Lessons for every start-up
Relatively late entrants to the market, Indian start-ups have “leapfrogged through several technological cycles”. Some have emerged triumphant, others are struggling to survive. Soum Paul explores the learnings in his book Flight Of The Unicorns: Lessons From India’s Startup Bubble.
In an email interview, Paul, an Indian Institute of Technology, Kanpur, graduate who has been part of several technology start-ups based out of the US, UK and India, explains how hurdles can be learning curves for anyone hoping to set up, or be part of, the start-up ecosystem. Edited excerpts:
How vital is the synergy among co-founders, especially in the early stages of a start-up?
Synergy among founders is the single most important attribute that makes or breaks a company. The start-up can adapt its core model, it can change the market it’s targeting, it can even completely pivot into a new business, but if the synergy amongst the founders isn’t great, it would never succeed. Unfortunately, it’s very hard to know if a working relationship would be great without trying it out once. An investor once told me that he spends most of his time acting as therapist and helping founders overcome their differences.
Is it better to have an India-only approach for start-ups? Or is the global-first approach a bigger learning platform?
If the start-up is solving a problem unique to emerging economies, or India in particular, then it will have to be India-only, of course. Or it could be India-first, if there are similar challenges in other emerging economies. However, if it is a solution to a problem that is universal, then it is of utmost importance that the global-first approach is undertaken from very early days. Every aspect of the start-up—sales, marketing, technology—is affected by this decision. When the start-up takes an India-only or India-first approach to a global problem, it fails to develop processes and systems that allow them to sell remotely, and therefore they find it difficult later to compete against global players who come knocking eventually. This is what we have seen happen with some of India’s biggest unicorns. Global-first also gives one the ability to target a much bigger market, while being cost-effective in operations and technology. The Indian start-up ecosystem is still in a relatively nascent phase, and the global-first approach can provide the competitive ability that can help propel it into the big league in the coming future.
What are the four key questions to ask when trying to find a scalable revenue-generating business model?
*+Is there repeatability in the transaction pattern that the start-up is trying to create? Consider the case of hailing a cab—it involves the same steps each time (hailing, describing destination, navigating, payment disbursal upon reaching destination according to a metre or negotiation). Therefore it is possible to grow this wherever this transaction pattern is spotted. On the other hand, consider the case of purchasing a travel package—it comes with a lot of back-and-forth discussion and negotiation on the offerings, and differs from operator to operator. Such transactions are very hard to scale, as they can never capture all the possibilities that arise.
*Would the growth in revenue from scaling lead to proportional increase in burn-rate forever? If so, then the business model is not scalable. Consider typical IT services companies—an increase in the number or scale of projects often requires hiring assets, thereby increasing burn-rate and future agility.
*Does scaling up require reinvention in a number of core areas? Or can the start-up improve on its existing offering and draw revenue from repeated use of the same product or platform? When the idea of scaling up involves the creation of new solutions constantly, in addition to the existing offerings, then the advantages from scaling up quickly disappear. Launching in another geography, for example, should not mean reinventing the product stack—the less customization required, the more scalable the model.
*Does scaling up add to massive increase in operational hurdles? If so, the model needs to be rethought. For example, if spreading to another city means that the start-up would need to create a team there, the model doesn’t lend itself to scaling easily.