5 must haves for a start-up to flourish

18 Aug, 2016 / mvsblog

Guy Kawasaki, Alltop Co-Founder and Entrepreneur, once said, “Ideas are easy. Implementation is hard.”

It is the spirit and the enthusiasm of the entrepreneur that turns those ideas into real businesses and India is not short of ideas. In fact, by 2017, India will be the third largest base for start-ups in the world. It is estimated that the number of start-ups in the country is expected to nearly triple from 3,100 in 2014 to 11,500 in 2020. The National Association of Software and Services Companies (NASSCOM), the premier body for IT industry, is predicting that the pace of start-ups will increase from three to four every day in 2015 to six to seven by 2020.

However, not all is hunky dory. The first six months of 2016 saw the closure of 18 start-ups, while in 2015 14 start-ups downed the shutters. Start-ups have also been in the news recently for withdrawing their job offers across campuses. With venture capitalists tightening their purse strings and governments relooking at regulations governing start-ups, these are indeed challenging times for entrepreneurs. That begs the question: What do start-ups need to do flourish in such a dynamic environment? Entrepreneurs need to keep in mind five factors when they set out to establish their companies.

They are:

Defining problems & solutions

The birth of a start-up idea arises from trying to solve real-world problems. However, many a time, start-ups themselves find it difficult to analyse the problems they face and consequently the solutions that they often come up with always falls short. This results in poor team management, bad products and ultimately failure of the business model. A well-defined problem often contains its own solution within it. By defining problems correctly, you make them easier to solve, which means saving time, money and resources. Unfortunately, no business school will teach you this very important skill. Hence, it is essential to keep an open mind and ask the question “What problem am I solving?”

Execution despite ambiguity

There will be many googlies coming your way and it is critical to keep one’s chin up. There might be negative reviews or comments about how a start-up operates, but it is essential that the internal team never loses sight of their goal despite the challenges. The challenges could be regulatory (like the ones taxi aggregator apps Ola and Uber are facing) or they could be a product of problems between the founders and the investors (like the Housing.com crisis). The departure of Housing.com founder Rahul Yadav and the resultant issues surrounding the start-up despite the many changes at the top did not push it to an abyss. They have restructured operations, worked on building blocks and are on course for $10 million revenue, thus showing that it is possible to overcome hurdles.

Willingness and openness to change

A Taoist guidance to practical living states, “If a branch is too rigid, it will break. Resist and you will perish. Know how to yield, and you will survive.” This is so true for start-ups. The flexibility to adapt and change as per the consumer’s requirement is the key to start-up survival. The sales team has to keep a close watch on the marketing window and assess any core issues that might lead to disgruntlement among the customers. In the middle of last year, Flipkart-owned Myntra decided on becoming an app-only marketplace. The customers were not amused. Keeping their interests in mind, Myntra re-launched its mobile and desktop websites this year.

Reassess core capabilities before scaling

A start-up should strengthen its core capability and capitalize its business before scaling. The strategy based on core competency is part of a broader strategy involving integrating technology, know-how, value & culture that will unleash superior value for customers. However, scaling too early can cost a start-up dearly, like PepperTap. PepperTap was among the Top 3 companies providing online grocery delivery service since 2014. The company claimed to have shipped 20,000 orders each day in December 2015. However, in April 2016, they pulled the plug as they failed to identify three big problems: Lack of integration with partner stores, continuous discounts and costly logistics. The business, which was expanding quickly, was losing cash on every order and profitability became an arduous goal.

Assessing and managing funding needs

One of the biggest decisions facing any entrepreneur is finding out what kind of funding one will need. Should you crowdsource it, or be a bootstrapped company? Or should you approach venture capitalists? Whatever the approach, remember this: The sooner you involve investors in your venture, the bigger their control and ownership per dollar. However, money alone will not help; you need to figure out how to use it wisely. Look at the food tech company TinyOwl. It raised $27 million from marquee investors like Sequoia Capital and Matrix Partners, but messed up majorly on hiring & retrenchment leading to the unsavoury hostage drama. Beware of the “shiny object syndrome”—where businesses expand in a number of directions that do not align with its core offering. TinyOwl wanted to do a Grofers-like business and that caused it to burn a lot of money on logistics. Make sure you have something of value to offer before you ask for funding.

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