A Model for Breeding Unicorns - Part-2

A Startup needs to survive….before it thrives….

Startups: The Odds of success!

Most Startups fail to take off, good many fail within an year, a few survive till the promoters run out of steam….

While there are said to be 500+ Incubators in India, most offer little to no funding. The chances of being accepted into a Y-combinator or Indian-Angel-Network is said to be about 1%. Of those who get accepted, less than 1% really do become long-term successful businesses.

I am aware the following questions have been asked and answered many times before; thousands of articles published, theories and magic formulas proposed.

Why do so many startups fail to take off? What exactly are the key constraints they face? And how does one enhance ‘the odds of success’ of every start-up? How do you turn as many startups as you can into long-term successes; enhance the number of Unicorns and Super Unicorns?

I know from my personal experience, most aspiring entrepreneurs still have the same questions. Whether they publicly admit it or not, those driving Central / State Government sponsored 50+ Startup-India schemes, also have the very same questions…

A deeper look at the problem below:

Profile of a typical Start-up Founder

• Given-up his job, Limited savings, can last a maximum of 1–2 years without funding.
• Usually comes up with an Idea, a little money and would need complimentary skills / partners
• Generally lacks the required tech / product building skills — needs a tech-partner.
• If the entrepreneur is a techie, would lack the necessary functional / marketing skills.

From Startup... To Give Up:

Issues with Current set of Incubators & Accelerators

Many of the current set of Incubators and Accelerators tend to be glorified shared-work-spaces — managed real-estate on hire, charged per-seat basis. In theory, the incubators are supposed to provide an environment to stimulate innovation, mentorship, funding etc., but in practice — all one gets... is a few seats, Wi-Fi, and a coffee shop.

I am not talking about Y-combinator type Accelerators; they have a different operating model altogether. They carefully select the most salable startups, and work with them for three months or so to bring them to best possible shape and refine their pitch. One keeps hearing a typical start-up has no more than 3% chance of being selected by Y-combinator, assuming they do everything right.

As most wannabe-entrepreneurs would experience, finding the right co-founder, and finding the right tech-resources to build a ‘minimum-viable-product’ are the two chief stumbling blocks for most start-ups from taking-off. A typical boot-strapped startup will have very limited capital, and hence ends up compromising on both the quality and the number of tech-resources being recruited. Good quality highly-skilled coders seldom join a start-up unless it is well-funded, one that ideally offers them market salaries as well as some equity.

The result, more often than not, is a “poorly conceived-poorly engineered product”, marketed not too well, that seldom finds funding beyond the seed-round. Most of the current set of Incubators and Accelerators offer little to no help with conceiving-engineering of the product, while some claim to offer providing support services like HR, Accounting, and sometimes Marketing.

A quick summary below:

Aside from the centrally sponsored 50+ Startup-India initiatives, a good number of State Governments in India have realized the importance of promoting the Startup ecosystem as a method of promoting entrepreneurial culture and more importantly for creating jobs for millions of graduates local engineering colleges churn-out every year. A few like Telangana have set-up their own Incubators.

(Ref-Related articles from Forbes:?Venture Builder or Venture Flipper?/?Five common questions about Venture Studios)

The Concept Of Venture Builders: Yet to gain popularity in India

Venture Builders or Start-up studios build several start-ups on a parallel mode on a factory model. Unlike incubators / Accelerators, Venture builders work on internal ideas, using internal teams, and internal funds. The graphic below) explains the difference and how the concept of Shared Venture Builders is different.

The popular start-up studios include Rocket Internet, Betaworks, and Le studio. Globally there are around 90+ Venture Builders / Start-up studios as reported a few months back. Couple of them have not-so-functional offices in India.

However, Venture Builders “sadly” are?not?for an average start-up entrepreneur. They?seldom fund outside ‘ideas’ — though it is not unknown.

In my experience, most Startups entrepreneurs give up halfway through the journey from idea to MVP (Minimum Viable Product), essentially because they cannot afford to employ a reasonably good team of developers at market salaries, and the second-rate team that they manage to bring-in can barely deliver a half-baked product; usually ‘a caricature of the brilliant idea’ with which they would have originally started.

If only there is?an Incubator that works like a Venture Factory, but onboards?every start-up entrepreneur with the right idea,?even if he comes with limited funds, and has no team other than himself…

If only…

Also read

1. The need for breeding Unicorns
2. Shared Ventured Builders: A factory model for breeding Unicorns

? Krishna Pera / [email protected]

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