Startups - An Ever Changing Maze of Challenges & Opportunities
Before I start, let me define what I mean by a start-up - A start-up is nothing but starting a new business which has now become a fad. People have always started new businesses and people will always will. However, now the mindset has changed. Instead of growing organically, the idea is to raise money and grow inorganically. Small businesses are just not happening.
My tryst with Start-ups started way back in 2004 when i was pursuing my post graduation with SPJIMR in Marketing. I belonged to a family of share brokers and we had lost a fortune in Ketanparakh scam of 2001. Markets were yet to recover from the shock and i didn't have any intention of joining my family business. It was the time when 'Start-up' fever was just catching up. Colleges were giving lot of benefits to those students who opted out of placements and went on to start a new venture. There was a great excitement and entrepreneurship was being encouraged.
"Technology can be a great enabler; but to consider technology as every thing is a mis take many startups make."
That is when the start-up bug hit me and after a lot of deliberation, I decided to get in the Insurance sector, which I realised was a huge, unorganised industry and needed some professionals. I went on to start Ideal Insurance immediately after my MBA from SPJIMR in 2005. With an investment of five lakh and no further funding, we are today valued at Rs. 100 crores!
The idea behind sharing the above is to drive an important point - you can still build an organisation without raising a lot of money and without burning a lot of cash. All you need is true entrepreneurial grit and passion and the intention to build an organisation, not to make quick money and exit.
However, when I compare today, I feel entrepreneurship has given way to a mad race for making quick bucks. Focus is not on building an organisation, but on raising money - which has become the ultimate purpose of the start-up. You are not judged by how much profits you are making, but how much cash you are burning. While it may be essential in some businesses, it cannot be a norm. Fortunately, the industry has started realizing that and all of a sudden, the funds have become tight. It was recently in the news that some investors of Flipkart has written down their value by more than 33 percent in a span of six months. And it is only going to get more and more difficult for start-ups to raise money.
It is no longer a 'Law of Average' game that you invest in 10 and one out of that will make up for the rest. With 1000's of start-ups launching every day, and more than 95 percent failing, one needs to be very careful while investing. I myself become an Angel Investor in 2012 when I joined Mumbai Angels and till date, I have invested in around 10 start-ups. Except one, all are still surviving and most are doing very well.
I always look for companies that are not pure 'Techie', but rather work more on a balance of offline and online model. You may like to believe I am old school.Nonetheless, I feel technology can be a great enabler, but to consider technology as everything is a mistake many start-ups make. If your business fundamentals, people management and thought process are not strong, technology can't only take you so far.
One aspect of start-up fever which I admire is the birth of a new breed of entrepreneurs who are hell bent on disrupting the way the world does business. They are focused on making our life easier - be it not standing in the heat for taking a cab, ordering your basic supplies on the click of a button, or taking your business global while sitting in a shop in Chandni Chowk. Life has become so much easier than it was a decade ago. The world is available on the click of a button on your smart phone.
The future of start-ups would be based on identifying and addressing customer needs and pain points. Only selling cheap products can never be a sustainable competitive advantage. There is always an order which emerges out of chaos and the same has to happen in the start-up phase. People are going to get rational. Entrepreneurs are going to get more focused. Investors are going to get more rational and less greedy.