think about, "Hey, these are the 10 team members of yours, and you need to first think about your team," but every person in Fynd is your team members, when you think about those. So I think on that conceptual level, these are the few concepts that we communicate on a monthly basis with the whole organization.

And on the tactical level, every final interview is always taken by one of the founders. Every time someone joins the company, the first week, there's at least one interaction, either a breakfast or a lunch with one of the founders, irrespective of where you've joined in the company.

And we will always be sitting in the absolute work base where everyone else is all sitting in. We use Slack as the internal communication method. And we, as founders, also ensure that we are very active on responding on Slack as well. So, for example, someone needs help with something, there's a Ask Me Slack channel. And they'll say, "Hey, you know what? I need help with so-and-so things." As founder, I would also reply to that. And that shows to everyone that we're as involved, even for the smallest of things, as anyone in the company is.

And so, a mix of these conceptual monthly reminders, along with these day-to-day small things, it's those little plays that a founder will also get involved in, will show that we maintain our agility while being a team of teams.

Ranjay Gulati:
Are all the founders still involved in the company?

Harsh Shah:
Yes. I think we are lucky that all three of us are still very much involved even after almost 10 and a half years of founding the company.

Ranjay Gulati:
One of the key challenges I've studied and written about is when and how a business should pivot its strategy. In today's rapidly changing markets, courageous leaders need to be ready to pivot towards new opportunities while not losing track of their key values and purpose. I asked Harsh Shah what advice he would give others about when to pivot and how to do it right.

Harsh Shah:
Headline first, I would say, is if you think you need to pivot, you probably should have pivoted maybe a quarter ago. I think you need to look at your company with a hundred-year timeframe. If you're going to look at it with a five, seven-year timeframe, it's going to be very difficult for you to take some of the calls that are very much required when you go through a pivot decision.

Simon Sinek talks about the infinite game, about how it's not always good to treat companies as sporting teams because of the infinite nature of the end outcome of games. And if you were to look at your company on a hundred-year lens, you will be able to internalize some of these pivot decisions much better.

So if you've got to think that, "Over a hundred-year period, I need the company to a, survive, b, thrive, and c, be value creative as well as impact creative, some of those pivot decisions become actually quite easy. Because then you will think that, "Yes, I need to pivot." But pivoting within two years out of a hundred-year journey is a fairly easy no-brainer then to do.

Ranjay Gulati:
But why a hundred years? Which entrepreneur thinks about their business in a hundred-year time horizon?|

Harsh Shah:
I think the hundred years is just so that you have some finite number to and infinite game, right? It's very easy to be lost out with your own lifetimes, which is a 40, 50, 60-year lifetime because then you will still end up doing things which may be short-term accretive but not actually long-term accretive. So a good concept that I like to refer to is people always talk about... I mean, there's the famous, "Go big or go home," right, where you need to hit the ball out of the park. The context of that is usually saying you need to maximize your peaks in your life curve.

I think you need to maximize the area under your life curve and not just focus so much on the peaks that are there. And I think as you start looking at the area under the life curve of an organization, it's no longer restricted to your own timeframe as a founder.

If you want to build companies that endure, and I think it goes back to the good to great that Jim Collins wrote about, where there's certain companies that are great, you see that over a large timeframe, and then you will start doing things very, very differently. And I think that helped us to internalize pivots very, very easily. And we said, "Okay, fine, whatever we've done, we've learned a hell of a lot, and it would be foolish for a hundred-year organization to continue doing this what you've discovered for the first two years." And hence, identifying what works and navigating that in order to reach a hundred-year goal becomes much easier to do.

Ranjay Gulati:
Okay, nearing the end now. I want to explore the word courage with you. Being an entrepreneur is not for the faint-hearted, right?

Harsh Shah:
Right.

Ranjay Gulati:
Do you think people are born with courage or they learn courage? And if they learn courage, how do you learn courage?

Harsh Shah:
I fundamentally believe people are not born with anything. I think people can learn absolutely anything. There's a very interesting quote from the movie Ratatouille, where, "A good chef can come from anywhere," right? And that's how a mouse becomes one of the best chefs in Paris. And I think I completely believe in that ideology, even for people, is that skill can be learned anywhere. I don't think it's about being born with courage. I think your circumstances help you become brave and courageous. I think the-

Ranjay Gulati:
Tell us about yourself. What made you courageous? Where do you think... Let's make it personal. How did you suddenly say, "I'm going to be an entrepreneur?" And that's the risk-taking, and it's risky, and the risk got more and more because the idea was not really taking off. What gave you the courage?

Harsh Shah:
So I was actually born with a hole in my heart. I was a blue baby. I was so lucky that there was a doctor in the room who identified it to my parents, "I think he's got a hole in his heart." It was a condition where in India we couldn't have operated me and sort of give me a life. So my parents were courageous enough to say, "We'll do whatever it takes to ensure that we can hopefully maximize his chances of surviving."

So, at the age of six months, my parents took me and got me to Miami to do an open-heart surgery. I think that instilled very early, both in my parents as well as in me, that I think we should be able to figure things out given the right means to do it. And by means is not just a financial means, but even capability and the right context to do it.

So they ensured that after we came back from the surgery, after I was fine... I still have the scar on my chest to remind me of that time every single day. They said, "We're going to be exposing him to as many things as possible." So I think it started off from that experience that my parents had, which got projected to me. Because as a baby, I don't know anything, but the projection of my parents' experience over the first two, three years of my life, the fact that given the means, whether it's knowledge, it's capability, it's financial means or the context, you can achieve anything, I think that was the start of it.

And then, across my schooling, they would expose me to everything from sports to leadership to academics towards the Asian tiger parents mindset where, "Oh, you've got 49 out of 50? Sure, next time, you can probably get 50 as well." And I think that was a great foundation.

We came from a business family as well. My grandfather started off a chemicals and pharmaceuticals business from a small room. He came from a village in Gujarat, set up shop in Bombay. We had factories, industries. So, again, seeing that firsthand of what you can do with your hard work and capability and, more importantly, the fact that here's a great foundation that the family has set for you to achieve whatever you can potentially achieve.

Ranjay Gulati:
Any scary moments in your entrepreneurship journey in the last 10 years that you're like, "Man, this is really scary"? And somehow, you plowed through it. Or one of your co-founders felt like, "Listen, guys, I think we should pull the plug on this. This is really hard," or, "This looks impossible."

Harsh Shah:
I don't think we reached the impossible end of the spectrum. Few times, I would say almost twice or thrice, where we didn't have capital to pay salaries that month. And we were all-in, credit cards maxed out, taking huge loans from families to just keep the lights going on, where we were just sort of figuring out that we've got to just turn under every rock to see if we can find something going.

It's happened twice with us. We've always been bailed out, thankfully, to going to investors, to going to family, to going to the team as well and saying, "Hey, you know what guys? We would request you to take anywhere between a 60% to 100% pay cut, but with the promise that if things work out, we'll probably give you that back plus a kicker on top of it." Twice that has happened to us in the company from a financial perspective.

Ranjay Gulati:
How do you deal with that emotionally? I mean, just think about your own emotional state at that moment in time. Don't you feel scared that this might not work out? I'm just trying to understand. Is it just inner conviction that you have it or-

Harsh Shah:
I think it's-

Ranjay Gulati:
... based on your capability that, "I've done it before. I know we can do it"?

Harsh Shah:
I think it's not about capabilities, but the experiences that you've had as growing up as well as in college, in sports, in leadership work. It's never as bad as it seems. And if you would pull through this, you're going to build some capability and build almost like a third arm that's going to really, really change the way you would do work going ahead. The fact that nothing's ever as bad. And if you've gone through that, you've now completely added one more bullet in your arsenal.

Ranjay Gulati:
Harsh Shah is a co-founder of the Indian online shopping platform Fynd. For more of my conversations with leaders in the business world navigating the 21st century business environment, visit my Deep Purpose website. While you're there, you can also find out about my book, titled Deep Purpose.

Companies that are serious about establishing and working towards a deep purpose find that it delivers game-changing results for the workers, the shareholders, and the larger society.

So visit with me at deeppurpose.net. This podcast is produced by David Shin and Stephen Smith, with help from Jen Daniels and Craig McDonald. The theme music is by Gary Meister. I'm Ranjay Gulati. Thanks for listening.