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It their quest for growth, startups will need to learn a thing or two from the tortoise as well

It their quest for growth, startups will need to learn a thing or two from the tortoise as well

Monday July 24, 2017 , 5 min Read

Once India's startup industry is able to solve real-world problems for local conditions, scale is likely to come from places like Africa and South-East Asia, where the solutions can be replicated.

One of the earliest stories (with a maxim) we all heard must be the one about a hare and a tortoise. From a startup’s standpoint today, the loudest cheer may well be reserved for the hare instead, in case of a ‘re-run’.

Speed and steady win the race. (Image: Shutterstock)
Speed will always remain an attractive quality, but it’s time we shifted this narrative to focus on the long haul, especially the attributes that go with it.

To be fair to IT startups, it is speed which has got them where they are today – nearly 5,000 of them in India, growing in double digits (10–12 percent CAGR), and in third position globally.

But now, we are riding wave number two. Which means startups have to look beyond that fair-weather friend called GMV and focus on unit economics, bottom-line growth, create brand loyalty and stickiness factor. Simply put, it is about reducing the characteristic dependency on funding and be able to focus on fundamentals which will make ventures self-sustainable.

A common enough “startup killer” is the high cost of customer acquisition, which must not be allowed to spiral out of control. It is a common observation that in a frenzied bid to increase GMV, often the fallout is a grossly higher Customer Acquisition Cost (CAC) over Long Term Value (LTV).

Ideally, CAC is best recovered within 12 months, though in the case of capital-intensive businesses, it can extend well beyond that frame. Offering deep discounts as a customer retention strategy is not sustainable. Sooner, rather than later, startups will have to articulate their USP (exactly the nature of problem that is being solved) and build brand equity to create stickiness factor which has remained elusive for many. Particularly in some spaces like the B2C (hyperlocal delivery, e-commerce, etc) it’s a bloodied ocean out there. Crimson red, make no mistake. Why not look at a blue ocean instead?

Gold mine of opportunity

Let us examine a few of the under-explored areas. For instance, India’s tryst with GST should result in a market opportunity of $20–25 billion – the sum total of what SMEs are likely to spend on GST compliance over the next few years.

Or for that matter, in healthcare – cost-effective solutions for a nation which is increasingly shifting towards a preventive mindset. Likewise, there are opportunities galore in edutech, agritech and the like. A $2.3-trillion economy that is India, and one that is growing at more than seven percent is saddled with many challenges which continue to create chasms.

Healthcare, financial inclusivity, clean energy, infrastructure, and education are some of the glaring examples where yawning gaps need to be bridged.

And most importantly, these solutions will have to be affordable. Essentially, here we are addressing the “bottom of the pyramid” where price elasticity is incredibly high and profitability can come only from large volumes. That new-age technology is what will do the job is obviously an implicit condition.

Call it solutioning for “real world” problems if you will, but once we are able to solve for Indian conditions, scale is likely to come from other geographies like Africa and SE South-east Asia, where they can be replicated.

Well, it isn’t as if these opportunities haven’t been explored already. The issue is about scaling up appreciably to make a perceptible difference. Given the magnitude, it is perhaps only possible through a collaborative approach.

The art of scaling

The idea has found traction, and startups are working with some of the large companies in co-creation. However, the large enterprises will have to further strengthen such engagements to assist entrepreneurs in reaching out to prospective customers and increase global footprints. A role which is seen beyond the realm of mentoring.

Startups will have to ramp up significantly on the quality of after-sales services and be obsessive about design. Global clientele can be absurdly demanding at times and it just won’t help to cut corners on these fronts. In order to challenge incumbents, startups will have to be agile, have a faster go-to-market strategy and offer omni-channel convenience which is but a “click” on a hand-held device.

Speed thrills (Image: Unsplash)

All of which will segue into the suite of new-age technologies veritably clubbed under digital. Obviously, the talent required will be very different – those well-versed in SMAC, IoT, AI and others. As the entire IT BPM industry is undergoing a transition in its bid to adopt digital, talent crunch is an industry-wide heartburn. The pool is limited as of now and to be able to attract people with relevant skills, it is imperative that startups articulate clearly the value they bring in.

India has scripted an awe-inspiring narrative to be regarded as an IT services powerhouse. It is possible for us to do something similar in the global product space as well. And to make it probable, a clarion call has been sounded for the startups to take lead.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)