The Indian start-up ecosystem is comparatively young as compared to the U.S. and other developed markets and therefore, the availability of relevant data is scarce.
When the founder of a start-up company shuts down the business, it’s customary to pen an essay, known as a ‘failure post-mortem’, that tells the rest of the community what went wrong. The failure post-mortem is such a Silicon Valley cliché. While some of these essays are real and enlightening, many assign blame and issue non-apologies.
Based on research conducted by CB Insights on the post-mortem essays by start-up founders to pinpoint the reasons for their failure, they believe their company failed because of the following reasons:
14-18% Poor product, weak business model and lack of marketing
19% The competition
23% Lack of the right team
29% Cash exhaustion
42% Lack of market needs
Prof. Aswath Damodaran, in his start-up valuation white paper, talks about arriving at the value of a young company. The survival rate table presented by him assumes that by the seventh year only 32 per cent of firms survive, and the annual failure rate is 9 per cent. The data pertains to Australian firms and dates to 1998.
In 2018, CB Insights released primary research based on start-ups that raised funds between 2008- 2010 and how they evolved. They found that only one per cent of the start-ups that raise seed funds (out of 1100 start-ups) reach a stage of Unicorn.
The Indian start-up ecosystem is comparatively young as compared to the U.S. and other developed markets and therefore, the availability of relevant data is scarce.
Let’s start with what the winners have in common.
– Recognise the Challenges Involved in Starting a Business
Wouldn’t it be great if you were your own boss? No swiping in and out of an office, no superior to answer to, and the corner office would be all yours. I find that many people want to start a business not because they have a novel product or a vision, but because of such reasons! Invariably, if you’re entering a business to exit a job, your chances of succeeding are very slim.
Now I’ll tell you what a successful entrepreneur looks like. Starting a business is a huge commitment. These people value the quantifiable amount of time, resources, and energy required to start and grow a business. They leave the 9 am to 5 pm job to commit themselves to a 9 am to 2 am job. Not 9 am to 2 pm. Elon Musk once started sleeping in his factory to save time. I sometimes wake up in the middle of the night because and start to work on a pending issue. You have to be borderline crazy to be able to build something crazy.
Hiring the right staff, ensuring capital flow is consistent and not getting discouraged by customers’ negative feedback is also to be taken care of.
– They Don’t Take Forever to Launch
When begining, a product or service must be at least good if not great. It must be differentiated in some meaningful way from the offerings of your competition. Everything else follows from this key principle. Please do not dilly-dally on getting your product out to market, because early customer feedback is one of the best ways to help improve your product. Psychologists say that perfectionism is a form of procrastination. Read about Perfectionism, Procrastination, Paralysis phenomena, that’ll help you understand the concept better. Remember, ‘a good enough product is always better than no product.’
Know what you are doing
Einstein said, if you can’t explain it to a 6-year-old, and have that 6-year-old explain it to another 6-year-old, you don’t know it yourself. The “elevator” pitch must be a brief, captivating introduction to a business. Successful entrepreneurs can modify their elevator pitch depending on whether they are pitching to prospective investors, customers, employees, or partners.
– Are Strong Salespeople
The owners of all successful businesses are terrific salespeople. They learn how to “sell” their business—not only to customers but also to prospective investors and potential employees. It’s important to be positive, trustworthy, and learn how to listen. Sales’ pitches are constantly refined after feedback from various quarters. The tenacity to follow up and ask for a sale is crucial.
– Understand Financial Statements and Budget
Start-up entrepreneurs who make it have a hold of their expenses and learn how to thoroughly understand financial statements and budgeting. Many startups fail when the entrepreneur isn’t able to adjust his or her spending to avoid running out of cash. Creating an in-depth, month-to-month budget is vital, and this budget must be reviewed periodically.
– Market Their Business Like Crazy
These people know that to succeed in business, you need to continually attract, build, and educate your target market. Marketing strategy must include basics like SEO (search engine optimisation), use of social media like LinkedIn, Facebook, Twitter and Pinterest, publication of guest articles in relevant media portals and journals, timely press releases and last but not least, networking!
These are just some fundamentals that determine if an entrepreneur of a start-up will succeed or not. If you want to be one of these people, I would recommend you inculcate some of these traits!
Source: Business World
