Realistic Plights of Start-Ups

Realistic Plights of Start-Ups

India, being the fastest growing e-commerce market, has started weighing its Entrepreneurship priorities as a front-runner. India is also the third largest start-up ecosystem in the world. Campaigns like “Make-in-India” and “Start-up India” have not only created awareness, but have also increased the potential of up-coming entrepreneurs from the country and abroad. But, 90% of them fail; either a slow death or they simply just flame out! A researching team, “Xeler8”, has come out with the statistics that, out of 2281 start -ups, since June 2014, 997(43.7%) of them have failed by 2016. Also, only 32 out of the 997 failed start-ups received funds from the investors, including notable ones like Autoraja($23K), Frankly.me($600K), Eazymeals, Investo Presto and TalentPad.

The average life of these start-ups seems to be just 11.5 months and this is alarming! Also, the average age of such entrepreneurs being 27.3 years is a good sign, implying that young bloods of the country wish to explore more. But their enthusiasm and energy die down when they get stuck without having further ideas to innovate and motivate their employees for future prospects. Why do these business ventures fail? Inefficiency, lack of funding, premature scaling, lack of innovation, over-crowding could be possible reasons. Let’s analyze what these data express. Only 32 out of the 997 failed start-ups procured funds. It only means that we need more investors to support the start-ups. In the U.S., for instance, angels make 16 times more investment than VCs. With close to 3,16,000 angel investors, there are about 6 such investors for every start-up. Axilor’s estimate pegs this number for India at 0.2. That’s definitely not good news.

The management of funds is also very crucial. According to a report released by “Startup Genome”- 70% of the start-ups failed due to premature scaling. Scaling is a good thing. Hiring is a good thing too. But, most startups fail because they try to scale too early. As Nathan Furr explains, “most start-ups are dying and they are dying because they are doing good things, but doing them out-of-order.” So, focus on customer, not on scaling. Take your time with funding, take your time to validate your market. Be strong, then try to grow up.

Therefore, a good, well-studied, and a technically consistent business plan is not only desirable, but is also essential. Once that is set, testing it becomes a crucial factor. More investors are needed who can capitalize the ideas that the entrepreneurs have. The risks involved will have to be managed and good “Risk Managers” should come to the rescue. Though “Entrepreneurship” is an endeavour where odds of favouring is low, it doesn’t have to be a game of chance!