If there is one biggest learning that I had in my startup experience it’s this
Never ask people to work for free.
To someone from outside India, this may look strange. Some startups in India do not pay their initial employees/interns. Instead they give them equity.
###Skin in the game Because when you ask them to work for free, you don’t have skin in the game. You don’t even nearly appreciate what they are going through for you. Until at least a small salary moves from your account to their account, you don’t have skin in the game. You won’t think sharply enough.
When you have to pay them every 25000 per month, you won’t even consider chasing opportunities that will increase your reveneus by 500 per month. You will be smarter in picking your battles. I must reiterate here, this 25k must literally move from your account to their account. Good intentions are not enough. You can’t just aim to pay them. You must pay them. Or, not hire them.
###Stupid hiring That brings us to hiring. You think you can simultaneously train your employees and get the work done. Thinking so, you’ll hire people even though you can’t get any productive work out of them because you don’t need to pay them. Once you don’t have the pinch of paying people at the end of every month, that accountability is lost. And because you are not paying them, you can’t even demand some productive work from them.
###Unrealistic projections Because you hire all these unproductive people (remember, even slightly productive people never work for free), you start thinking you can build all sorts of things. You will have bad estimates of your team’s abilities. This illusion is hard to get out. When you spend 1 hour coaching these people, you should expect at least 4 hours of output from them. In reality, you are lucky if they can at least match your hours in coaching i.e. if they can give 1 hour of output after you spend 1 hour coaching them.
Conclusion - Charity has no place in startups
All in all, charity has no place in startups. It looks like a good thing from outside and it’s a good thing in many places. But when you are trying to build a sustainable economic model, it’s mostly useless. The other inferences follow. Even if you have just introduced your product in the market, it makes huge sense to charge your customers from day one.
If they are reluctant to pay, they are not your target customer or your product isn’t good enough to pay for. Only paying customers give you solid feedback to build a sustainable business. Unpaid customers say they are grateful for your service but they are actually just indifferent to you. They don’t tell you when your product/service sucks. They try to be nice to you.
But a paying customer thinks that he/she has a right to extract the right service/product out of you. Which is good because that leads you to tune it to their exact requirements. This is more likely to succeed. You are more likely to find other such customers with the same problems and they most likely will buy your product as you’ve already tuned it for them. This lesson is clear to me.
I’ll never hire unpaid employees. I’ll always charge the customers.