Struggling startups - What are the reasons?
When a few startups in India are making waves, a large majority are struggling in the fringes. Most of these startups will probably give up after a period of struggle. Venture funds have become choosy in startup funding after burning fingers badly.
Most of the startups could fare far better if they can avoid some basic mistakes. A startup is an innovative business, which should test a new idea. A startup should not be confused with a small business, which is a replication of an existing idea. Some startups may seek to enter market with some kind of product differentiation or customer segmentation, but they operate in markets that already exists.
Startups, on other hand seek to establish new markets. Startups have no existing models to replicate. Even copying an idea from a different country to India should be considered as a new idea as the business has to be carefully configured for Indian conditions. Detailed business plans, market surveys and customer focus groups often fail for a startup. Startups need to develop new business models and test it in markets which are yet to be developed. Specifically, there could be a host of other obstacles where a startup could trip over. In your experience and opinion what are the main challenges faced by a startup? more
Most of the startups could fare far better if they can avoid some basic mistakes. A startup is an innovative business, which should test a new idea. A startup should not be confused with a small business, which is a replication of an existing idea. Some startups may seek to enter market with some kind of product differentiation or customer segmentation, but they operate in markets that already exists.
Startups, on other hand seek to establish new markets. Startups have no existing models to replicate. Even copying an idea from a different country to India should be considered as a new idea as the business has to be carefully configured for Indian conditions. Detailed business plans, market surveys and customer focus groups often fail for a startup. Startups need to develop new business models and test it in markets which are yet to be developed. Specifically, there could be a host of other obstacles where a startup could trip over. In your experience and opinion what are the main challenges faced by a startup? more
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Doing business in India - A new business paradigm needed While issues discussed here are related mostly to startups, issues affecting small businesses are also no doubt important. I find one or two general remarks particularly interesting. One is that India is quite different from the western countries and therefore the concept of a startup is not well understood. The culture of doing business in India for many centuries has been very different. New ideas may not get easy reception. Though very valid and genuine, I find this true for all of the 50 or more countries I have been involved. Every country has a certain traditional way of doing business and when the new knowledge intensive paradigms are introduced there are bound to be friction on the way. I find understanding what a startup is, especially its specific nuances good way to start. For this, I will synthesise all the comments received in the couple of posts in a new post. (LocalCircles is not particularly good for long discussion threads). I hope the discussions are helpful to at least some of you. If you have specific examples of difficulties that you have faced in recent past that you find worth sharing - or could be shared without compromising confidentiality — we can dissect them to find the causes. In the startup world there are no failures — only accumulated experiences. more
May 07
Pivot or perish The experience of Rakesh MK is interesting. “My startup is unable to penetrate the big OE because in automotive supplier selection is based on legacy” and “there are warranty claims in any new order which will be a challenge to address by a startup even if the product is validated.” One thing to understand is that all good business ideas fail on the first exposure to reality. The startup has to quickly learn this and they make a course correction and go through the testing cycle again. Product validation is not important. What the startup needs to do is the validation of the business model, see whether there is a good product-customer fit. In this example the product may be vert good. But what is the use of a good product nobody want - in this case due to incompatibility with legacy equipment and warranty issues? Certainly, there is a clear evidence to mismatch between the product and the customer needs. In such a situation a startup needs to make a pivot -in other words do a course correction- and see how it can change the product specifications to suit the targeted customer segment. If that is not possible, seek another customer segment that could use this product. As suggested by the comment certain things are beyond the control of a startup, such as asking a major customer segment to change legacy systems or make adjustments to warranty conditions. After all, the incubants will have all such barriers in place to have a monopoly advantage. In a classical disruptive innovation situation the newcomer should seek a low profile or a nitche customer segment, which the incumbent will also be glad to accede (due to perhaps low margins). If such pivoting is not done quickly, the startup is destined to perish. more
May 07
What if I don’t have a new idea? It is accepted that startup is a new idea. But some young entrepreneurs come to me with the this problem - I don’t have a good idea. Believe me there are no good or bad ideas. They are only useful ideas and ideas that don’t have immediate use. There are no dearth of new ideas anywhere the, but the challenge is to find an idea that can be of use to someone. That is the first challenge an entrepreneur has to face. One need not be highly educated or hold a large number of patents to have a new idea going. I know of companies holding hundreds and thousands of patents - and not a single of them could be transformed to a successful business. On the other hand I find patenting not only a costly affair, but also often not well suited in many cases - an excuse to burn some money. Every one has ideas and often they are half-baked. These incomplete ideas should collide with other half-baked and incomplete ideas to form a new complete idea. For this ideas should be open and let to collide with other ideas. There are many ways this could be done effectively. more
May 05
Putting all eggs into one basket is risky always! I suggest founders to have an alternate career to minimize the chances of getting into a desperate situation in chasing the success. Ideally, finding ecosystem players and start catering to them well in advance or parallel to building their own product is the best case. However, such engagements should be planned in such a way that it does not suck all their time or resources and it is not a distraction to the prime goals. more
May 04
Differentiate startups from small businesses We have a basic problem in clubbing together "startups" and "small businesses". Both are important and worthwhile businesses can be build through either of the models. However, the approach for startup vastly differs from that of a small business. Many startup flounder because this distinction is not well understood. In a previous discussion I initiated many comments were made, but they were mostly on small businesses - and many of them systemic issues like lack of government support, pervasive nature of corruption lack of public sector banking support to name a few (I have summarized the issues raised in that post; but will rise them again one by one as well). What need to be understood is that startup is a new idea, whereas small business is an implementation of an existing idea. If this distinction is made clear , a lot of difficulties faced by startups could be avoided. Business practices that work well for small businesses need not necessarily work for a startup. A "startup is a series of untested hypotheses - or just guesses", says Steve Blank. Assuming that a startup is a miniaturized version of a big enterprise is another mistake. A traditional business introduces a new product through a couple of well known hypotheses. For example, a traditional product development model starts with a concept, followed by its development, testing and market launch. Many startups fail because of adopting this very rigid model. A number of cases can be cited as examples. more
May 04
