7 lessons from a Houston-based unicorn startup founder
At a fireside chat at SXSW, a Houston founder pulled back the curtain on his entrepreneurial journey that's taken him from an idea of how to make the chemicals industry more sustainable to a company valued at over $2 billion.
Gaurab Chakrabarti, the CEO and co-founder of Solugen, joined the Greater Houston Partnership's Houston House at SXSW on Monday, March 13, for a discussion entitled, "Building a Tech Unicorn." In the conversation with Payal Patel, principal of Softeq Ventures, he share the trials and tribulations from the early days of founding Solugen. The company, which has raised over $600 million since its founding in 2016, has an innovative and carbon negative process of creating plant-derived substitutes for petroleum-based products.
The event, which quickly reached capacity with eager SXSW attendees, allowed Chakrabarti to instill advice on several topics — from early customer acquisition and navigating VC investing to finding the right city to grow in and setting up a strong company culture.
Here are seven pieces of startup advice from Chakrabarti's talk.
1. Don’t be near a black hole.
Chakrabarti began his discussion addressing the good luck he's had standing up Solugen. He's the first to admit that luck is an important element to his success, but he says, as a founder, you can set yourself up for luck in a handful of ways.
“You do make your own luck, but you have to be putting in the work to do it," Chakrabarti says, adding that it's not an easy thing to accomplish. “There are things you can be doing to increase your luck surface area."
One of the principals he notes on is not surrounding yourself with black holes. These are people who don't believe in your idea, or your ability to succeed, Chakrabarti explains, referencing a former dean who said he was wasting his talent on his idea for Solugen.
2. The co-founder dynamic is the most important thing.
Early on, Chakrabarti emphasizes how important having a strong co-founder relationship is, crediting Solugen's co-founder and CTO Sean Hunt for being his "intellectual ping-pong partner."
“If you have a co-founder, that is the thing that’s going to make or break your company,” he says. “It’s not your idea, and it’s not your execution — it’s your relationship with your co-founder.”
Hunt and Chakrabarti have been friends for 12 years, Chakrabarti says, and, that foundation and the fact that they've been passionate about their product since day one, has been integral for Solugen's success.
"We had a conviction that we were building something that could be impactful to the rest of the world," he says.
3. Confirm a market of customers early on.
Chakrabarti says that in the early days of starting his company, he didn't have a concept of startup accelerators or other ways to access funding — he just knew he had to get customers to create revenue as soon as possible.
He learned about the growing float spa industry, and how a huge cost for these businesses was peroxide that was used to sanitize the water in the floating pods. Chakrabarti and Hunt had created a small amount of what they were calling bioperoxide that they could sell at a cheaper cost to these spas and still pocket a profit.
“We ended up owning 80 percent of the float spa market,” Chakrabarti says. “That taught us that, ‘wow, there’s something here.”
While it was unglamourous work to call down Texas float spas, his efforts secured Solugen's first 100 or so customers and identified a path to profitability early on.
“Find your niche market that allows you to justify that your technology or product that has a customer basis,” Chakrabarti says on the lesson he learned through this process.
4. Find city-company fit.
While Chakrabarti has lived in Houston most of his life, the reason Solugen is headquartered in Houston is not due to loyalty of his hometown.
In fact, Chakrabarti shared a story of how a potential seed investor asked Chakrabarti and Hunt to move their company to the Bay Area, and the co-founders refused the offer and the investment.
“There’s no way our business could succeed in the Bay Area," Chakrabarti says. He and Hunt firmly believed this at the time — and still do.
“For our business, if you look at the density of chemical engineers, the density of our potential customers, and the density of people who know how to do enzyme engineering, Houston happened to be that perfect trifecta for us," he explains.
He argues that every company — software, hardware, etc. — has an opportunity to find their ideal city-company fit, something that's important to its success.
5. Prove your ability to execute.
When asked about pivots, Chakrabarti told a little-known story of how Solugen started a commercial cleaning brand. The product line was called Ode to Clean, and it was marketed as eco-friendly peroxide wipes. At the time, Solugen was just three employees, and the scrappy team was fulfilling orders and figuring out consumer marketing for the first time.
He says his network was laughing at the idea of Chakrabarti creating this direct-to-consumer cleaning product, and it was funny to him too, but the sales told another story.
At launch, they sold out $1 million of inventory in one week. But that wasn't it.
“Within three months, we got three acquisition offers," Chakrabarti says.
The move led to a brand acquisition of the product line, with the acquirer being the nation's largest cleaning wipe provider. It meant three years of predictable revenue that de-risked the business for new investors — which were now knocking on Solugen's door with their own investment term sheets.
“It told the market more about us as a company,” he says. “It taught the market that Solugen is a company that is going to survive no matter what. … And we’re a team that can execute.”
What started as a silly idea led to Solugen being one step closer to accomplishing its long-term goals.
“That pivot was one of the most important pivots in the company’s history that accelerated our company’s trajectory by four or five years," Chakrabarti says.
6. Adopt and maintain a miso-management style.
There's one lesson Chakrabarti says he learned the hard way, and that was how to manage his company's growing team. He shares that he "let go of the reins a bit" at the company's $400-$500 million point. He says that, while there's this idea that successful business leaders can hire the best talent that allows them to step back from the day-to-day responsibilities, that was not the right move for him.
“Only founders really understand the pain points of the business," Chakrabarti says. "Because it’s emotionally tied to you, you actually feel it."
Rather than a micro or macro-management style, Chakrabarti's describes his leadership as meso-management — something in between.
The only difference, Chakrabarti says, is how he manages his board. For that group, he micromanages to ensure that they are doing what's best for his vision for Solugen.
7. Your culture should be polarizing.
Chakrabarti wrapped up his story on talking about hiring and setting up a company culture for Solugen. The company's atmosphere is not for everyone, he explains.
“If you’re not polarizing some people, it’s not a culture,” Chakrabarti says, encouraging founders to create a culture that's not one size fits all.
He says he was attracted to early employees who got mad at the same things he did — that passion is what makes his team different from others.