The startup ecosystem in India is the talk of the town. With predictions of billions of investments and a 10-12% growth year-on-year, the picture certainly looks promising. But there is a flip side to this story. According to a survey conducted by Oxford Economics on behalf of IBM Institute for Business Value, 90% of Indian startups fail within the first five years. 70% of the venture capitalists say that startups fail because they are unable to obtain employees with the right skills and 65% of venture capitalists say that Indian startups are unable to source the necessary funding.
The bottomline – entrepreneurship does not come easy. Every stage of this journey is fraught with unforeseen challenges that could spiral into chaos for entrepreneurs. Factors like lack of funds, wrong product fitment, and inability to hire the right people with the right skill sets at the right time may land young entrepreneurs in tricky situations. The young founder therefore must be smart enough to wade through these troubled waters.
The Roadblocks in Getting Investments
Startups in India face funding roadblocks both at entry and exit stages. “Getting investments in India has been a hard task,” says Rohit Manglik, CEO, EduGorilla, a one-stop education community.
Apart from most investors focusing only on startups with loyal and paying customers, there are other factors like lack of exits for early-stage investors and hard regulatory policies related to taxation that have made early-stage venture capital investments plunge to a 3-year low in 2017. Most of the investors are focusing on the entrepreneurial track record of the founders and not financing those who have been behind the shut down of multiple ventures.
In an interview with Forbes India, Nagaraja Prakasam, angel investor and partner at Acumen Fund said that every business has to have scalability and a potentially huge revenue market. “How many businesses can be like that?” He opines that no investor is interested in putting money into “non-trending” startups despite having potential. For entrepreneurs, it is a two-edged sword. On one hand, you not only have to build an innovative application but also ensure market scalability.
Lack of funds can create disruption in the fledgling startup ecosystem. According to a report by The Economic Times, the year 2015 witnessed a record-setting launch of three to four startups a day but astonishingly enough, the second quarter of 2016 saw a lot of layoffs and shutdowns. One of the main reasons behind these shutdowns was lack of funds. “To ensure that we don’t run short of funds, we ensured that the employees who are selected had multi-faceted personalities, so that they can work in different roles when the need arises,” explains Manglik of EduGorilla.
The Right Product Fitment
Parking app startup Park Easy had a hard time getting customer response from India as Indians are just not interested in parking through an app at this moment. This is despite the fact that their app is the first-of-its-kind to utilise historic data and Artificial Intelligence (AI) in a parking application.
“The parking-through-app market is still very nascent in India though it has already become an area for competitive app building in west”, says Mahul Bhattacharya, CEO and co-founder, Park Easy. Park Easy faced many rejections before getting its pre-seed funding from Dutch accelerator Rockstart in October last year and now they are actively hunting for seed money.
Founders have to devise smart and quick strategies to make their products viable in the market. For instance, Park Easy needs lots of data to train their models for optimisation. “This is mostly data that other companies have and getting access to that data is difficult. We build AI demos to convince them to give us data that we can translate into good predictions,” adds Bhattacharya.
Picostone, India’s emerging home automation company, too suffered setbacks in their journey when a minor glitch in their design led to significant customer complaints. “Being a tech startup, our whole existence is highly dependent on our hardware systems and our biggest setback came from our hardware product. Since ours is a product that is wired into your homes, replacing each product deployed across the country looked like an uphill battle,” says Virang Jhaveri, CEO and co-founder of the company.
Jhaveri says they were quick to learn from their mistake and adapt to the market. They made their hardware more modular and restructured their testing processes which helped them resolve issues on time and improve the hardware testing.
The Right Set of Employees
Hiring is such a critical element that it is often one of the key reasons which can make or break your venture. This is something that rings true with Wild Voyager, an experiential travel startup. “One of the biggest challenges we faced during early days were in hiring the right people. We made hiring mistakes particularly by hiring freshers early on,” says Alankar Chandra, CEO, Wild Voyager.
For a startup, the first few employees should be ideal partners in the growth of the company who should later be made part of the top management. It is very difficult for a small founding team to manage multiple junior-level employees who are not self-motivated. But Wild Voyager made sure to undo their mistake by hiring vertical heads first on part equity who were strongly motivated.
The Cost of Entrepreneurship
There are lot of studies around how entrepreneurship disrupts social relationships and causes anxiety and near-debilitating depression among entrepreneurs. It’s a known fact that entrepreneurship is not a bed of roses and millennials are aware of its pitfalls. But, it is the excitement of treading into the uncharted territory that excites them. As one millennial puts it, it is the breakthroughs that we are more interested in than the troubles. As new trends emerge in the evolving Indian economy, young entrepreneurs are all geared up to show their commitment and passion for the next breakthroughs. Wading through the troubled waters is what they live for!