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Common problems faced by Indian startups

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According to a recent study done by the Kauffman Foundation, 33.2 percent of the cofounders of tech firms founded by immigrants in the US are Indians (since 2006). Despite such strong figures, when it comes to building a startup in India, most Indians are reluctant. The reason is that the road to building a startup in India is filled with hurdles and challenges. Let’s take a look at the five main impediments on the Indian startup route.

BUILDING A TEAM 

The common Indian mindset says that getting a job with a big brand improves career growth more than a startup. Also, job security plays a vital role in decision making. Working at larger organizations is more secure and socially valuable than working with startups. It is not uncommon to see people working in startups being pressured from home to take up better jobs with larger organizations.

Moreover, employee benefits are also minimal in startups when compared to big corporations. Hence, getting the right talent becomes challenging.

MENTORSHIP

To move your startup idea in the right direction, you need a good mentor. When it comes to mentorship and guidance to propel wannabe entrepreneurs – something TechStars in the US provides – India has far fewer options. However, in the last few years, we have seen them springing up.

FUNDING 

A recent study done by the India-based research firm Venture Intelligence says 64 startups have together received nearly $242 million of venture capital funding. But industry experts claim this number is negligible, and there is a need to increase it tenfold to sustain early-stage risk capital.

Taking into consideration the high interest rates and lengthy processes involved in getting funded, debt as a source of funding is also not a viable option.

Again, unlike the scenario in the US, personal funding becomes difficult as people are not financially stable here and have family responsibilities to take on – which demands the immediate revenue that can come from a job.

SELLING IS HARD

It is hard to break into the Indian market with a consumer product. People are substantially price-sensitive, and competition is fierce. Therefore, selling premium products becomes a hard task.

Moreover, when a startup aims to do a B2B sale, the decision making process to buy the product is very slow and may take several months. For example, for selling software to banks and government, or larger organizations, you may send the quote, keep following up for months, and then end up with a “no thanks.” This primarily happens because of poor decision making processes in companies and a “playing it safe” attitude. Hence, the risk factor remains.

REGULATIONS

According to the latest tax policy, startup firms are mandated to pay income tax on the premium they have charged over their fair market, while selling shares to unregistered investors, including private equity and venture funds. Though this aims to stop money laundering, analysts say it will affect the investment scenario for startups. Moreover, to register your startup takes a minimum of two to six months.

Although the road to launch and get started with a startup company is difficult, things are progressing interestingly. Passionate and ambitious people are finding their inroads to their entrepreneurial inner calling and working their way around hurdles to create success for themselves

Entrepreneurship

What Kills A Startup

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1 – Being inflexible and not actively seeking or using customer feedback

Ignoring your users is a tried and true way to fail. Yes that sounds obvious but this was the #1 reason given for failure amongst the 32 startup failure post-mortems we analyzed. Tunnel vision and not gathering user feedback are fatal flaws for most startups. For instance, ecrowds, a web content management system company, said that “ We spent way too much time building it for ourselves and not getting feedback from prospects — it’s easy to get tunnel vision. I’d recommend not going more than two or three months from the initial start to getting in the hands of prospects that are truly objective.”

2 – Building a solution looking for a problem, i.e., not targeting a “market need”

Choosing to tackle problems that are interesting to solve rather than those that serve a market need was often cited as a reason for failure. Sure, you can build an app and see if it will stick, but knowing there is a market need upfront is a good thing. “Companies should tackle market problems not technical problems” according to the BricaBox founder. One of the main reasons BricaBox failed was because it was solving a technical problem. The founder states that, “While it’s good to scratch itches, it’s best to scratch those you share with the greater market. If you want to solve a technical problem, get a group together and do it as open source.”

3 – Not the right team

A diverse team with different skill sets was often cited as being critical to the success of a starti[ company. Failure post-mortems often lamented that “I wish we had a CTO from the start, or wished that the startup had “a founder that loved the business aspect of things”. In some cases, the founding team wished they had more checks and balances. As Nouncers founder stated, “This brings me back to the underlying problem I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made.” Wesabe founder also stated that he was the sole and quite stubborn decision maker for much of the enterprises life, and therefore he can blame no one but himself for the failures of Wesabe. Team deficiencies were given as a reason for startup failure almost 1/3 of the time.

4 – Poor Marketing

Knowing your target audience and knowing how to get their attention and convert them to leads and ultimately customers is one of the most important skills of a successful business. Yet, in almost 30% of failures, ineffective marketing was a primary cause of failure. Oftentimes, the inability to market was a function of founders who liked to code or build product but who didn’t relish the idea of promoting the product. The folks at Devver highlighted the need to find someone who enjoys creating and finding distribution channels and developing business relationship for the company as a key need that startups should ensure they fill.

5 – Ran out of cash

Money and time are finite and need to be allocated judiciously. The question of how should you spend your money was a frequent conundrum and reason for failure cited by failed startups. The decision on whether to spend significantly upfront to get the product off the group or develop gradually over time is a tough act to balance. The team at YouCastr cited money problems as the reason for failure but went on to highlight other reasons for shutting down vs. trying to raise more money writing:

The single biggest reason we are closing down (a common one) is running out of cash. Despite putting the company in an EXTREMELY lean position, generating revenue, and holding out as long as we could, we didn’t have the cash to keep going. The next few reasons shed more light as to why we chose to shut down instead of finding more cash.

The old saw was that more companies were killed by poor cashflow than anything else, but factors 1, 2 and 4 probably are the main contributing factors to that problem. No cash, no flow. The issue No 3 – the team – is interesting, as if I take that comment ” I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made” and think about some of the founders and startup CEOs I know, I can safely say that the main way that any decision was made was by agreeing with them – it was “my way or the highway”. I don’t therefore “buy” the team argument, I more buy the willingness of the key decision makers to change when things are not working (aka “pivoting” – point 9).

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About the Author

This article was produced by Broadsight. Broadsight is an attempt to build a business not just to consult to the emerging Broadband Media / Quadruple Play / Web 2.0 world, but to be structured according to its open principles. see more.

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Callum Connects

Jasmine Tan, Director of Stone Amperor

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Jasmine saves her clients time and effort when doing kitchen fit outs with her biz Stone Amperor.

What’s your story?
I started working in the industry in 2003. I was in a marble and granite supplier company for 5 years. Even though I left the company, I still had customers calling me for my services. I referred them back to my previous company but they refused to because they loved the fast response service that I offered. I realised that customers do look at prices, however most of them prefer quality over quantity. Thus I have decided to establish a sole proprietor company also known as 78 Degrees which later rebranded as Stone Amperor in 2014.

What excites you most about your industry?
The kitchen countertop industry is a very confusing market. There are many brands, materials and prices to choose from. What excites me the most is my ability to help clients choose the best materials and brands within their budgets, whilst saving them time and effort.

What’s your connection to Asia?
I have been in Asia all my life and I love Asia. No matter where you go there is no place like home.


Favourite city in Asia for business and why?
I love Singapore. This is because Singapore has always been a stable country and it is great for doing business. However as it is a small country, it can be really competitive. I believe that if just do your best and give your best to your customers, you can overcome this.

What’s the best piece of advice you ever received?
“Take actions. Learn and improve continuously. An idea without action is just a dream.” This was really good advice that I received from my partner.

Who inspires you?
A very down to earth billionaire from Malaysia, Robert Kuok

What have you just learnt recently that blew you away?
Property is the foundation of every business.

If you had your time again, what would you do differently?
Own instead of renting property for my business.

How do you unwind?
I enjoy going shopping, watching movies and hanging out with friends. I am quite a simple being.

Favourite Asian destination for relaxation? Why?
I love going to Taiwan as I love the culture there. Everyone is so polite and the weather is great.

Everyone in business should read this book:
Sun Tzu, Art of war

Shameless plug for your business:
Perfect top, Perfect price, Perfect life from Stone Amperor

How can people connect with you?
Email me at [email protected]

Twitter handle?
@StoneAmperor

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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