The secret sauce behind a successful Indian start-up2 min read . Updated: 11 Jan 2018, 01:23 AM IST
Successful start-ups tend to be led by a group of not-so-young co-founders
In the popular imagination, a successful start-up founder in India is a young male IITian who struck gold in his first business venture. But data on Indian start-up founders shows that this is largely a myth. Successful start-up founders indeed largely belong to pedigreed institutions such as the Indian Institutes of Technology (IITs) but they tend to have plenty of experience compared to founders whose start-ups fold up.
The analysis is based on data for over 330 start-ups and 560 founders. The start-ups selected are businesses built around an innovative product or a tech-enabled platform. This definition precludes any companies that offer pure services or consulting solutions. The data on each start-up founder has been verified using at least two public sources.
The shortlisted companies were split into two groups—those start-ups that have shut shop versus those that have scaled up—start-ups that are active for the past two years, and have raised more than $10 million. The ideal differentiator between successful and other start-ups would have been profits but given how elusive profits have been in the Indian start-up ecosystem, this analysis uses total funds raised as a proxy for scale. Among the 330 start-ups, 151 start-ups have folded while 179 start-ups have scaled up.
As the above chart shows, start-ups that have scaled up tend to have founders with significant years of work experience. Less than a fifth of start-ups that folded had 10 or more years of experience. In stark contrast, about half of start-ups that scaled up had 10 or more years of prior experience.
Being a young founder has its advantages: the ability to be unencumbered by traditional ways of doing things, or being able to dedicate more time than older colleagues. But experienced founders usually have deeper domain expertise, are better equipped to manage people, and also have access to a wider network of investors and employees.
While pedigreed institutions such as the IITs and IIMs (Indian Institutes of Management) tend to produce a high number of founders, the more important difference between start-ups that succeed and those that close shop appears to be higher education, especially education abroad.
The data on start-ups reinforces the stereotype of a male founder. Only 13% of the founders in our sample were women. When considering only single founder companies, the number is even more dismal at a paltry 5%.
The data also suggests that having co-founders tends to increase the chances of success. 91% of start-ups in the sample that folded had a single founder. In contrast, only 37% of start-ups that have scaled up had a single founder.
Ultimately, there is no one definition of an ideal founder. Bhavish Aggarwal of Ola Cabs fits the mould of a young IIT founder whose company experienced explosive growth fairly quickly. Vijay Shekhar of Paytm had a different path to success. A non-IITian, he worked in obscurity for more than a decade before striking it big. Finally Rashmi Daga, founder of FreshMenu, one of the few food tech successes, worked at big and small firms for many years before venturing on her own.
Nonetheless, the aggregate patterns tell us that the successful start-up is likely to be led by a group of well-educated co-founders with several years, if not decades, of work experience between them.
Shailesh Chitnis is head of product at Compile Inc., a data intelligence company.