General Theory of Indian Startups
As I pen this post down, more and more people are getting exhilarate about the startup culture that has seeped into the mainstream India. People are becoming more creative and are striving to solve more problems with sustainable solutions while trying to make a business around it. If they succeed, the industry is disrupted until the next innovation comes along and does the same again. And if they fail to make a ripple, the failure is worn with a pride; a symbol of doing something unconventional. So what if I failed, I at least tried. As the startup culture starts to usher into the Indian youth, it heavily entices the people to work in it and why shouldn’t it? A cool and hip startup culture without the dress code is showing the door out to the conventional sitting-in-a-cubicle 9 to 5 jobs and one cannot avert their eyes from the sizable amount of paycheque that comes with it.
How do you define a startup? In general words, it is a group of people trying to find a sustainable solution to a problem without a guarantee of success. If and when success happens, it becomes a company. Starting a business is hard and not for everyone; I keep coming back to this statement by Elon Musk, well, technically by Elon’s friend, “Starting a company is like eating glass and staring into the abyss.” Enduring 10+ hours a day of work in making and strategizing a product, running on every street in the city to market it and going to stores and people to sell your product puts your pain threshold to a test. Some break and shatter into millions of pieces but some collect those pieces and try again. If you are doing what you enjoy, you start to love the entire process. You celebrate when you see a little jump in traction coming your way. If you are lucky enough, early adopters will notice you and you will have a shower of relief for the first time in months. But going by what a typical CEO of startups would do; instead of product, raising a capital will now take the front seat, quick meetings are set up with investors, founders try to push for maximum capital which puts a high price on their valuation regardless of the kind of VC coming onboard. Going by the school of learning I come from, I believe you should bootstrap for as long as you can and expand strategically. Borrow from parents or friends who believe in you. Pulling investors when your startup is just on the ground floor is foolishness. And utter foolishness is, taking a loan from the bank to start a business.
We regularly come across news where some startup raises X amount of capital in its Seed/Series A/Series B round and you dig a little about the startup and sometimes you utter in disdain, “Why the heck was this funded?” FoMo (Fear of Missing out) hits VCs hard. For some reason, this reminds me late 90’s Dot-com bubble. Internet was relatively new and was gaining a momentum and people saw an opportunity, so they started pouring their money into the internet companies like snowfall in Antartica. Raising capital has become more easy and accessible now; if the CEO plays it right, “He/she walks away with a hefty amount and we all know what happens with that amount. Why am I writing this post with a cynical mindset? I asked myself while I was drawing a rough draft and realized it is because people sugarcoat the current state of startups ecosystem in India. The situation is brutal, especially in the food sector where the ROI is as far away in future as the first manned mission to the Jupiter.
With an initial traction and raised capital, the founders start believing this is what success mean. This dark cloud of belief brings a gradient of change in their attitude towards people and their own business. Founders start losing their focus and eventually end up hammering down their own business into the ground. Burning their cash for all the wrong reasons and in all the wrong places. Then how do you suggest investing should be done Prateek? I am not an expert but I believe investment should be done in technology that you are working on, refine it, innovate it. Keep a tight lid on expenditure, remember it’s not your money you are burning, treat it well. A fancy office in a posh location won’t give you a bump in your users or services. Invest in people that are working with you, those who chose to believe in your vision. Incentivizing them timely will not only motivate them but will also make them feel respected. At the end of the day, it is they who will help you shape the future of your startup.
I recently met with a couple of people in a bar; one who worked at a food startup and another one was from the real estate space. What was the centrepiece that brought all of us together for a drink? We all were let go due to either cash inflow problem, because business model didn’t quite translated from paper to reality; high burn rate, spending so much on needless marketing, premium location for workspace, drawing hefty salaries and other luxuries, and over-hiring, that was done mindlessly when new rounding of funding was raised only to later realize, “Oh snap! We have little cash and not so many people are required for the job.”
Sometimes CEO lacking basic etiquettes has left me flabbergasted while sometimes learning about executives dropping sexual innuendos on female employees has taken me to the new depths of dumbfound-ness. Stories like these are not unheard of in this business and such behaviour leaves a bad stain on the entire community. The culture of a company is a reflection of the ideals that its founder(s) hold.
Starting a company is hard and it is even harder to keep it alive. Constantly striving for a work-life balance while hoping tomorrow will be better than today has its strains. I hope India in near future can position itself as a place where brilliant companies are formed and not just a place where “promising” startups are born.