The learning curve of Indian Startups

Being connected to academics for 15+ years, I have tought almost 5000+ future managers. A very large number of students are opening their startups or are joining existing startups after graduation, post graduation. The number of startups are growing at exponential rate. A report by IBM Institute for Business Value and Oxford Economics found that 90 percent Indian startups fail within the first five years. India is struggling to become the third-largest startup ecosystem in the world but it is leading towards more unemployment, as more and more startups are getting shut down. There are various reasons for this failuer rate and I am trying to mention a few important ones. 

Every startup is driven by the market where there are unsolved problems or the gap which a new idea can fulfill and make decent money in the process. But identifying the correct market and problem is not easy. You need to go out, talk to people before you start building your product. Research your industry, it is easier and cheaper to make changes in the idea stage.

Business model is the skeleton of every business and dictates the commercial and economical viability of your business to make money and value. Some companies are so much involved in the solution that they tend to overlook the business model. Analyse if your customer acquisition strategy is scalable. Your Cost to Acquire Customer should ideally be recovered from customer within 12 months. Practically estimate your sales cycle and return on investment. Management is most of the times the heart and brain of a company. Poor management can be exemplified by weak strategic decisions, communication gap between management and team, little or no work on product market fit and having bad hiring systems.

Cashflow keeps the business alive, no matter how passionate you are, how many users you have or how great your idea is, you still need to pay dues to your employees, marketing agencies and clear your bills. If funds are required the CEO and Management should work well in advance to explore all the funding options and secure funds before it’s too late.

A great product can fail if it is not backed by adequate marketing efforts, Nowadays marketing is not limited only to making more and more people aware about your product’s features.

Founder(s) play an important role in success as well as failures. Founders are idea people, and they mostly get carried away with ideas. In serious businesses, this could lead to distraction and waste of resource. Some startups try to expand their offerings too soon or begin to focus on many of things at a time. Micro management can also be one of the reasons for lost focus. Founders and other team members are humans too and all the humans have emotions and personal life, but when it comes to building a businessself-centered thinking and overly emotional behaviour could lead to conflicts, which finally destroys company culture, its value and hence lead to ultimate failure. Founder conflict is the last thing any startup or its investors want to see. In case of founder disputes, the founders agreement, the shareholder agreement should be in place in advance to deal with matter professionally. Make sure you have a work-life balance.

With the startup boom, everyone wants to utilize the opportunity, but only a few are succeeding. At the starting stage of startup boom, there was a dearth of experienced mentors and trainers. Hopefully, with the growing expertise on startups, and with the increasing government support, success rate of startups is more likely to increase in India.