Zenos Schmickrath, recently-exited Co-founder and CXO of Singapore-based co-living startup Hmlet, explains what it took to build the company up from profitable sideline to regional market leader.
My co-founder and I startedHmlet with just one apartment. Nine months later, in 2015, we were managing six. Initially, we’d looked at our business as a means of bringing in enough income so that we could get by financially while we worked on a high-growth Internet startup. But we soon came to the realization that what we’d started as a side-hustle actually had enormous potential.
For one thing, Hmlet was profitable, whereas the five Internet startups I’d previously worked on never generated enough revenue to be financially compelling. It was becoming clear that we had in our grasp one of those rare animals: a successful and sustainable startup.
1. A solid product
At that modest size, Hmlet provided a reasonable income for my co-founder and I, but it had become a full-time job, overtaking the other project we’d been working on. To me, Hmlet seemed a much better bet. In my experience, with most internet startups, you can never predict if or when the business will start making enough money to sustain you. It could happen in three months, it could happen in two years, or it might never happen at all. With Hmlet, we had a profitable company that had already provided good returns. It was only logical to run with it.
If Hmlet was going to be our focus, we thought, “Where are we going to take this?” That’s when we started thinking about the bigger picture. We began to discuss several key questions to establish our goals: What do we want to achieve with this company? What is the philosophy? What are our values? What is the change we want to create in the world? What’s the problem we want to solve?
It was clear that we needed resources to achieve our larger goal of changing the way people live, so we kicked off the initial steps for raising funds and really driving that vision further.
2. The correct investors
Once a startup has achieved product/market fit and devised a strategy for addressing that market, the next step is to find a backer who will empower you to make your vision a reality.
Choosing a funding partner who believes in the values of the company and the chosen strategy is critical to being able to fully execute the vision you have in mind. It’s not simply a matter of securing the funds to move forward. You need a partner who brings more than money to the table. During Hmlet’s funding rounds, we met with at least 100 potential investors and VCs.
In the rush to raise funds, it’s all too easy to think, “I just need an investor. I don’t care who it is. I just need the money.” But you must be conscious that you’re basically marrying this investor into your company. They’re your new partner for the long term and will become an integral part of how you’ll advance your startup to the next stage.
Ask yourself: Are they friendly? Are they supportive? Can they offer expert advice? Are they giving you the connections you need in order to move forward?
We were very fortunate that the investors we ended up working with truly added value to the business, beyond simply an injection of capital. For example, our seed round was funded by Aurum Investments, a subsidiary of construction conglomerate Woh Hup Holdings.They afforded us not only funding, but the power of a strong reputation.
When we’d go to see a landlord to propose managing one of their properties, and tell them our investor was Woh Hup — one of the biggest construction firms in Singapore, a billion-dollar company with nearly a century’s history — that landlord was immediately reassured to hear we had reliable backing. That really helped in building Hmlet up to where it is today, operating thousands of rooms in Singapore, Hong Kong, Japan and Australia.
While we sought out investors who’d be valuable partners, we were careful to ensure we retained full control of the philosophy, culture, and the vision of our company. We wanted the support of investors who understood the product but didn’t impose their will on how we did business — or the culture we set out to create.
3. A consistent culture
In a rapidly growing company, it is incredibly hard to maintain a cohesive culture. Every new hire comes in with their own philosophies, managerial methods, or work ethics that they have learned in previous roles at other companies. These may well be counter to your own company culture.
That’s why, in a fast-growing startup, identifying the values of the company and clearly communicating them to all new hires is essential in order to maintain a culture in line with the vision of the founders. This is something that I wish I had focused on more, and I firmly believe it should be one of the top priorities for new founders.
Cultural guidelines need to be established from the very start. My advice would be to carve out the mission statement as early as possible, when you have just a handful of people. As headcount grows from 10 people, to 20, 200, 2,000 or more, the mission statement and values will be clearly outlined and observed by every new hire.
When the company is rapidly scaling, to get certain jobs done, you’re often forced to hire people who may not be a completely natural fit for the culture you’ve created. If culture is something you consider essential to the startup’s DNA, everyone you bring aboard should recognize and adjust to the company’s core values.
A strong culture keeps the team united, boosts morale, and moves you closer to achieving your goals. It also helps keep the attrition rate low. I’m proud that at Hmlet, our turnover was very minimal — people would generally only resign if they had to leave the country or for personal reasons, rather than being unhappy or unsatisfied. Retaining good people is crucial. They’re not easy to find, as you’ll read below.
4. The right talent
At Hmlet, we started out hiring staff based on a few interviews with senior members of the team — if two out of three said ‘yes’ or there was a unanimous sense of positivity, we’d go ahead with the hire. Often, the decision was made on the basis of a collective ‘gut feeling.’
Unfortunately, going with our guts often led to us hiring the wrong person for the job. For one particularly challenging role, this resulted in constant turnover every few months. Looking back, I realize that I this mistake many times. We hired people who were great culture-wise, but should have been moved around in the company in order to find the perfect position for them.
The way we went about hiring changed drastically as we went from a dozen people to 170-plus. Our hiring became much more effective when we switched to a simple system with questions that each interviewee would be asked. This helped standardize the criteria for each candidate and identify those with the most potential for the role and harmony with the company culture.
Once we had a system, we were then able to have each interviewer focus on specific aspects of the candidate’s suitability, such as technical capabilities or cultural fit, and identify the best applicant more easily. I found the book ‘Who’ by Geoff Smart and Randy Street really helpful in developing a better system for hiring.
The right talent comes with a cost, but for a young, unfunded startup, it’s very important to be frugal — you need to spend a long time finding good and relatively inexpensive people to fill roles. These initial employees are joining because they have faith in the company vision and love being part of building something that they believe in.
As soon as the startup raises money, however, founders must shift their mindset towards finding the best people they can afford. Talented and generously-compensated employees will bring exponential value to a company that’s rapidly scaling up. Costly though they may be, you need to view those hires as an investment in growth.
5. A lot of luck
We were very lucky at Hmlet to recruit a great team of passionate people, partner with outstanding ‘smart money’ investors, and be in the right place at the right time, entering a vibrant market with an in-demand product. Make no mistake, there is a certain amount of luck involved in creating a successful company.
In particular, arriving at a certain product-market fit can be a game of chance. When you do hit that jackpot, the rapid iteration and thorough testing of ideas is what will help a startup find the direction to focus on and continue providing value to its customers.
The key is being able to roll the dice many times, and once something works, to then take a step in that direction and roll the dice again. It’s a constant game, and being able to test new ideas rapidly increases the odds of finding the perfect product-market fit that will propel your startup to success.
Good luck to you.
About the Author
Zenos is an ex-Microsoft serial entrepreneur who’s founded several startup companies with a strong focus on Internet technologies. This entrepreneur journey led him to Singapore, where he currently resides. Seeing the trend that co-living was becoming a necessity with working millennials, Zenos and his co-founders created Hmlet, now SEA’s largest co-living company. Zenos exited Hmlet in early 2020 and is now giving back to the startup community by serving as a board member of SEA Founders.