Only 10-15 per cent of all startups make it big. Executives who quit well-paying jobs to start their own venture need to strategise and execute well if they wish to be in this small bracket. A startup should refrain from disproportionately allocating resources. It should map customer requirements from the outset and evaluate key business parameters at different intervals.
Nearly 78 per cent of startups in India have a homogeneous founding team. About 62 per of founders are technology specialists. Hence, they are compelled to rely on non-techies for other business functions. A heterogeneous founding team adds lot of value to a startup's functioning.
The basic idea
A "me too" attitude doesn't work in this competitive environment. Entrepreneurs should not spend too much time on the idea. Everyone believes that their idea is great. Applicability and geographical reach of the idea is the biggest differentiator.
Many startups do not know enough about the customer. It's important to know customer needs before designing a product or service. I remember meeting a food-tech entrepreneur whose business was doing very well in summer. However, sales dipped during the winter months. This entrepreneur did not factor in his product's seasonality before setting out. The customer will not keep buying the product just because it is good.
Right business model
A startup needs to keep evaluating the key parameters of its business at regular intervals. Your competitive intelligence should keep evolving so that you can change the product suite accordingly. A good case in point is Flipkart which only sold books when it started. It was the safest thing to buy online back then as touch and feel are not that essential in this category. Books also endured the least damage in transit. With books, Flipkart was able to build buying behavior and trust with customers. Then they began selling other things. That's how a startup's business model should evolve.
Startups will always face talent crunch. Most management graduates are unaware of the constraints one faces in a startup. This results in disillusionment and churn. In an entrepreneurial setting, employees are required to wear various hats and juggle multiple roles. Not everybody can do that. It's important to figure out who can be empowered to do what from the early days itself. Empowering your employees helps in aligning them with the company's goals and builds a common corporate philosophy.
Alliances & Partnerships
A startup needs to build a network of alliances and partners to increase its customer base. It should also understand the competitive landscape and map strengths and weaknesses of competitors. Every startup should have a differentiator which must be shamelessly communicated to customers.
Technology is undoubtedly the way to go for startups. Around two-thirds of all startups in India are within the broader tech space. I believe analytics and mobility will attract more attention than cloud and social media. IT industry body Nasscom estimates that analytics and mobility are growing at 35 per cent while cloud and social media are growing at 15 per cent. Moreover, most startups are gravitating towards B2C rather than B2B sort of model. I expect that to continue.
Investors look at the opportunity (market size) and the team behind the startup before investing. Moreover, they look at how scalable the venture can be. When an investor puts in Rs 10 lakhs, he wants it to multiply upto Rs 100 crore. The 10x mentality of returns no longer holds relevance.
A startup should bootstrap for as long as possible. Investors want to see how effective and viable your business model is without external funding. Such an approach is also a big confidence booster for the founding team
Are we in a bubble?
The ecosystem today is much more robust in comparison to the dotcom boom period. Moreover, the demand is consumer-driven. There is fair bit of government push in it as well. India has emerged as the fourth largest hub of startups globally. A sizeable number of Indian corporates have allocated venture funds. Successful entrepreneurs such as Sachin and Binny Bansal (of Flipkart) are investing in ideas. So the mindset is changing. It's all very healthy.
(Sanjay Singhal is founder and principal consultant at Strategizers, an organisation that advises small and medium-size IT companies. Singhal, an alumnus of IIT Roorkee, has served as managing director/partner at Accenture. He is currently mentoring a handful of early-stage startups. Singhal spoke to Techcircle.in on the sidelines of TiE's "Aligning Strategy to Execution for Early Stage Ventures" conference recently.)
As told to our correspondent Disha Sharma.