Think carefully before you answer. Because, this question is not about distinguishing good entrepreneurs from the bad ones. It’s also not about who among them has a Midas touch and who doesn’t.
Think carefully before you answer. Because, this question is not about distinguishing good entrepreneurs from the bad ones. It’s also not about who among them has a Midas touch and who doesn’t.
THE BEST WAYS TO GET YOUR BOOTSTRAP BRAND OFF THE GROUND
You are ready to get your brand off the ground. It’s an exciting time. There are going to be lots of challenges in order to get your voice out there. You are basically competing in two categories. You are competing with those who are already in your industry brand. You are also going up against the other messages that people are sending.
While most entrepreneurs think of VC funding as the most obvious way of funding their startups, there are actually many different ways in which you can fund your startup.
Getting Risk Capital I.E. Angel Investors Or Venture Capitalist – VCs
Angel investors or VCs are investors who give you capital in exchange of equity in the company.
Investors will be interested because you have a plan to address an opportunity well, not just because you have identified an opportunity that is interesting. That’s why, while having a good idea is certainly a good starting point, it is not enough for investors to invest.
Most entrepreneurs make the mistake of detailing out their product or service or concept. What most investors are looking for is your plan for building a strong, profitable, scalable, defensible business around that product or concept.
The success of an entrepreneurial venture depends entirely on the quality of execution. Many companies fail to implement their ideas well. Hence what investors seek in the plans they review is evidence that this team will be able to execute well on a concept that appears to address a potentially large market.
In my view, easier availability of early-stage capital than ever before, public celebration & adulation of entrepreneurial heroes, a well-deserved respect for entrepreneurism and also society’s willingness to accept failures in entrepreneurial ventures make it easier for younger people to consider entrepreneurship as a career.
I share below some observations that will hopefully provide some food for thought before you embark on your entrepreneurial journey.
A great idea of concept is not the same thing as a great business. Once you identify aconcept that has a meaningful value proposition to your potential customers, you have to think of how you can build a strong, sustainable business around that concept. Think hard about concepts like revenue streams, business model, go-to-market strategy, resource requirements, etc.
Don’t ignore challenges. Think hard about all possible challenges and then find a way to mitigate them. Entrepreneurs tend to overlook the challenges when they are driven either by a desire to be an entrepreneur or when a concept stokes their interest.
Write a business plan. It is YOUR plan for YOUR business. Often, entrepreneurs assume that a business plan is to be written only when you seek venture capital or debt. However, a business plan is nothing but your plan for your business. Create a document that will help you think through the steps you need to take in your entrepreneurial journey. And that’s your business plan.
Do not bother about teamplates. A business plan is not about templates or formats. It is an articulation of your story about how you plan to go from point A to point B and then onward to points C and D in your journey. And as you think through various aspects, including costs and revenues, the plan will start getting more robust.
Don’t focus on the excel sheet. Focus on the business model. A 5-year excel sheet projection is just that – an excel sheet exercise. It is neither a reflection of the potential nor a reflection of your ability to meet that milestone. However, an excel sheet exercise provides you a reference point to consider different possibilities of scale and help you plan the intermediate steps in reaching those milestones. I.e. it is not important to detail the calculation for a Rs.98.74 cr revenue by 2012 as it is important to be able to state “We believe we can be around a Rs.75 cr to a Rs.100 cr. enterprise by the 3rd year of operation and here is how we plan to go towards those milestones”.
It is ideal to gain experience about building and managing businesses before you create your own enterprise. Most successful entrepreneurs have built businesses after gaining significant experience across functions in different organizations. Though often celebrated, entrepreneurial successes of people with no prior work experience are a rarity.
Think big if the opprtunity exists. Your ability to scale should be restricted only by your aspiration and not by capital. In today’s environment, it is far easier to raise early-stage capital than ever before. If your concept is right, if the market potential is large and if you have the capacity and capabilities to deliver on that potential, you will find the capital to fund your dream.
One of the most common observations of investors, both domestic and foreign, is that entrepreneurs (especially in India) are afraid of thinking big. Entrepreneurs tend to think that it is prudent to be very conservative in your projections, especially if you have no past record to prove your scaling-up capabilities. However, unless you are keen on creating a business that is small, it will be important to provide a view of the potential and your aspirations, especially if you are seeking venture capital. Of course, the aspiration to scale has to be based on a validated assessment of the potential and backed by a strong, sustainable plan to deliver on that potential.
Make your own decisions but listen to what more experienced voices have to say. If a number of investors reject your proposal, it should be a signal for you to consider what aspects of the model seem to worry investors – relevance of value proposition, market potential, business model or your ability to deliver on the potential. Once you have identified the issue or issues, you need to revisit that in your plan and see what changes you may want to make in order to address any flaws in your plan.
Just because you do not get funded does not mean it is a bad idea or your plan is wrong. Often, especially with new concept, it is difficult for investors to take a bold step. Often entreprenerus are able to create new markets based on their insights and conviction about the opportunity. Others may not be able to see the vision as the entrepreneur is imaging it. Hence, just because others reject your idea does not necessarily mean that this is not worth pursuing. But do also consider the points of skepticism as it will only help you iron out issues that you may not have thought about.
If you still do not get funded and do believe it is a concept worth fighting for, you need to find innovative ways of building a proof of concept.
Find mentors and investors with belief in your concept. It is also important for you to find investors who have a strong belief in the domain that you wish to be in and convince them about your ability to deliver on that potential.
Importantly, don’t be a lone ranger. Connect with other entrepreneurs. Seek guidance. Ask those ahead in the entrepreneurial journey to share their experiences. Network and seek mentoring from accomplished and successful entrepreneurs.
To end, I would like to clarify that entrepreneurship to my mind is not just about starting or owning an enterprise. It is about an entrepreneurial spirit that inspires individuals to take ownership of an assignment of area of responsibility. It does not matter whether it is in your own enterprise or whether in an organization where you work or whether the organization is a commercial enterprise or a not-for-profit entity. Do well in whatever you choose to do. Do it diligently, honestly, ethically and with enthusiasm and commitment.
And THINK BIG.
As the advertisement of a spirits brand said ‘Its your life, make it large’.
This article was originally published in Inc42. Read the article here.
I have often heard senior professionals tell entrepreneurs that they wish they had the guts to leave their jobs and startup on their own. But I have yet to hear an entrepreneur, irrespective of whether their venture is doing well or struggling, tell any professional,
I wish I had your job.
The reason is easy to understand. Entrepreneurs start ventures largely in their areas of interest or passion or competence. It’s always a great feeling when your work is also what you love to do. A job may or may not provide that option. Entrepreneurship does.
But just doing what you are passionate about is not the only reason why entrepreneurs are generally more excited about their work. In some cases, rare though, you may get to do what you really are passionate about in a job too. The big difference however is that while in a job you are living either someone else’s dream or a company’s objectives, in your own startup, you are driving your own vision, goals, dreams and aspirations. Every small step in an entrepreneurial journey feels like an accomplishment and gives you the satisfaction of having reached a new milestone.
Note: Before I begin, I would like to clarify the difference between market potential and revenue estimate. I have often seen entrepreneurs use the two terms interchangeably.
Market Potential is about estimating the size of the overall market opportunity. It is a sum total of the potential revenues of all players who are addressing that opportunity, if all the potential customers were to buy. I.e. If you were selling ‘affordable’ golf kits for first-time golfers, then you could estimate market potential as follows (all numbers are indicative for illustration and do not represent actual market) :
Senior professionals, moderately successful entrepreneurs as well as high net-worth individuals (HNIs) have been expressing an active interest in investing in start-ups. Individuals who are keen to explore start-ups as an asset class, however, have to recognise that investing in them is a high-risk, high-return game.
They need to get comfortable with the fact that they could lose their entire capital in some of the companies they invest in, and that most of the start-ups they invest in may not succeed.
Anyone who has the ability to spare Rs 5 lakh or above a year — and not lose sleep over it — could look at co-investing in two-three start-ups a year, so that over a two-three-year period, they are able to build a good portfolio.
With a diversified portfolio, investing in start-ups can provide better risk-adjusted returns. Existing angel groups and investors typically invest in start-ups raising upwards of Rs 2-3 crore, as their members do not usually want to write smaller cheques.
A business plan is nothing but a plan for your business. It is an articulation of your vision on how the future will play out.
A business plan also articulates how the startup proposes to go from point A to point B, and by when. It also outlines the milestones and other dynamics (costs, resources, revenues, etc.) on the way from point A to point B. I.e. It is a plan of how the concept of your startup will alter the market, and how you intend to implement that disruption.
But at startup stage, there is no past data that can be used to make reasonably dependable predictions. Hence the vision of what might happen in the market with your concept is based on assumptions that you have made based on your conviction and your insights. Even in more established companies, there is only so much predictability you can bring into a business plan based on past data. How in-market dynamics may change is an unknown, and business plans even of larger, established companies can and often do get disrupted.
Some of the assumptions you have made will play out as assumed, others will not. Nothing surprising about that. Why then is it important to make a business plan knowing that what happens in the market is most likely to be very different from what you planned for?
In the context of startups, metrics are parameters used for quantitative assessment of performance and progress of a venture. If goals are about where to go and strategy is about how to go there, metrics are about tracking progress of your journey.
Startup phase is about discovering what works and what does not. Scale up phase is about replicating what worked. For companies, especially startups and early-stage companies, metrics help founders identify what is working and what is not.
Importance of metrics for startups
They are important because in your entrepreneurial journey, you don’t want to discover at a very late stage that you progressed well, but in a different direction; or were going in the right direction, but at a different pace than estimated.
The journey of a startup is about making certain assumptions about what will happen once you launch your product or service in the market, and doing several experiments to ascertain if those assumptions are valid, and what is working and what is not working around the assumptions.
For example, If you assume that 1.5 per cent of all registered customers will buy, you first need to track if that is indeed the case in the market. And whatever the outcome i.e. whether 0.5 per cent registered users buy or 3 per cent users buy, what you need to know are the reasons for the outcomes so that you can avoid what did not work and replicate what works.
Success of a startup is NOT in executing a plan well, but in adjusting plans efficiently, appropriately and effectively, in order to go in the direction the venture was intended to. Metrics provide early warning signs – whether good or bad. It helps you adjust your plans based on quantifiable data on what impacts the outcome. Metrics help you make better-informed decisions in making adjustments in your plan.
Some myths about metrics – It’s not always about improving your metrics
1) Performance does not improve with scale. For example:
2014 was a defining year for the Indian startup ecosystem. Compared to the rest of the decade, a number of significant events and activities had changed the very nature of the startup world. Companies like Flipkart,Snapdeal, PayTm, Zomato, etc had redefined ‘scale’ and investors had started placing big bets on them. These companies darted ahead of the pack, to not just dominate their markets, but to grow it too. Of course, they were helped by a conducive environment – mobile phones, internet connectivity etc – but they also built infrastructure, people and processes that could handle a different order of scale than what they themselves could have imagined a few years ago. These startups demonstrated the potential and the competence to build world-scale companies and created new goalposts for entrepreneurs to aspire for.
As a result of e-commerce, a number of enabling technology and service companies started becoming more meaningful. Analytics, online engagement platforms, delivery companies etc found a much larger market to address their business case, and therefore their investment-worthiness became stronger. What remains to be seen is how effectively the e-commerce industry will retain customers once the discounting era is over and customers have to buy on the fundamental value proposition of e-commerce i.e. ease of access and choice. We may see some changed market dynamics at that stage, and the transition phase may throw up some new, unexpected leaders.
Only a very few aspiring entrepreneurs from among 1000s are able to convert their ideas into a business. And one of the key reasons for this is the lack of access to capital that is required to start something new.
Out of 1000s of investment-worthy startups, less than 300 are able to get initial capital in India.
The present environment is very conducive for people to think of entrepreneurship as a career option. Entrepreneurship cells, incubation centres in colleges, boot-camps, hackathons, and other forums for entrepreneurship promotion, as well as a vibrant media for startups – all have inspired very few to become entrepreneurs.
Angel investor groups, accelerators, and incubators get over 5,000 applications every year. Nearly 10,000 startups send their profiles to media houses every year. While quite of few of these large numbers may not be serious contenders, there is a significant number of aspiring entrepreneurs with the competence, commitment and concepts that can become strong businesses. And quite a few of these can become profitable investments for angel investors.
Yet, only about 300 or so of these aspirants are able to get initial capital to get started. And mostly those, who require capital between Rs 2 to Rs 5 crore range. That’s the declared ‘sweet spot’ of most angel investor groups and VCs who participate in early-stage deals.
Why are there less than 300 early-stage investments in India?
VCs and Angel investor groups are unable to do smaller deals because their members do not want to write smaller cheques, and the efforts required to review, process and close a Rs 50 lakh deal is as much as it takes to close a Rs 5 crore deal. The largest angel investor network in the country does less than 20 transactions in a year.
The number of startups whose funding requirements are less Rs 50 lakh is significantly higher than the number of startups requiring Rs 2 to Rs 5 crore. In fact, many a businesses can get going with just Rs 25 lakh.
Significantly, If we don’t find a way of funding 1000s of deserving entrepreneurs, we would end up frustrating that segment.
(My response below, to the above question on Quora)
Failure has many dimensions in the context of a startup and the founder of the startup.
For example: Failure could mean that you have not been able to achieve the numbers (revenues, or customers/users). However, it can still be a fairly profitable business at a lower scale than what you had estimated. If you have raised capital from investors, they may see a venture that does not scale as a failure. The founder may not.
Likewise, failure could mean that while the concept was good, the team was not able to execute well, or they ran out of money because they were not able to raise capital. In this case, the startup SHOULD NOT have failed, but it did not work out because of inexperience or lack of execution capabilities.
So, when people generalise that 8 out of 10 startups fail, it generally means that 8 out of 10 startups are not able to go to the scale or in the direction they assumed it would. It MAY or MAY NOT be a failure for the founders.
Also, it is important to recognize that very few startups fail because their product was bad. They usually flounder because of issues on areas like execution, processes, capital, etc. I have seen many, many founders start off without even talking to potential customers. This is usually a recipe for a disaster as your own views may or may not hold good in the market.
My belief is that while the number of unsuccessful attempts are quite high from among the ones that started off, the percentage of failures comes down significantly among those who had put good thought into their concept and business around the concept BEFORE starting off.
If your question was out of fear of failure, I would urge you to think again. Plan your venture well, understand the market and then take the leap of faith. Check the LinkedIn status of failed entrepreneurs. They either get started again (and investors like to back them) or they get good jobs (corporates like failed entrepreneurs because of the enterprising spirit and the learnings they bring with them). So, while your venture may not succeed, you are unlikely to fail if you pursue the path of entrepreneurship.
(My response below, to the above question on Quora)
Different investors participate in different stages of a venture. Angel investors invest at the very early stages – when the founders only have an idea or when the idea is being or has been developed into a prototype. They provide enough capital for the idea to be tested and proven in the market, so that another set of investors can bring in more capital after the model is proven and when the venture needs more money to take the proven model to a wider base.
What is a brand?
A brand is a set of values that are associated with a company or product or service. E.g. dependable, reliable, fast, elegant, expensive, high-value, etc.
In effect, a brand is the sum total of the perceptions about your product or service or company that different people have. These perceptions are a result of the brand’s look & feel and communication, including PR, as well as the customer’s experience with the product and the service. All of these have to work in sync for a brand to establish positive equity with all stakeholders.
What is brand management?
Simply put, brand management is about managing the perceptions about the brand that different stakeholders have.
During my talks at engineering colleges and business schools I often come across students who are clear that they want to be entrepreneurs, but they cannot do so immediately because they have student loans or other financial commitments to take care of. And that is a perfectly understandable reason for deferring your entrepreneurial ambition.
My advice to such aspiring entrepreneurs is to keep their entrepreneurial ambition as the key focus on their lives. Sure, go ahead and take up a job because you need to. BUT NO MATTER HOW MUCH SALARY YOU GET, KEEP YOUR EXPENSES AND LIFESTYLE WITHIN RS.25000 – RS.30,000 (USD 500). Continue reading “My advice to students aspiring to be entrepreneurs”
Startup Next, the global and top pre-accelerator program – backed by the likes of Techstars, Google for Entrepreneurs, Global Accelerator Network and Startup Weekend – is coming to New Delhi !
The Startup Next program is designed for startups who plan to apply to accelerators or are pitching to investors for funding.
Startup Next is an intense mentorship program consisting of weekly sessions (one session in a week lasting three hours) for five weeks. The program has a structured curriculum and in-depth engagement with one-on-one mentoring, designed to help startups build the foundation of scalable ventures.
Entrepreneurship teaches you a number of things about life, in general. It is an immensely satisfying journey, even if you do not reach your intended destination. However, the journey is often very challenging and it takes a lot of patience, persistence and perseverance to succeed. And unless you have the passion for what you are doing, finding the other 3 Ps within you becomes challenging.
I advice aspiring entrepreneurs to not get taken up by stories of instant success. Those are rare. Instead look at the 1000s of others whose ventures did not succeed. Or did not succeed as aspired.
Even those who succeed, often a lot longer than they had planned for, and it is often tougher than they had imagined. What sets the successful apart from the ones that gave up are the 3 Ps that I outlined above.
Over the last 5 years or so, India has seen the emergence of a number of private and government-supported accelerators and incubators. Many of them have run a few cycles and have now fine-tuned their models and programs. Quite a few of them have very good and solid programs.
Yet, if we were to measure the success of start-ups from all these programs in terms of them raising growth-capital, the report card is not very encouraging. If some industry numbers are to be believed, less than 1 per cent of start-ups that go through various incubation and accelerator programs in the country receive institutional funding. This number probably includes incubators in academic institutions, most of which have not been able to run meaningful programs to help entrepreneurs build fundable ventures.
Why is this number so low? Why the start-ups who join accelerator or incubator program with the hope of getting mentored for accelerating their journey towards growth are not able to get growth-capital? Continue reading “Guest Post – Why less than 1% of incubated start-ups get VC funding”
Apart from the global macro factors and a drive towards renewables, the Indian government is making some solid statements that indicate their thrust and seriousness about the renewable energy space. In fact, the Renewable Energy Minister Piyush Goyal has declared in a statement in The Economic Times India’s intent to be a world leader in this space in 4 years. That’s huge.
Given these statements, it appears that the government will create policies that create a more conducive environment for entrepreneurs to create ventures in this sector.
While several opportunities exist, one has not seen too many entrepreneurs considering it. Especially at early-stage, there are very few entrepreneurs creating startups addressing this segment. Continue reading “Why Startups should assess opportunities in the renewables energy sector”
Prime Minister Narendra Modi will kick off the ‘Make in India’ campaign on the 25th of September 2014. About a 1000 global and Indian business leaders are expected to attend the function.
The government is making a huge statement, and leaders of the business world are taking serious note. This is because the government appears to not just declare intent, but give the confidence that it will support the intent with enabling policies and create an environment for a supportive eco-system to evolve.
For an industry or sector to flourish and become sustainable in any geography, an enabling eco-system is necessary. Things cannot work in isolation. In the technology hotbeds like Silicon Valley and Bengaluru, there is an eco-system of technology companies, service providers, successful entrepreneurs, mentors, accelerators & incubators, co-working spaces, legal firms, investors and potential customers.
Likewise, for India to become a global manufacturing hub, which is the declared intent of the Narendra Modi government, it will need many supporting pieces to come together to create a conducive environment for manufacturers and customers to do business in. Continue reading “The ‘Make in India’ program will create a range of entrepreneurial opportunities”
The founders and teams of any startup are most likely to have more things to do than they can manage in a day. There is always likely to be more activity, primarily because in a startup, things are constantly evolving and changing, than there are people to execute those activities.
In such a scenario, time management becomes a critical skill that entrepreneurs have to learn and implement in their day-to-day life.
But fret not! All it needs is a little organising and prioritising and some serious time management. I came across this article written by to Alex Cavoulacos, “One founder’s best productivity trick: Save time and do less”.
I agree with Alex’s opinion. She hits the nail on the head when she says that – knowing what not to do, and what to stop doing, can make a huge difference in your happiness and productivity. Here’s what I would like to add… Continue reading “Learning Time Management is Critical for an Entrepreneur”
Employee Stock Options (ESOPs) is a powerful tool available to startups to attract as well as retain talent. However, often I have seen it being undervalued or under-utilised by startups.
ESOPs are shares that are given to employees so that they can enjoy significant monetary benefits if the startup is successful. Since the monetary value of selling equity of a successful startup can be several times higher than the salary, ESOPs alter the risk-reward equation and makes it attractive for potential employees to consider joining a startups, which otherwise at just salary levels may not be such a lucrative option.
ESOPs are especially useful when startups or early-growth stage companies have to hire senior talent with experience, and they don’t have monies to pay full market salaries.
In fact, investors too encourage founders to carve out an ESOPs pool – often between 5 – 20% of the equity depending on how well balanced the existing founding team is. If the team has gaps that need to be filled in, it is important to carve out a higher percentage of equity, as that will allow you to hire the right resources to complete the team.
As an entrepreneur, it is important for you to communicate the ‘value’ that your enterprise is likely to create and thus explain to potential employees the potential value of the stock they are getting under the ESOP. If the company is successful, the stock can provide a significant upside to employees.
Not just in hiring, but ESOPs can also be a very useful retention tool. That is because a well-structured ESOPs plan ensures that the equity is vested over a period of time (i.e. it is given to the individual in instalments spread over a period of time), and if the startup is successful, the individual is incentivized to stay on even if there is a matching salary offer from another company.
iSPIRT Open Ecosystem Questions(OEQ) Series. The conversation around this exciting session was lead by Sanat Rao (iSPIRT) and the speakers were Jay Pullur (Pramati Technologies), Sanjay Shah (Invensys Skelta), Pari Natarajan (Zinnov), Karthik Reddy (Blume Ventures) & Vijay Anand (The Startup Centre).
Sanat initiated the conversation with an observation that it was only the bigger exits that are picked up by the media. Smaller exits do not get any media attention at all. , We all hear about the big bang “home runs”: WhatsApp sold for 19 billion USD to Facebook, Google acquires Nest for 3.2 billion USD, etc. However, studies show that 65% of VC funded companies in the US return 0-1x to their investors. Even among the remaining 35%, the exit valuations are relatively small: since 2010, the average M&A deal size in the US/Israel is 100 million USD. Only a small 0.1% of VC-funded companies are home runs (50X returns). And not just in India. In Israel too, from 2010-14, out of the 88 exits, two deals on Viber and Waze accounted for a whopping 25% of the total M & A value.
Given these statistics, why do we promote the myth of a multi-billon $$ exit? Why don’t we recognize the value of these smaller exits? Should we not be promoting and helping product startups to find an exit at an earlier point in their lifecycle, rather than treating these exits as a worst case scenario? Continue reading “M&A: Why small exits matter? The big value of small exits (#iSPIRT-OEQ)”
On August 14th, 2014 iSPIRT, the industry enabler that is creating a vibrant eco-system for promoting, encouraging, supporting and enabling product companies out of India, organised a very useful online discussion on the concept of bootstrapping. Titled ‘Bootstrapping – Boon or Bane’, the discussion explored various facets of bootstrapping, including its relevance, benefits, limitations, and challenges.
Sharad Sharma, founder of iSPIRT kicked off the conversation with a very incisive observation that the startup community, largely driven by the media, tends to celebrate and showcase startups only when they receive angel or institutional funding. How true is that!!! There are a number of very successful and modestly successful startups, many of who are deserving of the praise and showcase, but they get reported about only when they close an investment round. (I am not sure if the media is to blame entirely. I suspect companies too reach out to media only after they have received an investment round, perhaps because they believe that funding makes the ‘story saleable’ for the media.).
Ask any investor who has engaged with 100s of companies, and they will tell you that the plans they begin with, are almost always never the exact plans that they eventually build their successful businesses on.
Failure is not a negative in the ‘Startup scenario.’ It merely means that some of the assumptions did not hold true in the marketplace, and hence we dumped it and we did something else. In that sense, the earlier conceived model failed, and we pivoted to a different concept; product; value proposition; customer segment; price-point; marketing plan; business model; sales plan; team or whatever it is that failed.
I therefore advice entrepreneurs to not fall in love with ideas but to fall in love with a problem. When you look at ‘owning the problem’ to solve, you can think of many different ways of solving it and try what seems to be the most suitable way, given your circumstances and the market. Then it doesn’t matter if a few ideas don’t work and you eventually have to try a different approach to solve the problem. Since the goal was defined as ‘solving the problem’, it is still a victory even if a few initial ideas fail.
I often get asked this question: “I have an idea. But I just don’t know what to do next. How do I start implementing it?”
It is not unusual to get stuck with the idea without knowing how to take it forward. Often the fear of having to manage operations, finances and staff is what stops people from getting started on their idea.
Having an idea is a good starting point. The first thing to do is to let that idea rest for a few days. Think about it every day. But don’t act on it. Think through all the positives AND all the negatives. Think of how great it can be. And also think about what could go wrong and how worse can it get. You will start seeing different aspects about the idea. Not all will be good. And that’s OK.
“Research is formalized curiosity. It is poking and prying with a purpose. ”
Zora Neale Hurston, American author
Scene 1 : A couple of years ago
You or your visionary team have a great idea for a new product!! It ‘feels’ like the answer to everyone’s problems! It will definitely be a big hit! So you get your creative heads, product designers, technical staff and experts all into a tizzy! The product must be ready in next 6 months! After hours and hours of hard work, there it is – to take the consumers by storm. You launch it with big fanfare!!
Scene 2 : Cut to the present
The ‘great’ and promising product was ‘great’ only on the drawing board! Your negative inventory is piling up; there are just not enough takers!
What went wrong?
The consumers just didn’t connect with the product or the price point was wrong or the brand personality did not appeal or the communication was not clear or the distribution was poor or the value-proposition was not meaningful!! There are a number of things that can have a very different response in the market, than you had imagined it. Continue reading “The Importance of Market Research”
Many people have ideas for a business. Almost everyone thinks of some idea at some point in his or her lives. But only a few individuals actually take the first steps to convert those ideas into a business.
To be an entrepreneur, one has to have the conviction and belief in the idea that one is pursuing. Unless you have that conviction, you are unlikely to take the first step required to convert that idea from a ‘thought in your head’ to a ‘venture in the real world’.
Once you have a thought or an idea about something that can become a good business venture, you have to think hard about the potential of that concept, assess the merits and challenges, and once you feel convinced enough, you have to be able to take that leap of faith to go and implement that idea in the marketplace.
Many aspiring entrepreneurs tend to test and research, and retest and re-research their idea or concept and depend only on the research findings to pursue or drop that idea. Often, research cannot give you the answer to whether an idea will work or not. Sometimes, entrepreneurs have to take that leap of faith and that gut-feel to make a concept work. Entrepreneurs however, should NOT be blind risk takers. Successful entrepreneurs understand the risks and take necessary steps to overcome those risks and challenges. Planning well is what helps them deal with the risks and challenges better. Others who give up often do not think hard enough about addressing those challenges. They get scared of the challenges because they do not think of solutions.
Entrepreneurship requires entrepreneurs to pursue their vision often in the face skepticism and negative feedback on their ideas and plans from many individuals. Often these individuals who are skeptical of the plans are well meaning and may give an honest feedback based on their own assessment of the risk-reward dynamics of that idea. But mostly, entrepreneurs are able to spot opportunities where others see problems.
Entrepreneurs see opportunities before others see them. Entrepreneurs catch the wave on the up…. That’s why successful companies often have the ‘first-mover advantage’. Others, who follow or are me-too copycats to successful first-mover concepts, often have a much harder road to success, if they do succeed. Entrepreneurial thinking and aptitude is about seeing the ‘signals’ where others see ‘noise’.
The ability to take that leap of faith AFTER assessing the potential and understanding the risks allows entrepreneurs to be confident and optimistic about the opportunity and potential of an idea. Optimism and confidence create positivity and enthusiasm, which infects others around them. It helps entrepreneurs build teams, get early adopters, and often, helps them get investments from investors. (It is not without reason that entrepreneurs who are successful are good presenters and can tell their story with conviction and passion.)
Go ahead. Think hard about the opportunity around that idea and what you need to do to make it work. Seek mentoring. Get guidance from those who have more experience in operationalizing a business venture. Plan well. Execute efficiently. Be confident.
You will never fail. Either you will win or you will learn. And this learning will help you prepare even better for the next journey of your life. Go ahead. Take that leap of faith in your idea.
The general rule is that out of 100 new ventures, perhaps 50-60 will shut down by year 2, may be 20-30 will survive with their heads above water or at a lower scale than the aspiration was. May be 8 – 10 will be reasonably successful and may be 1 or 2 of these 100 startups will be ‘very’ successful.
Just because a venture is not successful or shuts down does not mean that the entrepreneur has failed. It just means that this particular venture did not succeed. Simple.
Of course, aspire for success. But remember, there is no shame in having tried and not succeeding.Like everyone will advice you not to let success go to your head, remember to not let failure deter you.
Understand and evaluate your appetite for risks. Not just financial risks, but opportunity costs as well. Evaluate what the upside of success is and measure it against the risks. See if it makes sense.
More importantly, DO NOT start up on the basis on just your enthusiasm. Validate the concept with your potential customers/consumers, seek mentors who can guide you, seek advice and guidance in building a good business pan and see if the concept has a good business case.
Remember, entrepreneurs are NOT people who take unnecessary or unplanned risks. Good entrepreneurs make efforts to evaluate all the risks associated with a venture and take necessary steps to mitigate the risks.
Yet, you can fail. And it is all right. Plan for how you will deal with failure too. Failing or shutting down is not the end of your professional or your entrepreneurial journey. It just means that there could be a diversion from the originally intended path.
Angel investors participate in the ‘concept risk’ stage of the venture. i.e. when neither the idea,product/service, business model, operating plans nor the assumptions are proven.
It is also the stage where the startup is most likely to be resource starved.
Angel investors should assist the founders with everything they can, to help the company go past the concept risk stage. Often, this could also be about providing guidance and perspective to help entrepreneurs take the right decisions. In many cases, introductions to potential customers; partners;employees and mentors etc. at this juncture of the journey is invaluable.
Often angel investors have to be the adult supervisors, alerting the founders when they seem to go off the mark( read as ‘ strategy’) or when they are trying to do too many things rather than focusing on what is important.
When a startup is not doing well, angel investors have an enormously important role to play in keeping the founders motivated. Failures and challenges in a startup can be demotivating and challenging, making you feel terribly lonely. A good angel investor can make a big difference by just saying “Its okay.. lets focus on what’s do be done”. Often, testing times are tests of character too.
I often tell entrepreneurs that even when they do not need the money, they should go and raise some funds from good angel investors. Because, it’s not just about the money, it’s about the investor’s involvement in your journey and their support when you need it, that counts and contributes to your success story.
Whatever the split, assuming that equity should be split equally between all founders is an incorrect starting point.
Each team will have their own dynamics, and emotional as well as rational reasons to decide the split of equity between them. I would urge them to consider the following factors:
Here’s a link to a neat tool to help you decide on the equity split Co-Founder Equity Calculator
How well you are doing as a company is really not dependent on benchmarking versus how others in the same space/stage are doing. Each company may have chosen a different path towards similar goals, or it is also quite possible that the goals and aspirations of the companies could be very different.
Hence, how well you are doing or not doing, is to be evaluated against what your own plans, goals and milestones were when you started the journey.
Not for one moment am I suggesting that you need to look at your original business plans as THE only road to follow. I have rarely seen any startup or early-stage company come even close to what their original milestones were in their business plans. Your original plans are merely a roadmap that you define to think through the different aspects of your startups journey. Once you hit the road, you have to make adjustments according to the weather conditions i.e. market realities. In some cases, the direction itself may have to be altered or changed all together. And it is perfectly all right to do that as long as it is a well-thought out plan, after taking into consideration all factors that may help you take a good and informed decision.
Therefore, if you have a well-defined business plan with your goals and milestones towards those goals well laid out, it should give you an indication of whether you are going in the right direction and at the right pace.
For your business, you need to identify what the key drivers are and that will give you leads on what you should measure your progress or success against. Each business will have its own set of key drivers or aspects on which success or failure will depend. Sales/revenues is usually just one of the indicators to measure the progress of a success of a startup. Other factors could be things like gross margins, employee efficiency, brand equity & brand familiarity within the relevant audiences, cost of customer acquisition, maturity of processes, proving of the business model, organization structure in place (or getting into place), key people on board, attrition rate, quality of contracts and respect of partners/vendors, etc. are all examples of indicators of what can be tracked to check if you are doing well as a business.