Think before the startup trek

The Seed

Some of us have always wanted to create an enterprise of our own. It could be a startup or a regular business. It starts from when you have an idea.

The germination

You see news around. To an outsider, it appears just every startup is successful and gets funding - You only have to stand in queue to get it and take money bags home. You feel a few of those are absurd. Its hard to believe washing clothes or selling samosas can get millions. Your idea looks much more intellectual, innovative and niche. If an absurd idea can become so successful, think about mine! 

If you go by the media, it appears that investors, government, incubators, accelerators - everyone is working overnight to see turn you an entrepreneur. They feel so bad that the 'culture' is lacking, the 'risk taking' is lacking and no amount of encouragement is pushing our people into it. It appears investors are struggling to find startups to invest their free cash. It appears you are missing an opportunity. 

Then you figure out that there is a need, a market - and your idea is the best solution at the lowest cost. Only positive news about your idea seems hearable. You get blind to negativity. 'Follow your passion', 'Do what your heart wants you to do' are the most common phrases that appear on every wall around. 

The common feeling - It is a low cost model where I can fulfill people's need. It is a billion $ market. If not, I will create a market for a need people didn't even realize ! There is no competition. Money will pour into our accounts in a few months. It will turn the world on itself.

Tread safely

But alas ! Beware ! The real world is not so lovely. Startups are as risky or more risk prone than traditional businesses. Not to discourage. But if you are looking to stand up and startup, go ahead but be prepared to fight many more hurdles than you imagined. 

Don't get motivated just by news around. Many got into equities enticed by media before the great 2008 stock market crash too. 'India Inc.' was shining. The world was looking upto India. Industrial growth rate was projected among the top in the world. Anyone talking caution was seen as pessimistic. This was until 1 day before. Suddenly after the crash, the media was full of why the future is bleak for industry, why did pundits and regulatory bodies not foresee the fall.. etc. 

Now many startups are failing. Among them are all sorts of ideas. Funded and non-funded. For students, it is not much of a damage. Although you loose money, you gain in terms of knowledge and experience. 

But for those who left high-paying jobs mid-career, it can be devastating. More than what you prepared for.

Startup Funda

Don't startup owing to emotions, frustration at job or good startup news you see around. Startup by a mix of heart, head and worst case logic.

1. In real world, things are not as logical you are. It is not as simple as - X has a need -> I will give him that -> he will pay me -> I will keep profit from the sale. 

Real world defies popular logic or what seems common sense for you. So many ifs and buts pop out when it comes to make someone pay, even if it fulfills their need. 

It appears fraudsters get money from people easier than a genuine guy like you. 

3. From day 1 focus on money, money, money and profit, profit, profit. Don't get inspired by the Facebook, Google and Twitter models where you wait until the traction is so high that you can convert them into profitable customers. 

By the time the traction rises so high, you may burn out.

4. Just a website or app with a great idea is not enough. It needs to be supported by a team on the ground. Don't look for models which need lot of people to be deployed and huge logistics to fulfill a need. Although we hear some of such startups being valued high and getting funded, it is still not clear whether the margin they make per transaction is more than their cost. There are many which didn't sustain after a time. 

Human and logistics costs continuously increase. Equipment, vehicles have depreciation and maintenance. It will be hard to keep up all the time.

6. There are a lot of articles where you are advised to ping your idea to people around before you start. This works to an extent where they can point out competitors you missed. They may also give you a positive or negative prediction about it. So take opinions but don't stop there. The reality could be better or worse than their prediction - the reason is because a startup is in an unknown space. 

The startup is in an unknown space. No one can guess how it feels to walk on Jupiter - least are the people around you. 

7. Don't get sentimentally attached to your idea. It is after all a business, not your lover, friend or family. Be happy that you came out unscathed if you closed a startup early. 

Either start refining the idea or look for a new idea. Move on. Don't get stuck to it.

8. You may or may not find competitors from an internet search. But the more you find the better - and the earlier the better. Try to understand if they are growing and profitable. You wont go far without these. 

Check how different you are from competitors. Being different in terms of the solution is not enough. 

The difference from competitors should be in terms of the money making factors.

9. Contrary to what appears in the media, seeing you is not the happiest thing to happen to investors. They too want to avoid risks. You don't know the thousands of startups which haven't got investments. 

There are thousands of startups the media doesn't even know they started and closed before anything significant happened to them. 

10. In the initial days, don't spend too much of money on marketing, giveaways, freebies, infrastructure, rents, hi-fi gadgets etc. like most founders. Don't delay optimizing thinking that the money you will earn soon will cover all these. 

From Day 1, analyse every rupee you spend. Avoid spikes in expenses. Don't waste a single rupee. You wont get your lost money back.

11. Perseverance is said to be a solution for eventual success. Rome wasn't built in a day. But not all cities turned into Rome. Our cities are from same time but lack basic facilities! 

So perseverance doesn't pay beyond a point unless supported by good strategy and improving trends. Think like a doctor. When a patient is in a very critical state, doctors observe and act based on which direction key parameters are going over a period. Same here. Make your best efforts to turn your business around but look for signs of recovery. 

Keep checking if your efforts are resulting in improving key parameters atleast marginally as days pass by. Take bold decisions. 

Removing life care may sometimes be the best option to save time, effort & money. Whether for a human or for a startup.

12. Run the idea first as a real functional pilot. See if you are making profit, atleast at a transaction level. i.e your proportioned cost for the transaction v/s your revenue for the transaction. 

Check how comfortable and excited your users are. Try to build relationships with the customers. If it doesn't work out after a few weeks, think clearly and take a clear decision if you want to continue. If you decide to discontinue, do it without any hard feelings, emotion and attachment. 

Startup by doing the real thing in a functional pilot model for a few weeks. 

The environment around

Instead of just celebrating funding, the media could also disclose how many startups were created, applied to various funding events, and what ratio actually got funded. 

Institutions shouldn't just coerce everyone to startup by painting a rosy future ahead. This is creating an unsustainable startup culture with too many failures and devastated lives and careers. 

The investor-incubator-accelerator-government-media-mentor networks should create environments where anyone who has an idea gets easier access to research it, pilot it, refine it and to keep repeating these cycles until success. The goal is to keep the risk and damage as low as possible without risking our life's savings. 

The problem is that this opportunity is available now only to a very small fraction of startups. Blame it on our population causing over-competition or improper environment. Many get through luck and loud noise. Rest are left to fend for themselves. A great effort lost from these people. 

Almost EVERY worthy startup, not 1 in 100 should get attention, review and guidance as early as possible in their lifecycle. 

The idea is to put startups through reality test and warn the founder as early as possible. If the founder still wants to continue it will be more of a learned and prepared decision rather than in total imagination. 

Conclusion

Start up. But know in advance that an idea, solution, problem and market, complemented by your passion, commitment, honesty, dedication and hard-work are.... NOT at all enough ! Its hard to believe isn't it ? You read it right.

Start up. If you can add emotionless reality and facts to the above. Mentally prepare yourself - What if the world is not as logical as you expect, what if the world doesn't have the gratitude to comprehend and appreciate your effort and personal sacrifice to help them live a better life, what if there is a zero at the end. 

Don't be over-positive or under-positive. Identify early warning signals in a few weeks after startup. Put your idea through worst case scenarios everyday. Put hard reviews every 3 months. Keep listening to every customer and staff. Keep asking them- "What mistakes are we making." Save every rupee from Day 1. 

The mantra: Meet your fate as early as possible.