I have advised a few startups and been acquainted with the journey and travails of several others, as an Advisor, Mentor and Growth Hacker. Interestingly, most of them face similar challenges and hiccups, that stunt or kill their growth.
Number One: Immediate First Step Not Clear
Almost everybody with an idea can see very clearly how it will grow and impact the whole world, a little way down the line, but hardly anyone has clarity on the very first step, or the first mile. Everybody knows how to make multiplied millions after the first million has been achieved, but few know how to get that first million -whether it be users or bucks!
If they are building an App, they know how to build it, if they have the tech background, or they flounder around seeking the right tech development team, and usually get fleeced in the attempt. I know, I have experienced this myself, when I attempted my first internet business, which was a referral site. I am smiling as I write this, but I still think it was and is a great idea, IF ONLY I had been able to get the right people to write the code and build it for me. Instead, being completely alien and a stranger to the web development field (At that time!), I was advised by the vendor to take the Agile route. Did I know what that meant, then? NO – well, some months, and 11 lac rupees later, I had a disc with some code which just did not function the way I had envisioned. The programmers were half literate people who could not spell their own names properly and I had learned my first and biggest lesson in the internet business. HIRE your own team!
And this is what happens to many startup founders. I just met one last week who spent over Rs.15 Lac for an app. His app is ready and now he has come to me for advice. There are so many issues with his business model and offering, that it breaks my heart thinking how to tell him that! But after having built it, the poor guy does not know what to do!
So he erred in the very first step. I am approached almost twice a week by entrepreneurs with ideas for businesses, and hardly any of them has a Business Plan where they have thought of, and addressed every conceivable aspect, adequately and with granularity. The first step is to write down the business plan and to address every issue, from funding, to obtaining first users, to a go-to-market strategy, to revenue streams, not merely counting on advertising revenues which is the easy way out that everybody wagers the whole thing on!
If you are not addressing and resolving a significant pain point, then you better have a very well thought-out plan as to what you are doing and why it will be received or welcomed by users.
Number Two: Lack of Experience
All the youngsters out there suffer from this, and no doubt its a part of their definition – they are young, so they do not have experience. No problem with that – but shouldn’t they seek advice and guidance from somebody with experience? The error here is that most of these entrepreneurs do not even think of taking advice until they encounter a major wall. Often, they do eventually find a way out, but usually at a much higher cost in terms of time and money, than it would have taken if they had sought guidance from some senior person in the industry. Granted, mentors and advisors are not easy to find, and often they may come at a cost, but usually they are available and can be found, if one seeks diligently enough. Several portals have also come up that assay to fill this gap, and provide this service, although I have not found any that really does a good job. The market still awaits that definitive portal which will address this issue to the satisfaction and delight of entrepreneurs and veterans, while ensuring a strong revenue stream for the portal. In fact, I had conceived and created a sound prototype for a client that resolved this issue, but he tinkered with it and completely messed it up. Alas.
So a good bit of advice for young entrepreneurs and startups is – find a mentor.
What are the qualities one should seek in the mentor?
- Adequate domain knowledge and expertise in that particular field or industry, with good general knowledge of allied verticals. A specialist is good, but can be blinkered and not see the whole picture, so you need someone who can see the whole developing picture because the young business can metamorphose very quickly, and it should; the mentor should be able to guide this transformation or pivot.
- The mentor should be a more hands-on type of guy, rather than one who simply sits back and gives advice. Although basic principles remain the same, it is important to plunge into the actual market situation of the entrepreneur to know what advice to give, because what he communicates to you and what the situation actually is, may be entirely different. But it will need to be seen by your own eyes, to tell the difference. I have often experienced that there was a vast difference between the rosy picture painted by the entrepreneur vis-a-vis reality; I have also found, often, a great big genuine opportunity lying right next to the so-called opportunity that the entrepreneur had spotted. But he was blind to it, as he was focused on what he wanted and thought he knew. In such cases, it is a delicate and patient process trying to make the entrepreneur see the follies in his approach and the merit in the other opportunity, requiring a small tweak or change of focus. Unfortunately, many do not see it, and fail.
- The mentor should be willing to take some of his compensation in equity. If he absolutely is not willing, then it may indicate that he does not believe the business has any real chance of success. On the other hand, if the entrepreneur’s financial situation is such that he cannot afford to pay the mentor or advisor, he may have to persuade him to take the entire compensation in equity. Few are willing to go for this.
Number Three: Adequacy of Funds
When we say the word ‘startup’ we immediately also see an image of a cash-strapped entrepreneur! It’s as if the two go together. And for all the talk of StartUp India and VC/PE funding, it is vital to remember that money is not very easy to come by. As an entrepreneur, you must ensure that you have adequate funds to run your business for the time it takes to generate revenues and prove the business idea, model and your own mettle. Today, a lot of investors have moved up the value chain and are seeking revenue-making, even profitable companies to invest in, as against the rush to fund ideas, and early stage companies, some time back. So do not take it for granted that you will find a VC who will write you a check and life will be hunky dory. It could happen, but be prepared if it doesn’t happen. Start small, be frugal. Make sure that you make profits on the tiniest thing – it’s called unit economics nowadays, but I call it common sense. I break up the business into tiny steps and tasks, and I try to ensure that I have the best most efficient and economical way of achieving those little tasks. When I do that, I find that the overall business is also economical, lean and efficient.
Number 4: Granularity or Attention to Detail
Most people don’t like to “sweat the small stuff”, as they call it. Others realize that “the devil is in the details”. Frankly, I call it diligence. Aversion to this is laziness. Slothfulness or sluggishness, as the Bible puts it. One has to be diligent. One HAS to be painstakingly meticulous in planning and then, in execution.
And this has to become a part of your nature. You cannot be a lazy person in other things while being diligent in business. One of my favorite original (blush blush) statements is : We only have one heart. You cannot love one person with your heart while you hate another. The heart does not function this way. Similarly, you cannot be lazy in one thing but industrious in another! I learned this in school – when you play, you play all-out! That means, you don’t spare yourself. You don’t say, oh this is just a practice match, or a ‘friendly’, so I will take it easy. No, you push yourself constantly, and by doing so, you push the limits of what you can do, all the time. That’s how you grow!
If you lift the same weights every day, and do the same number of reps, you are not likely to see much change after a point in time.
Try doing high jumps without every raising the bar!
So whatever you are doing, FIRST think it through – with granularity!
Are you putting up a lemon juice stand? Where is your supply of lemons coming from? Which place will you get the best, freshest, juiciest and most economical and reliable supply of lemons? Where are you getting your table from? What could you use instead of a table which conceivably would cost much less? What is the sweetener you will use? What about alternatives to sugar, like honey, or something else? where is the table cloth? Glasses, Jugs? How will you ensure it remains cold? How will you pour it out?
How will you wash and cleanse the glass for the next person? Where will you put the stand? Why there? Did you stand and observe that place, at least for a whole week? Will it give you the best customer traffic? Is there some shade for you to stand under? A stool to sit? How will you price your lemonade? Is there any twist or innovation in your drink that will make customers delighted and enthusiastic promoters of your drink? etc, etc.
All these and many more questions need to be answered, even before you put up something basic like a lemonade stand. But the principles underlying any business remain the same. Funds run out because you did not ask all the right questions before starting out. Get all the questions down on paper, answer them, talk it over with a few friends and advisors. Try and talk to some cynics and critics too. Let people tell you why they think it will not work. I love those kind of people!
They help me prepare and plan well, while also motivating me to excel! Then figure out the costs of setting up and operating until you can break even; once you have a final figure, multiply it with 1.5 and try and ensure you have at least that to start with. This is a just a brief idea of how to ensure that you have the money. Obviously, initially you will need to bootstrap. Savings, friends, family, etc. But do not start unless you are certain you can stick it out and make it.
Number Five: Do not Rely on Money, in your mind.
Every entrepreneur, or maybe, Most entrepreneurs keep thinking about money a lot. That’s alright! One of the primary reasons to start a business, is of course, to make money. But – do not rely upon it.
What’s the difference, you ask?
Well, the person who depends on the money, thinks of that as the answer to every problem he faces. A lot of businesses did this in 2015-2017. They threw money at the problem. Some are still doing that! Some of the big e-tailers are guilty of this; their losses are in the thousands of crores, yet their business model is based primarily on sales driven by massive discounts.
Obviously, this is not sustainable in the long term. Yet, they persist! They feel that somewhere down the line, it will be all right because they will have acquired a huge number of customers and loyal users. What they do not realize is that customers who were won by discounts will also be enticed away by discounts and leave you the moment you stop the discounts.
So, my advice is – always use your brains to find an answer for the problem, not your wallet. This is not as easy as it seems. It’s a kind of a trick statement, but if you will persist in attempting to do it this way, you will discover the genius of the statement.
Of course, there is a lot more to entrepreneurship and success, and there are tons of books being written all around the world, on this subject yet the principles mentioned here shall continue to figure in discussions, books, essays and debates; and I have added my bit to the lot!