Investment-first Startups.
There is a storm rising. The calm before it is non-existent and the calm after looks unlikely.
There is an unlikely trend that has crept into the Indian Startup Ecosystem and it may turn the balance upside down. I’m talking about Investment-first Startups.
While working at CIIE India, and being active in this space, I have recently (past few months) have been approched by several startups that believe that if they can get funded/seed money/grant, they will build the next Billion Dollar company. Here’s a definition of a startup by Investopedia: A startup is a company that is in the first stage of its operations. These companies are often initially bankrolled by their entrepreneurial founders as they attempt to capitalize on developing a product or service for which they believe there is a demand.
Don’t get me wrong, there is nothing wrong in getting funded or getting government grants, however, there is a need for founders to really start building solutions for real-life problems and stop putting the proverbial cart before the horse. This movement is also turning students toward the startup paths and are turning them into wannapreneurs. Often inspired by shows like Silicon Valley and TVF’s The Pitchers (albeit funny), the younger wave of entrepreneurs are often deluded by the glamour of entrepreneurship and startups, and often forget why they started/wanted to start.
So coming back, funds and money are not going to solve any of your problems when it comes to Value Proposition, Customer Validation and building products for users and not VCs. I recently had a startup approach me with a business deck that emphasized on market sizing and competition. It look me a couple of minutes to really see what he was telling me:
- The startup had done a top-down market analysis of the market and wanted to capture 10% of the global market.
- If Company ABC can do it with X amount of Dollars, all they need is x amount to do the same.
All in all, the startup did not have a mission, vision, problem, solution, prototype or target customer in their deck, just numbers that if they can reaise x dollars, they’ll be competing with the best in the industry. Quite astonishing.
To wrap up, entrepreneurs really need to sit down and figure out what needs to be done rather than raising funds from the get go. What is your opinion on this? I would love to hear!
