Everyone's betting big on India's start-up culture. And we do have young entrepreneurs mushrooming across
the country. Some become names to reckon (read Snapdeal and Flipkart, Housing.com) with while others
fade away with time. While ideation, execution and sustainability are the basic mantras for a start-up, it is the
nitty-gritty involved in these stages of a new company, which makes a start-up a roaring success.
"In the complex world of entrepreneurship, it is difficult to avoid operational and strategic missteps. But the
real reason a large number of entrepreneurs feel dispirited is the feeling that their enterprise has gone the
wrong way. Whether it is the product/market fitment, scalability, or other managerial issues, one should not
give up before all the key elements have been tried and tested," said Utkarsh Joshi, Principal at the HR Fund.
BI India lists down the basic factors that come into play when one thinks of starting a new venture.
Founding and management team
People are the biggest asset of any company. And when the company is new, the right kind of leadership is
extremely essential. "Many experts believe that two people in the founding team are considered ideal as with
increasing number of founders, the company's value is shared accordingly. However, what is really important
to be mentioned is that more than the number, it is critical for the founder of the company to carefully
choose the right mix of co- founders with him/her who bring in the right expertise and culture to the table.
Founders need to realize their strengths and weakness," said Joshi.
This is also true for the management team that is at the core of any business. Right people with the right kind
of expertise and experience can either make or break any start-up. The
"A well-informed management team is considered good on strategizing and would be able to minimize the
risks at various aspects of business. It not only starts with putting together a right product but also validating
its usability at several instances (before and during development) for necessary checks and balances and
thereafter right planning to enter the market. The management also owns the responsibility for scheduling
the above aspect for rightful gains," said Joshi.
Besides, a good management team plays a pivotal role in the kind of talent the company ultimately gets, thus
penning down the fate of the start-up.
Valuation and funding
Valuation of a company is very important at every stage of its life cycle. It is this valuation that gives
confidence to investors to fund a certain start-up. Every year, several start-ups that receive seed funding at
the time of inception, fail to raise funding at later stages. This happens because the valuation of the start-up
has dropped significantly for investors to bet their money on it. But there have been times when a company,
whose valuation had dropped, manages to gain more after taking corrective steps, thus attracting the
investors' attention once again.
"Companies progress and fail at various stages of funding, reflecting on their valuations. Though it varies
from one industry to another, increase in valuation is an important milestone to be worthy for next round of
funding. However, it is also required to mention the risks of blowing up the valuation too much, which leads
to a potential investor/VC shying away at times and making it difficult to go for the future round of funding,"
But how do we measure a company's valuation? Well, it's simple! The company's ability to make inroads in a
certain market, handle business risks tactfully while expanding successfully add up the numbers.
"Proven ways to lower the cost of operations and customer acquisition speaks loud of a profitable business.
Such a business is scalable and needs further funding to speed up the growth or expand. Though it is possible
many times to raise money at lower valuations too, but running out of cash does not include signs of a
progressive company. Conserving and spending money judiciously is the art that is learnt on the go," averred
Choosing right investors
Every new entrepreneur needs guidance and the right investor provides exactly that. An investor with the
requisite background, industry expertise or specialization in business ventures offers advice, inputs and
guidance based on their experience with various companies they work with. Or they could be because they
were successful entrepreneurs themselves.
"In addition to money, proper hand-holding and guidance should be something that every entrepreneur
should look for. It is important to differentiate between the ones who seem to know enough about the
project/industry to cast an opinion but not substantial to help manage a situation," asserts Joshi.
Besides, when prominent people from the industry associate themselves with a start-up, not just the
valuation of the company but also its business grows by leaps and bounds. And then, there's no stopping!
This one is tricky but then when has running a company been a cakewalk! The cost of acquiring a customer
should be low. With digital media penetrating the businesses aggressively, reaching out to the right customer
is not a big deal. Try content marketing or word of mouth if it works for you but remember the bottom line is
—cost of customer acquisition should be lesser than the lifetime value of the customer.
"Judging the market right in terms of need for the product, its usefulness, timing, market size, and pricing
leads to consistent and successful customer acquisition, as these are all cohesive factors.
The 21 year old Ritesh Agarwal's OYO Rooms is a perfect example. His customer acquisition is way lesser
than the infinite lifetime value of its customer. This entrepreneur ventured into a territory that no one else
had thought about and its biggest marketing tool is probably the word-of-mouth. The budget-hotel segment
has suddenly become a hotbed and one can see many other similar services in this segment now.
"Rather than various marketing gimmicks - a well-defined process that leads to scalable ways to acquire the
customers and thereafter monetize them at a higher level than the cost of acquisition is the solution. PR also
plays an important role in the same. A press coverage is about positioning from the company's point of view
and perception from the reader's point of view. However, it is important to see how much does the coverage
talks about the progress made in the business. Startups need to judiciously manage and mention the press
coverage while fundraising, evangelizing among others," said Joshi.