'Founder mode' or 'manager mode' for your startup? The devil may lie in the details

Musthafa explains the missing tools in his armoury. The ‘10 to 100’ journey couldn’t be continued with the old weapons. The need of the hour was to inject fresh blood. “It (the journey) needed a different kind of skill set, a different mindset and management style, a lot of systems, processes, and an outsider who had ‘been there, done that’,” he says. The software engineer, who morphed into an entrepreneur in 2005, did his best to scale the bootstrapped company, which raised its maiden seed round in 2013, and then went on to add marquee investors such as Helion Venture Partners, Premji Invest and NewsQuest Capital to its long list of backers. From negligible revenue in the first year, iD Fresh posted an operating revenue of ₹479.3 crore in FY23, expanded its reach to 40 cities and over 30,000 retail stores across India, and a sizeable foreign presence across the UAE, Oman, the US, and the UK.

The scale of operation and the geographic footprint were commendable, especially given the context. “I don’t come from an FMCG background,” says Musthafa, adding that the ‘10 to 100’ journey needed an experienced FMCG professional. “There comes a point when you need to bring people from outside,” he says. In January, Musthafa roped in Rajat Diwaker as CEO, iD Fresh Food India. An FMCG veteran with over two decades of experience, Diwaker’s last stint was with Marico as managing director of Bangladesh. “Hiring Rajat is one of the best decisions in my entrepreneurial journey,” says the co-founder who moved himself into a global role and continues as chairman. “After taking a back seat, I have upgraded myself,” he says. The entrepreneur now has time to paint a bigger global canvas. “I am enjoying my work much better than I used to do a year ago,” he says.

Musthafa outlines the plusses of switching to a ‘manager mode’, a business leadership style wherein experts—managers—ensure stability, order and predictability in the system. “Till a year ago, we wouldn’t have dared to launch one SKU (stock keeping unit) every month,” he says, adding that for 16 years the company just had six products. “Now we are launching one new product every month,” he says. The company has moved into 10 more Tier II cities and plans to fan out in Tier III towns over the next six months. The brand has expanded its retail footprint from 30,000 stores to close to 40,000 and is on target to reach the 46,000-outlet mark by end of March 2025. The founder’s ambitions are now whetted.

“We are taking iD to 100 cities in India,” says Musthafa as he shares something hard for founders to disclose. “We are two years behind in having a CEO,” he confesses. Whenever a business stagnates, one must identify the problem and fix it. “This is the ‘founder mode’,” he says, adding that the company found the right CEO in Diwaker. “Over the last 11 months, every aspect of the business is doing well,” he claims. “Thank God, I am out of the God mode,” he says with a smile. Okay, so which mode would he be in now? Founder or manager? “We are in an iD Mode,” he beams on a Zoom call.

The new CEO is delighted to be in a new mode and territory. For over two decades, Diwaker worked in well-oiled companies which he terms as ‘incumbents’. There are systems, processes and well-defined hierarchies in place. There is predictability, sustainability, accountability and sanity. The move to join ‘insurgents’ or startups was not easy for Diwaker. “When the offer came, I had conflicting thoughts,” he says. What helped in switching sides was a candid conversation with Musthafa. “Have you ever worked in a startup?” was the first salvo from the founder. ‘No,’ came the expected reply. “Why? Is it too risky?” the founder probed deeper, which helped the professional initiate an honest conversation.

The context setting was brutal. Diwaker started by pointing out the glaring chinks in most startups: Lack of robust financial systems, growth at all costs, ‘scale fast break fast’, and the absence of fiscal discipline leading to unsustainable growth. Musthafa, interestingly, had been an outlier in terms of staying away from the stereotypical growth path treaded by startups. iD Fresh has grown slowly and steadily. It posted profits in FY24—a PAT (profit after tax) of ₹4.4 crore as against a loss of ₹32.9 crore in FY23—and pushed its overall revenue to ₹562.8 crore. After 19 years, iD needed an expert to press the scale pedals. Diwaker turned out to be the man for the occasion. An alignment in vision, mission and values sealed the deal for the new CEO. “We are now clocking a revenue run-rate of ₹700 crore and aggressively focusing on portfolio and geographic expansion,” he says. The combination of a founder and a manager looks like ‘double engine ki sarkaar’.

Interestingly, Musthafa’s adulation and need for a CEO for the ‘10 to 100’ stage of the journey is in sharp contrast to Paul Graham’s drubbing and berating the role of experts aka managers who come in as CEOs. In a blog post in September, the celebrated co-founder of Y Combinator questions the conventional wisdom of hiring good people and giving them the room to do their jobs. “It sounds great when it’s described that way… but in practice what it means is: Hire professional fakers and let them drive the company into the ground,” said the Silicon Valley icon.

Also read: Intentional Leadership: The must-have capabilities for leading into the future

Graham outlined two diametrically opposite ways of running a company: Founder mode and manager mode. The way managers are taught to run companies is like modular design. They treat subtrees of the org chart as black boxes. They tell direct reports what to do, and it’s up to them to figure out how. “But they don’t get involved in the details of what they (direct reports) do,” he said in his post which was inspired by a Y Combinator speech by Airbnb CEO and co-founder Brian Chesky. Venture capitalists, Graham contended, who haven’t been founders themselves don’t know how founders should run companies, and the C-level execs, as a class, include some of the most skillful liars in the world. “Until now most people, even in Silicon Valley, have implicitly assumed that scaling a startup meant switching to manager mode,” he said, adding that there is an existence of another mode: Founder mode. “Curiously enough… we still know so little about founder mode,” he asserted.

Chesky, interestingly, has shared enough dope on founder mode over the last three months. “If I could summarise founder mode, it’s about being in the details,” the Airbnb CEO decoded various aspects of ‘founder mode’ in The Verge’s ‘Decoder’ podcast in September. A founder and a leader, he underlined, has to be in the details. “If we were a military, like a battalion, the cavalry general should know how to ride a horse. It’s crazy that they don’t. And leaders shouldn’t be fungible. So it’s really about being in the details,” he summed up the core of the founder mode. Chesky’s belief emanated and crystallised from his not-so-memorable experience of running Airbnb for a decade. “From 2009 to 2019, I ran Airbnb the way most tech companies do,” he confessed in a detailed interview with Nilay Patel of The Verge. “I didn’t know how to run it. So I hired people from Google, Amazon, Microsoft and other companies,” he continued narrating his ordeal. What happened next was logical. The new hires brought their processes with them, Airbnb became a matrix organisation, and like almost all matrix organisations, it was hard to get work done. The company was sub-divided, sliced into silos, and moved in different directions. “There was even more bureaucracy because the groups don’t want to work together,” he rued.

The fortunes, interestingly, swung favourably once Chesky took control and switched on the founder mode. “A founder sets a vision, but more important than the vision, a founder sets the pace and the standards. And that’s what founder mode is all about,” Chesky outlined the broad characteristics of the founder mode of running a venture. He shares an interesting golf swing analogy of how he was coached. The instructor, Chesky pointed out, watched him swing thousands of times. “Eventually this is muscle memory, and I won’t need to watch your swing over time,” the coach pointed out to the rookie golfer. A founder mode, Chesky underlines, is akin to the swing philosophy. A founder gets into the details, is involved in everything, helps people around him develop muscle memory, and then lets them run the show. “My philosophy is you hire great people, and you’re in all their details. Over time, once they develop muscle memory and they prove that they understand the system, then you can gradually let go,” he reckons.

Back in India, a sea of startup founders swears by the founder mode. Take, for instance, Asish Mohapatra, co-founder and CEO of OfBusiness, an industrial goods and services procurement platform that has grown at a brisk pace over the last five years and closed FY24 with an operating revenue of ₹19,296 crore. “A founder creates resources and a manager manages resources,” says the founder of two unicorns: OfBusiness and Oxyzo. One of the traits of the founder mode, he adds, is that a founder has to make things happen. “There are no dead-ends for founders,” he says and takes us back to the formative years as a professional when he had stints with ITC and McKinsey. Later, he joined Matrix Partners as a venture capitalist in 2010, and after five years co-founded OfBusiness in 2015. After 15 months of starting up, the rookie founder was fast running out of money.

The timing, unfortunately, was not conducive for raising capital. The existing backers, understandably, wanted to see more growth before taking another bet and the potential backers too shied away citing rough market conditions. All roads were closed. But Mohapatra found a way out. He raised debt. Normally, under those circumstances, a manager would have managed to grow by making the most of the existing resources. “But we grew 3x of the previous year. Founders make resources happen,” says Mohapatra, adding another facet of the founder mode: Spotting and promoting talent. When the head of his material business opted to shift to a financial role within the company, Mohapatra had to look for a replacement. The hero emerged from the junior ranks of his team, raised his hands up, proved himself, and is now an integral part of the leadership team. “I believe in the 80:20 rule. Eighty percent of the senior management must come from within the existing team, and the rest has to be infused from outside. “Founders lead by example. Managers lead by feedback,” he adds.

Serial entrepreneur Arvind Parthiban tells us another strand of the founder mode. Plain-vanilla delegation is not what founders do. “If you are only delegating, it’s management. Leaders inspire,” says the co-founder and CEO of SuperOps. The most important job of a founder, he underlines, is to know whom to give what job. “Getting work done from a smart person is the most important task. Such people will ask questions. You need to motivate them,” says Parthiban, who co-founded Zarget, which was acquired by Freshworks. So, as a second-time founder, has he changed his role in terms of running the startup? “There is a stark contrast,” he contends.

During his first venture, Parthiban was perpetually worried about getting his first 50 customers and getting the product-market fit. “I was calling, selling and hustling,” he says, sharing the flip side of the approach. “I realised that I had become a bottleneck in scaling the company,” says the founder who had had stints at Zoho and Freshworks. At SuperOps, his second venture, Parthiban explained how to do the selling, and what he wanted from his team, and took a backseat. “I know I can do it, but if I can make many people do like me, then this is founder mode,” he says.

Another crucial DNA of the founder mode is working on a long-term vision. Ashwin Damera, co-founder and CEO of Eruditus, has worked in such a mode. One of the things a founder has is a long-term vision. A manager, in contrast, is evaluated on how he performs and leads in every quarter. “If the company is at $580 million, I am thinking about how can I make it a $3-billion revenue company,” he says. A manager, in contrast, won’t exhibit such a long-term horizon. The contrast is between the present and the future.

Yet another interesting version of the founder mode is realising that one doesn’t need a CEO from outside. And yes, this is not a ‘God mode’ of the founder that he ‘knows all’ and is the best, but stems from his confidence and belief in running and scaling the company in line with his vision, mission and passion. Nitin Saluja of Chaayos is one such aberration. Started in 2012 by Saluja and Raghav Verma, Chaayos had five outlets across one city and a revenue of ₹4 crore in FY15. Fast forward to FY24. The tea café chain has 170 outlets across seven cities and posted a revenue of ₹263 crore. “It is not important for every brand to get a CEO,” he says, adding that a founder should continue to be the CEO as long as the business does well.

In the case of Chaayos, the business has grown at a brisk pace. “The founder mode is being in the details,” he says, dishing out an example. When Chaayos planned a concept store, the brief to the team was simple: A live, energetic store that appeals to the consumers. Saluja outlined his vision and the team worked on the plan. There were changes, there were tweaks, but there was no interference. It was more like Chesky’s golf swing. Saluja knew what he wanted, and he collaborated with the team to make it possible. “Founder mode is not micro-management. It’s collaboration and challenging the best minds,” he says.

Back in Silicon Valley, Chesky outlined the contours of founder mode in detail, especially when the mode erroneously started getting equated with micro-management, a toxic workplace and ‘my way or highway’ attitude. “There is a downside to the name,” Chesky acknowledged in The Decoder podcast interview. “I remember a tweet that said, ‘I’m going founder mode on this burrito’. I don’t know what that means. I think people think it means the founder swagger,” he admitted. “It’s not,” he said. Founder mode, he underlined, is not disempowering. It requires collaboration. “If you want to be a lone wolf or a cowboy, that’s not going to work,” he pointed out.

Back in India, there is a growing realisation that founders need to use both modes at regular intervals. It’s like a handset with a dual sim. You don’t use both the sims at the same time. “Founder mode versus manager mode is also a function of the stage of evolution for the company that it finds itself in,” says Archana Jahagirdar, managing partner at Rukam Capital. There is a time to break things and there is a time to consolidate. “I think the best companies require both,” underlines the venture capitalist. Founder mode, she underlines, works best during the formative years. In the early stages, entrepreneurs are taking on the big, legacy players. That’s when you need to be in founder mode. “But you need to switch to a manager mode when you are in the consolidation phase,” she says, adding that both modes have to be used regularly, depending on the stage of the company. A founder mode needs to be repeated when complacency sets in. “That’s one reason why legacy companies become uncompetitive and leave a lot on the table for new-age companies,” she reckons.

But there is a flip side of founder mode. Tewari of InMobi talks about a dangerous and erroneous fallout: A toxic workplace. “You don’t have to exhibit obnoxious behaviour,” says the founder of Glance, which claims to have over 450 million users globally. One doesn’t need to howl, scream and be rude to the team. A founder can’t do the heavy lifting alone, and for the tribe to grow, one needs to surround oneself with bright talent.

“I am sorry, but the founder is not the smartest person in a room,” he says, adding that the only thing the founder is best at is having wloads of courage and conviction which leads to big, bold and outrageous bets. While underlining the need to have the best talent in the company, Tewari sums up the debate by pointing out the best of both modes. “A founder mode is ‘what if this goes big’, whereas a manager mode is ‘what if this goes wrong’. One needs both, in equal measures.