Sunday, May 15, 2016

On Start-Ups & Funding

[Disclaimer: The thoughts in this post are my personal opinions derived from the in-person and virtual interactions with start-ups & potential start-ups, publicly available data, experiences & observations as a user/customer of many businesses, articles in various media that I keep reading, and the knowledge of the market and the consumer that I have developed over years.]

How this word 'Start-up' took a huge leap in a very short span of time is beyond imagination. How many of us would know friends of ours from a decade back retaliating that they didn't want to be the heir of their ancestral business. All of a sudden the phrase 'meri dukaan' has garnered so much of valuation for itself, its startling!

Starting one's own business is very easy but running it can take a toll on you. And in the current times it is exponentially more difficult than running our father's dukaan, with all the hype that the idea has attracted. I joined this app called the StartApp started Sharad Seth. Everyday, on that app, there is at least one new message on a new idea or a new ask for funding. There is a huge amount of enthusiasm to just START UP. However, there are a few things that are worrying:

1. Lack of focus on the user: Most of the businesses have huge dependencies on their website/app. Take all the websites started in the last few years and check how many of them are mobile friendly. I am quite disappointed that apart from the key big ones and some niche ones, none of them are user-friendly on mobile devices at least. In the current times, there is a very high chance that a user would encounter your website on a mobile device first. In such a case, one needs to focus on building a seamless mobile experience first, then focus on the desktop one; not to say desktop is not important.
It is a harsh reality that the user is critical and has very high expectations. A few basic but extremely crucial principles that need to be followed while building a website/app are:
a. The user should never be confused on landing on the website/app. Many websites (even a few big ones) still don't have the full product information on the page: like the dimensions, size, volume etc.
b. Once the user lands on the website/app, the user should know an exhaustive list of things he can do or can get on that platform, on one screen itself. That one screen (landing page/home page) has to be the ultimate summary for the user. Usually, in the competitive spirit to make the 'BEST' website/app possible, the designer in the makers might overtake the focus on the user and that may lead to a disaster. It is extremely necessary to sit and chart out the entire flow of the user journey in sheets of a paper (this I learnt from my friend and colleague Aniruddh Jain, founder of and I cannot agree more on this with him.

2. Lack of knowledge of feasibility: I have always believed and stand by the belief that India has a latent demand for just about everything. However, that latent demand is not in masses. Many people think of an idea but also think of going mass at the same time. Not all ideas can be mass ideas. There is a huge enthusiasm about 'I want to start this', 'I have this idea', but how much is the market is something many are not thinking, though all planning would be based on these facts. To this, all think we just start off and it will run! Never be that sure. Of course, it will run but the scale and other facts need to be realistically known before starting.

3. Lack of conservative thinking: 3+ years back, I ordered a nailpolish from a very well-known apparel+accessories ecommerce website [no prizes for guessing which one!]. When I received the package, I was shocked. That packet could have fitted at least 3 200ml bottles comfortably. In that package, they sent me the 6ml nail polish bottle. My colleague noticed my reaction "how are they going to survive!", and replied "who cares about packaging Sridevi!". "Isn't cost the first thing that a business would look at?!", I wondered. 3 years later, just a week back I ordered a house utility article from one of the top ecommerce websites. The object was a small one that could have fitted very comfortably in the packet of say a 500ml Milton flask (20cmx5cmx5cm). The object was sent in a packet (cover) which was approximately 40cmx60cm. There are many examples like this, I would have ordered hundreds of articles online and I just keep calculating the savings they could have made from a more efficient packaging! The key is that the big guys can afford all this, it is the VC's money; but it is someone's money right! How can it be overseen! Looking back on how much money could have been saved on packaging alone, it would be a very starling figure, it would have possibly covered for all the discounts offered.
Everyone thinks they can get VC Funding, there are some messages on StartApp that read "need funding", some claim that they have an idea and it is a multi-million dollar one! We all think high of ourselves, but we need to analyze ourselves critically too!

4. Lack of Long-term vision: I wonder how we don't have an inch of hesitation from participating in a rat-race! This start-up wave has also evolved very quickly into the same again, and one just wants to enrol to participate in the race. The questions on 'what after enrolling', 'are we ready to participate if selected', 'are we fit to participate', 'how long will we be able to sustain in the race', 'what if it is too sunny', 'what if it rains': none of these questions are asked by many! The fancy terms like "Exit" which few are lucky to be a part of, have caught up which I think is leading to lack of commitment. By the way, I am sure many of us have come across businesses that are not clear on what to do with the ones they acquired (is it 'if I won't, someone will'?)!

Some key questions to ask before ideating would be:
1. What is the problem that this idea is going to solve?
Is it only your passion or is it a problem in the market that you want to solve?Also a lot of times, due to the early fame that the business attracts, the business model is changed and the fundamental problem that the business started to solve disappears in the fame! That is very sad.
2. Is the problem, really a problem for the users you are targeting?
And more important, do the users you are targeting really want a solution to the problem?
3. What are the pre-requisites for a user to use the service/product?
I see some business ideas based on apps, but the users targeted don't seem to be the target group owning or using smartphones :)
4. Are you committed towards the business you are starting?
There are some problems that you know your business model has or would definitely encounter. You don't need to start and run the business to know and realize them. These days, failing, and talking about learnings from the failure is considered a resume point unfortunately. Yes, it would be, but only for the founding members and not for the employees. When you start up,  you are taking a risk. But it is of utmost responsibility for the founding members to realize it is much riskier for the employees joining them.
5. Never start off by giving your products or services for free or discounts extraordinarily.
Much is talked about the ecommerce businesses thriving on discounts, those were big businesses and still they are a victim of this. Take a look at some data from on how much funding has gone into the businesses!
A scheme is good like a promotional offer, referral bonus or loyalty points, but don't ever bank all or majority of your business on discounts. If it is a marketplace, the discounts offered may be by the seller but as the marketplace owner, do make sure that you don't offer very differentiated pricing.
6. Never, ever over-commit - neither to yourself nor to the market.
I personally don't find any need for this, it is totally unnecessary. Make the realistic commitment and just strive to keep them, that itself is a mammoth task! If you exceed it is very good but try and never miss.

Lastly, kudos and best of the best wishes to all in the race; definitely a tough-one!

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