Startup Hurdles are a result of the mindset of the entrepreneurs.
A look at the statistics tells us that the survival rate of startups is poor and many do not cross the first year. Certain strong beliefs of entrepreneurs’, their approach in executing their ideas or inability to overcome hurdles lead to the downfall.
“If you are not ready to FALL you are not ready to HURDLE.”- quotesgram.com
Image Source:Michal Zacharzewski-freepik
Two experienced mentors have given their valuable inputs on startup hurdles. They have red flagged the following beliefs of startup entrepreneurs which create hurdles in sustaining their businesses
a. Most start-ups in India are me-too and poor imitations of successful ventures elsewhere. There are negligible (nil?) 'game changers'
b. Technology content is generally low. Disruptive tech. is non-existent.
c. The definition of startup is not clear to most entrepreneurs.
d. There is poor understanding regarding setting up social enterprises and on their functioning.
e. Most Indian entrepreneurs do not scale-up or take too long to achieve a critical mass. There is a need to quickly scale up or recognize 'failure', instead of lingering on for months or years.
I. The bubble bursts in 6 to 18 months due to the above mindset of startups. Most companies will close down or just about survive.
II. Angel investors will lose a lot of money and VCs will become more selective in future.
III. The old economy norms like profit and ROCE will be applied to start-ups, after the burst.
IV. Warren Buffet investing philosophy will prevail once again!
V. The handful of survivors will eventually thrive and become world class.
I. The Gen ‘Y’ with their care free mindset are making business models without having the required domain knowledge of the businesses they are planning on getting into.
II. The risk taking ability appears quite high.
III. The business idea is based on their personal experience.
IV. The idea is neither tested nor the necessary ground work done.
V. The market size data is based on web information which runs into a staggering million or billion dollars.
VI. The business model is based on the above data. They do not have a rational view of the market size which is around them to which they cater to, given their limited expertise and the infrastructural needs.
VII. Plan large scale launching of product or service.
VIII. Imagine that their dreams would be fulfilled with others money.
IX. Strive for more hits and concentrate less on consumers for the app or online business.
X. Rely on registrations and unable to convert the same into users.
XI. Many would like to follow the Freemium model based on existing successful ventures This puts the revenue model in a fix.
I. Are in a hurry to make it big and in the bargain, ignore many red flags in business planning and execution.
II. Most of them do make a business plan but pay little attention to the financial plan and the assumptions on which that is made.
III. The business plan is made only to pitch to the investors, but is not used as their own roadmap for business.
IV. The assumptions in making business plans are very hypothetical and are not based on any factual or relevant data or information.
Funding is the key word in the present business word today.
The media reports of large scale funding for different types of businesses misleads the entrepreneurs. Most of the time, they are unaware of hows and wherefores of funding.
They pitch on their needs for money while missing out on the more important Pitch-Why investors should invest their money.
Cannot differentiate between debt and equity. Many a times, while the need is for debt, they think of getting investment.
They assume the investor is interested in their business, not understanding the investor is only focusing on exit at a time with x times the returns.
They love their business and think the investor would also love the same.
The mind set of investors at the initial phase and the mind set of investors at growth stage are different. The entrepreneurs need to realize that they have different perspectives.
There are always exceptions to the above experiences of the mentors. Some of the successful startup Entrepreneurs, including gen Y, are mature and well-grounded and have alternate plans when things go wrong. The seasoned, as well as Gen ‘Y’ test waters before they plunge deep. They swim in shallow waters and learn the tricks of the trade and quickly make changes to their original plans.
They are the envy of wannabe entrepreneurs who think achieving success in a startup is cake walk.